Cornell Law School Library
A TREATISE

ON

STOCK AND STOCKHOLDERS

AND

GENERAL CORPORATION LAW

“AS APPLICABLE TO

RAILROAD, BANKING, INSURANCE, MANUFACTURING, MINING,
TELEGRAPH, TELEPHONE, EXPRESS, GAS, COMMER-
CIAL, BUSINESS, TURNPIKE, BRIDGE, CANAL
AND OTHER PRIVATE CORPORATIONS,

BY

WILLIAM W. COOK,

Or tHE New York Bar.
SECOND EDITION.

CHICAGO:
CALLAGHAN AND COMPANY.
1889. =
CopyrricHut, 1889,
By WILLIAM W. COOK.
To

THE HONORABLE i

THOMAS M. COOLEY, LLD,

PROFESSOR, AUTHOR AND JUDGE,

WHOSE PRE-EMINENT ABILITY, UNTIRING RESEARCH,
PROFOUND LEARNING AND EXALTED CHARACTER

HAVE SECURED FOR HIM AN

IMPERISHABLE FAME AS A JURIST,

UNDER WHOSE INSTRUCTION THE AUTHOR ACQUIRED A DESIRE TO SEARCH OUT

AND MASTER THE PRINCIPLES OF THE LAW,

THIS WORK
Is

RESPECTFULLY DEDICATED,

’
PREFACE.

The second edition of this work is a treatise on the law.of cor-
era as approached from the stand-point of stock and stock-
olders.

The first edition has been revised, enlarged, extended, and in large
part rewritten. No substantial part of it has been omitted, and
the general arrangement, order and section numbers have been re-
tained. But the notes have been enlarged by all the recent cases,
the text has been compressed into brief forms of expression, and
many chapters have been entirely remodeled.

In addition to this a large number of new subjects and princi-
ples are given, so as to make the book a complete work on corpora-
tion law. Among these new subjects may be mentioned the power

, of a corporation to hold land; to make mortgages; to borrow
money; to loan money; to issue bills and notes; to issue debent-
ures; to issue bonds secured by mortgages; to assign for the
benefit. df creditors; to give preferences; to exercise the power of
eminent domain; to sell all its property; to consolidate, merge,
amalgamate, absorb and lease; to enter into pools; to limit its lia-
bility; to make traffic arrangements; to make discriminations; to
“maintain monopolies and exclusive privileges; to become a partner
in a copartnership; to guaranty the bonds or stocks of another
corporation; to be an accommodation indorser; to undertake a new
business; to be an executor or trustee; to pay for lobbying, and
various other acts. A detailed statement of the law is made as
to the power of the directors, executive committee, president, sec-
retary, treasurer, cashier, general manager, superintendent and
‘other agents to act and contract for the company. The proper
‘method of executing corporate contrdcts and the liability of officers
on irregularly-executed contracts; the character and use of the cor- |
porate seal; the law as to notice and admissions; the liability of
the corporation for torts; and the rules, regulations and complica-
tions of directors’ acts and meetings, are fully explained. Irregular
incorporations; lapses of charters; misfeasances, malfeasances and
'- non-feasances; and dissolutions of corporations, with all the inter-
ests and complicated questions connected therewith, are examined.
V1 PREFACE.

“Trusts,” the recent combinations in trade, are explained and
their legality considered. This edition also treats of foreign cor-
porations, with their various rights, disabilities and liabilities, and
of the process, pleadings, procedure and service in suits by and
against foreign and domestic corporations.

The author believes that the law of stock and stockholders leads
naturally up to and includes the whole law of corporations. He
believes that the difficulty in understanding corporation law is
due largely to the method of studying the subject. That legal
fiction, that intangible existence, that imaginary body called the
corporation, is not easily understood, and is not, always dealt
with intelligently. It is believed, however, that he who under-
stands the rights, duties, powers and liabilities of stock and stock-
holders will have little difficulty in understanding the nature of ~
corporations, the powers, of corporations, the status of corporate
creditors, and the various peculiarities of corporation law. A com-
plete exposition of the law of stock and stockholders is a complete
exposition of the law of corporations.

The remarkably rapid growth of corporations during the past
twenty-five years has created a body of law which is fast becoming
a system of jurisprudence in itself. In the days of Angell and
Ames, corporation law was just arising, and in their great work it
was impossible to giye the infinite detail and subdivision of prin-
ciple which now exist. ‘In-these latter days, however, a text-book
on corporation law must give more than general principles and un-
digested citations of cases. It must explain the applications of the
general principles; subdivide the topics; evolve rules from fre-
quently-recurring facts; point out the difficulties, rights and rem-
edies in the separate cases as they have arisen; and give the gist
of the decisions themselves.

The writer has sought to make a clear, practical and complete,
presentation of the subject for the every-day use of the bench and
bar. The subdivisions, the chapter subjects and the section head- -
ings are made so as to aid in finding, without delay, the point of
law in which any one may be interested. These divisions ahd head-:
ings have been built up from the cases-themselves, and from a
study of the subjects which arise most frequently in the courts and
in business transactions. The writer has carefully avoided all
theories, long discussions, and, as far as possible, the use of tech-
nical language. He has not hesitated to express his opinion when
the occasion seemed to warrant it, but his sole object has been to
give a complete and concise statement of the law governing the
subject.

The plan of the work is original, and this volume is the result of
PREFACE, vil

a long and conscientious study of the sources of authority — the

cases themselves. These have been systematically examined and
collected, and made the groundwork of the subdivisions of the
‘book.

A special effort has been made to develop fully those subjects
which are litigated most often in the courts, and which occasion
doubt, difficulty, danger and lawsuits to corporations and _stock-
holders. The number and complexity of the decisions have caused
some confusion and doubt, even in the mind of the bench itself.
Out of the chaos of material which lay scattered throughout many
thousands of reperts, the writer has sought to construct a treatise
that will be a practical guide on all subjects relative to stocks and:

corporation law. A special effort has been made to explain fully

those principles which are of importance and constant interest and
use to lasvyers, investors, directors, stockholders, corporations and
the general public.

Copious notes are given for the purpose of illustrating, fortify.
ing and explaining the text. By this method it is believed that the
thread of thé subject is preserved in the text, and the mind of the
reader not distracted by a mass of details. On the other hand, by
the notes the subject is still further developed, and the application
of the principles to particular facts fully set forth.

The dates of the cases are given in the notes. It is Bhienae that
thereby the relative importance of a given case can be more easily

‘ascertained and determined. It is also worthy of note that the
dates of the cases become of great use when there is a conflict of
authority. By the dates also the important facts are. brought out
that the law of stock and stockholders and of corporations is of
very recent origin; that most of the cases have arisen within the
past fifty years; ‘that the law relative to stockholders’ actions
against directors has arisen within thirty years; and that we are as
‘yet only on the threshold of that new jurisprudence which, though
now in a formative state, is for the future to regulate the great
subject of corporations having a capital stock.

In the composition of Gis: work the author has been burdened
with an abundance rather than a paucity of material. The law‘ot

es corporations, when explored i in all its branches and details, isa vast
“subject. There are over twelve thousand cases cited in this vol-
ume. Although it is difficult to exhaust in a single volume the law
contained in so’ great a number of cases, yet a conscientious effort
bas been made to do so.

The generots ‘reception given to the first edition, ation was,
double the number usually printed, is appreciated by the author.

- The mode of treatment appears to have ‘been satisfactory,” and it:
Vili PREFACE.

1

has been retained in 'the present enlargement of the work to the
whole field of corporation law. If an equally favorable judgment
is passed upon the second édition, it will be a reward commen-
surate with the labor and thought involved in a work of this mag-
nitude.

Wititram W. Coox.
New York, November 4, 1889. :
CONTENTS.

PARRY J.
ISSUE OF AND LIABILITY ON STOCK.
CHAPTER I |
j ; . SEc.
DEFINITIONS AND SCOPE OF THE WORK - si ie ‘ A ° . 1
CHAPTER IL. .
Stock May BE IssuED LEGALLY FOR MONEY OR PROPERTY OR BY A STOCK
DIVIDEND ; - <j ‘ 2 ¥ : “ : : é ee,
3 CHAPTER III.
“WATERED” Stock — Stock May BE IssvED ILLEGALLY FOR MONEY,
PROPERTY, OR BY a STOCK DrvipDEND. IT Is THEN CALLED ‘‘ WATERED”
OR FIcTITIOUSLY PaID UP STOCK . .- . e s a 5 x 21
CHAPTER IV. f
¥
METHOD OF SUBSCRIBING — PARTIES TO SUBSCRIPTIONS — ACTION TO EN-
.. FORCE SUBSCRIPTIONS . < . , 7 - a s - 82
A. Methods of Subscribing.
B. Who is Competent to Subscribe for Stock.
C. An Action Lies to Collect Subscriptions.
CHAPTER V.
CONDITIONAL SUBSCRIPTIONS Z - ‘ : os ae é . %
CHAPTER VI.
MUNICIPAL SUBSCRIPTIONS . ‘ : ‘ ‘ ‘ 3 ‘i . - 90,
CHAPTER VII.
CaLLs . s é oe . he 7 . - % ° . 104

‘CHAPTER VIIL

FORFEITURE OF SHARES FOR NON-PAYMENT 3 - a s io » 424

CHAPTER IX. -

ms i
DEFENSE OF PAROL AGREEMENTS AND FRAUDULENT REPRESENTATIONS IN-
DUCING SUBSCRIPTIONS FOR STOCK . : ‘ 3 ‘ é . 185
: — ix é
x CONTENTS.

CHAPTER X.
; Src.

MISCELLANEOUS DEFENSES TO SUBSCRIPTIONS FOR CAPITAL STOCK . - 166
CHAPTER XI.

THE STOCKHOLDERS’ LIABILITY TO CORPORATE CREDITORS UPON UNPAID
SUBSCRIPTIONS ‘ 5 : F se dh a ena ee a - 199

CHAPTER XII.

Statutory LIABILITY OF STOCKHOLDERS TO CORPORATE CREDITORS . » 212
A. Extent of the, Liability.
B. Enforcement of the Statutory Liability.

CHAPTER XIII.

LIABILITY OF STOCKHOLDERS WHERE THE SUPPOSED INCORPORATION DoEs
Nor Prorecr THEM, AND FOR ASSESSMENTS BEYOND THE PAR VALUE

‘OF THE STOCK 5 : ‘ a ei j : é . x - 230
CHAPTER XIV.

‘LIABILITY OF PLEDGEES, TRUSTEES, EXECUTORS, AGENTS, ETC. . : . 244
CHAPTER XV.

LIABILITY AS AFFECTED BY TRANSFERS ‘ “ < 3 ae ws . 254

CHAPTER XVI.

ISSUE OF PREFERRED STOCK AND. STOCK UPON WHICH INTEREST IS GUARAN-
TIED 6 . 3 % “ s : : 7 ¥ ! s . 267

CHAPTER XVII.
INCREASE AND REDUCTION OF THE CAPITAL STOCK AND OVERISSUED Stock 279

.

PART II.
TRANSFERS OF STOCK,

CHAPTER XVIIL

LEGACIES AND Girts OF STOCK . f ; - . a e . . 299
CHAPTER. XIX.
Wo May Buy anp SELL Stock ‘ : ‘ * < »  .2 809

CHAPTER XX.

SALES oF Stock — Tur FoRMATION AND PERFORMANCE OF THE Contract -
GAMBLING SALES — FRAUDULENT SALES 7 ‘ . 821
A. Formation and Performance of Contracts to Purchaee Stock, :
B. Gambling Sales of Stock.
C. Fraud as Affecting a Sale of Stock.
CONTENTS. xi

CHAPTER XXL

SALes oF STtocK—SALES WHILE SUITS ARE ‘PENDING AFFECTING THAT
Stock — ForGEeRY — Lost AND STOLEN CERTIFICATES OF STOCK —
CoNFISCATION OF STOCK. oe eee BEB.

A. Purchases Without a Certificate of Stock. :
B. Sales of Stock while Suits are Pending Affecting that Stock.

C. Forgery.

-D.

E.-

SEc,

Stolen or Lost Certificate.
.- Confiscation of Stock.

CHAPTER XXIL

SALEs oF Stock — ForMAL ‘Mernop oF TRANSFERRING CuntmcaTss, AND
REGISTRY THEREOF . ole 2 , is - . 872
A. Method of Transferring the Certificate. ,
B. Method of Registering a Transfer of Stock.
C. Rights and Duties of the Corporation in Allowing or Refusing Reg-

istry.
CHAPTER XXIII.

RULES FOR CORPORATIONS IN REGARD TO REFUSING OR ALLOWING REGIS-
TRIES OF TRANSFERS OF STOCK. 3 ‘ Z . ‘ - 3893

CHAPTER XXIV.

NoON-NEGOTIABILITY OF STOCK AND DANGERS INCURRED IN THE PURCHASE
oF CERTIFICATES oF STOCK ‘ ‘ 3 i v s - 41
A. Non-negotiability.
B. Dangers Incurred in Purchasing Stock.

PART Uf.
MISCELLANEOUS INCIDENTS OF STOCK.
CHAPTER XXV.

,

STOCK-BROKERS AND THEIR CONTRACTS ft ee ae
CHAPTER XXVI.

PLEDGES AND Mortgages oF STOCK 5 «+0 6 7 ee ew 463
CHAPTER XXVII:

Levy of ATTACHMENT AND EXECUTION UPON SHARES OF STOCK i - 480

CHAPTER XXVIIL

CONSTITUTIONALITY OF AMENDMENTS, TO CHARTERS — RIGHT OF A " STOCK:
‘HOLDER TO OBJECT . se ew 402?

_ QOHAPTER XXIX.

‘“‘ TRUSTS” AND UNINCORPORATED JOINT-STOCK ASSOCIATIONS .« . . 508a
A. “Trusts.”
B. Unincorporated Joint-stock Associations.
xi : CONTENTS.
CHAPTER XXX.
. _ SEC.
’ STocKHOLDER’s RIGHT TO INSPECT THE BooKs OF THE CORPORATION . $5ll

CHAPTER, XXXI.

Ligns OF THE CORPORATION ON STOCK FOR THE STOCKHOLDER’S DEBTS TO
THE CORPORATION ‘ : : z ‘ 3 ‘ F . 521

| CHAPTER XXXII.

DIVIDENDS ON Stock . - 534
CHAPTER XXXIII.

Lire EsTATES AND REMAINDERS IN SHARES OF STOCK ‘ “ é . 552
CHAPTER XXXIV.

TAXATION OF SHARES OF STOCK AND OF CORPORATIONS . é ‘ . 561

A. Taxation of Shares of Stock.
B. Other Methods of Taxing Corporations.

CHAPTER XXXV.

ForRMS OF ACTIONS AND MEASURE OF DAMAGES WHERE A STOCKHOLDER
HAS BEEN DEPRIVED OF His STOCK i ; ri a UTS , . 578

CHAPTER XXXVI.

STOCKHOLDERS’ AND Drrecrors’ MEETINGS — CALLS, TIME, PLACE AND
CLASSES OF MEETINGS .

' CHAPTER XXXVII.
CORPORATE MEETINGS — ELECTIONS AND OTHER BUSINESS . . . - 602
A. Elections.
B. Irregularities and Informalities in Conducting a Meeting,

CHAPTER XXXVII.

DISSOLUTION, FORFEITURE AND IRREGULAR INCORPORATION “ . ~ 628

PART IV.

FRAUDS — ULTRA VIRES ACTS— INTRA VIRES ACTS — NEGLIGENCE
AND IRREGULAR CONTRACTS OF DIRECTORS, STOCKHOLDERS,
PROMOTERS AND AGENTS.

CHAPTER XXXIX.

FRravupULent Acts or Directors, Masority or STOCKHOLDERS AND THIRD
PERSONS ‘i : 5 : 2 ‘ ‘ F : 4 . 644
A. The Occasion, Scope and Purpose of the Subject Herein. :
B. Frauds of Corporate Directors, of a Majority of the Stockholders or
. Third Persons, to Remedy which a Stockholder May Bring
uit, ,
CONTENTS. xiii

CHAPTER XL.

\

ULTRA VirEs AcTS AND ConTRACTS—IN OTHER WORDS, ACTS AND COoN-
TRACTS WHICH ARE IN EXCESS OF THE CHARTER POWERS OF THE
CORPORATION, DIRECTORS OR STOCKHOLDERS & s = . - 664

' CHAPTER XLL

InTRA ViIRES ACTS AND ConTRACTS—IN OTHER WORDS, ACTS AND CoN-
TRACTS WHICH ARE WITHIN THE CHARTER POWERS OF THE CORPORA-
TION, DIRECTORS OR STOCKHOLDERS - * - ‘ : 3 . 683

CHAPTER XLII.

STOCKHOLDERS’ ACTIONS TO HoLp THE DrrECTORS LIABLE FOR NEGLIGENCE
IN THE DISCHARGE OF THEIR DUTIES . F ° , 5 - - 701

CHAPTER XLII.

THE POWER OF VARIOUS OFFICERS AND AGENTS TO CONTRACT FOR _A CoR-
PORATION AND THE MODE OF DRAWING AND EXECUTING CORPORATE
CoNTRACTS — ADMISSIONS AND NOTICE , . 704

A. Power of Promoters, Stockholders, Directors, Executive Commit-
tee, President, Secretary, Treasurer, Cashier, General Manager
and Miscsllaneoas Agents to Contract for a Corporation.

B, The Form of Corporate Contracts — Corporate Seal — Drafting, Sign-

ing and Sealing — Liability of Officers on Contracts Irregularly
' Executed. -
C. Admissions of Officers and Notice to Officers.

CHAPTER XLIV..

RATIFICATION, ACQUIESCENCE OR LACHES AS A BaR TO A STOCKHOLDER’S
ACTION HEREIN é é ‘ ‘ 2 2 ‘ a . 3 - 728

CHAPTER XLV.

PARTIES, PLEADINGS, ETC., IN SUITS BY STOCKHOLDERS IN BEHALF OF THE
» CORPORATION — SUITS BY OR AGAINST THE CORPORATION IN GEN-
ERAL . z . z 963
A. Suits by Stockholders i in Behalf of the Corporation.
B. Suits by or against the Corporation i in General — Service and Jurisdiction.

SEc,

|
TABLE OF CASES.

[The references are to the foot-paging.}

Abbey v. Chase, 943.

‘Abbot v. American Hard Rubber Co. by
697, 677, 912, 774, 971.

Abbott v. Aspinwall, 236, 284, 235, 194.

Abbott v. Merriam, 973.

Abbott v. Balt., etc., Co., 816.

‘Abbott v. Cobb, 899,” 553.

Abbott v. Johnson, etc., R. 'R. Co., 789,

U7,
Abbott v. N. Y., etc., R. R., 864. -
Abbott v. Omaha Smelting Co., 257
Abeles v. Cochran, 343.
Abels v. McKean, 554, 547.
Abercony’s Case, 64.
Abercrombie v. Riddle, 605, 589, 612.
Aberdeen R’y Co. v. Blakie, 742. 782.
Abrath v. Northeastern R’y Co., 171,877.
Academy v. Robinson, 86.
Academy of Music, Appeal of, 679, 429.
Accidental Ins. Co. v. Davis, 163.
_ Accola v. C.,.B. & Q. R. R. Co., 884.
Ackerman v. Halsey, 000. |
Ackerman v. Emott, 357.
Ackerson v. Erie R’y Co., 878, 879.
Ackerson v. Lodi, ete., R. R., 882.
Acklin v. Paschal, 720.
Adair v. Brimmer, 357.
Adam’s Case, 72, 128, 177.
Adams v. Creditors, 940.
Adams v. Cross, 766, 985.
Adams v. Fort, etc., Bank, 308.
Adams v. Goodrich, 228.
Adams v. Hannibal, etc., R. R. Co., 948.
Adams Ex. Co. v. Harris, 796, 984,
Adams Ex. Co. v. Holmes, 796.
Adams Ex. Co. v. Denver, etc., R’y Co.,
995.
Adams v. Kehlor, etc., Co., 763.
Adams v. Mills, 926.
Adams v. Nashville, 631, 629.
Adams v. Rivers, 863.
.. Adamson v. Jarvis, 465.
Addams v. Ferick, 277.
Adderly v. Storm, 478, 288, 6, 260, 270.
Addie v. Western Board, etc., Co., 740.
Addison’s Case, 177.
Addlestone, etc., Co., Re, 37.
Adkins v. Thornton, 236.
Adler v. Milwaukee, etc., Co., 215.
Adler v. Milwaukee Patent B. M’f’g Co.,
129, 215, 213, 218.

 

Adler v. Kansas, etc., R. R., 882.

Adley v. Reeves, 142.

Adley v. Whitstable Co., 890, 152, 889.

Administrator of Bigelow v. Cong. So-
ciety of M., 259,

Administrator v. Whipple, 109,

Adriance v. Roome, 930, 774.

Aftna Ins. Co. v. Shields, 168.

Aitna Ins, Co. v. Harvey, 870.

Aétna Life Ins. Co. v. Middleport, 122.

AXtna National Bank v. Charter Oak L.

~ T. Co., 809.

African, ete., Church v. Covaver, 550.

Agar v. Atheneum Life, etc., Co., 835.

Agate v. Sands, 249.

‘Agricultural Bank v. Burr, 200, 69.

Agricultural Branch R. R. Co. v. Win-
‘chester, 517,

Agricultural, etc., v. Wilson, 425,18.

Ae eminital C. Ins. Co, v. Fitzgerald,
199.

Aiken v. Western R. R., 804.

Aikin v. Wasson, 228.

Akin v. Blanchard, 845, 948. -

Alabama Gold Co. v. Central, etc., 823.

oa & F. R. R. Co. v. Kenney,

58.

Alabama & F. R. R: Co. v. Rowley, 137,

127, 561.

Alabama, ete., R. R. v. Mount, etc.,

'Co., 787.

Alabama, etc., R. R. Co. v. South., etc.,
R. R., 930.

Alabama, etce., R. R. Co. v. Kidd, 925,
933.

Alabama, etc., R. R. v. Thomas, 795. -

Albany, etc., Bank v. Maher, 632, 633.

Albert v. Sav. Bank of Baltimore, 362,
360. *

Albert v. State, 698.

aes Steel, etc., Co. v. Martin, 742,

. 740.

Albright v. Lafayette Assoc., 6.

Alcock v. Sloper, 609.

Aldebert v. Leaf, 965.

Alder v. Milwaukee, etc,, Manuf. Co.,
214.

Aldetman, etc., v. Finley, 985.

Aldham v. Brown, 903, 901.

Aldred v. North, etc., R’y, 904,

Aldsios v. Drury, 863.
xvi

TABLE OF CASES.

[The references are to the foot-paging.]

Aldrich v. Press Printing Co., 876.

Alexander, In-re, 603. .

Alexander v. Berney, 882.

Alexander v. Brown, 926. :

' Alexander’s Case, 272, 271.

Alexander v. Cauldwell, 947, 926.

Alexander v. Central R. R. of Iowa,
831.

Alexander Palace Co., In re, 604.

Alexander v. Searcy, ’961, 969.

Alexander v. Tolleston Club; 714, 854.

Alexander v. Williams, 759.

Alexander vy. Worman, 553.

Alfonso’s Appeal, 364.

Alford v. Wilson, 372, 735.

Alleghany, etc., Co. v. Moore, 930, 922

Allen v. Buchanan, 718.

Allen v. Clark, 250.

Allen v. Curtis, 892.

Allen v. Dykers, 488, 648, 495..

Allen v. First National Bank, 846.

Allen v. Graves, 468, 293.

Allen v, Hill, 679, 681.

Allen v. Inhabitants of Jay, 108._

Allen v. Herrick, 310.

Allen v. Jackson, 746,

Allen v. Londonderry, etc., R’y €o.,
308.

Allen v. Louisiana, ‘101.

Allen v. Montgomery R. R. Co., 368,
145, 217, 281, 218, 212, 839, 850, 282,
144, 294,

Aten v. N. J. Southern R. R. Co., 970,

79,

Allen v. Pegram, 390, 12, 13.

Allen v. Sewall, 236.

Allen v. Sullivan, etc., R. R. Co., 938,
Allen v. Texas, etc., R’y Co., 995.
Allen v, Walsh, 234.

Allen v. Wilson, 957, 960, 974.

Allen v. Woonsocket Co., 806.

Aller v. Town of Cameron, 713.

Allerton v. Allerton, 976.

Allerton v. Lang, 339.

Allibone v. Hager, 276, 202, 78.

Allin’s Case, 296.

Allison v. Coal, etc., Co., 954.

Allison v. Versailles, etc., R. R. Co.,
104.

Aan % Havana, R. & E. BR. BR. Co.,

Almado, etc., Co., Re. 38,

‘All Saints Church v. Lovett, 914,

ee etc., Co. v. Alta, etc., Co., 839,
it

Alvord v. Syracuse Savings Bank, 105.

Alward v. Holmes, 853.

Amador, etc., Co. v. De Witt, 858,

Ambergate, N.&B.& EJ. R’y Co. v.
Mitchell, 126, 574, 181, 324.

Ambergate Ry Co. v. Norcliff, 186.

Ambrose, Re, 50, 42, 31, 55, 740, 45, 87.

Enos etc., Co. v. Toledo, etc., Co.,

American, etc., Co., Appeal of, 478,

 

American Bank v. Baker, 7.

American Bank v. Mumford, 628.

American Bible Soc. v. Marshall, 868,

American Bible Soe. v. Noble, 855.

American Button, etc., Co. v. Moore,
869.

American Coal Co. v. Miegheny Co, 622,

.American Coal Co. v. Co. Com’rs, 621.

American, etc., Co. v. Maurer, 930.

American, etc., Co., v. East, etc., R. R,
Co., 870.

American Colonization Soc. v. Gartrell, ©
989.

American ‘Expr ess Co. v. Patterson, 818,
876. -

American File Co. v. Garrett, 829, 277.

American, etc., Co., Ex parte, 869, 945.

American Ins. Co. v. Butler, 870.

American, etc., Ins. Co. v. Owen, 849,
989.

American Ins. Co. v. Oakley,: 923, 934,

936,

American Ins, Co. v. Wellman, 870.

American Ex. Co. v. Johnson, 992.

American Life Ins. Co. v, Dobbins, 866.

American Prim, Soc. v. Billing, 692.

American Rapid Tel. Co. v. Conn. Tele-
phone Co., 797.

American Ry Frog Co. v. Haven, 681,
347, 682.

American, etc., R’y Co. v. Miles, 754,
925. :

American Silk Works v. Saloman, 22:

American Tel. & Cable Co. v. Day, 412.

American Tube Works v. Boston, etc,
Co., 809.

American U. T. Co. v. Bell Telephone
Co., 796.

American Union Tel. Co. v. Western
Union Tel. Co., 866.

Amesbury v. Bowditch, etc., ss Oe 889,

Ames v. Lake Superior, etc., R. R., 524,
514.

Ames v. Williamson, 612.

Amey v. Alleghany, 111, 115.

Amey v. Mayor, 102.

Amherst Academy v. Cowels, 85, 935.

Amherst Bank v. Root, 934,

Ammont v. Pittsburg T. Co.. 780.

Ammont v. President, etc., 987.

Amory v. Lawrence, 277.

Amory v. Merry weather, 389.

Amoskeag Nat’! Bank v. Ottawa, 108,
107.

Anaconda Tribe v, Murbach, 891.

Ancient Club v. Miller, 6.

Andenried v. Phil., etc., R. R., 792.

Anderson. etc., v. Beal, 116.

Anderson’s Case, 55, 51.

Anderson vy. C. B., ete., R. B., 641.

Anderson v. Kissam, 398,

Anderson v. Line, 275.

Anderson v. Longden, 983,

Anderson v, New Castle, etc., R. BR. Co.,
199, 158.
TABLE

‘

OF CASES.

xvii

[The nalerenten are to the foot-pagirg.]

Anderson v, “Nicholas, 414, 648.
Anderson v. Philadelphia Warehouse
Co., 482, 270.

Anderson Vv. Township of Santa Anna,

118, -
Andover, etc., Co. v. Gould, 86, 143, 144,
Andover, etc., Co. v. Hay, 67, 936, 916.
‘Andrews v. Bacon, 2 240.
Andrews y. Callender, 271, 284, 224.
Andrews v. .Clerke, 473,
Andrews v. Hart, 23,
‘Andrews v. Michigan Central R. R., 991.

Andrews v. Ohio & M.R R Co., 134, .

165.

Andrews v. Union, etc., Ins. Co., 817.

Andrews v. Vanderbilt, "601.

Andrews, etc., Co, v. Youngstown, ate,
Co., 944.

Andriessen’s Appeal, 899, 401.

_ Androscoggin Bridge v. Bragg, 719.

Androscoggin, etc., Co. v. Bethel, etc.,
Co., 885.

Angas’ Case, 79.

Angel v. Hume, 113,

Angelo, Re, 482.

Angell v. Hadden, 430.

Angell v. Lawton, 555,

Angerhoefer v. Bradstreet Co., 990.

Angle v. Siieeissipy & Mo. R. RB Co. ‘
. 786.

Anglo, etc., Bank v. Baragnon, 134,

Anglesea Colliery Co., Re, 270. .

Anglo-Cal. |
‘576, 570, 580, 569...

Anglo-Danibian, ete, Co., Re, 299, 62.

Angus’ Case, 275. |

Bank v. ’Grangers’ Bank,

Ansonia Brass and Copper Co. v. New |

Lamp Chimney Co., 238, 210.
Anthony v. Jasper, 112,
Antoine v. Smith, 278.
Antipaedo Bapt.. Soc. v. Mulford, 884.

: : Anvil, etc., Co. v. Sherman, 186.

‘Appeal Tax Court v. Gill, 625.
appes) te Tes om v. Northern Central
R. Co., 636.
Appeal hae Court v. Patterson, 625,
Appeal Tax Court v. Pullman P. C.
Co., 636.
: Appeal Tax Court v. Rice, 625.
Apperly v. Page, 902.
Applegarth v, McQuiddy, 975.
Applegate v. Ernst, 639.
Appleman v. Fisher, 461, 472, 475.
Appleton Mut. Fire Ins. Co. v. Jasser,
193,
Appleyard’s Case, 22,
Recher North, 984,
Archer v. Rose, 230.
’ Archer v. Terre Haute, etc., R. R., 778,
V7.
Arents v. Commonwealth, 830, 829.
Arenz v. Weir, 281. ;
Ardesco, etc., v. North American, 850.
Argus Co. v. Mayor, etc., 915.
’ Argyle, Re, 177.
b

 

Arkansas Mid. R. R. Co. v. Berry, 639.

a a v. Newbold, 741, 397, 740,

Arminton v. Barney, 858.

cea etc., R. R. v. Jacksonville,
a

| Arms v. Conant, 918, 656.

Armstrong v. Abbott, 934.

Armstrong v. Church Society, 812, 966.

Arnison v. Smith, 170.

Arnold, Appeal of, 3836.

‘Arnold v. Ruggles, 18, 11, 353, 12.

Arnold v. Suffolk Bank, 642, 571, 17,
568, 574, 569, 428.

Arnoldi v. Gonin, 228.

Arnot’s Case, 41.

Arnot v. Erie R’y Co., 785, 807.

Arnott v. Pittston, ete. ., Coal Co., 527,

370.
Arthur v. Commercial Bank, 716.
Arthur v. Commercial, etc., “Bank, 850,
842, 851.
Arthur v. Griswold, 897, 399, 171.
Arthur v. Midland R’y Co., 279.
Ash v. Guie, 546,
Ashburner v. MacGuire, 337.
Ashbury R. C., etc., Co. v. Rich, 772, 957.
Ashbury v. Watson, 302,
Ashbury v. Wilson, "300, :
Ashby v. Blackwell, 410, ‘
Ashe v. Johnson’s ‘administrator, 375.
Asher v. Sutton, 922.

| Asheville, etc.,.v. Aston, 852.

Asheville Division v. Aston, 883.

Ashhurst’s Appeal, 959, 745, 960.

Ashhurst v. Fowler, 896,

Ashley’s Case, 173, 162, 174.

Ashmead v. Colby, 169.

Asphitel v. Sercombe, 77, 902.

Ashtabula & New Lisbon R. BR. Co, v.
Smith, 96, 182, 93, 89, 691, 68, 65.

Ashton’s Appeal, 486.

Ashton v. Ashton, 331.

Ashton v. Atlantic Bank, 361, ;

Ashton v. Burbank, 519, 528, 811, 144.

Ashton v. Dakin, 385.

Ashton v. Langdale, 13,

Ashuelot, etc., Co. v. Hoit, 86.

Ashuelot, etc., Co. v. Marsh, 923.

Ashuelot R. R. Co. v. Elliot, 515.

Ashurst y. Mason, 348.

Ashurst v. Field’s Adm’r, 606,

Ashworth v. Munn, 379,

Askew’s Case, 169.

Aslor v. Westchester, etc., Co., 839.

| Aspinwall v. Commissioners, "112, 122,

109.
Aspinwall v. Lacon 253, ae
Aspinwall v. O. & M. R. R. Co.,-871,
655,
Aspinwall v. Torrence, 224.
Assignee v. Simpson, 53. °
Assignment of Vermilye, In re, 467,
Aston, Ex parte, 548,
Astor v. Arcade, etc., Co., 522. .
Xviii

\

TABLE OF CASES. \

[The references are to the foot-paging.]

Atchafalaya Bank v. Dawson, 709, 711.

Atcherson v. Troy, etc., R, R. Co., 228.

Atchison, City of, v. Butcher, 104.

Atchison, etc., R. R. Co. v. Denver, etc.,
R. R. Co., 784, 785, 791.

Atchison, etc., R. R. v. Roach, '787.

’ Atchison, etc., R. R. Co. v. Fletcher,
808, 968, 349, 959, 518.

Atchison, etc., R. R. Co. v. Phillips,
125, 121.

Atchison, etc., R’y v. Nave, 860.

Atheneum, etc., Society, Re, 229.

Athenzum, etc., Soc. v. Pooley, 836.

Atherford v. Beard, 380.

Atherton v. Sugar, etc., eS 181.

Athol, ete., Co. v. Carey,

Athol, etc., R. R. Co. v. Eisenia of
Prescott, "144,

Atkins v. Albree, 607, 611.

Atkins v. Gamble, 14, 643, 484, 489.

Atkins v. Wabash, ete., R. Co., 10.

Atkinson v. Atkinson, 363, 419,

Atkinson v, Marietta, ete, Co., 842.

Atkinson, Appeal of, '762.

Atkinson v. Pocock, 903.

Atlanta v. Gate, etc., Co., 701.

Atlanta, etc., R. R. Co. v. State, 701.

Atlanta & West Point R. R. Co, v. Hod-
nett, 160.

Atlantic, etc., Bank v. Savery, 984.

Atlantic City ‘Water-works v. Atlantic
City, 803.

Atlantic Cofton Mills v. Abbott, 88, 190.

agiaanie De Laine Co, v. Mason, 265, 665,

Atlantic, etc., Ins. Co. v. Sanders, 663.

Alenile, etc., Mill v. Indian, ete., Mill,
95

Atlantic, etc,, R, R. v. Allen, 688.

Atlantic, etc., R, R. Co.’s Case, 780.

Atlantic R’y Co. v. Dunn, 879.

Atlantic, etc., R. BR. v. St. Louis, 709,
860, 857.

Atlantic, etc., R. R. Co. v. Reisner, 9380.

Atlantic, etc., Telegraph Co. v. Com-
monwealth, 591.

Atlantic, ;etc., Tel.
Tel. Co., 778, 976.

Atlas Bank v. Nahant Bank, 987,

Atlas Nat. Bank v. Gardner, 690.

Attaway v. Third Nat. Bank, 138. :

Atterbury v. Knox, 865.

Attica v, Manuf., etc., Bank, 567.

Attleborough Nat. Bank v. Rogers, 844,

Attree v. Hawe, 833.

Attrill v. Huntington, 243.

Atwood v. Rhode Island Agric. Bank,
265, 220.

Atwood v. Shenandoah, etc., R. R. Co.,

Co. v. Union, etc.,

Atwool v. Merry weather, 744, '729.

Attorney-General v. Bank of Niagara,
700, 708.

Attorney-General v. Bay State Min.
Co., 615, 640,

 

Attorney-General v. Detroit, 708.

Attorney-General v. Evert Booming
Co., 862.

Attorney-General v. Whitwood, 565.

Attorney-General v. Life & Fire Ins,
Co., 827.

Attorney-General v. Petersburg, etc.,
R. BR. Co., 709.

Attorney-General v. Scott, 659, 676,

Attorney-General v. Corporation, 768. ,

Attorney-General v. Mayor, etc., 812.

Attorney-General v. Eee, etc., RR.
Co., 35.

Attorney-General v. Jamaica, etc., Cor-
poration, 708.

Attorney-General v. Simonton, 706,

Attorney-General v. Mid. Kent. R’y Co.,
. 708.

Attorney-General v. Joy, 882.

Attorney-General'v. R. R. Cos., '708,

Attorney-General v. Bank of Columbia,
10.

aorney General v. Great Eastern R’y
Co., 707, 8

ig Attorney- ea v. Utica Ins, Co., 773;

Attorney-General v. Great Northern
R’y Co., 707

Attorney-General v., Mercantile Ins. Co.,
545.

Attorney-General v. Foundling Hospi-
tal, 708.

Attorney-General v. Tudor Ice Co., 708.

Attorney-General, In re, v. North, etc.,
Ins. Co., 979.

Attorney-General v. Clergy Soc., 695.

Attorney-General v. Guardian Mutual,
etc., Ins. Co., 231, 983.

Attorney- -General v. Utica Ins. Co., 708.

Attorney-General v. Grote, 334,

Attorney-General v..R. R. Co., 798,

Attorney-General v. Wilson, 708.

Attorney-General v. Mayor of Rye, 885.

Attorney-General v. Boston, etc., R. R.

sCo., 818.

Attorney-General v. Bank of Niagara, :
773. ‘

Attorney-General v. Life Ins. Co., 825,
826, 827, 847.

Attorney- -General v. Germantown Road,.
801.

Auburn, etc., Co. v. Douglass, 806.

Auerbach v. Le Soeur Mill Co. 824,

Augusta v. National Bank, 617.

Augusta Bank v. Augusta, 104.

Augusta Bank v. Hamblet, 924.

Auglian R’y Co, v. Eastern, etc., R’y

Co., 778.
Aull'v. Colket, 414, 643.
Auld v. Glasgow, etc., Society, 547.
Aultman’s Appeal, 247, 281, 242, 294, 269.
Aultman v. Waddle, 194,
nee etc,, Soc. v. Paddock, 959, 887,

5

Aurora v. West, 108, 109, 830. .-
Aurora, etc., Co. v. Holthouse, 104,
TABLE OF CASES.

xix

[The references are to the foot-paging.]

Austin v. Manchester. 795.,
Austin v, Gillaspie, 376, 377.
Austin v. Boston, 627, 628.
Austin’s Case, 660, 148, 151.
Austin v. Bank of England, 366.

-Austin v, Daniels, 769, 814.

Austin v. Aldermen, 627.
eae etc., Co. v. Mounsey, 823,
3

Auther v. Auther, 332. é

Avil v. Alexander ‘Water Co., 416,
Averill v. Barber, 769, 973.
Avelyn v, Ward, 331.

Ayer v. Seymour, 481, 682,

Ayer v. Ayer, 594.

Aylmen v. Norrice, 11.

Aylesbury Railway Co. v. Mount, 282.
Aynesworth v. Bank of Eng,., 366,
Ayres’ Case, 172, 158,

Ayres v. French, 397, 643.

B.

Babcock v. Thompson, 380.

Babcock v. Beman, 942.

Babcock v. Helena, 116.

Bach v. Pacific, ete., Co., 821.

Bache v. Nashville, ‘ete. , Soc., 982, 711,
Bache v. Horticultura. Soc., 701,

’ Bacheller v. Pinkham, 896.

Bachman, In re, 286, 573, 578, 568, 283,
294, 575.

Backer v. Backus, 699.

Backus v. Lebanon, 859.

Bacon v. Mississippi Ins. Co., 825.

Bacon v. Mich. BR. R., 876.

Bacon v. Irvine, 973.

Bacon v. Robertson, 720.

Badger v. American Ins. Co., 944.

Badger v. Badger, 960, 961.

Badgers v. Cumberland Bank, 914,

Bagley v. Smith, 555, 545.

Bagnall v. Carlton, 741, 788, 161, '740.

Bagshaw, Ex parte, 775.

Bagshaw v. Eastern Union R’y Co., 813,
817, 811, 821, 965, 970.

Bagshaw v. Seymour, 173.

Bahia, In re, etc., R. R. Co., 325, 647,
651, 413.

Baile v. Calvert C. E. Soc., 158.

Bailey v. Railroad Co., 5.

Bailey v. R. R. Co., 590, 679, 584, 308,
304.

Bailey v. Birkenhead, L. & C. J. R’y
Co., 133, 969, 822.

Bailey v. Bancker, 287, 250, 238, 246. |

Bailey v. Citizens’ Gas Light Co., 584.

Bailey v. Hannibal, etc., R. R. Co., 301,

305.
Bailey v. Strohecker, 500, 4383.
Bailey v. Hollister, 515, 271, 514, 517.
Bailey v. Ford, 555, 545.
Bailey v. Buffalo, etc., R. R. Co., 756,
921: -
Bailey v. Valley, etc., Co., 984, >

 

Bailey v. Universal Provident Life As-
sociation, 64.

Bailey v. Chamberlain, 490.

Bailey v. Phil., etc., R. R. Co., 801.

Bailey v. Clark, 5.

Bailey v. Atlantic, etc., R. R. Co., 614.

Bailey v. Caulay, 900.

Bailey’s Appeals, 699. \

Bain v. Globe Ins. Co., 992.

Baine v. Whitehaven, etc., R’y Co., 423.

a v. Bank of Washington, 848, 913,

14,

Baird v. Ross, 902.

Bakemore v. Glamorganshire Canal, 717.

Baker’s Appeal, 675.

Baker v. The Atlas Bank, 251, 252, 207.

, Baker v. First National Bank, 628.

eee v. Backus’ Adm’ r, 252, 977, 712,

702

Baker’s Case, 274, 80.

Baker v. Cotter, 933, 923,

Baker v. Drake, 493, 471, 476, 474, 648,
470, 651, 472, 488, 647.

Baker v. Kansas, etc., Co., 933.

Baker v. Marshall, 432.

Baker v. Neff, 714.

Baker v. Tynte, 501,

Baker v. Wasson, 648, 405, 316.

Baker v. Woolston, 955, 663.

Bakersfield, etc., Assn v. Chester, 914.

Balch v. Hallett, 607.

Balch v. New York, etc., R. R. Co., 228.

Baldwin v. Canfield, 483, 966, 909, 480,
350, 981, 421, 658.

Baldwin v. Commonwealth, 375.

Baldwin v. Trustees, etc., 886.

Baldwin v. Bank, etc., 942.

Baldwin v. U. S. Tel. Co., 796.

Baldwin v. Lawrence, 969,

Bale v. Cleland, 170.

Balkis, etc., Co., Re, 420.

Ball v. Gilbert, 380,

Ballard v. Louisville, etc, R, R, 863.

Balliet v. Brown, 965, 774.

Ballin v. Ferst, 565.

Ballston Spa Bank v, Marine Bank, 215.

Balsh v. Hyam, 540.

Baltimore City, ete., Ry ‘Co. v. Sewell,
644, 76, 75, 649, 651, 420.

Baltimore, ete., R, R. Co. v. Wheeling,
9

Baltimore, etc., R. R. Co, v. Fifth Bap.
Church, 2.

Baltimore & P. R. Co. v. Fifth Bap.
Church, 874, 877.

Baltimore, ete., R. R. Co. v. Wright,
873.

Baltimore v. Balt. City Pass. R’y Co.,
636, 622.

Baltimore & O. R. R. Co. v, Allen, 636.

Bees etc., Turnpike Co. v. Barnes,
202.

Baltimore, etc., R. R. Co. v. Marshall
Co., 717, 711.

Baltimore Retort, ete., Co. v. Mali, 340.

!
xx

TABLE OF CASES.

[The references are to the foot-paging.]

Baltimore & O. R. R. v. Ford, 872.

Baltimore & H. v. Union R. R. Co., 858,
859.

Baltimore & O. R. R. Co. v. Gallahue’s
Adm’r, 873, 983. — .

Baltimore & O. R. R. Co. v. Wightman,
873.

Baltimore v. Baltimore & O. R. R.:Co.,
788.

Baltimore & P. S. Co. v. Brown, 785,
786.

Baltimore, etc., R. R. Co. v. Glenn, 208.

Baltimore v. Connellsville, etc., R’y
Co., 705.

Baltimore & 8S. R. R. Co. v. Compton,
861.

Baltimore & O. R. R. Co. v. Noell, 873. |
Baltimore & O. R. R. Co. v. Cary, 869.

Baltimore R. v. Boone, 878.

Baltzen v. Nicolay, -378.

Banet v. Alton & Sangamon R. R. Co.,
127, 517, 131, 182, 86.

Bangor, etc., Slate Co., Re, 311.

Bangor. etc., R. R. Co. v. Smith, 520,
311, 917, 524, 719. é

Bangs v. McIntosh, 988.

Bank, etc., v. Hooper, 942.

Bank ‘of Augusta v. Earle, 261, 989, 864.

Bank v. Lanier, 347, 569,. 403, 446, 581.

Bank v. Cresson, 945.

Bank of America v. McNeil, 878, 420,
648, 577, 581.

Bank of Attica v. Manuf. B’k, 569, 368,
572. :

Bank of Attica v. Pattier, etc., Co., 926.

Bank v. Bryce, 485.

Bank v. Burnham, 288.

Bank v. Charlotte, 523, 519.

Bank v. Concord, 119.

Bank v. Flour Co., 763, 657.

Bank, etc., v. Guttschlick, 935,

Bank v. Harrison, 433.

Bauks v. Judah, 959, 753.

Bank v. Kennedy, 698.

Bank v. Richardson, 518.

Bank v. Trenholm,.485.

Bank, etc., v. St. John, 601,

Bank, etc., v. Town, etc., 120. ¢

Bank of Australia v. Breillat, 823.

Bank of Australasia v. Nias, 245.

Bank of Batavia v. N. Y., etc., R. RB.
Co., 445. ‘

ao of Bethel v. Pahquioque Bank,

Bank of B. Falls v. Rutland, ete., R. R.
Co., 986.

Bank of British Columbia v. Page, 869.

Bank Com’rs v. Bank of Buffalo, 919,
708, 703.

Bank Commissioners v. Bank of Brest,
909, 912, 851.

Bank of California v. Collins, 260, 259.

Bank of Cape Fear v. Edwards, 625.

Bank of Chenango v. Brown, 515.

Bank of Chillicothe v. Dodge, 866, 827.

 

Bank of Chillicothe v. Swayne, 849.

Bank of Circleville v. Renick, 714.

Bank of Columbus v. Patterson, 935,

Bank of Commerce v. N. Y. City, 5, 626,

Bank of Commerce v. Rutland, ete.,
R. BR. Co., 990.

Bank of Commerce’s Appeal, 447, 588.

Bank of Danville, Matter of, 550,

Bank of Edwardsville v. Simpson, 989,

Bank of England v. Motfat, 365.

Bank of England v. Parsons. 366.

Bank of England v. Lunn, 366, 498.

Bank of Fort Madison v. Alden, 50, 966.

Bank of Genessee v. Patchin Bank, 808,
942, 809, 927. ;

Bank of Georgia v. Savannah, 617,

Bank of Hindustan, In re, 978,

Bank of Holly Springs v. Pinson, 569,
579, 570, 568, 4

Bank of Ireland v. Trustees of Evans’
Charities, 648, 412.

Bank of Kentucky v. Schuylkill Bank,
825.

Bank of London v. Terrell, 738.

Bank of Louisville v. Young, 866.

a of Louisville v. Gray, 394, 354,

94, ;

Bank of Lyons v. Demmon, 379, 179,
928.

Bank of Manchester v. Allen, 719.

Bank of Marietta v. Pindall, 989.

Bank of Metropolis v. James, 928, 921.

Bank of Metropolis v. Guttschlick, 934.

Bank of Michigan'v. Williams, 989, 884.

Bank of Michigan v. Niles, 853, 848,

Bank of Michigan v. Gray, 296.

Bank of Middlebury v. Edgerton, 863.

Bank of Middlebury v. Rutland, etc,
R. R., 659,

Bank of Middleberry v. Rutland, etc.,
R. R. Co., 988.

Bank of Monroe v. Gifford, 909.

Bank of Montgomery v. Reese, 317, 651.

Bank of Miss. v. Duncan, 720.

Bank of Montreal v. Sweeney, 360.

Bank of N. L. v. Lake Shore & M.S. R. 4
R. Co., 507.

Bank of N. A. v. Chicago, etc., RB. R.
Co., 886.

Bank of Old Dominion v. McVeigh, 514.

Bank of Oldtown v. Houlton, 9. |

Bank of Omaha v. Douglas Co., 626.

Bank of Penn. v. Commonwealth, 513.

Bank of Pennsylvania v. Gries, 228.

Bank of Pa. v. Reed, 928. z

Bank of Pittsburgh v. Whitehead, 952.

Bank of Poughkeepsie v. Ibbotson, 289,
227, 247, 233, 235, 210, 236, 252.

Bank of Redemption v. Boston, 681.

Bank of Républic v. Co. of Hamilton,
619, 688,

Bank of Rome v. Rome, 105, 122.

ern of St. Mary’s v. St. John, 915, 600,

1, 5
Bank of St. Mary’s v. Mumford, 951.
TABLE OF CASES.

Xxi

{The references are to the foot-paging.]

Bank of Scotland v. Addie, 171, 162.

Bank of §. C. v. Humphreys, 954.

Bank of Sing Sing, Re, 251.

Bank of South Australia v. Abraham,
834, 132.

Bank of State v. Bank of Cape Fear,

on of Switzerland v. Bank of Turkey,

Bank Tax Cases, 683, 626.
i of Toledo v. International Bank,
14.

Bank of U. S. v. Commonwealth, 711.
Bank of U. 8. v. Dallam, 212, 280, 213,
203, 208.
Bank of U. S. v. Dandridge, 935.
Bank of U. S. v. Davis, 953.
Bank of U. 8. v. Deveaux, 885, 2.
Bank of U. S. v. Dunn, 921, 928.
Bank of U. e v. Owen, 866, 849.
np. V

Bank of U. . Planters’ Bank, 995.
Bank of Utica v. Smalley, 568, 580, 9,
884, 984, 421, 575, 570.
Bank of Vergennes v. Warren, 940, 939.
Bank of Virginia v.. Adams, 211, 209.
Bank of Virginia v. Craig, 408, 363.
Bank of Waterville v. Belster, 984.
Bank of Watertown v, Watertown, 550.
Bank of Wilmington v. Wollaston, 887.
Bank of Wooster v. Stephens, 221.
Banks v. Poitiaux, 854, 938.
Bankhead v. Brown, 861, 862.
Bankright v. Liverpool Ins. Co., 991.
Bannatyne v. Direct, etc., Co., 822, 307.
Banner v. Lowe, 610.
Banque, etc., v. Brown, 828, 169, 166,
742.

Baptist Church v. Brooklyn Ins. Co. ;
948,
Baptist Church v. Mulford, 936, 934.
Baptist House v. Webb, 916, 710, 700.
Barber’s Case, 689.
Barclay v. Wainewright, 608, 605.
Barclay v. Culver, 484.
Barclay v. Talman, 700, 209.
Barclay v. Quicksilver M. Co., 774.
Barclay, Ex parte, 548.
Bard v. Banigan, 757.
Bard v. Poole, 865, 866, 263.
Bard v. Chamberlin, 849,
Bardstown & L. R. R. Co. v. Metcalf,
842, 838.
Bardwell v. Sheffield, etc., Co., 310.
Bargate v. Shortridge, 944, 369, 285.
Barge’s Case, 128.
Baring v. Dix, 555, 545.
- Barings v. Dabney, 851.
Barker v. Andover, 858.
Barker, In re, 676, 680.
Barker v. Stead; 899.
Barker v. Rutland & Washington R, R.
Co., 25,
Barker v. Mechanics’, etc., Co., 943,
Barksdale v. Finney, 11.
Barlow v. Chicago, etc., R. R. Co,, 860.

 

Barnard v. Backhaus, 386, 387, 389, 383,
381, 388.

Barnard v. Vermont, etc., R. R. Co.,,
306, 586, 305, 311, 310.

Barned v. Hamilton, 647, 650, 652.

Barned’s Banking Co., Re, 422, 350, 420.

Barnes v. Atchinson, 104, 111,

he v. Brown, 370, 30, 687, 6938, 734,
4

Barnes v. Hall, 497, 621.

oe v. Mobile, ’te., R..R. Co., 828,

Barnes v. Ontario Bank, 823, 827, 927,
825, 944,

Barnes v. Stoddard, 854, 867.

Barnes v. Lacon, 101.

Barnes v. Trenton, etc., Co., 951.

Barnes v. Morgan, 500.

Barnes v. Perine, 85.

Barnet’s, In re, 565.

aa Chicago, etc., R. R. Co., , 992,

Barnett’s Case, 178, 201, 52,

Barnett v. Lambert, 900.

Barnett v. South, etc., R’y, 947.

Barney v. State, 622.

Barnstead v. Empire Min. Co., 7.

Baron v. Mining Co., 945.

Baron v. King Mountain Min. Co., 989.

Barons De Beville Case, 3

Barr v. N. Y., etc., R. R. Co., 765,

Barr v. N. Y., etc., Co., 758.

Barre Nat'l Bank v. Hingham Mfg. Co.,
270, 203, 271, 217.

Barret, In re, 790. '

Barrett’s Case, 278, 272.

Barrett v. Alton, etc., R. R. Co., 520.

Barrett v. Blant, 899.

Barrett v. Hyde, 381.

Barrett v. Mead, 381.

Barrick v. Austin, 928.

Barrington v. ‘Pittsburgh & Steuben-
ville R. R. Co., 92, 185, 159, 133.

Barrington v. Washington Bank, 914.

Barrington v. Miss. C. R. R. Co.,.182.

Barron v. Burnside, 869.

Barrow v. Nashville, etc., T. Co., 854.

Barrow, etc., Co., Re, 311.

Barrow’s Case, 56.

Barrow v, Baltimore, 864. ;

Barry v. Calder, 648.

Barry v. Croskey, 528, 381, 370.

Barry v. Merchants’ Ex. Co., 587, 935,
823, 4, 586, 597, 837, 847, 855, 824, 852.

Barry v. Missouri, etc., R’y, 828.

Barstow v. Savage Min. Co., 445, 414.

Bartholomew v. Bentley, BB, 601, 10,
689, 688.

Bartlett v. Drew, 602, 601, 217, 600.

Bartlett v. Kinsley, 909.

Bartlett v. Norwich, etc., R. R. Co., 784.

Bartlett v. Pentland, 209.

Bartlett v. P. C. & St. L. R’y, 795.

Bartlett v. Smith, 384, 387.

Bartley v. Bartley, 565. .
‘

xxii

TABLE OF CASES.

[The references are to the foot-paging.]

Barton, Re, 564.

Barton’s Estate, 357. \

Barton’s Trusts, In re, 609, 608.

Barton v. Cooke, 331.

Barton v. Enterprise, etc., Ass’n, 696.

Barton’s Case, 142.

Barton v. Port Jackson, 848, 845, 956.

Barttel v. Meader, 112.

Barton v. London, etc., R’y, 412.

Barton v. North, ete., R’y Co., 412, 362.

Barton v. Port, etc., P. R. Co., 347.

Barwick v. English Bank, 875, 171, 874.

Bason v. Min. Co., 941. , ;

Bass v. Chicago R’y Co., 879.

Basset v. Moate, etc., Co., 745.

Bassett v. Monte Christo, etc., 656.

Bassett v. St. Alban’s Hotel Co., 234,
226.

Bassford v. Blakesley, 563,

“Basshor v. Forbes, 229.

Basshor v. Dressell, 709.

Batard v. Hawes, 901.

Bate v. Lewis, 157.

Bateman v, Mid-Wales R’y Co., 816.

Bateman v. Service, 248, 263, 242.

Bates v. Androscoggin, etc., R. R. Co.,
804, 306. , :

Bates v. Bank of Alabama, 936, 845,
916.

Bates v. Keith, etc., Co., 929.

Bates v. McKinley, 589, 605, 608, 609.

Bates v. New York Central R. R. Co,, |

938.

Bates v. New York Ins. Co., 595, 573,
576, 567.

Bates v. Wiles, 647,

Bates Co. v. Winters, 120, 124. ;

Bath v. Caton, 886. ;

Bath’s Case, 181, 168.

Battelle v. Northwestern, etc., Co., 957.

Battelle v. Northwestern, ‘743.

Batterson v. Cincinnati, etc., R’y, 724,

Batties’ Case, 295.

Bauton v. Dry Dock, etc., Co., 128.

Baxendale v. East. Co. R’y, 793,

Baxendale v. London. & 8, W. R’y, 794.

Baxter v. Moses, 209. g

Bay, etc., Assoc. v. Williams, 917.

Bay City v. State Treasurer, 104.

Bayard v. Hoffman, 379.

Bayard v. Farmers’ & M. Bank, 358,
361, 428. ‘

Bayless v. Orme, 911, 977.

Bayley v. Wilkins, 465, 474, 476.

Bayliffe v. Butterworth, 465, 474, 475.

Bayliss v. Swift, 231, 209.

Bayliss v. Lafayette, etc., R. R. Co.,
732, 759. ;

Beach v. Hazard, 184..

Beach v. Cooper, 978.

Beach v. Fulton Bank, 877, 845.

Beach v. Smith, 24, 184.

Beach v. Miller, 763.

Beadles v. McElrath, , 385.

Beal v. Chase, 769,

 

Beale v. Mouls, 899.

Beale v. Railway Co., 878.

Bean v. Bowen, 535.

Beard v. Union & A: Pub. Co., 869."

Beardsley v. Hotchkiss, 81.

Beardsley v. Smith, 108.

Beardsley v. Johnson, 663,

Beaston v. Farmers’ B’k, 885, 989.

Beattie v. Lord Ebury, 768. :

Beatty v. Northwest., etc., Co., 744.

Beatty v. Marine Ins. Co.,, 944.

Beaujolois Wine Co., In re, 699.

Beaumont v. Meredith, 546.

Beavan.v. Beavan, 610.

Becan v. Miss., etc., Ins. Co., 921.

Becher v. Wells Flouring Mill Co., 447,
481, :

Beck v. Ashuelot, etc., Co., 983.

Beck, Ex’r, v. McGillis, 334.

beck v. Kantorowick, 740, 739.

Beckett v. Billsbrough, 375, '76.

Beckett v. Houston, 18, 678.

Beckford v. Wade, 962.

Beckman v. Henderson, etc., Ry., 713,

Beckwith v. Rochester Iron, etc., Co.,
815. ; :

Becewith v. Burroughs, 502, 379, 478,

20.

Beckwith v. Windsor, 939.

Bedford v. Bagshaw, 173, 396.

Bedford R. R. Co. v. Bowser, 323, 177,
955, 146, 524, 91.

Bedford County v. Nashville, C. & St.
Louis’ R. R. Co., 22.

Bedford, etc., R’y v. Stanley, 905.

Beecher v. Dacey, 809.

a v. Marquette & Pac. P. M. Co.,

Beecher v. Wells, etc., Co., 821.

Beekman v. Hudson, 832.

Beekman v. Saratoga & S. R. RB. Co.,
856, 791. a 4

Beene v. Cahawba, etc., R. R. Co.,
884, 148, 84.

Beers v. Bridgeport Spring Co., 593, 594,
598, 592, 587. ‘

Beers v. Phoenix Glass Co., 827, 823,
918, 915.

Beers v. Waterbury, 238.

‘Behler v. German Mut. F. I. Co., 870.

Belcher v. Wilcox, 249, 248.

Belding v. Ford, 786.

Belfast, etc., R. R. Co. v. Belfast, 304,
807, 302, 306, 596, 301, 305, 298.

rn etc., R. R. Co. v. Brooks, 121,

Belfast, ete., R. R. Co. v. Cottrell, 189,
Belfast, etc., R. R. Co. v. Moore, 88, 90.
Bap v. Boston & Maine R. R. Co.,
Belknap v. North, ete., Ins. Co., 965.
Bell v. Penn, etc., R. R. Co., 960, 783.

| Bell’s Appeal, 215, 281.

Bell v. Railroad Co., 101,119. .
TABLE OF CASES.

xxiii

[The references are to the foot-paging.]

Bell v. Francis, 898.
Bell’s Case, 162.
Bell v. Donohue, 964.
Bell v. Lafferty, 588.
Bell v. Hull, 9. -
Bell Telephone Co. v. Commonwealth,
de
Bellaires v. Tucker, 398, 396.
Belleville Sav. Bank v. Winslow, 925.
Belleville Nail Co. v. P., 635.
Bellona, Company’s Case, 909.
Bellows v. Hallowell, etc., Bank, 881.
Bellows v. Todd, 656.
Bellis, etc., R. R. v. Christy, 907.
Belmont v. Coleman, 246, 222,
Belmont v. Erie R’y Co., 315, 967, 979,
696, 977.
Belo v. Com’rs of Forsyth, 622, 625.
Beloit.v. Morgan, 102. -
Belson v. Lang, 832.
Belton, etc., Co, v. Sanders, 186,
Belton v. Hatch, 890.
‘Beman v. Methodist, 992.
Beman v. Rufford, 7185, 967, 969.
Bemcomb Turnpike Co. v. McCarson,
915.
Bencroft v. Wilmington, etc., 936.
Bend v. Priest, 735. .
Bend v. Susquehanna Bridge Co., 282.
Benedict v. Lansing, 932.
Pee v. Western U. Tel. Co., 785,
968.
_Bengley v. Wheeler, 971, 970, 747.
“Benjamin v. Elmira, J. & C. BR. BR. Co.,
840,
Bennett, Ex parte, 295.
Bennett v. Maryland, etc., Co., 949.
Bennett’s Case, 296, 342, 276,
Bennett v. Nat. Ins. Co., 933, 756.
Benoist v. Carondelet, 935.
Benson v. Heathorn, 740, 742, 787, 756.
Benson, Ex parte, 793.
Benson v. Albany, 105.
Bent v. Hart, 11, 4, 345.
Benwood Iron Works v. Hutchinson,
942.
Bercich v. Marye, 646, 650; 651, 647,
414,
Beresford, Ex parte, 145.
Berford v. N. Y., etce., Co., 599, 994.
Bergen v. Porpoise, ete., o., 850, 257,
355.
Bergman v. St. Paul, etc., Assoc., 888,
22:
Berks, etc., Road'v. Myets, 883.
. Berks v. R. R. Co., 939.
Berlin v. Eddy, 484,
Berliner v. Waterloo, 107.
Bernard’s Case, 284, 158.
Berney v. Tax Collector, 626.
Berry v. Yates, 78, 189, 351, 357, 199.
Berry v. Broach, 696. 1
Berry v. Craskey, 158. :
Berry v. Cross, 911.
Berry v. Marietta, etc., R. R. Co., 204.

 

Berryman v. Cincinnati S. R’y, 94.

Bertram v. Godfrey, 463.

Bescoby v. Pack, 334.

Besley, Ex parte, 68, 64, 900.

Best’s Case, 72.

Besto v. Wathen, 734,

Bethel & Hanover T, Co. v. Bean, 140.

Bethune v. Kennedy, 333.

Bett’s Appeal, 88. :

Bevans v. Dingmans, 565.

Beveridge v. Hewitt, 384, 383, 387, 389,
385, 386.

Beveridge v. N. Y., etc., R. R. Co., 587,
910, 782.

Biddle’s Appeal, 318, 611, 606.

Biddle v. Bayard, 643, 44.

Bidwell v. Pittsburg, ete., R’y Co., 265.

Biederman. v. Stone, 465, 475, 474,

Bigelow, In re, 577, 578, 571, 574,

Bigelow v. Gregory, 6, 257.

Bigelow v. Benedict, 383, 461.

Biggart v. City. of Glasgow Bank, 79.

Biggs’ Case, 150.

Biggs, Ex parte, 162.

Biglin, In re, v. Friendship: Ass’ n, 415,

Bikhoff'v. Browne. R. & 8. M. Co., 195.

Bill v. Boston Union Telegraph Co., 758.

Bill v. President, etc., 985.

Bill v. Donohue, 971.

Bill v. Western Union Tel. Co., 974.

Billinger v. Bentley, 942.

Billings v. Robinson, 294, 231, 280, 220.

Billings v. Trask, 955, 231.

Bingaman v. Hickman, 587.

Bingham v. Weiderwax, 721, 720.

Bingham v. Rushing, 211.

Binney’s Appeal, 855.

Binney’s Case, 861.

Birch’s Case, 549; 296, 271.

Bird v. Dageett, 826, 933, 259, 6.

Bird v. Calvert, 232.

Bird‘v. Chicago, etc., R. R. Co., 362.

Bird v. Hayden, 244.

Bird v. Bird’s, etc., Co., 774, 778.

Birkenhead, etc., "Ry Co. v. Pilcher,
278, 353.

Birkenhead R’y Co. v. Webster, 136.

Birmingham Fire Ins. Co. v. Common-
wealth, 432.

Birmingham, etc., Co., In re, 219, 564,

Birmingham v. Sheridan, 428, 376.

Birmingham v. Gallagher, 552.

Birmingham National B’k v. nee
252, .258, 210.

Birmingham, etce., Ry Co. v. ‘Locke,
147, 150, 285, 151, 678, 144,

Birmingham, Bristol & Thames June,
R. Co. v. White, 565, 563.

Bischoffsheim v., Brown, 464,

Bish v. Bradford, 165, 85, 198.

Bishop's Case, 295, 369.

Bishop v. Globe Co., 576, 570, 419, 579,

Bishop v. Brainard, 873, 522.

Bishop of Petersborough v. Mortlock,
XXIV

‘TABLE OF CASES.

[The references are to the foot-paging.]' ;

Bishop, étc., Ass’n v. Kennedy, 491.

Bishop’s Fund v. Eagle B’k, 178.

Bissel v. First, etc., B’k, 927.

Bissell v. Kankakee, 108.

Bissell v. Michigan Southern & N. J.
R. R. Co., 786, 772.

Bissell v. Ryan, 476.

Bissell v. Spring Valley, etc., 113.

Bissell v. Township of Spring Valley,
119.

Bissit v. Kentucky River Navigation
Co., 221, 215.

Bittinger v. Bell, 103.

Black’s Case, 201. §

Black v. Delaware, etc., Canal Co., 775,
782, 696, 867, 841, '779, 523, 519.

Black v. Zacharie, 447, 14, 508, 15.

Black v. Wabash, etc., R. R., 795.

Black v. Huggins, 966, 970.

Black v. Fitchburg R. R., 787.

Black v. Homersham, 590, 589.

Black v. Shreve, 955.

Black R. R. Co, v. Clarke, 194, 184.

Black & White Smith’s Society v. Van-
dyke, 890. ,

Blackburn v. Selma, etc, R. R. Co.,
718, 871, 872, 988. ‘

Blackburn’s Case, 162.

Blackman v. Central R. R.,
760.

Blackshaw v. Rogers, 337.

Blackshire v. Iowa, etc., Co., 940.

Blackstock v. N. Y., etc., R. R. Co., 789.

Blackstone v. Blackstone, 332, 337.

Blackstone Manuf’g Co. v. Blackstone,
640.

Blain v. Pacific Exp. Co., 948.

Blain v. Agar, 902.

Blair v. Compton, 497, 499.

Blair v. Bullolph, 162, 157.

Blair v. Massey, 563. :

Blair v. St. Louis, etc, R, R. Co.,
966, 916, 724, 27.

Blair v. Perpetual Ins, Co., 865, 845.

Blair, etc., Co. v. Walker, 761.

Blaisdell v. Bohr, 411.

Blake, Ex parte, 177.

Blake’s Case, 162, 168, 160.

Blake v. Bayley, 690.

Blake v. Buffalo Creek R. R. Co., 761.

Blake v. Hinkle, 209,

Blake v. Holley, 712.

Blake -v. Griswold, 955, 40,

Blake v. Portsmouth, etc., R. R., 720,

698.
Blake v. Rich, 863,
Blake v. Traders’ Nat'l Bank, 359,
Blake v. Wheeler, 690.
Blakely, etc., Co., In re, 886.
Blakeley’s Case, 271.
Blaker v. Herts, etc., Co., 836.

ete., Go.,

| Bludhill Academy v.

Blakeman v. Puget Sound Iron Co., |

508. 2
Blanchard v. Dedham Gas ‘Light Co.,
509, 447.

Blanchard v. Dow, 691.
Blanchard v, Kaull, 257,

Blanco v. Navarro, 392.

Bland v. Crowley, 900,
Blandford y. School District, 914.
Blann v. Bell, 386.

'|'Blatchford v. Ross, 755, 516, 976, 780,

756, 919, 969.
Blen v. Bear, etc., Co., 921.
Blewitt v. Roberts, 336.
Bligh v. Brent, 12.
Bliss v. Anderson, 811.
Bliss v. Kaweah, etc., Co., 940, 921.
Bliss v. Matteson, '750. :
Block v: Atchison, etc., R. R. Co., 991,
994,
Block v. Com’rs, 115.
Block v. Fitchburg R. R., 806.
Block v. Merchants’, etc., Co., 796.
Blodgett v. Adams, 932.
Blodgett v. Morrill, 156, 178.
Blood v. Marcuse, 925.
Bloodgood v. Kain, 592.
Bloodgood v. Mohawk, 108. °°
Bloomfield & R., etc., Co. v. Richard-
son, 863, 862. =~
Bloomer v. Union Coal & I. Co., 834.
-Blossburg, etc., R. R. Co. v. Tioga R. R.
Co., 785, 886.
Blouin v. Liquidators, etc., 480, 491.
Bloxam’s Case, 72.
Bloxham v. Metropolitan R’y Co., 962,
821, 968, 597,598.
Witham, 903,

Blundell v. Winsor, 548.

Blunt v. Walker, 63, 23.

Blyn v. Second National Bank, 846.

Blyth’s Case, 200.

Blyth v. Carpenter, 647, 651.

Board of Com’rs of T. County v. Rey-
nolds, 355.

Board, etc., of Tippecanoe Co. v. Lafay-
ette R. R. Co., 811, 944, 975.

Board of Com’rs v. Elston, 62.

Board of &, v, New Orleans Water-
works Co,, 484, :

Board of Com’rs v. Davis, 631.

eos Com’rs of L. Co. v. Reynolds,
391.

ei of Bartholomew Co. v. Bright,
103.

Board of Com’rs v. Cottingham, 120.

Boardman v. Lake Shore, etc. R, R.
Co., 590, 960, 594, 309, 702, 308, 807,

. 805, 69, 307, 302, 994.

Boardman v. Cutter, 379.

Boardman v. Gaillard, 476.

Boatmen’s Ins. & Trust Co. v. Able, 405,

447,
Bove Ex’rs v. Alleghany, etc., Coy
Bodley v. Reynolds, 652,

Bodley v. Goodrich, 851,
Bodwell v. Eastman, 552.

 

|, Bodwin, etc,, Co., In re, 548,
TABLE OF CASES,

XXV

[fhe references are to the foot-pagin;.]

Boeppler v. Menown, 129.'
Bogardua v. Rosendale Mfg. Co., 216,

Bete v. Trinity, Church, 856.

Boggs v. Adger, 357,

Bogg v. Olcott, 64, 66, 199.

Bohannon v. Binns, 711.

Bohlen’s Estate, 362, 358. .

Poa v. City B’k of Richmond, 568,

70.

Bohn v. Brown, 280, 246.

Boisgerard v. N. Y. Banking Co., 550,
, 938, 883, 945.

Boland v. Haven, 937, 245.

Bolen v. Crosby, 247.

Bolles v. Brimfield, 112.

Bolton v. Liverpool, 557.

Bolz v. Kidder, 40.

Bernt v. American, etc., Co., 715,

Bonaparte v. Camden & H. R. R. Co. ‘
857, 862, 861.

Bond v. Wabash, etc., R’y, 794.

Bond v. Central Bank, 846.

Bond v. Appleton, 287, 235, 287, 243.

Bond v. Mt. Hope Iron Co., 648, 427.

a naa York & C. R. RB. Co., Re,

39 &
Bone v. Canal Co., 854.

~Bonewitz v. Van “Wert Co. Bank, 216,

Boston & A. R

yoy

236, 217.
Honheaae: Bonham, 612.
Bonnarcht v. Taylor, 564, 565.
Bonner, Re, 490.
Bonnifield_v. Bidwell, 104,
Boody v. Drew, 554.
Booe v. Junction R. R. Co., 519.
Booker, Ex parte, 978, 195, "808, 524,
Boone v. Citizens’ Bank, ete., 542,
Boorman v. Atlantic & "Pac. RB. RB. Co. i
565.
Booske v, Gulf, etc., Co., 712.
Boot & Shoe Co. v. Hait, 21, 24.
Boot, etc., Co, v. Dunsmore, 919,

' Booth v. Wonderly, 261.

Booth v. Fieiding, 469.
Booth v. Robinson, 351, 758.
Booth v. Bunce, ay.
Booth v. Smith, 392.
Booth v. Campbell, 227.
Bowdell v. Farmers’, etc.,
283, 270.
Boogher v. Life Ass’n of America, 877.
Boupad v. Haven, 247, 278, 290, 764,
235.
Borland v. Stokes, 644.
Borough v. Frederick, 824.
Borton v. Dunbar, 335.
Bosanquet v. Shortridge, 659, 286, 285.
Bostock v. Blakeney, 609, 358.
R. Co. , Matter of,
857.

Boston, etc., R. R. Co., Re, 859.
Boston, etc., R. R. v. N. Y., ete, RB. R.,
991, V5, 960, 959.

Nat’l Bank,

(

 

Boston Music Hall v. Cory, 368, 509.

Boston & M. R. R. Co. v. Lowell, 858.

Boston, etc., Co. v. Boston, etc., Co.,
881, 917, 640.

Boston, etc., R. R. v. State, 791, 880.

Boston, etc., R. R. v. Wellington, 187,
148, 64, 24, 67, 88.

Boston Water- -power Co. v. Boston &

W. R. R. Co,, 858.

Boston Mfg. Co. v. Commonwealth, 616,

Boston, etc.,
wealth, 585,

Boston Glass Mfg. Co. v. Langdon, 700,
699, 701.

Bee Gad Electric Co. v. Electric, etc., Co, bi
9

Boston, o & M. R. R. v. Gilmore, 43,

Boston & Albany R. R. Co. v. Pearson,
551, 554, 552. .

Boston, etce., Co. v. Ansell, 735.

Boston & L. R. R. Co. v. Salem & L, R.
R. Co., 858, 803.

Boston, ete. R. R. Co. v. New Eng. R,
R. Co., 780.

Boston, etc., Co. v. Bankers’, etc., Co.,
828, 351.

Boston, etc., R. R. Co. v. Richardson,
316, 652, 410.

Boston & Albany R. R. Co.. 550.

Bostwick v. Fire Dep’t of Detroit, 891.

Bothamley v. Shersan, 334.

pour: 3 Case, 132, 660.
otts -v, Simpsonville, etc., Co., 782,
973.

Bouch, In re, 609.

Bouchard v. Dias, 70.

Bauche v. Sproule, 609.

Bouldin v. Bull, 984.

Boulter v. Peplow, 901.

Bourne v. Freeth, 902.

Bouron, In re, 71.

Bouton v. Dement, 220, 23, 208.

Bow v. Allenstown, 719.

Bowden v. Johnson, 294.

Bowden v. Santos. 294.

Bowditch v. N. E., etc., Ins. Co., 846,

Bowen v. First Nat’ 1B k, 991.

Bowker v. Pierce, 607, 358.

Bowlby v. Bell, 474, 466.

Bowling Green, etc., R. R. Co. v. War-
ren,, 115.

Bowman v. Wathen, 962.

Bowman v. Chicago, etc., R’y, 801.

Bowring v. Shepherd, 292, 476,

Box’s Trusts, Re, 609, 611.

Boyce v. St. Louis, 868.

Boyce v. Trustees, etc., 715.

Boyd v. Ball, 249, 248, 237, 235.

Boyd v. Ches. & Ohio Canal, 982, 991.

Boyd v..Rockport Steam Cotton Mills,
447, 509.

Boyd v. Peach Bottom R’y Co., 92, 91,
185,

Boyer v. Boyer, 632, 628.

Boylan Hull Colliery Co., Re, 25.

R, R. Co, v. Common-
XXvi

\

Boylan v. Huguet, 651, 484, 647, 6438, 652,
470. ;

Boyle’s Case, 197.

Boynoll v. State, 629.

Boynton, etc., Co., In re, 697.

Boynton v. Hatch, 39, 38.

Boynton v. Andrews, 38, 391.

Boynton v. Lynn, etc., Co., 929.

Boys v. Williams, 338.

Brace v. Ormond, 557.

Brackett v. Griswold, 56.

Bradbury v. Burns, 745.

Braddock v. Phil., Marlton & Medford
R. R. Co., 126, 127.

Bradford Navigation .Co., In re, 698.

Bradford, etc., Co. v: Briggs, 580, 581,

* 568.
radford v. Water Lot Co., 883. ,

Bradley v. Bauder, 11, 617, 614, 620.

Bradley v. Luce, 400.

Bradley v. Illinois, 626.

Bradley v. New York & N. H.R. R.

\

Co., 362.
Bradley v. Ballard, 824, 828.
Bradley v. Farwell, 763.
Bradley v. Marine, etc., Co., 762.
Bradley v. Poole, 390.
Bradley v. Northern P. R’y, 857.
Bradley v. People, 629. |
Bradley v. Warren, etc., Bank, 926.
Bradley v. South, etc., Co., 806.

Bradley v. Holdsworth, 12. ,

Bradner, In re, 119.

Bradshaw, Ex parte, 833.

Bradstreet v. Bank of Rutland, 912.

Bradt v. Benedict, 699, 702.

Brady v. Brooklyn, 916.

Brady.v. Rutland & Burlington R. R.
Co., 24.:

Brady v. Mayor, etc., 774.

Brainerd v. Cowdrey, 3381.

Brainerd v. New York & H. R. R. Co.,

29,

Braintree, etc., Co..v. Braintree, 711.

Bramah v. Roberts, 912.

Brampton, In re, 905.

Branch v. Atlantic, etc., R. R., 844, 841. ,

Branch v. Jesup, 22, 301, 778, 957.

Branch.v. Baker, 235, 236.

Branch Bank v. Steele, 951.

Branch Bank of Montgomery v. Cro-
cheron, 847.

Branch v. Charleston, 638.

Brand v. Lawrenceville, etc., R. R. Co.,
188, 96.

Brand v. Henderson, 883.

Brander v. Brander, 608.

Brandon, etc., Co, v. Gleason, 701.

Branham v. Record, 96. ‘

Branin v. Conn., etc., R. R. Co., 800.

Branley v. S. E. R’y, 793.

Bransdan v. Winter, 333.

io v. New Eng., etc., Ins, Co.,

Branson v. Oregonian R’y Co., 286.

 

TABLE OF CASES.

| [The references are to the foot-paging:|

Brant v. Ehlen, 21, 38, 49, 89, 58, 23, 52,

57.
| Brass v. Worth, 495, 493, 472.

Bravard v. Cincinnati, etc., R. R., 717,

Bray v. Farwell, 554, 545, 185.

Bray’s Adm’r v. Seligman’s Adm’r, 223.

Breese v. U. 8. T. Co., 797.

Breitung v. Lindauer, 516.

Brenley v. Equitable Life Assurance,
965.

Brennan v. Tracy, 879, 877, 876.

Brent v. Bank of Washington, 568, 573,
576, 577, 574, 572, 595, 571.

Bressler v. Wayne, 680.

| Breton Co., In re Cape, 740.

Brewer v. Boston Theater, 973.

Brewer v. Michigan Salt, etc., Co., 602,
601.

Brewer v. Stone, 96.

Brewer v. Watson, 557.

Brewer Brick Co: v. Brewer, 108.

Brewer's, etc., Ins. Co. v. Burger, 70,
155, 156.

Brewster v. Hartley, 680, 681, 685, 687,
482, 480, 479, 282.

Brewster :v. Hatch, 170, 740.

Brewster v. Lathrop, 589.

Brewster v. Sime, 360, 488.

Brewster v. Van Liew, 648.

Brice v. Munro, 209.

Brick v. Brick, 481:

Bridge Proprietors'v. Hoboken, 804.

Bridgeford. v. Hall, $83.

Bridgeport v. Housatonic R. R. Co., 103.

' Bridgeport Bank v. N. Y., ete, R. RB.

Co., 402, 446, 420, 428, 403.
Bridgeport City Bank v. Empire Stone,
D. Co., 809.
Bridgeport Sav. Bank v. Eldridge, 923.
Bridger’s Case, 178, 156, 26.
Bridgeton v. Bennett, 936.
Bridgewater Iron Co. v. Lissberger, 509.
Bridgewater Nav. Co., Re, 811.
Bridgman v. Keokuk City, 11, 616.
Bridgport Old Brewery Co., In re, 664.
Brien v. Harriman, 555, 545.
Briggs’ Case, 162.
Briggs’ Ex parte, 172.
Briggs v. Cape Cod, etc., Co., 709, 716.

‘Briggs v. Cornwell, 249, 808.

Briggs v. Massey, 448.
Briggs v. Penniman, 227, 233, 400.

Briggs v. Oliver, 491.

Briggs v. Waldron, 291. 2

Brigham v. Mead, 281, 292, 418, 381, 481,
18, 285, 282.

Bright’s Case, -900.

Bright v. Lord, 591, 590.

Bright v. Hutton, 900.

Bright v. Metairis, etc., Assoc., 928.

Brighton Arcade Co, v. Dowling, 201.

Brightwell v. Mallory, 498, 11, 368.

Babooueads L. & C. R’y Co. v. Webster,

Brimley v. West, 983.
TABLE OF CASES.

XxVii.

[The references are to the foot-paging.]

Brinckerhoff v. ‘Bostwick, 898, 970, 97.
962, 708, 892. 978.

Brinham v. Wellersburg Coal Co., 234, |

235, 238, 258, 234.

Brinkerhoff v. Brown, 216.

Brinkley v. Hambleton, 29%.

Brinley v. Mann, 987, 938.

Brinley v. Grow, 611.

Brint v. State, '710.

Brisbane: v. Delaware, etc., R. R. Co.,
588, 587, 646, 403.

Bristol, etc., Ry Co., Re, 299.

Bristol’ ¥. Chicago, ete., R. R. Co., 886.

‘Bristol Milling, etc., Go. v. Probasco,
254,

Bristol, etc., Bank v. Keary, 926.

Bristol v. Sanford, 231.

Beek etc., Co., Re, 966, 45, 42, 962,

8.

British Assurance Co. v. Brown, 944.

British & American Tel. Co., Re, 64.

British, etc., Tel. Co. v. Colson, 72.

British Prov. Ths. Co., In re, 133.

British Farmers’ Pure ‘Linseed Cake Co.,,

Re, 58.

British Sugar Ref. Co., In re, v. Ex parte
Faris, 668, 184, 665.

British, etc., Co. v. Com’rs, 833. .

British: American Land Co. v. Ames,
989.

Brittain v. Allen, 10.

Brittain, Ex parte, 900.

Brittain v. Newland, 884. i

Broadbent v. Farley, 644.

Broadbert v. Johnson, 87.

Broadway Bank v. McElrath, 505, 420,
17, 480, 422.

Brocaw v. Board of Com’rs, 109.

Brocaw v. Gibson Co., 103, 120.

Brock District Council v. Bowen, 883. ,

Brockenbrough v. James River, etc.,
Co., 145.

Brockway v. Allen, 883, 948,

Brockway v. Innes, 228,

Brockway v. Ireland, 40, 39.

Brodie v. McCabe, 101.

Brooklyn, etc., R. Ro Co., In re, 14,
710.

Brooklyn, C. & J. BR. R. Co, v. Brook-
lyn C. R. RB. Co., 859.

Brooklyn, etc., Co. v. City, 715.

Brooklyn Life Ins. Co. v. Pale dooes 870.

Brooklyn, etc., R. R. v. Strong, 409.

Brookman v. Rothschild, 464, °

Brooks v. N. Y., etc., R. RB. Co., 996.

Brookville’Ins. Co. v. Records, 636.

Brookville & G. T. Co. v. McCarty, 193.

Brokaw v. N. J., etc., Co., 768, 874, 876. .

Bromley, In re, 611.

Bromley v. Elliott, 280.

Bromley v. Smith, 969. .

Bronson v. La Crosse R. R. Co., 759,
983.

Bronson v. Wilmington, etc., Ins. Co.,
254.

 

Brotherhood’s Case, 149, 960.

Broughton v, Manchester, etce., Works,
825, 827, 847.

Brower v. Passenger R. R. Co., 73, 79.

Brower v. Cotheal, 560.’

Brown’s Case, 36, 895, 689, 283.

Brown, Ex parte, 296.

Brown’ v. Adams, 425, 722, 447,

Brown v, Andrews, 920, 661.

Brown v. Brown, 336.

Brown v. Beatty, 862.

Brown v. Black, 278, 296. ‘

Brown v. Buffalo, ete., R. R., 978, 587.

Brown:v. Boorman, 466.

Brown v. Byers, 677, 825.

Brown v. Calumet, etc., R’y, 710.

Brown v. Campbell, 357.

Brown v. Commonwealth, 676.

Brown v. Dibble, 96, 195:

Brown v. Donnell, 923.

Brown v. Eastern Slate Co., 229:

Brown v. Farimount Min. Co., 516,

Brown v. Fisk, 213.

Brown v. Finn, 278,

oe v. Florida Southern R’y Co., 318,
20

Brown vy. French, 357.

Brown v. Hitchcock, 291, 287, 248, 236,
290, 298, 288,

Brown v. Holt, 548.

Brown v. Howard Ins. Co.,; 410.

Killan, 848.
‘La Trinidad, 903.
Lehigh Coal & Nav. Co., 585,

Mayor, etc., 886.

M.8. & L. R’y, 795.
McGuire, 337.

New Bedford Inst. for Sav.,

Orr, 965. ,
Pac. Mail, etc., 693, 682, 683,

Phelps, 381.
President, etc., 801.
Smith, 420.
Somerset, 933,
Speyers, 387.
Stoerkel, 546.
Union Ins. Co., 691, 911.
Vandyke, 760.
‘Ward, 491.

Brown v. Winnissimmet Co., 926, 934,

816.

Browne v. Collins, 605, 609.

Browne v. Monmouthshire Ry, etc.,
Co., 599.

Browne v. Monmouthshire R’y and
Canal Co., 586.

Browning v. Camden & W. R. R. Co.,
857.

Browning v. Great, etc., Co., 906,

Brownlee v. Ohio, etc., R. R. Co., 65,
156, 165, 68.

Brown v.
Brown v.
Brown v.
584.
Brown v.
Brown v.
Brown v.
Brown v.
491,
Brown v.
Brown v.
533.
Brown vy.
Brown v.
Brown v.
Brown v.
Brown v.
Brown v.
Brown v.
Brown v.
Brown v,

1

Brownlee v. Campbell, 163.
XXVill ‘

TABLE OF CASES,

[Phe references are to the foot-paging.]

Brownson v. Chapman, 467, 378.
Broyles v. McCoy, 267.

. Bruas’ Appeal, 380, 383.

Bruce v. Lord, 943.

Bruce v.. Nickerson, 172,

Bruce v. Platt, 690, '700.

Bruce v. Smith, 447, 873, 371.

Brudlove v. Martinsville F. RB. R. Co. is
128.

Bruff v. Mali, 326, 324, 325, 327.

Bruffett v. Great Western R. R. Co.,
700. .

Brum v. Merchants’, etc., Ins. Co., 723.

Brumly v. Westchester, etc., 971.

Brundage v. Brundage, 589, 590, 592,
610, 7, 584.

Brundage v. Monumental, etc., Mining
Co., 217, 241.”

Brunswick, etc., RB’ y, In re, 790.

Brunton’s Claim, In re, 835.

Bryan v. Baldwin, 495, 471, 494, 464,
651.

Bryan v. Lewis, 382.

Bryant v. Goodnow, 668,

Bryant v. Tel. Co., 796.

Bryon v. Carter, 569, 571, 567.

Bryson v. Raynor, 494, 495, 489.
Bryson v. Warwick, ete., Co., 970, 780.

- Buchan’s Case, 272.

Buchan, Ex parte, 563.

Buchanan v. Litchfield, 113.

Buchanan v. Meisser, 249,

Bucher v. Dillsburgh, etc., R. R. Co.,
75, 65, 156.

Bucheridge v. Ingram, 13.

Buck v. Buck, 548,

Buck, etc., Co. v. Lehigh, etc., Co., '703.

Buckfield, ete., R. R. Co. v. Irish, ’88,

Buckland v. Adams Exp. Co., 795.

Buckley v. Briggs, 936.

Buckley v. Whitcomb, 249,

Bucklin v. Bucklin, 535,

Buckmaster v. Consumers’ Tce Co., 483,

Buckly v. Briggs, 827.

Bucksport & Bangor R, R. Co. v. Buck,
90, 191, 187, 668, 517.

Bucksport, etc., R. R. Co., v. Brewer,
121, 90, 91.

Budd’s Case, 295.

Budd v. Monroe, 689, 360, 434.

Budd v. Multnomah St. R’y Co., 142,
645, 131, 648, 184, 133, 648,

Budine v. Grand Lodg e, 885.

Buell v. Com’rs of Fasettoville, 628,

Buell v. Buckingham, 851, 855, 745, 660.

Buffalo, City of, Re. 857,

Buffalo, Matter of City of, 856.

Buffalo, etc., R. R. Co. v. ‘Dudley, 1438,
517, 144, 145, 160, 782, 84, 17.

Buffalo R. R. Co. v. Clark, 86, 68.

Buffalo Grape Sugar Co. v. Alberger,
414, 430,

Buffalo, etc., R. R. Co. v. Dudley, 74.

Buffalo & J. R. R, Co. v. Gifford, 197,
198, 72, 68, 65.

 

Buffalo, etc., R. R. Co. v. Potter, 520,

Buffalo, etc., Institute v. Bitter, 942.

Buffalo & N. Y. C. R. R. Co. v. Brai-
nard, 862, 856.

Buffalo, etc.. R. R. Co., v. Buffalo, ete,
R. R. Co., 799.

Buffalo & A. R. R. Co, v. Cary, 256.

Buffalo & A. R. R. Co. y. Carey, 194,

Buffalo, etc., Co. v. Hatch, 195.

Buffalo, N.Y. & E. RB. R. Co. v. Lamp-
son, 840, 761.

Buffalo, etc., R’y Co. v. N. Y., ete, RB.
R. Co., 7 13,

Buffalo Lubricating Oil Co. v. Standard
Oil Co., 877.

Buffitt v. Troy & Boston R. R., 786,

Buford v. Keokuk, etc., Co., 975,

Buford v. Keokuk Northern Line Co.,
‘T75.

| Bugg’s Case, 278, 539.

Bugg, Ex parte, 279; 539.

Bulkley v. Briggs, 844, 935.

Bulkley v. Beg, etc., Co., 973.

Bulkley v. Derby Ins. Co., 944,

Bulkley v. Derby Fishing ‘Co., 934, 933,

Bulkley v. Whitcomb, 248,

Bull v. Douglass, 647, 651, 648.

Bullard v. Bell, 251, 235, 240.

Bullard v. Bank, 569, 581.

Bullard v. Kinney, 553,

Bullard v. Nantucket Bank, 884,

Bullock.v. Bullock, 359.

Bullock v. Chapman, 296.

Bullock v. Falmouth, etc., Co., 553.

Bullock v. Falmouth, 65, 85.

Bullock v. Kilgour, 245.

Bulmer’s Case, 271.

Bulow v. City of Charleston, 626.

Bult v. Morrell, 825.

Buncombe Turnpike Co. v. McCarson,
936.

Bundy v. Cocke, 241, 275.

Bundy v. Jackson, 347.

Bunn’s Appeal,211, 281, 214.

Bunn’s Case, 295.

Bunn v. Ryker, 380,

Bunting’s Adm’r vy. Camden & Atl. R,
-R. Co., 829.)

Burbidge v. Morris, 899.

Burch v, Breckenridge, 588.

Burford v. N. Y., etc., Co., 909.

Burges & Stock’s Case, 815.

Burgess’ Case, 174.

Burgess v. Pue, 934.

Burgess v. Seligman, 482, 481, 270.

Burke v. Badlan, 618, 622, +

Burke v. Concord, ete.. R.- R. Co., 785. -

Burke v. Smith, 146, 281, 92, 180.

Burker v. Lyndon, 899. :

Burkinshaw v. Nichols, 20, 58, 57,

Burkitt v. Taylor, 463.

Burleigh v. Ford, 919.

Burlington & Mo. River R. R, Co. v.
Boestler, 97, 98,

Burlington’ s Case, 79,

1
TABLE OF CASES.

Xxix

[The references are to the Soot-paging.]

Burlington R. R. v. Chicago, 791.

Burlington, etc., v., Palmer, 67.

Burlington, ete., R. BR. Co. v. White,

Burlinson’s Case, 275.

Burmester v. Norris, 824.

Pas uape v. Haskin’s Steam-engine Co,,

2)

Bure v. Pennell, 401, 284, 908, 603,

Burnham v. San F. & Co., 152.

~ Burnham v. Savings Bank, 884.

Burns v. Lawrie’s Trustees, 573.

‘Burnside v. Dayrell, 899, 908.

Burnsville, etc., Co. v. State, 483.

Burr v. Chariton, 116.

Burr v. Sherwood, 588.

Burr v. McDonald, 914, 911.

Burr v. Wilcox, 81, 133, 17, 199, 15, 272,
250, 5.

Burrall v. Bushwick R. R. Co., 11, 720,
424, 419, 434, 646, 5.

Burridge v. Anthony, 648,

Burrill v. Nahant Bank, 940, 919, 933.

Burrill v. Boardman, 856. .

Burrill v. Calendar, etc., Co., 754.

Burroughs v. Com’rs, 830.

Burroughs v. Woods, 213.

ae v. North Carolina R. R. ‘Co. 7
590, 7

Burrows v. Sniith, 12, 74, 65, 96, 93, 200.

Burt v. Farrar, 177, 71.

Burt v. British, etc., 965.

Burt v. Dutcher, 647.

Burt v. Rattle, 298, 838, 300, 303.

- Burtis v. Buffalo & 8. L. R. R., 786.

Burton, In re, 565.

Burton’s Appeal, 855.

Burton v. Burley, 925.

Burton v. Saddler’s, 565,

Busbee v. Freeman, 608.

Busey v. Hooper, 6, 662, 966, 179.

Bush’s Case, 18.

-. Bush v. Buckingham, 764,”

Bush v. Johnson, 781.

Bushell v. Commonwealth Ins. Co., 991,
886.

Bushnell v. Beloit, 106.

Bustros v. White, 563.

Butcher v. Dillsburgh & M. R. R, Co.,
185.

Butchers’, etc., Bank v. McDonald, 712.

Butler v. Cumpston, 539, 275, 2938, 79.

Butler v. Aspinwall, 190.

Butler v. Dunham, 103.

Butler v. Finck, 467.

Butler v. Glen Cove Starch Co., 415,
584.

Butler v. Rahm, 840, 842.

Butler University v. Scoonover, 68,

Butler v. Watkins, 875. °

Butman v. Howell, 481.

Butterfield v. Beardsley, 551, 555.

Butterfield v. Cowing, 961, '750.

Butterfield v. Spencer, 551.

 

Butternuts & Oxford Turnpike Co. v.
North, 93.

Butterworth v. O’Brien, 601.

Butterworth v. Kennedy, 483.

Button v. Amer. Tract Soc., 885.

Button v. Hoffman, 909.

Butts v. Monteaux, 902.

Butts v. Wood, 155.

Butz v. Muscatine, 111.

Buxton v. Lister, 375.

Byam v. Beckford, 550.

Byers v. Beattie, 386,

Byers v. Franklin, 289.

Byers v. Rollins, 321, 686,

Bye v. Union Bank of Louisiana,

By waters v. Paris, oe Co., 716.

C.

Cable R’y, Re, 718.
Cable v. McCune, 252, 2380.

‘Cabot & W.S. B. v. Chapin, 188.

Cachar Co., Re, 162,
Cadett v. Earle, 335.
Cady v. Potter, 406, 481.

| Cagwin v. Town of Hancock, 105,

Cagwin v. Hancock, 115, 118.

Cahall v. Citizens’, ete., ‘Ass’ n, 714,

Cahill v. Bigger, 881.

Cahill v. Kalamazoo, etc.,'Ins. Co., 700,
659, 887, 914.

ieGain's Case, 188,

Cain v. Pullen, 562. :

Cairo v. Sparta, 113. /

Cairo, etc., R. R. Co. v. Mahony, 930.

Cairo, etc., R. R. Co. v. Sparta, 107.

Cake v. Pottsville B’k, 928.

Calder, etc., Nav. Co. v. Pilling, 889.

Calderwood v. McRae, 887.

Caldicott v. Griffiths, 546, 547,

Caldwell v. Nat’! Mohawk B’k, 927.

eed v. New Jersey Steamboat Co.,
78.

‘Caledonian R’y v. Solway R’y, 813.

Caledonian, etc., R’y v. Magistrate, etc.,
905.

Caledonian, etc.; R’y Co. v. Helens-
burg, etc., 817.

. Caledonian, etc., Co. v. Curren, 895.

Caley v. Philadelphia, etc., R. R. Co.,
520, 94, 91,°196, 92. i

Calhoun y. The Steam Ferry-boat, etc.,’
915, .

Calhoun v. Padmeal, 8438.

California, etc., Co. v. Alta, etc., Co.,
804.

California v. Pacific R. R. Co., 2, 640.

California, etc., Co. v. Schafer, 87,

Calisher Case, 201.

Calkins v. Atkinson, 219.

Callahan v. Louisville, 873.

Callaway & Mfg. Co. v. Clark, 788, 816..

Callender v. Painesville, etc. R R. Co.,
715.
XXX

TABLE OF CASES.

_ [The references are to the foot-paging.]

Calvin v. Williams, 378.

Cam v. Westchester R. R. Co., 184.

Camblos v. Phil. & R. R. R. Co., 821,

| 967.

Cambrian R’y Co., Re, 299, 751. ;

Cambridge Water-works v. Somerville
Dyeing, etc., Co., 209, 241, 2381..

Cambridge v. Sumerville, etc., Co., 217.

Camden, etc., R. R. Co. v., Elkins, ,683,
682, 968.
Camden Rolling-mill Co. v. Swede Iron
Co., 991, 992.
Camden, etc., R. R. Co. v. May’s, etc.,
R. R. Co., 819, 778.

Camden, etc., R. R. Co. v. Briggs, 800.

Camden v. Douremis, 210..

Came v. Brigham, 221, 222, 245, 980.

Cameron v. Durkheim, 653, 471, 461,
649, 384. ;

Cameron v. Seaman, 690.

Cammey v. United, etc., Churches, 659,

Cammeyer v. United, etc., Churches,
688.

Camp v. Bryne, 654, 655.

Camp v. W. U. T. Co., 797.

Campbell’s Case, 762, 886.

Campbell v. Fleming, 399.

Campbell v. Kenosha, 102.

Campbell v. Miss. Union Bank, 700.

Campbell v. Marietta R. R., 793.

Campbell v. Morgan, 82, 46, 17.

Campbell v. James, 939.

Campbell v. London, etc., R’y Co., 308.

Campbell v. Parker, 494.

Campbell v. Paris, etc., R. R. Co., 101.

Campbell v. Pope, 936.

Campbell v. Poultney, 688.

Campbell v. Richardson, 380.

Campbell v. R. R. Co., 832.

Campbell v. Trustees, 931.

Campbell v. Woodstock Iron Co., 479.

Campton v. Wabash, etc., R’y, 844.

Canada Southern R’y Co. v. Gebhard,
867, 753, 751, 263.

Canal Co. v. Baltimore, etc., R. R. Co.;
709, 871, 718.

Canal Bridge v. Gordon, 934, 988, 718.

Canandaigua Academy v. McKechine,
984.
a v. Pennsylvania R. R. Co., 785,

Candy v. Globe Rubber Co., 875.

Canfield v. Minn., etc., Ass’n, 493.

Cannon v. Bryce, 388.

Cannon v. Trask, 134,692.

Cantillon v. Dubuque, etc., R. R. Co.,
125. - :

Cape’s Case, 293.

Cape, etc., Co., In re, 364, 680, 686, 739,
740, 742.

Cape’s Executor’s Case, 291,

Cape v. Dodd, 476.

Capel v. Lenis, 742,

Capel v. Sims, etc., Co., 168.

Capital, etc., Ins. Co., Re, 716.

 

Capper’s Case, 81, 296.
Capper, Ex parte, 900.

Cappin v. Greenlees. 344,
Cappur v. Harris, 375.

Capron v. Capron, 610.
Capron v, Stout, 229.

Capron v. Thompson, 473, 474,
Car v. Commercial Bank. 992,
Card v. Carr, 918.

Carew’s Estate Act, In re, 952.

Carew v. White, 561. _

Carey v. Cincinnati & Chicago R. R, Co.,
175.

Carey v. Cincinnati, etc., R. R., 715, 714,

Carey v. Pittsburgh & F. W., 843.

Cary v. Schoharie, etc., Co., 7. ‘

Carion Iron Co. v. McClaren, 990.

Cargill v. Bower, 170, 171, 396.

Carlings’ Case, 54, 59.

Carlings, Ex parte, 174, 899.

aaa v. Saginaw, etc., R. R. Co., 68,

Carlisle v. Southeastern R’y Co., 592,
598, 599.

Carlisle v. Terre Haute & Richmond R.
R. Co., 519.

Carmichael’s Case, 899.

Carmody v. Powers, 906.

Carothers v. Alexander, 942,

Sa ee v. Marine Bank, 215, 216, 239,

Carpenter 'v. Farnsworth, 943.

me Yeates v. Black Hawk Gold M. Co.,

Carpenter v. Catlin, 750. +

Carpenter v. N. Y., etc., R. R. Co., 586,

_ 599, 596, 598. : 7

Carpenter v. Rommell, 829, ;

Carpenter v. Westinghouse Air-brake
Co., 994.

Carr v. Iglehart, 265.

Carr v. Le Fevre, 22, 39, 829.

Carr v. Hinchliff, 468,

Carr v. Lancashire, etc., R’y, 794.

Carriage, etc., Assoc., In re, 735, 736.

Carrick’s Case, 900.

Carrol v. Green, 251, 252, 250.

Carroll v. Cone, 594.

_ Carroll v. Mullanphy Sav. B’k, 420, 495,

580, 887, 571, 569, 447.
Carroll v. East St. Louis, 868.

| Carroll Co, v. Smith, 118, 118, 121, 115.

Carroll v. St. Johns, etc., 988.

Carson v. Arctic Mining Co., 145.

Cartan v.' Father Mathew, etc., Society
Co., 142,

Cates v. Howe Machine Co., 876, 875,

we v. Ford Plate Glass Co., 751, -

Carter v. Taggart, 336.
Carter v. Manufacturers’ National B’k,

. 488, 366.

Cartwell’s Case, 879, 285, 918.
Carver v. Braintree Mfg. Co.,. 226, 280.
TABLE OF OASES.

XxXxi

[The references are to the foot-paging.]

Caaser Co. v. Manufacturers’, etc., Co.,

Carver v. Baltimore Mfg. Co., 9.

Caryl v. McElerath, 922.

.Case v. Bank, 579, 424, 581, 577.

Case v. Benedict, 932,

Case v. Citizens’ Bank, etc., 851.

Case v. Mechanics’ Banking Ass’n, 550.
Gase v. Small, 541, 278.

Casey v. Galli, 133, 240, 288, 250, 192.
Casey v. La Societe de Credit, 851.
Cass v. Dillon, 106.

‘Cass v. Gillet, 112. |

Cass v. Manchester, etc., Co., 779.

Cass v. Ottawa, etc., Co. Le 811, 970.

Cass v. Pittsburg, ete. .» R. R. Co., 75,
140, 74.
Cass v. Pittsburg, Vir: ginia & Charleston

R’y Co., 95.

Cassard v. OP ei 884, 382.

Cassell v. Lexington, etc., Co., 667, 661.

Castellan v. Hobson, 292, "096,

Castello’s Case, 296, 81.

Castello v. City Bank of Albany, 494.

Castle v. Belfast, etc., Co., 928.

Castle v. Lewis, 661, 839.

Castleman v. Holmes, 288, 236, 278, 541,
273.

Caswell v. Putnam, 472.

Catchpole v. Ambergate, etc., R’y Co.,
147, 426, 643, -

Cateham Ry v. London & Brighton,
7192,

Cater v. Everleigh, 537.

Caterham R’y v. London, ete., Co., 790.

. Cates v. Sparkman, 392,

Cathin v. Eagle Bank, 851,

Catlett v. Starr, 940.

Catskill Bank v. Gray, 806.

Cattle, Ex parte, 900.

Caulkins v. Memphis, etc., Co., 612, 481.

Cave v. Cave, 950. =,

Cayuga Lake R, R. Co. v. Kyle, 194, 67.

Cayuga B. Co. v. Magee, 805.

Cazeaux v. Mali, 396, 326, 390. ;

Cecil Nat’! Bank v. Watsontown Bank,
578, 581.

Cecil, Matter of, 680, 677.

Celpeper Agric., etc., Soc. v. Digges,
883.

Central, Matter of, 862.

Central, ete., Co. v. Chatham, 930.

Central, etc., Co. v. Hartshorn, 984,

Central, etc., Co. v. Ohio, etc., R. R.,
533.

Central, etc., Co. v. Smitha, 795. ,

Central, etc., Co. v. State, 799,

Central’ Agric., etc., Association v. Ala-
bama Gold Life Ins. Co., 294, 234, 198,
515.

Central. etc., Assoc. v. James, 374.

Central Bank v. Empire Stone Co., 808,
809.

Central, etc., Bank v. Levin, 951.

Central, etc., Bank v. Walker, 958, 267.

 

ae Gold Mining Co. v. Platt, 852,

Cr stral & Ins. Co. v. Callaghan, 906.

Central Nat’l Bank v. White, 562, 566.

Central Nat’l Bank v. Williston, 509.

Central Ohio Salt Co. v. Guthrie, 526.

Central P. R..Co. v. Clemens, 1938, 196.

Central R. R. Co. y. Collins, 348, 845,
810, 967, 517, 794.

Central, etc., R. R. Co. v. Twenty-third,
etc., R. R. Co., 710, 559, 563, 709.

Central R. R., etc., Co, v. "Atlantic, etc.,
R. R. Co., 650, 647,

Central R. R. & Banking Co. of Ga. v.
Papot, 589, 591.

Central R. R. Co. of N. J. v. Philadel-
phia R. R. Co., 848,

Central R. R. Co. v. Georgia, 638, 701.

Central R..R. ‘Co. v. Claghorn, 7.

Venual RR. & Banking Co. v. Ward,

1

Central R. R. v, People, 798,

Central Bridge Co, v. Lowell, 858.

Central R. R. Co. v. Pettus, 979.

Central R. R. v. Smith, 788. ’

Central, etc., R. R. v. Morris, 788,

Central’R. R. Co. v. B’d of Equal., 634,

Central, etc., T. Co. v. Bradbury, 796.

Central Trust Co. v. Ohio, etc., R. R.
Co., 785.

Central Turnpike Co, v. Valentine, 185,
186, 190.

Central Trust Co, v. Wabash, etc., R.
‘R. Co., 760.

Chadwick v. Crapsey, 634, 635.

Chaffin v. Cummings, 64, 172, 199.

Chafee v. Sprague, 371.

Chaffe v. Ludeling, 267, 256. -

Chaffee v. Rutland, etc., R. R. Co., 304,
586, 584, 298, 806, 588, 300, 596, 302.

Chaffee v. Middlesex R. R, Co., 315,

Chambers v. Falkner, 845.

Chamberlain v. Bromberg, 850, 219.

Chamberlain v. Burlington, 104. .

Chamberlain v. Chamberlain, 868, 855.

Chamberlain v. Huguenot Mfg. Co.,
226, 985, 604, 233.

Chamberlain v. Greenleaf, 470, 485, 648,
490,

Chamberlain v.'Painesville & Hudson
R. R. Co., 98, 90, 94, 182, 662, 91

Chamberlain v. Pacific, etc., Co., 754.

Chamberlain v. Mammoth, ete., Co.,
- 983, 985.

Chambers v. City of St. Louis, 854,

Chambers v. Manchester, etc., R’y Co.,
834.

Chambersburg Ins, Co. v. Smith, 284,
427, 426, 579.

Chamblos v. Phil. & R. R., 791.

Champion v. Memphis, ete., e R. Co.,
517, 523.

Chandler’ 's Case, 386.

Chandler v. Bacon, 972, 55, 736, 741,

Chandler v. Brainard, 552,
XXxil

TABLE OF CASES.

[The references are to the foot-paging.] ©

Chandler v. Brown, 254, 220. 219, 181.

Chandler v. Keith, 219, 129, 220, 218. .

Chandler v. Hoag, 690.

Chandler v. Mammoth Bank, 757.

Chandler v. Northern Cross R. R. Co.,
199, 204,

Chandler v. Siddle,. 211, 213.

Chapin v. First, etc., Soc., 550. |

Chapin v. School Dist., 885, 810.

Chapin v. Sullivan R. R. Co., 863.

Chapin v. Vermont & Mass. R. R. Co.,
828. :

Chaplin v. Clarke, 902, 77.

Chapman’s Case, 72, 270.

Chapman & Barker’s Case, 83, 276, 539.

Chapman v. Barney, 984,.551.

Chapman v. City Council, 361.

Chapman v. Douglass County, 976.

Chapman v. Gates, 108

Chapman v. Mad River & Lake Erie R.
R. Co., 90.

Chapman v. New Orleans Gas Light,
etc., Co., 507, 431.

Chapman v. Phoenix Nat’l Bank, 416.

Chapman v. R. R. Co., 171..

Chapman v. Reynolds, 334.

Chapman v, Shepherd, 474, 465, 294.

Chappell’s Case, 296, 369.

Charitable Ass’n in Granville v. Bald-
win, 885, 914.

ee Corporation v. Sutton, 894,
728.

Charity Hospital v. New Orleans, etc.,

Co., 701. ae
Charles River Bridge v. Warren Bridge,
805, 709.
Charleston v. People’s Nat’! Bank, 627.
CE eran etc., Co. v. Sebring, 970,

Charle v. Kenward, 3875, 2938, 371.

Charlotte v. Blakely, 68, 182.

Charlton v. New Castle R’y Co., 779,
784, 967.

Charter Oak, etc., Ins. Co. v. Sawyer,
871, 870.

Charter v. San Francisco 8. T. Co., 76.

Chartiers R’y Co. v. Hodgens, 749, 196.

Chase v. Curtis, 246, 248, 244, 230.

Chase v. Lord, 264, 6, 226, 252, 271, 237.

Chase v. Burritt, 338.

Chase v. Vanderbilt, 307, 598, 805, 591,
971, 970. ° ;

Chase v. Railroad Co., 84.

Chase v. East Tenn., etc, R. R. Co.,
141, 890.

Chase v. Sycamore & Courtland R. R.
Co., 97, 99.

Chase v. Tuttle, 657.

Chatauqua County Bank v. Risley, 853.

Chater v. San Francisco, etc., Co., 86,
373, 376.
hatteros R’y v. Kinner, 856.
pecney v. Lafayette, etc, R’y Co.,

Cheever v. Meyer, 508, 506. °

 

Chillicothe, etc., R. R. Co. v. Bruns-
wick, 105.

Cheltain v. Republie Life Ins, Co., 196,

Cheltenham, etc., R. R. Co. v. Daniel,
64, 421, -- :

Chemical Nat. Bank v. Kohner, 927,

Chenango Ins. Co., Matter of, 685, 672,
686, 914.

Chenango, etc., Co. v. Lewis, 917.

Chenango Bridge Co. v. Paige, 259.

Cheraw & C. R. R. Co. v. White, 186, |

Cheraw & Chester R. R. Co. v. Garland, :
127.

Cherokee Iron Co, v. Jones, 810. .

Cherry v. Colonial Bank, 768. .

Cherry v. Frost, 487, 447.

Chesapeake, etc., Canal Co. v. Balt. &
O. R. R. Co,, 695, 700, 709, 711.

Chesapeake, etc., R. R. Co.-v. Griest,
724, :

Chesapeake, etc., Tel. Co. v. Baltimore
Tel. Co., 799, 797.

Chesapeake & O. R. R. Co. v. Paine,
504, 510, 501, 13, 502.

Chesapeake & O. R. R. Co. v. Miller, 639,
638. é

Chesapeake & O. R. R. Co. v. Virginia,

8.

Cheshire Banking Co., Re, 271.

eh pie etc., Telephone Co. v. State,
23.

Chesley v. Cummings, 199.

Chesley v. Pierce, 288, 291. ~

enn Hill Turnpike v. Rutter, 984,

7

Chestnut v. Pennell, 222, 246.

Chester Glass Co. v. Dewey, 17, 64, 200,
75, 816, :

Chesterfield’ Colliery Co. v. Black, 743.

Chetlain v. Republic Life Ins. Co., 843,
973.

Chew v. Henrietta, etc., Co., 982, 829.
Chew v. Bank of Baltimore, 334, 421.
Chewacla, etc., v. Dismukes, 819.
Chicago Life Ins. Co. v. Needles, 802.
Chicago Building v. Crowell, 815, 927.
Chicago Life Ins.-Co. v. Auditor, 704.
Chicago, etc., Ins. Co. v. Needles, 704.
Chicago & N. W. R’y.v. Auditor-Gen- -
eral, 636, 872.
Chicago, etc., R: R. Co. v. Aurora, 120,
108, 116. -
Chicago & Alton R. R. v. Chicago & U.
Coal Co., 798.
Chicago, etc., R. R. Co. v. Cole, 635.
Chee etc., R. R. Co. v. Coleman,
Chicago, etc., R’y v. Crane, 790. :
oe etc., R’y Co. v. Dakota Co.,
Chicago R. R. Co. v. Davis, 874, 877.
Chicago, etc., R. R. Co, v. Dey. 799. .
CERER etc., R. R. Co. v. Freeman, |
Chicago. etc., R. R. Co. v. Guffey, 624.
TABLE OF CASES.

Xxxiii

[The references are to the foot-paging.]

Chicago v. Hall, 253.
She etc., R. R. Co. v. James, 912,

Chicago, etc., R. RB. Co. v. Keisel, 884.
hee etc., R. R. Co. v. Lewis, 940,

. Chicago, etc., R’y v. Loewenthal, 859.
‘Chicago, etc., R. R. Co. v. Minn., etc.,
R. RB. Co., 871, 872.
‘Chicago, ete., R Rv. MA, R., 860.
ee B &Q R. R. Co. v. McGinnis,

Chicago, etc., R. R. Co. v. Malloy, 117.
Chicago, etc., R. R. Co. v. Marseilles,
121,

Chicago, etc., v. Malcom, 114.

Chicago, ete., R. R. Co. v. Page, 611.

‘Chicago, etc., R’y v. People, 790, 793,
800, 798, 636, 792.

Chicago, etc., Co. v. People, etc., Co.,
528, 530.

Chicago, etce., R. R. Co. v. Pinckney,
111, 109.

Chicago, etc., R. R. Co. v. Putnam, 120,
781, 125, 783,

Chicago, etc., R. R. Co. v. Raymond,
635,

Chicago, etc., R’y v. R. R. Commission-
ers, 799.

Chicago, R. I. & Pac. R. R. Co. v. Town

- of Lake, 858, 861, 862.

‘Chicago R. R. v. President, etc, of
Town of Marseilles, 343.

Chicago, R. R. Co: v. Williams, 876.

‘Chicago, etc., R. R. Co. v. Wilson, 861.

Chicago, etc., R. R. Co. v. Schewe, 121.

‘Chicago, etc., R. R. Co. v. Smith, 103.

Chickaming v. Carpenter, 105, 125.

Chicot v. Lewis, 119, 116.

Child v. Boston, etc., Iron Works, 230.

Child v. Coffin, 287, 518, 514, 271

Child v. Hugg, 489, 490.

‘Child v. Hudson Bay Co., 568.

Child v. Morley, 466.

Child v. N. Y., etc., R. B., 880, 750.

Childs v. Smith, 372, 194,

Childs v. Digby, 503.

Childs v. Hurd, 257.

Childs v. Harris Mfg. Co., 902.

Chillas v. Snyder, 382.

China Steamship & L. Coal Co., In re,

127.

Chincleclamanch, etc., Co. v. Common-
wealth, 706, 715, 716.

Chinnock’s Case, 295.

Chippendale, Ex parte, 540, 549.

Chisholm Bros, v. Forney, 52, 207.

Choat v. Yeates, 337.

Chollette v. Omaha, etc., R. R. Co., 789.

Chorley, Ex parte, 62, 829.

Chouteau v. Allen, 486, 496, 933, 938,
494,

Chouteau v. Dean, 146, 207, 20.

Chouteau Ins, Co. v. Floyd, 204, 133,.

180,
b

 

Chouteau Ins. Co. v. Holmes, 658.

Chouteau Spring Co. v. Harris, 868, 427,
420, 294, 281, 426.

Christensen v. Colby, 201, 249, 203,

Christensen v. Eno, 244, 4, 212, 61, 213,

Christensen v. Ill, etc., Co. ., 82 8,

\Christensen v. Quintard, 203.

Christ Church v. Philadelphia, 514,

Christian Union v. Yount, 263, 867.

Christian University v. Jordan, 932, 9384.

Christie v. Gage, 988.

Christie v. Missouri P. R’y, 792.

Christmas v. Biddle, 5038.

Chubb v. Davidson, 723.

Chubb v. Upton, 281, 208, 186, 172, 194,
321, 175, 218, 47.

Church v. Sterling, 9, 988, 761, 927.

ae of Redemption v. Grace Church,
56.

‘Churchill v. Bank of Eng., 366.

Chynoweth’s Case, 295.

Cicotte v. Anciaux, 977.

Cincinnati v. Walker, 106.

Cincinnati, H. & D. R. RB. v. Pontius,
787,

Cincinnati, etc., R. R. Co. v. Pearce, 17,
157.

Cincinnati Mutual, etc., Co. v. Rosen-
thal, 869, 865.

Cin., Indiana & Chicago R. R. Co. v.
Clarkson, 22, 23,

Cincinnati, etc., R. R. v. Clifford, 71'7.

Cincinnati, etc., R. R. Co. v. Cole, 520.

Cincinnati, etc., R’y v. Citizens’ Nat'l
Bank, 328.

Cincinnati, etce., R. R. v. Duckworth,
977.

Cincinnati, etc., R. R. Co. v. Harter,
940.

Citizens v. Blakesley, 927.

Citizens’, etc., Co. v. Bridgeport, etc.,
Co., 804. .

Citizens’, etc., Co.. v. Gillespie, 215, 281,
129,

Citizens’, etc., Co. v. Elwoods, 803.

Citizens’ Bldg., ete., v. Coriell, 896.

Citizens’ Nat. Bank v. Elliott, ‘754.

Citizens’ Pass. R’y Co. v. Phil., 635.

Citizens’, etc., Fire Ins. Co. . Sortwell,
662, 184, 694.

Citizens’, etc., Ins. Co. v. Lott, 611.

City v. Lamson, 831, 830.

City of Atlanta v. Gate City Gas Co.,
719.

City of Aurora v. West, 111.

City, etc., Bank, In re, 265, 833.

City Terminus Hotel Co., In re, 270.

City v. Butler, 831.

City Bank of Balt. v. Bateman, 947,
946.

City Bank v. Bangs, 430..

City Bank of Columbus v. Bruce, 345,
814, 347. 4

City Bank of Columbus v. Beach, 825.

City, Bank v. oe 927.
TABLE OF CASES.

[The references are to the foot-paging.)

City, etc., Bank v. Houldsworth, 265.

City Bank of Macon v. Bartlett, 178.

City of Brenham v. Brenham, etc., Co.,
803.

City of Chester, Appeal of, 805.

City of Chicago v. Cameron, 961, 973,
817.

City of Chicago v. Jones, 317. ;

City of Council Bluffs v. Kansas City,
801... "

City Council, etc., v. Montgomery, etc.,
Co., 101. *

. City of Covington v. Covington, etc.,

' ~ Bridge Co., 698, 517, 800, 871, 719.

City of Davenport v. Miss. & Mo, R. R.
Co., 620. :

oy of Davenport v. Peoria, etc., Co.,

3D.

City of Evansville v. Hall, 616.

City Hotel:v. Dickinson, 88, 191, 143,
818. :

City of Indianapolis v. Vajen, 631.

City of Jonesboro v. Cairo R. R. Co.,
101. 5
City of Kansas v. Hannibal, etc., R. R.

Co., 941, 938.
City of Knoxville v. R. R. Co., 521,,780.
City of Kenosha v. Samson, 102.
City of Louisville v. President, etc., 802.
City of Lowell v. Morse, 885. ;
City of Lynchburg v. Slaughter, 101.
City of Memphis v. Ensley, 628.
City of Memphis v. Farrington, 624.
City Nat. Bank v. Paducah, 680, 632.
City Nat. Bank v. Maher, 629. .
City Nat. Bank v. Nat. Park Bank, 922.
City Nat. Bank v. Phelps, 881.
City of Ohio v. Cleveland, etc, R. R.
Co., 585, 590, 810, 309, 593.
City of Ottawa v. Cary, 101.
City of Philadelphia v. Ridge Ave. R.
R. Co., 5, 634,
City of Richmond v. Daniel, 620.
City of Richmond v, Richmond & Dan-
ville R. R. Co., 688, 637. °
City of Richmond v. Scott, 682.
City of San Francisco v. Mackey, 622.
City Sav. Bank v. Whittle, 553.
ee St. Louis v. St. Louis G. Co.,
City Terminus Hotel Co., Re, 277.
City of Utica v. Churchill, 626.
City of Wheeling v. Baltimore, 873, 981.
ae v. Farmers’ & Citizens’ Bank,
Claflin v. South C. Co., 763,
Claflin v. McDermott, 209. ;
ulaney v. Onondaga Fine Salt, ete., Co.,
Clapp'v. City of Burlington, 628.
Clapp v. Astor, 590, 610.
Clapp v. Cedar Co., 104,
Clapp v. Peterson, 600, 345, 343.
Clapp v. Wright, 249.
Claremont Bridge v. Royal, 867,

 

Clark v. Barnard, 873, 871, 152,

Clark, Ex parte, 25, 41.

Clark v. Atkins, 335.

Clark v. Bever, 48. ; :

Clark v. Continental Improvement Co.,
25, 66, 200,. 67. #4

Clark v. Crickfield Union, 937, 936,

Clark v. Edgar, 398,

Clark v, Des Moines, 108.’

Clark v. Foss, 387, 380, 389.

Clark v. Farrington, 24, 848, 199, 23, 22,

Clark v. Farmers’ W. M. Co., 827, 985,
939, 917, 824, 913, 937, 915.

Clark v. Flint, 376.

Clark v. Gibson, 380.

Clark v. Gordon, 938,

Clark v. Hart, 142.

Clark. v. Iowa City, 881.

Clark v. Jones, 710,

Clark v. Lincoln Lumber Co., 44.

Clark v. Le Cren, 889.

Clark v. Leathers, 109. 5
Clark v. South Metropolitan Gas Co,,
364. ’ ‘

Clark v. Myers, 253, 238.

Clark v. Middleton, 870.

Clark v. Monongahela Nav. Co., 51%.

Clark v. Pinney, 649.

Clark v. Reed, 558.

Clark v. Rochester, 105.

Clark v. Sparhawk, 493.

Clark v. San Francisco, 971,

Clark v. Titcomb, 488, 845, 823. ,

Clark v. Thomas, 192, 219,

Clark v. Turner, 328.

Clark v. Town of Eastern, 914.

Clarke, Ex parte. 899,

Clarke’s Case, 735.

Clarke v. Dickson, 174, 170.

Clarke v. Hancock Co., 114.

Clarke v. Hart, 146, 147,

a v. Imperial Gas Light,| ete., Co.;

/

Clarke v. Janesville, 830, 107.

Clarke v. Meigs, 468, 478.

Clarke v. Monongahela Nav. Co., 184.

Clarke v. Omaha, etc., R. R. Co., 814.

Clarke v. Potter County, 883,

Clarke v. Thomas, 820, 821.

Clarkson v. Clarkson, 685, 606, 609.

Clarkson v. Snider, 486.

Clay v. Hawkins, 106.

Clay Co. v. Society for Savings, 108,

Clayton v. Gresham, 608.

Clearwater v. Meredith, 701, 512, 519,
523, ‘ :

Clegg v. Hamilton Co., 257, 258.

Cleghorn v. New York Central R. R.
Co., 878. .

eae, v. N. Y. C. & H.R. R. Co.,

. /
Clem v. Newcastle & Danville R., R.
- Co., 163, 157, 204,
Clemens v. Clemens, 855,
Clements v. Bowes, 902.
i TABLE OF CASES.

. XXXV

[The references are to the foot-paging.] , I

Clements v. City of Lothrop, 888.

Clements v. Bower, 965.

Clements v. Todd, 903.

Cleveland v. Burnham, 249, 133, 70, 209.

Cleveland, etc., Co. v. Courier Co., 806.

Cleveland Iron Co. v. Ennor, 828, 156.

Cleveland v. Marine Bank, | 210.

Cleveland .R. R. Co. v. Robbins, 484,
404, 588.

Cleveland R. R. Co. v. Speer, 857, 872.

_ Cleveland, etc., Co. v. Texas Ry Co.,

57, 49.
Clews v. Bardon, 895.
Clifford v. Taylor, 561.
ones v. Financial Co., 520, 779, 975,
Clive v. Clive, 605, 590, 609.
Cldse v. Glenwood Cemetery, 741, 615,
522.
Cloutman v. Pike, 911.
Clowes v. Brettell, 209, 426.
Clubb v. Davidson, 762.
Cludwell v. Burke’ Co., 106.
Clute v. Loveland, 547.
Clyde v. Rogers, 563.
Coal Co., In re, 789.
Coal Co. v. Blatchford, 831.
Coal Field Coal Co. v. Peck, 211.
Coats v. Donnell, 927, 840, 828, 851.
Coats v. Elliott, 987.

Coats v. Nottingham W: ater-works Co., :

599, 307, 302.

Coates v, London & 8. W. R’y Co., 411,

Cobb v. Prell, 386.

Coburn v. Omega Lodge, 943.

Cockburn’s Case, 342.

Cockburn v. Union Bank, 559, 557. |

Cockrel v. Aucompe, 546.

Cockerell v. Var. Diemens, 151.

Cocker’s Case, 770.

Cockney’s Case, 65.

Cochran v. American Opera Co., 240.

Cochran v. Cochran, 334.

Cochran v, Ocean Dry Dock Co., 600,
764,

Cochrane v. Chambers, 353.

Coddington v. Gilbert, 828.

oe v. Columbus, P. &1 R. R. Co., 842,

31.

Coe v. McBrown, 840, 839.

Coe v. Johnson, 839, 828.

Coey v. Belfast, etc., R’y Co., 593, 591,
307.

Coffin v. Chicago & N., etc., Co., 492.

Coffin v. Collins, 6, 720.

‘ Coffin v. Ransdall, 52, 38.

Coffin v. Reynolds, 228.

Coffin v. Rich, 264, 226, 514, 515.
Cogswell v. Bull, 974, 972, 973.
Cogswell v. Cogswell. 605.
Coheco B’k v. Haskell, 948.
Cohen v. Gwynn, 431, 552, 360.
Cohen v. Wilkinson, 811, 790.
Cohn v. B’k of St. Joseph, 368.
Cohn v. Borst, 546.

 

Coil v. Gold Amal. Co., 322.

Coil v. Pittsburgh College, 165.

con v. North Car Gold Amal. Co., 89,

Coit v. Campbell, 962.

Colborne, Ex parte, 833.

Colderwood v. McCrea, 386,

Coldwater, ‘etc., R. R. v. Brown, 781.

Coldwater & Lake Mich, R. R. Co. ve
Stout, 95,

Cole v. ‘Cassidy, 398.

Cole v. Butler, 258, 249.

Cole v. Knickerbocker, etc., Ins. Co.,
697, 965.

Cole v. Milmine, 382,

Cole v. Le Grange, 108.

| Cole v. Ryan, 85, 294, 281, 368,

Coleman v. Coleman, 257.

Coleman v. Columbia Oil Co., 592, 344.

Coleman v. Eastern Counties’ Ry Co.,
808, 967.

Coleman v. San Rafael T. R. Co., 855,
854,

} Coleman v.'Second Ave. R. R. Co., 742,

Coleman v. Spencer, 508, 76, 447.

Coleman v. West, etc., Co., 928,

Coleman v. White, 237, 240, “215, 216,
241, 289, 214,

Coles v. Bank of England, 643, 412,

Coles v. Bristowe, 475. ' \

Colfax Hotel Co. v. Lyon, 65. a

Colgate v. Compagnie, 566. —

Colglazier v. Louisville, 872.

Colket v. Elis, 472, 476.

Collamer. v. Day, 380,

Collender v. Dinsmore, 795.

Colles v. Iron City, etc., Co., 814.

Collier v. Collier, 336, 612.

Collier v. Squire, 335, :

Collingwood v. Berkeley, 898. aa

Collins’ Claim, 659. 4

Collins v.. Godfrey, 755.

Collins v. Chicago, 626. !

Collins v. Yates, 563.

Collins v. City, etc., Bank; 1'74,

Colonial Bank v. Hepworth, 422, 395.

Colonial, etc., Corp’n, In re, 834,

Colquhoun v. Courtenay, 356, 296, 297.

Colt v. Tay, 881, 82.

Colt Ve Ives, 509.

Colt v. Netterville, 875, 377.

Colt v. Owens, 47, 474, 648, 651, 647.

Colt v. Woolaston, 902, 391, 77.

ese,

-Coltness Iron Co, v. Black, 597.

Colton v. Ross, 975.

Columbia Bank v. Patterson, 934, 935,
936.

Columbia, etc., Co. v. Meier, 694.

Columbine v. Chichester, 377.

| Columbus Buggy Co. v. Graves, 867,

Columbus Ins. Co. v. Walsh, 869, 871.

Columbus, Piqua, etc., R. R. Co.
Indianapolis & BR. R,. Co., 784,

Columbus, etc., R. R. Co. v. Burke,
766, 965.

ve.
XXXVI

TABLE OF CASES.

[The references are to the foot-paging.]

Columbus, etc., R. R. Co., v. Indian-
apolis, etc., R. R. Co., 783.

Columbus, etc., R. R. v. Powell, 724.

Colville’s Case, "477, 178.

Colvin v. Williams, 378.

Combination Trust Co. v. Weed, 816,
838;

Comeau v. Guild Farm Oil Co., 505.

Comfort v. Leland, 135.

Comins v. Coe, 391.

Commercial Bank, etc., Re, 699.

Commercial Bank of Buffalo v. Kort-
right, 480, 420, 424, 580.

Commercial Bank v. Cunningham, 953.

Commercial Bank v, Lockwood, 720,
124.

Commercial Bank of India, In re, 690,

Commercial Bank v. City of Iola, 108.

Commercial Bank v. French, 883, 942.

Commercial Bank v. State of Miss., 801. |

Commercial Bank v. State, 709, '705, 703.

Commercial Bank v. Newport Mfg. Co.,
825, 823.

Commercial Bank v. Ten Eyck, 893.

Commercial, etc., Co. v. New Haas etc.,
Co., 796.

Commercial Bank v. Nolan, 849.

Commercial, etc., Co. v. Scammon, 849.

Co. om rs Vv. Annapolis, etc., R. R. Co.,
625.

Com’rs of Craven v. Atlantic, etc., R.
R. Co., 61, 837, 823.

Com’rs v. Aspinwall, 830.

Com’rs v. Baltimore, etc., R. R. Co.,
115.

Comrs, etc., v. Bolles, 713.

Com’rs of Rice County v. Citizens’ Nat’1
Bank, 631.

Com’rs of Knox Co: v. Nicholas, 106. -

Com’rs v. Texas, etc., R. R. Co., 640.

Com’rs v. Lemly, 563.

Com’rs v. Miller, 102..

Com’rs, etc., v. Holyoke Water, etc.,
Co., 718. :

Com’rs of Crawford Co. v. Louisiana,
ete., R. R. Co., 103.

Com’ rs, ete., v. Thayer, 114, 950.

Com. Bank v. Pfeiffer, 712.

Commonwealth v.,Alger, 864.

Commonwealth v. Allegheny Co., 106,
7105, 702.

Commonwealth v. Arrison, 684.

Commonwealth v. Bakeman, 985, 719.

Commonwealth v. Boston & Albany R,
R. Co., 59.

Commonwealth v. Boston, etc,, R. R.
Co., 347, 797, 10.

Commonwealth v. Bried,!'705. .

Commonwealth v. Bringhurst, 676.

Commonwealth v. Cent. Bridge Co., |

879.

Commonwealth v. Central Passenger
R’y Co., 752.

Commonwealth v. Chesapeake & O. R.
R. Co., 641, 829.

 

Commonwealth, etc., v. Chesapeake,
etc., Canal Co., 830.

Commonwealth v. Cochituate, 252, 514,

Commonwealth v. Com. Bank, 703,

Commonwealth v. Cooper, 465.

Commonwealth v. Cullen, 700, 909, 663,
524, 694.

Commonwealth, etc., Bank v. Cumber-
land, etc., Co., 919.

Commonwealth Ice Co. v. Crane, 754.

Commonwealth v. Del. & Hud. Canal, -
798, 784, 707.

Commonwealth v. Erie, etc., R. R. Co.,
637, 634, 857, 868, 858,

Commonwealth v. Eastern R. R, 790.

Consents, Farmers’, etc., ’ Bank,
q

Commonwealth v. Fayette, etc, R. R.
Co., 637.

Commonwealth v. Fitchburg R. R. Co., ,
705.

Commonwealth v. Gill, 887, 684. 687.

. Commonwealth, v. German Society,

890.

Commonwealth v. Graham, 684.

Commonwealth  v. Gloucester, etc.,
Ferry Co., 640.

Commonwealth v. Hamilton Mfg. Co., ,
615, 801.

Commonwealth, etc., Ins. Co. v. Dun-
son; 886 >

Commonwealth v. Intoxicating Liquors,
01.

Commonwealth v. Lowell Gas Light
Co., 638.

Commonwealth v. Lykens Water Co.,
716, 715.

Commonwealth v. McWilliams, 106.

Commonwealth v. Milton, 866.

Commonwealth v. N. Y., LE. & W.
R. R. Co., 868, 853.

Commonwealth v. Nickérson, 674.

Commonwealth v. Oliver, 890.

Commonwealth v. Perkins, 106.

Commonwealth v. Phoenix Bank, 885.

Commonwealth v. Phoenix Tron Co.,
557, 558, 560, 559, 556.

Commonwealth v. Pj ttsburgh, 106.

Commonwealth v. Pittaburgh, etc., R.
R. Co., 718, 872, 584, 634, 705, 111, 122,
125, 585.

faa ouralen v. Pike Beneficial Soc.,
9)

Commonwealth v. Philanthropic Soe.,

Commonwealth v. Proprietors, 791, 879.

Oe ealth v. St.. Bernard Coal Co.,
62:

eee v. St. Mary’s Church,

Commonwealth v, St. Patrick Soc., 891. °

Commonwealth v. Smith, 841, 684, 529,
838, 827.

Co asecelthy v, Standard Oil Co,
TABLE OF CASES.

‘

XXXVil

[The references are to the foot-paging.]

Commonwealth v. Susquehanna, etc.,
R. R. Co., 832.

Commonwealth v. Tenth, etc., Co., 794.

Commonwealth v. Texas & Pac. R. R.
Co., 640.

Commonwealth v. Union Ins. Co., 702.

Commonwealth of Virginia v. '!Chesa-

. peake, etc., Co., 829. :

oat v. Vermont R. R. Co.,

79. ;

Commonwealth v. Woelper, 887, 669,
691, 673. ;

Commonwealth v. Watmouth, 505.

Commonwealth v. Wickersham, 659,
673.

‘Commonwealth v. Western Union Tel.
_Co., 640.

Commonwealth v. Wood, 392.

Comstock, Re, 869, 865.

Comstock v. Buchanan, 355, 354.

Conant v. Nat’l, etc., Co., 76.

‘ Conant v. Reed, 420.

Conant v. Seneca County Bank, 574,
447, 578, 580. :

Conant v. Van Schaick, 236, 2238, 246,
228, 515.

Conard v. Atlantic Ins. Co., 984.

Veneord, etc.,

OT

‘ .

Concord R. R. Co. v. Greeley, 862, 861.

Concord v. Portsmouth, etc., 121, 107.

Concord v. Robinson, 122.

Condit v. King, 4380.

Conent v. Van Schaick, 246.

Congregational Soc. v. Perry, 712.

Congregational Sociéty of. Bethany v.
Sperry, 661.

Conkey v. Bond, 464. ;

Conklin v. Furman, 236, 250, 222.

Conklin v. Second Nat. Bank, 569, 888,
582, 570. ‘

Conkling v. Washington
536. :

Connecticut, etc., R. R. Co. v. Bailey,
88, 156, 199, 143. ‘

: Soun Passumpsic R, R. Co. v. Baxter,
, 96.

Conn.,-etc., Ins. Co. v. Cleveland, etc.,
R. BR. Co., 830, 807.

Connecticut Life Ins, Co. v. Albert, 866.

Connecting R’y Co. v. Union R’y Co.,
805,

Conner v. Robertson, 384, 385.

Connolly v. Davidson, 597.

Connor v. Hillier, 647, 648.

Connor v. Vicksburg, etc., R. R. Co., 99.

Conover v. Albany Ins. Co., 915.

Conover v. Mutual Ins, Co., 927.

Conrad v. La Rue, 644, 371.

Conro v. Port Henry Iron Co., 944, 883,
908, 774. .

Conro v. Gray, '978.

Consolidated Ass’n v. Lord, 515.

Consols Ins. Co. v. Foster, 66.

Constant v. University, etc., 950.

University,

R. R. v. Forsaith, 793,

 

Constantinople, etc., Co., In re, 72.

Continental Nat. Bank v. Eliot Nat.
Bank, 480, 15, 505, 480; 422.

Continental Tel. Co. v. Nelson, 52, 48, 54.

Cech veney R..R. Cos v. Barker,

De

Converse v, Dimock, 974.

Converse v. Hood, 819.

Converse v. Norwich, 785, 786.

Conwell v. Town of Connersville, 616.

Conway, Ex parte, 851.

Conyngham’s Appeal, 494, 493, 489:

Cook v. City of Burlington, 6238, 616.
Cook v. Chittenden, 178.
Cook v. Detroit, etc., R. R., 724.
Cook. v. Champlain, etc., Co., 996.
Cook v. Berlin Woolen Co., 747.
Cook v. Gray, 587.

Cook v. Hager, 886.

Cook v. Manuf’g Co., 109, 108.

Cook v. Sherman, 733, 847.

Cook v. Ward, 920. _ /

Cook, etc., R’y v. Cazenove, 81.

Cooke v. Hallett, 502.

Cooke v. State Nat’! Bank, 927, 931, 995.
Coon v. Plymouth, etc., Co., 704.

Cooper v. Canal Co., 497.
Cooper v. Corbin, 641, 839, 635.
Cooper v. Curtis, 914.
Cooper v. Frederick, 323, 515.
Cooper v. Neil, 386.
| Cooper v. Lampeter, 920.
Copner v. New York, etc., R. R. Co.,
30.
Cooper v. Swamp, etc., Co., 433.

Cooper v. Wolf, 840. |

Cooper v. Welb, 902.

Cooper Manuf’g v. Ferguson, 866.

Coolidge v. Goddard, 46.

‘Cope, Ex parte, 229.

Copeland v. Copeland, 13.

Copeland v. C. Gas Co., 774.

Copeland v. Johnson, 755. ,

Copeland v. Memphis, etc., R. R. Co.,
871.

Copes v. Charleston, 106.

Copley v. Grover & Baker Co., 877, 875.

Copp v. Lamb, 654, 669.

Copper’s Case, 278.

Copper Miners v. Fox, 815, 936.

Coquard v. St. Louis, etc., Co., 322.

Corbett v. Woodward, 656, 764, 921.

“Corbett v. Underwood, 476.
Corcoran v. Chesapeake, etc., Co., 882.

Corey v. Morrill, 257.

Cork, etc., R’y Co. v. Cazenove, 273.

Cork, etc., R’y, In re, 833.

Cork & V. R’y Co., Re, 828.

Cormac v. Western, etc., Co., 285.

Corn Exchange Bank v. Blye, 486.

Corn Ex. Bank v. Cumberland Coal Co.,
660, 944.

Corn Ex. Bank v. Nassau Bank, 476.

Cornell, Appeal of, 215, 202, 96, 218,

Cornell’s Case, 354.

'
XXXVili

TABLE OF CASES.

[The references are to the foot-paging.]/ ‘

‘Cornell v. Clark, 762.

Cornell v. Colorado Springs Co.,, 714,
854. ‘

Cornell v. Hay, 161.

Cornell v. Utica, etc., R. R. Co,, 750.

Cornick v. Richards, 480, 482, 505, 492.

Corning v. McCullough, 248, 286, 250,
237, 251.

Cornwall, etc., Co, v. Bennett, 917.

Corporation v. Ropes, 189.

Corrigan v./Trenton, etc., Co., 938.

Corry v. Londonderry, etc., R’y Co., 302,
299, 308, 307, 597. :

Cortelyou v. Lansing, 488, 649.

Cortis v. Kent, etc., Co., 886.

Corwith v. Culver, 157, 155, 190.

Cory, etc., Soc. v. Beatty, 546.

Costa Rica v. Erlanger, 566.

Costa M. R, Co. v. Moss, 862.

Costello’s Case, 274, 295.

Cotheal v. Brower, 560, 561. |

Cottage, etc., Church v. Kendall, 88.-

Cottam v. Eastern Counties’R’y Co.,
408, 411, 362. .

Cotting v. New York, etc., R. R. Co.,
304. i

Cotton v. Atlas Nat. Bank, 483,

Cotton v. Loan Co., 103.

Coulter v. Robertson, 720. .

Coulter v. Trustees Western, etc., Sem-
inary, 884.

Count Phalen’s Case, 147.

County of Stevens, In re, 638.

County, etc., Co., In re, 914,

County v. Brinton, 106.

womly oa eee v. Cleveland, etc.,

County of Armstrong v. Brinton, 122.

County of Bates v. Winters, 120, 116.

County of Beaver v. Armstrong, 830.

County of Bruce v. Croma, 885.

County Court v. Baltimore & O. R. R.,
658, 872,,'764. :

County Commissioners v. Annapolis,
etc., R. R. Co., 628.

County Commissioners v. Woodstock |

Iron Co., 638. :
County Commissioners v. Farmers’ Nat.
Bank, 622.

County of Calloway v. Foster, 112.
, County of Cass v. Gillett, 110, 120.

County of Cass v. Johnson, 118.

vue of Clay v. Society for Savings,

County of Callaway v. Foster, 110.

County of Crawford v. Pittsburg & Erie
R. R. Co., 198.

corny of Daviess v. Huiderkoper,
107.

Come of Drummond v. S, E. R’y,

County of Henry v. Nicolay, 124, 110.

County of Jasper v. Ballou, 113, 114,

County of Lackawana v. First Nat.
Bank, 623.

County ‘of Lancaster v. Cheraw, etc.,
R. BR. Co., 106,

‘| County, etc., v. Locomotive, etc., 125.
| County of Macon v. Shores, 109

County Marine Ins. Co.. In re, 604,

County of Morgan v. Allen, 207, 221,

128.

County v. Moultrie, 110.

County of Moultrie v. Rockingham, 110,

» 109.

County of Ray-v. Vansycle, 112, 109.

County of Ralls v. Douglass, 116, 112.

County of Randolph v. Post, 110.

, County of Richland ‘v. People, 115,

County of San Mateo v. Southern Pa-
cific R. R., 718, 886: :

County of Schuyler v. Thomas, 124, 109.

County of Scotland v. Thomas, 124,
109, 112.

County of Silver Bow v. Davis, 632.

County of Tazewell v. Farmers’ Co.,
974, 760. :

County v. Thomas, 123.

coun of Tipton v.. Locomotive Works,

- 124,

Counts of Todd v. St. Paul, etc., R’y,

County of Washington v. Estate of Jef-
ferson, 544.

Soup of Wilson v. Nat. Bank, 995,

106.

. Coupland v. Challis, 902.

Coure v. Gray, 965.

Courtiss v. Harrison, 239,

Courtright v. Deeds, 17, 195,

Cousland v. Davis, 478.

Covell v. Loud, 470.

Covert v. Rogers, 657, 667, 10, 850.

Covington & Lex. R. R. Co. v. Bowler’s
Ex’ts, 747, 959.

Covington v. Covington, etc., Co., 524,

Covington, etc., Bank v. Covington, 680,

Covington, etc., Bridge Co. v. Mayer,
665, 871. ;

Covington, etc., Co. v. Sargent, 301.

Somarein v. Universal Life Ins. Co.,

Cowell v. Colorado, etc.., Co., ‘709,
Cowell v. Spring Co., 867, 263.
Cowles v. Whitman, 876.

Cowles v. Cromwell, 280.

Cowling v. Cowling, 335.

Coyle v. Ball, etc.; R. R. Co., 948,
Cox’s Case, 82, 541, 296, 279.

Cox, Ex parte, 834, ;

Cox v. Hart, 970,

Cox v. Hickman, 537,

Cox v. Midland, etc.,.R. R. Co., 980.
Coylus v. N, Y., etc., R. R. Co., 829.
Coyote, etc., Co. v. Ruble, 587.
Craft v. McConoughy, 527.

Craft v. Tuttle, 628, 617.

Cragg v. Taylor, 501.

Cragie v. Hadley, 875, 950.

 

Craig v. Andres, 117,
TABLE OF CASES.

XXXiX

'

[The references are to fhe foot-paging.]

Cragg v. Riggs, 606.

Craig v. First, etc., Church, 693.

Craig v. First Pres. Church, 676.

Craig v. Gregg, 964, 892.

Craig v. Phillips, 739.

Craig v. Town of Andes, 105,

Cram v: Bangor, etc., 659.

Cramer v. Bird, 587, 218, 698.

Crampton v. Varna R’y Co., 936.

Crandall v. Lincoln, 276, 272, 271, 317,
346, 276.

Craw. v. Easterly, 689.,

Crawford v. Dox, 612, 405.

_ Crawford v. Fisher, 430.

Crawford v. Longstreet, 818, 935, 854.

Crawford v. Northeastern, etc., R’y Co.,
304, 802, 307, 298.

Crawford R. RB. Co. v. Lacey, 193.

oe v. Prov. Ins. Co,, 438, 421,
25

Crawford v. Rohrer, 207, 218, 52, 49,
218, 180.

Crawford v. Spencer, 388, 389.

Crawshaw v. Soutter, 957.

Crease v. Babcock, 290, 215, 267, 214,
697, 269, 237, 680, 252, 215, 241, 344,
237, 227, 718,

Credit Fancier of Raginad, In a 515.

Credit Co, v. Howe, etc., Co.

Credit Co. v. Webster, 565.

“Credit Mobilier \v. Commonwealth, 531, |

538.

Creed v. Commercial Bank, 849.

Creek v. State, 684,

Cregin v. Brooklyn, etc., R. Co., 10.

Crescent, etc., Co. v. Deblieux, 480.

Cresson’s Appeal, 885.

Creswell v. Een 945, 933,

Creswell v. Oberly, 2

Creykes’ Case, 145.

Crichmer’s Case, 58, 41.

-Cridland v. De Mauley, 902.

Cristensen v. Eno, 47, 48.

Cristensen v. Quintard, 48. °

Crocker v. Crane, 73, 183, 74, 394.

Crocker v. Old Colony R. R. Co., 366.

Crocker v. Whitney, 849.

Crockerell, The, v. Van Dieman’s Land
Co., 149, 150.

Crocket v. Young, 927.

Croft v. Lumpkin, ete., Min. Co., 696.

Crogan v. Cooke, 498.

Cromlisle v. Shenandoah, etc., R. R.
Co., 994, 962.

Cromwell’. ‘County of Sac, 830.

Crook ¥. Jewett, 978.

Crooked, etc., Co. v. Keuka Nav. Co.,
742,

Crooks v. State, 102, 125.

Crosby v. Hanover, '859.

ee v. New London, ete., R. R. Co.,

0.

83
Cross’ Case, 341.
Cross v. Jackson, 552, 553.
Cross v. Pinckneyville Mill Co., 257, 86.

, Cummings , v. Merchants’,

 

Cross v. Peach Bottom R’y Co.; 518,
, 514, 521.

Cross v. Phoenix ae 568, 578, 575.
88.

Cross v. Reid, 490, 5

Cross v. Sackett, 391, 396, 56, 45.

Cross v. Williams, 546.

oan v. Penrose Ferry Bridge Co.,
1

Croton Co. v: Ryder, 806.

Crouch v. Credit Foncier, 835, 836,
Crow v. Greene, 901, 268, 902.
Crowther v. Thorley, 538.
Croydon Hospital v. Fair ly, 385.

Crubb v. Miller, 374.

Cruikshank v. Fourth Nat’l Bank, 995,
Crull v. Dodson, 377.

Crum’s Appeal, 554.

| Crumbe v. U. S. Min. Co., 158, 159, 948,

922, 160.
Crumlisle v. Shenandoah, ete., R. R.
Co., 962, 994.
Crump: v. "Thurber, 434.
Cruse v. Paine, 298, 376, 540, 468.
Crutchfield v. Mutual, etc., Co., 722.
Crutchire v. Bedford, "954,
Cuberston v. Wabash Nav. Co., 7.
Cuculla v. Union Ins. Co., 87, 212, 211.
Cuddon v. Eastwick, 100.
Cud or Cuddee v, Rutter, 375.
Cullen v. Thompson, 395.

Culpeper Agric., etc., Soc. v. Digges,
r 883.

Culver v. Fort Edward, 118. ;

Culver v. Reno, etc., Co., 306, 809, |

Culver v. Sanford. 550.

Culver v. Third National Bank, 239,
285, 236, 232.

Cumberland Coal Co. v, Sherman, 745,
782, 677, 958.

Cumberland, etc., Asso. v. Portland,
885.

Cumberland, ete.,
etc., Co., 994. '

Cumberland, etc., Co. v. Paresle, 763,

Co. v. Hoffman,

‘| Cumberland, etc., R. R. Co. v. Barren

‘ Co., 120.
Cumberland Valley R. R. Co, v. Baab,

94.

Cuming v. Boswell, 605.

etce., Nat.
Bank, 632, 633, 630.

Cummer v. Kent, 563.

Cumming v. Prescott, 481, 10, 689.

Cummings v. Cummings, 354,

Cummings v. Websters, 889.

Cumnock v. Institution for Sav., 489,
644,

Cunningham’s Appeal, 318.

rah gham v. Alabama, ete, Trust

68, 574, 571, 578.

Geen v. Pittsburgh, etc., R. R.
Co., 310.

Cunningham v. Edgefield R. R. Co.
165, 166, 159.

Cunningham v. City of Glasgow, 5389,
xl

TABLE OF CASES.

[The references are to the foot-paging.]

Cunningham v. Nat’! Bank of Augusta,

, 388.

Cunningham v. Pell, 969, 970.

Curling v. Chalklen, 913.

Curran v. State of Arkansas,
600, 207. 720.

Currie’s Case, 55, 51.

Currie v. Mut. Ass. Soc., 520.

Currie v. White, 372, 590, 589.

Currien v. Santini, 696, 699.

Currier v. Lebanon Slate -Co., 314, 276,
346.

Currier v. Marietta & Cin. R. R. Co.,
861, 857. 5 °

Currier v. Concord R. R. Co., 779.

Currier v. N. Y., etc., BR. R. Co., 965,
738, 974.

Curry v. Scott, 299, 482, 318, 317, 517, 79.

Curry v. Woodward, 583, 129, 590, 7,
202, 211, 213, 721, 218.

Curtis’ Case, 81, 278, 296.

Curtis v. Butler County, 102, 122.

Curtis v. Harlow, 287.

Curtis v. Steever, 354, 501.

Curtis v. Whipple, 108.

Curtiss v. Hurd, 392.

Curtiss v. Leavitt, 837, 838, 919, 828,
950, 825, 944, 925, 62.

Curzon v. African Co., 987.

Cushman v. Hayes, 493.

Cushman v. Shepard, 289.

Cushman v. Smith, 861.

Cushman v. Thayer Mfg. Co., 408, 438,
447, 376, 428, 421.

Custar v. Titusville, 159, 157, :

Custer v. Tompkins County Bank, 934.

Cuthbert v. Cuthbert, 333.

Cutler v. North, etc., R’y, 795.

Cutler v. Estate of Thomas, 553, 552.

Cutright v., Stanford, 209. 4

Cutting, Ex parte, 980.

Cutting v. Damerel, 284, 231, 289, 422,
219, 427.

Cuykendall v, Corning, 231.

Cuykendall v. Miles, 240, 248.

601, 128,

D.

Dabney v. State, 851.

Dabney v. Stevens, 920, 922,

Daggett v. Davies,-653, 643, 644.

Dails v. Lloyd, 465.

Daland v. Williams, 607, 608.

Dale v. Grant, 960.

Dale v. Hayes, 609.

Dale v. Donaldson, etc., Co., 980.

Dalla v. R. R. Co., 990.

Dallas County v. McKenzie, 110.

Dallemond v. Odd Fellows, 186.

Daloret v. Rothschild, 375.

Dalton v. Midland Counties R’y Co.,
594. 430, 411, 79, 595.

Dalton, etc., R. R, Co. v. McDaniel, 214,
218, 212.

 

Dalton & Morgantown R. R. Co. v. Me-
Daniel, 130.

Daly v. Georgia, etc., R. R. Co., 860.

Daly v.. National, etc., Ins. Co., 865,
988.

| Daly v. Thompson, 327, 428, 643, 325.

Dana v. Bank of U. §.; 908, 851, 774

Dana v. Brown, 567.

Dana v. Bank of St. Paul, 945.

Danbury & Norwalk Railroad Co. v.
Wilson, 67, 524, 198, 83, 136,517, 85,
145. 4 is .

Dane v. Dane Mfg. Co., 226, 252, 271.

Dane v. Young, 425, 283, 328, 290, 286, -

_ 227, 284.

Danforth v. Penny, 262.

Daniel v. Royal, etc., Bank, 427.

Daniells’ Case. 267, 295, 342. .

Daniell v. Official Managers of Bank, ,
174.

Daniell, Ex parte, 36, 37.

Daniels v. Hart, 841.

Dannemeyer v. Coleman, 967, 966, 962.

Dansforth v, Allen, 553.

Danville, etc., Co. v. Parks, 685.

Danville, etc.; Co. v. Pomroy, 950.

Danville, etc., T. Co, v. State, 705.

Papulls v. Montpelier, etc., R. R. Co.,
119.

Daper v. Moss, etc., Co., 943.

D’Arcy v. Tamar, etc., R’y, 658.

Darling v. Boston, ete., R. R., 738

Darlington, etc. Co., Re, 40.

Darnell v. Dickens, 940,

Darnell v. Lewis, 927.

Darnell v. State, 704.

Darst v. Gale, 838, 837, 927, 824.

Dartmouth College Case, 512.

Dartmouth College v. Woodward, 1,
808, 518, 637.

Dater v. Troy, etc., R. R. Co., 877.

ae ae v. Brown, 209; 226, 816, 231,
234. .

Dauphin v. Lafayette R. R. Co. v. Ken-
nedy, 637, 638...

Davendorf v. Beardsley, 948.

Davenport Bank v. Davenport, 629.

Davenport v. Dows, 970.

Davenport v. Kleinschmidt, 803.

Davenport v. Miss. & Missouri R. RB.
Co., 641.

Davey v. Pemberton, 563.

David’s Trusts, Re, 336.

Davidson’s Case, 156, 1778.

Davidson v. Bridgeport, 915.

Davidson v. Grange, 81, 684. «

Davidson v. Ramsey Co., 105.

Davidson v. Rankin, 282, 226, 288, 202,
236, 250.

Davidson v. Seymour, 741.

Davidson v. Tulloch, 395, 647, 161.

Davies v. Fowler, 380, 331, 332,

Davies v. Weed, 288.

Davis, Ex parte, 277. .

Davis’ Case, 824.

& i

 
TABLE OF

CASES. ali

' [The references are to the foot-paging.J

Davis v. Bank of England, 428, 411, 418,
419, 948, 643, 412.
Davis v. Bank of River Raisin, 847, 827.
Davis, etc., Co. v. Best, 924, 847,
Davis v. Beverly, 230.
Davis v. Cain’s Ex’r, 333. ,
Davis v. Cook, 995.
Davis, etc., Co. v. Davis, etc., Co., 769,
949, 376, ‘953.
Davis v. Essex, etc., Society, 5389, 271,
2 3 > «
Davis v. Gray, 231.
Davis v. Gemmell, 961, 762, 974.
Davis v. Gwynne, "463.
Davis v. Haycock, 292, 468, 475,
Davis v. Mayor, etc.. 987.
Davis v. Maycock, Au.
Davis v. Memphis, etc., R. R. Co., 721,
755, 928.
Davis v. Old Colony R. R. Co., 808.
Davis v. Oswell, 652,
Davis v. Proprietors, 299, 886.
Davis v. Rock, 761.
Davis v. Stevens, 541, 294, 278.
Davis v. Tuscompia, 862.
Davis v. Weed, 271.
Davison v. Davis, 3738.°
Davison v. Gillies, 586, 598.
» Davison v. Holden, 552. ‘
Dawes’ Case, 145.
Dawes v. Ship, 523.
Dawes v. North River Ins. Co., 944.
Dawkins v. Antrobus, 891.
. Dawson v. Gaskoin, 335.
Dawson v. Ins. Co>, 318.
_ Dawson v. Kittle, 476.
Dawson v. Morrison, 899.
Day v. American Tel. & Cable Co., 411.
Day v. Day, 611, 277. ©
Day v. Holmes, 478, 482, 476.
Day v. Newark, etc., Co., 995.
Day v. Ogdenburgh, etc., R. R. Co.,
715, 828, 865.
Day v. Perkins, 649,
Day v. Postal Tel. Co., 722, 720.
Day v. Spiral, etc., Co., 818.
Dayton v. Borst, 219, 213, 84.
Dayton & Cincinnati R. R. Co. v.
Hatch, 23, 98, 98, 99, 546, 517.
Dayton, ‘etc., Co. v. Coy, 87.
Dayton Nat. Bank v. Merchants’ Nat.
Bank, 477. Fe
Dayton. v. Warne, 948.
Deaderick v. Wilson, 355, 217, 556.
Deaf and Mute Inst. v. Norwood, 885.
Dean and Chapter of Fernes, Case of
the, 676.
Dean v. Biggs, 211, 220, 210.
Dean v. Bennett, 91. ~
Dean v. De Wolf, 228.
Dean v. Mace, 282.
Dean v. Whitroy, -236, 235.
Dean v. Sullivan R. R. Co., 863.
Deane v. Test, 333.
Deansville Cemetery, Matter of, 862.

‘Denike v. N. Y.,

 

De Bost v: Albert P. Co., 922.

De Camp v. Aylward, 700, 850.

De Camp v. Dobbins, 855, 854, 824.

De Caumont v. Bogert, 338,

Decker v. Hughes, 103, 110.

Deckirson v. Valpy, 825.

Dedham Bank v. Chickering, 934, '

Dedham Inst. v. Slack, 926.

Deenis v. Albany, etc., Line, 552.

De ae v. Wisconsin, etc., R. R. Co.,
120,

De Gendre v. Kent, 605.

De Groff v. American Linen Co., 945,
814, 807.

Delacy v. Neuse Riv. Nav. Co., 890.

Delafield v. State of IIl., 476.

‘Delamater’s Estate, 839, 335.

Delamater v. Miller, 594.

Delancy v. Strickland, 546. -

Delaney v. Van Aulen, 612.

Delane v. Butler, 320, 248, 233, 321.

Delano v. Case, 966.

Delano v. Trustee, etc., 916.

Delaware & R. C. Co. v. Camden, 858.

Delaware, etc., Co. v. Commonwealth,
641

Del. & Atlantic R. R. Co. v Irick, 885,
19 -

Delaware, ee , R. R. Co. v. Central,
etc., Co., 799

Delaware, etc., Canal Co. v. Pa. Coal
Co., 689, 798, 913, 914.

Delaware, etc., R. R. Co. v. Oxford Iron |
Co., 582.

Delaware Railroad Tax Case, 633, 638,
518, 687.

Delaware, ete., R. R. Co. v. Roland, |
198.

| Delaware, etc., Co. v. Sansom, 143, 281.

Delevan v. Simonson, 473.

De Lisle v. Hodges. 337.

Delta, etc., v. Williams, 931.

Deming v. Bull, 287, 286.

Deming v. Darling, 393,

Deming v. Puleston, 238.

Deming v. Williams, 3389.

Dempsey v. Harm, 388.

Den v. Vreelandt, 940.

Denham & Co.. Ke, 171, 602.

etc., Co., 696, 695.

Dennison, Ex parte, “484.

Dennistoun v. N. Y., ete, R. R. Co.,
873.

Dennis v. Kennedy, 554, 552, 551, 745.

Denny v. Cleveland, etc., R. R, Co.,
815.

Delaware R. R. Co. v. Tharp, 517, 718.

“Denny v. Lyon. 488.

Densniore Oil Co. v. Densmore, 6.

Densmore v. Central R. R. Co., 967.

Dent v. Holbrook, 647, 650.

Dent v. London Tramways Co., 586,
306.

Dent v. Nickalls, 4'76, 462.

Dent v. North, etc., Co., 925,
xlii TABLE

OF CASES.

[The references are to the foot-paging.] ,
a 3

Denton v. Jackson, 2.
Denton v. International Co., 995.
Denton v. Livingston, 497.
Denton v. Livingstone, 13.
Denton v. Macneil, 173, 162.
Dent’s Case, 41. i
Denver, etc., R. R. Co. v. Atchison,
etc., R. R. Co., 784.
Denver, etc., R’y v. Bourne, 860.
Denver R’y Co. v. Harris, 878, 874, 876.
Denver v. Mullen, 714. ~
Denver, etc., Co. v. Union, etc., R’y,
859. § :
De Pass’ Case, 286, 295, 291, 296.
De Peyster v. American Fire Ins. Co.,
597.
De Peyster v. Beekman, 542,
Deposit Life A. Co. v. Ayscough, 168,
Derby v. Yale, 979.
De Ruvigne’s Case, 54, 735.
De Ribeyre v. Barclay, 463.
Derrickson v. Smith, 243.
De Ruyter v. St. Peter’s, 850.
De Ruyter v. Trustee, etc., 855.
Descombe v. Wood, 970, 961.
Desdoity, Ex parte, 682, 686, 685.
Des Moines Valley R. R. Co. v. Graff,
96, 94,
_Des Moines, etc., R’y v. Des Moines, 803.
De Sobry v. Nicholson, 988.
Despar Continental, etc., Co., 991, 990.
Despatch, etc. v. Bellamy, etc., Co.,
935, 938, 930, 918, 914,10.
Detroit, etc., Bank v. Detroit, 553.
Detroit v. Detroit & Howell Plank-road
Co., 520, 718.
Detroit, etc., R’y v. Guthard, 688.
Detroit v. Jackson, 934, 915, 936.
Detroit Daily Post Co. v. McArthur,
878, 876.
mee v. Mutual Gas Light Co., 838,
60.
ane L. & L. M. R. R. Co. v. Starnes,

Detwieler v. Breckenkamp, 142.
Devala, Re, 175\

Devendorf v. Beardsley, 988. :
Devlin v. Pike, 647.

De Vitre v. Betts, 76.

Devoe v. Ithaca, etc., R. R. Co., 988.
Devon, etc., R’y Co., Re, 299, 751.
Dewees v. Miller, 380,

ee v. St. Albans Trust Co., 266,
we v. Perdicaries, 328, 415, 416,

De Witt v. Hastings, 194, 257, 985, 258.
De Witt v. Walton, 942, 943.

De Wolf v. Mallett’s Adm’r, 982.

De Wolf v. Mfg. Co., 850.

eee & Mason Co. v. Millerd, 136, 188,

Dey v. Holmes, 464, ;
De Zung v. Beekman, 937.
Diamond Match Co, v. Roeber, 529.

 

Diamond Match Co. v. Powers, 865,
557.

Diamond, etc., Co. v. Todd, 480, 371.

Dias v. Merle, 561.

Dick v. Balch, 30. :

Dickerson’s Appeal, 339.

Dickey v. Marine Tel. Co., 797.

‘Dickinson v. Central Nat. Bank, 577,
854, 15,-480, 421.

Dickinson v. Chambers of Commerce,
890.

Dickinson v. Gay, 476.

Dickinson v. Lilwal, 464.

Dickinson v. Valpy, 902.

Dickson’s Executor v. Thomas, 381, 383,
385.

Dickson v. Great, etc., R’y, 795. .

Dill v. Wabash Valley R. R. Co., 155.

Diller v. Brubaker, 491.

Dillian v. Central, etc., 993.

Dillion v. Barnard, 841.

Diman v. Providence, etc., R. R. Co.,,

66.
Dimpfel v. Ohio, etc., R. R. Co., 969,
837 ;

Dingham v. People, 801.

Dingwell v. Askew, 338.

Dinns v. Prop, of Grand Junction
Canal, 9. :

Dirby Turnpike Co. v. Parks, .799.

Direct, etc., Co., Re, 322,

Direct U. S. Cable Co. v. Dominion
Tel. Co., 989.

Directors, etc., of Central R’y Co, v.
Kisch, 158, 178, 161. ‘

Dishorough v. Ordealt, 498.

Dispatch, etc.,.v. Bellamy, etc., Co.,
689, 657, 688.

Diven v. Lee, 284, 226.

| Diven v. Phelps, 248,

Dix v. Shaver, 93.

Dixon’s Case, 177. °

Dixon, Ex parte, 285,

Dixon County v. Field, 102, 108.
Dixon v. Evans, 181, 146.

Doak v. B’k of the State, 478, 489.
Doane v. King, 392.

Dobbins v. Walton, 578.

Dobson v. Simonton, 721;

Dobson, Ex parte, 421.

Dockery v. Miller, 847,

Dodd v. Wilkinson, 846,

Dodd v. Winship, 607.

Dodds v. Hills, 360,

Dodge v. City of Council Bluffs, 864.

Dodge,v. County of Platte, 109, 105.

Dodge v. Minnesota, etc., State Roofing
Co., 286. "? \

Dodge v. Woolsey, 614, 968, 513, 687,
813, 729, 981,

Dodgson’s Case, 158.

‘Dodgson v. Scott, 287,

Doe Malden v. Miller, 885,

-| Doe v. Tamere, 987,

Doman’s Case, 779.
TABLE OF CASES.

xliii

[The references are to the foot-paging.]

Domestic ‘& For.’ Miss, Society's Ap-
peal, 885.

Donald v. Suckling, 487, 477, 485.

Donaldson v. Gillett, 394, 488.

Dongan’s Case, 780, 520, 702.

Donnell v. Lewis Co. Saving Bank, 823.

Donnell v. Wyckoff, 498, 483.

Donohue v. Mariposa, etc., Co., 981.

Donohue v. M’Cosh, 374.

Donovan v. Finn, 498,

Donworth v. Coolbaugh, 221, 245.

Dooley v. Cheshire Glass Co., 715.

‘Dooley v. Walcott, '714.

Doolittle v. Marsh, 230.

Door v, Geary, 335.

Doran v. Eaton, 398.

ieee v. Dutch Reformed Church,
14,

Dorman v. Jacksonville & A. P. R. Co.,
197, 199.

Dorison v. Westbrook, 375.

Dormitzer v. Illinois, etc., Bridge Co.,
602.

Dee French, 204, 219, 194, 197, 199,

Dorris v. Sweeney, 523, 195.

Dorsey Harvester Rake v. Marsh, 816,

Doss v. Missouri R. R. Co., 878.

Doty v. Michigan Cent. R. R. Co., 992. _

_ Douchy v. Brown, 294, 287.

~ Dougall v. Gardiner, 973.

Dougherty v. Hunter, 924.

Douglas v. Congreve, 14, 334,

Douglass v. Chatham, 103,

Douglass v. Douglass, 334.

Douglass v. Ireland, 38, 39.

‘Douglas v. Merceles, 648, 647.

Douglas v. Smith, 385.

Doggies Branch Bank at Mobile,

3

Douglass v. Craft, 647.

Doughty v. Somerville & E. R. BR. Co.,
857,

Dousman v. Wisconsin & Lake Superior,
etc., Co., 319.

Dovey’ 8 Appeal, 894,.408, 393.

Dow v. Beidleman, 798.

Dow v. Gould & Co., 353, 374, 590, 588.

Dowd v. Wisconsin, etc., RR. Co., 974.

Downer’s Adm’r v. Zanesville Bank,
574, 570, 573.

Downes v. Ship, 162, 960.

Downie v. Hoover, 132.

Downie v. White, 178, 156.

Downing v. Marshall, 852, 855.

Downing v. Mt. Washington, etc., 788.

Downing v. Potts, 691, 678, 679, 686,
147, 679.

Downing v, Whittier, 490.

Dows v. City of Chicago, 633.

Dows v. Naiper, 594.

Doyle, Ex parte, 271.

Doyle v. Continental Life, Ins, Co., 865,
869. A

Doyle v. Mizner, 657, 715.

‘

 

Doyle v. Muntz, 966.

Drake v. Flewellen, 948.

Draper v. Beadle, 40.

Draper v. Manchester, etc., R. R. Co.,
564, 565.

Drinkwater v. Falconer, 331.

Drinkwater v. Portland Marine Ry, 209,
244, 281.

Driscoll v. West Bradley, etc., Co., 570,

567, 569, 571.

Droitwich Patent Sali Co. v. Curzon,
813, 323.

Dronfield Silkstone Coal Co., Re, 180,
178, 177, 87.

Drover v. Evans, 82:

Drum Slate Quarry Co., Re, 786, 735.

Drummond’s Case, 25, 30.

Drummond Tobacco Co. v. Randle, 881.

Drumovan v. Green, 118.

Drury v. Cross, 492, 482, 759.

Drybutter v. Bartholomew, 18.

Dryden v. Kellogg, 234, 210, 238, 280.

Duensburg v. Jenkins, 405.

Daan etc., R’y Co. v. Black, 273, 81,

3:

Dubois v. Delaware, etc., Co., 935, 943.

Dubois v. Thompson, 466.

Ducarry v. Gill, 660.

Ducat v. Chicago, 865, 869, 864.

‘| Ducket v. Gover, 971.

Duckworth v. Roach, 252.

Dudley v. Collier, 871.

Dudley v. Gould, 495, 504, 405,

ae v, Kentucky High Schools, 693,

Duff v. Maguire, 553.

Duffield v. Barnum, etc., 575. .

Duggan v. Colorado, etc., Co., 718.

Duke’s Case, 343.

Duke v. Andrews, 901.

Duke v. Cahawba Nav. Co., 420.

Duke v. Diver, 901.

Duke v. Forbes, 901.

Dummer v. Corp’n, etc., 566.

Dummer v. Pitcher, 339.

Dumpby v. Travelers’ Asso., 961.

Duncan v. Jones, 550.

Duncan v, Hill, 476..

Duncan v. Jaudon, 361, 358, 486,

Duncan v. Luntley, 409.

Duncan v. Maryland, 845.

Duncomb v. N. Y., ete., R. BR. Co., 48%,
762, 838, 761.

Duncuft v. ‘Albioehts 375, 377.

Dundas v. Dutens, 498.

Dundee, etc., Co. v. Cooper, 713.

Dunham v. Cincinnati Pac. R’y Co.,
840, 841.

Dunham v. Earl, 840.

Dunham v. Isett, 843, 842, 840.

Dunkerson, In re, 580, 568.

Dunkle v. Renick, 849.

Dunlop v. Dunlop, 578, 574.

Dunlop, Re, 580.

Dunman v. Strother, 380.
xliv

TABLE OF CASES.

[The references are to the foot-paging.]

Dunn y. Com. B’k of Buffalo, 419, 580,
426.

Dunn v. Bell, 388.

Dunn v. Rector, etc., of Church, 936.

Dunn v. St. ‘Andrew's Ch., 936, 935, 934.

Dunn’s Adm’r v. Kyle’s Adm’ r, 894,

Dunne v. English, 742.

Dunnelroge Min. Co. v. Allment, 714.

Dunnoven v. Green, 103.

, Dunphy v. Travelers’, etc., Ass’n, 972,
976.

Dunston v. Imperial, Star Light Co.,
755, 7, 889.

Dupee v. Boston Water-power Co., 816,
348, 346, 855.

Du Pont v. Northern Pac. R. R. Co.,
968.

Duquesne Club v. Penn. B’k, 990.
Duquid v. Edwards, 476.
Durant v. Burt, 387, 465, 381.'
Duranty’s Case, 169: 159, 171.
Durar v. Ins. Co., 934, 927.
Durfee v. Old Colony, etc., R. R., 522,
782, 693.
Durham v. Mfg., etc., Co., 433,
Durham’s Case, 229.
Durkee v. Board of ee 110.
Durt v. Batavia Paper Mfg. Co., 949.
Dutch West India Co. v. Henriquez,
243.
eat West India Co. v. Van Moses,
882,

é

Dutcher v. Importers and Traders, etc.,

851.

Dutcher v. Marine National Bank, 231.

Dutchess Mfg. Co. v. Davis, 85, 194, 87,
984.

Dutchess, etc., R. R. Co. v. Mabbett, 65,
194.

Daen v. Connecticut Bank, 426, 508,
447,

Dutton v. Marsh, 9438.

Duvergier v. Fellows, 548.
Dwight v. Boston, 617.

Dwyer v. Fuller, 394.

Dyer v. Osborne, 617, 12.

Dyer v. Tuskaloosa, etc., Co., 806.
Dyer v. Walker, 710.

Dykers v. Allen, 484, 470.

Dykers v. Townsend, 382.

E.

Eagan v. Clasby, 374. \

Eagle Iron Works, Re, 10.

Eagle v. Beard, 124.

Eaglefield v. Marquis of Londonderry,
76, 171, 768.

Eakins v. American, etc., Co., 757.

Eakright vy. Logansport & N. Ind. R. R.
Co., 181, 187, 66.

Eales v. Cumberland, etc., Co., '756.

-Eames v. Doris, 239, "240, 253,

Heriot Lendsey v. Great Northern R’y,

,

 

Earl Powlett v. Herbert, 358.-

Earl of Shrewsbury v. North Stafford-
shire R’y Co., 817, 772, 905.

Early & Lane’s ’ Appeal, 344,

Earp's Appeal, 606, 585.

Earp v. Lloyd, 561.

East & West, etc., R’y Co., In re, 299,

East & West, etc., Co. v. Littledale, 480.

East, etc., Co. v. Dennis, 414,

East, etc., Co. v. Merryweather, 744.

East, etc., Co. v. Brown, 924.

East Boston, ete., Vv. Eastern R. R, Co.,
842.

East, ete., Church v. Froislie, 711.

' Hast Gloucestershire R’y Co. v. Barthol-

omew, 18, 1838, 427.

East, Hartford v. Hartford Bridge Co.,
80

East Oakland v. Skinner, 101.

East New York, etc., R. R. Co. v. El-
more, 594, 761, '74. ©

East New York & Jamaica R. R. Co, v.
Lighthouse. 22.

East P. Hotel Co. v. West; 194.

East River Bank v. Hoyt, 946.

East Rome, etc., Co. v. Nagle, 812.

East Tennessee, etc., R. R. Co. v. Gam-
mon, 678, 693, 157, 85, 155.

East Tennessee, etc., Co. v. Gaskell, 711,

East Tennessee, etc., R. R. Co. v. Gray-
son, 971, 964. , z

East Tennessee, etc., R. Co. v. Pickerd,
637.

Easterly v. Barber, 689, 244.

Eastern R. R. Co. v. Benedict, 378, 649,
647, 642.

Eastern Trans. Co. v. Com’rs, 634.

Eastern Counties R’y Co. v. Hawkes,
852, 905, 854,

Eastern v. London; etc., Bank, 420.

Eastern, etc., Co. v. Regina, 703, 716.

Eastern & Plank-road Coe. v. Vaughan,
147, 985, 6, 183.

Eastern, ete. , Bank v, Vermont Nat'l

Bank, 845.
Easthain v. Blackburn R’y Co., 885.

‘| Eastman v. Crosby, 254, 202..

Eastman v. Fiske, 447, 373.

Easton R. R. Co. v. Boston & M. R. R.
Co., 858.

Easton v. London, etc., Bank, 395.

Easton v. St. Louis, 994.

Eaton v. Aspinwall, 194.

mens & H. R. R. Co. v. Hunt, 701,

Eaton v. Pacific Nat'l Bank, 322, 320.

Eaton v. St. Louis, etc., Co., G91.

Ebbett’s Case, 80, 274, 273.

Ebbinghousen v. Worth Club, 546.

Ebbw. Vale Sheet Iron & Coal Co., In
re, 322.

ae Northern Pac, R. R. Co., 990,

Eby v. Guest, 505, 344,
Eckfeld’s Estate, 329, 838, 331.
\ TABLE OF CASES.

xlv

[The references are to the foot-paging.]

Eckstein v. Downing, 376.

Ae Towing Co. v. Pontchartrain,

Eclipse, etc., Co. v. Pontchartrain R. R.
Co., 784. i

-Eddy v. People, 112.

Edgar v. Knapp, 901.

Edgerby v. Emerson, 657, 916.

Eee EOn v. Fitzmaurice,

65.

Edie, etc., Re, 430.

Edinburgh, etc, Ry v. Hibblewhite,
187, 144,

Edinburgh, etc., R’y Co. v. Philip, 717.

170, 163,

Edison,. etc., Co. v. New Haven, etc.,.

Co., 721.

Edmonds v. Blaina, etc., Co., 838, 834.

Edmondson v. Crosthwaith, 609

Edwards v. Beugnot, 501.

eS v. Bringier Sugar Extracting
Coe, 22.

Edwards v. Cameron’s Coalbrook, 944,
942.

Edwards v. Fairbank, 855.

Edwards v. Fargo, etc., R’y, 757.

Edwards v. Grand Junction R’y, 905.

Edwards v. Hall, 12.

Edwards v. Midland R’y, 875.

Edwards v. Shrewsbury, ete., R’y Co.,
822.

Edwards v. Sonoma Bank, 428, 644.

Edwards v. Williamson, 107.

E. & P. Dis. v. Cecil, 794.

Egdell v. McLaughlin, 380,

Ehle v. Chitenang Bank, 583.

Ehrgott v. Bridge Manufactory, 825,
808.

Ehrman, etc., King v. Nat. M. & E.
Co., 870

Ehrman v. Teutonia Ins. Co., ‘870, 993.

Eicholz v. Fox, 647.

Eidman v. Bowman, 318, 319, 317, 907.

Eighmie v. Taylor, 155, 156.

Enmstein v. Rosenfield, 977.

Eisfield v. Kenworth, 257.

Elder v. Bank of Ottawa, 846.

Elder v. New Zeuland L, I. Co., 188.

Eldred v. Bell Telephone Co., 907.

Eldridge v. Smith, 842, 843.

Elems v. Ogle, O17.

Elevated R. R. Co., Matter of, 522.

Ely v. Positive, ete., Co., 903, 904.
Elizabethtown, etc., R. R
town, 640, 639, 637.
Elizabeth City Academy v. Lindsey,

914,
Elkington’s Case, 26.
Elkins v. Camden & Atlantic R. R. Co.,
~ 848, 596, 968, 307, 682, 967, 308, 304.
Elliot v. Abbot, 658.
Ellis’ Appeal, 486.
Ellis v. Am. T. Co., 797.
Ellis v. Andrews, 391,
Ellis v. Edens, 335.
Ellis v. Marshall, 720.
* \

Lose v. St. Louis, etc., R. R.

. v. Elizabeth-|

 

Ellis v. Pulsifer, 943.

Ellis v. Proprietors of Essex Merrimack
Bridge, 18, 610, 588, 363.

Ellis v. Schmoeck, 549,

Ellis v. Ward, 5A, 962.

Ellison v. Bignold, 548.

Ellison v. Mobile & O. R. R. Co., 92,
163, 204, 156.

Ellsworth v. Cole, 382.

Eilsworth v. Curtis, 971. 7

Ellsworth, etc., Co. v. France, 678, 913.

Ellsworth vy. New York, etc., R. R., veut

2, 866, 827.

Elston v. Piggott, 870, 867.

Elwell v.. Dodge, 933, 942.

Elwes v. Causton, 337.

Ely v. Sprague, 7, 586.

Bipsvule Mfg. Co. v. Okisko Co., 986,

16. ‘ ‘

Embrey v. Jemison, 888, 381.

Emerson v. Antrim, etc., R. R. Co., 992.

Emerson v. McCormick, etc., 990.

Emerson v. N. Y., etc., R. R., 961.

Emerson v. Providence, etc., Co., 933.

ee v. Evansville, etc., R. R. Co.,

Emery v. Mason, 611.

Emery v. Wason, 336.

Emma Silver Mining Co. Case, 563.

Emma, etc., Co. v. Grant, 738, 741, 740,
979, 739.

Emma Silver M. Co. v. Lewis, 735, 741,
161, 738.

i Emmerson’s Case, 297.

Emmett v. Reed, "927.

Emmett v. Springfield, I &PRR,
Co., 190.

Emmons v. Davis, etc., Co.,

Empire Assurance Co., “In = 64, 702.

Empire Bank, Re, 515. .

Empire City Bank, Matter of, 275, 290,
515.

Empress, etc., Co., In re, 905, 904.

Empire v. Darlington, 124, 117.

Empire Mfg. Co. v. Stuart, 712, 718.

Enders v. Board of Public Works, 648,
647,

Enfield v. Jordan, 111.

Enfield Toll-bridge Co. v. Conn. River
Co., 699, 709, 806.

Enfield Toll B. Co. v. Hartford, 805,
858.,

England v. Dearborn, 909, 922.

England’s Ex’rs v. Beatty, etc., Co.,
754.

Englefield Colliery Co., Re, 735.

English v. Chicot | Co., ‘103.

Episcopal, etc., Society v. Needham,
etc., Church, 935.

.Eppes v. Miss., ete., R. R. Co., 524, 24,

149, 136, 187.
Eppright v. Nicksron, 220, 941. .
Erickson v. Nesmith, 234, 224, 237, 241,
244, 253, 214, 218, 216,
xlvi

[The references are to the foot-paging.]

Ericsson v. Brown, 228, 229.

Erie City Works v. Barber, 875.

Erie & W. P. R. Co. v. Brown, 184, 91.

Erie & Northeast. R. R. v. Casey, 513,:
718, 721.

Erie R’y Co. v. Delaware, etc., R. R.
Co., 863.

Erie R’y Co. v. New Jersey, 641.

Erie, etc., R. R. Co. v. Owen, 68.

Erie, etc., R’y Co. v. Patrick, 272.

Erie R’y Co. v.. Vanderbilt, 767, 9'79.

Erlanger v. New Sombrero Co., 739,
7A1, 788. :

Ernest v. Croysdill, 962.

Ernest v. Nicholls, 659, 758.

Erskine v. Loewenstein, 57. -

. Erskine v. Peck, 180, 177,

Ervin v. Oregon R’y & Nav. Co., 565,
965, 992, 998, 968, 972, 765, 774, 979,
561, 994. ;

Erwin v. Oldman, 498.

Eslava v. Ames, etc., Co., 886.

Esmond v. Buliard, 246, 280.

Esparto Trading Co., 177.

Esser v. Linderman, 471. ,

Essex, etc., Co, v. Collins, 84, 916,

Essex Bridge Co. v. Tuttle, 88.

. Essex Turnpike Co. v. Collins, 938, 936.
Estabrook, Ex parte, 825, 826, 809.
Estell v. Knightstown & Middletown,

Turnpike Co., 128, :

Estes y. Belford, 992, 994.

Etting v. Bank of U.S8., 875.

Eureka Co. v. Bailey Co., 985, 929.

Eureka Ins. Co. v. Parks, 870,

European Central R’y Co., In re, 324.

European, etc., Society, In re, 698.

European, ete, R’y Co. v. Poor, 731,
732.

European Bank, In re, Masters’ Case,
281.

Eustace v. Dublin T. C, R’y Co., 428.

Evangelical, etc., Home v. Buffalo,
etc., Assoc., 780,

‘Evans’ Case, 72. .

Evans v. Brandon, 892, 893.

Evans: v. Coventry, 608, 224, 267, 342,
341, 271, 965.

Evans v. Hudson’s Bay Co., 567.

Evans v. Jones, 336,

Evans v. Lee, 940.

‘Evans v. Monet, 502.

Evans v. Osgood, 661.

Evans v. Philadelphia Club, 889.’

aan v. Smallcombe, 179, 149, 959,

Evans v. Trip, 381.

Evans v. Waln, 476.

Evans v. Wood, 468, 293.

Evansville R.’R. Co. v. Androscoggin
Mills, 787, =

Evansville Bank v. Britton, 620,

Evansville v. Carlisle, 156,

Evansville, etc,, R. R. Co. v. City of

. Hvansville, 122, 310, 301, 193, 108, 117.

 

TABLE OF CASES. 3

N

Evansville, ete., R. R, Co. v. Dunn, 98,

Evansville Nat] Bank v. Metropolitan
Nat’l Bank, 582.

Evansville National Bank v. Metropol-
itan, National Bank, 569.

Evansville, etc., R. R. Co. v. Shearer,
94, 97.

Evarts v. Killingworth Mfg. Co., 700.

Evening Journal Assoc. v. Dermott,
876.

Everett v. Coffin, 594.

Everett v. Smith, 693.

Everett v. United States, 933, 927.

Everhart v. West Chester & Phila. R.
R, Co., 517, 294, 299, 570, 184.

‘Everingham v. Meighan, 386. x

Everitt’s Appeal, 682.
Everitt v. Knapp, 389.

Evershed v. London & N. W. R’y, 798,

794,
Evertson v. National Bank, 880, 829.
Ewing v. Medlock, 554, 546.
Ewing v. Robinson, 984.
Excelsior .Co., Re, 516.

Excelsior Petroleum Co. v. Lacey, 608,

822,
Excelsior G. B. Co, v. Stayner, 184.
Exchange Banking Co., In re, 604.
Ex. Nat. Bank v. Miller, 681. ;
Executors of Gilmore ‘v. Bank of Ciu-
cinnati, 280. ‘
Exeter & C. R’y v. Buller, 821.
Exmouth Docks Co., In re, 698,
Express Cases, 796.
Express Co. v. Caldwell, 795.
Eyerman v. Krieckhaus, 47.

‘Hyre’s:Case, 296, 276, 295.

Eyster v. Centennial, etc., 597.
F,

Factage Parisien, Re, 698. ;
Factors’ & T. Ins. Co. v. Marine PD, D.
& S. Co., 404, 480, 408, 952,

Factors’, étc., Ins. Co. v. Harbor, etc.,
Co., 546,
Fadness v. Braunborg, 684.

Faikney.v. Reynons, 386,
Fairfield v. County of Gallatin, 109, 110,

111.
ee etc., Bank v. Chase, 952, 950,

Fairfield C. T. Co. v. Thorp, 181.

Fairfield Co. Turnpike v. Thorp, 948,
185, 914, 946. ie :

Falconer v. Buffalo, etc, R. R. Co,
119, 110, 122,

Falconer v. Campbell, 550.

Falk v. Moebs, 943. ‘

Fall, etc., Bank v. Sturtevant, 951. ”

Fall River Iron Works v. Old Colony
R. R. Co., 518,

Fallon v. R. R. Co., 376.

Falmouth, etc., Co. v. Shawhan, 203,
TABLE OF CASES.

xlvii

[The references are to the foot-paging.}

Fangele Hall Bank v. Bank of Brighton,

Fanning v. Gregoire, 805.

Fanning v. Osborne, 863.

Pareira v. Gabell, 388, 382, 389, 384, 385,

Fargo v. Louisville, ete., R’y Co., 550.

Fargo v. Michigan, 641.

Fargo v. Redfield, 796,

Faris, Ex parte, 668.

Faris v. Reynolds, 117.

Farley v. Kittson, 749.

Farmers’ Bank of Maryland Case, 571,
577.

Farmers’, etc., Bank v. Butchers’, etc.,
Bank, 931.

Farmers’ & Mechanics’ Bank v. Cham-

‘ plain Transportation Co., 344, 9.

Farmers’ Nat’l Bank v. Cook, 633, 628.

Farmers’ Bank v. Chester, 915.

ee etc., Nat?] Bank v. Dearing,

Farmers’ & M. Bank v. Downey, 735.

Farmers’ & Mech. Bank v. Empire Stone
D. Co., 809, 925.

; Farmers! & Mfg. Bank v. Haight, 939,
942

Farmers’ Bank of Md. v. Iglehart, 576,
572, 574, 568.

Farmers’ Bank v. Gettinger, 872.

Farmers’ Bank v. McKee, 952, 948.

Farmers’ & M. Bank v. Wasson, 369,
420, 568, 567, 888. a

Farmers’ & M. Bank v. Wayman, 362.

Ca Nat'l Gold Bank v. Wilson,
5

ue , etc., Bank v. Troy, etc., Bank,
984

Farmers’, etc., Co. v. Cincinnati, 841.

Farmers’, etc., Co. v. Chicago, etc., Ry
Co., 681.

Farmers’, etc., Ins, Co. v. Chase, 918.

Farmers’ & Citizens’ Bank v. Payne,
953.

Farmers’, etc., Co. v. Farmers’, etc.,
Co., 881.

Farmers’, ete., Ins, Co. v. Hurrah, 865,
869. i

Farmers’, etc., Co. v. Clowes, 844.

Farmers’, etc., Co. v. Vicksburg, 844.

Farmers’ & M. Bank v. Nelson, 182.

Farmers’, etc., Co., v. St. J., etc., R. R.
Co., 7183.

Farmers’ Loan & T. Co, v. Carroll, 945.

Farmers’ Loan & Trust Co. v. Commer-
cial Bank, 840.

Farmers’ Loan & W. Co. v. Hendrick-
son, 843, 838.

Farmers’ Loan & Trust Co. v. Hughes,
542,

Farmers’ ‘Loan & T. Co. v. McKinney,
868.

Farmers’ Loan & T. Co. v. Harmony,
868

Farmers’ Loan & T. Co. v. Perry, 847. |

 

Farmers’ Loan & T. Co. v. St. Joseph,
etc., R. R. Co., 777, 848.

Farmers’ Loan, etc., Co. v. Stone, 798,

Farmers’ Loan & Trust Co, v, Farmers’
etc., Co., 880.

Farming v. Ins. Co., 64.

Farmington Savings Bank v. Fall, 847.

Farnell v. Houghton Copper Co., 657,

‘Farnam v. Brooks, 962,

Farnham v. Benedict, 106, 715.

Farnsworth v. Robbins, 180,. 346.

Farnsworth v. Wood, 246, 219, 231.

Farnum v. Ballard, etc., Machine Shop,
245, 980.

Farnum v. Blackstone Canal Corp., 871.

Farnum v. Patch, 553.

Farrar v. Farrar, ‘Limited, 743,

Farrar v. Walker, 175, 173,

Farrar v. Ferley, 669. °

Farrell Foundry v. Dart, 934.

Farrer v. Perley, 670.

Farrier v. Dugan, 689.

Farrington v. Tennessee, 622, 621, 615,
637, 514, 624.

Farrington Academy v. Allen, 935,

Farrow v. Bivings, 253, 224.

Farwell v. Houghton, ete., Works, 681,
783.

Fatman-v. Lobach, 448, 487. ;

Faul v. Alaska Mining, etc., Co., 218.

Faulds v. Yates, 687, 693.

Faulkner v. Hebard, 375.

Faull v. Alaska, etc., Mining Co., 211,
212,

Faure, etc., Co., Re,

769.
| Faure, etc., Co. v. Phillapart, 660, 147,

Faville v. Shehan, 392.

Fawcett v. Charles, 890.

Fawcett v. Lawrie, eo ae 692,

Fay v. Gray, 482, 485, 4

Fay v. Noble, 928, 256, 928, 823, 945.

Fay v. Wheeler, 379.

Faxton v. McCarter, 620.

Fayette v. Cox, 101. —

Feather v. Lee, etc., Co., "74,

Featherstone v. Cooke, 980, 822,

Fecheimer v. Nat’! Ex. Bank, 368,

Fee v. Gas Co., 781, 702.

Felgate’s Case, 158.

Felt v. Heye, 488, 486.

Felton v. McClam, 922.

Fenlon v. Dempsey, 565.

Fenn v. Curtis, 396.

Fenn’s Case, 545.

Fennick’s Case, 279, 539, 541.

Fenton v. Hughes, 566.

Ferguson v. Paschall, 376.

Ferguson v. Wilson, 4, 970, 75, 76.

Fernside’s and Dean’s Case, 972,

Ferris v. Ludlow, 223, 313.

Ferris v. Myrick, 5387,

Ferris v. Shaw, 257.

Ferris v. Strong, 697.

Ffooks v. South, etc., R’y Co., 811,
962. \
xl viii

TABLE OF CASES.

[The references are to the foot-paging.]

Ffooks v. Southwestern R’y Co., 967,
966, 45.
Fidelity, etc., Co. v. Niven, 989.
Fidelity etc., Co. v. Shenandoah, etc.,
R. R. Co., 840, 940. 3
Fidelity Trust Co.’s Appeal, 332, 334.
Field v. Chicago, etc., R. R., 795.
Field v. Schieffelin, 363.-
Field v. Cooks, 257.
Field v. Field, 693. |
Field v. Haines, 244.
Field v. Kinnear, 475.
Field v. Lelean, 648. i
Field v. Northern Pac. R. R. Co., 561,
558, :
' Field v. Pierce, 11, 265.
Fielden v. Lancashire, etc., R’y Co., 299,
300. ; hae
Fiery v. Emmerts, 216, 215. .
Fietsam v. Hay, 3.
Fifth, etc.. Sav. Bank v. First Nat’l
~ Bank, 926.
‘Filder v. London, etc., R’y Co., 967.
Filli v. Delaware, etc., R. R. Co., 995.
Financial Corporation, Re, 323.
Fine v. Hornaby, 378.
Finlay v. Lindsay, 563.
Finley Shoe, etc., Co. v. Kurtz, 316, 694,
317, 75.
Finney’s Appeal, 505, 480, 491, 495.
Finney v. Bennett, 697.
. Fire Department v. Noble, 869.
Fire Ins. Co., Re, 229.
Firemen’s Ins. Co., Ex parte, 432.
First Municipality of N. O. v. Orleans
heater Co., 195.
rst Nat’l Bank v. Almy, 267,
First Nat’l Bank v. Anderson, 951.
First Nat’l Bank v. Arlington, 119.
First Nat'l Bank v. Bennett, 920.
First Nat’! Bank v. Breman, "81.
ie Nat'l Bank of New O. v. Bohne,
995.
First Nat’! Bank v. Christopher, 953.
cen Nat'l Bank v. Davies, 257, 260,
First Nat’! Bank v. Dorset, 118.
First Nat’! Bank v. Drake, 958, 74°,
First Nat'l Bank v. Dunbar, 927.
First Nat’! Bank v. Douglas Co., 627.
ey Nat'l] Bank v. Fancher, 626, 622,
First Nat’! Bank v. Fricke, 925, 951.
First Nat'l Bank v. Gifford, 426, 418,
285, 481, 18, 421, 408, 281.
First Nat’?l Bank of Garretsville v.
. Greene, 210, 208.
.First Nat'l Bank v. Hartford, etc., Ins.
Co., 568, 578, 570, 576.
First Nat'l] Bank v. Hendrie, 94.
First Nat’l Bank v. Hoch, 921, 462.
First Nat’l Bank v. Hogan, 925.;
First Nat’! Bank v. Hurford, 160, 197.
First Nat’l Bank v. Loghed, 953.
First Nat'l Bank v, Lucas, 768, 921.

‘Fisher v.

 

First Nat’] Bank, etc., v. McDonald,
850. . ;
First Nat’l Bank of Hannibal v. Mere-
dith, 633.

First Natl Bank v. Nat’l Exchange
Bank, 78, 351, 981, 350.

First Nat'l, etc., Bank v. North, etc,
Co., 924, .

First Nat’] Bank of Lyons v. Oskaloosa, ,
etc., Co., 887, 385, 384.

First Nat’l] Bank v. ‘Peterborough, 631.

First Nat’! Bank v. Price, 243.

First Nat’l Bank v. Reed, 732.

First Nat’l Bank v. Root, 478,

First Nat’?l Bank v. Salem, etc., Co.,
645. ’

First Nat’l Bank v. St. Joseph, 631.

First Nat’l Bank v. Sherburne, 951.

First Nat’] Bank v. Smith, 628, 620, 216,

602. :
First Nat’l Bank of Toledo v. Treasurer,
63:

2. é {
First Nat’l Bank v. Tisdale, 917, 955, 921,
916, 954. '
First Nat’l Bank v. Waters, 629.
First Nat’l, etc., v. Wolcott, 115.
First Par. in Sudbury v. Stearns, 686.
First Parish in Sutton v. Cole, 885, 853,
856, 852.

‘First Presby. Ch., In re, 881.

Fiser v. Miss. & Tenn. R. R. Co., 182,

Fish v. Kempton, 468. ,

Fish v. Nebraska, etc., Co.; 728.

Fish v. Budlong, 355.

Fisher’s Case, 26.

Fisher v. Brown, 651, 649, 644, 467, 395,
469, 488, 647. ;

Fisher v. Andrews, 973, 974.

Fisher v. Bush, 678, 687, 583, 370.

| Fisher v. Essex Bank, 421, 11, 509, 13,

447,

Fisher v.
13%. ‘

Fisher v. Fisher, 490.

Fisher v. Jones, 508, 425.

Fisher v. Mardin, 289.

Fisher v. Murdock, 952, 847.

Fisher v. Keane, 891.

Fisher v. Price, 382. “

Seligman, 482, 290, 47, 51.

Fishkill Sav. Inst. v. Nat’l Bank, 874.

Fisk v. Chicago, Rock Isl., etc., R. RB.
Co., 46. 36, 871.

Fisk v. Kenosha, 106.

Fisk v. Potter, 840.

Fisk v. Union R. R.. 965.

Fiske v. Carr, 508, 509.

Fister v. La Rue, 984, ‘

Fitch v. Lewiston, etc., Co., 939.

Fitchburg R. R. v. Gage, 798..

Fitchburg, etc., R. R. v. Grand, etc.
R. R., 800.

Fitchburg Sav. B’k v. Torrey, 420, 482.

Fitzhugh v. Bx of Sheperdsville, 567,

530.

Evansville, etc., R. R. Co., 94,

t
TABLE OF CASES.

xlix

[The references are to the foot-paging.]

Fitzpatrick v. “Disparel Pub. Co., 33, 59,

Fitzpatrick v. Woodruff, 379, 371.

Fitzroy, etc., Co., In re, 741, 961.

Flagg v. Baldwin, 389, 385, 380, 387.

Flage v. Manhattan R’y Co., 757, 782.

Flage v. Metropolitan R’y Co., 910.

Flagler, etc., Co. v. Flagler, 54. 45.

Been v. Great Western R’y Co, a
AD,

Flash v. Conn., 248, 239, 233, 234.

Fleckner v. B’k of U. S., 985, 845.

Fleeson v. Savage S. M. Go., 10.

Fleet v. Murton, 476.

Fleming v. Northampton Nat'l B’k, 483.

KE lemyng v. Hector, 546.

Fletcher, Ex parte, 177.

Fletcher v. Marshall, 464.

Fletcher v. McGill, 75.

Fletcher v. New York, etc., Ins, Co.,
865.

Fletzell v. Chicago, etc., R. R, Co., 983.

Flinn v. Bagley,. 81, 43, 49, 47.

Flint v. Clinton, ete., Co., 940, 850.

Flint v. Pierce, 888, 366.

Flint, etc., R’y Co. v. Dewey, 732.

Flint, etc, a Plank-road Co. -v. -Wood-
huil, 718.

Flitcroft., Case, 598, 608, 962.

Florence, etc., Co., In re, 835,

Florida, etc., RB. Rv. Banedee, 947.

Floyd ‘Acceptances, 827.

Flynn v. Hudson, vs R. R. Co., 992,

Fogg v. Boston, etc., R. R. Co., 876,

Fogg v. Griffin, 875.

Fogg v. Sidwell, 514.

Folger v. Chase, 697.

Folger v. Columbia Ins, Co., 696, 702.

Foll’s Appeal, 377.

Follett v. Field, 697.

Fonnereau v. Payntz, 334,

Foote, Appellant, 610, 334.

Foote v. Cunard Min. Co., -974.

Foote v. Linck, 614, 964. ~

Foote v. Mount Pleasant, 120.

Forbes’ Case, 25.

ete v. Memphis, etc., R. R. Co., 11.
59.

Forbes v. Whitlock, 981.

Ford v. Ford, 337.

Foreman v. Bigelow, 57, 58, 23, 20.

Forest, etc., Min. Co., In Te, 895.

Forest v. Manchester, 8, & L. R’y Co.,
788, 967.

Forest v. Domestic, ete Co., 929.

Forge v. Tucker, 845,

Forrest v. Elwes, 644, 651, 649.

Forrester v. Bill, 899.

Forrester v. Boardman, 476.

Fort Edward & Co. v. Payne, 84, 143,
85, 93. ,

Fort Madison, etc., Co. v. Batavian
Bank, 508.

Fort Worth, etc., R’y v. Queen, etc,
R’y, 804.

Fortenberg v. State, 382.
d

 

Fosdick v. Goshen, 106.

Fosdick v. Perrysburg, 106, 111.
Fosdick v. Greene, 652, 649, 644.
Fosdick v. Sturges, 35, 46, 45, 391, 82.
cn v. Harbottle, 977, 978, 821, 728,

Pee v. Essex Bank, 698, 935, 642,
Foster v. Kenosha. 106.

Foster v. Mansfield, etc.,.R. R., 961,
Foster v. Mackinnon, 66.

Foster v. Ohio, etc., Co., 926.

Foster v. Orford R. =. 746.

ain v. Potter, 510, 580, 501, 479, 502,
197,

Foster v. Pray, 551.

Foster v. Seymour, 45.

Fothergill’s Case, 25, 41.

Foulke v, San Diego, etc., R’y Co., 944.

Fountain Ferry Co. v. Tewet. 607, 197,
823, 980.

Fountaine v. Tyler, 332.

Fountains v. Carmarthan R’y Co., 824,
945, 834, 835.

Four-mile R. R. Co. v. Bailey, 198, 52.

Fourth Nat. Bank v. Francklyn, 210,.
238, 244, 231, 243.

Foushee v. Grigsby, 228.

Fowle v. Ward, 490, ae i 650.
‘Fowler v. Ludwig, 283, 2

Aad v. N.Y. Gold Ex. Bank, 466, 653) :

Fowler v. Robinson, 238, 248,

Fox, Ex parte, 782.

Fox’s Case, 296, 177, 168.

Fox, Matter of, 886.

Fox v. Allenville, C. S. & V. Turnpike-
Co., 184, 185, 672, 185.

Fox v. Carr, 336.

Fox v. Clifton, 902, 83, 278, 188..

Fox v. Horah, 721, 720.

Fox v. Northern Liberties, 933..

Fox v. Seal, 844.

Fox v. Western Pa. R. R. Co.,.861.

France v. Clayk, 448, 485,

Francis v. New York & B. El. B. RB. Co.,
339, 172, 400."

Francu-Texan Land Co. v. Laigle, 654.

Franco, etc., Co. v. Bousselet, 315.

Frank v. Morrison, 219.

Frankfort Bank v. Johnson, 981, 812.

Franklin v. Bank of Eng., 609, 366,

Franklin v. Twogood, 713.

Franklin Bank v. Commercial Bank,
350.

Franklin Bank v. Cooper, 698.

Franklin Sav. Bank v. Bridges, 202.

Franklin Savings Bank v. Fatzinger,
129.

Franklin Co. v. Lewiston Institution for
Savings, 78, 850.

Franklin & Co. v. White, 88, 144.

Franklin Bridge Co. v. Wood, 2.

Franklin, etc., Ins, Co. v. Hart, 907.

Franklin, etc., Ins. Co. v. Jenkins, 769.
TABLE OF CASES. ke

[The references ure to the foot-paging.]

Franklin, etc., v. Deposit Bank, 688.

Franklin Glass Co. v. Alexander, 143.

Franks Oil Co. v. McCleary, 281.

Fraser v. Charleston, 418, 505, 419, 447,
480

Fraser v. Ritchie, 346, 348.

Fraylor v. Sonora Min. Co., 757.
Frazer v. Seibern, 622, 629, 630, 623.
Frazer v. Whalley, 681.
' Frazier v. Wilcox, 865.

Fredenhall v. Taylor, 552.
Frederich v. Augusta, 108,

Fredericks y. Penn. Canal Co., 959, 674.

Freeholders v. State Bank, 10.

Freeland v. McCullough, 209, 243, 252,

226, 289.

Freeland v. Hastings, 108. .

Freeman v. Harwood, 648, 349, 644, 651,
152, 495.

Freeman v. Machiag Water, etc., 655,
654. <

Freeman v, Howe, 843.

Freeman v. Mack, 97. :

Freeman Nat. Bank v. Smith, 666.

Freeman, Assignee, v. Stine, 47, 755.

Freeman v. Winchester, 148, 212,

Free Schools v, Flint, 266, 267,

Fremont v. Stone, 687, 870.

French v. Braintree, 862.

French v. Currier, 357,

French v. First Nat’] Bank, 566, 565.

French v. Fitch, 892.

French v. Fuller, 594.

French v. Donohue, 806,

French v, O’Brien, 889.

French v. Teschemaker, 229, 264,

Frenkel v. Hudson, 28.

Freon v. Carriage Co., 648, 482.

Fresno, etc., Co. v. Warner, 712,

Friedlander v. Slaughter-house Co.,
507, 405. ;

Friedman v, Gold, etc., Tel. Co., 796.

Friezen v, '\Allemania, etc., Ins. Co., 996.

Frits v. Muck, 547.

Fromm v. Sierra Nevada Silver Min.
Co., 650, 647, 651.

Frost v. Clarkson, 384, 382.

Frost v. Domestic Sewing M. Co., 876,

Frost, etc., Co. v. Foster, 769.

Frost v. Inhabitants’ Ins. Co., 806.

Frost v. Shackleford, 537.

Frost v. Stokes, 482. :

Frost v. Walker, 552, 547, 551.

Frostburg, etc., Assoc. v. Bruce, 941.

Frostburg Build. Assoc. v. Stark, 978.

Frothingham v. Barney, 555, 775, 720,
554, 722.

Frowd, Ex parte, 157.

Frudman v. Allen, 846.

Fry, In re, 554,

Fry _v. Lexington, etc, R. R. Co., 88,
85, 519, 514, 63, 84, 186.

Fryeburg Canal Co. v. Frye, 915,

Fulgam v. Macon & Brunswick R, R,
Co., 200.

 

Fulkeron v. Chitty, 335.

Fuller v. Dame, 784,

Fuller v.. Ledden, 286, 285, 258, 259,

Fulton Bank v. N. Y., ete., Canal Co.,
988, 922, 953.

Fulton Bank v. Benedict, 952.

Furdoonjee’s Case, 277.

Furley v. Hydes, 605.

Furnham v. Benedict, 711.

Furniss v. Gilchrist & Co., 823.

Furwell v. Tweddle, 607,

Fyfe’s Case, 286,

G;

Gadsden v. Lance, 878,

Gaff v. Flesher, 294, 204.

Gaff v. Pittsburgh, etc., R. R. Co., 955.

Gafford -v. American, etc., Co.. 926, 917,

Gage v. Newmarket R’y Co., 817.

Gainsford v. Carroll, 650.

Galena Iron Co. v. Ennor, 199.

Galena, etc., R. R. v. Loomis, 800.

Galigher v. Jones, 648, 463,

Gallery v, Nat. Ex. Bank, 962.

Gallini v, Noble, 335.

Galloway v. Hamilton, 944,

Galt’s Ex’rs v. Swain, 95.

Galvanized Iron Co. v. Westoby, 188.

ee Hotel Co. v. Bolton, 71, 65,
187.

Galveston R. R. v. Cowdrey, 829, 831,
844, 841, 839, 840, 656.

Galveston R’y Co. v. Donahoe, 879.

Galveston City Co. v. Sibley, 415. -

Gamble v. Queens, etc., Co., 745, 46.

Games v. Robb, 104, :

Gamewell, etc., Co. v. Mayor, etc., 565.

Gamwell v. Pomeroy, 888.

Ganga Iron Co. v. Dawson, 989.

Gano v. Chicago & N. W. R’y Co., 826.

er Gully Co. v. Mcliister, 181, 147,
146.

Gardiner v. Pollard, 964,

Gardiner v. Victoria Estates Co., 842.

Gardner v. Butler, '755.

Gardner v. Dangerfield, 564,

Gardner v. Frunatte, 546.

Gardner v. Freemantle, 891.

Gardner v. liope Ins. Co,, 266, 515.

Gardner v. London, etc., R’y Co., 133.

Geedner v. Hamilton, ete,, Ins. Co., 515,

Gavesche v. Lewis, 202."

Garland, Ex parte, 585, 587.

Garman v. Guardian Sav. Bank, 822.

Garnett v. Richardson, 257, 258.

Garnett Min. Co. v. Sutton, 201,

x

| Garrard v. Hodley, 548,

oo v. Burlington, ete, Co., 824,

64, '

Garrett v. Dillsburgh & M. R, R, Co,
185, 178, «04,

Garrett v. May, 804, 828, 888,
TABLE OF CASES.

li

[The references are to the foot-paging.]

Garrett v. Sayles, 238, 355.

Garrison’s Case, 67.

Garrison v. Howe, 248, 289, 240,
235, 238. *

Garten v. B’ & E. RB. R., 798.

Gartside Coal Co, v. Maxwell, 257,

Garvey v. Colcock, 916.

Garwood v. Ede, 902.

Gas Light Co. v. Haynes, 220.

Gas Light, etc., Co. v. Terrell, 763.

Gass v. N. ¥., ete., R. R., 787,

Gashwiler v. Willis, 658.

Gaskell v. Chambers, 735, 983.

Gaskill v. Dudley, 245,

Gass v. Hampton, 487,

Gaston v. American Ex, Nat. Bank, 360.

Gatch v. Fitch, 248,

Gates v. Boston, etc, R. R, Co., 750.

Gauch v. Harrison, 248,

Gaudy v. Barrit, 537.

Gavenstine’s Appeal. 977, '760, 965,

Marlon Fort Wayne, etc., R. R. Co. a5
702.

Gee v. Alabama, 845,

Gee v. Moss, 398.

Gace % L. 8. & M.S. RB. R. Co.,

Gelpcke v. Blake, 178, 180, 155.

Gelpcke v. Dubuque, 101, 880, -102.

Gelpcke v. Phil. R. R. Co., 156.

General Exchange, In re, 573. /

General Estate Co., In re, 827, 836, 944.

Gen’l Ex. Bank v. Horner, 734.

Gen’l Ins, Co. v. U. S. Ins. Co., 951.

General Lying-in Hospital v. Knight,
885.

Genesee, etc., Bank v. Mich., etc., Co.,
826,

Genet v. Howland, 498, 494.~

Genin v. Isaacson, 463, 379.

Gent v. Mfg., etd., Co. 908,

Georgetown Colle; age v. Brown, 809.

George’s Appeal.

Georgia Co. v. Castlebury, 902.

Georgia R. R. Co. v. Hart, 10.

Georgia R. R. v. Smith, 798, 799.

Gerard v. Penswick, 561.

Gerhard v. Bates, 396, 390, 395, 165. -

German Date, Re, 698.

German Bank v. Franklin, 112.

German, etc., Inst. v. ‘Jacoby, 824.

German Land Ass'n v. Scholley, 549.

German Sav, Bank v. Hulfekubler, 345.

German Security Bank v. Jefferson, 568,
577. ;

German Union B, Ass’n v. Sendmeyer,
420, 422.

Germantown Ins. Co. v. Dhein, 846.
Germantown, etc., R’y Co. v. Fitler,
207, 147, 213, 220, 130° 146, 218, 152.

Gerry, Re Accounting of, 612.
Getty v. Devlin, 740.

Geyer v. Western Ins. Co., 568, 574.
Gheen v, Johnson, 466, 387.
Gibbons v. Mahon, 585, 608,

258,

4

 

Gibbons v. Mobile, 103.

Gibbons v. Ogden, 804,

Gibbs v. Queen Ins. Co., 997.

Gibon’s Case, 158.

oe v. Columbia & N. BR. T. & B.

0.

Gibson v.. Crick, 469, 476.

Gibson v. Dayton, 117,

Gibson v. Manuf., etc., 993,

Gibson v. Mason, 862.

Gibson v. Mc@all, 550.

Gibson v. Richmond, 483.

Gibson v. Stevens, 543,

Giddings v. Sears, 475.

Giesy v. Cincinnati, Wil. & Z BR. R.
Co., 861, 863,

Giffin v. Beverley, 900.

Giffith v. Chicago R. B., etc., Ca., 921.

Gifford v. Livingston, 550,

Gifford v. New Jersey R. R. Co., 524,

. 693, 7, 967, 960, 673.

Gifford v. Rockett, 883,

Gifford v. Thompson, 610, 607.

Gilbert’s Case, 296, 138, 369, 355, 296.

Gilbert .v. Gouger, 384.

Gilbert v. Manchester Iron Mfg. Co., 9,
420.

Gilbert v.. Nantucket Bank, 884,

Gilbert v. Sykes, 880.

Giles v. Cornfoot, 899.

Giles v. Hutt, 145, 147,

Giles v. Smith, 230.

Gilfillan v. Union Canal Co., 753,

Gilkey v. Paine, 607.

Gills Case, 828, 201,

Gill v. Burley, ‘608.

Gill v. Balis, 207, 180, 157,

Gill v. Kentucky, etc., Co., 84, 194, 87,
86, ae 865.

Gill v..N. Y. Cab Co., 754, :

Gillan v. “Morrison, B41.

Gillespie v. Gaston, 618.

Gillespie v. Commercial, 993.

Gillett v. Bate, 498,

Gillett v. Missouri R. R. Co., 877.

Gillett v. Moody, 847, 346, 550, 207.

Gillett v. Phillips, 945, 550.

Gillett v. Peppercorne, 464.

Gillis v. Bailey, 918.

Gillis v. Western, etc., Co., 796.

Gilman v. Sheboygan, 103, Te, 864,

Gilman, Peoria & & Spring. R. R. Co. v.
Kelly, 46.

Gilman, sien R. R. Co. v. Kelley, 32, 35,
958, 732.

Gilman v. Sheboygan, 103.

Gilman v. Second Nat. Bank, 951.

| Gilmer v. Lime, etc., Co., 857.

Gilmer v. Morris, 490.

Gilmore v. Woodcock, 380.

Gilpin v. Howell, 484, 494,

Gindrat v. Dane, 965.

Ginz v. Stumph, 481.

Girard v., Philadelphia, 881.

Given’s Appeal, 414, 739.
‘Glenn v.

lii

TABLE OF CASES.

[The references are to the foot-paging.]

Glaize v. South Carolina R. R. Co., 636,
997.

Glamorganshire Iron, ete., Co. v. Ir-
vine, 164.

Glasier v. Rolls, 738, 742. :

Glass v. Tipton, etc., Co., 883, 880.

Glass v. Hope, 152.

Giasscott v. Copper, etc., Co., 566, 565.

Gleason v. McKay, 554.

Gleaves v. Brick, etc., Co., 719.

Glen Iron Works, In re, 47, 48, 211.

Glen v. Dorsheimer, 129, 203,

Glen v. Springs, 221.

Glen v. Breard, 259.

Glenn v. Clabaugh, 14.

Glenn v. Dodge, 129.

Glenn v. Foote, 202, 281.

Glenn v. Howard, 12'7,' 202.

Glenn v. Lancaster, 212.

Glenn v. Macon, 202.

Glenn v. Orr, 985, 194, 71.

Glenn v. Priest, 203.

Glenn v. Saxton, 208, 218, 129, 130.

Sample, 129.

Scott, 281, 276.

Glenn v. Soule, 202.

Glenn v. Williams, 217, 129, 218, 202.

Glouster Bank v. Salem Bank, 935.

Godbold v. Branch Bank, 756.,

Glenn v.

Goddard v. Grand Trunk R’y of Can.,'|.

878, 879.
Goddard v. Stockman, 117,
Godden v. Kimmell, 962.
Goddin v. oe 106, 107.
m

‘Godfrey v. Pell, 643.

Godfrey v. Terry, 250, 251.°

Godsen v. Dotterill, 14.

Goesele v. Bimeler, 550, 549,

Goff v. Flesher, 178.

Goff v. Hawkeye, 44.

Goff v. Hawkeye Pump & Water M,
Co., 157. .

Goff v. Winchester College, 87.

Goforth v. Rutherford, etc., Co., 106.

Gold, ete., Co. v. Nat’l Bank, 933.

Gold Co., Re, 56, 44, 45, 47, 50.

Gold Mining Co. v. National Bank, 347,

951, 846.

» Goldschmidt v. Jones, 475.

Goldsmith v. Great E. R’y, 795.
Goldsmith v. Home Ins, Go., 866.
Goldsmith v. Swift, 606, 611, 605.
Gondone Co., Re, 44,

Gooch’s Case, 275.

Good v. Elliott, 880.

Gooday v. Colchester R’y Co., 935, 905.
oo Hope Co. v. R. R., etc., Co., 992,

Goodin v. Evans, 520, 22, 524.

Gpegin v. Cincinnati, etc., R. R, Co.,
Goodlad v. Burnett, 334.

Goodlett v. Louisville -R. R. Co., 873,
Goodloe v. Godley, 950, 949.

Goodman v. Jededjah Lodge, 546.

‘

 

| Goodnow v. Oakley, 940.

Goodrich v. Reynolds, 23.

Goodspeed v. East, Haddani Bank, 875,
874, 877. . '

Goodson’s Claim, 352, 276.

Goodwin, Appeal of, 376, 595.

Goodwin v. American Nat'l Bank, 488,
866, 364.

Goodwin v. Hardy, 590, 7, 589, 583.

Goodwin v. McGehee, 267, 600.

Goodwin v. Colorado, ete., Co., 997.

Goodwin v. Ottawa & P. R’y Co., 424,
433.

Goodwin v, Robarts, 12.

Goodwin v. Union, etc., Co., 981.

Goodyear Rubber Co. v. Goodyear, etc.,
Co., 881, 880. :

Goodyear v. Phelps, 768.

Gordon’s Case, 285. .

Gordon v. Appeal Tax Court, 514, 624.

| Gordon v. Duff, 331.

Gordon v. Jennings, 228,

Gordon’s Ex’rs v. Mayor, etc., 616, 621,
625.

Gordon v. Parker, 374.

Gordon v. Preston, 838, 7, 939.

Gordon v. Richmond, etc., R. R. Co,
807, 802, 585, 599.

Gordon v. Sea, Fire & Life Ass’n Co.,
229, 824,

Gordon v. Winchester, etc., 849.

Gorgier v. Milville, 829,

Gorham v. Campbell, 691.

Gorham v. Gilson, 765.

Gorman v. Pacific R. R., 800.

Goshen v. Dotterill, 334.

Goshen, etc., Co. v. Hurtin, 148, 87, 85.

Goshorn v. Supervisors, 878.

Goshorn v. Ohio County, 106.

Goss v. Hampton, 485, 488,

Goss, etc., Mfg.'‘Co. v. People, 499.

Goss v. Phillips, etc., -Go., 497.

Gott v. Cook, 585,

Gott v. Dinsmore, 552.

Gottfried -v, Miller, 766, 498, 935.

Gould v. Cayuga, etc., B’k, 976.

Gould v. Farmers’ Loan & Trust Co,
485, 490, 487, 488.

Gould v. Town of Oneonta, 105, 145.

Gould v. Town of Sterling, 122, 116.

Gould v. Norfolk, 917,

Gould v, Seney, 25.°

Goulding v. Clark, 662.

Meee v. Northampton Water Co.,

Gourand v, Edison, etc., Co., 562.

Gouthwaite’s Case, 271. .

Gouthwaite, Ex parte, 271.

Government Co. v. Dempsey, 201, 200.

Gowan v. Penobscot R. R. oa, 802.

Gowan, Appeal of, 673,

Gowen’s Appeal, 693, 670, 694, .

Gowen Marble Co, v, Farrant, 757.

Gower's Case, 147, ‘146, 290,

Grady’s Case, 276, 842.
TABLE

OF CASES.

liii

{The references are to the foot-paging.]

Graff v. Bonnett, 585, 544.

Graff v. Pittsburgh & 8. R. R. Co., 156,
281, 70.

Graham v. Boston, etc.; R. Rr Co., 759,

Graham v. Boston, H. & ERR. Co.,
oe 980, 960, 655, 694, 872, 812, 850,
202.

oeem v. First Nat. B’k of Norfolk,

Graham v. National Bank, 849.

Graham v. Birkenhead, etc., Co., 960.

Graham v. Hendricks, 814.

Graham v. Noy, 909.

Graham v. St. Joseph, 618.

Graham v. Van Dieman’s Land Co., 665,
150.

Grahan vy. Atlanta, etc., Co., 62.

“Grahan v.'R. R. Co., 745.

ae etc., Exchange v. Chicago Board,
7, '

Grain’s Case, 180.
Gram v. Stebbins, 382.

‘Gramble v. Queens, 61.

Granby, etc., Co. v. Richards, 258.

Grand G. B’k v. Archer, 705, 849.

Grand Rapids Savings B’k v. Warren,
250, 237, 146, 248, 249, 245,

Grand Rapids, -etc., v. Grand, ete., R.
R., 858, 803.

Grand Lodge v. Farnhams, 87.

Grand Lodge of Ala. v. Waddill, 845.

Grand Trunk; etc., R’y Co. v. Brodie, 77.

Grangers’ Cases, 799.

Grangers’ Life, etc., Ins. Co. v. Kamper,
318, 6, 323.

Granger v. Bassett, 7, 611, 610.

Granger v. Grubb, 694, 663, 669.

Granger Ins. Co..v. Turner, 171,

Grangers’ Market Co. v. Vinson, 272, 82.

Granite Roofing, etc., Co. v. Michael, 42,
127, 136.

Grant’s Cases, 964, 825.

Grant v. Attrill, 391, 355.

Grant v. Hamilton, 380. \

ary v. Mechanics’ Bank, 573, 5'76, 594,
570.

Grant v. Corter, 105.

Grant v. Henry, etc., Coal Co., 853.

Grant v. United, etc., Co., 758.

Granville v. Charitable Assoc., 914.

Grape Co. v. Small, 925, 906.

Gratwick’s Trusts, Re, 336.

Gratz v. Penn. R. R. Co., 781.

Gratz v. Redd, 601, 603, 597, 600, 143.

Graville v. N. Y.,; ete, R. BR. Co., 916.

Gray v. Coffin, 514, 27i, 253, 224, 518,
264, 226.

-Gray.v. Chaplin, 950.

Gray v. Fox, 357.

Gray v. Lewis, 729.

Gray v. Lynch, 397

Gray v. Me congebulai Nav, Co., 187, 884,
520.

‘Gray v. Nat’l St. Co., 724.

G.ay v. N. Y., etc., Co., 976.

‘Green v,

 

Gray v. Portland Bank, 814, 319, 648,
318, 317.

Gray v. Quicksilver Min. Co., 995, 993.

Gray v. Robbins, 393

Gray v. The State, 123.

Grayville, etc., R. R. Co. v. Burns, 947,

Greary v. Chandler, 553,

Great Wheal Polgroath, In re, 7388.

Great North of England R’y Co. v. Bid-
dulph, 574, 184. ~

Great Barrington v. County Cont! rs, 671.

ae Falls & C. R.-R. Co, . Copp,

Great Northern R’y Co. v. Eastern ©
Counties R’y Co., 348, 778.

Great Falls Mfg. Co. v.. Fernald, 862.

Great Western Tel. Co. v. Gray, 47, 129,

Great W. R’y v. McCarthy, 795.

Great Northern, etc., Min. Co., Re, 698.

Great Western R’y Co. v. Metropolitan

_ R’y Co., 849.

Great Western R’y Co. v. Miller, 878.

Great Northern, etc., Ry Co. v. Ken-
nedy, 144, 152.

Great Western R’y Co. v. Oxford, etc.,
R’y Co., 959.

Great W. Ry v. Preston, etc., R’y, 816.

Great W. R’y Co. v. Queen, 717,

Great Western R’y Co. v. ushout; 783,
966.

Gréat Western R’y v. Sutton, 798, 794.

Great Eastern R’y Co. v. Turner, 343.

Greaves v. Gouge, 973.

Green, In re, 385, 387.

Green v. African Methodist Society, 890.

Green v. Beckman, 252, 264, 251.

Green v. Barrett, 77, 902. .

Green v. Biddle, 515,

Green v. Brookins, 378.

Green v. Cady, 914.

Green v. Diesen, 490, 480.

Green v. Merchants’ Ins. Co., 954.

Green v. People, 536, 548.

Green v. Seymour, 847,

‘Weaver, 467.

Green Bay & M. R. R. Co, v. Union
Steamboat Co., 808.

Green Co. v. Conness, 702.

Geen Mount. & S. L. Co. v. Bulla, 424,

3

Greenbrier, etc., Co. v. Ward, 703.

Greenfield, etc., B’k v. Simons, 745.

Greenleaf v. Ludington, 404.

Greenleaf v. Moody, 476.

Greenleaf, etc., v."R. R., 757.

Greenpoint Suger Co. v. Whitin, 839,

Greenville & C. R. R. Co. v. Coleman,
188.

Greenville & Columbia R. R. Co. v.
Coleman, 517, 678, 172.

Greenville, etce., R. BR. Co. v. Cathcart,
143.

Greenville, etc., R. R. Co. v. Johnson,
518,
liv

TABLE OF CASES.

[The references are to the foot-paging.} \

Greenville & C. R. R- Co. v. Woodside,
183.

Greenwich v. Easton & A. R. R. Co.,
859. :

Greenwood’s Case, 547, 229.

Greenwood v. Freight Co., 718, 518, 614,
963.

Greer v. Chartiers R. R. Co., 70.

Gregg v. Mass. Medical Soc., 890.

Gregory v. German Bank, 516.

Gregory v. Lamb, 177.

Gregory v. N. Y., etc., R. R. Co., 993.

Gregory v. Patchett, 960, 970, 766, 978,
959.

Gregory v. Wendall, 388, 471, 381, 883:

Gregory’s Ex. v. Trustees, 721.

Grenada Co. v. Brogden, 109, 655,

Grew v. Breed, 271, 269, 489, 988.

Grey’s Case, 282,

Grey, In re, 338.

Grey v. N. Y., etc., Steamship Co., 774.

Gridley v. Barnes, 252.

Gridley v. Lafayette, etc., R. R. Co.,
756. '

Griffins v. Macon County, 831.

Griffith v. Jewett, 370, 533, 368, 682.

Griffith v. Mangam, 212, 218, 217.

Griffith v. Paget, 311.

Griffith v. Pearce, 380.

Griffith v. Watson, 616.

Griffiths v. Sears, 889.

Grimes v. Harrison, 855.

Grindle v. Stone, 223,

Grisewood, Ex parte, 548.

Grissell’s Case, 127, 200, 201.

Grissell, Ex parte, 833, 834.

Grissell v. Bristowe, 292, 475, 468.

oe v. Seligman, 482, 270, 64, 199,
28.

Griswold v. Trustee, 86.

Grizewood v. Blane, 388, 881.

Grose v. Hilt, 226, 234, 248, 202.

Grosse Isle Hotel Co. v. L’Anson’s
Ex’rs, 127.

Grover’s Case, 161, 737, 164, 146.
Grover & Baker 8. M.Co. v. Missouri
Pacific R’y Co., 786. :

Groye v. Oxford, etc., 116.

Grubb v. Mahoning Nav. Co., 187.

Grubbe v. Vicksburg & Brunswick R.
R. Co,, 187. ;

Gruber v. Washington, etc., R. R. Co.,.

874, 818.
Gruley v. Smith, 721, 648, 474, 647, 473.
Grund v. Tucker, 245, 222, 221, 235.
Grundy v. Pine, etc., Co., 754.
Grymes v. Hone, Ex’r, 339, 447.
Guadulupe, etc., Ass’n v. West, 266.
Gue v. Tide-water Canal Co., 497, 780.
Guernsey v. Burlington, 862.
Guernsey v. Cook, 370. %
Guest v. Worcester R. R. Co., 87.
Guild v, Parker, 346,
Guiness v. Land Corporation of Ireland,
801, 299, 12,

 

Gulf, etc., R’y Co. v. Morris, 777, 909.
Gulf, C., etc., R’y Co. v. Neeley, 178.
Gulf, etc., R’y Co. v. State, 784, ,
Gulf, etc:, R’y v. Trawick, 795.
Gulick v. Markham, 394.
Gulliver v. Adams Exp. Co., 795.
Gunmakers v. Fell, 889.

Gunn v. Central R. R., 874, 788, 806,
Gunn v. London, etc., Ins. Co., 905,
Gurney v. Atlantic, etc., R’y Co., 228, \
Gustard’s Case, 427. oy

H.

Habenicht v. Lissat, 547.

Habertson’s Case, 133.

Habicht v. Pemberton, 554.

Hackensack Water Co, v. De Kay, 718,

945, 914. :

Hackett v. Ottawa, 115.

Hackettstown v. Swackhames, 823. -

Hackney v. Alleghany Ins. Co., 948,

Hadden v. Spader, 498, 379.

Hadey v. Bates Mfg. Co., 988.

Hadley v. Freedman’s, etc., 988, 865.

Hadley v. Russell, 224, 253, 216, 214,
241,

Hafer v. New York, ‘etc., R. R, Co.,
534, 682. . :

Hagan v. Providence R. Co., 878. :

Hagar v. Union Nat’l Bank, 594, 578,
582, 595.

Hagar v. King, 878.

Hager v. Cleveland, 190, 227, 288, 281.

Hager v. Bassett, 194. ,

Hager v.-Thompson, 391.

Hagerman v..Empire State Co., 870.

Hagerstorm Road Co. v. Creeger, 885.

Hagg v. Snaith, 476.

Hague v. Dandeson, 572.

Hahn, Appeal of, 96, 189.

Hahneman, etc., Co. v. Beebe, 989..

Haig v. Swiney, 836. *

Haight, Ex parte, 900.

Haight v. Day, 73.

Haight v. Morris Aqueduct, 984,

Haight v. R. R. Co., 622. \

Haight v. Sahler, 948, 984.

Hain v. North W. G. R. Co., 185.

Hakim’s Case, 295.

Halderman v. Ainslie, 224.

oe v. Republican River Bridge Co.,
591.

Hale’s Case, 900.

Hale, Ex parte, 172.

Hale v. Continental Life Ins, Co., 983.

Hale v. Sanborn, 185,

Hale v. Walker, 270.

Haley v. Reid, 501.

Halford v. Cameron Coalbrook, 944.

Halket v. Merchants’, Traders’, etc.,
Assoc., 229, !

Hall’s Case, 177, 348, 146, 899, 72.

Hall, Ex parte, 284, 82, 286, 83, 271.

Hall, etc., R’y, Re, 835.
5 TABLE OF OASES.

lv

{The references. are to the foot-paging.]

Hall v. Asteria, ete., Co., 978.

Hall v. Auburn Co., ” 808.

Hall v. Carey, 915.

Hall v. Connell, 564.

Hall v. United States Ins. Co., 282, 138,
219, 186, 421, 578, 574, 575.

Hall v. Mobile, etc., R. R. Co., 947.

Hall v. Old T. L. Min. Co., 174.

Hall v. Rose Hill & E. Road Co., 405, |

593. -
Hall v. Selma R. R. Coss 199, 183.
Hall v. Vermont, etc., Co., 907, 756.

Hall Mfg.. Co. v. American Ry, etc., |

Co., 815.

Halladay v. Elliott, 545,

Hallam v. Indianola Hotel Co., 763,

Halles v. Drew, 263. . :

Hallet v. Dow dall, 229. :

Halliday v. Holgate, 486.

ee aa etc., R. R. v. Hamlin, 917,
21,

ad v. Fermie,. 169, 175, 161, 162,
166

Halsey, etc., Co. v. Donovan, 185, '

Halsey v. McLean, 243, 244.

Halsey v. Ackerman, 893.

Halstead v. Dodge, 17,

Halsted v. Meeker’s Ex’rs, 357.

Halthins v. New Eng., etc., Co., 264.

Halwerson v. Cole, 476.

Hambelton v. Glenn, 209.

Hambleton v. Central O. R. R. Co., 410.

Hambro v. Hull, ete., Co., 815.

Hamer v. Hathaway, 647.

Hamer, etc., Co., Re, 658.

Hamilton v. Accessory, etc., Co., 720,
722.

Hamilton’s Windsor Water-works, In
re, 833, :

Hamilton ‘College v. Stewart, 85.

Hamilton v. Dennis, 938.

Hamilton & D. P. R. Co. v. Rice, 186.

Hamilton v. Granger's L. & H. Ins. Co.,
171, 205.

Hamilton, etc., Co. v. Hamilton, 806.

Hamilton, etc., Ins. Co. v. Hobart, 515.

Hamilton, etc., Iron Works, In re, 835.

Hamilton v. Keith, "799.

Hamilton v. Lycoming Ins. Co., 935,
986;

Hamilton Co, v. Massachusetts, 615.

Hamilton v. McLaughlin, 937.

Hamilton Mutual Ins. Co. v. Hobart,
524, 779.

Hamilton v. New Castle & D. R. R. Co.,
827, 825.

Hamilton, etc., R. R. Co. v. Rice, 199,
64, 65, 84, 85, 69, 68.

Hamilton v. Grand, etc., R. RB. Co., 132.

Hamilton v. Smith, 901.

Hamley’s Case, 689.

Hamlin v. Kassafer, 913.

Hamlin v. Meadville, 113,

Hammett v. Little Rock & N. R. R. Co.,
197, 195,

 

} Hammond v. Hudson River, etc.; Co.,

213,

| Hammond v. Shepard, 882, 883,
) Hammond vy, Straus, 719.

Hammond’s Appeal, 762.
Hampson v. Price’s, etc., Co., 812.

) Hamipson v. Weare, 221, 245.

Hamtayne v. Bourne, 823.
Hancock v. Holbrook, 696, 724, 961.

| Hancock v. Toledo, etc., R. R. Co., 750.
| Hancock, ete., Co. v.. Worcester, etc.,

R. R. Co., 724, ~
Hand v. Dexter, 977.

| Hand Gold Mining Co. v. Parker, 862.
)} Handrahan v. Cheshire Iron Works,

245.

| Handy v. Draper, 252, 234, 250, 209, 251.
| Hankey v. Hammond, 537. ;

Hanks v. Drake, 471, 494.

Hanly’s Claim, 904.

Hann v. Mulberry & Jefferson Co., 135.

Hanna v, Cin. & Fort Wayne R. R. Co.,
517,

ore v. International Petroleum, Co.,
9

Hannah v. The Moberly Bank, 211.

Hannibal v. Fountleroy, 118.

Hannibal, R. C. os P.P.cR. Co. v. Men-
ifee, 195.

Hannibal, etc., R. R. Co. v. Shacklett,
4, 624, 623.

Hannibal, etc., R. R. Co. v. St. Joseph,

Hanover, etc., Co. v. Ashland, etc., Co.

948.

Hanover Junction & Susquehanna R. |
R. Co. v. Haldeman, 93, 185, 98, 186,
187, 193. --

Hanson v. Donkersley, 237, 248.

Hanson v. Vernon, 102.

Hansory v. Eichstaedt, 557.

Happer v. Sage, 475.

Harben v. Phillips, 686, 677.

Harcum v. Huduall, 588, 589.

Hardenburgh v. Bacon, 890, 484, 392.

Hardenburgh v. Farmers’, etc., Bank,
692, 669, 78, 73, 662, 691.

Harding v. Chicago '& ALR. R.. Co.,
988.

Harding v. Rockford, etc., 115.

Harding v. Vandewater, 666, 657.

Hardman v. Sage, 247.

Hardon v. Newton, 765, 697, 8162

ae v. Merriweather, 198, 165, 843,

Hew 's Case, 168.

Hare v. London, ete., R’y Co., 971, 785.

Hare v. Waring, 373,

Harford v. Stobart, 290.

Harger v. McCullough,
236.

Harkness v. Manhattan Ry Co., 782,
757, 910.

Harlem Canal Co. v. Seixas, 189, 14°,

’

247, 677, 233,
lvi

TABLE OF CASES.

[The references are - the foot-paging.] .

Harlem Canal Co. v. Spear, 189.

Harmon v. Colombia, etc., R. R., 788.

Harmon v. Page. 213.

Harmon’s Case, 779.

Harmstead v. Washington Fire, etc.,
Co., 891.

Harpevding v. Munson, 760, 975, 749,
163.

Harper v. Raymond, 551, 5384.

Harper v. Union Mfg. Co., 240, 281.

Harpold v. Stobart, 287, 254,

Harrel v. Mexico, etc., Co., 510.

- Harrington v. First Nat'l Bank Thomp-
son, 911.

Harrington v. Plainville, 116.

Harris v. American Bible Ass’ n, 855.

Harris, Appeal of, 648, 482.

Harris’ Case, 919, 72, 71,

Harris v. First Parish, 240, 214.

Harris v. McGregor, 258.

a v. Miss., etc., R. R. Co., 700,
705

SEE v. Muskingum, etc., Co., 908,
699.

Harris v. Nesbit, 700.

Harris v. Norvell, 228.

Harris v. Thompson, 851

Harris v. Tumbridge, 473, 651, 461, 463,
383, 881, 649, 471.

Harris v. Pullman, 209.

Harris v. Piatt, 392.

Harris v. San Francisco, etc., 585.

Harris v. Stevens, 590

Bene ete, R. R. Co.,- Appeal of,

39, :

Harrisburg Bank v. Tyler, 948. ‘

ae v. Arkansas, etc., R. R. Co.,

' Harrison’s Case, 295. ;

Harrison, Ex parte, 835.

Harrison v. Harrison, 536, 358.

Harrison v. Heathorn, 548, 64, 172.

Harrison v. Mexican R’y Co., 300, 302,
299, 591.

Harrison v. Pryse, 481.

a v. Union Pac. R’y Co., 43,

Harrison v. Vines, 11.

Harrison v. Williams, 565, 564.

Harrod v. Hamer, 257, 998. _

Harshman v. Bates County, 118, 124.

Hart v. Boston & H.-E. R. R. Co., 572.

Hart v. Brown, 746.

Hart v. Clarke, 549.

Hart v. Chicago, etc., R’y, 795.

Hart v. Frantino, ete. .» Gold Min. Co.,
404, 481, 406.

Hart v. Lauman; 25.

Hart v. Stephens, 589.

’ Hart v. Ten Eyck, » 491,/358.
Hart v. St. Charles St./R’y Co., 819, 318.

Hart, Re, 386.

Harter v. Eltzroth, 393.

Harter v. ernochan, 109, 124,

Hartford Bank v. Hart, 046, 948.

 

Hartford, etc., R. R. Co. v. Boorman,
282.

vy. Doyle, 869.
jo. v. Inhabitants,

Hartford Fire Ins, Co.

Hartford, etc., Ins.
886,

Hartford & New Haven R. R. Co. v.,
Croswell, 810, oe 773.

Hartford, etc., R. RB. Co. v. New York,
etc., R. R. Co., 788, 818, 794.

Hartford, etce., R. R. Co. v. Kennedy, » :
145, 7, 86, 87, 143. op

Hartga v. Bank of England, 365, 366.

Hartley v. Allen, 609, 610.

Hartley’s Case, 178.

Hartman v. Ins. Co. of Valley of Va.”
254.

Hartridge v. Rockwell, 314, 318, 344,

Hart’s Case, 80, 274.

Harvard College v, Amory, 607, 357,

Harvard College v. Boston, 856

Harvey v. Collett, 902.

Harvey v. Clough, 549.

Harvey v. Thomas, 862.

Harvey v. West Side, etc., Co., 947.

Harvey v. Illinois, etc., R'y Co., 839,

Harwood v. R. R. Co., 760, 960.

Harwood’s Case, 64.

/

‘Hasbrouck v. Wandervoort, 478, Sa

483.:
Hascall v. Life Ass’n, 883, 929, 942.
Hasenritter v. Kirchoffer, 713. -
Haskell v. Worthington, 166, 185.

.| Hasking v. Nicholls, 332. -

Haskins v. Harding, 234,

.| Haskins v. Warren, 476.

Haslam v. Adams Exp. Co., 795.

Haslett v. Wotherspoon, 267.

Hassell v. Merchant Traders’ Associa-
tion, 229.

Hasselman v. U. §&., etc., Co., 718.

Hassler v. Phila. Musical Ass’n, 891.

Hastings v. Blue Hill, etc., 419.

Hastings v. Drew, 600, 246, 601, 720.

Hat B. Co. v. Eickmeyer, ete., "74,

Hatch v. Barr, 937.

Hatch v. Burroughs, 248, 231, 235.

Hatch v. Chicago, R. I., etc., Co., 989,
971, 964, 976.

Hatch v. City Bank of New Orleans,

Hatch v. Codding. 928.

Hatch v. Dana, 129, 217, 239, 212, 180,
218, 215, 213.

Hatch v. Douglas, 384, 469, 380, 465.

Hathorn v. Calef, 514.

Hatten v. Russell, 360.

Hattersley v. Earl Selburne, 977,

Hatton, Ex parte, 296,

Hauseman v. Building Assoe., 952.

Havana Gold Min. Co., Re, 698,

Havemeyer v. Iowa Co., 102. =

Havemeyer v. Havemeyer, 349, 870,
687, 534,

Haven v, Adams, 939.

| Haven v. Grand, etc., Co., 880, 989, 828.
TABLE OF CASES.

lvii

[The references are to the foot-paging.]

Haven,-etc., Co., In re, 677.

Haven v. New Hampshire Asylum, 915,
917%,

Hawheach, etc., Co. v. Teague, 914,

Hawes v. Anglo-Saxon Petroleum Co.,
221, 245, 227.

Hawes v. Oakland, 729, 964, 969.

Hawes v. Petroleum Co., 221,

_ Hawkins v. Carroll Co., 118. %

Hawkins v. Furnace Co., 251.
Hawkins v. Glenn, 202, 221, 284.

‘ Hawkins v. Mansfield Gold Mining Co.,

76.
Hawkins-v. Maltby, 2938, 468.
Hawkins v. Miss. & Tenn. R. R. Co., 523,
Hawkins v. Munic. Council, etc., 885."
Hawley v. Bibb, 383. -
Hawley v. Brumagim, 17.
Hawley v. Cramer, 464.
Hawley v. Fairbanks, 113.

Hawley v. Upton, 67, 84, 200, 70, 47, 65. .

Hawtayne v. Bourne, 982.
Hawthorne v. Calef, 515.

Haxtem v. Bishop, 850.

Hay v. Palmer, 610.

Hay v: Cohoes Co., 862.

Haydel v. Hurck, 612.

Hayden v. Androscoggin, 990. :

‘Hayden v. Atlanta Cotton POCIOEY 20,

199.
Hayden v. Davis,’ 827.
Hayden v. Middlesex, etc., Co., 912, 936,
933, 908, 642.
Hayes v. Hayes, 331, 337.
Hayman v. European Central R’y, 1178.
Hayne v. Beauchamp, 183.
Haynes v. Brown, 199, 71, 955, 282.
Haynes v. Hunnewell, 948.
Haynes v. Palmer, 281.

Hay’s Case, 735. .
Hays v. Brown, 64.
Hays v. Commonwealth, 675, 674,
Hays v. Dowes, 107.
‘ Hays v. Galion, etc., Co., 889, 823, 824.

Hays v.
Hays v.
Hays v.
Hays v.

Holly Springs, 109, 110.

Houston R. Co., 874, 878.

Lycoming, 211. -

Ottawa, etc., R. BR. Co., 528, 196.

Hays v. Penn. Co., 791, 793.

Hays v. Pittsburgh, etc., R. BR. Co., 70,
185, 136.

Hayter v. Tucker, 549.

_ Hayward v. Nat. Bank, 494.

Hayward v. Pilgrim Soc., 948, 933.

Haywood v. Lincon Lumber Co., 763,
978.

Haywood, etc., Plank-road Co. v. Bryan,
“22, 99, 677, 182.

Hayworth v. Junction R, R. Co., 524,

Hazard v. Dillon, 548.

Hazard v. Dusant, 919, 972, 973, 962.

Hazard v. Nat. Ex. Bank, 507.

Hazard v. Vermont, etc., R. R. Co., 750.

Hazelhurst v. Savannah R. R. Co., 348,
801, 300.

 

Hazeltine v. Belfast, 307, 306, 597,
Hazelton Canal Co, v. Megarel, 847.
Hazen v. Boston & M. R. R. Co., 861.
Hazen v. Union Bank of Penn., "B14.

-Heacock v. Sherman, 230.

Head v. Providence Ins, Co., 2, 944.

Head v. Tattersell, 740.

Head’s Case, 290.

Health Com’rs v. Mauran, 854,

Heard v. City of Brooklyn, 721,

Heard v. Eldridge, 607, 608.

Heard v. Talbot, 711.

Heart v. State Bank, 568, 567, 368,

Heaston v. Cincinnati, ete., R, R,, 984,
149, 985, 199. | :

Heath v. Barmore, 720.

Heath v. Erie R’y Co., 965, 974, 9'70.

Heath v. Griswold, 482.

Heath v. Mahoney, 462.

Heath v. Silverthorn Lead Min., etc.,
Co., 655, 681, 654, 720.

Heathcote v. North Staffordshire Ry
Co., 783.

Hebb’s Case, 71, 72.

Heck v. Bulkley, 646.

Hecks v. Burns, 288.

Hedge’s and Horne’s Appeal, 545, 551.

Hedges v. Harpur, 336.

Heebner v. Chave, 228,

Heffner v. Brownell, 943.

Heinig v. Adams, ee Co,, 711, 258.

Heinman v, Hardie, 381.

Hemneimen v. Druids, etc., Assoc.,

7

Held v. City of Bangor, 621,

a v. Swiggett, 369, 575, 434, 447,
5

Heman v. Britton, 600, 355.

Hemenway v. Hemenway, 607, 611.

Hemming v. Maddick, 539, 540.

Hemphill’s Appeal, 357.

Hempling v. Burr, 493, 391.

Hendee v. Pinkerton, 938,

Henderson v. Bank, 812.

Henderson v. Central Pass. Ry Co.,

701, 169, 860, 721.

Henderson, Ex parte, 285, 286.

Henderson v. Jackson Co., 124.

Henderson, etc., Assoc, v. Johnson, 142,

pe dae v. ‘Lacon, 158, 170, 76, 160,
1

Henderson v. Midland R’y Co., 877.

Henderson & Nashville R. R. Co. v.
Leavell, 89, 97.

Henderson v. Royal British Bank, 427.

Henderson v. Decow, 430. :

Hendricks v, Jackson, 110.

Hendriques v. Dutch West India ,Co.,
718

Hendrix v., Academy of Music, 1535, 185,
Hennessey’s Case, 275, 285.

Henning v. Planters’ Ins. Co., 990.
Henning v. U. 8. Ins. Co., 935,
Henriques v. Dutch, etc., ‘Co., 989.
Henriques v. West india Co., "984,
lviii

TABLE OF CASES.

[The references are to the foot-paging.]-

Henry v. Dubuque & Pac. R. R. Co.,
863.
Henry v. Duffield, 943.

Henry v. Great Northern, etc., R’y Co., |

805, 807, 298, 304, 299, 302.
Henry v. Jackson, 547, 859.
Henry, etc., Co. v. Northern Bank, 947:
Henry v. Rutland, etc., R. R. Co., 757.
Henry v. Travelers’ Ins. Co., 564.
Henry v. Vermillion & Ashland R. R.
Co., 21, 156, 129, 182, 221, 218, 213.
Henkle v. Salem, etc., Co., 27], 270.
Henkle v. Town of Keota, 616.
Hepburn v. Exchange, etc., Co., 823,
Hepburn v. School Directors, 631, 629.
Hepburn v. Skerving, 334.
Herand v. Leaf, 902.
Herdegen v. Cotznausen, 580.
Hereford & Co., In re, 787.
Heritage v. Paine, 462.
Heritage’s Case, 235.
Herkimer Co. Bank v. Furman, 231.
Herkimer, etc., Co. v. Small, 143, 144.
Herne Bay Water-works Co., Re, 835.
Heroy-v. Kerr, 851.
Herridge v. Hesse, 898,
Herries v. Platt, 247.
Herries v. Wesley, 65.
Herrington v. District, etc., 659.
Herrman v. Maxwell, 483.
Herron v. Vance, 698. ’
Herschfield v. Clark, 565.
Hersey v. Veazie, 965, 973.
Hersh v. Northern R. R., 793.
Hershire v. First Nat. Bank, 621.
Hervey v. Illinois, etc., R’y Co., 960.
Heseltine v. Siggers, 378.
Hess v. Rau, 472,461.
Hess v. Werts, 229,
Hester v. Memphis & Charleston R. R.
Co., 518, 517.
Higeeoarule, etc., R. R. Co. v. Shields,
6.

Hewitt v. Pioneer-Press Co., 876.

Hewitt v. Price, 382.

Hewitt v. Swift, 768, 876, 896.

Heymann v. European Central R’y Co.,
171, 166, 164.

Hiatt v. Griswold, 482, 270.

Hibblewhite v. McMorine, 378, 420, 382.

Hibernia Ins. Co. v. New Orleans, etc.,
Co., 723.

Here Ins. Co. v. St. Louis, etc., Co.,
12a. + :

Hibernia Nat’] Bank v, Lacombe, 989.

Hichens v> Congreve, 737, 740.

Hickling v. Wilson, 47, 192, 213.

‘Hickory Farm Oil Co. v. Buffalo, N. Y.
& P. R. Co., 854, 853,-

Hickory v, Ellery, 103.

Hide v. Holmes, 565, 560.

Higgins v. Hopkins, 898.

Hige’s Case, 296.

Higgs v. Assam Tea Co., 579, 576,

Higgs v. Northern, etc., Co., 836,

‘| Hill v.

 

Highland, etc., Co. v. McKean, 86, 183.,

Hightower v. Mustian, 213, 851.

Hightower v. Thornton, 207, 2138, 720,
208, 4.

Hildyard v. South Sea Co., 410,

Hill’s Case, 277, 855, 823, 286.

Hill v. Beach, 242, 261

Hill v. Beebe, 493.

Hill v. Burlington, ete., R. R., 787.

Hill v. Com’rs of Forsyth, 106,

Hill v. Exchange Bank, 680.

Hill v. Frazier, 604, 603.

Hill v. Finigan, 490.

Hill v. Gt. W. R. Co., 564, 561, 565.

Hill v. Lane, 399, 169.

Hill v. Philp, 563.

Hill v. Pine River Bank, 570, 642, 853,
579, 428.

Hill v. Manchester Water-works, 944,
626, 939, 955, 940, 565.

Hill v. Newichawanick Co., 592, 589,
590, 483. :

Hill v. New Orleans R. R. Co., 878,

Hill v. Nisbit, 349, 187, 746.

Hill v. Reed, 850, 182,

Hill vy. Rockingham Bank, 888,

Hill v. Scotland, 829,

Hill v. Silvey, 179.

Hill v. Smith, 374.

Spencer, 228.

Hill v. Western Vermont R. R. Co., 861.

Hill Mfg. Co. v. Boston, etc., R. R., 786,
785.

Hill, ete., Co. v. Stetler, 267.

Hiller v. Burlington, etc, R. R. Co,
992.

Hillier v. Allegheny Mutual Ins. Co.,
249, 201.

Hilles v. Parish, 683, 654, 656.

Hilliard « Goold, 934.

Hills v, Bannister, 943.

Hills v. Rodgers, 182.

Hillyer v. Overman, etc., Co., 947,

Hilton v. Eckersley, 527.

Hinchman v. Lincoln, 378.

Hinckley v. Gildersleeve, 779.

Hinckley v. N. Y.C. & H. R. R., 795.

Hinds v. Canandaigua, etc., R. R. Co.,
239, .

Hinkley v. Blether, 555.

Hipple v. Fire, etc., Co., 241, 214, 217.

Hirsch v. Norton, 278.

Hirschel, Ex parte, 902.

Hye Rasce v. Bank of United States,

67. -

Hitchcock v. McElrath, 648,

Hite’s Ex'rs v, Hite’s Devisees, 606.

Hixon v. Pixley, 463, 7

Hoadley v. County, etc., Essex,.2, 554.

Hoag v. Lamont, 935, 947, 236, :

Hoag v. Board, etc., 883.

Hoagland v. Bell, 69.

Hoagland v, Cin. & F. W. RB. RB. Co., 186.

Heegiend v. Hannibal & St. J. R. RB,
TABLE OF CASES.

lix

* [The references are to the foot -paging.}

Hoard v. Giesapedies ete., R’y, 724.

Hoard v. Wilcox, 235, 234, 236,

Hoare’s Case, 539, 824,

Hobart v. Gould, "249,

Hobart v. Johnson, 275.

Hobart v. Supervisors, 116.

Hobbs v. Wayet, 611.

Hobbs v. Western Nat’l B’k, 364.

Borekey Build. Ass’n v, Martin, 700,
5,

Hockett v. State, 799,

Hodder v. Kentucky, etc., R’y Co., 840.

Hodges Distillery Co., In re, 720, 728,

Hodges v. New Eng. Screw Co., 894,
Oe,

‘Hodges Ex. v. First Nat’] B’k, 921.

Hodges v. Rutland, etc., R. R. Co., 921,
756.

Hodges v. Silver Hill Mining Co., 214,
224, 210.

Hodges v. Planters’ B’k,.578, 568, 576.

Hodges v. Paquette, 158.

Hodgkinson v. Nat’! Live-stock Ins,
Go., 196, 179.

Hodgkinson v. Kelly, 468, 475,

Hodgmau v. St. Paul R. BR. Co., 122,

; 121.

Hodgson v. Cheever, 243.

Hodgson v. Earl of Powis, 814,

Hodson v. Tea Co., 834, 835.

Hodsdon v. Copeland, 765, "722.

Hoey v.’Henderson, 520.

Hoff v. Jasper Co., 112..

Hoffman v. Banks, 870.

Hoffman v. Livingston, 465. .

Hoffman Steam Coal Co. v. Cumber-
land Coal Go., 782, 958, 745.

Hoge v. R’y Co., 639.

Hogeg’s Appeal, 215,

Holbert v. St. Louis R. R. Co., 864, 868,

Holbrook v. Basset, 823.

Holbrook v. New Jersey Zine Co., 422,
15, 361, 447, 4038, 407, 408.

Holbrook v. "Fauquier, etc., Turnpike
Co., 326, 17.

Holbrook v. St. Paul Fire & M. Ins. Co.,

256.

Holcomb v. Managers, etc., Bridge Co.,
660.

Holden v. Metropolitan Nat’l B’k, 352.

Holden v. Hoyt, 917

Holden v. Lafayette; etc., R’y Co., 756.

Holden v. N. Y. & Erie Bank, 950.

Holden v. Upton, 926.

Holgate v. Oregon R’y, 993.

Holinan v. State, 763.

Holladay v. Patterson, 735.

Holladay v. Elliott, 77.

Holladay v. Weissenborn, 555.

Holland v. Heyman, 762, 248,

Holland v. Lewiston, etc., Bank, 754.

Holland v. Dickson, 562.

Hollingshead v. Woodward, 251, 585,
178, 210.

Hollis v. Drew Theological Sem., 868.

|, Hope, .ete.,
520.

 

Hollis v. Allen, 609.

Hollister v. Hollister, 249,

Hollister v. Stewart, 831, 841, 748, 839,

Hollman v. Williamsport, 73.

Hollwey’s Case, 276.

Holman v. Norfolk Bank, 948.

Holman v. State, etc., 42.

a Ex parte, 347, 682, 681, 678,
982

Holmes’ Case, 323.

Holmes, Booth & Hayden v.
Holmes, etc., Co.,.880, 273.

Holmes v. Gilliland, 258.

Holmes v. Holmes, etc., Co., 88.

Holmes v. Higgins, 901.

Holmes v. Mead, 5385, 536, 549.

Holmes v. Newcastle-upon-Tyne Abat-
toir, 322, 600, 48,959.

Higlines v. Sherwood, 213, 224, 217, 218,
214,

Holmes v. Old Colony R. R. Co., 806.

Hoit’s Case, 539, 158,

Holt v. Winfield, 942.

Holt v. Jex, 335.

Holt v. Bennett, 764.

Holton v. Bangor, 617.

Boe v. Plattsburg, etc, BR. R. Co.,

4

The

Holyoke Bank v. Burnham, 269, 290,
294,

Holyoke Bank v. Goodman, etc., Mfg.
Co., 245, 421. s
Holyoke Bank v.
Manuf’g Co., 221.

Home Ins. Co. v. N. Y., 627.

Home Ins. Co. v. Davis, 866.

Home Ins. Co. v. Swigert, 640.

Home Stock Ins, Co. v. Sherwood, 193,
427, 183, 421.

Home of the Friendless v. Rowse, 636.

Home v. Commercial Bank, 83.

Home & Holland, Re, 835.

Homersham v. Wolverhampton Water-
works, 936.

Honold v. Mever, 393.

Hood v. New York & W. H. R. R, 786.

Hooker v. Eagle Bank, 923.

Hooker v. Utica, ete., R. Co., 721,

Hooker v. Vandewater, 528.

Hooker v. Rossiter, 608, 609.

Hoole v. Great Western R’y Co., 306,
968, 970, 598.

Hooper v. Auburn, etc., Co., 941.

Hooper v. Wells, Fargo & Co., 793.

Hoosace, etc., Co. v. Donat, 961.

Hopcroft v. Parker, 901.

Ins. Co. v. Beckman, 524,

Goodman Paper

s

Hope v. International Financial Soc.,
342, 341.

Hope, etc., Ins. Co. v. Koeller, 520, 524.

Hope Ins. Co. v. Perkins, 823.

Hope v. Lawrence, 463, 653,

Hope v. Salt Co., 746, 762.

Hopkins’ Trust, Tn re, 609,
‘dx

TABLE OF CASES.

[The references are to the foot-paging.]

Hopkins’ Appeal, 765.

Hopkins v. Gallatin, 851, 939,

Hopkins v. Mebaffy, 948.

Hopkins v. Roseclare Lead Co., 909.

Hopkins v. Whitesides, 722.

Hopkinson v. Marquis of Exeter, 546,

891.

Hopper v. Sage, 476, 590.

Hoppin v. Buffum, 680, 679, 681.

Hopson v. Attna Axle, etc., Co., 838,
763, 674. ;

Horbury, etc., Co., In re, 691.

Horn v. Chicago, etc., R’y Co., 800.

Horn v. Horn, 498. :

Horn, In re, 835.

Hornaday v. Ind. & Ill. BR. B., 166, 197.

Horne v. Boston R. R. Co., 872.

Horne v. Greene, 627.

Hornecks Ex’r v. Amer. Bible Soc., 885.

Horner v. Carter, 722.

Horton v. Baptist Church, 480...

Horton v. Morgan, 476, 470, 484, 482.

Horton v. Town of Thompson, 122, 106.

Horts’ Case, 779.

Hosack v. College of
946,

Hosack v. Rogers, 988.

Hotchin v. Kent, 944.

Hotel Co. v. Wade, 762, 831.

Hotham v. Sutton, 334, 14.

Bop ereen v. City of Glasgow Bank,
291, 171. Pe :

Houldsworth v. Evans, 959, 149.

Housatonic Bank v. Martin, 949.

House v. Cooper, 978.

Household, etc., Co. v. Grant, 71, 72.

Houston v. Flour Mill Co., 943.

Houston v. Jefferson College, 695, 524.

Houston R. R. v. Rust, 793.

Houston, etc,, R. R. v. Shirley, 724.

Physicians, etc.,

Houston & T, C. R’y Co. v. Van Alstyne,

405.
Hovey v. Ten Broeck, 228.
Hovey v. Magill, 943.
Howard’s Case, 918.
Howard v. Kay, 335.
Howard v. Hull, 678.
Howard Co. v. Booneville, etc., 125.
Howard v. Bank of England, 354,
Howard County v. Paddock, 110.
Howard v. Ky., etc., Ins. Co., 212.
eae etc., Coal Co. v. Teague, 131,
Howe v. Boston Carpet Co., 351.
Howe v. Bemis, 493.
Howe, Matter of, 810.
Howe, etc., Co. v. Avery, 941.
Howe vy. Freeman, 842, 840.
Howe v. Deuel, 977.
Howe v. Keiler, 939.
Howe v. Starkweather, 497, 499, 381, 13,
Howe v. Van Schaick, 535.
Howe Machine Co. v. Souder, 875.
Howell v. Harvey, 555. .
Howell v. Cassopolis, 620, 628.

 

Howell v. Chicago, etc.. R. R. Co., 599,
585, 998, 59, 586, 591, 320.

Howell v. Harvey, 545.

Howell v. Manglesdorf, 242.

Howland v. Meyer, 923. ;

Howland v. Edwards, 128.

Howlett v. N. Y., etc., R'y, 859.

Howessey’s Case, 82.

Hoyt v. Amer. Bank, 563,

Hoyt ‘v. Bridgewater Copper Co., 934,
688.

Hoyt v. Quicksilver Min. Co., 301.

Hoyt v. Chicago, etc., R. R. Co., 800.

Hoyt v. Sheldon, 918.

Hoyt v. Thompson, 660, 940, 888, 939,
918. :

Hoyden v. Davis, 846. ;

Hoy Lake R’y Co., In re, 578, 282.

Hoyle v. Plattsburgh & M. R. R. Co.,
843, 731.

Hubbard v. Camperdown Mills, 658,
979.

Hubbard v. Chappel, 713.

Hubbard v. New York & H. R. R, Co.,

* 829, 755.

Hubbard v. Johnson Co., 629.

Hubbard v. Meigs, 58.

Hubbell v. Drexel, 484, 482, 17.

Hubbell v. Meigs, 652, 399, 955.

Hubbersty v. Manchester, etc., R’y Co.,
572.

Hubbuck v. Helms, 836.

Bes Canal Co. v. Buckley, 282,
280. :

Hudson v. Carman, 223, 719.

Hudson & Mohawk R. R. Co., Matter
of the, 681. 1

Hudson‘v. Green, 712. -

Hudson River Co. v. Patterson, 635.

Huey v. Macon County, 831.

Hughes v. Antietam Mfg. Co., 178, 517,
165, 188, 143, 186, 149, 177, 185, 137,
985, 84. 4

Hughes v. India, etc., Co., 540.

Hughes v. Chester’, 863.

a v. Northern Pac. R’y Co., 716,

De

Hughes v. Parker, 662, 691.

Hughes v. Oregonian R’y Co., 211.

Hughes v. Vermont Copper Min. Co.,
596, 430, 645.

Hughes v. Turner, 336.

Huguenot Bank v. Hudwell, 690,

Huidekoper v. Dallas Co., 112

Hulett’s Case, 829. :

Hull v. Burtis, 235.

Hull v. Enoch, etc., Co., 912.

Hull v. Glover, 920.

Hullman v. Honcomp, 684,

Humberstone v. Chase, 366.

Humbert v. Trinity Church, 856.

Humble v. Mitchell, 377, 13.

Humble v. Langston, 292.

Humby’s Case, 290.

Hume vy. Commercial Bank, 83,
TABLE OF CASES.

lxi

[The references are to the foot-paging.]

Bars vy. Winyah & W. Canal Co.,

Humeston v. Tel, Co., 652.

Hummell v. Bank of ‘Monroe, 950,
Humphrey v. Mooney, 258, 257.
Humphrey v. People, 916.

Deas Patrons’ Mercantile, etc.,

Humphreys v. Humphreys, ‘837.
umphreys v. Pegues, 637.

Humphreys v. St. Louis, etc., R’y, 778.

Hun v. Cary, 895.

Hun v. Van Dyck, 976.

Hundleston v. Gouldsbury, 334.

Hunt’s Case, 7386,

Hunt, In re, 381.

Hunt’ v. Hewitt, 563,

Hunt vw. Bullock, 842.

Hunt v. Appellant, 357,

Hunt v. Hamilton, 124,

Hunt v. Gunn, 76. ©

Hunt v. Kansas Bridge Co., 198, 186,

ae v. International R’y, etc., Co.,

Hunter’s Appeal, 618.

Hunterdon Bank v. Nassau Bank, 505.

Huntington, etc., Coal Co. v. English,
651, 647, 644, 650.

Huntington v. Palmer, 964, 614.

Huntington v. Sav. Bank, 3. ‘

Huntington v. Mather, 478, Z

Hurbert v. Mechanics’ Building & Loan
Ass’n, 489.

Hurd v. Green, 818.

Hurd v. Tallman, 281.

Hurges v. Keith, 648.

Hurlbert v. Carter, 182.

Hurlbert v. Root, 132,

Hurlbert v. Reid, 182.

Hurlbut v. Marshall, 672, 966,

Hurlbut v. Taylor, 602,

Hurrell v. Hyde, 12.

Hurst v. Coe, 697.

Hurt v. Hamilton, 117,

Hurt v. Baebes 257,

Huss v. Rau, 3

Hussey v. Chichi, 380.

Hussey v. King, 877, 876, 874, 768,

Hussey, etc., Co. v. Deering, 992,

Hussey v. Manufacturers’ & M. Bank,
434, 567,

Hutchins’ Adm’r v. State Bank, 366.

Hutchins v. Bynum, 939.

Hutchins v. New England Coal Mining
Co., 243. °

Hutchins v. Smith, 86,

Hutchins v. State Bank, 13.

Hutchinson v. Chicago, etc,, R’y, 795.

Hutchinson v. Green, 910, 850,,774.

Hutchinson v. Kilkenny R’ 'y, 907.

Hutchinson v. Lawrence, 890,

Hutchinson v. Surrey, 904,

Hutton v. West, 756.

Hutton v. Thompson, 901.

Hutton v. Upfill, 900.

 

ae v. Scarborough, etc., Co., "299,

Hutt’s Case, 565,

Hutzler v. Lord, 292.

Byylee v. Cragin Cattle Co. 561, 556,
55

Hyam’s Case, 295.

Hye v. Allen, 583, 7, 610, 606, ae
Hyatt v. Argenti, 494,

Hyatt v. McMahon, 881.

Hyatt v. Swivel, 379.

Hybart v. Parker, 548.

Hyde Park Gas Co, v. Kerber, 977.

q

Tasigi v. Chicago, B. & QR. R. Co. oy
433.

| Inmsen’s Appeal, 857.

ms ete., cee v. Chicago, etc., BR. R.
0., 806

Illinois Co. v. Hough, 54, 857.

Illinois Central R, R. v. Copeland, 786.

Illinois River R. R. Co. ¥. immer, 517,
126. 86, 182, 518, 187, 516,

Ill, etc., R. BR. Co. v. People, 799, 794.

Illinois Central R. R. v. Chicago, etc.,
R, R., 859, 858, ©

Th. Grand Trunk R. R. Co. v. Cook,
519, 195.

Ii, etc., v. Barnett, 125.

Til, "Ins. Co. v. Marseilles Mfg. Co., 9.

Til, River R. R. Co. v. Beers, 520. :

Til. on R. R. Co, v. Supervisors, etc,,

“ 196,

a a v. intoweahy; etc., Min. Co., 714,
94

Imlay v. Union Branch R. R, Co., 861.

Imperial, etc., Ass’n v. Coleman, 971,
967, 785, 743,

Imperial Land Co., In re, 836,

imperial, etc., Co. v. Hampson,

11

toperiel Gas Co. v. Clarke, 665,

663.

977,
564,

| Importing, etc., Co. v. Locke, 712, 989.

Aaperiay "Hotel Co. v. Hampson, 731,
6

Ince Hall Rolling Mills, Re, 87.

Inchbald v. The Western Coffee
464, 465,

Ind’s Case, 270, 589, 276, 427.

Independence, etc, Co. 'v. Burlington,
ete,, R. R., 787.

Independent Ins Co., Re, 697,

Co.,

| Independent: Assurance Co., Re, 229.

Independent Aid v. Paine, 718,
Inderwick v. Snell, 911.
India Bagging Ass’n v. Kock, 527,
Indian, etc., Co., In re, 677. ex
Indiana v. American Ex, Co., 641.
Indiana, etc., R. RB, Co. v. Attica, 103,
Indianapolis F. & Min, Co. v, Herkimer,
195, 257.
lxii

TABLE OF CASES.

[Lhe references are to the foot-paging.]

Indianapolis & St. L. R. R. Co. v. Junt-
gen, 789. :
Indianapolis, etc., Co. v. St. Louis, etc.,
R. RB. Co., 980.
Indianapolis, etc., R. R. v. Ewin, 794.
Indianapolis R. R, v. Jones, 724,
Indianapolis, etc., R. R. Co. v. Morgan-
town, 940.
_ Indianola R. R. v. Fryer, 724.
‘Ingalls v. Cole, 253, 248,
Inglehart v. Thousand, etc., Hotel Co.,
762, 743.
Inglis v. Great North R’y Co., 144.
Ingraham v. Ferry, 721.
Inhabitants of Middleton v. McCormick,
885. | .

“y

Inhabitants, etc., v. Wedgewood, 9835.

Inhabitants of Norton v. Hodges, 264.

Inhabitants, etc., Salem v. String, 885.

Inhabitants, etc., Glouster v. Forest, 885.

Innes v. Lansing, 979,

Innes v. Mitchell, 336.

Innis v. Sayer, 336.

Inns, etc., Co., Re, 62.

Inns of Court Hotel Co., 834.

oe v. Frankfort, etc., Co., 86, 148,
144. é

Ins. Co. v. McCain, 929, 982.

Insurance Co, v. Morse, 869.

Ins. Co. v. Purcell, 997.

Ins. Co..v. The C. D., Jr., 989.

Ins. Co. v. Brum’s Assignee, 832.

Insurance Co, v. Francis, 988.

International, etc., v. Com’rs, 885.

oe etc., Co. v. McMorran,

2. :

International, etc., R. R. Co. v. Bre-
mond, 960, 779, :

International Mt. P. Co. v. Jack, 205.

eo etc., R, R. Co. v. Moody,
788. :

reve ete., Co. v. American, etc., Co.,

Iowa Barb, etc., Wire Co. v. Southern |

Barbed Wire Co., 986.

Iowa Lumber Co. v. Foster; 844.

Iowa & Minn. R. R. Co. v. Perkins, 187,
71, 65, 185, 70.

Ireland v. Palestine, etc., Turnpike Co.,
514, 524. 7

Trish Peat Co. v. Phillips, 72,

ee Bank v, City of Pittsburgh,

be a
| Iron v. Mfrs. Bank,’ 250, 245, 965, 290.
— Mt. Bank v. Mercantile Bank, 875,
77.

Tron R, R. Co. v. Fink, 484.

trons v. Mfg. National B., etc., 851,

Irrigation Co., In re, 665,

ivin v. Nashville, etc.. R’y, 789.

Irvine v. Forbes, 552, 554,

Irvine v. Lumberman’s Bank, 712.

Irvine v. Turnpike Co., 517.

Irvine v. Union Bank of Australia, 962,

5.

 

Irving v. Houstoun, 608.

Irwin v. Bailey, 920. ‘

Irwin v. Williar, 385, 380, 386, 384.

Isaac v. Clarke, 483.

Isham v. Bennington, 945, 940, 908. .

Isham v. Buckingham, 427, 281, 284.

Island, etc., Bank v. Sachtleben, 728.

Isle of Wight R’y Co. v. Tahourdin, 911. .

Isle, etc., Co. v. Sec’y of State, 871,

Ithaca Gas Light Co. v. Freeman, 760,
967.

Ives v. Smith, 958, 994, 784, 829.

Ives v. Sterling, 86.

J.

Jack v. Naher, 155.

Jackson, Re, 18, 706.

Jackson v. Brown, 838,

Jackson v. Campbell, 926,

Jackson v. Cassidy, 547.

Jackson Co, v. Brush, 119.

Jackson v. Hathaway, 863.

Jackson’s Adm’r v. Newark Plank-road
Co., 592, 591, 598.

Jackson, etc., Co. v. Burlington, etc.;
R. R. Co., 964. . :

Jackson v. Bank of Marietta, 984,

Jackson v. Foote, 387.

Jackson.v. Hampden, 666, 663,

Jackson v. Haynes, 66.

Jackson v. Ludeling, 976, 746.

Jackson v. Leggett, 985.

Jackson v. Meek, 248, 289.

Jackson Marine Ins. Co., In re, 701.

Jackson v. Munster Bank, 896,

Jackson v. McLean, 732,

Jackson v. New York, etc., R. BR. Co.,
830, 757,

Jackson v. Pratt, 940.

Jackson v. Plumb, 984,

Jackson v. Rutland, 863.

Jackson v. Twenty-third Street R’y

Co., 889,
Jackson v. Second Ave, R. R. Co., 876.
Jackson v. Sligo Manuf’g, etc., Co.,
290, 282, 58,
Jackson v. Traer, 52, 24, 207.
Jackson v. Turquand, 162, 272,
Jackson v, York, etc.,“R. R. Co., 880;
Jacksonport v. Watson, 103.
oe ores ete., R. R. Co. v. Virden,
Jacobs v. Miller, 870.
Jacobson v, Allen, 231,
Ji pos v. Monongahela, etc., Bank,
Jacques v. Chambers, 830.
Jagger Tron Co. y. Walker, 247, 250,

James Bage's Case, 891,

James v. Eve, 87, -

James v. Cincinnati, etc, R. R. Co.,
78, 200, :

James v. May, 540, 293,
TABLE OF CASES.

Lxiii

[The reférences are to the foot-paging.]

James v. Mayrant, 587.

James v. Milw: aukee, 107.

James v. R. R. Co., 759, 762, 829,

James v. Woodruff, 723, 720.

Jameson v. People, 719. ‘

Janes v. Victoria, etc., Co., 915.

Jansen'v, Otto, ete., Co., 926,

Jarrett v. Kennedy, 175.

“Jarvis v. Manhation, etc., Co., 409.

der Adm’r, v. Rogers, 487, 648, 485,

Jaudon v. Nat, City Bank, 358, 361, 359.

Jay Bridge Co. v. Woodman, 888

Jaycox v, Cameron, 469.

Jeanes, Appeal of, 494.

Jefferson v. Hale, 647.

Jefferson v. Patterson, 830,

Jefferson Bank v. Skelly, 636.

Jeffersonville R. R. Co. v. Rogers, 878,
875, 876.

Jeffreys v. Jeffreys, 271, 833.

Jeffries v. Lawrence, 110,

Jefts v. York, 943,

Jenkins v. Andover, 108,

Jenkins v. Charleston, 620,

Jenkins v. Fowler, 334.

Jenkins v. Jenkins, 978.

Jenkins v. U. T. Co., 184,

Jenner’s Case, 900.

Jennings, Re, 188.

Jennings v. Baddeley, 545, 555.

Jennings v. Broughton, 175, 167.

Jennings v. Bank of Cal. B72.

Jennings v. Hammond, 528.

Jennison v. Citizens’ Sav. Bank, 387.

Jermain v. Lake Shore, etc., R. R. Co.,
809, 14, 592, 593, 605, 11.

Jerman’s Adm’ v. Benton, 515,

Jersey City Gas Co. v. Dwight, 703, 276,
42, 860.

Jersey ae ete., Co. v. Jersey City,
623, 6

Jervis - First Nat. Bank, 951.

Jervis v. Wolferston, 540.

Jessamine Co. v. Swigert’s Adm’r, 113.

Jessop v. Carnegie, 242, 257, 258, 260,

243,

Jessopp’s Case, 295,

Jessopp v. Lutwyche, 386.

Jessup v. Bridge, 843.

Jessup v. Ill, etc., R. R. Co,, 850,

Jesup v. City Bank, etc., 922.

Jewell v. Rock River, ete., Co., 64, 66,
199.

Jewett v. Kennedy, 171.

Jewett v. Lawrenceburgh, etc., R. R.
Co., 94, 97, 99, 98.

Jewett v. Valley R’y Co., 178, 187, 159,
199.

John v. Cincinnati, etc., R. R. Co., 109,

John v. Farmers’, etc., Bank, 711.

Johns v. Johns, 12.

Johnson’s Appeal, 862.

Johnson, In re, 5387

Johnson, Ex parte, 694.

 

Johnson v, Albany & Susquehanna R.

» Co., 208.
Johnson v, Albany, étc., R. R. Co., 147,
17, 199.

| Johnson v. Bridgewater Mfg. Co., 610,

590.

Johnson v. Bush, 940.

Johnson v. Crawfordville, F. K. & Ft.
W. R. R. Co., 158, 131, 187.

Johnson v. Chicago, etc., R. R. Co., 857.

Johnson v. Crawley, 938.

Johnson v. Cocker, 76.

Johnson v. Commonwealth, 624.

Johnson v. Consol. Silv. Min. Cais 565.

Johnson v. Crow, 514, 805.

Johnson v. Cumming, 487.

Henneen v, Elizabeth, etc., Ass’n, 947,
1

Johnson v. Fall, 380.

Johnson v. Gallagher, 275.

Johnson v. Georgia, etc., R. R. Co., 90.

Johnson v. Goslett; 542, 549, 188,

| Johnson v. Hudson River R. R. Co., 515.

Johnson v. Johnson, 333, 608.
Johnson v. Kessler, "267,

Johnson v. Kirby, 391, 434, 646, 3.
Johnson v. Laflin, 346, "296, 355, 427, 428,
600, 219, 580, 276, 369, 347, 421, 342,
ae v. Lyttle’s Iron Agency, 150,

147, :

Johnson v. Mulry, 378, 464.

Johnson v. N. Y. & Erie R. R, Co., 28.

Johnson v. Pensacola & Ga. R. R. Co.,
517, 155, 792.

Johnson.v. R. R., 794, 793.

Johnson:v. Shor tridge, 950.

Johnson v. St. Louis Despatch Co., 876,
Johnson v. Somerville Dyeing, etc., Cd.;
270, 221.
Johnson v.

Southwestern Railroad
Bank, 294. ,

-| Johnson v, Stark, 114.

Johnson v. Sullivan, 57, 180.

Johnson v. Underhill, 290, 292, 447, 421,

Johnson v. Wabash, etc., Co., 70.

Johnson v. Wabash & Mt. Vernon Co.,
178.

Johnston v. Crawley, 720.

Johnston v. Dexter, 491.

Johnston v. Jones, 679, 684, 691, 661,
665.

Johnston v, Renton, 412, 411, 410, 44,

Johnston v. Russel, 380,

Johnston v. Talley, 722.

Joint-stock Case, In re, 668, 698, 665.

Jonah be -stock Discount Co,’ ¢ Case, 563,
36

J ae Discount Co, v. Brown, 896,
351, 78, 894.

Jones’ Case, 25, 23.

Jones, Ex parte, 146.

Jones v. Andrews, 561.

Jones v, Arkansas, 745.

Jones v. B’k of Tenn., 712.

Jones v. B’k of Leadville, 697.
lxiy

: &
TABLE OF OASES.

[The references are to the foot- ‘paging.]

Jones v. Barlow, 244, 247.

Jones v. Bolles, 400,

Jones v. Boston Mills, 987.

Jones v. Brinley, 14, 645.

Jones v. Cincinnati, etc., Co., 712.
Jones, etc., Co. v. Commonwealth, 628.
Jones y. Davis, 5, 618, 11.

Jones v. Dawson, 5387.

Jones v. Guaranty, 841, 838.

Jones v. Habersham, 856, 854,
Jones v. Harrison, 903.

-Jones v. Hurlbert, 116.

Jones v. Jarman, 264, 214, 239.
Jones v. Johnson, 755, 895.

Jones v. Kokoma, etc., Ass’n, 713.
Jones v, Kent, 372.

Jones v. Latham, 509.

Jones v. Littledale, 468.

Jones v. Marks, 463, 466.

Jones v. Milton & Rushville Rarnpikke,
668.
Jones v.
Jones v.
Jones v.
Jones v.
Jones v.
Jones v.
Jones v.

Milton, 83,

Morrison, 317, 755, 585, 756.

Newhall, 376,

Ogle, 609, 605, 610. -

Peppercorne, 467,

Scudder, 370. —

Seligman, 587.

Jones v. Smith, 870. ;

Jones v. Terre Haute, etc., R. R. Co.,
590, 591, 7, 589, 18, 315, 594, 587.

Jones v. Wiltberger, 253, 248.

Jordan v. Alabama R. R.:Co., 877.

Jordan v. Hayne, 104.

Josephes v. Pebner, 548.

Joslyn v. Pacific, etc., Co., 517.

Joslyn v. Pacific Mail Steamship Co.,
5238, 517.

Joy v. Jackson, 518, 517.

Judah v. Am. Live-stock Ins, Co., 661,
84, 133, 258,

Judson v. Rossie Galena Co., 213, 988,
288.

Juker v. Commonwealth, 887.

Juker v. Fisher, 887, +

Junkins v. Union, etc., District, 920.

Junction Railroad v. Bank of Ashland,
61

Junction R. R. Co. v. Cleneay, 829.

Junction R. R. Co. v. Reeve, 23, 658, 95.

Jurman v. Lake Shore, etc., R. R. Co.,
589. f

Justh v. Holliday, 388, 885. ‘

K.

Kahn v. Walton, 388.

Kaiser v. Lawrence St. Bank, 258.

Kalamazoo, etc., Co. v, McAlister, 947,

, Kampf v. Jones, 332.

‘Kanawha, etc., Co. v. Kanawha, ete.,
Co., 709.

Kane v. Bloodgood, oe 594, 589,

Kankakee v. Atna, 119,

 

Kansas, ete., Co, v. Central Bank, 929,

Kansas Con. Co. v. Topeka, etc., R R,
Co., 26.

Kansas City Hotel v. Hunt, 194,

Kansas R. R. Co. v. Topeka, 994,

Kansas Pac. R’y v. Mower, 800.

Kansas, etc., R. R. v. Interstate, etc.,
Co., 995.

Kansas, etc., Co. v. Sauer, 700.

Kansas City Hotel Co. v. Harris, 321.

Kansas City Hotel Co. v. Hunt, 821,
320.

Kantama Land Co. v. Holley, 194.
Karnes v. Rochester, etc., R. R. Co.,
731, 587, 586, 977.

Karuth’s Case, 689,

Katama, etc., R. R. Co. v. Jernegan, 88,
Katzenberger v. Aberdeen, 110.
Kavey v. Amazon Ins. Co., 932.

Kean v. Johnson, 779, 696, 774, 519, 967.
Keane v. Robarts, "865.

Kearney v. Andrews, 887.

Keasley v. Codd, 546,

Kechland v. Menasha, etc., Co., 980,

| Keeler v, Brooklyn El. R. R., 978.

Keeler v. Frost, 659.

Keene’s Ex’rs Case, 285.

Keene v. Van Reuth, 714.

Keeney v. Globe Mill Co., 612,

Keine v. Kent, 870.

Keith v. Globe Ins. Co., 949.

Keith, etc., Co. v. Bingham, 937,

Kelk’s Case, 148, 145, 142.

Keller v. Johnson, etc., R. R. Co., 98.’

Kelley v. Mayor of Brooklyn, 945,

Kelley v. Miss., etc., R. R. Co., 759, 982,

Kelley v. Newburyport, ete., R. R. Co.,
738, 712, 958.

Kellock v. Enthoven, 292, 293.

Kellogg v. Larkin, 52 28,

Kellogg v. Stockwell, 447, 18, 292, 283.

364,

| Kellogg v. Union Co., 710.

Kelogs Bridge Co. v. United States,
552.

Kelly v. Calhoun, 941.
Kelly v. Mariposa Land, & Mining Co. lies
775, 978.

‘Kelly v. Munson, 469.

Kelly v. People’s Trans. Co., 852, 854.
Kelly v. Upton, 872.

Kelner v. Baxter, 898.

Kelsey v. National Bank, 927, 813.
Bay v. Northern Light Oil Co., 157,
Kelsey v. Pfaudler, etc., Co., 562, 561.
Kelsey v. Sargent, 974, 978, 55,
Kempson v. Saunders, 77, 76.

Kendall v. Kendall, 835.

Kendig v. Dean, 434,

Kenfield v. Latham, 472,471, °
Kenicott v. Supervisors, 101.

Kenkel v. Macgill, 830.

Kennebec Co. v. Augusta Ins. Co., 865.
ee etc., R. R. Co. v, Jarvis, 199,
Ne <a ae

TABLE OF CASES.

lxv

[The references are to the foot-paging.|

Kennebec, etc., R. R. Co. v. Kendall,
88, 145, 888, 142, 266,

Kennebec, etc., R. R. Co. v. Palmer, 85.

aeeunebee & P. R. R. v: Portland, 842,

Kennebec & Portland R. R. Co. v.
Waters, 155.

Kennedy v. Balt. Ins. Co., 936,935.

Hoey v. Chicago, etc., R. R. Co.,
561.

Kennedy v. Gibson, 240, 233, 995, 698.

Kennedy v. Panama, N. J. & A. R. M.
Co., 164, 165.

Kennedy v. Porter, 355.

Kennedy v. St. Louis, V. & T. H. BR. R.

Co., 636;
Kennedy v. R. R. Co., 561.
Kenner v. Mfg. Co., 944.
Kenosha, Rockford, etc., R. R. Co. v.
Marsh, 528, 522, 521. i
Kent, Ex parte, 201.
Kent Benefit, etc., In re, 854.
Kent v. Freehold, 174, 739.
Kent v. Ginter, 647.
Kent v. Jackson, 699, 892.
Kent v. Miltenberger, 386, 380.

‘Kent v. New York, etc., R. R. Co., 228.

Kent v. Quicksilver Mining Co., 300,
825, 823, 956, 301, 11, 45, 327, 888, 302,
957, 301. ;

Kenton Co. Court v. Bank Lick Turnp.
Co., 520, 524.

Kenton Ins, Co. v. Bowman, 579, 571.

Kenton Furnace,-etc., v. McAlpin, 681,
668, 595, 48.

Kentucky Seminary v. Wallace, 883.

Kentucky Union R’y, Co. v. Bourbon
Co., 111.

Keppel’s Adm’r v. Petersburg R. R.
Co., 593, 594, 416, 592.

Beene v. Gettys, 688, 865, 689, 371,
874. 3

Kermode v. McDonald, 3385, 337.

Kernaghan v, Williams, 815,

Kernochan, In re, 606, 590.

Kernochan v. Murray, 374.

Kerr v. Doughery, 859.

Kerr v. Middlesex Hospital, .336.

Kerr, Matter of, 858.

' Kerrison v. Stewart, 832.
_ Kersey, etc., Co. v. Oil., etc., R. R., 658,

Kessler v. New York Central R. R. Co.,
785.

Ketchum v. Duncan, 831.

Keyes v. Bradley, 356,

Keylinge’s Case, 363.

Keyser v. Hitz, 275.

Keyser v. McKissam, 915.

‘Keystone Bridge Co. v. McCheney, 57.

Kid v. Mitchell, 647, 650. ‘
Kidwelly Canal Co. v. Raby, 178,
Kiley v. Western U. Tel. Co., 796.
Kilgore v. Bulkley, 944.

Kilgore v. Smith, 870.

Killer v. Johnson, 156, 166.

e

‘King v.

 

Killey v. Milan, 101. 5

, Killmer v. N. Y. C. & H.R. RB, R,, 791,

798.
Kilpatrick v. Penrose, etc., Co., 754.
Kilvert’s Trusts, In re, 885,
Kimball v. Ives, 966.
Kiniball v. Reding, 357.
Kimball v. Union Water Co., 432,
Kimber v. Barber, 473, 356.
Kimberly v. Ams, 82.
Kimmel v. Greeting, 964,
Kimmel v. Stoner, 964.
Kimpson v. Saunders, 548.
Kincaid’s Case, 162. -
od v. Dwinelle, 246, 228, 210, 233,
Kinder v. Taylor, 548.
Kinealy v. St. Louis, etc., R. R. Co., 790.
Kingman v. Rome; etc., R. R. Co., 968.
Kingman v. Spurr, 534, 551.
Kinmouth v. Brigham, 357,
Kintrea’s Case, 295.
Kinzie v. Chicago, 987.
Kip. In re, 946.
Kirkstall Brewery Co., In re, 322.
ee Case, 295, 144, 148, 278, 541, 539,

wine v. Accumulation, etc., Ass. Co.,

29. :

King v. Amery, 700.

King v. Ashwell, 889, 887.

King v. Bank of England, 482, 558, 586,
643, 642. |

King v. Barnes, 986, 770, 355, 431.

King v. Bedford Level, 914, 913.

King v. The Church-wardens of Parish
of St. John Maddermarket, 645,

King v. City of Madison, 624,

King, The, v. Chetwynd,668.

King v. Clear, 558, 560.

King v. Cooper, 13.

King v. Duncan, 288, 250, 251.

Dupine, 498.

Elliott, 22.

King v. Follett, 610, 589.

King v. Gray, '700.

King, The, v. Hill, 664,

King v. Hughes, 719.

King v. Inhabitants, etc., 956.

King v. Katharine Dock Co., 130, 712.

King v. London Assurance Co., 432.

King v. London, etc., Co., 558.

King v. Marshall, 133,

King v. Mayor, etc., 657.

King, The, v. Mayor of Carlisle, 663.

King v. Merchant Tailors’ Co,, 559, 838.

King v. Ohio, etc., 302. :

King v. Paterson, etc., R’y Co., 595, 593,
592, 594. ‘

King Bridge, etc., Co.: v. Plymouth,
etc., Co., 925. .

Hing v. Prop. of Wilts. & Berks, Nav.,

860. . ‘ : :

King v. Severn & Wye R’y, 790.

King v. Wilson, 104.

King v.
Ixvi

TABLE OF CASES..

[The references are to the foot-paging.]

King v. Talbot, 357,

King, The, v. Theodorick, 665, 668.

King, The, v. Winstanley, 13.

King v. Trevenen, 691.

King v. Trevannion, 564.

Kings County El. R’y Co., Re, 715.

Kingsbury v. Kirwan, 381, 475.

Kingsbury v. Ledyard, 915, 914,.

Kingsford v. Gt. W. R. Co., 565.

Kingsley v. First Nat’] Bank, 985.

Kingsley v. New England, etc., Ins.
Co., 945. 889.

. Kirby v. Potter, 331,

Kirk v. Bell, 660,

Kirk v. Nowill, 142.

Kirkland v. Menasha, etc., Co., 932.

Kirkland v. Dinsmore, 795. -

Kirkpatric v. Bonsall, 385, 383, 380.

Kirksey v. Florida, etc., Co., 143, 191.

Kirsch v. Central R’y, 166, 162.

Kishacoquallis & Centre T. R. Co. v.
McConahy, 156, 193. °

Kitchen v. St. Louis, etc., R’y Co., 751,
960, 959, 747.

‘Kittow v. Liskeard Union, 548.

Klaus, In re, 368.

a v. Alton, etc., R. R. Co., 143, 86,
182. .

Klopp v. Lebanon Bank, 576, 575.

Kluht’s Case, 80, 275. :

Knapp v. R. R. Co., 831.

Knapp v. Williams, 13.

eee Case, 151, 147, 148, 150, 144,
149. oe

Knight v. Fitch, 386.

Knight v. Cambers, 386, ;

Knight v. Norris, 228.

Knight v. Old Nat’! Bank, 568, 581.

Knightley, W. M., Ex parte, 178.

Knott v. Southern, etc., Ins. Co., 994.

Knott v. Raleigh, etc., R. R. Co., 787.

Knowl v. Abbott, 42.

Knowles v. Duffy, 40.

Knowlton v. Ackley, 214, '700, 226, 284.

Knowlton v. Congress, etc., Co., 328,
34, 44,

Knowlton v. Fitch, 464, 384, 461.

Knox v. Baldwin, 252, 244, 251.

Knox Co, v. Aspinwall, 107, 102.

Knox v. Bank of United States, 866.

Knox vy. Protection Ins. 'Co., 886.

Knoxville v. R. R. Co., 519,

Koehler v. Black, etc., Co., 781, 759, |
940, 987, 768,

Koehler v. Brown, 546.

Koehler, Ex parte, 799.

Kohl v. Lilenthal, 775.

Kohn v. Lucas, 212.

ae Carriage Co, v. Beresford,

Koons v. First National Bank, 489.

Kortright v. Buffalo Com. Bank, 580,
423, 643, 642, | \

Kraft v. Freeman, etc., Co., 924,

Kramer v. Arthurs, 552, 553,

 

Kramer v. Cleveland & P. R. R. Co.,
856.

‘Krause v. Setley, 382. 3
Krauser v. Ruckel, 229, 228.

Krebs v. Carlisle Bank, 720, 722,
Kreiger'v. Shelby R. R. Co., 123,
Krider v. Trustees’, etc., Co., 925.
Krohn v. Miller, 570, 580.
Kroppholler v. St. Paul, etc., R. R., 882,
Kruger v. Andrews, 48.

Kruse v. Dusenbury, 262.

Krutz v. Paola Town Co., 256,
Kryger v. Andrews, 392.

Kuhn v, McAllister, 648, 646, 399.
Kuhns v. Westmoreland Bank, 575.
Kunkelman v. Rentchler, 223, 248.
Kuykendall v. Draper, 252.

Kyle v. Montgomery, 502.

Kyle v. Mayor, etc., 628.

Kyle v. Fayetteville, 627.

Kyle v. Lauren R. R. Co., 786.
Kynaston v. East India Co., 557.

te

Lacey v. Hill, 472, 474.

Lacharme v. Quartz Rock Mariposa
Gold Min. Co., 9, 564.

Lackland v. North Mo. R. R. Co., 857.

Lacombe v. Forstall’s Sons, 490.

Ladd v. Cartwright, 254, 240.

Ladd v. Southern, etc., Co., 799.

Lady Henloch v. River Dee Co., 824.

Ladywell, etc., Co. v. Brooks, 738.

La Farge Fire Ins. Co. v. Bell, 953,

La Farge v. La Farge Fire Ins, Co., 566.

Lafayette Bank v. St. Louis Stoneware
Co., 826, 809. ;

| Lafayette, etc., R'y v. Cheney, 756,

Lafayette B’k v. State B’k, 927.
Lafayette Ins. Co. v. French, 865, 884,
993,

| Lafayette Ins. Co. v. Rogers, 984.

Lafayette, etc., R. R. v. Geiger, 109, 108.

Lafayette Co. v. Neely, 975, 969.

Lafond v. Deems, 555, 546, 818,

La Grange & P. M. R. Co. v. Mays, 157.

La Grange, etc., R. R. Co, v. Rainey,
709, 699, 695.

La Grange v. State Treasurer, 964, 977.

Lahr v. Metropolitan, etc., R’y, 860.

Laing v. Burley, 286.

Laing v. Reed, 823.

Lake v. Argyle, 899, 901.

Lake Erie, etc., R. R. v. Griffin, 724,

Lake Ontario Shore R. R. Co. v. Cur-
tiss, 98, 88, 87.

Lake Ontario, etc., R. R. Co. v. Mason,
85, 84, 124, 148, 178, 186, 183.

| Lake Ontario, ete., Bank v. Onondaga

Bank, 697.

Lake Shore & M.S. R, R. Co. v. Ben-
nett, 789. ,

Lake Shore, etc., R’y v. Cincinnati,
etc., R’y, 800, 858.
TABLE OF CASES.

lxvii

[The references are to the foot-paging.]

Lake Superior Jron Co. v. Drexel, 39,
345, 38.

Lake Superior Build. Assoc. v. Thomp-
son, 884.

Lake View v. Rose Hill Cem. Co., (801.

Lallande v. Ingram, 481.

Lamar v. Micou, 357, 363.

Lamar Insurance Co. v. Gulick, 217,

Lamb v. Bowser, 871

Lamb v. Anderson, 121,

Lamb v. Burlington, etc., 114,

Lamb v. Cecil, 850.

Lamb v.. Pannell, 850.

Lamb v. San Pedro, ete., Co., 976.

Lamb v. Lamb, 865.

Lambert v. Northern, etc., R’y Co.,
755.

Lambert v. Neuchatel. Asphalte Co.,
586.

Lambert v. Lambert, 609, 333.

Lamm vy. Port Deposit Homestead, 875.

Taner etc., R. R. Co. v. Fairfield,
101

Lamson, etc., Co. v. Russell, 939.

Lancashire R’y v. Gidlow, 794.

Lancashire Co, v. Greatorex, 563.

Lancaster, etc., R’y Co. v. Northwestern
R’y Co., 785.

Lance’s Appeal, 861, 857.

Land v. Coffman, 853.

Land Credit, etc., In re, 827,

Land Credit Co. v. Lord Fermoy, 816,
342, 894.

Land Co. v. Bushnell, 854.

Land Grant R’y & Trust Co, v. Coffey
County, 261, 865.

Landes v. Globe, etc., Co., 965.

Landman v. Entw istle, 899, 236.

Lane’s Appeal, 214.

Lane’s Case, 317, 276,

Lane v. Brainerd, 669, 89, 189, 98, 67,
90, 657.

Lane v. Boston, etc., R. R. Co., 948,

‘Lane v. Harris, 235, 248, 209, 231, "237,

Lane v. Loughran, 609.

Lane v. Morris, 235, 231, 252.

Lane v. Weymouth School, 980,

Lang, etc,, Co. v. Ross, 748.

Langan v, “Towa & Minnesota Construc-
tion Co., 260, 258.

Langdon v. Branch, 349.

Langdon v. Fogg, 45, 54, 972, 55.

Langford v. Ottumwa’ ‘Water-power
Co., 211.

Lanforty v. Wheeler, 256.

Langley v. Little, 518:

Langsdale v. Bonton, 917.

Langston v. South C. R. R. Co.,, 830,
829.

Langton v. Waite, 484, 485, 468, 488.

Lankester’s Case, 296.

Lanyon v., Smith, 549,

Lardner v. Murry, 828.

Larkin, Ex parte, 761.

Larrabee v.. Badger, 647,

\

 

Larrabee v. Baldwin, 246, 289, 237, 236,
228, 288.
Larwell v. Hanover Savings Fund, 823,
2:

Larymer v. Smith, 385.
| Lashwiler v. Willis, 908,

Latham v. Houston, etc., 943.

Lathrop v. Commercial Bank of Scioto,
989, 985, 867, 852, °

Lathrop v. Kneeland, 318, 228, 23,

Lathrop v. McBurney, 498,

Lathrop v. Scioto Bank, 914,

Lathrop v. Stedman, 704, 718, 722, 965.

Latimer v. Eddy, 975, 6 97,

eae v. Union Pacific R’y Co., 991,

Latourette v. Clarke, 917,

Lauder v. Tillia, 211,

Lauman v. Lebanon, etc., R. R. Co,

- 782, 696, 519, 515, 775, 524.

Laurd’s Case, 79.

Laurel Fork, etce., R. R. Co. v. West
Va., etc., Co., 798.

Law v. Conn., ete., R. R., 907.

Lawe’s Case, 276.

Lawler v. Burt, 250, 248.

Lawler v. Rosebrook, 246, -

Lawndes v. Garnett & Mosely, 823.

Lawnds v. Lawnds, 336.

Lawrence v. Greenwich Fire Ins. Co.,
978, 691, 980, 697, 822.

Lawrence v. Gebhard, 913,

Lawrence’s Case, 162.

Lawrence; Ex parte, 1773.

Lawrence v. Nelson, 249, 201.

Lawrence v. Maxwell, 470, 485, 490.

Ligweenes v. Morgan’s, etc., S: S. Co.,
7 &

Lawson v. Milwaukee, etc., R. R. Co.,
116, 106.

Lawton v. Colchester, 988.

Lawton v. Kittredge, 390.

Lea v. American Atlantic, etc., Canal.

.Co., 700.
Leach v. Fobes, 375.
Leach v. People, 913.
Lean v. Lean, 609.
Learned v. Burrington, 111.
Leasure v. Union Ins. Co., 989.
Leatherman v. Times Co., "983.
Leavenworth v. Douglass Co., 115, 104.
oe County v. Miller, 107, 104,
1
Leavenworth v. alorton, 111.
Leavett v. Pell,
Leavitt v. Bit rd, 838, 550, 825.
Leavitt v. Fisher, 419, 423, 430.
Leavitt v. Oxford, etc., Co., 918, 265, 658.
Leavitt v. Palmer, 846, 827,
Leavitt v. Tyler, 550. | *
Leavitt v. Yates, 550, 912, 847.
Leazure v. Hillegas, 854, 940, 858.
Lebanon v. Adair, 915.
pea Savings Bank v. Hollenback,

+ tee
Ixviill

TABLE OF CASES.

[The najeronnes are to the foot-paging.]

Lebby v. Ahrens, 653.

Le Blanc, Matter of, 592, 593.

Lecke’s Case, 735.

Le Cray v. Eastman, 484.

Ledwich v. McKin, 829.

Lee’s Bank of Buffalo. Re, 515, 718.

Lee v. Citizens’ Nat. B’k, 582, 404, 492,
569, 502.

Lee County v. Rogers, 102.

‘Lee v. Granger, etc., Co., 98.

Lee v. Neuchatel, etc., Co., 599.

Lee v. Pittsburgh, etc., Co., 933.

Lee v. Sturges, 618.

Leech v. Harris, 547, 890.

Leed & Evensburg Turnpike Road Co.
v. Phillips, 519.

Leed, etc., R’y Co. v. Fearnley, 81.

Le Farge. v. Exchange, ete.; Ins. Co.,

886.

Lefray v.-Gore, 901, 899.

Leggett v. N. J., ete., Co., 921, 940.

Leggett v. Bank of Sing Sing, 574, 569,
568.

Legrand v. Hampden-Sidney College,
936.

Legrand v. Manhattan, etc., Ass’n, 757.

Lehigh & R. R. Co. v. McFarlan, 856.

Lehigh Bridge Co, v. Lehigh Coal, etc.,
Co., 700, 886,

Lehigh Valley Coal Co. v. tiscite,

Lehigh, etc., R. R. v. Orange, etc., Co.,
85Y.

en ee Feld, 387.

Lehmann v, Strassberger, 887, 3884,

Leibke v. Knapp, 156.

Leifchild’s Case, 539, 816. :

Leighty v. Susquehanna & Waterford
T. Co., 23, 184.

Leitch v. Wells, 480, 445, 611, 447, 353,
407, 364, 408,

Leland v. Hayden, 607, 585, 344, 608.

Leo v. Union Pac. R. R. Co., 698, 975,
838, 974, 969. -

eominster, etc., Co. v. Shrewsbury,

' etce., R’y, 904.

Leonard v. Burlington, ete., Ass'n, 929.

Leonard v. Davenport, 550.

Leonard v. Spencer, 7.

Leonard v. Washburn, 993,

oo dsville Bank v. Willard, 712, 194,
sd

Leonberger v. Rowse, 622.

Le Roy v. Globe Ins. Co., 598, 598.

Lesassier v. Kennedy, 293.

Leslie v. Lorillard, 813, 819, 828, 530,
785, 978, 772.

Lessee of Frost v. Frossburg Coal Co.,
718, 256.

Lesseps v. Architects’ Co., 142,

Lester v Howard Bank, 848.

Lester v. Webb, 926, 912.

Letty v. Barnes, etc., Co,, 930.

Levering v. Mayor, ete., 935,

Levick’s Case, 72.

 

Levise. v. Shreveport, etc., R. R. Co.
757,

Levy v. Abercorris, etc., Co., 834, 883,

Levy v. Loeb, 464, 474.

Le Warne v. Meyer, 966.

Le Warne v. Mexican, etc., Co., 972.

Lewey’s Island R. R. Co. v. Bolton, 149,
186, 150, 147, 189.

Lewis’ Case, 136, 755.

Lewis v. Barbour, 103.

Lewis v. Clarendon, 125, 107.

Lewis v. ‘Brainerd, 557, 562, 556.

Lewis v. Coates, 372.

Lewis v. Bank of Kentucky, 989, 984.

Lewis v. Graham, 493, 495, 480, 488,
494,

Lewis v. Glenn, 69, 850, 202.

Lewis v. City of Shreveport, 101.

Lewis v. Meier, 732, 50, 874.

Lewis v. Mott, 485.

Lewis v. St. Albans, etc., Works, 971,
167.

Lewis v. St. Charles, 227.

Lewis v. Robertson, 207.

Lewis v. Rider, 252.

Lewis v. Tilton, 552.

Lex v. Potters, 500.

Lexington R. R. Co. v. Bridges, 604. .

Lexington & W.C. R. R. Co. v. Chand-
ler, 191, 187, 150, 149.

Lexington, etc., Ins. Co. v. Page, 597,
602, 600, 601.

f Lexington Co. v. Portsmouth Bank, 124,

Lexington, etc., R. R. Co. v. Staples,
150.
Libbey v. Hodgden, 992.

Liberty ' Female College Association v.

Watkins, 231.
Liebke v. Knapp, 22.
Life Ass’n v. Fassett, 721, 720..
Life Ins. Co. v. Mechanics’, etc., Co.,
921, 828, 845.
Liggett v.. Ladd, 553.
Light v. Everett Ins. Co., 984.
Lightfoot v. Creed, 397.
Lighthall, etc., Co., Matter of, 672, 677.
Lightner’s Appeal, 480.
2 oe Valley R. R. Co. v. Williams,

Lilleed v. Porter, 982.

Lilley v. Rankin, 388.

Lily v. Commissioners, 627. .
Lime Rock Bank v. Lacomber, 934,
Limerick Academy v. Davis, 985.
Lincoln v. Cambria Iron C6., 116.
ee etc., Bank v. Richardson, 698,
Linder v. Carpenter, 734.

Lindsay v. Gladstone, 565.

Lindsay, etc., Co. v. Hurd, 789, 741.
Lindsay v. Hyatt, 252, 250..
Lindsley v. Simonds, 209, 252.
Lingard v. Bromley, 979.

Linger, Ex parte, 158.

Lingle v. Nat'l Ins. Co., 248,
%

?

TABLE OF CASES.

lxix

{The references are to the foot-paging.]

Linnard, ape of, 394.

Lion, etc., Ins. Co. v. Tucker, 265.

Lionberger v. Broadway, 219.

Lionberger v. Rowse, 627, 631.

Lippett v. American, etc., Co., 504, 500.

Lippincott v. Pava, 114, 111.

Aappineels v. Shaw Carriage Co., 763,

Liquidators of the British Nation Life
Assurance Association, In re, 351.

Liquidators, etc., v. Douglas, 895,

Lishman’s Claim, 133.

List v. Wheeling, 110.

Litchfield’s Case, 274.

Litchfield Bank v. Church, 182, 157,
178, 985, 172, 189.

Litchfield v. White, 895.

Litchfield Iron Co. v. Bennett, 913,

Litchfield Bank v. Peck, 175.

Litchfield v. Vernon, 864.

ew v. Scranton Gas & Water Co.,

Little v. Barker, 486.

ee Miami, etc., R. R. Co. v. Dayton,

7, ;

. Little Rock, etc., R’y v. Hanniford, 801.

Little Rock, etc., R. R. Co. v. Perry, 904.

Little v. O’Brien, 204, 846. .

ae Rock, etc., R’y Co. v. Page, 764,

Littledale, Ex parte, 574.

Littler v. Baker, 482.

Littleton Mfg. Co. v. Parker, 185.

Livermore v. Bushnell, 369.

Liverpool Ins. Co. v. Massachusetts, 264,
550, 865, 639.

Tigerpeel, etc., Co. v. Phenix, etc., Co.,

Livesey v. Omaha Hotel, 190. ‘

Livingston Co, v. Hannibal & St. J. BR.
R. Co., 636.

Livingston v. Lynch, 511, 554, 778, 694,
698, 552. * :

Livingstone v. Pittsburgh, ete., R. R.
‘Co., 79.

Livingstone v. Rogers, 88.

Lloyd, Ex parte, 906.

' Lloyd v. Loaring, 552.

Loan Assoc. v. Stonemetz, 756.

Loan Assoc. v. Topeka, 108.

Loaners’ Bank v. Jacoby, 718.

Locke v. Venables, 505, 609.

Lockhart v.. Van Alstyne, 304, 596, 7,
301, 310, 583.

Lockwood v. Brantly, 490.

Lockwood v. Mechanics’ Nat.
568, 690, 447, 581, 659.

Lockwood. v. Thunder, etc., Co., 912.

Lodge v. Phi'adelphia & W. B. Co., 861.

Loeb v. Chur, 966.

Logan v. McAllister, 719.

Logan, etc., ‘Bank v. Townsend, 817.

Logan v. Vernon, etc., R. R., 706. '

Lohman v. New York, etc., R, R. Co.,
315.

Bank,

Eebaan v. N.Y. & E. RB. R.Co., 915,

1s

Lollande v. Ingram, 480. ,

Lombard, etc., R’y Co. v. Christian, 497.

Lombardo v. Case, 476. :

Londesborough v. Somerville, 612, 611.

London, etc., Co., In re, 72, 665, 38, 341,

London Assurance Co. Case, 960.

London, etc., Fire Ins. Co., 665.

poecn India Rubber Co., In re, 311,

London Ins. Co.,‘Re, 174.

London & Mercantile Discount Co., In
re, 699. ~

London Suburban Bank, In re, 698.

London, etc., Tel. Co., Re., 364.

London. etc., Association v. Wrexham,
etc., R’y Co., 299, 751. :

London, etc., Association v. Clark, 369.

London, etc., Association v. Kelk, 960.
12,

London, etc., Asso. Soc. v. London, etc.,
Life Ins. Co., 881,

London, etc., R’y Co, v. Fairclough, 288,
147, 285, 144, 282.

London v. Lynn, 884.

London, etc., R’y v. Freeman, 285.

London & N. W. k’y v. Evershed, 794,
798. ;

London, etc., R’y Co. v. London, etc.,
R’y Co., 778.

London & C. Ins. Co. v. Redgrave, 188.

London v. City of Wilmington, 614.

London & Prov. Consol. Coal Co., Re,
It. =

London & Staffordshire Fire Ins. Co.,
Re, 173.

London & Northwestern R’y Co.
McMichael, 136.

Long v. Long, 866.

Long v. New London, 103.

Long v. Penn. Ins.,Co., 201.

Long I. T. Co. v. Terbell, 754.

Long v. Stewart, 358.

Long Island R. R. Co., Matter of, 668,

- 678, 889, 667, 685, 142, 686.

Longdale Iron Co. v. Pomeroy Iron Co.,
278. ;

Longley v. Boston & Maine R. R., 788.

Longdale’s Settlement Trusts, 3385. .

Longley v. Little, 287, 251.

Longley v. Stage Line Co., 7.

Longmont, etc., Co. v. Cottman, 658.

Loomis v. Eagle Bank, 953.

Lord Belhaven’s Case, 177, 146, 181.

Lord Talbot’s Case, 229.

Lord v. Brooks, 606.

Lord v. Governor, etc., of Copper Mines,

|. 429.

Lord v. Hutzler, 292.

Lordell v, Stowell, 647.

Lorillard v. Clyde, 906, 31.

Loring v. Brodie, 360, 361, 951.

Loring v..Salisbury Mills, 362, 360.

Loring v. U. S., etc., Co., 851.

Ve

 
lxx

TABLE OF CASES,

[The references are to the Soot-paging.]

Loring v. Woodward, 331.

Losee v. Bullard, 702, 230.

Lothrop v. Stedman, 720, 722, 718, 518.

Lothrope v. Commercial Bank, 848.

, Loubat v. Le Roy, 546.

‘ Loughborough v. McNevin, 489.

Louisiana Ins. Co. v. Gordon, 283.

Louisiana Paper Co. v. Waples, 213.

Louisiana State Bank v. Senecal, 953.

Louisiana v. Taylor, 110, 112.

Louisiana v. Wood, 976.

Louisville, etc., Co. v. Barbour, 623.

dauiesills, etc., T. R. Co. v. Ballard,
4.

Louisville Transfer Co. v. Am. Dist.

Telephone Co., 796.

Louisville, etc, R. R. Co. v. County

Court, 106.

- Louisville R. R. Co. v. Commonwealth,
879.

Louisville, etc., R. R. Co. v. Te 2,
989, 988.

Louisville & N. R: R. Co. v. Palmer,
639.

Louisville v. Savings Bank, 110.
Louisville, etc., R. R. Co. v. State, 618,
879,

Louisville, etc., R. R. Co. v. Tennessee,
8.

ae ae & N. R. BR. v. Tenn. R. R.

Co

\ Louisville & Nash. R. R. Co. v. Thomp-
son, 155.

Love v. Harvey, 381.

Loveland v. Alvord, etc., Co., 508.

Lovell v. Minot, 357, 607,

~ Lovett v. German "Reformed Church, :

914.
Lovett v. Steam Assoc., 941.
Lovitt v. Yates, 657. -
Low vy, Buchanan, 239, 240.
Low v. Connecticut & P. R..RB., 818.
Low v. Central Rac. R. R. Co., ‘807.
Low v. Studebaker, 157.
Lowe’s Case, 286.
Lowe v. Edgefield & K. R. R. Co., 89, 95.
Lowe v. Thomas, 334, 14,
Lowell v. Boston, 108,
Lowell v. Steamer, etc., Assoc., 940,
Lowett v. Steam Saw-mill Co., ‘989.
Lowne v. American Fire Ins. Co., 593,
Lowry v. Com. Bank, 480, 447, 364, 366.
Lowry v. Dillman, 388.
a Inman, 244, 243, 241, 242, 266;
Luard’s Case, '79, 275.
Tene Oil Co. v. Standard Oil Co.,

Lucas v. Bank of Darien, 958.

Lucas v, Beach, 901.

Lucas v. Bank of Georgia, 989.

Lucas v. Pitney, 828, 845, 825.

Lucas v, White ‘Line Transfer, 809, 808.
Be ve Manchester, etc, RR. Co.,

 

Ludlam’s Estate, 331, 337.

Ludlow. v. Hurd, 840.

Luffman v. Hay, 463.

Luling v. Atlantic Mutual Ins. Co., 592,
591.

Lull, etc., Co., Re, 38.

Lum v. Robertson, 720.

Lumbard v. Aldrich, 867.

Lumbard v. Stearns, 862.

Lumpkin v. Jones, 709.

Lumsden’s Case, 80, 352, 273.

Lund’s Case, 295.

Lung Chung v. Northern Pac. R’y Co.,
996, 994.

Lungren v. Pennel, 739.

Luse v. Isthmus, etc., R’y Co., 921.

Luxembourg R’y Co. v. Magnay, 742,

Lycoming County v. Gamble, 618,

Lycoming Fire Ins. Co. v. Wheetlock,
870.

Lycoming F. Ins. Co, v. Longley, 989,

Lyde v. Eastern Bengal R’y Co., 787,

Lydney, etc., Co. v. Bird, 740, 741, 738,

Lyman v. Bonney, 720.

Lyman v. Boston, etc., R. R. Co., 800,

Lynch v. Macdonald, 490,

Lynch v. Metropolitan R. Co., 876.

Lyndeborough Glass Co. a Massachu-
setts Glass Co., 934, 930, 8

Lyne v. Siesfield, 386,

tee v. Freemansburg, etc., Assoc,
88, é

Lyon’s Case, 188.

Lyon v. American, etc., Co., 560.

Lyon v. Culbertson, 381, 384,

‘Lyons v. Ewings, 23.

Lyons v. Jerome, 918, 920.

| Lyons v. Munson, 115.

er, v. Orange, etc., R. R. Co., 719,
5

Lyrick v. Eastern, etc., R. R. Co., 126,

Lyster’s Case, 660, 148.

M.

Macauly v. Robinson, 144, 145,
MacDougall v. Gardiner, 662, 980, 665.

| Macdougall v. Jersey Imperial Hotel

Co., 598.

Macedon & Bristol Plank-road Co. v.
Snediker, 93.

Maceton & B. P. R. Co. v. Lapham,

Machinists’ Bank v. Dean, 551.

Machinists’ Nat'l Bank v. Field, 410,
418, 316.

Mack, Appeal of, 202, 99.

Mackay v. Commercial Bank, etc., 875,
158, 171. ‘

MacKellar, etc., Co. v. Commonweal{i:s
618

Mackintosh v. Flint, etc., R. BR. Co.,
305, 749, 765, 349, 564, .

Mackley’ s ’Case, 71, 78, 228,

| Maclac 'v. Sutherland, 823.
TABLE OF CASES.

lxxi

[The references are to the foot-paging.]

Maclaren v. Stainton, 609.

MacNaughton v. Osgood, 978, '755. -

Macon, etc., R. R. Co. v. Georgia R. R.
Co., 807.

Macon R. R. Co. v. Vason, 131, 151, 135,
187, 144,

Maddick v. Marshall, 899.

Maddox v. Graham, 104.

Madison, etc., Co. v. Watertown, etc,,
Co., 807, 844.

Madison, etc., Church v.
‘Church, 856, 693.

Madison Ave., etc., Church v. Oliver
St. Bap. Church, 976.

Madison County Court v. Richmond,
etc., R. R. Co., 121. |

Madison Co, v. People, 103.

Madison & I. R. R. Co. v. Norwich Sav-
ings Ass’n, 807, 826.

Madrid Bank v. Pelly, 735. \

Maenhant v. New Orleans, 112.

Magdalena, etc., Co., In re, 960.

Meeieleua Steam Nav. Co, v. Johnson,

Baptist

Magee v. Atkinson, 478, 468.

Magee v. Badger, 23.

Magee v. Mokelumne Hill Canal Co.,
823, 825.

Magill v. Kauffman, 935, 946, 916.

Magnin v. Dinsmore, 795,

Magnus v. Queensland, etc., Bank, 489.

Magruder v. Colston, 294, 290, 270,

Magnire’s Case, 421, 284.

Maguire v. B’d of Revenue, 628,

Magwood v. Patterson, 587.

Magwood v. R. R. Bank, 362.

Mahey v. Adams, 170, 171.

Mahon v. Wood, 519, 157, '76. _

Mahoney Min. Co. v. Bennett, 966.

Mabeney v. Atlantic & St. L. R. R.,

Mahoney v. East., etc., Co., 914.

Mahoney v. EDM etc., Co., 857.

Maid v. Johnson, 836.

Main v. Mills, 602, 598.

Maine Stage Co. v. Longley, 936.

‘Maitland’s Case, 275, 279, 920, 899, 690.

Malecek v. Tower, etc., Co., ei 948, 879.

Malone v. Crescent, ete., Co., 940.

Mallory v. Russell, 549,

Mallory v. Hanover, etc., Works, 528.

Malloy v. Mallett, 720.

Maltby v. Northwestern Va. R. R. Co.,
193,

Maltby v. Reading R. R. Co., 621, 641.

Mammoth Copperopolis, etc., Co., 602,
604.

Manchester, etc., Case, 270.

Manchester, etc., R’y v. Brown, 824.

Manchester, etc., R’y v. Denaby, etc.,
Co., 794.

Manchester R’y v. Fisk, 918.

Manderson v. Commercial Bank, 957,

944, 815, 818.
Mandeville v. Riggs, 552, 280.

 

Mandion v. Fireman's Ins. Co., 294,

Mandlebaum v. North Am, Min. Co. a
414, 325, 446.

Mangles v. Grand: Collier Dock Co., 157.

Manhattan Bank v. Walker, 488.

aan Beach Co. v. Haren, 409,

Manhattan Co. v. Tyas 931. 4

Manhattan R. Co. v. N. Y. El. R. RB. Co.,
966, 757.

Manheim, etc., Co. v. Arndt, 518.
anisty’s Case, 146.

Mann’s Case, 278. 296.

Mann v. Brookville Natl B’k, 12, 478,
"502, 479

Mann v. Butler, 555.

Mann v. Cook, 220, ;

Mann v. Cooke. 47, 156, 148, 145.

Mann v. Chandler. 943.

Mann v. Currie, 58, 272.

Mann v. Pentz, 216, 218, 129; 128, 214,
(219, 213.

Mann v. People, 768.

Mann v. Williams, 374.

Mannech, etc., Co. v. Mannech, 977.

: Manney v. ‘High School Mfg. Co., 884.

Manning v. Gasharie, 552.

Manning v. Quicksilver Min. Co., 590,
309, 592, 587.

Manserge v. Campbell, 336.

Mansfield, etc., R. R. Co. v. Brown, 781,

94,

Mansfield & New Lisbon R. R. Co. v.
Smith, 95.

a etc., R, R. Co. v. Stout, 94,

Mansfield Iron Works vy. Willcox, 233,
236.

Manufacturers’, etc., B’k v. O’Reilly,
19.

Manufacturing Company v. Bradley,
282.

.Manville v. Beldon, etc., Co., 945, 824.

Manville v. Edgar, 243,

Manville v. Karst, 248.

Many v. Beekman, ete., Co., 942, 566,
971.

Mapes v. Scott, 848, 854.

Mapes v. Second N; at’l B’k, 947.

Mapper v. Mortimer. 251.

March v. Eastern R. R. Co., 390, 767,
508, 590, 524, 970, 812, 780, 589,

Marchand v. Loan, etc., Ass’ n, 907.

Marcy v. Clark, 237, 294,

Mare v. Charles, 943,

Maria Anna, etc., Coal & Coke Co., In
re, 277.

Marie v. Garrison, 677, ‘749, 750, 970.

Marietta, etc., R. R. Co, v. Elliott, 519,
518, 520.

Marin Mansion Co., Re, 888, 834,

Marine M. Co., In re, 183.

Marine Bank v. Butler, ‘etc., Co., 945.

Marine Bank of Balt. v. Biays, 593, 884.

Marine Bank, ete. v. Clements, 922, 924,
Lxxii

TABLE OF CASES.

[The references are to the foot-paging.] '

Marine Bank v. Ogden, 806. °

Marine Co. v. Jauncey, 989.

Mariners’ B’k v. Sewall, 697.

Marino’s Case, 286.

Marion Saving Bank v. Dunkin, 848.

Marion Co. v. Harvey, 124

Market Nat. Bank v. “Pacific Nat. Bank,
992,

Market, etc., Co. v. Stump,

Markham v. Jaudon, 493, Pigs, 20, 471,
492, 472, 651.

Markoe v. Hartranft, 617..

Markwell’s Case, 900.

Marlborough, etc., R. R. Co. v. Arnold,
70, 189.

Marlborough Mfg. Co. v. Smith, 283,
516, 284, 447, 425.

Marquetie, etc., R. R. Co. v. Taft, 930.

Marryatt v. Bank of Eng., 366.

Marseilles Extension R’y, In re, 934, 341.

Marsh v. Burroughs, 221, 129, 218, 224,
217, 218, 1389, 1384, 128, 215.

Marsh v. Fairburg, etc. R. R. Co., 813.

Marsh v. Fulton Co., 125, 101.

Marsh v. Keating, 473, 409, 645.

Marsh v. Russell, 529.

‘Marsh v. Stone, 409.

Marshall v. Baltimore & Ohio R. R.
“Co., 813, 988.

‘Marshall v. Glamorgan Iron & Coal

Co., 179.

Marshall v. Golden Fleece, etc., Co., 153.

Marshall v. Farmers’, etc., Bank, 896.

Marshall, etc., Co. v. Killian, 208, 157.

Marshall v. Loveless, 552.

Marshall v. Queensborough, 916,

Marshall v. Thurston, 887, 888.

Marshall v. ‘Western, ete., R. BR. Co.,
123, 724, 752.

Marston v. Dargin, 547,

Marten v. Gibbon, 593, 465,

Martin’s Estate, 372.

Martin v. Central, etc., R. R., 884.

Martin v. Continental, etc., R. R. Co.,
782.

Martin v. Fewell, 267, 257.

Martin v. Mobile & O. R. R. Co., 865,
878, 503.

Martin v. Niagara, etc., Co., 924, 946,

Martin v. Pensacola & Ga. R. RB, Co.,
524, 523, 96. .

Martin v. Walton, 954.

Martin v. Webb, 928, 951.

Martin v. Sedgwick, 394,

Martin v. Zellerbach, 724.

Martinius v. Helmuth, 430.

Martino v. Commerce, ete., Co., 889.

Martinus v. International, ete, ’990.

Marye v. Strouse, 464, 465.

Maryland Fire Ins, Go. v. Dalrymple,
495, 648, 493, 644, 494.

Marzett’s Case, 342,

i v. St. Louis, ete, R. R. Co.,

| Mason v.

 

Mason v. Alexander, 291, 241, 239, 293,

Atlantic De Laine Co., 667
Davol Mills, 318.

Decker, 378.

Harris, 973; 971, 729, 744,
N. Y., ete., Mfg. Co., 283,
New York Silk, etc., "Co., 231,
Pewabic Min. Co. 5 253 E
York, etc., R. R. Co., 831.

Mason v.
Mason v.

Mason v.
Mason v.
Mason v.
Mason v.
Mason v..

204.
Mass, Iron Co, v. Hooper, 567.
Massey v. B’ld’g Ass’n, 712,
Master’s Case, 369, 295.

Masters v. Rossie Lead Mining Co., 224,.

214, 253, 971, 239.
Mather v. Eureka, etc., Co., 757.
Mathez v. Neidig, 234, 213, 248, 249, 238,
Matthewman’s Case, Mrs., 79, O75,
Matthews v. Albert, 249, 239, 235, 201,
5, 224, 270, 227, 253.
Matthews v. Coe, 651.

Matthews v. Great Northern, etc., R’y

Co., 299, 301, 302, 308, 307.

Matthews v. Mass. Nat’l B’k, 422, 420,

927, 408, 409, 448,

-Matthews v. Murchison, 349, 750.

Matthews v. Shinken, 849,
ar aia v. Theological Seminary, 865,
66.

Matthews v. Trustees, 690.

Mattison v. Demarest, 979.

Maturin v. Tredinnick, 393, 740, 400,

Maultby v. Northwestern, etc., R. R.
Co., 79.

Maund v. Monmouthshire Canal Co.,
877.

Maunsell v. Midland, etc., R’y Co., 783,
78, 810, 814, 348,

Maupin v. Virginia, etc., Co., 932.

Maux, etc., Co. v. Branegan, 756.

Maxted v. Nor ris, 468.

Maxted v. Paine, 475, 468, 462,

Maxton v. Green, 385, 384,

Maxwell’s Case, 266.

Maxwell’s Trusts, In re, 610.

Masel v. Atchison, etc., R. R. Co.,

Maxwell v. Dulwich College, 916.

May v. Grave, 335,

May v. Memphis Branch R. R. Co., 205,

190.
Maybin v. Kirby, 405, 483.
Mayer v. Child, 379,
Mayer v. Denver, ete., R. R. a 966.
Mayer v. Norwich, ete., R. He a
Mayer v. Rutland ‘& Bur. BR. RB » 786,
Mayhew’s Case, 285, 549.
Maynard’s Case, 25, 28, 41,
Maynard v. Eaton,. 296,
Maynard v. Firemen’s Fund Co., 876.
seer v. Lummbermen’s Nat’l Bank,
Maynard v. Tilden, 490.
Mayor, etc., v. Bailey, 877,

|
Mason & Augusta R. R. Co. v. Vason,.
TABLE OF

CASES. 1

4

xii

[The references are to the foot-paging.]

Mayor, etc., of Bala ve Balt. &
0. B. R. Go, 625, 620, 349

Mayor, etc., of Macon v. First Nat'l
Bank, 626.

Mayor, ’ete., v. Graves, 562, 564, 559.

Mayor of Stafford v. Bolton, 884,

Mayor, etc., v. Inman, 758.

Mayor, etc., of Baltimore v. Ketchum,

411, 412.

Mayor, etc.,.of Worcester v. Norwich
& Worcester R. R. Co., 522,

Mayor, etc., v. Norfolk R’y Co., 817.

Mayor, ete, v. N.Y. & Staten’ L, ete.,
Co., 986.

Mayor, etc., of Baltimore v. Pitt. & C.
R. RB. Co., 718.

Mayor, etc., v. Tenth Nat’! Pou abe

Mayor, etc., v. Twenty, etc., R. BR
718, 638. j

Mayor v. Wylie, 944.

Mays v. Foster, 909.

_Maysville Turnpike Co. v. How,.799.

McAden v. Com’rs, etc., 630. -

McAleer v. McMurray, 45.

McAllen v. Woodcock, 747. .

McAllister v. Indianapolis & Cin. R. BR.
Co., 157.

McAllister v. Kuhn, 646, 399.

McAllister v- Plant, 838, 842.

McArthur v. Seaforth, 474, 649.

McAuley v. Billinger, 85.

McAuley v. Columbus, etc., R’y, 709.

McAuley v. Yorke Mining Co., 236, 9.

McBride v. Hardie Co., 124,

McBride v. Porter, 693.

McBurney v. Martin, 469.

McCabe v. O’Conner, 87.

McCall v. Byram Mfg. Co., 914, 656,
913, 690, 983.

McCall v.-Town of Hancock, 118.

McCallie v. Chattanooga, 116,

McCallie v. Walton, 850.

McCallion v. Hirbernia, etc., Soc., 546.

McCalmont v. Phil. ete., R. R. Co.,
813.

McCallum v. Purssell, 913.

McCann v. First Nat'l Bank, 322.

McCargo v. Crutcher, 563.

McCarter v. Orphan, etc., Meson: 852,
855.

ems v. Lavasche, 321, 235, 193,

MoCerthy v. Gould, 498,

McCarty v. Selinsgrove, 155, 137.

McClaren v. Franciscus, 294, 231, 287,
209.

McClean v. Stuve, 386.

' McClellan v. Detroit, 809, 27, 922.

McClellan v. Scott, 160, 162, 166, 173.

McClelland v. Norfolk, etc., R. R., 829,

8380.
_ McClelland v. Whitely, 65, 83.
McClinch v. Sturgis, 258,
McClure v. Township of Oxford, 101,
115.

 

McClure v. Manchester & L. R. R., 786,

McClure v. People’s Freight Co., 524,
155, 99.

McCluskey v. Cromwell, 228.

McComb v. Chicago R. R. Co., 566.

McCombe v. Credit Mobilier of Amer-
ica, 134, 68.

McComahy : Centre & Kish Turnpike
R. Co., 155

-McConihan v. . Wright, 721,

McConnell v. Hamm, 108.

McCord v. Ohio & Miss. R. R. Co., 200.

McCorniick v. Penn. Central R. R. Co.,
996.

Morey v. Cincinnati, etc., R. R. Co.,

« 994,

McCoy v. Farmer, 721.

McCracken v. McIntyre, 58.

McCray v. Junction R. R. Co., 519.

«HERES v. Rumsey, 574, 569, 576, 283,
570.

McCully v. Pittsburgh, etc., R. R. Co.,
194, 85, 88, 198, 172, 204.

McCulloch v. Norwood, 721.

McCulloch v. State of Ma., 626, 2.

McCullough v. Merchants’, etc., Co., 10.

McCullough v. Moss, 288, 908, 922, 245,
236.

“McCullough v. Taladega Ins. Co., 935.

McCully v. Pittsburgh, etc., Co., 198,
207.

McCune Min. Co. v. Adams, 192.

McCurdy’s Appeal, 832.

McCurdy v. Meyers, 775.

McCurry v. Suydam, 425, 447.

McDaniels v. Flower Brook Mfg.
938, 939, 693, 669, 483, 666, 680, 681.

McDermott v. Dongan, 204,

McDermott v. Hannibal, etc., R. R. Co.,
948.

McDonald v. Haughton, 813.

McDonald v. State, 801.

McDonnell v. Grand Canal Co., 783,
779, 969.

McDonough v. Bank, 906.

McDonough v. Phelps, 220,
242.

McDonough v. Webster, 330.

McDougall v. Gardiner, 821, 729.

McDougall v. Jersey, etc., Vo., 310, 188.

McDowell’s Appeal, 481,

McDowell v. Chicago Steel Wor ks, 490,
494.

McDowell v. B’k of Wilmington, 568,
574,

McDowell v. Rutherford, etc., Co., 106.

McDuffee v. Portland & R. R. R., 793,
794.

McElhenny’s Appeal, 739.

McElroy v. Carmichael, 380.

McEuen v. West London Wharves, ete.,
Co., 283, 290, 183.

McEwan v. Campbell, 899.

McEwen v. Montgomery, etc., Co., 949,

McEwen v. Woods, 466, 474,

148, 243,

Co.,
lxxiv

TABLE OF CASES,

[The references are to the foot-paging.]

McFall v. M’Keesport, etc., Co., 374.

McFarlan v. Triton Ins. Co., 848, 718,
194.

McFerran v. Jones, 498.

McGary v. People, 888.

McGarzell v. Hazelton Coal Co., 914,

McGeary’s Appeal, 365.

McGenness v. Adriatic Mills, 948. ,

McGinnis v. Smythe, 471.

McGoon v. Scales, 697.

McGraw v. Cornell University, 856.

McGregor v. Erie R’y Co., 872, 988.

McGregor v. Home Ins. Co., 811.

McGrew v. City Produce Exchange,
388, 384, 259.

McGuire v. Evans, 322.

McGuffey v. Humes, 648, 651.

McHenry v. N. Y., etc., R. R. Co., 974,

McHenry v. Jewett, 682, 646, 681.

McHose v. Wheeler, 84, 69, 235, 33, 193,
67, 236. |

McIndoe v, City of St. Louis, 854.

McIntire v. Blakeley, 491.

McIntyre v. McLane D. Ass'n, 195.

McIntyre Poor School v. Zanesville
Canal, etc., Co., 695.

McIntyre v. Preston, 845, 942.

McIntyre v. Trustees, etc., 566.

McIntyre v. Union College, 971.

McIver v. Robinson, 627, 630.

McKay v. Beard, 719.

McKay’s Case, 735.

McKee v. Wilmington, etc., R. R., 804.

Mose v. County of Northampton,

17. :

McKelvey v. Crockett, 211.

McKenney v. Haines, 651, 644, 643, 650,
649, 647. :

McKensey v. Edwards, 943.

McKenzie v. Kitteridge, 281.

McKeon v. Kearney, 550, \

McKiernan v. Lusgan, 929.

McKim v. Glenn, 272, 281.

McKim v. Odom, 3, 565, 987, 2.

McKinley v. Wheeler, 886.

McLaren v. Franciscus, 294,

McLaren v. Pennington, 718,

McLaren v. Lafayette Bank, 849, 574.

ae v. Detroit, 67, 311, 960, 310,

McLean v. Eastman, 601. :

McLoughlin v. Chadwell, 632, 628.

McMahon, In re, 682, 629.

McMahon v. Macy, 222, 481, 270, 245.

McMahon v. Morrison, 701.

McMahon v. N. Y., etce., R. R. Co., 25.

McManus v. Lancashire, etc., R. R., 794.

McMaster v. Davidson, 291, 288, 289. ©

McMaster v. Reed Exp., 825.

McMillan v. Carson, etc., Co., 78.
McMillan v. Maysville &' Lexington
R. R. Co., 98, 90, 197. ete. %
McMillen vy. Boyles, 104.
McMillen v, Lee Co., 104.

McMill’s Case, 1'74.

 

McMurray v. Northern, etc., R’y Co,,
974. ;

McMurrich v. Bond Head Harbor Co.,
649, 644, 567, 651, 424.

McNaughton v. McLean, 499.

McNeal v. Mechanics’, etc., Assoc., 497,
621, 633.-

McNeely v. Woodruff, 681, 686, 662.

McNeil v. Tenth Nat. Bank, 420, 492,
422, 469, 398, 445, 580, 487, 447, 480,
448, 470. :

McNichol v. United States, etc., 992,

McPherson v. Foster, 772.

McQueen v. Middletown, 991.

McRea v. Russell, 182.

McRoberts v. Washburn, 804.

McWhorter v. Lewis, 943.

McVeagh v. Chicago, 622.

McVeigh v. Loomis, .630.

McVicker v. Ross, 554.

Mead v. Bunn, 167.

Mead v. Keeler, 915, 825, 932, 194, 823,

Mead Vv. N. Y., ete., R. R. Co., 709.

Meadow Dam Co. v. Gray, 267, 193,

Meads v. Merchants’ Bank, 931.

Meads v. Walker, 73.

Meads v. Wandell, 805. ;

Mean’s Appeal, 226, 231, 219.

Means v. Rees, 393.

Means v. Swormstedt, 943.

Mears v. Moulton, 553,

Measure v. Carelton, 332.

Mechanics’ Soc., In re, 709.

Mechanics’, etc., Assoc., Appeal of, 588.

Hechenles etc., Co. v. Hall, 143, 88,
144,

Mechanics’, etc., Co. v. Burnet, 914.~

Mechanics’, etc., Ass’n v. Conover, 502,
478, 479,

Mechanics’ Bank v. Bank of Columbia,
945, 942.

Mechanics’ Nat. Bank, etc., v. Burnet

| Mfg. Co., 684, 918. *

Mechanics’ Bank v. Merchants’ Bank,
571, 568, 576.

Mechanics’ Banking Ass’n v. Mariposa
Co,, 426.

Mechanics’ Bank v. Meriden Agency, 78.

Mechanics’ Bank v. N. Y. & N. H.R. RB
Co., 445.

Mechanics’ Bank v. N. Y., etc, R. R.
Co., 14, 816, 447, 818, 824.

Mechanics’ Banking Ass’n.v. New York
& S. White Lead Co., 809, 826.

Mechanics’ Bank v. Richards, 429.

Mechanics’ Bank v. Schaumberg, 951.

Mechanics’ Bank v. Seton, 952, 483, 428,
376, 362.

a ame etc., Bank v. Smith, 888,

Mechanics’ Bank v. Thomas, 623,

Medbury v. N. Y., etc., R. R. Co., 946.

Medical Inst. v. Patterson, 2. :

Medical and Surgical Soc, v. Weath-
erby, 669, 890. ‘
TABLE OF CASES.

Ixxv

[The references are to the foot-paging.]

Medill v. Collier, 259.
Medomak Bank v. Curtis, 928, 983.

Medway Cotton M’f'ry v. Adams, 883, -

884, 882.

Meeker v. Winthrop Iron Co., 693, 765;

Mege’s Case, 39.

Meints v. East St. Louis, etc., Co., 211,

Meisser v. Thompson, 238.

poner v. American U. Tel. Co., 387,

1

Melhado v. Hamilton, 301, 299.

Melhado v. Porto, etc., Co., 906.

Melledge v. Boston Iron Co., 883, 882.

Mellen’v. Town of Lansing, 121.

Mellen v. Moline, etc., 966.

Melvin v. Lamar Ins. Co., 270, 482, Be
157, 179.

Melvin v. Lisenby, 118.

Memphis R. R. Co. v. Alabama, 872, 873.

ioe R. R. Co. v. Commissioners,

Memphis City v. Dean, 973, 981.

Memphis & L. R. R. v. Dow, 838, 827,
38, 824, 823.

Memphis, etc.. R. R. Co. v. Memphis,
etc:, Co., 299, 808.

Memphis, "ete,, R. R. Co. v. Sullivan,
524, 190, 185,199, 517, 519.

‘Memphis, etc., R. R. Co. v. Thompson,

_ 121, 95, 97.

-Memphis & Little Rock R. R. Co. v.
Berry, 639.

Memphis, etc., Co. v. Williamson, 981.

Menacho v. Ward, 798, 791, ‘792.

Menasha v. Milwaukee, ete., R. R., 724.

eee v. Anaheim Lighter Co.,
78

Mendenhall, Re, 551.

Mendham v. Losey, 934.

Menesha v. Hazard, 114, 124,

Menier v., Hooper’s Tel. ‘Works. 765.

Mercantile Trading Co., In re, 598.

Mercantile Nat. Bank v. City of New

York;629, 631, 628, 632.

Mercantile, etc., Co. v. Missouri, etc.,
R’y, 839,

Mercer Co. v. Hackett, 102, 62.

Mercer Co. v. Pittsburgh R. R. Co., 119,
117.

Meant etc., v. Bank of England,
12.

Merchants’ Mut. Ins. Co. v. Brower, 498,
501. .

Merchants’ Bank v. Central Bank, 929,
944, 934,

Merchants’ Bank v. Chandler, 245, ‘222,

Merchants’ Bank v. Cook, 483, 478..

Merchants’, etc., Bank vy. Detroit, etc.,
Works, 929.

Merchants’ Bank v. Goddin, 939.

Merchants’ Nat. Bank v. Hall, 478, 491.

Merchants’ Bank v. Heard, 699,

Merchants’ Bank of Canada v. Living-
ston, 361, 580, 395.

 

eas Bank v. Marine Bank, 948,

ene Bank of New Haven v. Bliss,

Merchants’ Nat’l Bank v. Richards, 406,
480, 509, 421, 447, 422, 373.

Merchants’, etc., Co. v. Rice, 919.

Merchants’ Bank v. Rudolf, 954.

Merchants’ Bank, etc., v. Shouse, 595,
567, 569, 573.

Merchants’ Bank v. State Bank, 927,
826, 932. |

Merchants’, etc., Bank v. Stone, 257.

Merchants’, etc., Line v. WERE TEr 700,
972, 973.

Merchants’ Mfg. Co. v. Grand, eas Ry
Co., 994.

Meriden Tool Co. v. Morgan, 714.

Merrick v. Brainerd, 262.

Merrick v. Burlington Plank- ity 945.

Merrick v. Burlington R. Co., 93

ae Van Santvoord, 242, 263, 865,

Merrill v. Gamble, 328.

Merrill v. Call, 368. :

Merrill v. Reaver, 196, 328.

Merrill v. Suffolk Bank, 721, 245, 221.

Merrill v. Consumers’ Coal Co., 920,

Merrimac Mining Co. Vv. Bagley, 145, x82.

Merrimac Mining Co. v. Levy, 282, 84,
281, 76.

Merriman v. Magivennis, 257.

Merritt v. Farris, 665, 664.

Merritt v. Lambert, 945.

Merritt v. Reid, 251.

Merry v. Nickalls, 462.

Merry v. Carroll, etc., Co., 697.

Merwin v. Hamilton, 466. ~

Messenger v. Penn. R. R., 792, 793..

Messersmith v. Sharon Sav. Bank, 281,

Metcalt’s Case, 736.

Metcalf v. First Parish, 833.

Metcalf v. Williams, 394,

Methodist E. U. Church v. Pickett, 194,

Methodist Church v. Remington, 853.

| Methodist, etc., Church v. ‘Pickett, 714

Methodist Chapel v. Herrick, 915,
Metropolis Bank v. Jones, 948, 912.
Metropolis Bank v. Orme, 884.
Metropolitan, etc., Co. v. Domestic, etc.,
Co., 658, 919, 759, 918.
Metropolitan City R’y Co. v. Chicago
U. D. R’y Co., 858;
Metropolitan Bank v. Godfrey, 867.
Metropolitan Bank v. Heiron, 741,
Metropolitan Bank v. Huron, 961.
Metropolitan, etc., T. Co., Matter of, 720.
Metropolitan Co. v. Hawkins, 563.
Metropolitan. etc., Ry Co. v. Manhat-
a ete., R’y Co. ., 907, 782, 910, 976,
Metropolitan Sav. Bank v. Mayor, ete.,
of Baltimore, 410.
Metropolitan, etc.,' Bank v. St. Louis,
etc., Co., 368,
lxxvi

TABLE OF CASES.

[The references are to the foot-paging.]

Metz v. Buffalo, etc., R. R. Co., 749, 752.

Mexican Gulf, etc., R. R. Co. v. Via-
vant, 65, 143.

Meyer v. Blair, 371, 379.

Meyer v. Johnson, 842, 701, 839, 840.

Meyer v. City of Muscatine, 122, 102.

Miami Exporting Co. v. Clark, 850.

Michaud v. Girod, 742, 782.

Michigan, etc., R. R. v. Burrows, 794.

Mich. State Bank v. Gardner, 698.

Michigan Air Line Co. v. Barnes, 10.

Mickey v. Stratton, 940. :

Mickles v. Rochester City Bank, 701,
746, 685, 684, 583. ;

Middlebrook v. Merchants’ Bank, 680,
488, 364. :

Middlebrooks v. Springfield, etc., 990.

Middleport v. Aitna Ins. Co., 111.

Middlesex Bank v. Minot, 496.

Middlesex R. R. Oo. v. Boston, etc., R.
R. Co., 778, 774.

Middlesex, etc., v. Davis, 719.

Middlesex, etc., Bank v. Hirsch, etc.,
Co., 929.

Middlesex, etc., Co. v. Locke, 518.

Middlesex Turnpike Co. v. Swan, 265,,
518, 205.

Middleton v. Boston, etc., R. R. Co.,
731,

Middleton Bank v. Magill, 287, 236.

Midland R’y Co. v. Gordon, 299, 253,
283, 284, 286. :

Midland R’y Co.\ v. London, etc., R’y
Co., 784.

Midland R’y v. Great Western R’y, 778.

Midland R’y Co. v. Taylor, 408, 411.

Miers v. Zanesville & Maysville Turn-
pike Co., 213, 215, 253.

Mihills, etc., Co. v. Camp, 952.

Miles v. Bough, 139, 138, 137, 692.

ae v. New Zealand, etc., Co., 574,
581,

a a etc., Turnpike Co. v. Brush,

Milk Co, v. Brandenburg, $92.
ae .v. St. Francis, etc., Academy,
De

Millard v. Bailey, 330. |

Millaudon v. New Orleans, etc., R. R.
Co., 224,

Millbank v. N. Y., etc., 349.

Mill-dam Foundry v. Hovey, 938, 2380,
90, 940, 288.

Millen v. Guerrard, 608, 610.

Miller’s Case, 129.

Miller’s Dale, etc., Co., In re, 321.

Miller, Appeal of, 180.

| v. Barber, 175, 398, 390, 399, 170,

Miller v. Bradish, 221, 597.

Miller v. Chance, 838.

Miller v. Downs, 871.

Miller v, English, 692.

Miller v. Ewer, 655, 654,

Miller v. First, etc., Bank, 629.

 

Miller v. Great Republic Ins. Co., 281,
294. *.
Miller v. Hanover Junction R. RB, Co.,,
156, 155.
Miller v. Heilbron, 630.
Miller v. Ill., etc, R. R. Co., 317, 320,
818, 952, 592.
Miller v. Lancaster, 724.
Miller v. Little, 331.
Miller v. Maloney, 132.
Miller v. Marion, 227.
Miller v. Miller, 334.
Miller v. Newberg, etc., Co., 721.
Miller v. Pittsburgh, etc., R. R. Co., 310,
90,197, 811. .
Miller v. Porter, 853.
Miller v. Preston, 157.
Miller v. Rutland, etc., R. R. Co., 937,
848, 828, 831. .
Miller v. Second, etc., Ass’n, 179,
Miller v. State, 522. .
Miller v. Tracy, 500.
Miller v. Wheeler, 201.
Miller v. Wild Cat, etc., Co., 86, 199,
182, 160, 156.
Miller v. White, 250, 222, 245.
Milliken v. Dehon, 472, 494.
Milliken v. Whitehouse, 289, 245, 221.
Millish, Ex parte, 812, ©
Mills v. Town of Jefferson, 830.
Malls v. Central R. R. Co., 788, 522, 960,
524,
Mills v. Hoffman, 357. te
Mills v. Hurd, 548, 555, 533, 972, 774. |
Mills v. Northern R’y Co., 304, 598, 599,
965.
Mills v. Scott, 214, 240, 220.
Mills v. Stewart, 145, 146, 207, 144.
Mills v. Western Bank, 847.
Milnor v. New York & N. H.R. Co.,
873, 865, 786. “ ;
Milroy'v. Spurr Mountain Iron Mining
Co., 236, 241. '
Milvain v. Mather, 215.
Milver v. Pensacola, 118.
Milwaukee R’y Co. v. Arms, 878.
SEU etc., R. R. Co. v. Field, 311,
Miner v. Butman, 490.
Mineral, etc., R. R. Co. v. Keefe, 886.
Mineral Water, etc., Co. v. Booth, 528.
Miners’ Bank v. U. §., 718, 805.
Miners’ Ditch Co. v. Zellerbach, 856,
772, 989.
Min., etc., Co. v. Davis, 156,
ee Co. v. Anglo, etc., Bank, 924,
18.
Mining Co. v. Mining Co., 724.
Minneapolis, etc., Co. v. Crevier, 86.
Minn. Ass’n v. Canfield, 495.
oe & St. L. R’y Co. v. Bassett,
2.
Pere Harvester Works v. Libby, :

Minn. C. R’y Co. v. Morgan, 476.

fe
TABLE OF CASES.

Ixxvii

[The references are to the foot-paging.]

Minor v. Bank of Alexandria, 178.

Minor v. Mechanics’ Bank, 914, 187, 157.

Minot’s Case, 607.

Minot v. Boston ‘Asylum, 885.

Sine v. Phil. & Wilmington R. R. Co.,
641.

Minot v. R. R. Co., 622, 620.

Minot v. Paine, 7, 608, 585, 607.

Mintzer v. County of Montgomery, 628.

Bee elpPhs etc., R. R. Co. v. Camden,

Miss., etc., R. R. Co. v. Cross, 520, 196,
195, 155, 156.

Miss., etc., R. R. Co. v. Gaster, 984, 139,
149.

Es etc., R. R. Co. v. Harris, 83,

Mice ‘Ry. Co. v. McDonald, 856.

Missouri’ R. Co. v. Com’rs Miami Co.,
941,

Missouri R’y Co. v. - Mankay, 802.

Missouri, etc., R. R. v. Richards, 757.

Missouri, etc., R’y Co. v. Richmond, 876.

Missouri Union Sav. Ass’n v. Seligman,
270.

Missouri Pacific R’y Co. v. Taggard, 94,
97.

Missouri Pacific R’y Co. v. Texas, etc.,
R’y Co., 784, 780, 873.

Mitchell’s Case, 539, 296, 80, 24, 353.

Mitchell v. Beckman, 84, 18, 6 8, 9.

Mitchell v. Burlington, 102.

Mitchell v. Deeds, 923, 712.

Mitchell v. Hartless, 384.

Mitchell v. Newhall, 475.

Mitchell v. Reed, 761.

Mitchell v. Reynolds, 530, 802.

Mitchell v. Rome R. R. Co., 948, 946,
182, 845.

Mitchell v. Union, etc., Co., 938.

Mitchell v. Vermont, etc., Co., 136, 147,
152, 654, 159, 923.

Mitchell ve Wedderburn, 372.

Mix v. Andes Ins. Co., 995.

Mixer’s Case, 172, 158, 174, 171,

Moas v. Missouri, etc., R. R. Co., 829.

Mobile Mutual Ins. Co. v. Cullum, 368,
580.

Mobile, etc., Ins. Co. v. McCallum, 573,

Mobile v. Cedar Point, 839.

Mobile, etc., R. R. Co. v.
etc., R’y Co., 859.

Mobile, etc., R. R. Co. v. Yandal, .84.

Mobile, etc., Co. v. Gilmer, 928.

Mobile, etc., R. R. Co. v. Kennedy, 638,
637.

Mobile & Ohio R. R. v. Franks, 787.

Mobile & Ohio R. R. Co. v. Moseley,
636,

Mobile, etc., R. R. v. Steiner, 793, 800.

Mobile, etc., R. R. Co. v. State, 800,
696, 695.

Mobley v. Morgan, 374, 687.

Moch v.: Virginia, efc., Ins. Co., 991,
996, 993.

Alabama,

| Moore v.

 

Moffat v. Winslow, 390, 400.

anes Farquhar, 369, 679, 368, 688,

Mogvidge’s Case, 94,

Mogul, etc., Co. v. McGregor, 529.

Mohawk, etc., R. R. Co., In re, 691, 672,
678, 669, 914, 680.

Mohawk, ‘etc.,. R. R. v. Niles, 786.

Mohawk Bridge Co. v. Utica, etc., R.
R. Co., 804. ,

Mohr v. Minn., etc., Co., 248, 260.

Moies v. Sprague, 237,

Mokelumne Hill, etc., Co. v. Woodbury,
257, 226, 9.

Mollett v. "Robinson, 474,

Molson’s Bank v. ‘Boardman, 279.

Monadnock, etc., R. R. Co. v. Peterboro,
etc., 117.

Monadnock R. R. v. Felt, 96.

Monk v. Graham, 409.

ar Mut. F. Ins. Co. v. Lowell,

Monomio Great Beach v. Rogers, 934.

,Monongahela Nav. Co, v. Coon, 521,

“Monopolies, Case of the,- 802, oS 529.

Monroe v. Fort W., J. & S. RB. RCo,
186, 198.

Monroe v. Smeiley, 380.

Monroe v. Peck, 466.

Monsseaux v. Urquhart, 681.

Montana, etc., R’y v. Helena, 858.

Montgomery, ‘ete., R. R. v. Boring, 724,

Montgomery v. Exchange Bank, 955.

Montgomery v. Everleight, 537.

Montgomery v. Forbes, 262.

Montgomery, etc., Soc. v. Francis, 830.

MonLgOnIery R. RB. Co. v. Hurst, 917,
12,

Montgomery, etc., R’y Co. v. Matthews, .
158, 165, 175, ‘

Montgomery v. Merrill, 718.

Montpelier & Wells River R. R. Co. v.
Langdon, 96.

‘Mcnument National Bank v. Globe
Works, 826, 809.

Mooar v. Walker, 510.

Moodaly v. Morton, 566.

Moodie v. Seventh Nat. Bank, 448, 394.

Moody v. Caulk, 647.

Moore v. Anglo-Italian Bank, 835.

Moore v. Bank of Com., 368, 579.

Moore v. Brooklyn, etc., R. R. Co., 702.

Moore v. Boyd, 252.

Moore v. Brink, 546.

Moore v. Campbell, 97.

Moore v. Chicago, St. P., etc., R., R. Co.,
869, 873,

Moore v. Conham, 487, 485.

Moore v. Fitchburg RR. Co., 876, 768,

Moore v. Freeman’s National Bank, 993.

‘Moore v. Garwood, 902.

Moore v. Gennett, 503. 502.

Moore v. Hammond, 657.

Hudson River R. R. Co., 373,

25,
lxxviii

TABLE OF CASES. “

[The references are to the foot-paging.]

Moore v. Jones, 282, 269.

Moore v. McLaren, 295.

Moore ‘v. Metropolitan Nat. Bank, 448,
379. :

Moore v. Moore, 340, 852.

Moore v. N. J., ete., 152.

Moore v. Rector, etc., 660.

Moore v. Schopfurt, 711.

Moore, etc., Co. v. Towers, etc., Co.,

769,

Moorehouse v. Crangle, 379. ‘

Moores v. Citizens’ Nat’l Bank, 403, 409.

Moran v. Lydecker, 863.

Morehead v. Western N. C. R. R. Co.,

508.

Moreland ¥. State Bank, 945.

Morelock v. Westminster Water Co.,
909. ; si

Morford v. Farmers’ Bank, etc., 809.

_Morgan’s Case, 341, 276, 560, 552.

Morgan, Re, 338.

Morgan, Ex parte, 341.

Morgan v. Bank of North America, 570.

Morgan v. Donovan, 840, 788, 714, 854.

Morgan v. Great Eastern R’y Co., 598.

Morgan v. Lewis, 179, 345, 283.

Morgan v. Louisiana, 639.

Morgan v. Morgan, 564.

Morgan v. New York, etc,, R.:R. Co.,
239, 207, 214, 217,

Morgan v. Pebrer, 380,

Morgan v. R. R. Co., 973.

Morgan v. Skiddy, 399, 397, 390.

Morgan v. Struthers, 379.

Morgan v. Thames Bank, 499.

Morgan v. White, 869.

Morgan County v. Thomas, 198.

Morley v. Bird, 332.

Morley v. Thayer, 234, 226, 264.

Morrell v. Dixfield, 946.

Morrice v. Hunter, 475.

Morrill v. Boston, etc., R. R. Co., 785.

Morrill v. C. T., etc., Co., 916.

Morrill v. Noyes, 840, /

‘Morrill v. Segar, ete., Co., 945, 942, 916.

Morris v. Cannan, 293, 421.

Morris v. Cottle, 900.

Morris v. Cheney, 132.

Morris v. Keil, 945, 940,

Morris v. Morris, 104.

ae lee & Bkg. Co. v. Nathan, 94,

moe Canal & B. Co. v. Townsend, 863,

Morris & Esse R. R. v. Blair, 859,

Morris & E. R. Co. v. Newark, 861.

Morris Run Coal Co. v. Barclay Coal
Co., 370, 527.

Morris v. Conn., etc., R. R. Co., 499.

Morris, etc., R. R. Co. v. Central, etc.,
R. R., etc., 863, 859,

er Canal & Bank. Co, v. Fisher,

Morris, etc., R. R. Co. v. Green, 948.

Morris Canal & Bank, Co, v. Lewis, 828.

 

Morris v. St. Paul, etc., R’y Co., 882,
Morris v. Trustee, etc., 802.

Morrison, Ex parte, 900.

Morrison, In re, 577.

Morrison v. Dorsey, 190.

Morrison v. Globe Panorama Co., 52, 47,
Morrison v. Gold, etc., Co., 903, 76.
Morrissey v. Weed, 553.

“Morrow vy. Nashville, etc., Co., 61.

Morrow v. Superior Court, 232.

| Morse v. Beale, 940.

Morse v. Brainerd, 786.

Morse v. Conn, etc., R. R. Co., 948,

Morse v. Hagenah, 79.

Morse v. Swits, 396.

Mortimer v. McCullon, 382, 468.

Morton’s Case, 183.

Morton v. Grafflin, 503, 505.

Morton v. Metropolitan Life Ins. Co.,
877.

Morton v. Mutual Ins. Co., 993.

Morton v. Preston, 644, 643.

Morton, etc., Co. v. Wysong, 887,

Morville v. Great North. R’y, 795.

Mosby v. Burrow, 711, 701.

Mees v. Ocoee Bank, 83, 328, 28, 818,
210,

Moses v. Scott, 534.

Moses v. Tompkins, 181, 684, 671, 910.

Moshannon, etc., Co. v. Sloan, 926.

Moss’ Appeal, 611, 606.

Moss v. Averell, 246, 824, 916, 924, 935,
286, 237, 815.

Moss v. Harpath Academy, 828.

Moss v. Livingston, 943. .

Moss v. McCullough, 222, 245,

Mow v. Oakley, 288, 289, 222, 240, 236,

25.

Moss v. Rossie, etc., Co., 922, 934, 853.

Moss v. Steam Gondola Co., 64,

Moss v. Syers, 299.

Mott v. Danville Seminary, 722.

Mott v. Hicks, 825, 888, 827.

Mott v. Penn. R. R. Co., 637,

Mele v. United States Trust Co., 845,
846.

Moulin v. Ins. Co., 990, 992.

Moultrie v. Rockingham, 119,

Mount Holly, L. & M. T. Co. v. Ferrie,
428, 491, 487, 448, 481, 480, 406.

Hy Holy Paper Co., Appeal, 826, 575,

Mt. Sterling, etc., Co. v. Little, 84.

Mt. Sterling, etc., Co. v. Looney, 923.

Mt. Vernon v. Hovey, 103. ,

Mousseau v. Urquhart, 679, 686.

Movius v. Lee, 971, 966, 690, 896.

Mowatt v. Castle, etc., Co., 836.

Mowatt v. Londesborough, 902.

‘Mower v. Staples, 518 ~

Mower v. Inhabitants of Leicester, 879.
Mowrey v. Indianapolis, etc., R. R. Co., .
514, 522, 782, 524, 519, 523, 521, 696,
Moyer v. Pennsylvania Slate Co., 226.

Moyle v. Landers, 975, 962,
TABLE OF CASES.

lxxix

_ (fhe references are to the foot-paging.]

Mozet v. Pennsylvania, 229.
Mozley v. Alston, 729, 977.
Mudford’s Case, 201.
Mudgett v. Horrell; 70, 69. :
Muhlenberg v. Phila., etc., R. R. Co.,
309. ‘ 3
Muir v. City of Glasgow Bank, 589.
Muir v. Louisville Canal Co., 935.
Mulhado v. Porto, etc., R’y, 905.
Mulhall v. Williams, 537.
Muller v. Boone, 941.
Mulligan v. Mulligan, 228.
Mulling v. Smith, 332.
Mullins v. Smith, 330, 334.
Mumford v. American, etc., Ins. Co.,
263, 825, 827, 847.
Mumford v. Hawkins, 923. 927.
Mumma v. Potomac, etc., Co., 699, 207,
721,
Munas v. Isle‘of Wight R’y, Co., 299.
Mundy, etc., Co. v. De La Green, 179.
Mundy v. Davis, 377,
Munger v. Jacobson, 249, 233,
Munhall v. Penn. R. R., 792, 793.
Munn v. Barnum, 3738.
Munn v. President, etc., Co., 825.
Munn v. Commisssion Co., 929.
Munn vy. Illinois, 798.
Munson v. Lyons, 113.
Munson v. Syracuse, etc., R. BR. Co.,
908, 746, 741.
Munster’s Case, 162.
Munt’s Case, 342, 296, 276, 295.
Mats v. Shrewsbury, etc., R’y Co., 810,
1%,
Murphy, Re, 508.
Murphy, Ex parte, 686.
Murphy v. Farmers’ Bank, etc., 702.
Murray v. Bush, 285, 284. ,
Murray v. Charleston, 123.
‘Murray v. Fleinour, 358.
Murray v. Glasse, 605, 608.
Murray v. Stevens, 432:
Murray v. Vanderbilt, 699, 209.
Murriam v. Childs, 490.
Murrick v. Reynolds, etc., Co., 714.
Murrick, etc., Co. v. Phil., etc., 83.
Murry v. Nelson, etc., 921, 923.
oe Turn Verein v. Funck, 697,
700.
Muscatine, etc., R. R. Co. v. Horton,
104.
- Musgrave & Hart’s Case, 290.
Musgrave v. Morrison, 83.
Musgrave v. Beckendorf, 651.
Musgrave v. Morrison, 81, 66, 64.
Muskingum Valley F. Co. v. Ward, 138,
139, 279. . ‘
Mussell v. Cooke, 377.
Mussey v. Eagle Bank, 931.
Mussina v. Goldthwaite, 759, 974.
Mustard v. Hoppers, 113.
Mutter v. Eastern, etc., R’y, 562,
Mutual Gas Co. v. Davis, 865, 989.
‘ Mutual Ins. Co. v. Supervisors, 551, 4.

ie

‘

 

Mutual Benefit Ins. Co. v. Rowood, 228.
Mutual Ins. Co. v. Chase, 181. :
Mutual Saving Bank & B’ld’g Ass’n v.
Meriden Agency Co., 351.

Mutual, etc., Ins. Co. v. Sortwell, 669.
Mutual, etc., Ins, Co. v. Stokes, 719,
Mutual Ben. Life, etc., v. Bales, 871.
Mutual Life Ins. Co. v, Wilcox, 846,

' Myers v. Croft, 854.

Myers v. Irwin, 264.

Myers v. Johnson, 104.

Myers v. Manhattan Bank, 259.

Myers v. Perrigal, 13.

Myers v. Dorr, 988.

Myers v. Seeley, 218, 47, 218, 129, 57, 58.

Myers v. Tobias, 385, ‘

Myers v. Union Pac. R’y Co., 995.

Myers v. Village Nat’l Bank, 582.

Myers v. York & Cumberland R, R.
Co,, 25, 828, 830.

Myles v. Northern, etc., R’y Co., 596.

Myrick v. Dame, 553 ;

N.

Nabob of Carnatic v. East India Co.,
242,

Nabring v. Bank of Mobile, 647, 478,
497, 643, 502, 480, 494, 648, 493.

Nagle v. Pacific Wharf Co., 508,

Naglee v. Alexandria, etc., R’y, 789.

Najac v. Boston & Lowell R. R., 786.

Nanney v. Morgan, 423, 422. °

Nannock v. Horton, 336.

Nantes v. Corrock, 498.

Nanty-Glo, etc., Co. v. Grave, 636, 741.

Napa Valley R. R. Co. v. Napa County,
1038, 107.

Napier v. Central, etc., Bank, 491.

Napier v. Poe, 182. ~

Napier v. Staples, 561.

Nappier v. Mortimer, 241.

Narragansett Bank v. Atlantic, etc.,
Co., 917, 915. :

Nashua, etc., R. R. Co. v. Boston, etc.,
R. R. Co., 960, 959, 910, 872, 784, 916.

Nashua Lock Co. v. Worcester & N.
R. R., 786.

Nashville Bank v. Petway, 700.

Nashville Bank v. Ragsdale, 497.

Nashville, etc., Co. v. Nashville Sav-
ings Bank, 58. be

Nashville R. Co. v. Starries, 878,

Nashville, etc., R’y v. State, 801.

Nassau Bank v. Jones, 350, 78, 772,

Nassau, etc., Co. v. City of Brooklyn,
619.

Natal, etc., Co., In re, 836.

Nathan v. Tompkins, 692, 689, 911, 780,
975. ‘

Nathan v. Whitlock, 723, 294, 224, 276,
219, 720. :

National Albany Ex. Bank v. Wells,
611, 630. :

National Bank v. Baker, 496, 493.
xxx

TABLE OF CASES.

[The references are to the foot-paging.]

National Bank v. Burkhardt, 476.

National Bank v. Commonwealth, 622,
627, 629, 615, 628, 626.

National Bank v. Case, 350, 233, 270.

National Bank v. Colby, 851.

National Bank St. Johnsbury v. Con-
cord, 106.

National Com. Bank v. Mobile, 620.

National Bank v. De Bernales, 989.

National Bank v. Drake, 659, 757.

National Bank v. Dover, 631.

National Bank v. Graham, 878. ;

National Bank Commerce v. Hunting-
ton, 990.

National Bank v. Ins. Co., 848,

National Bank v. Kimball, 682.

National Bank of New London v. Lake
R. R. Co., 405, 645, 502, 501.

National Bank, etc., v. Landon, 256.

National Bank v. Matthews, 849, 846,
854, 848. :

National, etc., Bank v. Mechanics’, etc.,
Bank, 851.

National Bank v. Rith, 841.

National Bank of Xenia v. Steward, 582,
847.

National Bank v. Van Derwerker, 551.

National Bank v. Watsontown Bank,
424, 18, 17, 579, 580, 578, 581, 572,
568.

National Bank v. Whiting, 849.

National Bank v. Wills, 808. -

National Bank-v. Young, 809.

National Bank v. Ins. Co., 701.

National Exchange Co. v. Drew, 158,
874,

National Exchange Bank v. Hartford,
Prov. & F. R. BR. Co., 829.

National Exchange Bank v. Silliman,
576,

National Exchange Bank v. Sibley, 827.

National Express Bank v. Hartford,
etc., R. R. Co., 830.

National Mut. Ins. Co. v. Russell, 870.

National Park Bank v. German, etc.,
Co., 952, 924.

National Park Bank v. Gunst, 992.

National Park Bank v. Nicholas, 995.

National Pemberton Bank v. Porter,
844, 772, 848.

National Shoe, etc., Bank v. Mechanics’,
etc., Bank, 985, 851.

a Security Bank v.-Cushman,

D3.

National State Bank v. Young, 616.

National Trust Co. v. Murphy, 867, 848.

National Union Bank of Watertown v.
London, 267, 551. ’

National, etc., Co., Re, 310.

National, etc., Fuel Co., Re, 165.

National Financial Co., re, 276, 540.

National Funds, etc., Co., In re, 603.

National Patent ’S. F. Co., Re, Bakers’
Case, 828.

National Bank v. Norton, 953.

 

National Exchange Co. v. Drew, 897,
161,

‘National Condensed Milk Co. v. Bran-

denburgh, 991.
National, etc., Co. v. Gilfillan, 34,
Nation’s Case, 286.
oe Water, etc., Co. v. Clarkin,
53.
Natusch v. Irving, 778, 511, 818
Nauney v. Morgan, 338.
Neale v. Janney, 569, 567.
Neale v. Turton, 925, ~
Neall v. Hill, 977, 893.

| Neff v. Wolf, etc., Co,, 724,

Neiler v. Kelley, 645, 11, 651, 14, 488,
498, 648, 647.

Neilson, Appeal of, 356.

Neilson v. Crawford, 245, 223.

Neilson, Ex parte, 465.

Nellis v. Coleman, :271.

Nelson v. Cowing, 159.

Nelson v. Blakely, 195.

Nelson v. Burrows, 978, 893.

Nelson v. Eaton, 828, 8388.

Nelson v. Luling, 398, 398, 257.

Nelson v. Vermont & Canada R. R.,
788, 800. ,

ae v. Washington Bank, 569, 580,
420.

Ness v. Angas, 64.

Ness v. Armstrong, 64, 271. ee

Neuse River Nav. Co. v. Com’rs, 61, 21.

Nevins v. Henderson,.899.

Nevitt v. Bank of Port Gibson, 698, 721,
207.

New v. Nicholls, 587, 588. i

New Albany v. Burke, 981. 180.

New Albany, etc., Co. v. Fields, 163.

New Albany, L. & L. C..R. RB. Co. v.
Smith, 829. ca

New Albany & Salem R. R. Co. v. Me-
Cormick, 95, 199. 93, .137,, 149.

New Albany & Salem R. R. Co. v.
Fields, 157, 204, 85. '

New Albany R. R. Co. v. Grooms, 992.

Nery Penays etc., R. R. Co. v. Johnson,

New Albany & Salem R. RB. Co. v. Pick-
ens, 128.

New Albany & Salem R. R. Co. v.
Slaughter, 156. :

New Albany R. R. Co. v. Tilton, 992,

Newall v. Williston, 509, 425.

Newark City Bank,v. Assessor, 617.

Newark B. Co. v. Newark, 618, 681. .

Nee Bedford, etc., Co. v. Adams, 148,

Newberg Petroleum Co. v. Weare, 989,
864, 263, 714. ‘ :

Newberry v. Robinson, 244. ‘

rey v. Detroit, etc., Iron Co., 509,
576.

Newberry v. Garland, 398. i,

New Brunswick & Can. R’y v. Cony-
beare, 874, 161. ‘
TABLE OF CASES.

lxxxi

[The references are to the foot-paging.]

New Brunswick, etc., v. Muggeridge,
68, 82, 164, 166.

New Buffalo v. Iron Company, 124,

Newburgh Co. v. Miller, 806.

ee T. Co, v. Eastern R. R. Co.,

ee one v. Oregon, etc., R. R. Co., 880,

1

Newby v. Van Offen, etc., Co., 988.

New Castle, etc., R. R. Co. v. Simpson,
716, 33.

New Castle & A. T. Co. v. Bell, 186.

Newcastle & R. R. R. Co. v. Peru, 858.

New Central Coal Co. v. St. George Cc.

I. Co., 862,

New Clydach, Re, 834, 833.

Newcomb v. Reed, 258, 663.

Newell’s Appeal, 885.

Newell v. Borden, 552,

Newell v. Great Western P’y Co., 990.

New England, etc., Bank v. Newport
Steam Factory, 209, 271, 237, 264.

New Eng. Exp. Co. v. Maine Cent. R.
R., 794, 796.

New England, etc., Ins. Co. v. De Wolf,
926, 942,

New Bae: étc., Ins. Co. v. Woodworth,

New Eng. Iron Co. v. N. Y. Loan Co., 563.

New Eng., etc., Life Ins. Co. v. Phillips,
315, 684, 681,

New Eng., etc., Co. v. Union, etc., Co.,
5

N. E. R. R. Co. v. Rodriques, 163.

New Eng.,, etc., Co. v. Gilbert, 940.

N. Eng., ete., Co. v. Gay, 942.

» New Eng., etc., Co. v. Chandler, 502.

New Eng. Trust Co. v. Eaton, 607, 611.

New England F. & M. T. Co. v. Robin-
son, 869, 935.

New Hampshire, etc., Land Co. v. Til-
ton, 867.

New Hampshire, etc., R. R. Co. v. John-
son, 88, 190, 143.

New Haven & D. R. RB. Co. v. Chap-
man, 187.

New Haven, etc., v. Chatham, 114.

New Haven, etc., Co. v. Hayden, 912.

New Haven, ete., Co. v. Linden Spring
Co., 21, 243, 38.

A Hope Bridge Co. v. Phoenix Bank,

3, 9
ee Hone, etc., Co. v. Poughkeepsie,

New Jersey, etc., Bank v. “Thorp, 989,

New Jersey, etc., Co. v. Ames, 832.

New Jersey 8. Co. v. Brockett, 874.

New Jersey Central R. R, Co. v. mals
971, 964.

New Jersey Midland R’y Co. v. Strait,
182, 188, 135, 519.

New Jersey, etc., R. R. v. Jersey City,
639.

New Jersey, etc., R. R. Co. v. Long
Branch Com’rs, 711.

f

 

New Jersey v. Yard, 520.

New Jersey Zinc Co. v. Rew Jersey
Franklinite Co., 775.

Newlands v. National, etc., “Ass? n, 390.

Newling v. Francis, 887.

New London & Brazilian Bank v. Brock-
lebank, 573, 581.

Newman v. Newman, 334.

New Orleans Building v. Lawson, 924,

New Orleans, etc., Co. v. Briggs, 143.

New Orleans, ete., Co. v. Harris, 696.

New Orleans Co. v. Ocean Dry Dock
Co., 351.

New ‘Orleans v. Delamore, 841.

New Orleans, etc., Co. v. Louisiana,
etc.,.Co., 701, 798.

New Orleans Gas Light Co. v. Bennett,

New Orleans v. Graihle, 111.

| New Orleans v. Houston, 718, 622, 624.

New Orleans, Jackson & Great North-
ern R. R. Co. v. Harris, 519.

New Orleans Nat’! Banking Ass’n v.
Wiltz, 480, 569, 580. 14, 582.

New Orleans R. Co. v. Bailey, 874, 879.

New Orleans, -etc., ‘R. R. Co, v. Burke,
878.

New Orleans, etc., R. R. v. Harris, 520,
673.

New Orleans, etc., R. R. Co. v. Board
of Assessors, 615.

New Orleans, etc., R. R. Co. v. Frank,

New Orleans, Jackson, etc., R. Co. v.
Hurst, 878.

New Orleans, etc., R. R. Co. v. Me-
Donough, 105.

New Orleans, etc., Steamship Co. v.
eo Dock Co., 78.
New Orleans v. 'Sav., etc., Co., 622.

Newport Mechanics’ “Mfg. Co. v. Star-
bird, 885.

Newry, etc., Ry Co. v. Coombe, 81, 353,
274,

Newry,. etc., R’y Co. v. Moss, 270, 484,
539.

Newry, etc., R’y Co. v. Edmunds, 574,
140, 126.

New Sombrero Co. v. Erlanger, 738.

Newton v. Fay, 481, 478

Newton v. Belcher, 899.

Newton v. Daly, 549,

Newton Mfg. Co, v. White, 909.

New York African Soc. v. Varick, 883.

New York, etc., Co. v. Buffalo, etc.,
Co., 762.

New York, etc., Co., In re, 686, 81, 82.

New York, C., etc., R. R. Co., In re,
859, 861, 858.

New York C. BR. R. Co., Matter of, 862..

New York Elevated R. R. Co., Matter
of, 515, 709.

New York Ex. Co. v. De Wolf, 98.

a York, etc., Canal Co. v. Fulton,

%
lxxxil

TABLE OF CASES.

[The references are to the foot-paging.]

New York Cable Co. v. Mayor, etc.,
710.

New York, etc., Co. R. R. v. Ketchum,
‘756.

New “York, ‘etc., Co. v. Phoenix Bank, °

913.

New York, etc., Co. Works v. Smith,
699. ;

New York Dry Dock Co. v. Hicks, 867,
989 :

New York Exchange v. De Wolf, 199,

‘| 159,

New York & New Haven R. R. Co. v.
Schuvler, 323, 875, 874, 318, 403, 325,
828, 824, 826, 447, 667, 402.

New York, etc., R. R. Co. v. Hunt, 185,
188.

New York & H. R. R. Co. v. New York,
934,

New York, etc., Exchange v. Board of

' Trade, etc., 799.

New York El. R. R. Co. v. Manhattan
R’y Co., 757. .

New York Fireman Ins. Co. v. Ely, 847,
827, 845.

New York Fireman Ins, Co. v. Sturges,
849, 845.

New York & H. R. R. Co. v. Forty-
Second St. R. R. Co., 859.

New York, H. & N: R. R. Co. v. Boston,
H. & E. R. R. Co., 858. =

New York & H.R. R. Co. v. Kip, 862,
857, 856.

New York, L. E. & W. R. R. Co. v.
Davies, 488,

New York, etc., Min. Co. v. Negaunee, -

928. :
New York & O. M. R. R. Co, v. Van
Horn, 184.
N. Y. & W. R. RB. Co., In re, 263.
N. Y., etc., R. R., In re, 864, 857, 859,
. 861.
New York, etc., R. R. Co. v. Dixon, 896.
N. Y., etc., R. R. Co. v. N. Y¥., ete, R.
. R. Co., 951.
New York, etv., R. R. Co. v. Cook, 9.
Ney York, etc, R. R. Co, v. Stokes,
1 : é F
Ne etc., R. R. Co. v. Nickals, 597,

New York, etc., R. R. Co. v. Ketchum,

New York R. R. Co. v. Newton, 189.

N. Y., etc., R. R, Co. v. Carhart, 565.

N. Y., etc., R. R. v. Parmalie, 721,

N. Y., etc., Trust Co. v. Helmer, 846.

N. Y., etc., Tel. Co. v. Dryburg, 796.

New York, etc., Soc. v. Varick, 942.

Niagara Falls. etc., R. R., Re, 856, 862.

Niagara Ins. Co., In re, 697,

Nicholay’s Case, 900. _

Nicholls v. Diamond, 768.

Nichols v. Mose, 829, 866.

Nichols v. Burlingten & Louisa County
Plank-road Co., 97, 99.

 

Nichols v. Nashville, 106.

Nichols v. Pearce, 768.

Nichols v. Somerset, 861,

Nicholson v. Great West R’y, 793, 791.

Nicholson v. Mounsey, 896

Nickalls v. Eaton, 462, 292.

Nickalls v. Merry, 462, 358, 296, 2'78, 475.

Nickels v. Crosby, 77.'

Nickerson v. English, 839, 743, 199,

Nickerson v, Wheeler, 254.

Nicol’s Case, 276, 342, 163, '71, 41.

Nicolay v. St. Clair County, 112.

Nicoll v. New York & E.,R. Co., 852,
853.

Nicollet Nat. Bank v. City Bank, 569,

Nightingale v. Devisme, 645, 14,

Nikim v. Hibbard, 359.

Nimick v. Mingo Iron Works, 244, 243,

Nimmons v. Tappan, 700.

Nippenose Mfg. Co. v. Stadon, 159, 91,
155.

Nixon v. Brownlaw, 523,

Nixon v. Green, 287.

Noble v. Collender, 156.

Noble v. Vincennes, 118.

Noble v. Turner, 508.

Nockels v. Crosby, 902, 548, 903.

Noesen v. Town of Port Washington,
519, 120. 5

Nolan v. Arabella, etc., Co., 147,

Noll v. Dubuque, etc., R. R., 860,

Noonan v. Ilsley, 644, 650, 647, 651.

Norbury’s Case,-900..

Norfolk, etc., R. R. Co. v. Cotrell, 993.

Norfolk, etc., R. R. Co. v. Common-
wealth, 640.

Norman v. Mitchell, 523, 152.

Norris v. Crocker, 244.

Norris v. Harrison, 605, 608.

Norris v. Irish Land Co., 488, 428,

Norris v. Johnson, 227, 239, 235.

Norris v. Wallace, 357,

Norris v. Mayor of Smithville, 699,

Norris v. Wrenschall, 515, 248.

North, Ex parte, 165.

North Shore Staten Ferry Co., Matter
of the, 680, 679.

North v. Forrest, 878. ’

ae v. Phillips, 885, 387, 651, 644, 650,

North v. State, 702. s

North America Building Ass’n v. Sut-
ton, 648, 644, 651.

North Car. R. R. Co. v. Leach, 159, 156.

North, etc., R. R. Co. v. Winkler, 90, 94.

North American,Colonial Ass’n v. Bent-
ley, 282.

North Chicago R’y v. Lake View, 802.

‘North Missouri R. R. Co. v. Maguire,

638, 637.
North Penn, R. R. Co. v. Adams, 830.
North Mo. R. R. Co. v. Akers, 996.
Northeastern R’y Co. v. Jackson, 756.
North River Bank v. Aymar, 953.
North State, etc.,Co. v. Fields, 153.
TABLE OF CASES.

Ixxxiii

[The references are to the foot-paging.] We

North Ward Nat. Bank v. City of New-
ark, 621, 631, 615.

Northwest, etc., Co. v. Beath, 744,

Northwestern Distilling Co. v. Brant,
883.

SRE teh etc., Packet Co. v. Shaiv,
81

Northwestern Mutual L. I. Co. v. Over-
holt, |866, 867.

Northern Assam Tea Co., In re, 835,
576, 579.

Northeast, etc., R. R. Co., Ex parte,
212,°516.

Northern R. R. Co. v. Concord, etc., R.
R. Co., 857.

Northern R. R. Co. v. Miller, 148, 523,
84, 511, 144, 522, 718, 85.

oe Pac. R. R. Co. v. Du Pont,
745.

Northern Trans. Co, v. Chicago, 867.

Northern, etc., Co. v. Young, 760.

Northern R’y Co. v. Kennedy, 145.

Northern P..R. R. v. Territory, 790.

gc ian, -etc., R’y Co. v. Raymond,

41.

Northern Liberties Bank v. Cresson, 915,

or eastern R. R. Co. v. Rodrigues,
8 .

Northampton Bank v. Allen, 845.

Northampton Bank v. Pepoon, 933, 918,:

912, 919.

Northey v. Johnson, 549.

Northrop v. Curtis, 425.

Northrop v, Bushnell, 47.

Northrop v. Newtown & Bridgeport
Turnpike Co., 447, 587.

Northrop v. Newtown & Co., 421.

Northrup v. Miss. Ins. Co,, 947.

Northumberland Avenue Hotel Co., Re,
904,

Northumberland Co. Bank v. Eyer, 884.

Norton v. Blinn, 387, 388.

Norton v. Brownsville, 112.

Norton v. Dyersburg, 122.

Norton v. Norton, 502.

Norton'v. Peck, 100. i

Norton v. Shelby County, 119.

Norton v. Union Trust Co., 4380.

Norton v. Walkiil, etc., R. R. Co., 722.

Norvah, etc., In re, McKay Case, 741,

Norwegian Titanic Iron Co., 706. -

Norwich Ins. Society, In re, 265.

Norwich Gas, etc., Co. v. Norwich City,
etc., Co., 804.

Norwich & L. Navigation v. Theobold,
188. :

Norwood, In re, 721.

Nott v. Clews, 45, 54.

Nott v. Hicks, 942.

Nourse v. Prince, 484.

Noyes v. Blakeman, 537.

Noyes v. Marsh, 370, 376. -

Noyes v. Spaulding, 381, 378, 421, 447,
484, 15.

Noyes v. Rutland & Bur, R. R. Co., 785.

 

Nugent v. Boston, etc., R. R., 788.

Nugent v. Cin.. Harrison & Indianapo-
lis 8. L. R. R. Co., 165.

Nugent v. Supervisors, 119, 124, 523, 114.

Nulton v. Clayton, 84, 65, 87.

Nurrich v. Peru Coal Co., 754,

Nutbrown y. Thornton, 376,

Nute v. Hamilton, 888.

UGeE v. Lexington, etc., R. R. Co.,

20. :

Nutting v. Boardman, 365.

Nutting v. Hill, 712. i

Nutting v. Thomason, 365,

Nyce’s Appeal, 357.

On

Oakbank Oil Co. v. Crum, 591, 12.

Oakes v. Oakes, 335. :

ee v. Turquand, 523, 164, 160, 291,

67.

OBrien v. Breitenbach, 349, 370.

O’Brien v. Chicago, Rock Island & Pa-
cific R. R. Co., 314.

O’Brien v. O'Connell, 973.

O’Brien v. Shaw’s, ete., Co., 991.

O’Brien v. Mechanics’ & T. Ins. Co.,
500.

Occidental, etc., Assoc, v. Sullivan, 147,

S

Ocean Ins. Co. v. Portsmouth, etc., R’y

Co., 990.
Ochiltree v. Railroad Co., 227, 515.
O’Connor v. Irvine, 377, 376.
Odd, etc., Bank’s Appeal, 365.
Odd Fellows v. Bank of Sturgis, 926.
Odd Fellows, etc., Co. v. Glazier, 88.
Odell v. Odell, 852.
oO Ponala v. Evansville, etc., R. R. Co.,
984,
Oelrichs v. Ford, 476.
Ogden v. City of St. Joseph, 617.
Ogden v. County of Daviess, 101.
Ogden v. Lathrop, 494, 484.
Ogden v. Murray, 756. ee
Cee renoree Bank v. Van Rensselaer,
- 982

Ogdensburgh, etc., R. R. Co. v. Frost,
144, 143, 184, 79.

Ogdensburgh, etc., R. R. Co. v. Ver-
miont, etc., R. R. Co., 704.

Ogdensburgh, etc., R. R. Co. v. Wooley,
23, 184,

Ogle v. Knipe, 334, 14.

Oglesby v. Attrill, 134, 980.

Ogilvie v. Currie, 399, 169, 174, 162...

Ogilvie v. Knox Ins. Co., 175, 212, 218,
214, 51, 172, 129, 218, 216, 217.

O'Hare v. Second Nat. Bank, 347, 846.

Ohio, etc., College v. Higgins, 85.

Ohio College, etc., v. Rosenthal, 310.

Ohio, Ind. & Ill. R. R. Co. v. Cramer,
127, 22.

a Ins. Co, v. Nunnemacher, 320, 2,
18.

Ohio Life Ins. & T. Co., Re, 845.

a
Ixxxiv

.TABLE OF CASES.

[The references are to the foot-paging.]

Ohio Life Ins. Co. v. Merchants’ Ins.
Co., 227, 847, 814, 264,

Ohio & Mississippi R. RB: Co, 'v. Dunbar,
788.

Ohio & M. R. R. Ang v. Indianapolis,
etc., R. R. Co.,

Ohio & M. Ry v. Dae 790, 655, 688,
701,

Ohio & M. R. R. Co. v. Quier, 993.

Ohio & M. R. R. Co. v. Weber, 5, 872,
635, 636.

Ohio & M. R. RB. Co. v. Wheeler, 878, 2,
872.

Ohio, etc., R. R. Co. v. Cramer, 99.

Ohio R. R. Co. v. McPherson, 656, 655.

Ohio, etc., Trust Co. v. Debolt, 638.

Oil Creek, etc., R. R. Co. v. Penn. Trans.
Co., 817.

O’Kell v. Charles, 943.

Olcott v. Supervisors, 103, 862.

Olcott v. Tioga R. R. Co., 918, 886, 934,
924, 825, 784, 943, 942.

Old Colony R. R. Gorp. v. Evans, 852.

‘Oldham v. ers 849.

Oldtown & Lincoln R. R. Co. v. Veazie,
189, 985, 190, 518, 515.

Oldtown Bank v. Houlton, 948.

O'Leary v. B’d of Education, 946..

Oler v. Baltimore, etc, R. R.

. %4, 182.

Olery v. Brown, 547.

Oleson v. Green Bay, 106.

Oliver v. Liverpool & L. L. & F. Ins.
Cou., 264, 689, 550, 265.

Oliver v. Washington Mills, 620. ,

Oliphant v. Woodhaven, etc., Co., 31.

Oliphant v. Woodburn, 892.

Olney v. Chadsey, 921, 916.

Omaha Horse R’y Co, v. Cable Tram-
way Co., 804.

Omeara v. North American Min. Co.,
651, 647, 76.

Ommaney v. Butcher, 334.

O’Neal v. King, 96.

Oneida Bank v. Ontario Bank, 847, 827.

O'Neil v. Whigham, 492, 490.

Onondaga Trust & Deposit Co. v.
Price, 336, 388.

Onslow’s Case, 690, 64.

Onstott v. People, 117.

Ontario Salt Co. v. Merchants’ Salt Co.,
529, 938.

Opdyke v. U. P. BR. R., 807.

Opdyke v. Marble, 563, 564.

Opelika v. ‘Daniel, 103.

Orange, etc., R. R. Co, v. Fulvey, 647.

Ord, Ex parte, 278.

O'Reilly v. Bard, 253, 226.

Oregon v. Jennings, 121.

Oregon Cascade R’y Co. v: Bailey, 862,

Oregon, etc., R’y v. Oregonian, etc.,
R’y, 819, 778, 6, os 47%,

a & Ww. a & I. Co. v. Rathbun,

Co., 63,

 

Oregon, etc., v. Scoggin, 194, 186.

Oregonian R’y Co. v. Oregon Ry, etc.,
Co., 263, 984, 714.

Oriental], etc., Ex parte, 539.

Oriental Co, v. Briggs, 378.

Orkright v. Newbold, 161.

Orleans v. Platte, 115.

Ormerod’s Case, 735.

Cee Vermont, etc., Co., 656, 651,

2, 655, 647, 654.

orncer Budd, 393.

Ornamental P. W. Co. v. Browne, 188,

Oroville, etc., R. R. v. Supervisors, 710.

Orpen, Re, 342.

Orr v. Bigelow, 82, 368, 272.

Orr v. Bracken County, etc., 521.

oa v. Brown, 426, 420, 422, 487,
44

Ortt v. Minneapolis, etc., R’y, 787.

Osage Valley, etc., R. R. Co. v. Morgan
Co., 105.

Osborn v. Crosby, 85.

Osborn v. U. S. Bank, 995.

Osborne v. Adams Co., 108.

Osborne, etc., Co. v. Croome, 690.

Osborne v. McAlpine, 383.

Osborne, Ex parte, 899.

Osborne v. Tunis, 940.

Osgood v. Bander, 382.

Osgood v. King. 89, 53, 54, 31, 207.

Osgood v. Laytin, 600, 603, 601, 207.

Osgood v. Manhattan Co., 948,

Osgood v. Ogden, 201.

Oskaloosa Agri. Works v. Parkhurst,
188. ;

Oestpee etc., Co. v. Canney, 194, 824,
192.

Osterburg v. Union Trust Co., 640.
Oswego, etc., Factory v. Dolloway, 619,
635, 634.

Oswego, etc., Bridge v. Fish, 805.

Otis v. Gardner, 894, 480,, “433, 487, 447.

Otis v. Harrison, 848.

Otis Co. v. Inhabitants, etc., 885.

Otoe County v. Baldwin, 116,

See ete, R. R. Co. v. Black, 783,

Ottawa, v. Carey, 101, 108. 100.

Ottawa, etc., R. R. Co. v. Hall, %5, 74.

Ottawa’ Glass Co. v. McCaleb, "613, 622,
635, 620.

Otter v. Brevoort, 48, 31, 30.

Otto v. Journeymen, etc., Union, 547.

Ottoman, etc., Co. v. Dane, 881.

a ea Red R. R. R. Co. v. Cross,
197. \

Overend, etc., Co. v. Gibbs, 896.

Owen v. Challis, 902

Owen v. Purdy, 814, 524,

Owen v. Ronth, 650. '

Owen v. Smith, 721, 720.

Owen v. Whitaker, 684.

‘Owens, In re, 636,

Owens v. Missionary Soc, of M. E.
Church, 549.
TABLE OF CASES.

Ixxxv

[The references are to the foot-paging.]

Owings v. Speed, 915, 917.

Owsley v. ontgomery R. Co., 877, 876,
Ce Turnpike Co, v. Bunnell, 447,
Oxford Turnpike Co. v. Brund, 481.
Oxtord, etc., Society, Re, 603.

Oxford Ins. Co. v. Sprays 825, 823,

PL

Pacific Bank v. De Ro, 882.

Pac. R. R. Co. v. Cutting, Jr., 602, 978,

722.

Pacific R. R. v. Hughes, 523,

Pacific Hotel Co. v. Lieb, 635.

Fae, etc., Mills v. Dayton, etc., Ry
23,

Pacific R’y Co. v. Missouri R’y, 960,
872, 958, 760, 964,

Pac. R. BR. Co. v. Maguire, 637.

Pacific National Bank Cases, 208.

Pac. R. R. v. Pac. R’y, 760.

Pacific R. R. Co. v. Thomas, 980.

Pacific Trust Co. v. Dorsey, 28, 33,

Pacific, etc., Removal Cases, 995.

Pacific R. R. Co. v. Renshaw, 518.

Pacific R. R. Co. v. Seeley, 816, 853,

Packard v, Jefferson Co., 115.

Paddock v. Fletcher, 170.

Padstow, etc., Co., in re, 544,

Paducah, ete., Bank v. Parks, 199, 90.

Page v. Austin, 328,

Page v. Fowler, 647, 648.

Page v. Heineber Zs 852.

Page v. Leapingwell, 336, 387.

Paige v. Contocook Valley R. R, Co., 10.

Paine v, Elliot, 17.

Paine v. Hutchinson, 2938, 426, 467, 376.

Paine v. Irwin, 743.

Paine v. Lake Erie, etc, R. R., 724,
732. :

Paine v. Stewart, 252, 294, 233, 235, 236,
248, 294.

Paine v. Warren, 562,

Paine v. Wright, 614.

Painesville, etc., R, R. Co. v. King, 310,
594,

Palfrey v. Paulding, 828, 515, 520, 719.

Palmer v. Forbes, 842. —

Palmer v. Hawes, 491, 973.

Palmer v. Lawrence, 64, 848, 86.

Palmer v. Penn. Co., 992.

Palmer v. Ridge Mining Co., 281.

Palmer v. Yates, 919.

Pane v. Lippincott, 113.

Panama, etc., R’y Co., In re, 833, 834.

Panama, etc., Mail Co., In re, 835.

Panama, etc., Tel. Co. v. India Rubber.
Tel. Works ’Co., 738.

Pana v. Bowler, 114,

Paper Co. v. Waples, 130.

Parbury’s Case, 173.

Paris v. Paris, 608.

Parish v. Parish, 375.

Parish, etc., v. Newburyport, 941.

| Parker v.

| Parmly v.

 

Parish v. Wheeler, 848, 788, 838.

Park v. Commonwealth Ins. Co., 993.

Park v. Grant Locomotive Works, 596,
708, 587, 597, 586.

Park v, Petroleum Co., 981,

Park v. Spaulding, 546.

Park v. Whitney, 372.

Parker, Ex parte, 296.

Parker v. Bernal, 351.

Parker v. Crol, 466,

Parker v. Glover, 358.

Parker v. Gt. West. R’y, 794.

Parker v. Kett, 914.

Parker v. Mason, 597, 608.

Parker v. Nickerson, 761, 743, 747,

Parker v. McKenna, 747,

Parker v. New Or leans, etc., R. R., 840.

| Northern, etc., R. R. Co., 72,
78, 86.

Parker v. Scogin, 104.

Parker v. Thomas, 163, 98,

Parker v. Washoe Mfg. Co., 940, 941.

Parker Mills v. Com’rs, 640.

Parkins v. Bradley, 926.

Parkins v. Fry, 901.

Parkins v. Watson. 849.

Parks v. Automatic, 589.

Parks v. Heman, 129,

Parks v. Evansville, Ind. & Cleveland
S. L. R. R. Co., 98. '

Parmley v. R. R. ’Cos., 614.

Tenth Ward B’k, 550.

Byers, 965, 974.

Colby, 247, 289.

City of Lawrence, 805.

Parrott v. Thatcher, 476.

Parrott v. Worsfold, 333, 331.

Parson v. Gas Light Co., 635.

Parson’s Case, 2738.

Parsons v. East, etc., Co., 641.

Parsons v. Hays, 4 z

Parsons v. Martin, 648, 463, 475.

Parsons v. Spooner, 898.

Parsons v. Winslow, 607.

Partridge v. Badger, 825, 926, 91 4, v9,
823.

Partridge v: Forsythe, 476.

Partridge v. Partridge, 338, 333.

Paschall v. Whitsett, 600.

Passmore v. Mott, 943.

Patent File Co., Re, 888.

Patent Paper Mfg. Co., Re, 276.

Parrott v.
Parrott v.
Parrott v.

‘Paton v. Sheppard, 610.
‘Patrick v. Reynolds, 899.

Patterson’s Appeal, 385, 359, 357.

Patterson v. Baker, 242,

Patterson v. Lynde, 240, 233, 232, 213,
214, 209, 254.

Patterson v. Mississippi R. R. B. Co.,
862.

Patterson v. Syracuse National Bank,
931.

Patterson v. Wyomissing Mfg. Co., 281,
235.

Pattison v. Supervisors, 111.
Ixxxvi

Pattison v. Syracuse National Bank,
817.

Paul v. Virginia, 865, 869, 864.

Paulding v. Chrome Steel Co., 851.

Paulding v. Jerome. etc.. Co., 765.

Pauling v. London R’y Co., 936.

Paulson v. Van Steenburgh, 966.

Pawle’s Case, 174. :

Payne v. Baldwin, 845, 801.

Payne v. Ballard, 1438, 208.

Payne’s Case, 369, 295.

Payne v. Elliot, 11, 200, 14, 648.

Payne v. Commercial Bank, etc., 928.

Payne v. New South, etc., Co., 905.

Payne v. Western R. R. Co., 876.

Payson v. Stoever, 221, 317. i

Payson v. Withers, 518, 317, 157, 204,
242,

Paxon v. Talmage, 212.

Paxton, etc., Co. v. First Nat'l Bank,
906.

Peabody v. Eastern Methodist Soc. in

. Lynn, 550.

Peabody v. Flint, 765, 960. -

Peake v. Wabash R. R. Co., 187, 140.

Pearce v. Billings, 333, 384. -

Pearce v. Madison R. R. Co., 519, 778,
78%, 825.

Pearly v. Smith, 610.

Pearsall v. Western U. Tel. Co., 955.

Pearson’s Case, 181, 900, 741, 735.

Pearson v. Concord R. R. Co., 349, 352,
758,

Pearson v. Bank of England, 365.

Pearson v. London, etc., R’y Co., 308.

Pearson v. Scott, 467.

Peavey v. Town, etc., 681.

Peck v. Coalfield Coal Co., 23. ~.

Peck v. Cooper, 768. . -

Peck v. Detroit, etc., Works, 947,

Peck v. Miller, 228.

Peck v. Ellis, 979.

Peckham v. Hendrew, 954.

Peckham v. Ketchum, 476, 465.

Peckhan v. Newton, 358.

Peckham v. North Parish, 990.

Peckham v. Smith, 321. a

pashan v. Van Wagener, 592, 595,

* 591. Z

Pedell v. Gwynn, 229,

Peebles, In re, 573, 577.

4

Peebles v. Patapsco Guano Co., 875, 874, |

171.
Peek v. Derry, 652, 163, 170.
Peek v. Detroit, etc., Works, 916.
Peek v. Gurney, 399, 170, 396, 173, 398,

395.
‘Peel’s Case, 178, 162.
Peel v. Thomas, 549.
Peirce v. Jersey W. Co., 188.
Pell’s Case, 41, 25, 22.
Pellatt’s Case, 93, 26, 72, 71.
Pelly, Ex parte, 736, 978, 979.
Pelfon v, Northern Trans. Co., 686, 635.
Pelton v. Nat. Bank, 633, 632,

 

TABLE OF CASES.

[The references are to the foot-paging:]

Pembina, etc., Co., v. Penn., 871, 866.

Pembina Mining Co. v. Pennsylvania,
640.

Pender v. Lushington, 679, 688, 968, 680.

Pendergast v. Bank of Stockton, 568,
571,

Pendergast v. Turton, 148.

Pendleton Co. v. Amy, 115.

Pendleton v. Empire, etc., Co., 757.

Pendleton Mfg..-Co. v. Mahanna, 166.

Pendleton, etc., Co. v. Mahon, 26,

Penfield v. Skinner, 546.

Peninsula, etc., R. R. Co. v. Duncan,
73, 6.

Peninsula R. R. Co. v. Howard, 10.

Peninsular Bank v. Hanmer, 927.

Peninsular Iron Co. v. Stone, 964.

Penniman v. Briggs, 210, 233.

Pennock v. Coe, 840, 848, 838.

Pennoyer v. Neff, 992. s

po etc., Co.’s Appeal, 724, 422, 357,
750.

Penn. R. R. v. Angel, 877. :

Pennsylvania R. R. Co. v. Ball, ete., R,
R. Co., 804.

Bou R. R. Co. v. Commonwealth, 350,
623.

Penn. R. R. Co. v., Canal Com’rs, 2.

Penn., etc., Co. v. Cooke, 988.

Penn. Co. v. Dandridge, 934, 787.

Penn. Coal Co. v. D., etc., Canal Co.,
793, '784,

Penn. Bank v. Hopkins, 966.

Penn. Match Co. v. Hapgood, 905.

Poeyivanias etc., R. R. Co. v. Leuffer,

28...

Penn. Ins. Co. v. Murphy, 553.

Penn. R. R. Co. v. Nat’l R’y Co., 863.

Pennsylvania R. R. Co. v. Philadelphia,
109, 101, 106. Be

Pennsylvania. Bank v. Reed, 983, 912.

Penn. R. R. v. Riordan, 795.

Penn. R. R. Co. v. St. Louis, etc., R. R.
Co., 777, 6, 808, 873. °

Penn. Co, v. Sloan, 263. :

Penn. R. R: Co. v. Vandiver, 935, 876.

Penn. Co. v. Wentz, 800.

Penny, Ex parte, 369.

Penobscot, etc., R. R. Co, v. Bartlett,
88, 187.

Penobscot & Kennebec R. R. Co. v.
Dunn, 97, 985, 914, 185.

Penobscot R. R. Co. v. Dummer, 135,
189, 86. ;

Penobscot Boom Corp, v. Lamson, 699,
710, 719. aq

Penobscot R. R. Co. v. Bartlett, 191.

.Penobscot R. R. Co. v. White, 189.
* Pensacola, etc., Co. v. State, 799.

Seno Tel. Co. v. W. U. T. Co., 797,
Penticost v. Ley, 385.

Pentz v. Citizens’ Fire Ins. Co., 142
Pentz v. Hawley, 220, 224, 223,
Pen-y-Van Colliery Co., In re, 698.
‘ TABLE OF CASES.

Ixxxvii

(The references are to the foot-paging.]

People v. Albany, etc., 977, 879.
People v. Albany, etc., R, R. Co., 977,
684, 691, 665, 705, 683, 657, 682, 672,
673, 693, 687, '790, "692, 685.
People v. ‘Anderson, etc., Co., 722.
Pee v. Assessors, 629, 640, 634, 632,

2.

People v. Austen, 635.

People v. Babcock, 795.

People v. B’k of Niagara, 705.

People v. Barnett, 113, 196.

People’s Bank v. Kurtz, 325, 326.

People’s, etc., Co. v. Babinger, 90.

People v. Batchellor, 107, 116, 669, 105,

3.

People, etc., Co. v. Balch, 86.

People v. Bergler, 985.

People v. Board of Governors of Albany
Hospital. 662.

People v. Board of Assessors, 584.

People v. Bogart, 705.

People v. Boston, etc, R. RB, 801, 790.

People v. Bowen, 2.

People v. Bradley, 619, 629.

People v. Brewster, 848.

People v. Brooklyn, 864.

People v. Cady, 557.

People v. Chambers, 182.

People v. Chapman, 118.

People v. Chicago Board of Trade, 891.

People v. Conklin, 673.

People v. City Bank, 716.

People v. Cummings, 662.

People v. Coleman, 634, 551, 633,

People v. Commissioners, ete. , 5, 629,
635, 619, 626, 6x7, 630, 634, 618,

People v. ‘Conklin, ‘O77.

People v. Coon, 103, 123.

People v. Cornell, 557.

People v. Crissey, 675.

People v. Crockett, 567, 568, 433, 570.

People v. Crossley, 887, 677, 886.

People v. Cummings, 662, 679.

People v. Datcher, 113.

-+ People v. Davenport, 619, 634.

People v. Detroit, 104.

People v. Devin, ‘679, 686.

People v. Dolan, 626.

People v. Dispensary, etc., Soc., 703.

People v. Eastman, 641.-

’ People v. Elmore, 509,

People v. England, 768,

People v. Equitable, etc., Co., 641, 640,
635.

People v. Farnham, 719. |

People v. Ferguson, 619.

People’s Ferry Co. v. Balch, 187, 95.

People v. Fire Asso. of Phil.,
263.

People v. Fire Underwriters, 89, 890.

People v. Fishkill, etc., Co., 709.

People v. Fort Edward, 109.

People v. Franklin, 108, 117.

People v. Goss, etc., Mfg. Co., 499, 483.

People’s Bank v. Gridley, 421, "447, 508.

 

‘People v. McLean,

866, 634,

 

People v. Griffin, 414.

People v. Gunn, 260.

People v. Harp, 118,

People v. Hatch, 118.

People v. Hektograph Co., 699.

People v. Henshaw, 105.

People v. Hillsdale & T. Co., 705.

People v. Hitchcock, 119.

People v. Holden, 96, 121, 122.

Pe Home Ins. Co., 619, 618, 634,
4

People v. Howard, 866, 871.

People v. Hughitt, 117.

People v. Hurlbert, 117, 118, 100.

People v. Hutton, 113.

Feople v. Improvement Co., 703, 707,

People v. Jackson, etc., Co., 716.

Boule v. Kankakee Improvement Co.,

People v. Kenney, 675.

People v. Kingston, etc., Co., 709, 716.

People v. Kip, 687, 688, 679.

Feo a Bank v. ‘Kurtz, 324, 325, 327,
5 LT

| People v. Lake Shore Road, 563, 558,

561,, 559, 562.

People v. Logan County, 118, 19%, 111.

Ferpe v. Louisville, etc., R. R. Co., 122,

People v. Manhattan Gas Co., 798, 709,

People v. Mauran, 852.

619, 636, 640.

People v. Medical Society of Erie, 890.

People v. Merchants’ & Mech. Bank, |
592.

People v. Metropolitan R’y Co., 782,
757, 910.

People v. Miller, 432.

People v. Mitchell, 106.

People v. Moore, 629.

People v. Morris, 100.

People v. Mott, 561,

People v. Mutual Gas, etc., Co., 565.

‘People v. Nat’l Sav. Bank, 186, 42, 715,

716, 717.
People v. Nat’! Trust Co., 723.
People v. Nelson. 260.
People v. New York Benevolent Soc. i

‘

890.
People v. New York, etc., Co.,,619.
Poors v. New York Commercial Ass’n,

1

People v. New York Cott. Ex., 547, 891,
Hecple v. N. Y., etce., R. R., 790, 879,
People v. Nidvars, 550.
People v. Northern R. R. Co., 688, 749,
People v. Mulholland, 801.
People v. Oakland, etc., Bank, 709, 703.
People v. O’Brien, 718, 721, 780.,
People v. Oldtown, 117.
People v. Oliver, 118, 117.
People v. Ottawa, etc., Co.
People v. Pacific, etc., Co., 564, "561, 562,
LTxxxvili

TABLE OF CASES.

[The references are to the foot-paging.]

People v. Parker Vein Coal Co., 482,
3 1

%.

Peck, 664, 691, 117, 668.
Pendleton, 977.
Phillips, 686, 888, 687.
Phoenix Bank, 709.
Potter, -883.

Pres., etc., 722.

Pueblo Co., 103. /
Reilly, 557.
Remington, 228.
People v. Rensselaer, etc.,
People v. Robinson, 679.
People v. Rochester City Bank, 685.

People v.
People v.
People v.
People v.
People v.
People v.
People v.
People v.
People v. 7
R. R., 707.

People v. Rome, etc., R, R. Co., 121,
790. ;

People v. Runkle, 700, 883.

People v. Saint Francisco’s Benevolent

Society, 890. :
‘People v. San Francisco, etc., Union,
59

7.

People’s Bank v. St. Anthony’s Church,
922, 658, 921.

People v. St. Louis, etc., R’y Co., 558.

People v., Salem, 108, 104.

People’s Sav. Bank v, Collins, 713.

People v. Sawyer, 118.

People v. Schoonmaker, 886.

People v. Sierra, etc., Co., 882.

People v. Soldiers’ Home, etc., 637.

People v. Smith, 861, 117, 113.

‘People v. Spencer, 106. 3

People v. Stanford, 707, 705, 708.

People v. State Treasurer. 111.

People v. Sterling, etc., Co., 37, 48, 887.

People v. Stockton, etc., R. R. Co., 68,
28, 183. ;

People v. Sturtevant, 977, 971.

People v, Suffern, 113.

People v. Supervisors of Niagara, 596.

People v. Tax Com’rs, 640, 634,

People v. The Supervisors, 597.

People v. Throop, 560, 888, 564, 561.

People v. Tibbits, 677.

People v. Town of Santa Anna, 114.

People v. Town of Laena, 114,

People v. Tuthill, 686.

Hecpe v. Twaddle, 672, 691, 913, 317,

People v. Utica Ins. Co., 707, 6, 885.

People v. Van Valkenburg, 117.

People v. Wagner, 118.

People v. Walker, 559, 560, 659.

People v. Wall St. Bank, 633.

People v. Washington, etc., Bank, 705.

People v. Watertown, 550.

People v. Weaver, 626, 627, 631.

People v. Webster, 688.

People v. Wemple, 551. ;

oops Mut. Ins. Co. v. Westcott, 131,

People'v. White, 721.

People v. Williamsburgh Gas Co., 619,
635, 709. :

People v. Woodstock T. Co., 704.

J

 

People v. Wren, 700.

Peoria, etc., R’y v. Coal Valley Co., 777.

Peoria, ‘etc., R. R. Co. v. Elting, 148,
517, 518. :

Peoria & R. I. R. R. Co. v. Peoria, 858,

oe & R. I. BR. R. Co. v. Preston, 185,

1%. ;
eons etc,, R. R. Co. v. Thompson, 382,
29,

Pepper v. Chambers, 573.

Peppercorne v. Clinch, 462.

Peppin v. Cooper, 913. __.

Percy v. Millaudon, 316, 314, 894, 918,
912. :

Perdicaris v. Charleston Gas Light Co.,.
415, 828. | ‘ é

Perin v. Carey, 852. j

Perin v. Parker, 471.

Perkins v. Church, 232, 209. :

Perkins v. Maysville, etc., Assoc., 876.

Perkins v. Missouri R. R.,-879.

Perkins v. Portland, Saco & R. R. R.,.
785, .

Perkins'v. Port Washington, 120.

Perkins v. Sanders, 238, 719, 186, '

Perkins v. Savage, 73, 82. —

| Perkins v. Union B., H. & E. M. Co.,

180.

Perkins v. Washington Ins. Co., 935,
933, 936, 914.

Perpetual Ins. Co. v. Goodfellow, 574,
571, 580, 576.

Perrine v. Chesapeake, ete., Co., 772.

Perrine v. Firemen’s Ins. Co., 578,

Perrine v. Granger, 142.

Perry v. Barnett, 475.

Perry v. Hale, 396, 260, 172.

Perry v. Hoadley, 184.

Perry v. Keane, 105,

Perry v. Little Rock, etc., R. R., 904,

Perry v. Maxwell, 331.

Perry v. Round, etc., 3. 4

Perry v. Simpson, etc., Co., 925.

Perry v. Turner, 215, 254, 284, 227, 236,
235, 239. 3 =

Perry’s Case, 896.

Persch v. Quiggle, 394.

Persch v. Simmons, 212.

Person v. Warren R. R. Co., 641.

Persse, ‘etc., Works v. Willett, 714.

Peru Iron Co., Ex parte, 853.

Peruvian R’y Co., In re,.72, 984, 825, 71.-

Peterborough, etc., R. R. Co. v. Nashua, -
etc., R. R. Co., 482, 34. :

Peters v. Heywood, 645.

re v. Lincoln & N. W. R. Co., 158,

83, e

Peters v. Ft. Madison,.etc., Co., 728.

Peters v. Marshville Sav. Bank, 491.

Peters v. St. Louis, etc., R. R. Co., 800.

Hater Pats Sav. Co. v. Lumsden, 575,

eee y. IIL Land & Loan Co., 345,

Peterson v. New York, 933,
TABLE OF CASES.

IXxxix

[The, references are to the foot-paying.}

Peterson v. Sinclair, 211.
Peto v. Brighton, ete., Ry Co., 377,
Petre v. Eastern, etc. ‘Co., 905.
Petre v. Petre, 337.
Petrie v. Hannay, 528, 370, 388.
Petrie v. Wright, 934.”
Pettillon v. Hipple, 380.
Pettibone v. McGraw, 241.
Pettibone v. Toledo, etc., R. R. Co., 836.
Pettis v. Atkins, 258, B51.
Peychaud v. Love, 204,
Pfohl v. Simpson, 253, 218, 240, 239.
Phelan v. Hazard, 49, 38, 52.
Phelan v. State, 557.
Phelps v. Farmers’ & Mech. Bank, 590.
Phelps v. Farmers’, etc., Bank, 7, 590.
Phelps v. Lyle, 690.
Phene v. Gildan, 540.
Philadelphia, etc., Co.’s Appeal, 606,
514, 806,
Phil., ete., R. R. Co., v. Bowers, 799.
Phil. Contributionship, etc., v. Com.,
634,
Phil. Loan Co. v. Towner, 866, 848.
Phil. Fire Ass’n v. New York, 640,
Phil., etc., Co, v. Knight, 808, 880.
Phil., ete., Co. v. Penn, 641.
Phil. |R. RB. Co. v. Cowell, 172, 88, 594,
64,
Phil. R. R. Co. v. Derby, 876, 874.
_Phil., etc., R. R. Co. v. Hickman, 92.
Phil. R. R. Co. v. Larkin, 878.
Phil., etc., R. R. Co. v. Lewis, 827, 62,
829, 826.
Phil. R. R. v. Quigley, 874, 875, 175,
877, 878, 874.
Phil., etc., R. R. Co. v. Stichter, 828,
823,
Phil. & West Chester R. R. Co. v. Hick-
man, 22, 97, 96, 184, 181, 135.
Philadelphia, W. & D. R. R. Co. v.
Sy Oviper ts 840.
Phila., W. & B, R. R. Co. v. Maryland,
638.
Phil. & Wilmington R. R. Co, v. State,
~ 625.
Philippi v. Philippi, 962.
Philips v. Albany, 106, 116.
Phillips Academy v, King ig, 810.
Phillips v. Blatchford, 547, 552, 555. .
Phillips v. Campbell, 926, 930.
Phillips v. Covington & Cin, Bridge Co.,
22, 189.
Phillips v. Eastern R. R. Co., 596, 585,
303.

Phillips v. Ives, 380.

Phillips v. Knox County Ins, Co., 8.

Phillips v. Noir, 476, 466.

Phillips v. Thurasson, 288, 251.

Phillips v. Wickham, 700, 691, 676, 672,
677. .

Phillips v. Winslow, 841, 840, 843.

Phillips v. Wortendyke, 768.
Phillipsburgh Bank v. Lackawanna
R. R. Co., 873,

 

Phipps.v. Jones, 552.

Phoenix Foundry v. North River Ga
Co., 977, 699.

Pheenix Ins.
865.

Phoenix, Warehousing Co., Re, 815.

Phoenix Warehousing Co. v. Badger,
ee 65, 194, 64, 285, 219, 155, 128, 56,

Phosphate, etc., Co. v. Green, 958, 148,

Co. v. Commonwealth,

Phosphate Sewage Co, v. Hartmont,
736, 740.

Pickering’ s Claim, 942.

Pickering v. Appleby, 377.

Pickering v. Cease, 382.

Pickering v. Demeritt, 473, 464.

Pickering v. Ilfracombe R’y Co., 182.

Pickering v. Stephenson. 773, 979.

Pickering v. Templeton, 165, 178, 197, 47.

Pickford v. Grand Junction Ry, 794,

Pidgeon.v. Burslem, 386.

Pier v. George, 244.

Pier v. Hanmore, 244.

Pierce v. Burroughs, 606.

Pierce v. Commonwealth, 675.

Pierce v. Compton, 865, 851, 869.

Pierce v. Emery, 840, 841, 837, 844.

Pierce v. Equitable Life ‘Ass'n Co., 588.

Pierce v. Drew, 797.

Pierce v. Jersey, etc., Co., 905.

Pierce v. Kearney. 8.

Pierce v. Milwaukee, 240, 216, 215, 241.

Pierce v. Milwaukee & St. Paul P. R.
R. Co., 842, 840.

Pierce v. Partridge, 7.

Pierce v. Somersworth, 991.

Pierson v. Bank of Washington, 577,
576.

Pierson v. McCurdy, 846, 351, 961, 976.

Pierson v. Morgan, 962.

Pike v. Bangor & Calais 8S. L. R. R.
Co., 184.

Pike County v. Rowland, 658.

Pike v. Shore Line, 191, 181, 127.

Pillow v. Roberts, 938. ,

Pim’s Case, 379, 82. 81.

Pinedo v. Germania. etc:. Co., 398.

Pine Grove v. Tabbet, 104.

Pine River Bank v. Hadsdon, 183.

Pingrey v. Washburn, 814, 813, 524.

Pinkerton v. Manchester, etc., R. R.
Co., 644, 481, 508, 650, 642, 425, 647, 651.

Pinkett v. Wr: ‘ight, 358, 567.

Pinson v. McCarty, 976.

Pinto Silver Min. Co., in re, 960.

Pioneer Gold, etc., Co. v. Baker, 970.

Pioneer Paper Co,, Re, 681.

Pipe v..Bateman, 554, 547, 552.

Piscataqua Bridge v. N. H. Bridge, 804,

Piscataqua Ferry Co. v. Jones, 183, 148,
155.

Pitcher v. Board of Trade of Chicago,
547,

Pitchford v. Davis, 188, 554, 190.

i
xc

TABLE OF CASES.

% [The references are to the foot-paging.]

Pitman, Ex parte, 835, 823.

Pitman’ v. Kintner, 943, 825.

Pitot v. Johnson, 505, 581, 569, 480.

Pitts v. Temple, 669.

Pittsburg, etc., v. 7 pplenate. 71.

Pittsburg, Cin. "& St. L . R’y Co, v. Kain,
789,

Pittsburg, Cin. & St. L. R’y Co. v. Hol-
lowell, 789

Pittsburg Coal Co, v. Foster, 955.

Pittsburg, etc., Co. v. Reese, 921.

Pittsburg & Connellsville R. R. Co. v.
Stewart, 92, 95, 98, 91, 923, 156.

Pittsburg Iron Co. v. Otterson,- 281.

Pittsburg Min. Co. v. Spooner, 741.

Pittsburg & Steubenville R. R. Co. v.
Biggar, 90, 92.

Pittsburg, etc., R. R. Co.’s Appeal, 33,
965

Pittsburg, etc., R. R. Co. v. Alleghany
Co., 128.

Pittsburg, etc.. R. R. Co. v. Applegate,
67, 69, 182.

Pittsburg R. R. Co. v. Byers, 202, 198.

Pittsburg R. R. Co. v. Clarke, 568, 575,
127, 570, 580, 281, 573, 574.

Pittsburg, etc., R. R. Co. v. County of
Allegheny, 304, 3038, 310, 596.

Pittsburg, etc., R. RB. v. Gazzam, 519,
64, -70,. 88.

Diseoures etc., R. R. Co. v. Plumber,
202.

Pita bars, etc., R. R. Co. v. Rothschild,

Pittsburg, etc., R. R. v. South, etc., R.

R., 800.

Pittsburg, etc., R’y v. Rugby, 950.

Pittsburg, etc., R. R. Co. v. Woodrow, 92.

Pitzman v. Freeburg, 111.

Pixley v. Boynton, 382, 384,

Pixley v. Roanoke, etc., Co., 707.

Planters’, etc., B’k v. Andrews, 886.

Planters’ Bank, aes v. Bivingsville,
etc., Mfg. Co.,

Planters’, etc., Bank y. Padgett, 257,

Planters’ Bank v. Sharp, 933, 849.

Planters’ Bank v. State, 705.

Planters’ Bank v. Union Bank, 847.

Planters’ Bank v. Whittle, 851, 764,

Planters’ Ins. Co. v. Wicks, 723,

Planters’, etc., Ins. Co. v. Selma Sav.
oe 568, 574, 578, 575, 447, 572, 569,

Planters’ & M. B’k v. Leavens, 510..
Planters’ etc., Co. v. Olmstead, 929,
Plaskynasture, etc., Co., Re, 38.

Plate Glass Ins. Co. v. Sunley, 177, 196.
Platt v. Ashman, 721,

Platt v. Archer, 995,

Platt v. Birmingham, 572, 581, 406, 950.
Platt v. Hawkins, 353,

Platt v. Jones, 57,

Platt v. Turner, 460.

ae etc., Co. v. Northern, etc., Co.,

 

Platte Valley B’k v. Harding, 714,

Plimpton v, Bigelow, 498, 11, 503,

Plitt v. Cox, 721.

Plumb v. Campbell, 372.

Plumbe v. Neild, 609.

Plymouth Bank v. Bank of Norfolk,
569, 506, 509.

Plymouth R. R. Co. v. Colwell, 780.

Plympton Min. Co. v. Wilkins, 161.

Pneumatic, etc., Co. v. Berry, 981, 960,

Pochelu.v. Kemper, 268.

Pocock v. Reddington, 358.

Polar Star Lodge v. Polar Star Lodge,
812, 696.

Police Jury v. McDonough, 104.

Pollard v. Bailey, 234, 214, 240, 239,

Pollard v. Gardiner, 893.

Pollard v. State, 630.

Pollard v. Maddox, 842.

Polleys v. Ocean Ins. Co., 946, 948,

Pollock v. Pollock, 610.

Pollock v.. Nat’! Bank, 411.

Pollock v. Shultz, 757. :

Pollock v. Stables, 475, 466, 474.

Pomeroy v. N. Y. R. R. Co., 991.

Pond v. Framingham, etc., Co., 965.

Pond v. Vt. Valley R. R. Co., 963.

Pond v. Vermont, etc., R. R. Co., 974,

Pontchartrain R. R. v. Heime, 950.

Pontchartrain R. R. Co. v. Paulding,
893.

Pontiac, etc., Co. v. Hilton, 711,

Pontius, Re, 722,

Poock v. Lafayette Build., 845.

Poole v. Middleton, 375, 368, 369.

Poole v. West, etc., Ass’n, 320, 929, 392.

Pooley Hall Colliery Co., Re, 824, 834.

Pool’s Case, 202, 128.

Pope v. Br: andon, 850.

Pope v. Capital Bk, 256.

Pope v. Leonard, 241, 217, 235.

Pope v. Terre Haute, etc., Co., 992.

Port v. Russell, 732. .

Porter v. Androscoggin, R. RB. Co., 938.

Porter v. Bank of Rutland, 951, ao

Porter v. Buckfield Branch R. R.,

Porter v. Parks, 486, 467.

Porter v. Pittsburgh, ates 400 738, 766.

Porter v. Raymond, 96, 9:

Porter v. Robinson, 668, 56, 666, 669.

Porter, v. Rockford, ete., R. R. Co., 660,
615, 614, 617, 616.

Porter v. Sabine, 970.

Porter v. Sawyer, 380.

Porter v. Viets, 384,

Porter v. Wormser, 379, 463, 465.

Portland Bank v. Stone, 845.

Portland Dry Dock, etc., Co, v. Trustees
of Portland, 699.

Portland, etc., R. R. Co. v. Grand, 800.

Ean ete., . R. R. Co. v. Graham,

Portland & Oxford Central R. R. Co. v.
Inhabitants of Hartford, 97, 120.

Portland, etc., R. R. v. Deering, 800.
‘TABLE OF CASES.

\

XCl

[The references are to the foot-paging.]

Force Mobile v. Louisville, etc., R. R.,

Port Royal R. R. Co. v. Hammond, 872,
994, 871.

Portsmouth, etc., Co. v. ‘Watson, 989.

Post v. Supervisors, 101.

Be Toledo, etc., R. R. Co., 245, 557,

Pott v. Flather, 647, 650.

Potter, Appeal of, 357.

Potter’ v. Baker, 336.

Potter v. Bank of Ithaca, 814, 845.

Potter v, N. Y. Asylum, 927, 923.

Potter v. Rio, etc., Co., 867.

Eee Stephens Machine Co., 234,

Potter v. Thornton, 852,

Potter’s Appeal, 59.

Potteries, etc., R’y Co. v. Minor, 8385.
Potteries,. etc., R’y Co., Re, 299.

Potts v. Wallace, 200.

Poughkeepsie, etc., Co., Re, 857.
Poneubecrse etc., Co. v. Griffin, 517,

Powell v. Jessopp, 549, 379.

Powell v. M’Cord, 384.

Powell v. Newburgh, 934.

Powell v. North Mo. R. R. Co., 721,
701.

Powell v. Penn. R. R..

Powell v. Oregonian Ry, 228, 280, 699,

251,

Pow ell v. Willamette R. R. Co., 761,
272.

Power v. Cassidy, 535.

Power v. Conner, 979.

Powers v, Harding, 426, 427.

Powers v. Inferior Court of Dougherty
County, 163.

Powis v. Harding, 174.

Powles v. Page, 953.

Prairie Lodge v. Smith, 825,

Prall v. Hamil, 265.

Prall v. Tilt, 364, 365, 423.

Prater’s Estate, Re, 335.

Pratt v. American Bell Tel. Co., 381,,
382, 318.

Pratt_v. Bacon, 970.

Pratt v. Boston & Albany R. R. Co.,
411, 412.

Pratt v. Eaton, 848, 847.

Pratt v. Goswell, 563.

Pratt v. Hutchinson, 548.

Pratt v. Jewett, 696.

Pratt v. Machinists’ National Bank, 316.

Pratt v. Meridan Co., 561.

Pratt v. Munson, 752,

Pratt v. Pratt, 8i1, 587.

Pratt, In re, 698.

, Pratt v. Taunton Copper Mfg. Co., 410.

’ Pratt v. Short, 847, 845.

,Pray, Vv. Mitchell, 378.

Pray’ s Appeal, 357.

Preachers’ Aid Soc. v. Rich, 885, 546.

Prendergast v. Turton, 152.

 

Presbyterian Cong. v. Carlisle Bank,
578, 428, 568,

President, etc., v. Hamilton, 711.

President, ete., Co. v. Weed, 984.

President, etc., v. Myers, 940.

President, etc., v. People, 879.

President, etc., Vv. Moore. 724, 720.

| Preeident, etc., of Romeo v. Chapman,

' 885.

_President and Trustees, etc., v. Thomp-

son, 700.

a Union Bridge Co. v. Troy,

Press, etc., Co. v. State Board, 260.

Preston v. Cincinnati, etc., R. R. Co., 53.

Preston v. Cutter, 928.

Preston v. Fire, etc., Co., 995.

Preston v. Grand Colliery, 77, 78, 1383,
157, 969, 134, 729.

Preston v. Liver pool, ete., R’y Co., 814,
905.

Preston v. Melville, 608, 605.

Preston v. Missouri, 916.

Preston v. Preston, 962.

Prettyman v. Tazewell Co., 103.

Prettyman v. Supervisors, 117, 111,

Price v. Anderson, 605, 608

Price v. Brown, 269.

Price v. Grand, etc., R. R., 659, 122,

Price v. Great Western R’y Co., 886.

Price v. Grover, 484.

Price v. Minot; 376, 381.

Price v. Reed, 490.

Price v. Price, 13.

Price v. Whitney, 290.

Price v. Yates, 252. ‘

Price’s Appeal, 266. —~

ee v. Essex Hat Manufg. Co., 226,

04, 209

Priest v. White,. 50. 170, 964.

Prince, ete., Co. v. Prince, etc., Co., 986.

Prince v. Lynch, 247.

Prince of Wales Ass. Co. v. Harding,
945.

Princess of Reuss v. Boo, 698.

Princeton, etc., Co. v. First Bank, 852.

Princeton Bank v. Crozer, 499.

Printing House v. Trustees, 520.

Proprietors, etc., v. Frye, 919.

Props. of N. Bridge-v. Story,, 185.

Proprietors, etc., v. Dickerson, 86, 195. .

Proprietors of Lock, etc., Vv. Nashua &
L. R. R. Co., 857, ‘861.

Pruprieiors Union Lock, etc., v. Towne,
524, 519.

Prosser v. First Nat’l Bank, 396.

Prosper, etc., Co., In re, 549.

Protection Life Ins. v. Osgood, 277, 58.

Br eenen Life Ins, Co. v. Osgood, 643,

2.

Prothro v, Meriden, etc., 916.

Prouty v. Lake Shore, etc., R. R. Co.,
701, 30, 805, 307, 308, 994.

Prov. Bank v. Billings, 625, 687.

Prov. -Inst. v. City of Boston, 629, 628,

,
xcii

TABLE OF CASES.

[The references are to the foot-paging.]

Prov. Inst. for Sav. v. Gardiner. 623.

Provident Sav. Bank v. Ford, 996.

Prov. Sav. Inst. v. Jackson Place, etc.,
Co., 515, 294, 227. eee

Prov., etc., R. R. Co. v. Wright, 623.

Provincial Ins. Co. v. Shaw, 281.

Psychaud v. Hood, 156.

’ Pugh & Sharman’s Case, 79, 84, 79.

Pulford v. Fire Dep’t, 888.

Pullan v. Cincinnati & C. A. L. R. R.,
841, 839, 842.

Pullman v. Upton, 321, 47, 269, 282, 985,
984.

Pullman Pal. Car Co. v. Missouri Pac.

\,, B. RB. Co., 350, 701.

Pulsford v. Richards, 164, 155.

Pumpelly v. Green Bay Co., 864."

Purchase v. New York Exchange Bank,
431, 447, 406, 425, 354.

Purdy’s Case, 183. -

Purse'v. Snaplin, 333.

Purton v. New Orl., etc., R’y Co., 723.

Pusey v. New Jersey W. H. R. Co.,
825.

Putnam v. City of New Albany, 207,
83, 92. : ; ‘

Putnam v. Sweet, 685.

Pyles v. Riverside, etc., Co., 850.

Pynchon v. Day, 561.

Pyrolusite, etc., Co., In re, 697,

Q.

Quarl v. Abbett, 407.

Queen v. Bradford Nav. Co., 879.
Queen v. Carnatic R. Co., 275.
Queen v. Eastern Cos. R’y Co., 717.

Queen v. General Cemetery Co., 426.

Queen v. Grand Junction R’y, 791.

a v. Great Northern, etc., R’y Co.,
_ 879.

Queen v. Grimshaw, 669, 670.

Queen v. Gurney, 401.

Queen v. Lancashire, etc., R’y Co., 717.

Queen v. Ledyard, 212, 130.

ayer v. Liverpool, M., etc., R’y Co.,

2.

Queen v. London, 791.

oe v. Londonderry, etc., R’y, 126,

Queen v. Manchester, 879.

Queen v. March, 401.

Queen vy. Mariquita Min. Co., 561,

Queen v. Saddlers’ Co., 887.

Queen v. Smith, 547.

Queen v. Stewart, 401.

Quéen v. Undertakers of the Grand
Canal, 565.

Queen v. United, etc., Tel. Co., 797.

Queen v. Victoria Park Co., 212, 180.

Queenan v. Palmer, 289, 248.

Queen’s College v. Sutton, 382.

Queensburgh v. Culver, 105, 107.

Queensland, etc., Co., Re, 211.

Quick v. Lemon, 88, 246. '

 

Quinby v. Vermont Central, etc., 863.

Quincey v. White, 370.

Quincey v. Young, 370.

Quincy Bridge Co. v. Adams Co., 615,

. 871, 636, 872. ©

Quincy, etc., Co., v. Hood, 950.

Quincy, etc., R. R. Co. v. Morris, 103.

Quincy v. Steel, 974, 981, 964.

Quiner v. Marblehead Social Ins, Co.,
419, 368, 354.

Quinn v. Iowa Central R’y Co., 99.

Re

Racine ‘County Bank v. Ayers, 311, 94.

Racine, etc., R. R. Co. v. Farmers’ L, &
T. Co., 701, 718, 872.

Racine R. R. Co. v. Farmers’ Loan & T.
Co., 935, 751.

Rae v. Grand Trunk R. R. Co., 869.

Raeder v. Bensberg, 228.

Rafferty v. B’k of Jersey City, 714.

Ragan v. Aiken, 793.

Ragland v. Broadnax, 308.

Rahm v. Bridge, etc., 808.

Railway Co. v. Allerton, 520, 317.

Railway Co. v. Alling, 980, 860.

Railroad Co. v. Becht, 992. ; .

Railroad Co. v. County of Otoe, 102,
105.

Railroad Co. v. Commissioners, 637.

Railroad, etc., Co. y. Falconer, 121, 108,
112. ‘ '

a

Railroad Co, 'v. Gaines, 687. “ ,

Railroad Co. v. Georgia, 639, 701.
Railroad Co. v. Howard, 600, 750, 855,
807.

Railroad Co. v. Jackson, 641.

Railroad Co. v. James, 842.

eae Cos. v. Keokuk, etc., Co., 920,
819.

Railroad Co. v. Koontz, 873.

Railroad Co. v. Lewis, 854.

<i

Railway Co. v. McCarthy, 785, 786.
Railroad Co. v. Mfg. Co., 786, 787, 795.
Railroad Co. v. Orr, 831.

Railroad Co. v. Pearce, 155.

Railroad Co. v. Penn., 625.

Railway Co. v. Phila., 637.

Railway Co. v. Platt, 786. -

Railroad Co. v. Portland, etc., R. R. Co.,

801; 800.

Railroad Co. v. Richmond, 798,

Railroad Co. v. Rollins, 724.

Railroad Co. v. Stratton, 548.

Railroad Co. v. Talman, 839,

Railroad Co. v. Vance, 636,

Railroad Co. v. Webb, 548.

Railroad Co. v. White, 70.

Railroad Co. v. Whitton, 878, 988.

Railroad Commissioners’ Cases, 798, 799.

Railroad Commissioners v. Oregon, etc.,
Co., 799. *

Railroad Commissioners v. Portland,
ete., R, R. Co., 2!
TABLE OF CASES.

XCilL

[The references are to the foot-paging.] ‘

Rainey v. Laing, 856.

Raisbeck v. Oesterricher, 702.

Raleigh, etc., R. R. Co. v. Conner, 621.
Raleigh v. Fitzpatrick, '746.

Raleigh, etc., R. R. Co. v. Reid, 625.
Ralls v. Douglass, 110.

Ramsden v. Boston R. R. Co., 876, 874,
Ramsey v. Erie R’y Co., 315, 965, 821.
Ramsey v. Gould, 968, O74.

Ramsgate, etc., Co. v. Montefiore, 71, 72.
Ramskill v. Edwards, 979.

Ram well’s Case, 48, 30.

Rance’s Case, 602, 599.

Rand v. Hubbell, 585, 608, 607, 583.
ae v. Wilmington R. R. Co., 832, 840,

_ Rand v. White Mountain R. R. Co., 141,

211,

Rand v. Wiley, 133, 372.

Rand v. Upper Locks, etc., Co., 991.

Randall v. Albany City Nat'l Bank, 647,
651, 474,

Randall v. Elwell, 8438, 640.

Beatally: Van Vechten, 934, 943, 936,
935

Randolph v. Larned, 780.

Randolph v. State, 557.

Range v. Franklin, 7380,

Ranger v. Great Western R’y Co., 875,
158, 564, 874.

Rankin v. Hop, etc., Co.. 98.

Rankine v. Elliott. 219, 220.

Rankins v.. McCullough, 495, 494.

Ransome v. East. Co. R’y, 798, 791.

Ranson v. Stonington, etc., Bank, 938,
983.

Rapid Tel. Co. v. Conn. Tel. Co., 796.

Raritan, etc., R. R. Co. v. Delaware,
etc., Canal Co., 777, 863.

Rashdall v. Ford, 768.

Ratcliffe v. Davis, 485, 487.

Begone v. Parkersburg, etc.,
74,

Rathbun v. Snow, 946.

Ray v. Powers, 254, 553.

Raymond v. Brodbelt, 333.

Raymond v. Leavitt, 370, 528.

Raynell v. Lewis, 546.

Rawley v. Horne, 954.

Rawlings v. Hall, 389, 467.

Rawlins v. Wickhams, 169..

Read v. Head, 609.

Read v. Lambert, 470.

Read.v. Memphis. Gayoso Gas Co., 181,
918,

Read v. Jaudon, 463.

Reading Industrial Mfg. Co. v. Graeff,
229.

Reading v. Webber, 125.

Ream v. Hamilton, 386.

Reaveley, Ex parte, 81.

Reaveley’s Case, 81.

Rece v. Newport, etc., Co.; 869.

Reciprocity Bank, Case of, 296, 515, 278,
296, 270, 276, 841, 321, a5.

Co.,

| Regina v.

 

Recomier, etc., Co. v. Seymour, 923.

Red Rock v. Henry, 112, 121.

Red W. Hotel Co, v. Friedrich, 198,

Red River B. Co. v. Clarkesville, 858.

Redfield v. Wickham, 780.

Reding v. Anderson, 552.

Redmond v. Dickerson, 742.

Redmond v, Enfield Mfg. Co., 699, 994.

Reed’s Appeal, 841, 33.

Reed v. Boston Machine Co., 309, 328.

Reed v. Bank of Newburgh, ” 588,

Reed v. Copeland, 339.

Reed v. Hoyt, 815, 24, 658, 22, 754.

Reed v. Head, 607.

Reed v. Home Sav. Bank, 877.

Reed v. Jones, 682,

ee v. Paper Tobacco Warehouse Co.,

Reed v.
66.

Reese v. Bank of Commerce, 568, 575,
577, 574, 576, 570.

Reese Vv. Bank ‘of Montgomery, 319, 592,

1

Reese v. Bank, 318.

Reese v. Conocheaugue Bak 984, 845.

Reege v. Fermie, 388.

Reese River Silver Mining Co. v. Smith,
169, 168, 165, 174, 160, 164, 167, 162.

Reeve v. Dennett, 391, 892.

Reffe v. Life Ins. Co., 622.

Reformed, etc., Church v, Brown, 86.

ea ete., ’Co:, In re, 660, 62, 836,

Richmond Street R. R. Co., 195,

ee v. Williams, 718, 520.

Regina v. Aldham, etc., ‘Ins. Soc., 662.

Regina v. Arnaud, 886. ~

Regina v. Brown, ‘401.

Carnatic R’y Co., 354, 488.

Cronmire, 466,

Esdaile, 401.

Regina v. Liverpool, etc., R’ Y, 434,

Regina v. Nash, ae

Regina v. Wing, 5

Regina v. The Be dalore’ Co., 559, 564.

Reg. v. London -& St. Catherine Docks
- Co., 568.

Reg. y. Wilts, & Berks.
560, 565, 558.

Reg. v. Gov., etc., Co., 677.

‘Reg. v. Grand Canal, 563.

Rehm v. King, etc., Co., 932.

Reichman v: Manhattan Co., 565,

Reichwald v. Com. Hotel Co,, 654, 20,
656, 700, 851, 906, 7, 254.

Reid’s Case, 278, 81,

Reid v. Eatonton Mfg. Co., 266, 598.

Reid v. Allen, 229. ~~

Regina v.
Regina v.

Canal Nav.,

‘Reid v. Northwestern R. R. Co., 987.

Reiger v. Beaufort, 118.

Reilly v. Oglebay, 665, 691.
Reineman -v. Covington, 105.
Reitenbaugh v. Ludwick, 651, 647.
Remfrey v. Rutter, 468.
Remington v. King, '249.
XviV

TABLE OF CASES.

[The references are to the foot-paging/

Remington v. Samana Bay Co., 210.

Renner v. Bank of Columbia, 476.

Rennie v. Wynn, 899.

Rennie v. Clarke, 899.

Renshaw v. Creditors, 492.

Rensselear, etc., T. Co. v. Barton, 143,
184.

Rensselaer & S. R. R. Co. v. Davis, 856,
862, 858, 857.

Rensselaer R. Co. v. Wetsel, 198, 148,
186.

Republic Ins. Co., Re, 228, 196, 346.

‘Republic Life Ins. Co. v. Pollock, 628.

Reuter v. Telegraph Co., 797, 944.

Revere v. Boston, 616, 700. |

Rex v. Bavb, 562.

Rex v. Buckingham, 565.

Rex v. Prop. of Birmingham Canal, 717.

Rex v. Carmarthen, 670.

Rex v. Coopers Co., 889.

Rex v. Dodd, 547, 548.

Rex v. Doncaster, 665, 666.

Rex v. Gardner, 885.

Rex v. Head, 887, 687, 888.

Rex v. Langhorn, 668.

Rex v. Town of Liverpool, 665, 891.

Rex v. Miller, 660.

Rex v. Newcastle, 562, 559.

Rex v. Spencer, 687, 887, 888,

Rex v. Toppenden, 889,

Rex v, Vice-Chancellor, 941.

Rex v. Westwood, 720, "887.

Rex v. Worcester Nav. Co., 482.

Reynell v. Lewis, 900.

Reynolds v. Feliciana Steamboat Co.,
236, 237.

Reynolds v. Myers, 374, 985.

Reynolds v. Simpson, 815.

Rezet v. McClellan, 492,

Rhey v. Evensburg, 67, 81, 88.

Rhodes v. Webb, 922.

, Ribon v. R, R. Cos., 970, 760, 749, 832.

Rice’s Appeal, 765.

Rice’s Case, 739,

Rice v. Merrimack Hosiery Co., 245.

Rice v. Nat. Bank, etc., '702.

Rice v. Peninsular Club, 932, 909, 912.

Rice v. Rock Island R. R. Co., 518, 193.

Rice v. Rockefeller, 429.

Rich v. ‘State Nat. Bank, 925, 75.

os v. Attleborough Nat. Bank,

Richards v.
Richards v.
Richards v.
832.
Richards v.
Richards v.
Richards v.
Richards v,
Richards v.
Richards v.
933, 838.
Richards v, New Hampshire Ins, Co.,
851, 894,

Beach, 209.
Brice,' 248,
Chesapeake, etc., R. R. Co.,

Coe, 209, 235.

Crocker, 249.

Donagho, 110,

Home, ete., Ass’n, 72,
Kinsley, 201,

Merrimack, etc., R. R. Co.,

Richardson v.

 

Richards v. Town, etc., 629, 631.
Richardson’s Case, 273, 279, 296, 81.
Richardson v. Abendroth, 270, 228, 290,

238.
Richardson v. Kelley, 380.
Richardson v. Mass., etc., Ass’n, 852..
Pitts, 251, 259.
Richardson, 607, 605.
R. R. Co.

Richardson v.

Richardson v. ss :

Richardson v. Sibly, 841, 838,

Richardson v. Vermont, etc., R. R. Co,,
804, 668, 310, 872, 306.

Riche v. Ashbury R’y Carriage Co., 815.

Richmond’s Case, 177, 342, 146, 276,

Richmond, etc., R, R. Co. v. Alamance
Co., 616.

Richmond v. Daniels, 617.

Richmond, etc., Co. v, Clarke, 67, 195,

Richmond v. Irons, 290,. 294, 240, 250,
246, 252. -

Richmond, etc., R. R. v. Louisa R. R.,
805, 858.

Richmond, etc., Co. v. Richmond, 815.

Richmond, F. & P. R. RB. Co. v. Snead,
825,

Richmond v. Union Steamboat Gos 476.

Richmondville Mfg. Co, v. Prall, 426,
15.

Richter v. Jerome, 750.

Ricker v. American Loan & Trust Co.,
544, 532, 533.

Rickette v. Birmingham, etc., R’y Co.,
947,

Ricord v. Central Pacific R. BR. Co., 877,
813

Riddington v. Mariposa, etc., Co., 992.

Riddle v. County of Bedford, 915, 914, -

Riddle v. Harmony Fire, etc., Co., 891.

Riddle v. Philadelphia, 106.

Riddle v. N. Y., etc., R. R. Co., 995.

Ridenour v. Mayo, 552, 256.

Rider v. Kidder, 339.

Rider v. Morrison, 294, 177.

Rider Life Raft v. Roach, 814,

Ridgefield & N. Y. R. R. Co. v. Brush,

“ 189, 156, 155, Te

Ridgefield & N. Y. BR. R, Co. v. Rey-
nolds, 98.

Ridgely v. Dobson, 546.

Ridgway v. Farmers’ Bank, 912, 828,
826.

Ridley v. Plymouth, etc., Co., 659, 925.

Rielly v. Oglesby, '753.

Riggs v. Commercial, etc., Ins, Co., 9

Riggs v. Cragg, 606,

Riggs v. Swann, 552, 280.

Riker v. Alsop, 749.

Rikhoff v. Brown’s Rotary, etc., Co.,
133, 145.

Riley v. City of Rochester, 854, 852.

Riley v. Albany Sav, B’k, 981.

Riley v. Packington, 898.

oe v. People’s Freight R’y Co.,
15

Ringo v. Biscoe, 851,
TABLE OF CASES.

xcyv

[The references are to the foot-paging.]

Ripley v. Sampson, 226, 271.

Risley v. Indianapolis, 732, 923.

Ritso’s Case, 72.

Ritter v. Cushman, 472.

Ritterband v. Baggett, 889.

Rivanna Nav. Co. v. Dawsons, 345,

Hiver Dun Nav. Co. v. North, etc., Co.,

Rivers v. Dudley, 852.

Rives v. Montgomery South Plank R.:
Co., 159, 156, 131.

Rivington’s Case, 779.

Robbins v. Butler, 554, 545,

Robbins v. Waldo, 555. ,

Roberts’ Case, 94, ‘98,

Roberts’ Appeal, 520, 606, 554, 340.

Roberts, Ex parte, 900, 899,

ae v. Mobile & O. RB. R. Co. » 97,

5,

Robertson v. Bullions, 810.

Robertson v. Rockford, 108, 109.

Robins v. Embry, 851.

Robinson v. Addison, 3382.

Robinson v. Bank of Darien, 123, 248,
‘218, 258.

Robinson v. Bidwell, 123, 103, 229.

Robinson v. Beale, 344.

Robinson, v. Edinboro Academy, 86.

Robinson v. Chartered Bank, 369.

Robinson v. Fitchburg, etc., R. R. Co.,
948,

Robinson v, Hunt, 336.

Robinson v. Hurley, 480, 491, 490.

Robinson v. Mollett, 475, 465, 464.

Robinson v. Lane, 720.

Robinson v, Nat. Bank of New Berne,
506, 594, 427, 645.

Robinson v. Nat’l Bank, 588, 589, 852.

Robinson v. Norris, 471, 465, 476.

Robinson v. Philadelphia, etc., R. R.
Co., 749.

Robinson v. Pittsburgh & Connellsville
R. R. Co., 178, 156. ;

Robinson v. Smith, 816, 729.

Eg iaeon v. Spaulding, etc., Co., 498,
142.

Robinson’s Executors’ Case, 271,

Robison v. Oceanic, etc., 990.

Robson v. Dodds, 969.

Roche v. Ladd, 87@.

Rochdale Canal Co. v. King, 960,

Rochester, etc., R’y Co., Inre, 78, 92, 674,
857.

Rochester vy. Alfred, 107.

Rochester Savings Bank v. Averell,
839.

Rochester v. Barnes, 515.

Rochester, etc., R. R. Co. v. N. Y., etc.,
R. R. Co., 986, 860.

Rochester Ins. Co. v. Martin, 61.

Rock v. Nicholis, 381, 509.

Rock Creek v. Strong, 103.

Rock River Bank v. Sherwood, 849.

Rockford, etc., R. R. Co. v. Sage, 903,
787.

¢

 

Rockford, etc., R. R. Co. v. Schunick, 66.

Rockhold v. Canton, etc., Ass’n, 818,

Rockland, etc., Co. v, Sewell, 185.

Rockland, etc., Co. v. Camden, etc.,
Co., 806.

Rockville, etc., Co. v. Van Ness, 69,

Rockville, etc., Turnpike Co. v. Max-
well, 146.

Rockwell v. Elkhorn Bank, 825, 823,

Rocky Mountains Bank v. Bliss, 282,
234, 209.

Rodemacher v. Milwaukee, etc., R. R.,

Roehler v. Mechanics’ Aid Society, 890.

Rogan v. Watertown, 106,

Rogers’ Case, 72, 99. -

Rogers, Ex parte, 386, 914.

Rogers v. Burlington, 102,

Rogers v. Danby, 7.

Rogers v. Gould, 470, 379.

Rogers v. Huntington Bank, 678, 574,
568, 576, 570.

Rogers v. Lafayette, etc., Works, 974,
970, 976.

Rogers v. Hastings, etc., Co., i

Rogers v. Michigan, etc., R. R., 400.

Rogers v. N. Y., etc., Co. 12,

Rogers v. Oxford, etc., R’y Co., 967.

Rogers v. Phelps, 585.

Rogers v. Jones, 888.

‘Rogers, etc., Works v. Southern R. R.,

808.

Rogers v. Stevens, 507, 505.

Rogers, etc., Co. v.’ Union, etc., Co.,

Rogers v. Wheeler, 832, 749, 537.

Rohner v. First Nat’l Bank, 991.

Roland v. Apothecaries Co., 826.

Rollins v. Clay, 700, 774, 851.

Rolling Mill v, St. ‘Louis, ete.,, R. R.,
924,

Romaine v. Van Allen, 651.

Roman Catholic Orphan Asylum v.
Emmons, 835.

Roman v. Fry, 274, 278, 294,

Home etc., R. R. v. Ontario, etc., R. R.,
724.

Romes v. Cotton Press Co., 362.

Rood v. Railway, etc., Ass? n, 546.

Roosevelt Hospital v. "Mayor of N.Y,
639.

Root v. Godard, 944, 827.

Root v. Oicott, 927.

Root v. Great Western R. R., 786.

Root v. Long,.etc., R. R. Co., 791.

Root v. Sinnock, 227, 288.

Root v. Wallace, 944, 827, 847.

Roots v. Williamson, 360.

Rorke v. Thomas, 604, 250. .

Rose v. City of Br idgeport, 830.

Rose v, Turnpike Co., 700.

Rosenbach v. Salt Springs Nat’l Bauk,
582, 142.
xevi

TABLE OF OASES.

[The references are to the foot-paging.]

Rosenburg v. Weeks, 629.
Rosenfield v. Einstein, 560.
Rosenfield v. Peoria, etc., R’y, 795.
Rosenstock v. Tormay, 466, 475.
Rosenthal v. Madison, etc., Co., 882.
Rosevelt v. Brown, 6, 289, 269.
Rosewarne v. Billings, 386.
Ross, Ex parte, 660.
Ross v. Bank, etc., 147.
Ross v. Borer, 336.
Ross v. Chicago, etc., R. R. Co., 518.
Ross v. Crockett, 658.
Ross v. Estate Investments Co., 160,
162.
Ross v. Lafayette & Indianapolis R. R.
Co., 128, 187, 185.
Ross v. Ross, 510.
Ross v. San Antonio, 178,
Ross v. Silver, etc., Co., 31.
Ross v. Southwestern R. R. Co., 363,
447,
Ross v. Union Pacific R’y Co., 375, 377.
Rotheram, etc., Co., Re, 904.
Rothwell v. Robinson, 974.
Rounds v. McCormick, 240.
Roundtree v. Smith, 381.
Rowe v. Hoagland, 480.
Rowland’s Case, 59, 41.
Rowland v. Meader Furniture Co., 204,
193. :
Rowley, Appeal of, 75, 81.
Royal Bank of India’s Case, 350, 78, 269.
Royal, etc., Bank v. Turquand, 945.
Royal Bank v. Grand, etc., R. R. Co.,
939, 960, 938, 941.
Royal Ex. Ins. Co. v. Moore, 467.
Payee vy. Royalton Turnpike Co.,
44,
Rozet v. McClellan, 490.
Rubey v. Shain, 108.
Ruby v. Abyssinian Soc., 948, 938,
Ruchizky v. De Haven, 385, 383, 462,
273, 387.
Rudge v. Bowman, 374.
Rudolph v. Winters, 389.
Ruerbach v. La Soeur Mill Co., 935.
Ruffin v. B’d of Commissioners, 627.
Rugely & Harrison v. Robinson, 277.
Ruggles v. Brock, 175, 194,
Ruggles v. Illinois, 798.
Ruggles v. City of Fond du Lac, 630. -
eal v. Metropolitan B’k, 394, 448,
Rumsey v. Berry, 387.

Runyan v. Coster, 854, 858, 867, 865,

868.
Rush’s Estate, 357. ;
Russell’s Executors’ Case, 272.
Russell v.- Allen, 856.
Russell v. Bristoll, 88.
Russell v. Loring, 612.
Russell v. Manhattan R’y Co., 565.
a v. McLellan, 719, 909, 700, 701,
Russell v. Temple, 18.

 

Russell v. Texas, etc., R’y, 852.

Russell v. Wakefield, etc., Co., 975, 971,
811. ‘

Rutland & B. R. R. Co. v. Proctor, 788,
855.

Rutland & B. R. R. Co. v. Thrall, 131, .
188, 184, 517, 187, 186, 308, 148, 306,
148, 144, 299, 301, 310, 311, 149, 150,
300. . i.

Rutland, etc., R. R. Co, v. Lincoln, 83,

Rutledge, Ex parte, 610.

Rutz v. Ester & R. Mfg. Co., 199, 159,

Ryan v. Com’rs, 622.

Ryan v. Dunlop, 928.

Ryan v. Leavenworth, etc., R. R. Co.,
589, 959, 349, 782.

Ryan v. Martin, 883.

Ryan v. Ray. 971.

Ryder v. Alton, etc., R. R. Co., 177, 76,
182, 180, 591, 683.

Ryle v. Ryle, 392.

S

Sabin v. Bank of Woodstock, 356, 502,
577, 576, 568,

Sackett’s Harbor Bank v. Blake, 249,
202, 243.

Sackett’s Harbor Bank v. Codd, 847.

Sackett’s Harbor Bank v. Lewis Co.,
814.

Saddle River v. Colfax, 934.

| Sadler v. Lee, 650, 645.

Sadler’s Case, 426, 275, 80.

Safety, etc., Co. v. Smith, 903.

Saffold v. Barnes, 157.

Safford v. Wyckoff, 825, 847.

Sage, Re, 558, 871.

Sage v. Central R. R. Co., 750.

Sage v. Memphis, etc., R. R., 844.

Saginaw Gas Light Co. v. Saginaw City,
804

‘Sagory v. Dubois, 148, 86, 129, 600, 47.

Sahlendecker, Appeal of, 201,

St. Albans v. Nat. Car Co., 620, 622.

St. Andrew’s Bay Co. v. Mitchell, 936.

St. Cecelia Academy v. Hardin, 984.

oh see etc., R. R: Co. v. Assessors, ©

6. -

St. Clair v. Cox, 990, 992.

St. Helen Mill Co., In re, 658.

St. James Club, Re, 546.

St. James, etc., v. Newburyport, etc.,
R. R., 935, 927.

St. John v. Erie R’y Co., 304, 597, 596,
802, 801, 303.

St. John College v. Purnell, etc., 520.

St. Johns v. Steinmetz, 940.

St. Joseph, etc., R. R. Co. v. Buchanan
Co., 105.

St. Joseph Township v. Rogers, 117, 118.

St. Joseph, etc., R. R. Co. v. Ryan, 813.

St. Joseph v. Saville, 788.

St. Lawrence Steamboat Co., Re, 10,
689, 685, 686, 679, 688, 677. ,
TABLE OF CASES.

xcevii

[The references are to the foot-paging.]

St. Louis Nat'l Bank v. Allen, 995.

St. Louis v. Alexander, 764, 105.

Bh Deas & Alton R. R. Co. v. Dalby,

St. Louis, etc., Loan Association v. Au-
gustin, 700, 919.

oe & Tron Mt. R. B. Co. v. Berry,

a etc., R. R. Co, v. Chenault,

St. ous ete., Bank v. Cleveland, etc.,
R’y, 844.
St. Louis, etc., Ins. Co. v. Cohen, 991.'
St, Louis, etc., Co. v. Consolidated,.etc.,
On,
So. Louis, etc., R. R. Co. v. Eakins, 98,
7 :

St. Louis Perpetual Ins. Co. v. Good-
fellow, 568, 420, 570.

St. Louis, etc., R. R, v. Grove, 929.

St. tout R. R., etc., Co. v. Harbine,
51

St. Louis, etc., Co, v. Hilbert, 345.

St. Louis R. R. v. Hill, 793, 792..

St. Louis Association v. Hennessey, 193.

St. Louis, etc., Co, v. Jackson, 740.

St. Louis Iron M., etc., R. R. Co. v.
Loftin, 4,

St. Louis, etc., R. R. v. Mathers, 813.

ee Fouls Nat. Bank v. Papin, 621, 630,

2:

St. Louis, etc., Co. v. Quimby, 768.

St. Louis v. Risley, 940.

St. Louis R. R. v. N. W. RB. R., 709.

St. Louis, etc., Co. v. Sandoval, etc.,
Co., 958, 750, 146.

St. Louis v. Shields, 713,

St. Louis, etc., R. R. v. Tenn., etc.,
R. R., 961.

St. Louis, etc., Bank v. Tiernan, 756, 43.

St. Louis Hosp. Ass’n v. Williams’
Adm’r, 885,

St. Louis, etc., R’y v. Weakly, 787.

St. Louis & San F. R’y Co. v. Wilson,
507.

St. Luke’s Church v. Matthews, 914.

St. Mary’s, etc., Ass’n v. Lynch, 665.

St. Mary’s, etc., v. St. Johns, 179, 914.

St. Mary’s Church v. Cagger, 916.

St. Marylebone Banking Co., Re, 276.

St. Paul & Pac. R. R. Co. v. Porcher,
842,

a Fan etc., R. R. Co. v. Robbins, 200,

5, 85.
st Philip 's Church v. Zion, etc., Church,
720

St. Romes v. Cotton Press Co., 394.

, Salem Bank v, Glouster Bank, 812, 935.
Salem Iron, etc., Co. v. Danvers, 622,
Salem Mill-dam’ Corporation v, Ropes,

828, 186, 185, 83, 313.
Sales v. Bates, 277, 291, 589, 275, 272.
Salisbury v. Black’s ‘Adm’ r, 202.
Salisbury 'v. Metropolitan R’y Co. 310,
604, 968, 603, 597, 598.

&

Salisbury Mills v. Townsend, 480, 860,
595, 588.

Salmon v. Richardson, 396,

Salmon v. The Hamborough Company,
207, 986, 213.

Pejamens v. Laing, 348, 817, 972, 968,

| Saloy v. Hibernia, etc., Bank, 487, 395.

Salt Lake City v. Hollister, 874, 976,
72, 244, 265, 226.

Salt Lake, etc., Bank v. Golding, 626.

Saltmarsh v. Planters’, etc., Bank, 721.

+Saltmarsh v. Spaulding, 264, 656, 839.

Saltsman v, Shults, 554.

Samainego v. Stiles, 210.

Sampson v. Bowdoinham Co., 914, 66%,
659, 719, 664.

Sampson v. Shaw, 370, 380, 528.

Samuel v. Holladay, ”, 970, 657, 946,
887, 759.

Samuels v. Evening Mail, etc., 878.

San Antonio v. Gould, 106

San Antonio v. Lane, 830.

San Antonio v. Jones, 106.

| San Benito, etc., v. Southern P. R. R.
Co., 640,

San Buenaventura Com., etc., Co. v.
Vassault, 663, 664, 665.

‘Sanborn v. Lefferts, "72, 38, 690.

Sanborn v. Benedict, 382,

Sanders v. Bromley, 611.

Sanderson v. Aitna, 180.

Sanderson’s Patents Ass’n, In re, 698.

Sandford v. R. R., 796, 967. \

‘Sandford v. Handy, 168, 159.

San Diego v. San Diego R. R. Co., 758.

Sands v. Kimbark, 239.

Sands v. Sanders, 149,

Sandy, etc., Bank v. Merchants’, etc.,
Bank, 928.

Sandy River R. R. Co. v. Stulls, 761.

Sanford v. ear ‘etc., 550, 551.

San F. & N.’P R. R. Co. v. Board of
Equalization, 634.

San Francisco v. Caldwell, 862.

San Francisco v. Flood, 618.

San Francisco v. Fry, 618.

San F., etc., R. R. Co. v. Bee, 753, 27.
Sanger v. Upton, 56, 47, 199, 175, 20,
213, 207, 64, 129, 276, 221, 5, 218, 88,

Sanitary, etc., Co., In re, 693.

Pan Z ose, etc., Bank v. Sierra, etc., Co. 2

San Jose Savings Bank v. Pharis, 248.

Sankey Brook Coal Co., Re, 182.

San Mateo v. Southern Pacific R. R.
Co., 520. ,

Santa Clara, etc., Co., In re, 689.

Santa Clara Co. v. R. R. Co., 633.

Santa Clara, etc., Co. v. Hayes, 526.

Santa Cruz R. R. Co. v. Schultz, 186.

Pane Cruz R. R. Co. v. Spreckles, 266,

82

Santa, etc., Min. Assoc, v. Meredith, 757.

 

Sanxey v. Towa, 750
X¢eVill

TABLE OF CASES.

[The references are to the foot-paging.]

Sappington v. Little Rock, etc., R. R.,
724,

Sargent, Ex parte, 480, 448, 369, 485,
487, 420, 422.

Sargent v. Boston & L. R. R., 796, 816.

Sargent v. Essex Marine R’y Corp., 580,
420, 509.

Sargent v. Franklin Ins. Co., 428, 509,
854, 888, 642, 368, 567, 12, 425, 651,
569, 573, 595, 647, 420, 368, 381.

Sargent v. Webster, 650, 850, 669, 660,
693

Sauerhering v. Iron Ridge, etc., R. R,
Co., 115.

Saugatuck, etc., Co, v. Westport, 738.

Saunders’ Case, 539.

Savage v. Ball, 678, 52.

Savage v. Russell, 985,

Savage Mfg. Co. v. Armstrong, 989.

Savage v. Medbury, 128.

Savage v. Walshe, 695. ’

Savannah, etc., R. R, Co. v. Lancaster,

829.
Savannah, etc., R’y v. Pritchard, 787.
Savin y. Haylake R’y, 905.
Sav. Assoc. v. O’Brien, 244, 212.
Savings Assoc. v. Topeka, 108.
Savings Bank v. Bates, 851.
Savings Bank, etc., v. Caperton, 895.
Savings Bank v. Davis, 657, 939, 986,
937.
Savings Bank v. Hunt, 887.
Savings Bank v. Nashua, 623.
Savings Bank v, Torrey, 420.
Savita’s Case, 72.
Sawyer v. Dubuque, etc., Co., 775.
Sawyer v. Hoag, 206, 214, 221, 207, 200.
Sawyer v. Taggart, 887, 885, 384.
Sawyer v. Methodist Ep. Soc., 7.
Sawyer v. Winnegance, etc., Co., 948.
Saxby v. Easterbrook, 563.
Saxton v. Texas, etc., R. R. Co., 988,
Sayles v. Blane, 284, 293.
Sayles v. Simpsor, 27.
Scadding v. Lorant, 670.
Scammon v. Kimball, 201.
: Regpeiie v. Academy of Music, 155, 187,
140.
Scarth v. Chadwick, 979.
Schaeffer v. Bonham, 116,
Schaeffer v. Mo. House Ins. Co., 200.
Schaeffer v. Missouri, etc., Co., 63.
Schaffner v. Jeffries, 90.
Schall v. Bowman, 110.
Schalucky v. Field, 250.
Scheffer v. Nat’l Life Ins. Co., 995.
Schenck v. Andrews, 39, 38.
Schenck v. Dart, 338.
Schenck v. Mercer, etc., Ins, Co., 949.
Schenectady, etc., R. R. Co. v. Thatcher,
85, 186, 669, 282, 520, 194, 84, 668,
Schepeler v. Eisner, 474,
Schermerhorn v, Talman, 61.
Schmidt v. Abraham, etc., Lodge, 546.
Schmidt v. Gunther, 554,

 

Schmidt v. Hennepin Co., 574,
Schneitman v. Noble, 928.

Schoff v. Bloomfield, 669, 670, 667.
Schoharie Valley R. R. Case, 685.
Schoharie, etc., R. R., Re, 678, 685.
Scholefield v. Redfern, 609, 610, 612, -
Scholey v. Central R’y Co., 172, 167.
Scholfield v. Union Bank, 688, 680.
School District v. Everett, 352.
School District v. Griner, 884, 855.
Schoolfield’s Case, 894.

Schricker v. Ridings, 227.

Schroder’s Case, 25, 39, 22.

Schuman v. Seymour, 659. .

Schurtz v. Schoolcraft, etc., R. R. Co.,
84, 73.

Schwanck v. Morris, 173.

Schwenck v. Naylor, 398.

Scofield v. Blackmarr, 386.

Scofield v. L. 8. R’y Co., 792, 793.

Scotland Co. v. Mo., Iowa, etc., R’y Co.,
629, ; 4

| Scott v. Central R. R. Co. of Ga., 594,

585, 592, 588, 595.
Scott v. Clinton & 8. R. Co., 842,
Scott v. Dixon, 395, 396, 161.
Scott v. De Peyster, 895. ;
Scott v. Detroit, etc., Society, 259.

| Scott v. Colburn, 838

nt v. Eagle Fire Ins. Co,, 587, 597,

604.

Scott v. Embury, 898.

Scott v. Grand Trunk R’y Co., 788.

Scott v. Indianapolis Wagon Works,
879, 495, 498.

Scott v. Middleton, etc., R. R. Co., 916,
924, :

Scott v. Pequonnock Bank, 420, 505, 15.

Scott v. Rogers, 647.

Scott v. Izon, 535. ;

Scottish, etc., Co., In re, 661.

Scottish v. Petroleum Co.,*Re, 168.

Scottish N. E. R’y Co, v. Stewart, 717.

Scoville v. Thayer, 44, 328, 324, 328, 31,
48, 218, 42, 208, 313, 52, 201, 129, 47, 180.

Scoville v. Canfield, 242, °

Scoville v. Roosevelt, 606.

Scranton, etc., Co., Appeal of, 805, 804.

Scripture v. Francestown Soapstone
Co., 405, 508, :

Seale v. Baker, 162.

Beamiae v. Enterprise Fire, etc., Ins.

0., 9.

Seaman v. Low, 3891.

Searing v. Searing, 589,

Sears v. Hotchkiss, 765,

Searsburgh T. Co. v. Cutter, 10..

Seaton v. Grant, 967, 768,.979.

Seaver v. Coburn, 943.

Seawright v. Payne, 20, 816, 267.

Secombe v. Railroad Co., 862.

ee Ave, R. R. Co. v. Mehrback,
22.

Bicone National Bank v. Hall, 242, 258,.
TABLE OF CASES.

XC1X

[The references are to the foot-paging.]

Second National Bank v. Howe, 950.

Second National Bank v. Lovell, 263.

Second Nat. Bank of Louisville v. Nat.
Bank of New Jersey, 582.

Second & Third St. Pass. Ry Co. v.
Philadelphia, 635.

Secor v. Singleton, 614.

ee Warsaw, etc., R’y Co. v. Abell,
186

Seddon v. Rosenbaum, 378, 372.

Sedgwick Co. v. Bailey, 124,

Seeley v. New York Nat. Exchange
Bank, 322, 597.

ao v. San Jose, etc., Co., 981, 930,

Seeligson v. Brown, 502, 505.
Seighortner v. Weissenborn, 555. .
Seizer v. Mali, 327, 326. .
Self-acting, etc., Co., In re, 64.
se v. St. Louis, ete., R. R. Co.,
502
. Sellers v. Phoenix Iron Co., 756.
Selma R. R. Co. v. Anderson, 175, 165,
185.
Selma, etc., R. R. Co., Ex parte, 103,
Selma & Tenn. R. R. Co. v. Roundtree,
182, |

Selma, etc., R. R.. Co. v. Tipton, 86,

915, 178, 148, 76, 85.

Selwyn v. Harrison, 537.

Semmer, In re, 672, 678.

Semple v. Bank of British Col., 869.

Seneca County Bank v. Massachusetts,
951, 950.

Sercombe v. Catlin, 987.

Seton v. Slade, 932.

Seventh, etc., Bank v. Shenandoah,
ete., Co., 844.

Sewall v. Boston Water-power Co., 408,

’ 410, 445, 412.

Sewall v. Brainerd, 831.

Sewall v. Chamberlain, si

Sewall v. Eastern R. RC 319.

Sewall v. Laficaster Bank, B73, 570, 643,

576.

Sewall’s Case, 324, 325, 821, 828, 817.

Seward v. City of Rising Sun, 12, 618,
617.

Seybert v. Pittsburgh, 122, 102.

Seymour v. Bagshaw, 396.

Seymour v. Bridge, 475.

Seymour v. Canandaigua, etc., R. R.
Co., 840, 843.

Seymour v. Detroit Copper, etc., Mills,
687.

Seymour v. Green, 849.

Seymour v. Ives, 648, 651, 652.

Seymour v. Sturgess, 220, 242, 88, 128,
218, 129.

Shaaber’ s Appeal, 961.

Shackamason Bank v. Disston, 202.

Shackleford v. Dangerfield, 138, 882,
184, 140.

Shackleford v. New Orleans, etc., R. R.
Co., 757.

Shaw v.

 

Shackley v. Fisher, 129.

Shales v. Seigmoret, 384.

Shamburg v. Abbott, 552,

Shamokin Valley R. R. v. Livermore,
841, 843.

Sharp’ s Case, 900.

Sharp v. Dawes, 909, 603.

Sharp v. Warren, 554,

Sharpe v. Belles, 9438,

Sharpless v. Mayor, 107, 18, 101.

Sharpless v. Philadelphia, 106.

Sharpley v. Louth & E. C. R’y Co., 190.

Sharman’s Case, 296.

Shaver v. Bear, etc., Co., 930, 984.

Shaw, Ex parte, 394. \

Bill, 840. ,

Boylan, 264.

Dennis, 103.

Fisher, 292, 428, 293, 376.

Holland, 650, 652, 647.

Clark, 952.

Norfolk Co, R. R. Co., 841, 837,
938, 778, '724.

Shaw v. Port Philip, ete., Gold Min.
Co., 409.

Shaw vy. Railroad, 832, 750.

Shaw v. Rowley, 574, 293, 373.

Shaw v. Morfold, etc., R. R. Co., 832.

Shaw v. Spencer, 361, "486, 447, 476, 359,
446, 488.

Shaw v.
Shaw v.
Shaw v.
Shaw v.
Shaw v.
Shaw v.

f Shawhan v. Zinn, 981, 971.

Shawmut Bank v. Plattsburgh & M.
R. R. Co., 788.

Shawmut Sugar Co. v. .Hampden Mut..
Ins. Co., 885.

Shay v. Toulumne, etc., Co., 908,

Shea v. Madry, 894, 812.

Shears v. Jacobs, 838. ;

Sheffield, A. & M. R’y Co. v. Wood-
cock, 421, 135, 284.

Sheffield Nickel Co. v. Unwin, 807.

Shelby Co. Court v. Cumberland R, R.
Co., 104. -

Shelby v. Hoffman, 869.

Shelby v. Mobile, 112.

pheee R. R. Co. v. Louisville, etc., 665,

Shelbyville & Rushville Turnpike Co. v.
Barnes, 519.

Sheldon v. Chappell, 810,

Sheldon v. Fickemeyer, etc., Co., 959,
960, 850, 774.

Shelley, Re, 480.

Shellington v. Howland, 288, 210, 234,
252, 233, 290, 209.

Shenandoah Valley R. R. Co. v. Grif-
fith, 572, 504,

Shepherd’s Case, 369, 290.

| Shepherd v, Gillespie, 468, 376.

Shepherd v. Johnson, 650.

oo Atlantic & St. L. R. R., 842,
23.

Sheppard v. Scinde, etc., R’y, 722.

Sheppard v. Murphy, 468, 467, 476.

Sheppard v. Oxenford, 548, 902.
G TABLE OF ,CASES.

[The references are to the foot-paging.]

Sheridan, etc., Co. v. Chatham, etc.,
Bk, 912.

‘Sheridan v. Sheridan Electric L. Co.,
735, 973.

Sheriff v. Lowndes, 802.

Sherlock v. Winnetka, 61.

Sherman v. Clark, 327.

Sherman v. Connecticut Bank, 884.

Sherman v. Fitch, 934, 938, 987.

Sherman v. Smith, 515.

Sherman v. Wells, 795.

Shertard v. Sherrard, 610.

Sherrington’s Case, 26.

Sherwood v. American Bible Soc., 852,
868, 867, 550.

Sherwood v. Buffalo, etc., R. R. Co., |

218, 239.

Sherwood v. Meadow Valley M. Co.,
446, 414.

Sherwood v. Tradesman’s Nat’l Bank,
378,

Shetucket Foundry Co. v. Stoddard, 24.

Shewalter v. Pierron, 854, 939.

Shickle v. Watts, 200, 250, 213, 209, 53.

Shield, Re, 340. :

Shields v. Ohio, 520, 798, 522, 701.

Ship’s Case, 523. :

Ship v. Cresskill, 166, 170, 162, 524,

Shipley v. Mechanics’ Bank, 432,

Shipley v. The City of Terre Haute, 128.

Shipman’s Case, 284. .

Shipman v. A‘tna Ins. Co., 354, 481.

Shipper v. Penn. R. R., 792.

Shockley v. Fisher, 850, 220.

Shoe & Leather Ass’n v. Bailey, 563.

Shoemaker v. Nat’l Mechanics’ Bank,
347, 846, 350.

Sholl v. German, etc., Co., 862.

Short’s Estate, In re, 618.

Short v. Medberry, 229,

Short v. Stevenson, 789.

Short_v. Unangst, 694, 664,

Shorter v. Smith, 806, 858.

Shortridge v. Bosanquet, 286, 369.

Shotwell v. Mali, 327, 526.

Shotwell v. McKown, 936.

Shrewsbury, etc., R’y Co. v. London,
etc., R’y Co., 784.

Shropshire Union R’ys & Canal Co. v.
Queen, 360, 448, 404.

Shufeldt v. Carver, 514.

Shurtleff v. Wiscassat, 121.

maa v. Schoolcraft & T. R. R. BR. Co.,
185,

Shuttleworth v. Greaves, 881, 336.

Sibbald v, The Bethlehem Iron Co., 465,
460, 464..

Sibell v. Remsen, 851.

Sibley v. Minton, 545.

Sibley v. Mobile, 103.

Sibley v. Perry, 338.

Sibley V. Quinsigamond Nat’] Bank, 421,
447, 15, 505:

Sichell Case, 284.

Sichell, Ex parte, 900.

 

Sickels v. Richardson. 495, 492, 828,

Siddall, In re, 538, 542.

Sidney’s Case, 72.

Sidney, etc., Co. v. Bird, 741, 740.

Sieghortner v. Weissenborn, 545.

Siegnouret v. Home Ins. Co., 313.

Silk Mfg. Co. v. Campbell, 980.

Silkstone Fall Colliery Co., In re, 664.

Silliman v. Fredericksburg, etc., R. R.,
717, .

Silloway v. Columbia, etc., Co., 990.

Silva v. Metropolitan, etc., Co., 922.

Silver Hook Road v. Greene, 131, 918,

Silver v. Ely, 10.

Silver Lake B’k v. North, 264, 854, 846,
989, 867.

Silverthorne v. Warren R. Ri Co., 641,

Simmons v. Dent, 275.

Simmons v. Hill, 285.

Simmons v. Southwestern R. R. B’k, 360,
361.

Simmons v. Sisson, 253.

Simmons v. Vallance, 333.

Simon v. Anglo, etc., Co., 325, 410.

Simons v. First Nat?l B’k, 848.

Simons v. Vulcan, etc., Co., 787.

Simonson v. Spencer, 235, 287, 238.

Simonton v. Sibley,, 548. :

Simpson's Case, 26.

Simpson’s Claim, 928.

Simpson v. Denison, 807, 518, 783, 779.

Simpson’ v. Moore, 606, 585.

Simpson v. Reynolds, 211.

Simpson v. Westminster Palace Hotel
Co., 773, 818, 818,

Sims v. Street R. R. Co., 79, 747.

Sinclair v. Gray, 565.

Sinclair v. Wayne, etc., Co., 714.

Singer v. Given, 207. :

Singer’s Case, 342.

Singer. etc., v. Belgart, 932.

Singer Mfg. Co. v. Brown, 870.

Singer, etc., Co. v. Carpenter, 27.

Singer Mfg. Co. v. Co. Com’rs, 640,

Singer Mfg. Co, v. Elizabeth, 114.

Singer Mfg. Co. v. Wright, 633.

Single v. Nat’! Ins. Co., 762.

Singleton v. Southwestern R. R., 788.

Sinking Fund Cases, 515, 794, 518, 718.

Sioux City, etc.,.R. R. Co. v. United
States, 596.

Sioux City, etc., R’y v. Sioux City, 800.

Sipperly v. Stewart, 476. 7

Sistare v. Best, 461, 350.

Sitgreaves v. Farmers’, etc., Bank, 418.

Sixth R. R. Co. v. Kerr, 858,

Skiddy v. Atlantic, etc., R. R. Co., 881.

Gijaper v. City of London Co., 577, 658,

Skinner v. Dayton, 546, 280, 552, 554,

Skowhegan Bank v. Cutler, 286, 508,
290, 379.
Blew negen & A. RR. Co, v. Kinsman,
TABLE OF CASES.

’

ci

[The references are to the foot-paging.]

Skrainka v. Allen, 600, 47, 48.

Skrainka v. Scharringhausen, 529.

Slack v. Maysville, etc., R. R. Co., 114,
107, 111, 116.

Slark v. Highgate Archway Co., 847.

Slate Co. v. Savings Bank, 853.

Slater’s Case, 296, 291.

Slater Woollen Co. v. Lamb, 816.

Slatterly v. St. Louis, etc., Co., 723, 980.

Slaughter v. Commonwealth, 866, 865.

Slaughter-house Cases, 803.

Slaymaker v. Bank of Gettysburg, 497,
858, 355, 18.

Slee v. Bloom, 264, 233, 222, 210, 146,
246, 221, 48, 700, 695, 702, 199.

Slee v. International Bank, 369.

Sleech v. Thorington, 332.

Sleeper v. Goodwin, 228, 232, 515, 240,
269, 251, 228.

Slingsby v. Granger, 336.

Slipher v. Earhart, 98, 97, 199.

Sloan v. Pacific R. R., 798.

Slocum v. Prov. 8. & G. P. Co., 1938.

eae v. Bank of England, 408, 411,
152,

Small v. Herkimer, etc., Co., 84, 151,
144, ;

Smallhouse v. Kentucky, etc., Co., 229.

Smead v. Indianapolis, etc., R. R. Co.,
520, 827, 809, 524.

Smelser v. Wayne, etc., T. Co., 712.

Smith v. Alabama, 801.

Smith v, Allison, 97.

Smith v. Alvord, 865, 656.

Smith v. American Coal Co., 680, 508,
505, 679, 507, 588, 407, 447, 403.

mae v. Anderson, 731, 5388, 543, 544,
531.

Smith v. Baker, 353.

Smith v. Bangs, 73, 74.

Smith v. Bank of Victoria, 747.

Smith v. Bank of Scotland, 934.

Smith v. Bourbon County, 123.

Smith v. B’d, etc., Co., 950.

Sniith v. Bouvier, 468, 380, 385.

Smith v. Burley, 623.

Smith v. Central Plank-road Co., 884.

Smith v. Chadwick, 161.

“Smith v. Chicago, etc., R. R., 724, 751.

. Smith v. City of Fond du Lac, 118.

Smith v. Clarke Co., 105, 109.

Smith v. Coale, 491.

Smith v. Cook, etc.. Assoc., 930.

Smith v. Colorado Fire Ins. Co., 258,

Smith v. Cork, ,etc., R’y Co., 307, 308,
3805.

Smith v. Crescent City, etc., Co., 420,
421, 14, 407, 506, 505, 403.

Smith v. Danzig, 690, 851.

Smith v. Erb, 914. 5

Smith v. Eureka Flour Mills Co., 823,
825.

Smith v. Exeter, 619, 617.

Smith v. Fagan, 747.

Smith v. First Nat’l Bank, 629.

Smith v. Forty-nine and Fifty-six Quartz
M. Co., 379, 478.

Smith v. Goldsworthy, 323.

Smith v, Gower, 700, 842, 198.

Smith v. Hallett, 132.

Smith v. Heath, 465.

Smith v. Heindecker, 204,

Smith v. Hotchkiss, 765.

Saath v. Huckabee, 258, 214, 239, 264,

Smith v. Hull, etc., Co., 933.

Smith v. Hurd, 604, 892.

Smith v. Ind. & Il. R’y Co., 137, 136.

Smith v. Johnson, 912.

Smith v. Lansing, 747.

Smith v. Lawson, 922, 927.

Smith v. Law, 670, 823, 825, 657.

Smith v. Little, 869. “

\Smith v. Lockwood, 552.

Smith v. Long I. R. R. Co., 757.

Smith v. Lowell Meeting-house, 935.

Smith v. Maine Boys. Tunnel Co., 153.

Smith v. Miss., etc., R. R. Co., 712, 845.

Smith v. Mutual Life of New York, 991.

Smith v. Natchez, etc., Co., 917.

Smith v. Nelson, 889.

Smith v. New York, etc., Co., 774, 851.

Smith v. North American Mining Co.,
316, 484, 481.

Smith v. Northampton Bank, 590, 497.

Smith v. Plank-road Co., 182.

Smith v. Poor, 594, 893, 648.

Smith v. Prattville Mfg. Co., 586.

Smith v. Putnam, 754.

Smith v. Rathbun, 972, 893, 816.

Smith v. Reese River, etc., Co., 169.

Smith v. St. Louis, etc., Ins. Co., 779.

Smith v. Sheeley, 713, 852, 854.

Smith v, Silver Valley Min. Co., 654, 691,

Smith v. Skeary, 851,

Smith v. Smith, 941, 923, 891.

Smith v. Sorby, 741.

Smith v. South Royalton Bank, 952,

Smith v. Sowels, 87.

Smith v. Standard, etc., Co., 768.

Smith v. Tallahassee, etc., P. R. Co.,
195, 160, 157, 188.

Smith v. Tracy, 397.

Smith v. Virgin, 553, 555, 544,

Smith v. Weed Sewing M. Co., 989.

Smith v. Wells, 977.

Smith v. W. U. T. Co., 797.

Smith v. Woodville, 754,

Snioot v. Heim, 500.

Smouse v. Bail, 490.

Smyth v. Burns, 357. e

Smyth v. Darley, 663, 657. | :

Snell’s Case, 144, 145, 348, 178, 72.

Snow v. Indiana, etc., R’y, 787.

Snow v. Wheeler, 552, 547,

Snow v. Alley, 392.

Snyder v. Studebaker,' 714.

Snyder v. Tunitas, etc., Co., 344,

Societe Generale de Paris v. Tramways

 

Union Co., 581, 420, 404.
cli

TABLE OF CASES.

x
[The references are to the foot-paging.]

Societe Generale de Paris v. Walker,
405, 426, 415.

Societe, etc., v. Mackintosk: 942.

Society for Sav. v. Coite, 633.

Society, etc., v. City, etc., 119.

Society, etc., v. New London, 103, 125.

Society of Italian Union, etc., v. Monte-
donico, 890.

Society for Visitation of Sick v. Meyer,
890.

Society, etc., v. Town, etc., 985.

Sodus Bay, ete, R. R. Co. v.
68.

ae Bay, etc., R. R. Co. v. Lapham,
197.

Somerset, etc., R. R. Co. v. Cushing,
324, 314,

Somer ville’s Case, 296.

Sondheim v. Gilbert, 381.

Soper v. Buffalo R. R., 948, 946.

Souhegan Nail, etc., Factory v. Me
Conihe, 884, 885.

South, etc., Co., In re, 300, 295.

South Mountain Consol, Re, 49, 31, 199.

South Mountain, etc., Mining Co., Re,
207.

South Australia v. Abraham, 127. 4

South Bay, etc., Co. v. Gray, 148, 985.

South Georgia, ete., R. RB. Co. v. Ayres,
779, 196, 520, 200, 978. |

South, etc., Co. v. Muhlbach, 937.

South Car’ Mtg. Co. v. Bank of S. C.,
208, 224.

South Baptist Church v. Clapp, 938.

South Carolina Bank v. Hammond, 945.

Southeastern R’y v. Hibblewhite, 140.

South & N. A. R. Co. v, Chappell, 874.

South, etc.; R. R. Co. v. Paulk, 886.

South Bay Meadow Dam Co. v. Gray,
515.

South Cov., etc., R’y v. Gest, 830.

South, ete., Iron Co. v. Shaw, 739, 741.

South, etc. R. BR. Co. v. Morrow, 618.

South Durham Brew ery Co., Re, 300.

South School District v. Blakeslee, 692,
. 664, 880, 669.

South Wales Ry Co, v. Redmond, 874,

788.
South Yorkshire, etc., Co. v. Great
Northern R’y Co., 784.
Southall v. British, “ete., Ass'n, 784,
Rant hempten Dock Co. v. Richards, 134,
Southern, etc, R. R. Co. v. Towner,
104.

Southern Ry v. Internat. Bridge, 793.

‘Southern California Ass’n v. Busta-
mente, 940, 950.

Southern D. Co. v. Houston, 986,

oa n Exp. Co. v. Memphis, etc., R.

Southern Life Ins. Co, v. Lanier, 182,

Southern Pacific R’y Co. v. Esquibel,

Hanlin,

 

Southern Pacific, etc., v. Orton, 854,

Southern Penn. Iron, etc., R. R. Co. v,
Stevens’ Ex’rs, 517.

Southern Life Ins, Co. v. Cole, 378.

South Gate v. Atlantic, etc., Co., 929,

Southmayd v. Russ, 232, 288, 248, 236,
237,

Southwestern R’y Co. v. Papot, 349,
591, 390.

Southwestern R. R. Bank v. Dowels,
483.

Southwestern R. R. Co. v. Thomason,
18, 866.

Southwick v. First Nat. Bank, 991.

Sowles v. Soule, 621.

Spackman’s Case, 146.

Spackman v. Evans, 64, 149, 177, 959,
181, 146, 960.

Spalding v. Bank, etc.. 947, 849.

Spalding v. Paine’s Adm’ r, 479.

Spalding v. Susquehanna Co., 948,

Spangler v. Ind. & IIL. Central R. R.
Co., 126, 187, 127, 185, 140.

Spargo’s Case, 21, 41,

Sparhawk v. Union, etc., Ry, 818, 968.

Sparks v. Weedon, 337.

Sparling v. Parker, 549, 18.

Sparrow v. Evansville, etc,, R. R. Co.,
781.

Spartan & Union R. R. Co. v. De Graf-
fenried, 98, 94.

AE enn & A. R R Co. v. Ezal,

182

Spear v. Crawford, 6, 81, 854, 200, 85.

Spear v. Grant, 601, 600, 214, 207.

Spear v. Hart, 589, 592, 590.

Spear v. Ladd, 909, 912.

Speight v. Gaunt, 358.

Spence’s Case, 272.

Spence v. Iowa Valley Construction
Co., 264. '

Spencer v. Clarke, 976.

Spering’s Appeal, 894, 895.

Sperry v. Johnson, 99.

Speyer v. Colgate, "466, 474,

Spiller v. Paris, etc., Co., 906.

Spofford v. Boston, ete., R. R., 793.

Sponsler’s Appeal, "333,

Spooner v, Holmes, 880.

Spottiswood’s Case, 901.

Sprago’s Case, 25.

Sprague v, Cachego Manut’g Co., 407,
360, 361.

Sprague v. Ill. River R. R. Co., 517.

Bemmete v. Hartford, etc., R. R. Co,

Spring, etc., Works, In re, 257.
Spring, etc., Bank v. Hulings, etc., Co,,

Spring Co. v. Knowlton, 34, 81,

Spring Valley Water-works v. Board
oF Supervisors of San Francisco, 522,
985

Spring, etc., Works v. Schottler, 799,
18,
TABLE OF CASES.

ciii

{The references are to the foot-paging.]

prnetels v. Connecticut R. Co., 857,

Springfield St. R’y Co. v. Sleeper, 96.
Sbenepont v. Teutonia Savings Bank,

Spurlock v. Missouri Pac. R’y Co., 123.
erie v. Pac. R. R. Co., 568, 574,
1,

Spyker v. Spence, 947.

Squire v. N. Y. C. R. R., 795.

‘Stace’s Case, 26.

Stack’s Case, 10.

Stackpole v. Seymour, 432.

Stacy v. Little Rock & Fort Smith R.
R. Co., 20.

Stafford v. Bolton, 884.’

Stafford v. Barnes, 175.

Stafford v. American Mills Co, 988,

Stafford v. Horton, 334.

Stafford Bank v. Palmer, 259,

Stafford v. Wyckoff, 944.

Staffordshire R’y Co. v. Burnside, 150.

_Stainbank v. Fernley, 400.

‘Stainland v. Willot, 339.

Stamford Bank v. Benedict, 936.

Stamford Bank v. Ferris, 501, 353.

Standing v. Bowring, 339, 355.

Stanhope’s Case, 142, 146, 959.

Stanley v. Chester, ete., R’y, 905.

ee v. Cleveland, C. & C. R. R. Co.,

4,

Stanley v. Sheffield, etc., Co., 921.

Stanley, Ex parte, 1382.

‘Stanley v. Stanley, 290, 514.

Stanley v. Supervisors, 630.

Stanton v, Allen, 528.

‘Stanton v. Camp, 943,

Stanton v. Chadwick, 562.

Stanton v. King, 538.

Stanton v. Missonri, etc., R’y Co., 749.

Stanton v. Small, 384. .

Stanton v. Wilkeson, 230.

Stanton v. Wilson, 86.

Stanton Iron Co., Re, 537.

Stanwood v. Stanwood, 353. \

Stapleford, etc., Co., In re, 735.

Staples v. Gould, 382.

‘Star Fire Ins. Co. v. Palmer, 495,

Starin v. Genoa, 105, 122, 116.

Stark v. Burke, 220, 210.

Stark Bank v. U. S. Pottery Co., 808,
926.

Starkweather v. American Bible Ass’n,
868

Starr v. Camden & Atl. R. e or 859.
Starr v. Gregory, etc., Co., 981.
Starrett v. Rockland, ‘ete., ‘4 — 86.
Staten Isldnd.R. P. o., Re, 861, "184.
State v. ‘Accommodation Bank of Lou-
isiana, 523.
+ State v. American Cotton Oil Trust, 42,
536.
State v. American Institute, 889.
State v. Atchison, etc., R. R. Co., 706,
708, 33, 42.

‘State v.

State v.

 

State v. Adams, 891.

State Treasurer v. Auditor-general, 641.

State v. Bailey, 23, '703, 701, 775, 524.

State v. Baltimore, etc., R. R. Co., 585,
598, 594, 584, 586, 625, 591.

State v. Bank of Charleston, 709.

State of Louisiana v. Bank of Louisi-
ana, 587, 586, 590.

State v. Bank of Maryland, 850.

State v. Bank of South Carolina, 703.

State v. Barron, 701, 704, 705.

State v. Bates, 855.’

State v. Baumgardner, 675.

State v. Beinville Co., 565, 560, 559.

State v. Beck, 79, 704, 705, 65.

Blake v. Bell "Telephone Co., 797, 796,

5.

State v. Bentley, 623, 624.

State v. Bergenthal, 558,

State v. Bissell, 104.

State v. Bonnell, 670, 663, 690, 692.

State v. Boston, 867.

State v. Bradford, 2. |

State v. Branin, 6238, 624.

State v. Brassfield, 118.

State v. Brown, 829.

State of Ohio y oe 911.

State v. Bull,

State v. ate on 638.

State v. Building Association, 345, ‘707.

State v. Carteret Club, 890..

State v. Catskill Bank, 9.

State v. Central, etc., "Ass? n, 708, 257.

State v. Chambers, of Commerce, 889,
891, 890, 547.

State v. Cheraw, etc., R. R. Co., 304,
433, 800. 5.

State. v. Chicago, etc., R’y, 799.

State v. Cincinnati, etc., Co., 704, 803.

State v. Clark, 105.

State v. Collectors, 852, 858, 639,

State v. Columbus Gas Co., 805, 798,
705.

State v. Commercial Bank, 928, 705, 850,
706, 703

State v. Commissioners, etc., 853, 639,
106, 852, 637.

State Bank v. Comegys, 933.

State v. Concord, etc., R. R. Co., 785.

State v. Conklin, 889,

State v. Constantine, 675.

State v. Council Bluffs, etc., Co:, 703.

State v. County Court, 112, 116.

State v. County of Babaunsee, 114.

‘Crescent City, etc., Co.. 76, 179.

State v. Curtis, 660, 661, 691, 889, 888,
915, 674.

State v. Dallas County, 116, 112.

State of Tennessee v. “Davis, 928.

State v. Dawson, 720.

Delaware R. R. Co., 873.

District Court, 990.

Essex Bank, 707, 704.

Fagan, 763.

Ferris, 6, 426, 678, 679, 689.

‘

State v.
State v.
State v.
State v.
civ

TABLE OF CASES.

[The references are to the foot-paging.]

‘State v. Fidelity, etc., Co., 709, 866.

State v. First Nat’l Bank, 15, 438, 481,

480, 508, 447, 505. a

State v. Flavell, 614.

State v. Fosdick, 865, 640.

State v. Fourth, etc., Co., 709.

State Bank of ‘Ohio v. Fox, 344, 347,
348,

State of Ohio v. Franklin Bank of Co-
lumbus, 344, 618.

State v. Fremont, etc., R. R., 799.

State v. Gas Co., 799.

State v. Garoutte, 123.

State Ins. Co. v. Gennett, 480, 509, 481.

‘State v. George Medical Soc., 891.

State v. Godwinsville, etc., Co., 879,
709.
State v.
State v.
State v.
State v.
State v.
State v.
State v.
State v.
State v.
State v.
State v.

Granville Alexandria Soc., 845.
‘Great Works Milling Co., 879.
Green Co., 124, 105.
Greer, 675.
Green, 673.
Guerrero, 482.
Guttenburg, 111.
Haight, 628.
Hamilton, 615.
Hancock, 119, 121.
Hannibal, etc., RR. Co., 623,
617.

State v.. Harmer, 825.

State v. ‘Hart, 628.

State v. Hartford & N. H.R. R. Co.,

789, 813.

State v. Haven, 412.

State v. Holladay, T18, 128,

State v. Housatonic R. R. Co., 633,
State v. Hunton, 688.
State of Indiana’ v. Woram, 886.

State v. Jefferson T. Co., 82, 178.

State v. Jennings, 120. -

State v. Jersey City, 920, 857.

State v. Kingan, 705.

State v. Kill, etc., Co., 705.

State v. City of Kokomo, 118. -

State v. Kupersforte, 684,

State v. Lake Shore, etc., R. R. Co,

560.

State v. Lancaster Co., 112,

State v. Lake City, 124,

State v. Lathrop, 865, 640.

State v. Law, 670.

State v. Laffingwell, 100,

State v. Lehre, 73, 74, 81, 691, 686.

State v. Limkin, 433,

State of Nevada v. Lecte, 678, 447,

State v. Linn Co., 105.

State v. Lime, 122.

State v. Lusitanian Portuguese Soc.,
etc., 891.

State v. Macon Co., 112, 105.

State v. Madison, etc., Ry Co., 708.

State v. Maine, etc,, BR. R. Co., 520,

State v. Mason County Court, ‘116.

State v. Mayhew, 620.

State v, Mayor, ete., 684.

 

State v. Merchants’, etc., Co., 708, 701,
817, 700. ©

State v. Merchants’, etc., Trust Co., 70%,

State v. Merchants’ Ex., 888.

State v. Metz, 572.

State of Minnesota v. Young, 109.

State v. Minn., etc., Co., 42, 705, 704,
845.

State of Michigan v. Howard, 259,

State v. Miller, 637.

State v. Milwaukee, etc., Co., 808, 2.
703.

State v. Mobile, etc., R. R., 792.

State v. Montclair R’y Co., 857.

State v. Morris & Essex R. R. Co., 879, |

709, 874, 637. “5
State v. Moore, 107.
State v. Morgan, 842.
State v. Morristown Fire Ass’n, 5, 264,
State v. McDaniel, 688, 686, 10, ‘684,
State v. McGrath, 881, 321, ’880.
State v. Murfreesboro, 879.
State v. Nebraska Telephone Co., 79,

State v. Nemaha, 104.

State of Conn. v. New Haven, etc., Co.,
790, 800.

| State v. New Orleans Gas Light Co.,
15.

State v. New Orleans & C. RB. R, Bees
405, 588. ;

State v. New Orl., etc., Co., 703. -

State v. North, etc., Co., 769, 526.

State v. North Central R’y Co., 843.

State v. North La. & T. R. R. Co., 390,
827,

State v. Northern, etc., R. R., 872.

State v. Northern’ Central R’y Co.,- 840,
871, 843,

State v. Noyes, 718, 800, 301. !

State v. Osawkee Township, 108.

| State v. Overton, 889.

State v. Paterson, etc., T. Co., 702.

State v. Pawtucket, etc., ae n, 704,

State v. Penn., etc., Co.,

oie of Nevada v. Dedtincl, 669, 679,

2, 691, 661.

Bute v. Petway, 625.

State v. Pecple’s, ete, Ass’n, 658, 438,
703, ‘707.

State v. Phillips, 669.

State v. Pipher, 706.

State v. Porter, 660.

State v. R. R., 790, 793.

State v. R’y Co., 705.

State v. Réal Estate Bank, 706,

State Ins. Co. v. Redmond, 182. =

State v. Rice, 848.

State v. Rives, 720, 780, '722, 700,

State v. Robinson, 612.

State v. Roggen, 113,

State v. Rombauer, 432,

State v. Saline, etc, Court, 101, 708.

State v. Scott, 864.

State v. St. Louis, etc., Co., 432,-

State v..Seneca Co, Bank, 706,
TABLE OF CASES,

cv

[The references are to the foot-puging.]

State of Ohio v. Sherman, 701.
State v. Sibley, 719, 520, 524.
State v. Sioux City & P, R. R. Co., 789,
State v, Smith, 656, 84, 681, 347, 689,
680, 318, 314, 686, 688, 348.
State Treasurer v. Somerville, etc., R.
R. Co., 634. ‘
State v. Southern Min. Co., 790.
State v. Societe, etc., 706.
State v. Standard, etc., Ass'n, 708,
State v. Sullivan Co., 705.
State v. Swearingen, 688.
State R. R. Tax Cases, 633.
‘State v. Telephone Co., 797, 884, 801.
State v. Thomas, 621.
State v. Thompson, 678.
State v. Tombeckbee Bank, 704.
State v. Town of Clark, 122.
State v. Tudor, 677.
State v. Tunis, 623.
State v. Union Township, 106.
State Bank v. U. S. Pottery Co., 825.
State v. United, etc., R. R. Co., 857.
State v. Urbana Mut. Ins. Co., 847.
State v. Vanderbilt, 777.
State v. Warren Foundry & M. Co., 507,
879, 499, 482, 501.
State v. Wapello, 104. .
arti v. Washington Social Lib. Co.,
845.
State v. West., etc., R’y Co., 705.
State v. Western Union Tel. Co., 640.
State v. Western, etc., 774.
State v. White’s, etc., Co., 702.
State v. Whiteside, 106.
State of Tenn. v. Whitworth, 624.
State v. Woodruff, etc., Co., 641.
State of Indiana v. Woram, 815, 808.
State of Nevada v. Wright, 662.
State, etc.. Ins. Co., Re, 965, 322, 756,
48, 323, 515. _ :
State Bank of Va, v. City of Richmond,
615.
State Bank v. Cox, 394.
State Bank v. State, 720, 703.
State Board of Agriculture v. Citizens’
Street R’y Co., 808.
State Bank of Ohio v. Knoop, 511, 512,
518, 614.
State Ins. Co. v. Sax, 481, 505. Y
State Sav. Ass’n v. Kellogg, 233, 210,
234, 262. : :
State Bank v. Bell, 936.
Staystown, etc., Co. v. Craver, 912.
Steacy v. Little Rock & Fort Smith R.
R. Co., 58, 57,
Steam Navigation Co. v. Weed, 845.
Steamboat Co. v. McCutcheon, 852, 854,
Steamship Dock Co. v. Heron’s Adm’x,
569, 567.
Steamship.Co. v. Tugman, 988.
Stearns v. Marsh, 393, 492.
Stearns v. Allen, 943.
Stears, Ex parte, 640.
Stebbins v. Leowolf, 282, 386. |

 

Stebbins v. Merritt, 938, 661, 663, 666,
917, 668.

Stebbins v. Phoenix Ins. Co., 447, 568,
570, 572, 573.

Stedman v. Eveleth, 210.

Steel’s Case, 168.

Steele v. Oswego, etc., Co., 942.

Steers v. Lashley, 388, 389.

Stein v. Bienville, 805.

Stein v. Howard, 82, 820.

Stein v. Mayor, 103.

Steiner’s Appeal, &38, 842.

Steinmetz v. Versailles, 132, 131.

Stenton v. Jerome, 472, 494.

Stephens v. Fox, 221, 213, 246.

Stephens v. James. 536, 537.

Stephens v. De Medina, 373.

Stephenson v. Dawson, 382.

coo v. N. Y., ete, R. R. Co.,
30.

Stephenson v. Pold, 587.

Stephenson, Ex parte, 38.

Stephenson’s Case, 64.

Sterett v. Denver, etc., R. R. Co., 992.

Sterling v. Jaudon, 471, 494.

Sterling v. Marietta Co., 948.

Sterling v. Wilkinson, 339.

Stetson v. City of Bangor, 616, 627.

Stetson v. City Bank of New Orleans,
697, 721.

Stettaner v. New York, etc., Co., 560,
566.

Steubenville, etc., R. R. Co. v. North
Township, 106.

Stevens v. Anson, 104.

Stevens v, Carpe. etc., 985,

Stevens v. Corbitt, 96.

Stevens v. Buffalo & N. Y. R. R, Co.,
840.

Stevens v. Davidson, 977, 779, 887.

Stevens v. Eden Meeting-house Society,
666, 662, 661.

Stevens v. Erie R’y Co., 857.

Stevens v. Hurlbut Bank, 648, 494,

Stevens v. Hill. 918, 912.

Stevens v. Great W. R’y, 794.

Stevens v. Midland, etc., R’y. Co., 299,
877, 751.

Stevens v. N. Y., etc., R. R. Co., 881.

Stevens v. Phoenix Ins. Co., 989, 263,
993,

Stevens v.'Pratt, 849, 865.

Stevens v. Rutland. etc., R. R. Co., 968,
519, 513, 811. 524. 523, 512.

Stevens v. South Devon R’y Co., 587,
302, 807. ’

Stevens v, Watson, 840.

Steward’s M. E. Church v. Town, 156.

Stewart v. Trustees of Hamilton Col-
lege, 85.

Stewart v. Austin, 521.

Stewart. Appeal of, 358.

Stewart’s Case, 162, 958, 172, 528, 146.

Stewart v. Cauty, 648, 464, 652, 371.

Stewart v. Drake, 471, 474.
evi

TABLE OF CASES. |

[The references are to the foot-paging.]

Stewart v. Erie, etc., Trans. Co., 957,
959, 785, 786.

Stewart v. Fireman’s Ins. Co., 612, 366.

Stewart’s Trustees v. Evans, 71.

Stewart v. Garrett, 387.

Stewart v. Huntington Bank, 946, 947,
948.

Stewart v. Jones, 780, 842.

Stewart v. Lay, 232, 219, 224, 2877, 229,
253.

Stewart v. Lehigh Val. R. B., 792, 867,
767.

Stewart v. Mahoney, etc., Co., 681.

Stewart v. National Bank, 846, 347.

Stewart v. Polk Co..104.

Stewart v. Schall, 387.

Stewart v. Walla, etc., Co., 281, 425.

Stickle v. Watts, 67.

Stiles v. Cardiff Steam Nav. Co., 877.

Stiles v. Western R. R, Co., 948.

Stilphen v. Ware, 202, 247, 250.

Stinchfield v. Little, 937, 948.

Stinson v. Thornton, 360.

Stock. Ex parte, 688, 899.

Stockdale v. South Sea Co. , 362.

Stocken’s Gase, 145, 141, 183.

Stockholders of Shelby R. Rv. Louis-
ville, etc., R. R. Co., 665.

Stockton's Case, 147,

Stockton Malleable Iron Co., In re, 574.

Stockton v. Baltimore, etc., R. R. Co.,
263, |

Stockton, etc., R. R. Co: v. Stockton,

103.

Stockwell v. St. Louis M, Co., 426.

Stoddard v. Shetucket Foundry Co.,
28, 595, 592, 593.,

Stoddert v. Port Tobacco Parish, 909.

Stokes v. Stickney, 244.

Stokes v. Lebanon, etc., Co., 145, 148,
88.

Stokes v. N, J., etc., Co., 922.

Stokes v. Philips, 758. :

Stokes v. Schwab, 711.

Stokes v. Scott, 104.

Stone v. Berkshire, etc., Soc., 985, 884,

Stone v. City and County, 174,

Stone v. Cartright, 896. j

Stone v. Chisolm, 240.

Stone v. Framington, 701.

Stone v. Great Western Oil Co., 185, 86.

Stone v. Hackett, 339.

Stone v. Illinois Cent. R. R. Co., 866.

Stone v. Wiggin, 210.

Stoneham Beach R. RB. Co. v. Gould,
185, 151.

Stoney v. American Life I. Co., 826, 825.

Stoops v. Greensburgh, etc., Co., 193.

Storm v. Waddell, 498.

Storrs v. Flint, 587,

Story v. Furman, 235, 515, ie 2381.

Story v. Jersey, etc., 1 C0. 528

Story v. N. Y. EL,

Story v. Salomon, oy "381, 383.

Stourbridge Canal Co. v. Whaley, 806.

 

| Stout v. Sioux City, etc., R. R. Go., 872,
988. ;

Stout v. Yeager, etc., Go., 764.

Stout v. Zulick, 258.

Stoutimore v. Clark, ie

Stover v. Flack, 378, 270, 82, 272, 355,
224, 2,87,

Stow v. Wyse, 666.

Stowell v. Stowell, 94.

Stoystown, etc., Co. v. Cramer, 658.

Straffon’s Case, 285, 271, 493, 473.

Straker v. Wilson, 608.

Strange v. Houston, etc., R. R. Co., 402,
393, 404, f

Stranton Iron and Steel Co., Re, 369, 379,
688.

Strapton v. Missouri, etc., R’y Co., 972.

Strasburg v. Echternacht, 376, 87.

Stratford R’y Co. v. Stratton, 136.

Stratton v. Allen, 763.

Straus v. Chicago, etc., Co., 991.

Straus v. Eagle Ins. Co., 825, 845.

Stray v. Russell, 468, 475, 474.

Street v. Morgan, 468.

Streeter v. Sumner, 277.

Stribling v. Bank of Valley, 48.

Strick v. Swansea Canaf,, 793.

Strickland v. Symons, 587,

Strickland v. Railroad Co., 105.

Stringer’s Case, 587, 599, 598, 586,

Stringer, Ex parte, 573.

Strong v. Brooklyn Crosstown R. R,
Co., 822, 587, 323.

Strong v. McCagg, 697, 708.

Strong v. Nat’l Ass’n, 472,

Strong v. Smith, 685, 678, 681.

Strong v. Wheaton, 229, 248, 285, 286.

Strong v. Southworth, 238,

Strong’s Appeal, 218.

Strother v. Franklin, etc., Ass’n, 547.

Biot v. Natl Water & ‘Min. Co., 608,

2.

Struthers v. Drescel, 872. «

Stryker v. Cassidy, 228,

a a v. Mechanics’ & Farmers’ Bank,

ae v. Valley R. R. Co., 68, 72, 179,

Studdert v. Grosvenor, 812, 677.

ama etc., Co., v. Montgomery,
7

Studley, Ex parte, 900.

Stupart v. Arrowsmith, 699.

Sturge v. Eastern, etc., R’y Co., 801,
299, 307, 305, 302.

Sturges v. Carter, 617.

Sturges v. Keith, 651, 649, 648, 647.

Sturges v. Knapp, 832.

Sturges v. Bialaan, 391, 31, 152, 61, 35,
46, 82,

Sturges v. Vanderbilt, 601, 690.

Sturgis v. Board of Trade, 891.

Stutzer, Matter of, 612.

Submarine Tel. Co. v. Dickson, 797.

Suburban Hotel Co., In re, 698.
TABLE OF CASES.

evii

[The. references are t to the foot-paging.]

Sudlow v. Dutch R. R. Co., 153.

Sullivan v. Campbell, 554, 229,

Sullivan v. Metcalfe, 161. ;

Sullivan v. Portland, etc, R. R. Co.,
701, 962, 960. :

Sumbre Co. v. Nat. Bank, 630.

Summerfieid v. Pritchard, 565.

Summers v. Sleath, 200.

Summerset R. R. Co. v. Clarke, 191.

Summerset R. R. Co. v. Cushi g 191.

Spare v. Marcy, 851, 222, 232, 84u, 816,

Sumner v. Stewart. 467.

Sumrall v. Mutual Ins. Co., 520,

Sumrall v. Sun, etc., Ins. Co., 719, 524.

Ba une Co. v. Mississippi, etc., Co.,

Sunapee v. Eastman, 884,

Sunderland Marine Ins. Co. v. Kearney,
229.

Supervisors v. Galbraith, 118, 119, 109.

Supervisors of Fulton County v. Miss.,

& Wabash R. R. Co., 517, 519.
Supervisors of Schuyler Co. v. People,

Supervisors v. Schenck, 114.
Supervisors v. Stanley, 626, 630, 632,
631. :

Supervisors v. Wis., etc., R. R. Co., 104.

Supply, etc., Co. v. Elliott, 508.

Supreme Lodge, etc., v. Knight, 889.

Susquehanna, etc., Co. v. Bonham, 842.

Susquehanna Ins. Co. v. Perrin, 946.

Susquehanna. etc., Co. v. General Ins.
Co., 914, 838.

Susquehanna R. Co. v. People, 879.

Sussex R. R. Co, v. Morris, etc., R. BR
Co., 784.

Sutherland v. Olcott, 313, 317.

Sutliff v. Cleveland, etc., R. R. Co,
315. :

Sutton’s Case, 224.

Sutton v. Bank of Eng., 426.

Sutton v. Tatham, 474, 476.

Suydam v. Jenkins, 651.

Suydam v. Morris Canal & B. Co., 845.

' - Swan, Ex parte, 40%, 411, 413.

Swan v. North British Ins, Co., 413,
411, 408, 643.

Swan v. Watertown Ins. Co., 870.

Swan v. Williams, 862.

Swansea Vale R’y Co.,v. Budd, 564.

Swansea Dock Co. v. Lewien, 131, 666.

Swartout v. Mich. Air Line R. R. Co.,
91, 90, 198, 189, 199.

Swasey v. American Bible Soc., 546.

Swatara R. R. Co. v. Burne, 155.

Swazy v. Choate, etc., Co., 75.

Sweatland v. Ill. Tel. Co., 948.

Sweeney v. Bank of Montreal, 360.

Sweeney v. Grape Sugar Co., 758.

Sweet v. Hurlbert, 102, 105.

Sweeting v. Pearce, 468, 476.

Sweny v. Smith, 146, 147, 152.

Swepson v. The Bank, etc., 764.

 

Swift v. Beers, 846,

Swift v. Jewsbury, 76.

Swift v. Smith, 766, 909.

Swift v. State, 560.

Swigert, In re, 639.

Sword v. Wickersham, 714.

Sykes v. Beadon, 531.

Sykes’ Case, 128. 133, ‘561.

Symon’s Case, 81, 274, 269.

Syracuse, etc., R. R. Co., In re, 45.

Syracuse, P. & O. R. R. Co. v. Gere,
159, 184.

ras Savings Bank v. Seneca, 117,
120. ae

Syracuse, etc., R. R. Co., Matter of the
Application of the, 685.

T.

Taber v. Cincinnati, L. & C. R. R., 838,
Tabor v. Goss, etc., Co., 282.
Tackerson v. Chapin, 646.
Taft v. Brewster, 943.
Taft v. Chapman, 467.
Taft v. Harrison, 534,

.Taft v. Hartford, etc., R. R. Co., 298,

304, 299, 802.

Taft v. Ward, 552, 244.

Taggard v. Curtenius, 490.

Taggarts v. Western Md. R. R. Co., 95,
182, 94, 89, 195, 202, 517.

Tahiti Cotton Co., Re, 480.

Taite’s Case, 162, 173.

Talbot v. Dent, 104.

Talbot v. Scripps, 973.

Talbot v. Hudson, 861.

Talcott & Co. v. McCormick Harvesting
Machine Co., 991. :

Talcott v. Olcott. 757.

Talcott v. Pine Grove, 104.

Talledega Ins. Co. v. Landers, 719.

Talledega Ins. Co. v. Pencock, 927, 838.

Tallmadge v. Fishkill Iron Co., 201, 215,
249,

Tallman v. Butler Co., 620.

Talmage v. Pell, 78, 846, 550, 350.

Talmage v. Third Nat’] Bank, 394.

Talman v. Rochester City Bank, 845.

Talty v. Freedman’s, etc., Co., 486, 485.

Tanner v. Tanner, 331.

Tanner’s Case, 899.

Tanner v. Gregory, 484.

Tantum v. West, 389, 387.

Tappal v. Bailey, 554, 552.

Tappan v. Merchants’ National Bank,
620, 633.

Tarbell v. Page, 257, 198.

Tarbox v. Gorman, 954,

Tarlton v. Baker, 380.

Tarpey v. Deseret Salt Co., 868.

Tarquand v. Marshall, 608.

Tar River Nav. Co. v. Neal, 198, 86, 148,

Tasker v. Wallace, 58, 22.

Tatem v. Wright, 869, 640.

Taunton v. Royal Ins, Co., 812.
evlil

TABLE OF CASES.

[The references are to the foot-paging.]

Taurine, In re, 295.

Taussig v. Hart, 484, 470, 478, 464, 472,
485.

Taver v. Eighth R. R. Co., 884.

Tavers v. Kansas Pacific R? y, 879.

Tax-payers of Milan v. Tennessee, etc.,
R. RB. Co., 106.

Tax-payers of Kimgston, Ex parte, 105.

Taylor, Ex parte, 739.

Taylor v. Agriculture & M. Ass’n, $23,
938, 919.

Taylor v. Ashton, 165.

Taylor v. Chichester, etc., R. Co., 962,
957, 854, 772.

Taylor vy. Fletcher, 98.

Taylor v. Grand Trunk R’y, 878.

Taylor v. Great Indian Peninsula R’y
Co., 420, 475, 393.

Taylor v. Griswold, 666, 888, 674, 676,

677.

Taylor v. Heggie, 938.

Taylor v. Holmes, 973.

Taylor v. Hughes, 285, 341, 69, 284.

Taylor v. Hutton, 911.

Taylor v. Ifill, 552.

Taylor v. Jones, 498.

Taylor v. Ketchum, 472, 484.

Taylor v. Life Asso., 699.

Taylor v. Miami, etc., Co., 971, 344, 681.

Taylor v. Midland R’y Co.; 411, 408.

Taylor v. Newberry, 106.

Taylor v. North, etc., Co., 153.

’ Taylor v. Phil. & 8. BR. Co.; 46, 828.
Taylor v. Soloman, 969, 761.
Taylor v. South & North Ala. R. B. Co.,

328, 301, 959. 958, 46, 962.

Taylor v. Stray, 475, 474.
Taylor v. Taylor, 271.
Taylor v. Ypsilanti, 108, 105.
Taymouth v. Koehler, 916, 659.
Teachout v. Des Moines, 805, 860.
Teachout v. Van Hoesen, 891, 742.
Teake v. Jackson, 549.
Teasdale’s Case, 178, .348, 148, 341, 324.
Tees Bottle Co., Re, 420.

_ Telegraph Construction Co., Re, 515.
a Co. v. Davenport, 428, 411,

Telegraph Co. v. Texas, 869,

Telgate’s Case, 156.

Tempest v. Kelner, 647, 652, 650, 76, 378.

eee Grove Seminary v. Cramer, 818,

Temple v. Lemon, 185,

Templin v. Chicago R. R., etc., oa, 921.

Ten Broeck v. Winn, etc., Co., 945.

Tench v. Great Western Ry Co., 876.

Ten Eyck v. Pontiac, etc., R’y Co., 757,

Tennant v. Stoney, 587.

Tennent v. City of Glasgow Bank, 291,
174, 167.

Tenney v. Foote, 389, 387, 384, 388.

Tenney v. Lumber Co., 941, 938,

Tenney v. New England Protection |

Union, 547.

| Thomas v.

 

Tenth Ward Nat. Bank v..City of New-'
ark, 628.

Terhune v. Midland R. R. Co., 971,

Terrell v. Branch Bank at Mobile, 953.

Terrell v. Hutton, 905.

Terrell v. Taylor. 706.

Terrell’s Case, 907. .

Terry v. Anderson, 251, 209, 210.

Terry v. Bank of Cape Fear, 203, 249,
254.

Terry v. Calnan, 250, 243.

Terry v. EHagle Lock Co., 318, 317, 585.

Terry v. Little, 264, 235, 989," 214, 240.

Terry v. McClure, 252, 251, 250.

Terry v. Tubman, 251, 240, 210, 250.

Teuton v. Dempsey, 565.

Texas, etc., R. R. Co. v. Robards, 816,

Texas, etc., R’y v. Gentry, 915, 648,

Thacker v. Heed. 385, 381, 384,

hackrah v. Haas. 355.

Thames Tunnel ‘Company v. Sheldon,
6, 64,

Thames, etc., R’y v. Rose, 660.

Thatcher v. West River N. Bank, 884.

Thayer v. Middlesex Ins. Co., 915, 917.

Thayer v. New England Lithographic
Co., 245.

Thayer v. Tyler, 993.

Thayer v. Union Tool Co., 287.

Thebus v. Smiley, 240, 258, 248, 249,
291, 201.

ier v. Mississippi, etc., R. R.'Co.,
87, 94.

Third oS "Savings Bank v. Dimock, ,
837

oe Ave. R. R. v. N. ¥. RB. R. Co.,
859.

Third Nat'l Bank v. Boyd, 647.

Third Nat’l Bank v. Harrison, 384, 954,
388, 995.

Thomas v. Brownsville, etc., R. R. Co.,
782.

Thomas’ Case, 348, 177, 26,147, 271.

Thomas v. City of Glasgow B’k, 275, 80.

Thomas v. Citizens’, R’y Co., 838, 839.

Thomas y. Clarke, 549: :

Thomas v. Chisholm, 886.

Thomas v. Dakin, 550, 2, 882.

Thomas v, Ellmaker, 547, 546.

Hoblen, 972, 975,

Merchants’ Bank, 992.

Mutual, etc., Union, 889.

Placerville, etc., Co., 991.

Peoria, etc., R’y, 844, 758.

Port Hudson, 104.

Sternheimer, 647.

Thomas v. Sweet, 762.

Thomas v. Railroad Co., 327, 777, 6, 976.

Thompson, Matter of, 809.

Thompson's Appeal, 606, 610.

Thompson’s Estate, In re, 706,

Thompson v. Abbott, 7124,

Thompson v. Alger, 382, 378.

Thompson v. Bell, 931.

Thompson v. Bemis, etc., Co., 601.

Thomas v.
Thomas v.
Thomas v.
Thomas v.
Thomas v.
Thomas v.
-

TABLE. OF CASES.

cix

|
[The references are to the foot-paging.]

Thompson v.
Thompson v.
Thompson v.
Thompson v.
Thompson v.

Brown, 5386.

Candor, 714.

City of Peru, 103, 111.

Cummings, 388.

Davenport, 468.

Thompson v. East, etc., R’y Co., 779.

Thompson v. Erie, etc., R. R. Co,, 305,
304, 565, 563, 3807.

Thompson v. Guion, 514, 194, 518.

Thompson v. Holladay, 479.

Thompson v. Jewell, 235.

Thompson v. Kelley, 106, 109, 108.

Tem peen v. Lambert, 823, 960, 826,

Thompson v,
101.
Thompson v.

McKee, 928.
Thompson v.

Meisser, 249, 237, 201, 248.

Thompson v. N, Y., etc., R. R. Co., 804.

Thompson v. Page, 86.

Thompson v. Patrick, 485.

Thompson v. Parrine, 1138,

Thompson v. Penn. R. R., 860.

Thompson v. People, 716.

Thompson v. Pittston, 108.

Thompson v. Reno, etc., Bank, 129, 84,
199, 192, 83, 203, 208, 215.

Thempeon v. St. Nicholas, etc., Bank,

Thompson v. Society of Tammany, 890.

Thompson v. Swoope, 868.

Thompson v. Toland, 489, 647, 360, 488,
484, 470, 650.

Thompson v. Universal, etc., Co., 825.

Thompson vy. Waters, 2, 868.

Thompson v. Williams, 657.

Thorington v. Gould, 9138, 940.

Thorndike v. Locke, ’379.

Thornton v. Lane, 209.

Thornton v. Marginal Freight R’y Co.,
697.

ees v. National Exchange Bank,

49.

Thornton v. Wabash: R’y Co., 701, 749.

Thoroughgood’s Case, 66.

Thorne v. Travellers’ Ins. Co., 871.

}

Thorp v. Woodhull, 183, 15, 22, '75, 481,

425.

Thorpe v. Rutland & Burlington R. R.
Co., 512, 800. °

Thorpes v. Hughes, 169.

Thornburgh v. New Castle & D. R, R.
Co.,*155, 166.

Thouron v. East, etc., R’y Co., 759, 964,
979.

Thrasher v. Pike, etc., R. R. Co., 88, 87.

Thurber v. Thompson, 40. '

Thurbur v. Crump, 376.

Thurston v. Duffy, 40.

Thweatt v. Bank of Hopkinsville, 854.

Ticonic, etc., Co. v. Lang, 188, 82, 97.

Ticonic Water-power & Mfg. Co. v.
Lang, 94.

Tide-water Co. v. Coster, 861.

Tifft v. Porter, 331, 333.

Lee County, 880, 102, 116, ©

 

Tift, In re, 986.

Tileston v. Newell, 908.

Tilford, etc. Co. v. Gerhah, 642, 505.
Tilley v. County of Cook, 476.
Tillinghast v. Troy, etc., RR. Co., 882.
Tisouborys etc., Co. v. Goodrich, 70, 69,

Tinker v. Van Dyke, 243,

Tinkler, In re, 609.

Tinsley’s Case, 387.

Tioga R. R. Co. v. Blossburg, etc., R.
R. Co., 866.

Tippecanoe County v. Lafayette, etc.,
R. R. Co., 779

Tippets v. Walker, 12, 943.

Tippling v. Pexall, 2.

Tisdale v. Harris, 15, 378.

Titcomb v. Kennebec, etc., Co., 722.

er a v. Union, etc., Ins. Co., 576,

see v. Cairo, etc., R. R. Co., 912, 920,

Titus v. Cartelyou, 561.

Titus v. Great, etc., Road Co., 325.

Titus v. Ginheimer, 842.

Titus v. Maybee,. 842,

Titus v. President, etc., of the G. W.
Turnpike, 17.

Titusville, etc., i a Co. v. Waren,
etc., R. R. Co., 7

Tobacco-pipe eee v. Woodraffe, 888.

Tobey ,v. Robinson, 31, 44, 371

Tobey v. Russell, 219.

Tobey v. Hakes, 433.

Tockerson v. Chapin, 399.

Todd v. Emby, 546.

Todd v. Taft, 375.

Toledo, etc., R. R. Co. v.: Hinsdale, 96.

age. etc., R. R. Co. v. Johnson, 195,
711.

T., W. & W. RB. R. Co. v. Elliott, 794.

Toledo, etc., R. R. Co. v. Prince, 930.

Toledo, etc., R. R. Co. v. Rodriques, 930.

Toll-bridge Co. v. Betsworth, 948.

Toll-bridge Co. v. Osborn, 689, 622.

Tombigbee R. R. Co. v. Kneeland, 989.

Tomblin v. Callen, 385.

Tome v. Parkersburg, etc., R. R. Co.,
825, 326.

Tomkinson v. South, etc., R’y Co., 812.

Tomlinson v. Bury, 334, 382, 338.

Tomlinson v. Branch, 638, 636.

Tomlinson v. Bricklayers, "etd., 753.

Tomlinson v. Miller, 378.

Tomlinson v. Tomlinson, 13.

Tompkins v. Buterfield, ’929.

Tompkins v. Fort Smith R’y, 832.

Tn ineon v. South, etc., R’y Co.,

Tonawanda R. R. Co. v. New. York,
etc., R. R. Co., 784, 687.

‘| Tonica, etc., R. R. Co. v. Stein, as 156.

Tooke, Ex parte, 574,

Topeka Bridge Co. v. Cummings, 185.

Topeka, etc., Co, v. Hale, 179, 283, 157.

‘
cx

TABLE OF CASES.

[The references are to the foot-paging.]

Topeka, etc., v. Martin, 932.

Toplean v. Greenside, etc., Co., 833.

Topping v. Bickford, 936.

Torrey v. Baker, 694.

Torry v. Bank of Orleans, 464, 747.

Totten v. Tison, 298, 300, 302.

Totterdell v. Forehan, etc., Co., 919.

Toucey v. Bowden, 281, 283.

Touche v. Metropolitan R’y, etc., Cot,
905.

Tourine Co., In re, 919.

Towar v. Hale, 550.

Town v. Bank, etc., 699.

Town of Duanesburgh v. Jenkins, 116.

Town of Douglass v. Niantic Sav.
Bank, 119.

Town of Concord v. Portsmouth Sav.
Bank, 122.

Town Council, etc., v. Elliott, 369.

Town of East Lincoln v. Davenport,
124.

Town v. First Society, etc., 983.

Town of Lyons v. Chamberlain, 105.

Town of Mentz v. Cook, 106.

Town of Newark v. Elliott, 855.

Town of Platteville v. Galena, etc., R.
R. Co., 120.

Town of Plainview v. Winona, 109.

Town of Scipio v. Wright, 103.

Town of Springfort v. Teutonia Sav.
Bank, 105.

Town of Solon v. Williamsburg Sav.
Bank. 105.

Town of Windsor v. Hallett, 115, 119. |.

Townes v. Nichols, 4382.

Townsend, Matter of, 867, 863.
Townsend’s Case, 72.

Townsend, In re, 861.

Townsend v. Goewey, 547, 552, 553.
Townsend v. Martin, 382.

Townsend v. Mclver, 430, 427, 428, 433.

Tracy v. Guthrie, 919, 920, 931.

Tracy v. Talmage, 347, 846, 350, 550.

Tracy v. Yates, 288, 291.

os Auxiliary Co. v. Vickens, 822,

Traders’ Nat’l Bank v. Lawrence, 61.

Rast etc., Ins. Co. v. Brown, 588,

Trafford v. Boehm, 356. -

Trask v. Maguire, 614, 615.

Trask v. Peekskill, etc., Co., 781.

Travers v. Leopold, 481.

Treadwell v. Salisbury Mfg. Co., 673,
696, 775.

Tigeeneee v. Commercial Coal Min. Co.,

‘Treat v. Hiles, 549.
Tredwen v. Bourne, 549, 190.
Tregear v. Etiwanda, etc., Co., 479,

Tremain v, Guardian, etc., Ins. Co., 979. °

Trent, etc., Road Co. v. Marshall, 885.
Trenton Bank v. Haversteck, 886.
Trenton, etc., Co. v. Woodruff, 951.
Trenton Ins. Co, v. Johnson, 380.

 

Trester v. Missouri P. R’y, 864.
Trevor v. Whitworth, 341. ,
Trinder v. Trinder, 385, 334.

Trimmer v. Penn., etc., R. R. Co., 976.
Tripp v. Appleman, 291.

Tripp v. New, etc., Co., 947.

Tripp v. Northwestern, etc., Bank, 850.

.| Trippe v. Huncheon, 246.

Trott v. Saschett, 99, 97.

Trott v. Warren, 719, 920, 934,

Troup’s Case, 824,

Trowbridge v. Scudder, 258.

Troy & Boston R. R. Co. v. Tibbits, 91,
92, 72, 143, 310.

Troy & Greenfield R. R. Co. v. Newton,
25, 188.

Tr etc., Ins. Co, v. Carpenter, 949,

48,

Troy Iron, etc., Factory v. Corning, 547.

Troy. etc., R. R. Co. v. Boston, etc., R.
R. Co., 860, 777. .

Troy, etc., R. R. Co. v. Kerr, 143, 700,
196, 518, 521, 70. ,

Troy, etc., R. R. Co. v. McChesney, 148,

Troy R. R. Co, v. Newton, 189, 191.

Troy, etc., R. R. Co. v. Warren, 84.

Troy Turnpike Co. v. M’Chesney, 914.

True v. Houghton, 376.

Trundy v. Hartford, etc., Co., 912.

Trustees, etc., v. Bosseiux, 895,

Trustees of Canandaigua Academy v.
McKechnie, 940.

Trustees of Dartmouth College v,
Woodward, 512. ‘
neces of Eminence v. Deposit Bank,

28.
Trustees, etc., v. Flint, 888, 266.
Trustees v. Gibbs, 719, 686.
Trustees v. Greenough, 979.
Trustees v. Hart’s Executors, 550,
Trustees, etc., in Lerant v. Parks, 885.
Trustees of the Louisiana Paper Co, v.
Waples, 218.
Trustees of M. E. Church v. Tryon, 884.
Trustees, etc., v. Stewart, 87.
Trustees of Vernon v. Hills, 204.
Tuchbund v. Chicago, etc., R. R., 998.
Tuckahoe Canal Co. v. Tuckahoe R. R.
Co., 806.
Tucker’s Case, 72. '
Tucker v. Aiken, 616.
Tucker v. Gilman, 219.
Tucker, etc,, Co. v. Fairbanks, 943.
al v. St. Louis, ete, R. R. Co.,
Tucker v. Wilson, 491.
Tuckerman v. Brown, 177.
Tully v. Tranor, 647.
Tumacmenced, In re, 698.
Tunnison v. Detroit, etc.. Co., 931.
Turnbull v. Payson, 69, 67.
Turnbull v. Prentiss Lumber Co., 215.
Turner v. Commissioners, etc., 104.
Turner v. Granger, 174. —
Turner v. May, 877, 375.
TABLE OF CASES.

cxi

[The references are to the foot-paging.]

Teper v. North Beach R. R. Co., 878,

Turner v. Turner, 335.

Turnpike Co. v. Davidson County, 801.

Turnpike Co. v. Illinois, 721, 852.

Turnpike Co. v. McKean, 917.

Turnpike Co.'v. State, 704.

Turquand v. Marshall, 895.

Tuscaloosa Manuf’g Co. v. Cox, 821.

‘Tuskaloosa, etc., Ass’n v. Green, 698.

ae etc., Co. v. Shaver, etc., Co.,

%

Tuttle v. Michigan, 779, 196, 519, 664,
666, 669.

Tuttle v. Walton, 571, 576, 568, 576, 580.

Tweedy v. Bogart, 503.

bee a Street Mutual Co. v.*Jackson,

22.

Twin Creek, etc., Co. v. Lancaster, 85.

Twin Lick, 'ete., "Co. v. Marbury, ‘962,
959, 746, 762.

Twycross v. Grant, 738, 739, 161.

Tylee v. Yates, 846.

Tyler v. Beacher, 861, 862.

Tyng v. Commercial, etc., Co., 849.

Tyrrell v. Bank of London, 734, 740.

. Tyrell v. Washburn, 552, 553.

Tyson v. Mahone, 971.

Tyson v. School Directors, 109.

U.

Uline v. N. Y.C., etc., R. R., 860. :

Ulrich v. N. Y., ete, R. BR., 795.

Ulster v. Banbridge R’y, 764, $23.

Umisted v. Buskirk, 253, 214, 224, 231,
241, 216.

Underhill v. Gibson, 768.

Underwood v. New York, etc, R. R.
Co., 592.

Union Agr. & Stock Ass’n v. Mill, 518.

Union Bank, etc., v. Elliott, 774, 851,

Union Bank v. Geary, 984.

Union Bank of Georgetown v. Laird,
578, 574, 447, 568, 578, 570.

Union Bank v. Jacobs, 825, 823,

Union Bank v. Knapp, 917.

Union Bank v. BeDenonehs 73.

Union Bank v. Owens, 9.

Union Bank v. Ridgeley, 887, 889, 914,
916, 984, 936.

Union Bank v. State, 620, 624, 18.

Union Bridge Co. v. Troy, etc., R. R.
Co., 778, 939.. -

Union Canal Co. v. Gilfillan, 753.

Union Canal Co. v. Lloyd, 949, 955..

Union Canal Cd. v. Young, 706.

Union Cement Co. v. Noble, 984.

Union Central L. I. Co. v. Thomas,
869,

Eos goes Co. v. International, etc.,
Co., 482.

Union, etc.,.Co. v.. Jenkins, 85, 86, 87.

Union, etc., Co. v. Rocky, etc., Bank,
917, 931, 929..

t

 

Union, etc., Co. v. Troy, etc., R. R. Co.,

939.

Union Ditch v. Zellerbach, 774.

Union Gold Min. Co, v. The Bank, 939,
823, 824, 846, 940, 941, 908.

Union Hotel v. Herr, 78.

Union Hotel Co, v. Hersee, 79, 93, 517,
197, 84.

Union Hill Company, Ex parte, 666.

Union Ins, Co., In re. 673.

Union Ins. Co. v. Frear 8S. Mfg. Co.,
42, 157, 47, 207.

Union, etc., Ins, Co. v. White, 945.

Union, etc., Ins. Co. v. Keyser, 888, 848.

Union Iron Co. v. Pierce, 244, 516.

Union Mfg. Co. v. Pitkin, 936.

Union Mutual Ins, Co. v. "White, 920.

Union Mut. L, I. Co. v. McMillan, 870.

Union Nat’l Bank v. Carr, 384.

Union Nat’l Bank v. Chicago, 633.

Union Nat’! Bank v. Hunt, 390, 347.

Union Nat’l Bank v. Miller, 989.

eae Pac, R. R. Co. v. United States,
596.

Union P. R. R. v. Credit Mobilier, 733,
758.

Union P, R. R. v. Durant, 735.

Union Pac. R. R. Co. v. Hall, 789. .

Union Pac. R’y Co. v. Leavenworth,
etc., R’y Co., 859.

Union Pac. R. R. Co. v. McComb, 995.

Union Pac. R. R. Co. v. Smith, 108,

Union, etc., R. R. Co. v. East, etc., R.
R, Co., 863.

Union R. R. Co. v. Dull, 733.

Union Screw Co. v. American Screw
Co., 589.

Union S. S. Co. v. Buffalo, 635.

Union Turnpike Co. v. Jenkins, 143,
944,

Union Turnpike Co. v. Perkins, 183.

| Union Trust Co. v. Morrison, 844.

Union Trust Co. v. N. Y., etc. R. Ry
Co., 829.

Union Trust Co. v. N. Y., ete, R. RB.
Co., 85.

Union Trust Co. v. Rochester, etc., R.
R., 872,.760.

Union Water Co. v. Murphy’s: Flat
Fluming Co., 845, 837,

United Service Co., In re, 698.

Union & T. Bank v. Farrington, 482.

United States v. American Bell Tel. Co.,
994.

United States v. Amedy, 885.

United States v. B. & O. R. R. Co., 880.

United States Bank v. Dana, 912.

United States Bank v. Dandridge, 928,
916, 944, 914.

United States Bank v. Stearns, 984,

United States v. Berry, 687.

United States v. Britton, 347, 401.

United States v. City Bank, ete., 928.

United States v. Columbian Ins. Co.,
681.
exii

TABLE OF CASES.

[The references are to the Soot-paging.]

United States v. Cutts, 480, 419, 447,
421,

United States Exp. Co. v. Backman,
95.

oth

United States Ex. Co. v. ‘Henderson,
566.

United States Ex. Co. v. Lucas, 866.

United States v. Fox, 886, 869, 868.

United States v. Globe Works, 601.

United States Insurance Co. v. Shriver,
951.

United States v. Insurance Tos., 989,
985.

United States v. Jefferson Co., 112.

United States v. Knox, 252.

United States Life Ins. Co, v. Adams,
871.

United States v. McKelden, 670, 663,

668. ’

United States v. Memphis, etc., R. R.
Co., 986.

United States Mortgage Co. v. Gross,
868, 849.

United States v. New Orleans R. R.,

_ 840, 103, 843.

United States v. Planters’ Bank, 123.

United States v. R. R. Co., 624, "622,

United States Rolling Stock Co., Re,
872.

United States v. R. R. Bridge Co., 858.

United States v. San Pedro, etc., Co.,
951.

United States R. Clock Co. v. Atlantic,
etc., R. R. Co., 758.

United States Trust Co. v. Brady, 848, 2.

United States Trust Co. v. Harris, 347.

United States Trust Co. v. New York,
etc., R. R. Co., 696.

United States Trust Co. v. Lee, 868. °

United States Trust Co. v. United States
Fire Ins. Co., 347.

United States v. Union Pacific R. R.
Co., 789, 957, 708.

United States v. Vaughan, 420, 3881,
505, 447.

United Society v. Eagle Bank, 178,

Dnited Society, etc., v. Underwood, 894.

Unity Insurance Co. v. Cram, 73, 258.

University v. People, 637.

Upham v. Burnham, 427.

Uphill’s Case, 900.

Upper, etc., Co. v. Roach, 168,

Upper, etc., Co. v. Whittaker, 992.

Upson, etc., R. R. Co. v. Sharwan, 778.

“pen v. Burnham, 428, 284, 199, 47,

Upton v. Englehart, 175, 163, 167, 166.

Upton v. Hansbraugh, 162, 207, 221, 47,
192, 282.

Upton v. Jackson, 524, 321.

Upton v. Tribilcock, 85, 175, 157, 51, 64,
199, 163, 84, 221, 56, 47, 67.

Uruguay, etc., R’y Co., In re, 699.

Utica Ins. Co, v. Bloodgood, 847, ,

Utica Ins. Co. v. Cadwell, 9.

 

Utica Ins. Co. v. Kip, 847.
Utica Ins. Co. v. Scott, 847.

| Utica, etc., R. R. Co. v. Brinkerhoff, 88,
| Utica, etc., Co. v. Tilman, 985.

Utley v. Clark-Gardner L. M. Co., 869.

¥; :

Vail v. Hamilton, 347, 839, 681.
Vail v. Jameson, 851

Vail v. Rice, 476.

Valk v. Crandall, 86, 23.
Vallans v. Fetcher, 77, 902.

| Valle v. Zeigler, 623, 619.

Valley Bank, etc., v. Sewing Soc., 701,

Valley R’y Go. v. Lake Erie Iron Co. as
351,

Van Aernam v. McCune, 876.

Van Allen v. Illinois, etc., R. R. Co., 68.

Van Allen v. Assessors, 11, 17, 626, 627,
629.

Van Allen vy, Ill. Central R. R. Co., 134,
15, 315.

Van Amburgh v. Baker, 690.

Van Arnam v. Billstein, 554,

Vanatta v. State Bank, 848.

Van Blarcom v. Broadway Bank, 480.

‘Van Blarcom v. Daget, 612.

Vance v. Bank of Ind., 984.

) Vance v. Erie R’y, 875, 877.

Vance v. Phoenix Ins. Co., 893.

Vance v. Tourne, 475.

Van Cise v. Merchants’ Nat. Bank, 509.

Van Cott v. Van Brunt, 24, 52, 55, 246.

Veneell vy. South Francisco Duck Co.,
815

Vandenburgh v. Broadway R’y Co.,
685, 673, 678, 679, 686.

| Vandenheyden v. Mallory, 354,

Vanderbilt v. Bennett, 533.

Vandermaker v. Glenn, 220, 202, 69.

Van Doren v. Olden, 606.

Van Dyck v. McQuade, 592, 596, 895.

Van Dyke v. Stout, 74.

Vane v. Cobbald, 164, 902.

Van Glahn v. De Rosset, 698.

Van Hastrup v. Madison, 102,

Van Hook v. Somerville, 917.

Van Hook v. Whitlock, 235, 239, 252.

Van Leuven v. First Nat’! Bank, 942.

Van Ness v. Fisher, 555, 545.

mata v. pene Car, etc., Co.,

Van Norman v. Tadkeou County Cir-
cuit Judge, 497, 498, 500.

Van Pelt v. U. 8., etc., Co., 213.

Van Riper, Ex parte, 248, 242.

Van Sandan v. Moore, 264, 551,

Vansands v. Middlesex Co. Bank, 447,
570, 571, 572, 576,

Van Slyke ve State, 629.

Van Wagenen v. Clark, 219.

‘Van Weel v. Winston, 158, 965.

‘= Wickle vy. Camden & A. R, R. Co. ey
57,
TABLE OF CASES.

exili

[The references are to the foot-paging.]

- Van Valkenburgh v. Thomasville, etc.,
R. R. Co., 733.
Vantine v. Morse, 502.
Varnam v. Hart, 985.
Vatable v. N. -Y., etc., R. R. Co., 752,
“01, 153.
Vater v. Lewis, 712.
Vaughan v. Wood, 489,
Vaupell v. Woodward, 491, 378, 478.
wear v. Ohio & Mississippi R. R. Co. es
200
. Vawter v. Griffin, 378.
Veazie v. Mayo, 800.
Veeder v. Baker, 244,
Veeder v. Lima, 106.
Veeder v. Mudgett, 208, 22'7,-321, 250.
Veiller v. Brown, 290, 294.
Venango Nat’] Bank v. Taylor, 852.
Venner v. Atchison, etc, R. R., 516,
518, 962, 969.
Vensant v. Roberts, 885.
Vermilye v. Adams Ex. Co., 476.
Vermilyea v. Fulton Bank, o71, 984,
Vermont Central R. R. Co. v. Clayes,
23, 182, 24.
Vermont, etc., R. R. Co. v. Vermont
Cent. R. R. Co., 524, 844,
Vernon v. Hovey, 124.
Vernon v. Manhattan Co., 954.
Vernon Society v. Hills, 914,
Verplanck v. Mercantile Ins; Co., 345,
697, 978, 986, 982.
Vick v. La Rochelle, 180.
Vick v. Lane, 216.
Vickers, Ex parte, 161.
Vicksburgh, 8. & T. R. R. v. McKean,
160, 182, 195, 282.
Vidal v. Girard’s Express, 810, 855.
Vigers v. Pike, 960.
Vilas v. Reynolds, 937,
Vinal v. Continental, etc., Co., 721.
Vinas v. Merchants’ Co., 874, 876.
Vincent v. Bramford, 228,
Vinton’s Appeal, 606, 611.'
Virginia, etc., Nav. Co,
, States, 885.
Virginia, etc., R. R. Co. v. County
Com’rs, etc., 96.
Vivian v. Mortlock, 337.
Volger v. Ray, 551.
Von Hoffman v. Quincy, 102.
_Von Schmidt v. Bourn, 644, 645.
Von Schmidt v. Huntington, 217, 555,
696.
Voorhees v. Bonésteel, 354.
Voorhees v. Receiver of Bank, etc., 192.
Voorhees v. Terhune, 499.
Voris v. McCready, 464.
Vose v. Grant, 207, 601, 600.
Vose v. Condrew, 749.
Vowell v. Thompson, 680, 681, 479,
Vredenburg v. Behan, 259,
Vreeland v. N. J. Stone Co., 64, 158,
169, 171.
Vulcan Iron Works, Re, 41, 59.

h

v. United

 

W.

Wabash, etc., R. R. Co. v. Ham, 701.

Wabash, etc., R. R. v. Jaggerman, 795.

‘Wabash, etc., R. R. v. Peyton, 789.

Waddill v. Alabama, etc., R. R. C
845.

Wadsworth v. St. Croix Co., 120.

Wadsworth v. Supervisors, 112.

‘Wagoner v. Loomis, 682.

Wagstaff v. Wagstaff, 334.

Wait v. Smith, 889.

Waite v. Coombs, 334.

Waite v. Dowley, 628.

Waite v. Mining Co., 913.

Waite v. Whorwood, 358.

el Fargo, 228, 272, 229,. 280}.
278.

Wakefield B’k v. Truesdale, 927.

Wakeman v. Dalley, 267, 398,

Walburn v. Ingleby, 564, 548, 562.

Waldo v. Chicago, St. P., etc., RB: R..
Co., 162, 169.

Wales v. Stetson, 512.

Walker’s Case, 290. a

Walker v. Bartlett, 379, 420, 292.

Walker v. Cincinnati, 109, 110, 106.

‘Walker v. Continental Ins, Co., 992.

Walker v. Crain, 231, 215.

Walker v. Detroit Transit R’y Co. , *422;.
433, 17, 352, '448.

Walker v. Devereaux, 73, 78, 74.

Walker v. Flemming, 913.

Walker v. Granite Bank, 563, 565.

Walker v. Ogden, 152, 151,

Walker v. Lewis, 227, 264.

Walker v. Mackie, 336.

Walker v. Mad River, etc., R’y Co., 821.

Ons,

Walker v. Milne, 13.

Walker v. Mobile R. R. Co., 165, 84, 167.

Walker v. Southeastern R’y, 875, 877.

Walker v. Springfield, 871.

Walker v. Wilmington, etc., R. R. Co.,
945, 932,

Wall v. Schneider, 384,

Wall v. Tomlinson, 353,

Wallace v. First Parish, etc., 916,

Wallace v. Loomis, 718, 882.

Wallace v. Long Island R, R. Co., 781,
758, 778.

‘Wallace v. Townsend, 76, 179.

Waller v. Bank of Kentucky, 935.

Waller v. Thomas, 546.

Wallingford, etc., Co. v. Fox, 87, 132.

Walls v. Bailey, 476,

Wallworth v. Holt, 981, 969.

Waln’s Assignees v. Bank of North
America, 571.

Walnut v. Wade, 116, 119,

Walradt v. Maynard, 594, .

Walser v. Seligman, 209, 210, 216.

1 v. Memphis, etc., R, R. Co., 216,

Walsh v. Seager, 169.
Walsh v. Sexton, 339.
cxiv

\

TABLE OF CASES.

[The references are to the foot-paging.]

Walsh v. Stille, 360, 361.

Walsh v. The Union Bank, 296.

Walsh v. Trustees, etc., 2.

Walstab v. Spottiswoode, 902.

Walter's Case, 276, 426, 285, 342.

Walters v. Comers, 389.

Walter's Second Case, 146, 276.

Walter A. Wood Mowing Co. v. Cald-
well, 870. '

Waltham Bank v. Waltham, 616,

Walton, Ex parte, 427.

Walton v. Coe, 232.

Walton v. Riley, 713.

Walton v. Walton, 387, 330, 331.

Walworth, etc., Bank v. Farmers’, etc.,
Trust Co., 921, 925.

Walwortly v. Brackett, 662, 193.

Wandsworth Gas Light, etc., Co. v.
Wright, 684.

Wann v. W. U. T. Co., 797.

Wanneker v. Hitchcock, 680.

Wannell v. Kern, 393.

Wapello v. B. & M. R. R. Co., 104, 123,

Ward’s Case, 71, 342, '72, 286.

Ward v. Brigham, 901.

Ward v. Davidson, 755, 762, 761.

Ward v. Davis, 549,

Ward v. Farwell, 703, 704.

Ward v. Garfit’s Case, 286.

Ward v. Griswoldville Manufg. Co., 213,
129, 180, 191, 218.

Ward v. Johnson, 817.

Ward v. Kitchen, 358, 357,

Warren v. Hewitt, 387.

Warren v. King, 302, 596, 304, 597.

Warren Mfg. Co. v. Autna Ins. Co., 869,

Warren v. Ocean Ins. Co., 914. >

Warren v. Postlewaite, 336.

Warwick R. R. Co. v. Cady, 186, 191.

Warten Min. Co. v. Jennings, 745, 731,
47. ,

Waseca Co. B’k v. McKenna, 633.

Washington Bank v. Lewis, 912, 953.

Washington Bank v. Palmer, 9

Washington Benevolent Soc. v. Bacher,
91

Washington Bridge Co. v. State, 801.
Washington v. Emory, 858, 357.
Washington Hotel Co, v. Marsh, 925,
Washington Ins. Co. v. Price, 9.
Washington v. Raleigh, etc., R. R., 787.
Washington, etc., T. Co. v. State, 703,
Washington Turnpike v. Cullen, 944,
Wasmer v. Delaware, etc., R. R. Co.,
789.
Watson v. First Natl Bank, 628, 627,
. 680.

Waterbury, In re, 985.

Waterbury v. Merchants’ Union Ex-
press Co., 554, 977, 544, 967, 555, 550,
696, ine s 3

Waterford W. W. & B. R’y Co. v, Dal-
biac, 188. /

Waterhouse v. Jamieson, 57, 37, 58.

Waterhouse v. London & 8S. W. Ry
Co., 410, 325.

Waterman v. Buckland, 380.
Waterman v. Troy, etc., R. R. Co., 310,
_ 811.

« Ward v. Londesburgh, 77, 902.
\ Ward v. Salein R’y, 742.
«~ Ward v. Sea Ins, Co., 697.

‘Ward V. Soc. of Att’ys, 696. :

Ward v. Sittingbourne, etc., R’y Co.,
600, 598.

Ward v. Southeastern R’y Co., 354, 481.
Ward v. Van Duser, 466.
Ward v.'Vosburgh, 384, 882, 381, 386.
Warde, In re, 358, :
Wardell v. R. R. Co., 738. °
Warden, etc., Shrewsbury v. Hart, 882.
‘Wardens of Christ Church v. Pope, 686.
‘Wardens v. Rector, etc., Co., 757.
Wardens, etc., Trinity Ch. v. Hall, 881.
Wardrobe v. California Stage Co., 878,
Ware v. Grand, ete., R’y Co., 523,
Ware v. McCandlish, 605.
Ware v, Bazemore, 973.
Warield v. Marshall, etc., Co., 889; 763,
Waring v. Cahawha, 7.
Waring v. Mayor, etc., of Mobile, 520.
‘Warne v. Meyer, 45.
‘Warner v. Beers, 550, 2.°
‘Warner v, Callender, 218, 215, 241.
Warner v.. Hopkins, 965.

Warner v. Mower, 669, 851, 667, 665,

670, 945, 663, 664,
Warr v. Bank of West Tennessee, 951.
Warren v, Brandon Mfg. Co., 508,
Warren v. Davenport Fire Ins. Co., 8

 

Waterman v. Sprague Mfg. Co., 850.

Waters v. Gilbert, 917.

Water-works Co. v. Burkhart, 861.

Water Valley Mfg. Co. v. Seamen, 182,
151, 162,

Watkins, Ex parte, 278.

Watkins v. Dorsett, 498. *

Watson, Ex parte, 177.

Watson v. Bennett, 936.

Watson v. Earl Charlemont, 171.

Watson v. Eales, 150, 149, 288,

Watson v. Miller, 468.

Watson v. Spratley, 18, 379, 549, 12.

Watts’ Appeal, 894, 838, 959, 962, 816.

Watts v. Salter, 188, 902.

Waugh v. Beck, 388.

Waukon, etc., R. R. Co. v. Dwyer, 84,
128.

Waudaw, etc., Co. v. Plummer, 7.

Waynesville Nat. Bank v. Irons, 952,

Wear v. Jacksonville, etc, R. R. Co,
94, 97, 187,

Weare v. Gove, 768. ~

Weaver v. Barden, 448, 394, 445.

vee v. Huntingdon, etc., Coal Co.,

‘Weaver v. Weaver, 627.

Webb v. Burlington, 617,

Webb v. Challoner, 462.
TABLE OF CASES.

CXV

[The references are to the foot-paging.]

Webb v.
Webb v,
Webb v.
Webb v.
Webb v.
Webb v.

Com. of Herne Bay, 847, 835.

Direct London, etc., R’y, B00,

Earle, 308, 299, 307, bea.

Graniteville Mfg. Co., 363.

La Fayette Co., 118.

Ridgely, 682.

Webb v. Town of Burlington, 611.

Webb v. Wetherhead, 549.

Webber v. Townley, 357,

‘Weber v. Fickey, 215, 18, 427, 156,

Webster’s Case, 148, 523.

WobSSe v. Grand Trunk R’y Co., 648,
64

‘Webster v. Hale, 331.

Webster v. Sturges, 388, 384, 887.

Webster v. Turner, 700.

Webster v. Upton, 47, 56, 291, 282, 427,
175, 221, 194, 84.

Weckler v. First Nat’l Bank, 462)

Weed v. Little Falls, etc., Co., 960.

Weed v. Snow, 827, 846,

‘Weeke’s Case, 341.

Weeks v. Love, 253, 239, 284,

Weeks v. Propert, 7168,

Weeks v. Silver, etc., Co., 153, 266, bon

Weolien ‘v. St. Paul, ete., R. RB.’ Co.
831.

Weetjen,v. Vibbard, 745,

Wehrman v. Reakirt, 290, 237, 209, 294,
231, 284.

Weidenger v. Spruance, 514.

Weigley v. Coal Oil Co., 229.

Weight v. Shelby R. R. Co., 159.

Weightman v. Clark: 111, 103.

Weikersheim’s Case; 354, 269,

Weinman v. Wilkinsburg, etc., ._ R’y

Co., 284.

Weir v. Barnett, 171, 896, 399,

Weir v. Bell, 171.

Weir v. St. Paul & S. F. R. R. Co., 862.

Weismer v. Village of Douglass, 108,

Weiss v. Mauch’ Chunk Tron Co., 25,
229.

Weisser v. Denison, 885.

Welch vy. Post, 101.

Wella v. Pace, etc., Co., 506.

Welland Canal Co. v. Hathaway, 715.

Wellersburg, etc., Co. v. Hoffman, 73.

Wellersburg, etc., Co. v. Young, 63.

Welles v. Cowles, 13.

Welles v. Stout, 249.

Wellman v. Howland Coal and Iron
Works, 216.

Wells v. Abernethy, 647.

Wells, Fargo, etc., v. Welter, 462.

Wells v. Gates, 552, 546,

Wells v. Oregon R’y & N. Co., 796, 880.

Wells v. McGeoch, 389.

Wells v. Pontiac Co., 116.

Wells v. Rahway, etc.,-Co., 659, 915.
Wells v. Rogers, 669, 132,

Wells v. Supervisors, 105, 101.

Wells v. Yates, 553.

Wellsborough, etc., Co. v. Griffin, | 752,
749,

 

Wellsborough v. N. Y., etc., R. R. Co. Ny
11%.

; Wemele v. St. caselies etc., R. R. Co.,

Wenlock v. River, etc,, Co., 885.

Wentz v. Lowe, 256.

Westcott v. Fargo, 554, 552.

Westcott v. Minnesota, etc., Co., 142.

West, Ex parte, 172, 166,

West v. Carolina, ete., Ins. Co,, 701,
1

West v. Crawfordsville & A. T. Co., 163,

West v. Madison Co. Agric., etc., 888.

West v. Wentworth, 649.

West, etc., Bank v. Kitson, 768.

West Bank of Scotland and Liquida-
tors v. Baird, 915.

West Branch Bank v. Armstrong, 580,
574, 576.

West Branch, etc., Canal Co.’s Appeal,
644, 649.

West Chester, etc., v. Jackson, 305, 303,
301, 593, 302,

West, etc., Bank v. Ford, 985.

West, etc., Bank v. Shawnee, ete.,
Bank, 928,

West, ete., Bank v. Thompson, 954,

West, etc., Co.’s Appeal, 394,

‘West Cornell v. Moffatt, 64.

West Devon, etc., Case, 563.

‘West Devon, etc., Mine, In re, 559, 564,
565.

West Philadelphia Canal Co. v. Innes,
281; 282.

West R. R. Co. v. Mowatt, 44, 36.

West River Bridge Co. v. Dix, 864, 858.

West, etc., Sav. Bank v. Ford, 713,

West St. Louis Bank v. Shawnee Co,
Bank, 809, 928.

West Va. Trans. Co. v. Volcanic Oil,
etc., Co., 862.

Western, etc., v. Addie, 888, 158, 161,
170, 875.

Western Bank v. Baird, 689.

Western Bank v, Mills, 847.

Western Bank v. Gilstrap, 927.

Western Bank of Scotland v. Tallman,
23, 24.

Western Boatmen’s Benevolent Ass’n
v. Kribben, 844, | .

Western, ete., Co. v. Causley, 903.

Western, etc., Co. v. Rogers, 798.

Western’ Cottage Organ Co. v. Reddish,

45,

Western Maryland R’y Co. v. Franklin
Bank, 826.

Western, etc., R. R. Appeal, 706.

Western R. R. Co. v. Avery, 202.

Western R. R. Co. v. Bayne, 922.

Western R. R. Co. v. Babcock, 984.-

Western R. R. Co. v. Nolan, 881.

Western, etc., R. R. v. Exposition, etc.,
795.

Western Tel. Co. v. Burlington, etc.,
R’y Co., 785.
CXVi

TABLE OF CASES.

[The references are to the foot-paging.]

Western, etc., Tel. Co. v. Massachu-
setts, 641

Western Trans. Co. v. Schen, 635.

‘Western Trans. Co. v. Stevens, 636.

Western Union Tel. Co, v. Am. U. T.
Co., 797.

Western Union Tel. Co. v. Atlantic,
etc., Tel. Co., 785, 797.

Western Union Tel. Co, v. B. & O. Tel.
Co., 947, 797.

Western Union Tel. Co. v. Burlington,
etc., R’y, 797.

‘Western Union T. Co. v. Carew, 797.

Western Union Tel. Co. v. Chicago,
etc., R. R., 797, 785.

Western Union Tel. Co. v. Eyser, 874,
879.

Western Union Tel. Co. v. Lieb, 639.

Western Union Tel. Co. v. Mayor, 689,
864, 869, 802.

Western Union Tel. Co. v. Rich, 818.

ee etc., Tel. Co. v. Union R’y
Co., 735

‘Western Union Tel. Co. v.'U. P. R’y, 6,
257.

Western Union Tel. Co. v. Ward, 796.

Westerfield v. Radde, 922.

Westfield B’k v. Cornen, 953.

Westmoreland Bank v. Klinesmith,
948.

‘Weston’s Case, 278, 869, 567, 281, 295,
296, 274, 735, 81.

Weston v. Bear River, etc., Mining Co.,
580.

Weston v. Bear R. & A. Co., 481, 509,
508.

Weston v. City of Charleston, 5, 626.

Weston v. Foster, 863.

Weston v. Ives, 547.

Westropp v. Solomon, 465, 475.

Wetherbee v. Baker, 41, 52, 214, 209,
216, 156.

Wetmore v. St. Paul, etc., R. R. Co.,
750, 832.

Wetmore v. Parker, 856.

Wetumpka v. Wetumpka, 113.

Wetumpka, etc., R. R. v. Bingham,
719, 520.

Weyer v. Second Nat?l Bank, 12, 445,
365, 447, 366.

wey Bridge Co. v. Green, 740, 789,

Wheat v. Bank of Louisville, 921.

Wheatcroft’s Case, 98, 178.

Wheatland v. Taylor, 118,

Wheatly v. BIlkStoné, etc., Co., 835,

Wheeler, In re, 318.

Wheles, Matter of, 321, 317, 672, 691,

Wheeler, etc., Co. v. Boyce, 876.

Wheeler v. Faurot, 289, Dot, 293, 290.

Wheeler v. Friend, 880.

Wheeler v. Frontier Bank, 514.

Wheeler v. Millar, 208, 249, 218, 297,
250, 64, 222, 249, 200, 16, 246,

 

Wheeler v. New Haven, etc., Co., 350,

Wheeler v. Newbould, 494.

Wheeler v. Perry, 606.

Wheeler v. San Francisco & A. R. R,
Co., 785, 788.

Wheelock v. Kost, 270, 192.

Wheelock v. Moulton, etc., 908, 18,

Whelan v. Lynch, 649, 463, 466,

Wheless v. Second Nat’! Bank, 877, 875,

Whelpley v. Erie Railway Co., 328,

Whillenton Mills v. Upton, 806.

Whipple v. Parker, 551.

Whitaker v. Grummond, 181.

Whitaker v. Hartford, etc., R. R. Co.,
830.

Whitaker v. Smith, 228.

| Whitbeck v. Mereantile, etc., B’k, 630.

White v. Barber, 3

White v. Baxter, ri

White v. Blum, 212, 237,

White v. Boyce, 400.

White v. Brownell, 545, 547.

White’s Case, 286, 80, 275, 290.

White v. Campbell, 712, 720.

White v. Carmarthen, etc., R’y, 969,
824.

White v. Crow, 985.

White’s, etc., Co. v. Davidson Co., 709,

White v. Drew, 378

White Mountains R. R. Co. v.’ East-
man, 88, 143, 178, 156, 157, 191.

White v. Franklin Bank, 846, 848.

White, Executor, v. Salisbury, 373.

White Hall & Plattsburgh R. R, Co, v.
Myers, 523.

White v. How, 826.

White v. Howard, 856, 550, 868.

White v. N. Y., etc., Soe., 677,

White, etc., Co. v. Pettes, ‘etc. , Co., 742,

White v. Price, 865, 361.

White v. Salisbury, 647, 475, 447, 421,

White v. Schuyler, 376.

White v. Shelby R. R. Co., 182,

White v. Smith, 461, 384, 473, 651.

White v. State, 886.

White v. Syracuse, etc., R. R. Co., 522,
849, 520.

ae Bank v. Toledo Ins. Co., 845,
57

White Water Valley, etc., v. Vallette,
839, 933, 61, 62; 855, 836, 837,

White River T. Co. Vv. Ver mont Cen. R.
R. Co., 858, 828.

White v. Westport Cotton Mfg. Co.,
933, 936.-

White v. Winchester, 333, 337.

Whihele v. Southeastern R’y Co., 874,

Whitford v. Laidler, 942.

Whitehall & P. R. R. Co. v. Myers, 155,

Whitehaven, etc.. Co. v. Reed, 327.

Wi aenese v. Buffalo, etc., Ry Co.,

Whitehead v. Whitehead, 610.

Whitehouse’s Case, 162, 173,

\
TABLE OF CASES.

CXVil

[The references are to the foot-paging.]

Whitehouse & Co., Re, 201.

Whitehouse v. Moore, 476, 465.

Whitehouse v. Sprague, 553.

Whitely Partners, In re, 81.

Whitesell v. Boston, etc., Co., 617.

Whitesides v. Hunt, 388, 384, 387.

Whitewright v. American Tel. & Cable
Co., 410.

Whiting v. Sheboygan, 106.

Whiting v. Town of Potter, 114.

Whiting v. Union Trust Co., 939.

Whiting v. Wellington, 915.

Whitley v. Harrison,. 885.

Whitman v. Bowden, 782, 554, 962.

Whitman v. Granite Church, 917,

Whitman v. Porter, 553, 202. ,

Whitman v. Proprietors, 70, 69.

Whitney v. Atlantic & St. Lawrence
R. RB. 788.

Whitney v. Butler, 286.

Whitney v. Hyman, 257, 942.

Whitney v. Leominster, 815.

Whitney v. City of Madison, 615,

Whitney v. Mayo, 970.

’ Whitney v. Page, 292,

Whitney v. Pray, 62.

Whitney v. Phoenix, 606, 611.

Whitney v. Madison, 629.

Whitney v. Ragsdale, 620.

Whitney v. South, etc., Co., 982, 929.

Whitney v. Union Trust Co., 938, 939,
944, 940.

Whitney v. Wyman, 906.

Whitney Arms Co. v. Barlow, 814, 246,
172.

Whittemore v. Amoskeag Nat'l Bank,
969.

Whittlesey v. Delancy, 761.

Whittlesey v. Frantz, 884, 85.

Whitwell v, Warner, 254, 929, 933, 932,
899.

Wicken v. Evans, 529.

Wickersham v. Chicago, etc., Co., 950.

Wicks v. Adirondack Co., 829.

Wicks v. Hatch, 495, 471, 494.

Widow Conant v. Millaudon, 680.

Widow of ‘Reynolds v. Commission,
855.

Wigan v. Fowler, 847.

Wigfield v. Potter, 588, 531.

Wiggins Ferry Co. v. East St. Louis,
etc., 860.

Wiggins v. Freewill Baptist Church,
666, 664, 663, 667.

Wight v. Shelby, etc., R. R. Co., 74, 75,
163, 156.

Wight ve "Springfield, etc., Rz R. Co.,
688.

Wilber v. Lynde, 763.

Wilbur v. Atlantic, etc., R’y Co., 878.

Wilbur v. The Stockholders, 129, 214,
218, 218, 214, 212, 216, 127.

Wilby v. West Cornwall R’y Co., 785.

Wilcox v. Brickel, 974,

Wild v. Bank, 927,

| Williams v.

 

Wild v. Davenport, 536.

Wild v. Passamaquoddy Bank, 914,

Wilday v. Sandys, 609,

Wilday v. Mid. Hants R’y Co., 835, 833.

Wilde v. Northern R. R. of NJ. & E.
R’y Co., 788.

Wildman v. Wildman, 13, 353.

Wiles v. Suydam, 284, 236, 241, 251, 244,
252, .

Wiley v. Board of Education, 937.

wale v. Rochester, etc., R’y Co., 973,

717,

Wilkins v. Thorne, 153, 994.

Wilkinson’s Case, 162, 173.

Wilkinson v. Anglo, etc., G. M. Co., 72.

Wilkinson v. Bauerle, 830, 851, 746.

Wilkinson v. Delaware R. R. Co., 873,

Wilkinson v. Dodd, 979.

Wilkinson v. Prov. Bank, 482.

Wilkinson v. Lloyd, 373.

Willamette Mfg. Co. v. Bank of Brit-
ish Col., 842.

Willamette, etc., Co. v. Williams, 991.

Willard v. Gould, ae

Willard v. Pike, 616

Wiles Ex parte, 483, 659, 678, 685,
680,

Willcox v. Toledo, etc., R. R. Co., 723.

Willey v. Parratt, 913.

Williams v. Archer, 647, 645, 650.

Williams v. Bank of Mich., 553, 259, 712,

Williams v. Boice, 602, 604.

Williams v. Carr, 887.

Williams’ Case, 539, 541, 296, 279, 295.

Williams v. Cheney, 927, 870.

Williams v. Chester, ete., R. R, Co., |
925.

Williams v. Colonial Cae 395, 422,

Williams v. Colby, 724.

Williams. v. Galles Corner & Rich-
mond Gravel Road Co., 562.

Williams v. Creswell, 865, 989.

Williams v. Duanesburgh, 106.

Duck River, 106.

Fullerton, 595.

German, etc., Fire Ins. Co.,

Gilman, 476,

Great Western R’ y Co., 10.
Gregg, 894,

Hall, 108.

Halliard, 962.

Hanna, 374, 283, 288.
Hintermeister, 986,
London, 423,

Lowe, 567.

Mechanics’ Bank, 447, 481,

McDonald, 846, 894.
McKay, 895.

Meyer, "128, a a
Missouri R. R. Co., 989.
Williams v. New Jersey §. R. R, 842,
Williams v. Page, 77, 902,

Williams v. Parker, 310.

Williams v.
Williams v.
666.
Williams v.
Williams v.
Williams v.
Williams v.
Williams v.
Williams v.
Williams v.
Williams v.
Williams v.
Williams v.
505.
Williams v.
Williams v.
Williams v.
Williams v.
exvili

TABLE OF CASES.

[The references are to the foot-paging.]

Williams v. Peel, etc., Co., 645, 650.

Williams v. Pigott, $99. s

Williams v. Planters’ Ins. Co., 875, 877.

Williams v. Patrons of Husbandry, 754.

Williams v. Prince of Wales Ins, Co.,
563, 565, 564.

Williams v. Reynolds, 498.

Williams v. Roberts, 116.

Williams v. Riley. 846.

Williams v. St. George, etc., Co., 905.

‘Williams v. Salmond, v7, 903.

Williams v. Savage Manut’g Co., 316,
345, 847, 564. .

Williams v. Smith, 10.

Williams v. Supervisors of Albany, 680.

Williams v. Traphagen, 201.

Williams v. Western Union Tel. Co., 5,
59, 585, 586, 596.

Williams v. Wadsworth, 228.

Williamson v. Mason, 394, 462.

Williamson v. New Albany, etc., R. R.,
840.

Williamson v. New Jersey Southern R.
R. Co., 478, 831, 844, 840.

Williamson v. Pigott, 899. |

Williamson v. Smoot, 497.

Williamson, Ex parte, 824, 699.

Williamson v. Kokomo, ete., Ass’n, 714,
713.

Williamsport Gas Co. v. Pinkerton, 831.
Willink v. Morris Canal & B. Co., 840,
841, 844.
Willis v. Fry, 325.
Willis, etc., Co. v. Northern Pac. R’y
260.

day .

Willis v. Phila., etc., R. R. Co., 325.

Willis v. Plaskett, 334.

Willis v. Toledo, etc., R’y Co., 931.

Williston v. Michigan, etc., R. R. Co.,
299, 305, 599.

Willoughby, Re, 609.

Willoughby v. Comstock, 494, 550.

Wills v. Murray, 664, 426, 657.

ae v. Atlantic, etc., R. R. Co.,

2.

Wilmington R. R. Co. v. Reid, 518, 625,
614, 636, 639.

ee ator etc., R. R. v. Downward,
Ui =

Wilmington, C. & R. R. R. Co, v.
Thompson, 193.

Wilmott v. London, 835,

Wilson’s Appeal, 611.

Wilson, Ex parte, 274,

Wilson v, Atlantic, etc., R. R. Co., 488,

405.

Wilson v. Baker, 884,

Wilson v. Bank of Montgomery County,
313, 319,

Wilson v. Blackbird Creek M. Co. , 856.

Wilson v. Brownsmith, 333.

Wilson’s Case, 72, 80, 278, 824,

Wilson v. Caneadia, 113.

Wilson v. Curzon, 901.

Wilson v. Furness R’y Co., 817.

 

Wilson v. Gains, 6389.

Wilson v. Harman, 610.

Wilson v. Keating, 376.

Wilson v. Little, 14, 478, 481, 480, 494,
493, 650.

Wilson v. Maddison, 886.

Wilson v. Martin, ete., 992.

Wilson v. Matthews, 649.

Wilson v. Metropolitan R. R. Co., 755.

Wilson v. Miers, 816.

Wilson v. Pittsburgh, etc., Coal Co., 221.

Wilson v. Proprietors of Central Bridge,
680, 696, 699, 766.

Wilson v. Roots, 378.

Wilson v. Salamanca, 124, 781.

Wilson v. Seligman, 212.

Wilson v. Shreveport, 104.

Wilson v. Stanhope, 902.

Wilson v. The Stockholders, etc., 245,
223, 246.

Wilson v. Whittaker, 651, 653.

Wilson v. Wilson, 690.

Wilson v. Willies Valley R. R. Co., 136,
517.

Wiltbank’s Appeal, 606, 585.

Wiltz v. Peters, 685.

Winans v. Hassey, 475.

Winch v. Birkenhead, etc., R’y Co., 970,
779,

Wincham, etc., Co., In re, 83. ;

Winchester v. Balt.'& Susq. R. R. Co.
951,

Winchester E. T. Co. v. Vimont, 842.

Winchester v. Metter, 380.

Wincock v. Turpin, 218, 224.

Windham Prov. Sav. Institution v.
Sprague, 234, 236, 264,

Winfield v. Barton, 209.

Wing v. Harvey, 949.

Winget v. Quincy, etc., Co., 166, 712.

Wingfield v. Peel, 209.

Winn v. Macon, 103, :

‘Winnes v. Ulster, etc., Inst., 952.

Winslow v. Fletcher, 503, 406.

Winsor, Ex parte, 595, 131, 215.

Winsor v. Bailey, 968, 972, 969.

Winston v. Tennessee, etc., R. R. Co,
106.

Winter v. Belmont Min. Co., 414.

Winter v. Little, 849.

Winter v. Muscogee R. R. Co., 517, 518,

‘Winters v. Armstrong, 186, 220.

Winters v. City Council, 120, 116.

‘Winthrop Iron Co. v. Meeker, 693.

Wintringham v. Rosenthal, 58,

ba Sa v. Greenville, etc., R. R. Co.,

10.

Witherhead v. Allen, 246, 552, 237.

Withers v. Buckley, 864.

‘Witmer, Appeal of, 748,

Witmer v. Schlatter, 899.

Witt v. Steere, 605, 608.

Witte v. Derby Fishing Co., 944.

Witter v. Miss., Ouachita & Red River
R. R. Co., 517, 518.

‘
TABLE OF CASES.

CXiX

[The references are to the footpaging’

Witters v. Armstrong, 821.

Witters v. Sowles, 271, 240, 895, 338, 603,
249, 277, 275, 271, 951, 79, 288,

Witwell Vv. Wormer, 764,

Wolcot v. Heath. 3382.

Wolff v. New Orleans, 107.

Wollaston’s Case, 148.

Women’s, ete., Union v. Taylor, 913.

Wonson v.. Fenno, 877.

‘Wontner v. Shairp, 190, 188, 172.

‘Wood's Case, “

Wood's Claim, 5:

Wood’s Appeal, 364, 448, 487, 488.

Wood v. Argyle, 899.

Wood v. Bedford e B. R. R. Co., 842,
778.

‘Wood v. Coosa, etc., R. R. Co., 69, 182,
194.

Wood, etc., Co. v, Coldwell, 866.

Wood v. Commissioners of Oxford, 106.

Wood v. Dummer, 602, 218, 720, 721,
207. 600.

Wood v. Draper, 552, 614,

Wood v. Dubuque, 749,

Wood v. Finch, 546.

Wood v. Guaranty, etc., Co., 881, 841.

Wood v. Hayes, 470, 485.

Wood v. Jefferson Co. Bank, Bea:

‘Wood v. Lary, 585.

Wood v. Memphis, etc., R. R. Co., 683,

349.
Wood v. Smith, 487.
Wood v. Whelan, 941, 906, 940.
Wood v. Wiley, etc., Co., 935, 713,
Wood v. Wood, 891.
Wood v. Union, etc., Ass’n, 828.
Wood Hydraulic, ete., Me King, 656,
Woodfork v. Union Bank, 516, 720.
Wocdhall’s Case, 20.
Woodhouse wv, Crescent Mutual Ins.
Co., 394,
Woodhouse v. Commonwealth Ins. Co.,
515.
Woodman v. York, etc., R. R. Co., 938.
Woodruff, Estate of, 606.

Woodrutf & Beach Ir on Works v. Chit- |

tenden, 288, 248.
Woodruff v. Dubuque, etc., R. R. Co.,
588.
Woodruff v. Erie R’y Co., 777.
Woodruff v. Harris, 509.
Woodruff v. McDonald, 68, 391.
‘Woodruff v. Rochester, etc., R. R., 931.
Woodruff v. Trapnall, 515.
Woodruff v. Wentworth, 687.
‘Woods v. De Figaniere, 564.
Woods v. Lawrence Co., 102,
Woods v. Wicks, 248, 264, -
Woodstock Iron Co. v. Extension Co.,
94, '734.
Woollaston’s Case, 147, 145, 148.
Woolmer v. Toby, 901.
Woolsey v. Independent Order, etc., 891.
Woonsocket Union R. R. Co. v. Sher-
man, 98.

108, 62,

*

Wooster v. Neville, 393.
Worcester, ete., Co., Re, 230.
Worcester v. Norwich, etc., R. R., 800.
Worcester, etc., Co. v. Willard, 148, 87.
Worcester & N. R. R. Co. v. Hinds, 191.
Work v. Bennett, 488, 651, 485.
Workingman’s Banking Co. v. Rauten-
burg, 847. '
Works v. Chittenden, 248.
Worral v. Harford, 537.
Worrall v. Judson, 290, 6, 283. .
Worrell’s Appeal, 357, *
Worth v. Com’rs, 617, 618.
Worth v. Phillips, 383.
Worthington v. Sebastian, 617.
Worthington v. Tormey, 471, 493.
Woven Tape Skirt Co., Matter of, 721.
Wright’s Appeal, 324, B25, 326, 390.
Wright’s Case, 168, 174, 178, 664,
Wright v. Bishop, 110.
Wright v. Bundy, 656,
Wright v. Central Cal.,
685.
Wright v.
Wright v.
Wright v.

etc., Water Co.,

Commonwealth, 675.

Hughes, 824, 825.

Lanckton, 936.

Wright v. Liverpool Ins. Co., 991.

Wright v. Bank of Metropolis, 648,

Wright v. McCormack, 215, 281, 282,
239, 253.

Wright v. Oroville M. Co., 760.

Wright v. Pipe Line Co., 351,

Wright v. Stelz, 615, 629.

| Wright v. Springfield, etc., R. R. Co.,

10.

| Wright v. Tuckett, 605, 610, 589.

Wright v. Vermont, etc., R. R. Co., 310.
Wright v. White, 607. :
Wrightman v. Clark, 111.

Wrysgan. etc., Co., In re, 548, 549,

| Wych v. Meal, 565, 971.
Wylde v. Northern R. R., 786.

Wylie v. Speyer, 830.

Wylly v. Collins, 537.

Wyman v. Amer. Powder Co., 20, 7,
230, 642, 647, 649.

Wyman v, Fiske, 381, 387, 388.

Wyman v. Hallowell, etc., Bank, 947.

Wyman v. Penobscot & K. R. R., 788,

Wyndham Provident, Institution, ete.,
v. Sprague, 226.

Wynkoop v. Seal, 466.

Wynne’s Case, 779.

Wynne v. Price, 293, 376, 428, 467.

Wyscaver v. Arkinson, 109.

 

¥.

Yates v. Boston, 749.

Yates v. Maddan, 336,

Yates v. Van De Bogert, 721.

Yazoo, etc., R. BR. v. Board, etc., 638.
Yeager v. Scranton, ete., Bank, 129,
Yeaton v. United States, 244,
CXX

TABLE OF CASES.

[The references are to the foot-paging.]

Yelland’s Case, 426.

Yellow, etc., Co. v. Stevenson, 925, 923,
934,

Yerkes v. Saloman, 384, 381, 388.

Yetts v. Norfolk R’y Co., 811, 134.

Yoeland, etc., Re, 275.

Yool v. Great Western Ry ag 599,

York Co. v. Central R. R., 795.

York County v. Small, 914,

York & C. R. R. Co. v. Pratt, 186.

York & Maryland L. R. R. Co. v.

Winans, 788. ;
York North Mid. R’y v. Queen, 717.
York v. Passaic, etc., Co., 377.

York, etc., R’y Co. v. Hudson, 812, 747.
R. R. Co, v. Ritchie, 147,

York, etc.,
918.

York Tramways v. Willows, 139.

¥oughiogheny Shaft Co. v. Evans, 226,

Young, Ex parte, ae 386, 384, 383.
Young v. Drake, 968, 974.

Young v. Erie oe tion 40, 56, 59.
Young v. Fox, 393.

Young v. Harrison, 806,

Young v. Moses, 722,

 

Young v. New York & Liverpool
Steamship Co.; 216.

Young v. Rollins, 724, :

Young v. Rosenbaum, 232, 236, 287.

Young v. South, etc., Iron Co., 508,
503.

Young .v. Vough, 576, 568, 573, 579, 581.

Z.

Zack v. Pennsylvania R. R. Co., 857.
Zabriskie v. Cleveland, etc., R. R. Co.,
967, 349, 35, 520, 807, 960, 667, 665. .
Zabriskie v. Hackensack, etc., R. R. ,
Co., 528, 524, 521, 517, 696, 522, 518,
960, 102. ‘i

Zambrino v. Galveston, etc., -R’y Co.,
995.

Ziegler v. Hoagland, 755.

Zimmer v. Schleehauf. 230.

Zimmer v. State, 802, 701.

Zimmerman v. Jewett, 534,

ages v. Joliet Opera House Co., 180,

2,
Zulick v, Markham, 4'70.
Zulueta’s Claim, 342, 276, 341, 343. .
STOCK AND STOCKHOLDERS

GENERAL CORPORATION LAW.

PART a
ISSUE OF AND LIABILITY ON STOOK.

CHAPTER I.

DEFINITIONS AND SCOPE OF THE WORK.

§1. Classes of corporations and the | § 4a. Relation of stockholders towarda

class considered herein, the corporation.
2. Corporations having a capital | 5. Shares of stock defined.

stock. 6. Shares are personalty and not real
3. Definition of capital stock. property.

3a. Definition of charter.

4. Definition of corporator, sub-
scriber, shareholder and stock-
holder.

Stock as property.

Law of place governing stock,
Classes of stock.

Certificates of stock.

em
Peer

81. Classes of corporations. and the class considered herein. —
A corporation, as defined by Chief Justice Marshall in the Dart-
mouth College Case," is “an artificial being, invisible, intangible,
and, existing only in contemplation of law.” This celebrated defi-
nition comprehends incorporated bodies of every class and nature.
For the better understanding, however, of the law of corporations,
and for the treatment of special branches of that law, the early
writers, like Kyd, Blackstone, Kent, Angell and Ames, and many
subsequent authors, have subdivided corporations into distinct
classes. These subdivisions have been made on various principles
of classification. When divided with respect to the members of
corporations they are aggregate and sole. As regards their func-
tions they are public, such as cities and towns; guasz public, such

1 Dartmouth College v. Woodward, 4 Wheat., 518, 636 (1819).
(1) 1
§1.]

DEFINITIONS AND SCOPE OF THE WORK.

(cH. I.

as counties and school districts; and private; and again private
corporations are divided into ecclesiastical and lay; and still fur-
ther, lay corporations are divided into eleemosynary or charitable,
and civil, the latter of which include all private corporations that
are created for temporal purposes, such as banking, insurance, trad-
ing, railroad, manufacturing, turnpike, bridge and canal corpora-
tions, and certain educational institutions.’

1The following cases give definitions
of a corporation: Ohio Ins. Co. v. Nun-
nemacher, 15 Ind., 295 (1860); Ohio, etc.,
R. R. Co. v. Wheeler, 1 Black, U. 8.,
286, 295 (1861), per Taney, C. J.; Board,
etc., Tippecanoe Co. v. Lafayette, etc.,
R. R. Co., 50 Ind., 85, 108 (1875); R. R.
Commissioners v. Portland, etc., R. R.
Co., 68 Me., 269, 277 (1872); Thompson
v. Waters, 25 Mich., 214, 223 (1872);
Baltimore, etc., R. R. Co. v. 5th Bap.
Church, 108 U. &., 317, 330 (1882); Peo-
ple v. Assessors of Watertown, 1 Hill,
616, 620 (1841); Thomas v. Dakin, 22
Wend., 9, 70, 104 (1839); Warner v.
Beers, 23 Wend., 108, 123, 124 (1840);

~Head v. Providence Ins. Co., 2 Cranch
(U. 8. 8S. ©), 127, 167 (1804); Bank of
U.S. v, Deveaux, 5 Cranch, 61, 88 (1809),
per Marshall, C. J.; Louisville, etc., R. R.
Co. v. Letson, 2° How., 497, 552 (1844);
2 Kent, Com., 268; State v. Milwau-
kee, etc., R’y Co., 45 Wis., 579, 592
(1878).

In Tippling v. Pexall, 2 Bulst., 233
(1618), ‘‘ The opinion of Manhood, chief
baron, was this, as touching corpora-
tions: that they are invisible, immortal,
and have no soul. A corporation is a
body aggregate; none can create souls
but God; but the king creates them,
and therefore they have no souls.”

Congress has constitutional power to
incorporate a bank. M’Culloch v. State
of Md., 4 Wheat., 316 (1819). Congress
may incorporate interstate railroads.
California v. Pacific R. R. Co., 127
U. S., 1, 39 (1888). ;

In England certain colleges have
power to create corporations. No such
power exists in this country. Medical
Inst. v. Patterson, 1 Denio, 61 (1845).
For examples of irregular incorporation

2

and for incorporation illegally under
the general law, see chapter XTIT.

It is well to state here that a joint-
stock corporation and a joint-stock as-
sociation are essentially different. Both
have a capital stock, and both are man-
aged by boards of officers and meetings
of the stockholders. But a joint-stock
company is unincorporated and is buta
partnership. See chapter XXIX.

No particular form of words is requi-
site to create a corporation. Denton v.
Jackson, 2 John. Ch., 320 (1817). Yeta
statute which seems to create a cor-
poration may be construed not to have °
that effect. See Walsh v. Trustees, etc.,
96 N. Y., 427 (1884), holding that the,
trustees of the Brooklyn bridge are not
a corporation, but that the property be-
longs to the two cities of New York and
Brooklyn.

A corporation can be created by or
under legislative enactment, and by
that alone. Franklin Bridge Co. v.
Wood, 14 Ga., 80 (1858); United States
Trust Co, v. Brady, 20 Barb., 119 (1855);
Penn. R. R. Co. v. Canal Com’rs, 21
Pa. St., 9 (1852); Stowe v. Flagg, 72
Iil., 397 (1874); Hoadley v. County, etc,
Essex, 105 Mass., 519 (1870); State v.
Bradford, 32 Vt., 50 (1859);«McKim v.
Odom, 3 Bland’s Ch. (Md.), 407, 417
(1829).

The legislature is to decide whether
a special or general incorporation law
shall be enacted. People v. Bowen, 21
N. Y., 516 (1860); Gilbert El. R. R. Co.,
70 N. Y., 361 (1877). ,

The definition of acorporation throws
some light upon its nature, but a still
clearer idea is obtained by considering
the inherent powers of corporation. 1
Blackstone’s Com., 475, says that the
 

CH. 1.] DEFINITIONS AND SCOPE OF THE WORK. [§ 1.
\

At an early day private corporations for business purposes were
few in number and of little importance in the law. Chancellor
Bland states that no instance of such a corporation in the colonial
times of America can be found.' In England, also, at that time,
private corporations for profit were of small consequence. But the
past seventy-five years have completely reversed the relative im-
portance of the different classes of corporations, and, at the present
time, private corporations for- temporal purposes have completely
overshadowed all other kinds.

* With this change there is a decided tendency to re-classify the
subject, and the modern treatises on corporation law have recog-
nized the fact that old classifications are to be disregarded, and
that corporations are to be divided into joint-stock corporations, or
those having a capital stock, and corporations without -a capital
stock. Indeed, the modern text-books on corporations treat very
little of the older classes of corporations and the principles which
govern them, but fully and explicitly of corporations having a cap-

ital stock.

This change is due largely to the remarkable growth of the law
regulating the one prominent difference between the two classes.

That feature is that corporations

inseparable incidents or powers of all
corporations aggregate are: (1) To have
perpetual succession. (2) To sue and
be sued, and grant and receive in the
corporate name, (8) To purchase and
hold lands and chattels. (4) To have a
common seal, (5) To make by-laws.
Chancellor Kent, in II Com., 278, n.,
adds: (6) The power to expel members.
1 Kyd on Corp., 18, 69, 70, has a differ-
ent summary of incidents.

The greatest and most vital features
of modern corporations, however,—
features that have become prominent
since those authors wrote,—and the
features that have rendered possible the
universal use and great achievements
of corporations, are two in. number:
(1) The limited liability conferred, by
implication, by the granting of a char-
ter. (2) The right of the corporation to
issue shares of stock, and the right of
the members to transfer them,

A corporate franchise may mean
either the power to act as acorporation,
or may mean the. right which a corpo-

y 3

with a capital stock have stock

ration has to ‘operate a franchise, such
as a railroad’s right of way. The for-
mer is not property. It is not an ele--
ment of value in estimating the value
of the majority of the stock. Johnson
v. Kirby, 65 Cal., 482 (1884). It is not
anasset. A bank franchise does not pass
toits assignee for the benefit of creditors,
and the court will deny his application
to sell it. Fietsam v. Hay, 13 N. E.
Rep., 501 (Ill., 1887). For various defi-
nitions of franchise, see Wait on In-
solvent Corporations, § 12.

The domicile of a corporation is en-
tirely distinct from the domicile of

its officers or stockholders. Perry v.

Round, etc., Assoc., 22 Hun, 293 (1880).

See, also, cases in §§ 750, 758, infra,
where the jurisdiction of the federal
courts was at issue.

1McKim v. Odom, 8 Bland’s Ch,
(Md.), 407, 418 (1828). Fora list of the
first incorporated business companies in
America, see Harvard Law Review,
Nov. 1888, p. 165.
§§ 2, 8.) ee
and stockholders, while corporations without a capital stock have
none, and are governed largely by principles of law that have.
changed little since the days of Blackstone, Kyd and Kent. It is
with this feature of modern corporations, that of stock and stock-
holders, as distinguished from the characteristics of the early cor-
porations at common law, which have sunk into comparative unim-
portance,! that the present work is concerned.

§ 2. Corporations having a capital stock.— The questions which
arise in connection with corporations having a capital stock maye
be divided into two groups. The first includes those principles of
law which affect all corporations, whether they have a capital
stock or not. Of such a kind are the old questions of how a cor-
poration shall contract; whether a seal be necessary ; whether and
how it may act through an agent; the right to sue and be sued in
various courts; and to hold and dispose of property. These ques-
tion, capacities and incidents, for the most part, have become so
well settled as to give rise to comparatively little litigation at the
present day.

On the other hand, it is believed that the modern law of corpo-
rations, as regards its litigated questions, its unsettled principles,
its new problems and its rapidly crystallizing results, is the law of
stock and stockholders. This law involves the issue of stock, and
the rights, duties, liabilities and miscellaneous incidents of stock-
holdership. Indeed, it may be said that the law of stock and stock-
holders is the proper stand-point from which to treat of general
corporation law. It is upon this theory that the present edition of
this work has been written.’

§ 8. Definition of capital stock.— Capital stock is the sum fixed
by the corporate charter as the amount paid in or to be‘paid in by
the stockholders for the prosecution of the business of the corpora-
tion and for the benefit of corporate creditors.! The capital stock ~
is to be clearly distinguished from the amount of property pos-

DEFINITIONS AND SCOPE OF THE WORK.

1The subject of municipal corpora-
tions would seem to form an exception
to this statement, were it not that the
great and deservedly successful work of
Judge Dillon on Municipal Corporations
has clearly stated, and thereby settled,
most of the difficult subjects connected
with that branch of the law.

2The first edition of this treatise did
not include these subjects. The pres-
ent edition, however, has been extended

so as to include all subjects of corpora-
tion law.

3See the preface for an explanation
of the author’s ideas on this subject.

4¥For various definitions see Barry v.
Merchants’ Ex. Co., 1 Sand. Ch., 280,
805 (1844); Christensen v. Eno, 106 N.
Y., 97, 100 (1887); Hightower v. Thorn-
ton, 8 Ga., 486, 500 (1850); Hannibal &
St. Joseph R. R. Co. v. Shacklett, 30
Mo., 551, 558 (1860); St. Louis, Iron M.,
etc., R. R. Co. v. Loftin, 80 Ark., 693,
709 (1875); Bent 'v. Hart, 10 Mo. App.,
143, 146 (1881); Mutual Ins. Co, v. Su-
pervisors, etc., 4 N. Y., 442 (1851);
wt

[8 8a.

sessed by the corporation. Occasionally it happens that, under the
terms of statutes relating to taxation which have been drawn with-
out regard to the technical meaning of words, the: courts will con-
strue the capital stock to mean all the actual property of the cor-
poration. But this is for the purpose of carrying out the intent of
the statute, and is not the real meaning of the term. At common
law the capital stock, does not vary, but remains fixed, although the
actual property of the corporation may fluctuate widely i in value
and may be diminished by losses or increased by gains. The term
“stock”? has been used at times to indicate the same thing as
capital stock. Generally, however, it means shares of stock, “and
in this sense it is used in this treatise.

§ 3a. Definition of charter— A charter is the instrument which
creates the corporation: It formerly was granted by the king.
Later it was granted by an act of the legislature —a separate act
being passed for each charter. At present the constitutions of the
various states generally require that in all possible cases the legis-
lature shall pass general acts whereby, by the simple filing of a
prescribed instrument, persons may form a corporation without
applying to the legislature at all. These general acts specify the
contents of the instrument to be-filed, and specify also the powers
of the corporation. It is clear that the instrument so filed should

CH. 1. DEFINITIONS AND SCOPE OF THE WORK.

Bailey v. Clark, 21 Wall., 284 (1874),
where Field, J., says ‘‘it applies only
to the property or means contributed by
the stockholders as the fund or basis for
the business or enterprise for which the
corporation or association was formed.”
Jones v. Davis, 35 O. St., 474, 476 (1880) ;
Burrall v. Bushwick R. R. Co., 75 N. Y.,
211 (1878), where Folger, J., defines it as
**that money or property which is put
in a single corporate fund by those who,
by subscription therefor, become mem-
bers of a corporate body.” Williams v.
Western Union Tel. Co., 93 N. Y., 162,
188 (1888), where Earl, J., tersely says
it is ‘the property of the corporation
contributed by its stockholders or other-
wise obtained by it, to the extent re-
quired by its charter.” Sanger v. Up-
ton, 91 U. S., 56, 60 (1875); State v.
Morristown Fire Ass’n, 23 N, J. L., 195;
State v. Cheraw & C. R. R. Co., 168. C.,
524 (1881). A savings bank corporation
may be formed without any capital

stock; the profits going to depositors.
Huntington v. Sav. B’k, 96 U. S., 388-
(1877). Such is the statute law of New
York.

1Ohio & M. R. R. Co. v. Weber, 96
Ill, 443 (1880); City of Philadelphia v.
Ridge Ave. R. R. Co,, 102 Penn. St., 190
(1880). -

2Burr v. Wilcox, 22 N. Y., 551, 555
(1860); People v. Commissioners, etc.,
23 N. Y., 192, 220 (1861); Bailey v. Rail-
road Co., 22 Wall., 604, 637 (1874). For-
merly government bonds were called
“stock,” both in England and in this
country. Bank of Commerce v. New
York, 2 Black, 620 (1862); Weston v.
City of Charleston, 2 Pet., 449 (1829);
Cavanagh’s Law of Money Securities
(2d ed.), 488-494. This use of the term
still prevails in England, but is gener-
ally obsolete in this country, although
the securities of the city of New York
are still called ‘‘ stock.”
DEFINITIONS AND SCOPE OF THE WORK. [cH. I.

$4]
contain only such facts as the statute requires. No powers can be
acquired in addition to the powers specified in the statute. The
instrument filed cannot add to those powers. Otherwise special
charters would practically be the result.!

§ 4. Definitions of corporator, subscriber, shareholder and stock-
holder— A corporator is one of those to whom a charter is
granted; or of those who file a certificate of incorporation under
a general incorporating statute? A subscriber is one who has
agreed to take stock from the corporation on the original issue of
such stock.’ A shareholder in this country means the same thing
as a stockholder, and the terms are used interchangeably to indi-
cate one who owns stock in a corporation and has been accepted

as a stockholder by the corporation.

A stockholder does not

stand in the attitude of a partner towards the corporation.

1Oregon R’y, etc., Co. v. Oregonian
R’y Co., 130 U.S., 1 (1889); Thomas v. R.
R., 101 U. 8., 71 (1879); Penn. R. R. v.
St. Louis, ete., R. R., 118 id., 290, 807
(1886); Grangers’ Ins. Co. v. Kamper, 83
Ala., 825; Albright v. Lafayette Assoc.,
102 Pa. St., 411 (1883); Western U. T.
Co. v. U. P. R’y, 1 McCrary, 418 (1880);
Eastern Plank-road Co. v. Vaughan,
14.N. Y., 546 (1856); Bigelow v. Greg-
ory, 73 Ill., 197; Rochester Ins. Co. v.
Martin, 18 Minn., 54; Ancient Club v,
Miller, 7 Lansing, 412; People v. Utica
Ins. Co., 15 Johns., 358 (1818); Roberts
and Pynes’ Appeal, 60 Pa. St., 400.

A provision cannot be included ina
charter under the general act, whereby
stockholders are to vote according to
their stock. Commonwealth v. Nicker-
son, 10 Phil., 55 (1878).

Articles of incorporation may include
many purposes specified in the general
act. Bird v. Daggett, 97 Mass,, 494
(1867).

2 Chase v. Lord, 77 N. Y., 1-11 (1879),
the court saying: ‘‘Corporators exist
before stockholders, and do not exist
with them. When stockholders come
in, corporators cease to be.” Cf. Lady
Bryan’s Case, 1 Saw., 349.‘ In Penn-
sylvania, under a peculiar statute, it
has been held that the incorporators
thereof need not be subscribers. See

Densmore Oil Co. v. Densmore, 64
Penn. St., 48, 54 (1870).

3 Busey v. Hooper, 85 Md., 15; Spear
v. Crawford, 14 Wend., 20, 28, In The
Thames Tunnel Company v. Sheldon,
6 Barn. & C., 341 (1827), the word “‘ sub-
scriber” is elaborately defined, and it
is held to mean only such persons as
have entered into an express contract to
take up a certain definite number of
shares. See, also, a definition at some
length by Cooley, J., in Peninsular, etc.,
R. R. Co. v. Duncan, 28 Mich., 130
(1878).

See Rosevelt v. Prawn: 11 N.Y
148, 150 (1854); State v. Ferris, 42 Conn.,
560 (1875); Adderly v. Storm, 6 Hill, 624
(1844); Worrall v. Judson, 5 Barb., 210
(1849). Where the registered fader is
merely a nominal holder he will not be
entitled to special privileges, such as
free admission to a place of amuse-
ment. Appeal of American‘ Acad,, etc.,
108 Pa. St., 510 (1885).

A person is held to be a stockholder,
although no certificate has been issued
to him. See §§ 73, 192, infra. More-
over, he may be held to be a stock-
holder, although he has sold and trans-
ferred his certificate of stock, if such
transfer has not been recorded on the
corporate stock-book. See chapter XV,
infra.
OH. I.] DEFINITIONS AND SCOPE OF THE WORK. [§ 4a.

§ 4a. Relation of stockholders towards the corporation.— A cor-
poration may contract with its stockholders to the same extent and
in the same manner that it may with any other persons.!

A stockholder, as a creditor of the corporation, may obtain secu-
tity for his debt in exclusion of other creditors.?

A stockholder has no legal title -to the property or profits of the
corporation until a dividend is declared, or a division made on the
dissolution of the corporation.? He may sue the corporation or be
sued by it, both at law and in equity. Moreover, he has a direct
interest in the corporation, and at times may take the part of the

corporation in prosecuting or defending its suits.®

1 Hartford & N. H. BR. R. Co. v. Ken-
nedy, 12 Conn., 499, 509 (1888); Gordon
v. Preston, 1 Watts, 385 (1833); Central
R. R., etc., Co. v. Claghorn, 1 Speers’
Eq. (8. C.), 545, 562 (1844).

Thus, where one subscribed for stock
and paid for it by mortgages payable at
times mutually agreed upon between
the parties, ‘‘this was merely a mode
of payment.” ‘‘He stands in two ca-
pacities: one as debtor to the associa-
tion, one as stockholder in it. These
capacities are independent of each
other.” Ely v. Sprague, 1 Clark’s Ch.
(N. Y.), 351 (1840); Longley v. Stage
Line Co., 23 Me., 39 (1843), holding that
where.a creditor consented, as a stock-
holder, to the re-organization of the
company which had become indebted
to him under the former organization,

_ he had not thereby forfeited his right to
recover from the newly-organized cor-
poration, to which he had become a
subscriber; American Bank v. Baker, 4
Met. (Mass.), 164, 176 (1842), holding
that a corporation vote to compromise
certain securities to the detriment of a
member who was also a creditor could
not be regarded as consented to hy him
in his absence.

2 Reichwald v. Commercial Hotel Co.,
106 TIL, 439 (1888). ‘

3 Hyatt v. Allen, 56 N. Y., 558 (1874);
Jones v. Terre Haute, etc., R. R., 57 N.
Y., 196 (1874); Brundage v. Brundage,
1 N. Y. Supr. (T. & C.), 82 (1878); Good-
win v. Hardy, 57 Me., 148 (1869); Minot
wv. Paine, 99 Mass., 101 (1868); Granger

v. Bassett, 98 Mass. , 462 (1868); Phelps v.
Far mers’, etc., B’k, 26 Conn., 269 (1857);
Burroughs v. N. C. R. R. Co, 67 N. G.,
376 (1872) ; Curry v. Woodward, 44 Ala.,
305 (1870); Lockhart v. Van Alstyne, 31
Mich., 76, 78 (1875). See, also, ch.
XXXII, on Dividends.

+ Waring v. Cahawba Co., 2 Bay (S.
C.), 109 (1797), where this right of a
stockholder was the question directly ,
in litigation; Rogers v. Danby Univ.
Soc., 19 Vt., 187 (1847); Culberston v.
Wabash Nav. Co., 4 McLean, 544 (1849);
Peirce v. Partridge, 44 Mass., 44 (1841);
Barnstead v. Empire Min. Co., 5 Cal.,
299 (1855); Ha parte Booker, 18 Ark.,
338 (1857); Sanborn v. Lefferts, 58 N.
Y., 179 4874); Cary v. Schoharie, etc.,
Co., 2 Hun, 110 (1874); Wausau, etc.,
Co. v. Plummer, 35 Wis., 274; Sawyer
v. Methodist Ep. Soc., 18 Vt., 405 (1846);
Dunstan v. Imperial, etc., Co., 3 B. &
Ad., 125 (1822); Gifford v. New Jersey,
etc., Co., 2 Stock. Ch., 171 (1854); Sam-
uel v. Holladay, 1 Woolw., 400, 418

(1869). ,

A stockholder who is also a director
may nevertheless sue to compel his cor-
poration to abate a nuisance. Leonard
v, Spencer, 108 N. Y., 388 (1888).

5Part IV is on this subject. It is,
however, a general rule that a stock-
holder cannot usually come in as a party
and defend a suit in which the corpora-
tion is the defendant, even though the
corporation is unable or unwilling to
defend. See § 659, infra.
§ 4a.] DEFINITIONS AND SCOPE OF THE WORK. (cH. 1.

The admissions or declarations of stockholders do not bind the

corporation;! nor do the admissions of one stockholder bind an-.

other stockholder.’

Notice to individual stockholders is not notice to the corporation,
and their knowledge of facts is not notice of those facts to the cor-
poration.’ Service of process on astockholder is not service on the
corporation.* ,

A stockholder in an insurance company has the same rights that
a stockholder in any other corporation has.°

The stockholder is an individual, distinct from the corporation in
its contracts and transaction of business. The mere fact that he is
a stockholder does not make him an agent to contract for it or
bind it by his acts.®

One person may own all the stock, and yet the existence, rela-
tions and business methods of the corporation continue.’

The stockholders, assembled together in a corporate meeting,
have the powers to elect officers; make by-laws; increase or reduce
the capital stock, if the statute permits; authorize auxiliary or fun-

‘damental changes in the charter, if constitutional; and perform a
few other acts for and in behalf of the corporation. But there
their powers cease. The forming of corporate contracts; the man-
agement of corporate business; the employment and direction of
agents; the bringing or defending of suits, and all the infinite de-
tails of corporate management, are under the control of the directors

and their agents. The stockholders have no power herein, either |

individually or in meeting assembled.®

A stockholder is chargeable with notice of entries made upon
the corporate books, if they were made i in his presence and he pre-
sumably assented thereto.®

A shareholder in a corporation which does not properly i insure
its property has such an insurable interest in that property that he
may recover upon a policy. thereon taken in his own name, for an
amount which, added to the company’s insurance, would cover his
interest.” :

1See § 726, infra. : rate assets. Traders’, etc., Ins. Co. v.

2Simmons v, Sisson, 26 N. Y., 264 Brown, 8 Northeast. Rep., 184 (Mass.,
(1863). 1886).

3 See § 727, infra. 6 See 8§ 708, etc., infra.

4See § 752, infra. TId.

5Thus, ashareholder inaninsurance See § 712, infra.
company, conducted on both the stock 9See § 727, infra.
and the mutual-insurance plan, is en- 10 Warren v. Davenport Fire Ins. Co.,
titled to all the rights in the guaranty 81 Iowa, 464 (1871); distinguishing Phil-

accumulations that a stockholder in lipsv, Knox County Ins. Co., 20 Ohio, 174 .

any other corporation has in the corpo- (1851). Cf. Seaman v. Enterprise Fire,
f 8
CH. 1.]

DEFINITIONS AND SCOPE OF THE WORK.

[8 4a.

At common law the stockholder, on account of his interest in
the corporation, was not a competent witness for the corporation in
a suit in which the corporation was a party.! In some states, how-
ever, this rule has been changed by statute; and in others it is
easily evaded by a formal transfer of the certificate of stock to an-
other person.’ .A stockholder is incompetent to serve as a judge?

etc., Ins, Co., 18 Fed. Rep., 250; S. C.,
5 McCrary, 558 (1883). Contra, Riggs
v. Commercial, etc., Ins. Co., 51 N. Y.
Super. Ct., 466 (1884). See Greenhood on
Public Policy, 255; Angell on Fire &
Life Insurance, ch. XI, and cases cited.

Porter v. B’k of Rutland, 19 Vt., 410
(1847); McAuley v. The York, etc., 6
Cal., 80 (1854), See cases in next note.

In Pierce v. Kearney, 5 Hill, 82 (1848),
a shareholder was held incompetent to
testify that the defendant, in an action
‘to enforce a statutory liability of stock-
holders, was a stockholder.

Compare, however, In the Matter of
Kip, 1 Paige, 601 (1829), involving the
testimony of a corporator and pew-
holder in a church corporation. Moke-
lumne, etc., v. Woodbury, 14 Cal., 265,
in which, in deciding upon the compe-
tency of a stockholder as a witness, the
court held that ‘‘ members of a corpo-
ration who are answerable personally
for the corporate debts and liabilities
stand in the same position in relation
to the creditors of the corporation as if
they were conducting their business as
@ common partnership.” To same ef-
fect, Mitchell v. Beckman, 64 Cal., 117
(1883).

The president, though a stockholder,
is a competent witness for the company
if he is willing to testify, since his pri-
vate interest is greater than his stock-
holder interest. Church v. Steriing, 16
Conn., 388 (1844).

A stockholder in a company which is
a creditor of a party to a suit may tes-
tify in behalf of the latter. Simons vs
Vulcan, etc., Co., 61 Pa. St., 202 (1869).

The purchase by a bank of its own
stock, in order to enable the stockholder
to testify for it, was upheld, though its

charter prohibited it from purchasing
goods, etc. Farmers’, etc., B’k v. Cham-
plain Trans, Co., 18 Vt., 181 (1846).

Washington Bank v. Palmer, 2 Sandf.
Super. Ct., 686 (1850), and New York,
etc., R. R. Co. v. Cook, id,, 782 (1850),
are both to the effect that a stockholder
is not a party to the action, nor a per-
son for whose immediate benefit it is
prosecuted, within meaning of the code.
He is therefore a competent witness. —

A stockholder need not testify against
his corporation. Bank of Oldtown v.
Houlton, 21 Me., 501 (1842).

2See N. Y. Code of Civil mia
§§ 828, 839. That a transfer will render
the transferrer competent, see Ill. Ins.
Co. v. Marseilles Mfg. Co., 6 Tl., 236
(1844); Union B’k v. Owen, 4 Humph.

(Tenn.), 338 (1843); Bell v. Hull, 6M. &

W., 699 (1840); 1 Greenleaf’s Evidence,
§ 429. He is competent though the trans-
fer has not been registered. Bank of
Utica v. Smalley, 2 Cow., 770 (1824) ; Gil-
bert v. Manchester Iron Mfg. Co., 11
Wend., 627 (1834); Delaware, etc., R. R.
Co. v. Irick, 28 N. J. L., 821 (1852); and
although he expects to buy it back: but
there must be no agreement expressly
to that effect. Utica Ins. Co. v. Cad-
well, 3 Wend., 296 (1829); State v. Cats-
kill B’k, 18 Wend., 466 (1837). Contra,
Carver v. Braintree Mfg. Co., 2 Story,
482 (1848).

3Dinns v. Prop. of Grand Junction
Canal, 3 H. L. Cases, 759 (1852), where
the lord chancellor was a stockholder
in the defendant company, and had af-
firmed a decree by the vice-chancellor
inthe case. The house of lords reversed
the decision on this ground. Cooley on
Constitutional Limitations, §§ 410, 411;

“Washington Ins. Co. v. Price, 1 Hopk.
§ 4a.]

DEFINITIONS AND SCOPE OF THE WORK.

[CH. I.

or juror'in a case where the corporation is a party. A stockholder
or director of an insolvent corporation is competent and qualified

to act as its receiver or assignee.”
be a stockholder, unless a statute
vides.’

Ch, (N, Y.), 1 (1823), Chancellor Sandford
therein refusing to follow Chancellor
Kent in Stuart v. Mechanics’ & Farm-
ers’ B’k, 19 Johns., 496, 501 (1822). In
Peninsular R’y Co. v. Howard, 20 Mich.,
18 (1870), the court say: ‘“‘It is not a
matter of discretion with the judge or
other person acting in a judicial capac-
ity, nor is it left to his own sense of
‘propriety or decency; but the principle
forbids him to act in such capacity at
all, when he is thus interested, or when
he may possibly be subject to the temp-
tation.” In New York the statute now
prevents an interested judge from sit-
ting. See Cregin v. Brooklyn, etc., BR.
R. Co., 19 Hun, 349 (1879), Being re-
lated to a stockholder does not disqual-
ify. Searsburgh T. Co. v. Cutter, 6 Vt.,
315 (1834).

1Page v. Contocook Valley R. R. Co.,
21N. H., 488 (1850) ; Peninsular R. R. Co.
v. Howard, 20 Mich., 18 (1870); Fleeson
v. Savage S. M. Co., 3 Nev., 157 (1867) ~
Silver v. Ely, 3 Watts & S. (Penn.),
420 (1842). Cf. Williams v. Smith,
6 Cow., 166 (1826). The incompetency
extends to the son of a stockholder.
Georgia R. R. Co. v. Hart, 60 Ala., 550
(1878). A person donating to the railroad
is incompetent to serve in condemnation
proceedings. Michigan Air Line R’y
Co. v. Barnes, 40 Mich., 383 (1879), But
the fact that the Aorpeiation’ is inter-
ested in a subsequent case on the same
facts does not render the stockholder
incompetent. Commonwealth v. Bos-
ton, etc., R. R. Co., 57 Mass., 25 (1849).

Objection to competency must be
raised at the trial. It cannot be raised
for first time by motion for new trial.
Williams v. Great Western R’y Co., 3
H. &N., 869 (1859).

The fact that a juror and plaintiff are
both stockholders in the same corpora-

A. director need not necessarily
or the charter expressly sO pro-

tion is no cause for challenge in a suit
not involving the corporation. Brittain

_y, Allen, 2 Dev. Eq. (N. C.), 120 (1829).

“2 Covert v. Rogers, 38 Mich., 363 (1878);
Re Eagle Iron Works, 8 Paige, 385
(1840); modifying S. C., 3 Edw. Ch., 885
(1840); Bowery Bank Case, 16 How. Pr.,
56 (1857). Cf. Att’y-Gen. v. B’k of Co-
lumbia, 1 Paige, 511 (1829), § 2429, N. Y.
Code of C. P., expressly authorizing
such appointments.

In Atkins v. Wabash, etc., R. Co., 29
Fed. Rep., 161 (1886), however, the court
removed the receivers, and said: ‘‘ Re-

‘ceivers should be impartial between the

parties in interest; and stockholders
and directors of insolvent corporations
should not be appointed unless the case
is exceptional and urgent; and then
only on the consent of parties whose
interests are to be intrusted to their
charge.” See, also, Beach on Receivers,
§ 33.

In New Jersey a corporate officer is
held to be ineligible to the position of
receiver. Freeholders v. State B’k, 28
N. J. Eq., 166 (1877); McCullough v.
Merchants’, etc., Co., 29 N. we Eq., 217
(1878),

The court will not appoint as counsel
for the receiver the counsel for the
party who obtained the receivership.
Emmons v. Davis, etc., Co., 16 Atl. Rep.,
157 (N. J., 1888).

3 Wight v. Springfield, etc., R. R. Co.,
117 Mass., 226 (1875); Re St. Lawrence
Steamboat Co., 44 N. J. L., 529, 541
(1882); State v. McDaniel, 22 O. St., 354
(1872). Cf. Bartholomew v. Bentley, 1
O. St., 87 (1852); Despatch Line v. Bel-
lamy Mfg.-Co., 12 N. H., 205, 228 (1841);
Cumming v. Prescott, 2 Younge & C.,
488 (1887); Stack’s Case, 88 L. J. (Ch.),
781 (1864). ;

10
L$ 5.

§ 5. Shares of stock defined. A share of stock may be defined
as a right which its owner has in the management, profits and
ultimate assets of the corporation. By the court of appeals of New
York it is said that “the right which a shareholder in a corporation
has, by reason of his ownership of shares, is a right to participate
according to the amount of his stock in the surplus profits of the
corporation on a division, and ultimately on its dissolution, in the
assets remaining after payment of its debts.”!

It is said that the rights which a share of stock secures to its
owner are the rights “to meet at stockholders’, meetings, to partici-
pate in the profits of the business, and to require that the corporate
property shall not be diverted from the original purpose.” ?

In England a share means the same as it does in this country;
but the word “stock” there signifies a number of paid-up shares,
so united that the owner may divide it and transfer it in large or
small quantities, irrespective of the number and par value of the

CH. 1.] DEFINITIONS AND SCOPE OF THE WORK.

shares which have been thus merged into “stock.”

1Plimpton v. Bigelow, 93 N, Y., 592,
599 (1883). To same effect see Burrall
v. Bushwick R. R. Co., 75 N. Y., 211,
216 (1878); Kent v. Quicksilver Mining
Co., 78 N. Y., 159 (1879); Jermain v.
Lake Shore, etc., R. R. Co., 91 N. Y.,°
483, 492 (1883) ; Field v. Pierce, 102 Mass.,.
258, 261 (1869); Jones v. Davis, 35 Ohio
St., 474, 477 (1880); Bradley v. Bauder,
36 id., 28, 35 (1880); Bent v. Hart, 10 Mo.
App., 143 (1881); Harrison v. Vines, 46
Tex., 15, 21 (1876); Brightwell v. Mal-
lory, 10 Yerg. (Tenn.), 196 (1836); Barks-
dale v. Finney, 14 Gratt., 338, 357 (1858) ;
Van Allen v, Assessors, 3 Wall, 578,
585 (1865).

Chief Justice Shaw, by way of a def-
inition of a share of stock, says: ‘‘The
right is, strictly speaking, a right to
participate, in a certain proportion, in
the immunities and benefits of the cor-
poration; to vote in the choice of their
officers, and the management of their
concerns; to share in the dividends of
profits, and to receive an aliquot part of
the proceeds of the capital on winding
up and terminating the active existence
and operations of the corporation.”
Fisher v. The Essex B’k, 5 Gray, 373,
378 (1855). Cf. Arnold v, Ruggles, 1
R. L, 165 (1837).

2 Forbes v. Memphis, etc., R. R. Co.,
2 Woods, 3238, 331 (1872). Of. Payne v.
Elliott, 54 Cal., 889 (1880). Mr. Justice
Sharswood says: ‘‘A share of stock is
an incorporeal intangible thing. It isa
right to a certain proportion of the
capital stock of a corporation — never
realized except upon the dissolution
and winding up of the corporation —
with the right to receive in the mean-
time such profits as may be made and

declared in the shape of dividends.”  -

Neiler v. Kelley, 69 Penn. ‘St., 408, 407
(1871). See, also, Bridgman v. City of
Keokuk, 33 N. W. Rep., 355 (Iowa, 1887).

3Norrice v. Aylmer, L. R.,7 H. L,
717, says: ‘‘Shares are not necessarily
converted into stock as soon as they are
paid up; they may exist either as paid-
up shares or as not paid-up shares. But,
as regards stock, that can only exist in
the paid-up state. . . . There isa
certain extent of change as well as con-
solidation in these paid-up shares. They
are changed from ordinary shares in
this respect, that they are no longer
incapable of being subdivided.”

Stock “‘is a fund or capital which is
capable of being divided into and held
in any irregular amount. Thus, the
ordinary government. funds (consols,

11 -
§ 6.]

DEFINITIONS AND SCOPE OF THE WORK.

[cH. I.

Hence it may be concluded that a share of stock is a propor-
tional part of certain rights in the management and profits of the
corporation during its existence, and in the assets upon dissolu-

tion.!

"$6. Shares are personalty and not real property— It has been
well settled that shares of stock are personalty and not realty. It
is said that a share of stock is not real estate, has nothing to give
it the character of real estate, is not land, nor an hereditament, nor

an interest in either of them.?

new threes, etc.) are called ‘stocks,’
because a person can buy them in any
amount (such as £99 19s. 11d. as well as
£100). A share or debenture, on the
other hand, is of a fixed amount (such
as £10, £50, £100), and is incapable of
subdivision or consolidation.” Rapalje
& Lawrence’s Law Dic., p. 1224. Shares
may be converted by the company into
stock, so as to enable their holders to
dispose of them in small or irregular
amounts. Hurrell & Hyde on Joint-
Stock Companies, 47.

There are certain other terms used in
England which may as well be defined
here.

Thus, articles of association are simi-
lar to. by-laws, and are for the regula-
tion and management of the corpora-
tion. Memoranda of association are
the same as the American articles of
incorporation required to be filed under
general statutes for incorporations.
Deed of settlement is a term that was
used in England, prior to 1862, to indi-
cate the same as the modern articles
of association and memoranda of as-

sociation. See Burrows v. Smith, 10°

N. Y., 550, 555 (1853); Rapalje & Law-
rence’s Law Dic., 361; London Finan-
cial Association v. Kelk, L. R., 26 Ch.

_D., 107; Guiness v. Land Corporation of
Ireland, L. R., 22 Ch. D., 369.

In England scrip is a written acknowl-
edgment by a corporation that the
holder will be entitled to certain shares
of stock and a certificate therefor when
the unpaid instalments on such shares
are all paidin. They are negotiable in-
struments. Goodwin v, Robarts, L. R.,

1 App. Cas., 476 (1876); Rumball v.
Metropolitan B’k, L. R., 2 Q. B. Div.,

194 (1877).

In this country scrip generally means
a kind of dividend: e. y., land scrip
dividend entitling the holder to take so
much land; and a scrip dividend en-

titling the holder to future dividends.

the same as stock receives, but without
the voting privilege of stock. See § 536,
infra.

The courts will protect the holders of
land scrip, and compel the corporation
to recognize it. Rogers v. N. Y., ete.,
Co., 1 N. Y. Supp., 908 (1888).

10akbank Oil Co. v. Crum, L. R., 8
App. Cas., 65 (1882).

2Bligh -v.' Brent, 2 Younge & C.
(Exch.), 268 (1836); Edwards v. Hall, 6
De G., M. & G., 74 (1855); Bradley v.
Holdsworth, 3 Mees. & W., 422 (1838);
Ee parte Lancaster Canal Navigation
Co., 1 Dea. & Ch., 411 (1832); Watson v.
Spratley, 28 Eng. Law & Eq., 507 (1854).
In Allen v. Pegram, 16 Iowa, 163, 173
(1864), Mr. Justice Dillon says: “<¢ My,
Williams treats of shares in corporations
as ‘incorporeal, personal property ’—a
very neat and accurate designation.
Wis. on Pers. Prop., 155.” See, also,
Johns v. Johns, 1 Ohio St., 350 (1853),
Thurman, J.; Arnold v. Ruggles, 1 R.I.,
165 (1837); Dyer v. Osborne, 11 id., 821,
825 (1876); Tippets v. Walker, 4 Mass.,
595, 596 (1808), Parsons, C. J.; Sargent
v. Franklin Ins. Co., 8 Pick., 90 (1829);
Weyer v. Second National Bank, 57
Ind., 198 (1877); Manns v. Brookville
National Bank, 73 id., 248 (1881); Sew-
ard v. City of Rising Sun, 79 ic., 851

12
CH. I.]
(

DEFINITIONS AND SCOPE OF THE WORK.

\

[§ 6.

In some of the earlier cases, upon the theory, perhaps, that the
shareholders had a direct interest in the tangible property of the
corporation, shares were held to be real estate where the corporate
property consisted wholly or chiefly of realty! —

But as a result of all the authorities it is clearly settled that
shares of stock are to be regarded as personalty,? a view which has
frequently found expression in declaratory statutes both in Eng- -
land * and in the various states of the Union.

Stock, though personalty, is not a chattel;° it is rather a chose in
action; or, as some older authorities declare, property in the nature

of a chose in action.®

It is, moreover, of such a nature that it cannot ordinarily, either
by act of the law or act of its owner, be taken into tangible pos-

(1881); Southwestern R. R. Co. v. Thom-
ason, 40 Ga., 408 (1869). Cf. Wheelock
v. Moulton, 15 Vt., 519 (1843); Russell v,
Temple (Mass., 1798), 8 Dane’s Abr., 108,
109.

1Price v, Price, 6 Dana (Ky.), 107
(1888); Copeland v. Copeland, 7 Bush,
349 (1870). ‘But as soon as this latter
decision was handed down, the legisla-
ture passed an act declaring shares of
stock in Kentucky to be personal prop-
erty; thus bringing the courts of that
state into line with other common-law
courts upon this question. In Meason’s
Estate, 4 Watts, 341 (1835), there is to
be found a tendency to hold shares in a
toll-bridge, realestate. “Turnpike stock
was held realty in Welles v. Cowles, 2
Com., 567 (1818); S. P., Knapp v. Will-
fams, 4 Ves. Jr., 480, note (1798). So of
canal shares. Tomlinson v. Tomlinson,
9 Beav., 459 (1823). Cf. Buckeridge v.
Ingram, 2 Ves., 652 (1795); Drybutter
». Bartholomew, 2 P. Wms., 127 (1728);
The King v. Winstanley, 8 Price, 180
(1820). Contra, Walker v. Milne, 11
Beav., 507 (1849). See, ‘also, Sparling
v. Parker, 9 id., 450 (1846); Myers v.
Perrigal, 18 L. J. (Chan.), 185 (1849);
8. C., 21 L. J. (C. P.), 217 (1852); Ash-
ton v. Langdale, 4.Eng. L. & Eq., 80
(1851); 8. C., 20 L. J. (Chan.), 234, and
an interesting discussion of the ques-
tion in 3 Dane’s Abridgment, 108 et seq.

2See cases cited supra, Also, an

essay on Stock, its Nature and Transfer,
% Southern Law Review (N. S.), 480
(1881).

341 Geo. III, ch. 3; Watson v. Sprat-
ley, 28 Eng. Law & Eq., 507 (1854); Ea
parte Vallance, 2 Deacon, 354 (1837);
Ex parte Lancaster Canal Navigation
Co., 1 Dea. & Ch., 411 (1832).

41 Rev. Laws of New York, 247; New
York Laws of 1848, ch. 40, § 8; New
York Laws of 1850, ch. 140, § 8; Laws
of New Jersey, 1830, p. 83, § 17; Code
of Virginia, p. 550, § 21.

5King v. Copper, 5 Price (Eng.
Exch.), 217 (1870).

6 Wildman v. Wildman, 9 Ves., 174
(1808); Howe v. Starkweather, 17 Mass.,
240, 243 (1821); Hutchins v. State Bank, —
12 Mete., 421, 426 (1847); Union Bank of
Tennessee v. The State, 9 Yerg. (Tenn.),
490, 500 (1836); Allen v. Pegram, 16
Towa, 163, 173 (1864); Arnold v. Rug-
gles, 1 R. L, 165 (1887); Slaymaker ».
Bank of Gettysburg, 10 Penn. St., 373
(1849); Denton v. Livingston, 9 Johns.,
96 (1812); Chesapeake, etc., R. R. Co. v.

Paine, 29 Gratt., 502, 506 (1877) Barks-

dale v. Finney, 14 id., 338, 357 (1858);
Fisher v. Essex Bank, 5 Gray, 373, 377
(1855); People’s Bank v. Kurtz, 99 Penn.
St., 844, 349 (1882); Humble v. Mitchell,
11 Adol. & El., 205, 208 (1839). Cf. Kel-
logg v. Stockwell, 75 Ill., 68 (1874); In
re Jackson, L. R., 12 Eq., 354 (1871).

13
i

DEFINITIONS AND SCOPE OF THE WORK. [oH. 1.

§§ 7, 8.]
session, although, of course, its representative — the certificate of
stock — may be.!

It is an English doctrine that shares of stock are not “ goods,
wares, or merchandise,” as those terms are to be understood in
construing that section of the statute of frauds which requires de-
livery, payment or memorandum in writing of a sale thereof? In-
this country, however, the courts have taken the opposite view.’
Furthermore, it is said that shares are not money,‘ nor are they a
security for money,° nor a credit.®

§ 7%. Stock is property.— Shares of stock, being in the nature of
a chose in action, are, at common law, not subject to attachment
or levy of execution;” but most of the states have enacted statutes
which have changed this rule. This species of property may be
made subject to taxation;® and for purposes of taxation it exists
apart from the corporation, the corporate property, the corporate
franchises, and the capital stock. In most of the states, and in the
federal courts, trover lies for the conversion of stock. In Penn-
sylvania, however, a contrary rule prevails, although conversion is
held to lie for the conversion of certificates of stock.®

§ 8. Law of place governing stock.— Justice Story, in his Con-
flict of Laws, says that questions relating to shares of stock are
to be determined by the law of the state of the corporation.”
For purposes of attachment and execution levied upon stock this
is undoubtedly true, since it is only at the domicile of the corpo-
ration that such an attachment or execution can be levied." As
regards the taxation of stock, however, the stock follows the domi-
cile of the stockholder, and may be taxed in accordance with the
law of the domicile of such stockholder.” In reference to transfers

1Jermain v. Lake Shore, etc., R. R. New York, etc, R. R. Co., 18 N. Y.,

_ Co., 91 N. Y., 488, 492 (1883); Neiler- v.
Kelley, 69 Penn. St., 403, 407 (1871);
Payne v. Elliot, 54 Cal, 339, 841 (1880).

2 See §§ 339, 340, infra.

31d.

4Nightingal v. Devisme, 5 Burr.,
2589; S. C., 2 Wm. Black., 684 (1770);
Jones v. Brinley, 1 East, 1 (1800);
Douglas v. Congreve, 1 Keen, 410
(1836),

5Ogle v. Knipe, 38 L. J. (Chan.), 692
(1869); Godsen v. Dotterill, 1 Mylne &
K., 56 (1832); Lowe v. Thomas, 5 DeG.,
M. & G., 815 (1854); Hotham v. Sutton,
15 Ves., 820 (1808); Atkins v. Gamble,
42 Cal., 86 (1871); Wilson v. Little, 2
N. Y., 443 (1849); Mechanics’ Bank v.

599, 626 (1856).

® New Orleans National Banking As-
sociation v, Wiltz, 10 Fed. Rep., 880
(1881); S. C., 4 Woods, 43. See, also,
Smith v. Crescent City, etc., Slaughter-
house Co., 30 La, Ann., 1878 (1878).

* See chapter XXVII.

8 See chapter XXXIV.

5 See chapter XXXYV.

10 Story on Conflict of Laws (8th ed.),
§ 3838. And see the discussion of this
subject in Black v. Zacharie, 8 How.,
483 (1844).

11 See chapter XXVII.

22See chapter XXXIV.

The case of Glenn v. Clabaugh, 8 Atl.
Rep., 902 (1886), holds that the insolv-

14
OH. 1.] DEFINITIONS AND SCOPE OF THE WORK.

[§ 9.
of stock, the law of the forum governs.! Legal proceedings against
the stock may be initiated at the domicile of the corporation.’

In regard to shares of stock owned by married women, the pay-
ment of dividends is governed by the law of the domicile of the

corporation;* but the legality of transfers is governed by the law
of her domicile.‘

A guardian’s sale of stock is governed by the law of the state of
the guardianship.®

A certificate of stock is not necessary to the complete ownership
of the stock; § nor is payment of the subscription necessary thereto.’
But the corporation is bound, upon demand, to issue a certificate
of stock to one who is entitled to it;® and, if it refuses, the stock-
holder may bring suit in equity to compel its issuance ;* or ne may.
sue it in an action at law for damages.”

As regards the common-law and statutory liability of a stock-
holder on his stock, the law of the domicile of the corporation
determines the extent of the liability, while the law of the forum
determines the method of enforcing that liability."

§ 9. Classes of stock.— The capital stock of a corporation may
be either common or preferred. By common stock is meant that
stock which entitles the owners of it to an equal pro rata division
of profits, if any there be; one shareholder or class of shareholders
having no advantage, priority or preference over any other share-
holder or class of shareholders in the division. By preferred stock
is meant stock which entitles its owners to dividends out of the
net profits before or in preference to the holders of the common
stock. Common stock entitles the owner to a pro rata of dividends

ent laws of Maryland cannot discharge
a Maryland subscriber to a Virginia
corporation. The validity of a con-
tract to sell stock under the statute of
frauds is determined by the lex loci
contractus. Tisdale v, Harris, 37 Mass.,
9 (1838).

1 See chapter XXII.

2 See chapter XXVII, and §§ 361, 362,
infra; and, in general, see Noyes v.
Spaulding, 27 Vt., 420 (1853); Rich-
mondville Mfg. Co. v. Prall, 9 Conn.,
487 (1833); Black v. Zacharie, 3 How.,
483 (1845). ws regards national banks,
see Scott v..Pequonnock Nat’l Bk, 15
Fed. Rep., 494 (1883); Continental Nat'l
B’k v. Eliot Nat’l B’k, 12 Rep., 35; Dick-
inson v. Central Nat’l B’k, 129 Mass.,

279; Sibley v. Quinsigamund Nat'l B’k,
183 Mass., 515 (1882); State v. First
Nat’! B’k, etc., 89 Ind., 302 (1883); Hol-
brook v. New Jersey, etc., Co., 57 N.
Y., 616 (1874).

3 See § 542, infra.

4See § 319, infra.

5 See § 328, infra.

6 Wheeler: v. Millar, 90 N. Y., 353
(1882); Burr v. Wilcox, 22 N. Y., 551,
555 (1860); Thorp v. Woodhull, 1 Sand.
Ch., 411 (1844). ~

7Wheeler v. Millar, supra.

3See § 192, infra.

31d.

101d,

See chapters XI and XII,

15-
§ 10.] DEFINITIONS AND SCOPE OF THE WORK. (OH. I.’

equally with all other holders of the stock except preferred stock-
holders; while preferred stock entitles the owner to a priority In
dividends. See

| By watered or fictitious stock is meant stock which is issued as
fully paid up, when, in fact, the whole amount of the par value
thereof has not been paid in. If any amount less than the whole.
face value of the stock has not been paid, and the stock has been
issued as full paid, then the stock is watered to the extent of the
deficit. Watered stock is, accordingly, stock, which purports to
represent, but does not represent, in good faith, money paid in to
the treasury of the company, or, money’s worth actually contrib-
uted to the working capital of the concern. The issue of such
stock may be lawful, but it is generally in fraud of the rights of
some interested party, as, ¢. g., creditors of the corporation, certain
shareholders or classés of shareholders, or of the public.’

By deferred stock or bonds is meant stock or bonds the payment
of dividends or interest upon which is expressly postponed until
some other class of shareholders are paid a dividend, or until some
‘certain obligation or liability of the corporation is satisfied.?

By overissued or spurious stock is meant stock issued in excess of
the full amount of capital. stock authorized by the charter of the
corporation.? Such stock is void even though issued in good faith.

In Massachusetts some classes of corporations issue what is there
known as special stock. This is a peculiar kind of stock, essentially
' Jocal in character, provided for by statute,and unknown before the
year 1855. Its characteristics are that it is limited in amount to
two-fifths of the actual capital; it is subject to redemption by the
corporation at par after a fixed time, to be specified in the certifi-
cate; the corporation is bound to pay a fixed half-yearly sum or
dividend upon it as a debt; the holders of it are in no event liable
for the debts of the corporation beyond the amount of their stock,
and the issue of special stock makes all the general stockholders
liable for all debts and contracts of the corporation until the spe-
cial stock is fully redeemed.*

§ 10. Certificates of stock.— A certificate of stock is from one
point of view a mere muniment of title, like a title deed. It is not
the stock itself, but evidence of the ownership of the stock; that is
to say, it is a written acknowledgment by the corporation of the
interest of the shareholder in the’ corporate property and fran-
chises; it operates to transfer nothing from the corporation to the
shareholder, but merely affords to the latter evidence of his rights. -

1See chapter III. 3See §§ 291, 298.
2 See § 687, infra, and chapter III. 4 See § 275, infra.
‘ 16
CH. I.] DEFINITIONS AND SCOPE OF THE WORK. [§ 10.

It should be clearly apprehended that the certificate is not the
stock, but merely written evidence of the ownership of shares.!
Accordingly, it follows that shares have no “ ear-marks ”— that one
share cannot be distinguished from another share — but that it is
- only the certificates which are distinguishable one from the other
by their numbers and in other ways. The certificate, therefore,
has value in itself only as evidence, and, apart from the shares
which it represents, it is utterly worthless.? And even as evidence
it is not in every case essential; it is merely a convenient voucher,
which the shareholder has a right'to receive if he asks for itt One
element of its value to the shareholder is that it is prima facie evi-
dence of his title.5 Ps

The right of every shareholder to demand and receive from the
cqmpany a certificate is generally conceded.* When certificates
are executed by a part only of the officers required by law to sign
them, they may be void.’ But acertificate issued to an officer of the
corporation who is a shareholder, although the certificate is signed
by that officer, is valid.’ It is not, however, essential to the ‘exist-
ence of the corporation that certificates of stock shall be issued.

1Hawley v. Brumagim, 33 Cal., 394 an additional and convenient evidence
(186%); Campbell v. Morgan, 4 Bradw., of the ownership of the stock.” _Cin-
100 (1879); People’s Bank v. Kurtz, 99 cinnati, etc., R. R. Co. v. Pearce, 28
Penn. St., 344 (1882); Hubbell v. Drexel, Ind., 502 (1867).
11 Fed. Rep., 115 (1882); Van Allen v. 5 Broadway Bank v. McElrath, 13 N,
Assessors, 3 Wall., 578, 598 (1865); Burr J. Eq., 24 (1860); Courtright v. Deeds,
v. Wilcox, 22 N. Y., 551 (1860). ‘Stock 87 Iowa, 508 (1878); Walker v. Detroit
is one thing, and certificates another. Transit, etc., Co., 47 Mich., 888 (1882).
‘The former is the substance, and the 6 Buffalo, etc., R. R. Co. v. Dudley, 14
latter is the evidence of it.” Hawley v N. Y., 336, 347 (1856); N: ational Bank wv.

Brumagim, supra. Watsontown Bank, 105 U. S., 217 (1881),
2 Hubbell v. Drexel, supra. A valid certificate may be issued out of
® Payne v, Elliot, 54 Cal., 339. the state in which the corporation ex-

4Johnson v. Albany, etc., R. R. Co., ists. Courtright v. Deeds, 37 Iowa, 508
40 How. Prac., 193 (1870). Cf. Arnold (1878).
v, Suffolk Bank, 27 Barb., 424 (1857), a The failure of the corporation to issue
ease in which the distinction betweena a certificate isno defense to an action
refusal on the part of a corporation to to collect the subscription. See § 192,
issue a certificate ina certainformand a infra.
refusal to recognize the owner of shares The certificate of stock need not be
as owner —a denial of his property in under seal. Halstead v. Dodge, 51 N. Y.

” the stock—is clearly drawn. Thesu- Super. Ct., 169 (1884).
preme court of Indiana have noted the ‘Holbrook v. Farquier, etc., Co., 3
distinction to the effect that a certifi- Cranch, C. C., 425 (1829). See § 363.
cate is not the title, but only evidence 8 Titus v. President, etc., of the G. W.
of the title, to shares. The court say: Turnpike Road, 61 N. Y., 237 (1874).
*‘ The certificate did not constitute the 9 Chester Glass Co. v. Dewey, 16 Mass.,
titlé to the stock. . . . Inlegalcon- 94 (1819); Burr v. Wilcox, 22 N, Y., 551
templation the certificate was merely eee
(2) 1
§ 10.] DEFINITIONS AND SCOPE OF THE WORK. [OH. 1.

Without a certificate the shareholder has a complete power to trans-
fer his stock,! to receive dividends,” and to vote,’ and he is individ-
ually liable as a stockholder.t A certificate of stock may be a
valid subject of a donatio causa mortis, of a legacy, a contract of
sale, a pledge, or a gift.2 Under the English statute an issue of
stock by a corporation has reference only to the issue of the cer-
tificates, and means an original putting out of the shares.6 In New
York, making out and mailing the certificates has been held to con-
stitute a due issuing thereof.’ And in Maryland, the stub of a book
from which certificates have been detached is evidence of their
regular issue.$

Certificates of stock are not negotiable instruments. They have
sometimes been said to have a quast negotiability, but this phrase-
ology throws little light upon the real character of the transfer-
ability of stock. It may be said in general that by the operation
of the law of estoppel the purchaser of a certificate of stock, in
good faith and for value, may take it free from many claims of
previous holders which would be allowed to come in, in the case of
a sale of an ordinary chose in action.®

* 1¥First National Bank v. Gifford, 47 278 (1844); Mitchell v. Beckman, 64 Cal.,
Iowa, 575 (1877); National Bank v. Wat- 117 (1883).
sontown Bank, 105 U. S., 217 (1881). Cf. 5 See chapter XVIII.
Brigham v, Mead, 10 Allen, 245 (1865). 6 Hast Gloucestershire R’y Co. v. Bar-
? Ellis v. Proprietors of Essex Merri- tholomew, L. R., 8 Exch. » 15 (1867);
mack Bridge, 2 Pick., 248 (1824). Bush’s Case, L. R., 9 Chan., 554 '(1874).
3 Beckett v. Houston, 82 Ind., 393 7 Jones v, Terre Haute, etc., R. R. Co.,
(1869), 17 How. Pr., 529 (1859).
4 Agricultural Bank v, Wilson, 24.Me., -8 Weber v, Fickey, 47 Md., 196 (1877).
is ®See chapter XXIV.
CHAPTER IL.

STOCK MAY BE ISSUED LEGALLY FOR MONEY OR PROPERTY, OR
BY A STOCK DIVIDEND.

§ 11. Different methods of issuing | §17. Sale of stock for property.

stock. 18. English ‘statute governing issue
' 12. First method: Issue by money for property.
subscription. : 19. Performance of contract to pay
18, Second method: Issue for prop- in property.
erty, labor or construction 20. Third method: Issue by stock
work. dividend.
14, Whee such subscriptions are not 20a. Pledge of stock by the corpora-
egal.
15. What property may be received. 206. Tene? of stock for partnership
16. .Payment in property as a favor, > property.

not as a contract right.

§ 11. Methods of issuing stock—There are in general three
methods of issuing stock. It may be issued, first, by means of sub-
scriptions, payable in cash, the subscription being made in writing,
or by acts equivalent thereto.! Second, the issue may be by means
of subscriptions, payable in labor, property, or both. Third, the
issue may be by a stock dividend.

$12. First method: Issue by money subscription — An issue of
stock by means of a subscription, payable in cash, is the most
honest and safe method of issuing stock. In the absence of any
agreement to the contrary, an ordinary subscription for stock is
deemed a cash subscription, and payment in money may be en-
forced. The subscription contract is generally made by a writing
duly signed by the subscriber. The writing itself is contained in
books opened by the corporation or by commissioners appointed in
conformity with a statute, or it is made without formality on sub-
scription lists or separate sheets of paper.

A subscription, payable in cash, may arise also from the mere

acts or declarations of a party. A person having assumed the posi-
tion of a subssriber or stockholder is frequently held to be bound
as such. Any act or declaration, sufficient to indicate an intent on
the part of the person to be a subscriber, and an acceptance, by
the corporation, of the person as such, is equivalent to a written
subscription, and the person is bound as:a subscriber.’

§ 13. Second method: Issue for property, labor or construction
work.— The issue of stock for labor, property, contract work, or
any valuable consideration other than money, has given rise to

1See chapter IV. 21d.
~ 19

‘
METHODS OF ISSUING STOCK. Low. Ts

8 13.]

much controversy and litigation. In England a long line of decis-
ions, under the Companies Acts, has established the principle that
stock need not necessarily be paid for in cash, but that it may be
paid for in money’s worth.! Such, also, was the rule at common
law.? The well-established rule now is that a subscription for stock,
payable by its terms in property or labor, or both, is a good and
legal subscription. If the property is taken at a valuation made
without fraud, the payment is as effectual and valid as though made
in cash to the same amount. An issue of stock for property is one:
which finds support, not only in, the decisions, but in the daily
.transactions of corporations,’ and the law does not compel the cor-
poration and the subscriber to go through the useless form of a:
payment by the corporation to the subscriber of the value of the
property, and an immediate repayment of the same money by the

subscriber to the corporation on his subscription.‘

1 See many cases in chapter III. Stacy
v. Little Rock, ete., R. R. Co., 5 Dill.,
348, 376 (1879).

2 Woodhall’s Case, 3 De G. & Sm., 63
(1849); Burkinshaw v. Nichols, L. R., 3
App. Cas., 1004, 1012 (1878), where, pay-
ment having been made in property,
the court said: “If there had been no
statutory enactment forbidding a trans-
action of that kind, it is a transaction
which might be properly valid.” Cf.
dictum in Sanger v. Upton, 91 U. S.,
56, 60(1875). ‘It is not now questioned
that a corporation may issue its stock by
way of payment in the purchase of prop-
erty. This is on the principle that there
is no need for the roundabout process
of first issuing the stock for money, and
then paying the money for the prop-
erty. But it is necessary that the prop-
erty so taken be considered reasonably
worth the par value of the stock paid
for it.” Chouteau v. Dean, 7 Mo. App.,
210 (1879); Wyman v. Amer. Powder
Co., 62 Mass., 168 (1851); Reichwald v.
Commercial Hotel Co., 106 IIL, 439
(1883); Haydon v, Atlanta Cotton Fac-
tory, 61 Ga., 234(1878). ‘‘ Whatever may
have been formerly held, it is now es-
tablished that subscriptions to corpo-
rate stock need not, in the absence of
statutory provisions requiring it, be
paid for in cash, The principle is now
generally accepted, both in England

and America, that any property. which
the corporation is authorized to pur-
chase, or which is necessary for the
purposes of its legitimate business, may
be received in payment for ‘its stock,
Any payment, whether it be in money
or money’s worth, so that it be in good
faith, will give the shares so paid for
the status of paid-up stock. In the
language of Lord Justice Gifford, in
Drummond’s Case, 4 Ch. App., 772: ‘If
a man contracts to take shares he must
pay for them, to use a homely phrase,
in meal or in malt; he must either pay.
in money or money’s worth; if he pays
in one or the other that will be a satis-
faction.’ The contract to re-
ceive in payment the letters patent,
plows, material and other assets of its
predecessor, Unthank & Coffin, was
therefore not ultra vires.” Coffin v.
Ransdall, 11 Northeast. Rep., 20 (Ind.,
1887), holding, also, that payment for
stock by transferring to the corpora-
tion the property and assets of a part-
nership was legal, provided that a fair
valuation was placed upon the property .
so conveyed. If such property is over-
valued, the dangers incurred thereby
are various. See chapter IIL.

3Foreman v. Bigelow, 4 Cliff., 508,
544 (1878),

4Seawright v. Payne, 6 Lea (Tenn.),

283 (1880); Brant v. Ehlen, 59 Md., 1
20
CH. 11.] METHODS OF ISSUING STOCK.

[S$ 14, 15.
There is some doubt as to whether an oral agreement of the cor-
porate agents that a subscription may be paid i in property is bind-
ing upon the corporation. Under the well-established rule that
parol evidence will not be allowed to add to or vary a written
agreement, it has been held that such an oral agreement with the
agent cannot be admitted in evidence.! When, however, the parol
agreement is made subsequently to the act of subscribing, and. is
supported by a sufficient consideration, it is valid and enforceable.
§ 14. When such subscriptions wre not legal. A subscription

. payable by its terms in labor or property is in the nature of a'con-
_ditional subscription.

Accordingly, in certain states, where a per-
centage or fixed amount of the capital stock must be subscribed for
before a charter can be obtained, and where, by the decisions of
the courts, such preliminary subscriptions must be absolute and
unconditional, a subscription payable by its terms in labor or prop-
erty, being conditional to that extent, cannot form a part of the
preliminary subscription. In such states, however, subscriptions
to the remainder of the capital stock, the part subscribed after the
charter has been_or may be obtained, may be conditional, and may,
by their terms, be payable in property or labor.t On the ground
that subscriptions payable in property or labor are conditional, it
has been held. also that a subscription payable in labor or property
is not to be counted in ascertaining whether the full capital stock
has been subscribed,’ but it is doubtful whether such a rule can be
considered good law.

§ 15. What property may be received. A corporation may re-
ceive in payment of its shares of stock any property which it may
lawfully, purchase,* and, in general, may receive any consideration
which is suitable and applicable to the purposes for which the cor-

(1882); Spargo’s Case, L. R., 8 Ch. App.,
412 (1873); Boot & Shoe Co, v. Hart, -56
N. H., 548 (1876). Payment in property
by subscribers was held not allowable
in Neuse River Nav. Co. v. Com’rs of
Newbern, 7% Jones’ Law (N.. C.), 275
(1859); also Henry v. Vermillion & Ash-
Jand R. R. Co., 17 O., 187 (1848), al-
though the latter case seems to involve
an oral agreement to allow such pay-
ment, and to have been decided on that
ground. There is a long line of cases
sustaining the validity of an issue of
stock for money’s worth instead of
money itself. They are given in this
and the following chapter. So well es-
tablished has this principle of law be-

come that the few cases holding to the
contrary can no longer be considered
good law. “That in the absence of
fraud an agreement may ordinarily be
made by which stockholders could be
allowed to pay for their shares in pat-
ents, mines or other property, to which
it is not easy to assign a determinate
value,-would appear to be well settled.”

New Haven, etc., Co. v. Linden Spring

Co., 142 Mass., 349 (1886).
‘1 See § 187, infra.
21d,
3 See 8§ 79, 180, infra,
4 See § 82, infra.
5 See § 180, infra. i
6 Brant v. Ehlen, 59 Md.,.1 (1882);

- 21

m
§ 15.]

METHODS OF ISSUING STOCK.

[oH. In.

poration was organized.’ A railroad corporation may receive pay-
ment in contract’ work, in right of way, or in any kind of material
or labor applicable to its construction”? <A manufacturing cor-
poration may receive payment in the good-will of a business or the
stock in trade. Land may be taken in payment when the cor-
poration would be allowed to purchase the same. Promissory

The American Silk Works v. Saloman,
‘4 Hun, 185 (1875).

In Louisiana the general act for in-
corporation prescribes that the articles
of incorporation shall state the time
when and the manner in which ‘the
stock shall be paid for.” See New Or-
leans, etc., R. R. Co. v. Frank, 1 South.
Rep., 310 (La., 1887).

1See Green’s Brice’s Ultra Vires
(2d ed.), 145; Angell & Ames (11th ed.),
§ 517% “Payment of stock subscrip-
tions need not be in cash, but may
be in whatever, considering the situa-
tion of the corporation, represents to
that corporation a fair, just, lawful and
needed equivalent for the money sub-

scribed.” Liebke v. Knapp, 79 Mo., 22°

(1883). Payment in newspaper adver-
tising of the enterprise upheld in this
case. The subscription may, by its
terms, be payable in plank for a plank-
road company, and the subscriber is a
stockholder before payment is com-
pleted. Haywood, etc., Co. v. Bryan,
6 Jones’ Law (N. C.), 82 (1858). Pay-
ment in Confederate bonds redeemable
in cotton upheld. Schroder’s Case, L.
R., 11 Eq. Cas., 181 (1870). So, also,
payment in stock in a coal corporation
carrying on a supplementary business,
East, etc., R. R. Co. v. Lighthouse, 6
Rob. (N. Y.), 407 (1868). Payment by a
patent-right has been upheld. Edwards
v. Bringier Sugar Extracting Co., 27 La.
Ann., 118 (1875); and in another case,
under a statute not upheld. Tasker v,
Wallace,.6 Daly, 864 (1876). Payment
may be by canceling a debt of the com-
pany past due. Carr v. Le Fevre, 27
Pa, St., 418 (1856); Reed v. Hayt, 51
N. Y. Super. Ct., 121 (1884), Or not
yet due. Appleyard’s Case, 49 L. J.
(Ch.), 290 (1880), Payment, however,

x

2

to a bank in its own currency was not
upheld, it being statutory that only
specie could be received. King v. Elliott,
13 Miss., 428 (1845). Payment by check
cannot be objected to by another sub- .
scriber. Thorp v. Woodhull, 1 Sandf.
Ch., 411 (1844). Stock may be issued to
the president in payment of past salary
and debts. Reed v. Hayt, 4 Ry. &
Corp. L. J., 185 (N. Y., 1888).

2 ** We can see no objection whatever
to a railroad company issuing stock and
taking in payment materials or labor or
land necessary for its road.” Clark v,
Farrington, 11 Wis., 806 (1860). ‘The
corporation had a right to accept pay-
ment of stock in labor or materials, in
damages which the company were lia-
ble to pay, or in any other liability of
the company, provided these transac-
tions were entered into and carried out
in good faith.” Phil. & West Chester
R. R. Co, v. Hickman, 28 Pa. St., 318
(1857); Bedford County v. Nashville, C.
& St. Louis R. RB. Co., 14 Lea (Tenn.),
525 (1884), holding, also, that thirty
years’ delay in demanding the stock is
no bar to the right. Payment may be
in cross-ties. Ohio, Ind. & Il RB. BR. Co.
v. Cramer, 23 Ind., 490 (1864). Or in
real estate and services. Cin., Ind. &
Chicago R. R, Co. v. Clarkson, 7 Ind,
595 (1856). Or in services and materials,
Phillips v. Covington & Cin. Bridge
Co., 2 Metc. (Ky.), 219 (1859). Or by
the construction of the road, See § 17.
One railroad having power to consoli-
date with another may, jn payment
therefor, issue stock to the contractors
who are constructing the latter. Branch
v. Jesup, 106 U. S., 468 (1882),

3 Pell’s Case, L. R., 5 Ch., 11 (1869).

“Goodin v. Evans, 18 O. St, 150
(1868); Cin., Ind. & Chicago R. R. Co,
3 :
“ou. 1]

a

METHODS OF ISSUING STOCK. ,

Z [§ 16.

notes may also be-taken, under the corporate power, to give eredit
and extend the time of payment of debts.!

§ 16. Payment in property as a favor, not as a contract right.— /
There is an important distinction to be made between payments in
property, where the subscription itself, by its terms, allows such
payment, and a payment in property, which is allowed, as a matter
of favor, by the corporation, the subscription itself being silent as

to the mode of payment.? The

v. Clarkson, 7 Ind., 595 (1856); Peck
v. Coalfield Coal Co., 11 Bradw. (III),
88 (1882); Brant v. Ehlen, 59 Md., 1
(1882); Jones’ Case, L. R., 6 Ch. App.,
48 (1870); Maynard’s Case, 22 W. R.,
119. In Foreman v. Bigelow, 4 Cliff.,
508, 544 (1878), the court say: ‘‘ Argu-
ment to show that the transaction of
issuing the stock in payment for the
mineral land would have been valid
.« » . is scarcely necessary.” In In-
diana formal acceptance by the direct-
ors is necessary. State v. Bailey, 16
Ind., 46 (1861); Junction R. R. Co. v.
Reeve, 15 Ind., 236 (1861); Dayton, etc.,
R. R. Co. v. Hatch, 1 Disney, 84 (1855);
Carr v. Le Fevre, 27 Penn. St., 413
(1856); Johnson v. N. Y. & Erie R. R.
Co., 2 Sand., 39 (1848). A corporation
receiving a deed of land in payment
of stock subscription is protected in its
title to the land, the same as any other
bona fide purchaser of it would be
against a former vendor's lien for the
purchase money. Frenkel v. Hudson,
2 South. Rep., 758 (Ala., 1887).
1Stoddard v. Shetucket Foundry Co.,
84 Conn., 542 (1868); Ogdensburgh, etc.,
R. Ry Co. v. Wooley, 3 Abb. Ct. of App.
Dec., 898 (1864); Magee v. Badger, 30

Barb., 246 (1859); Goodrich v. Reynolds, |

31 Ill, 490 (1863); Vermont Central R.
R. Co. v. Clayes, 21 Vt., 30 (1848);
Hardy v. Merriweather, 14 Ind., 203
(1860); Pacific Trust Co. v. Dorsey, 72
Cal., 55 (1887). In Wisconsin a cor-
poration may accept in payment of
stock a note secured by a mortgage on
real estate. Clark v. Farrington, 11
Wis., 306 (1860); Blunt v. Walker, 11
Wis., 2384 (1860); Cornell v. Hichens,

latter class of transactions have

11 Wis., 353 (1860); Lyon v. Ewings, 17
id., 61 (1863); Andrews v. Hart, id.,
297; Western Bank of Scotland v. Tall-
man, 17 Wis., 580 (1863). In Tennessee
payment in notes is not upheld, but the
subscriber is: to be credited with the
amount collected on such notes, Moses
v. Ocoee Bank, 1 Lea (Tenn.), 398 (1878).
In New York the payment of a sub-~ ;
scription by one’s own note is prohibited
by statute. 1 R.5S., ch. 18, title 4, § 2.
Payment by bond and mortgage was
upheld in Valk v. Crandall, 1 Sandf.
Ch., 179 (1848); and in Leavett v. Pell,
27 Barb., 322 (1858). Also in Pennsyl-
vania, Leighty v. Susquehanna & Wa- ,
terford T. Co., 14S. & R., 484 (1826);
although the payment was contrary to
statute; also, People v. Stockton, etc.,
R. R. Co., 45 Cal., 306 (1878). But a
worthless note is not payment. Bouton
v. Dament, 123 IIL, 142 (1887). A com-
pany authorized by statute to sell stock
for cash may sell it for the bonds of
the vendee, and may enforce the bonds.
Southern Life Ins, Co. v. Lanier, 5 Fla.,
110 (1853). :

2 Many of the cases which apparently
are cases of subscriptions, wherein the
subscriber has expressly stipulated that
he may pay in property or labor, will
be found, on close examination, to be
absolute subscriptions payable in cash.
Afterwards the corporation, although
not obliged so to do, accepts property
or labor instead of the cash. This kind
of transaction is almost universally up-
held by the courts when entered into
and carried out in good, faith. Such
payment is upheld even in opposition
to the express terms of a statute re-

23
METHODS OF ISSUING STOCK. [oH. II,

§ 17.] ;

been uniformly upheld, except when positively prohibited by stat-
ute, and payment has even been held to be valid, although the
statute required it to be in money or in cash.!

§ 17. Sale of stock for property The issue of stock for prop-
erty, labor or contract work need not necessarily be accompanied
with the formality of a subscription? Frequently the issue is
spoken of as a sale of the stock for the property received in pay-
ment. Sometimes the issue is by means of a contract, whereby,
upon the completion of certain work, the party is to be entitled to
the stock. The New York court of appeals stated the law clearly
when it said, in respect to such issues, that “the right of the offi-
cers of a railroad corporation to enter into an agreement to build
its road and pay for the construction of the same in stock or bonds
cannot be seriously questioned, and contracts of this description are

frequently made for such a purpose.”’?

quiring payment in cash. ‘Ses § 18.
Many of the American cases, also, are
plainly cases in which payment in prop-
erty was allowed by the corporation,
not as a right but as a matter of favor.
The courts uphold such agreements be-
cause they are similar to offsets of ac-
counts, and the delays, uncertainties,
special privileges, and other objections
to subscriptions payable in terms in
property and labor are obviated. See
Boot & Shoe Co. v. Hoit, 56 N. H., 548
(1876); Stoddard v. Shetucket Foundry
Co., 34 Conn., 542 (1868), where the
court say, ‘‘that the defendant could
have insisted upon the plaintiff’s pay-
ment for his stock in cash is unques-
tionable.” See, also, Vermont Central
R. R. Co. v. Clayes, 21 Vt., 80 (1848);
Boston; etc., R. R. Co. v. Wellington,
113 Mass., 79 (1878). In’ New York
railroad corporations must require pay-
ment in cash of a certain percentage
of the subscription at the time of sub-
scribing. Laws 1850, ch. 140, §§ 2, 4.
Ninety per cent. may be paid in such
manner as the directors may require,
Id., § 7% Even here, however, the
courts hold that the ten per cent. may
be paid by property actually received.
Beach v. Smith, 30 N. Y., 116 (1864),
where payment was by services ren-
dered. The court said: ‘‘ Was it neces-

sary, for any purpose, that the ceremony

of paying money by the company to the
defendant, and by the defendant of the .
same money back again, should be gone
through with? It seems to me not.”

1See p. 25, note 3,

2A charter provision authorizing the
opening of stock subscription books
does not amount toa prohibition against
any other mode of becoming a stock-
holder. “If a railroad could sell its
stock for the right of way, for lands for
depot purposes, for iron, or anything es-
sential to the accomplishment of its
purpose, it might do so.” Itis a legal
issue of stock without subscription.
Western Bank of Scotland v. Tallman,
17 Wis., 530 (1863). See, also, Clark v.
Farrington, 11 Wis., 306 (1860); Reed v.
Hayt, 51 N. Y. Super. Ct., 121 (1884),
In Jackson v. Traer, 20 N. W. Rep.,
704 (1884), stock having been issued in
payment of contract work, the court
say: “We have seen no case which
recognizes a difference between those
stockholders who become such in pur-
suance of a written agreement and
those who become such by the mere ac-
ceptance of stock issued to them.”

3'Van Cott v. Van Brunt, 82 N. Y.,
535 (1880). See, also, Eppes v. Miss.,
Gainesville & Tuskaloosa R. R. Co., 85

Ala., 33 (1859); Brady v. Rutland &
24
CH. 11.] METHODS OF ISSUING STOCK.

[§ 18,

It is doubtful, however, whether any clearness of ideas is obtained,
under any circumstances, by calling an original issue of stock a
sale of stock. Such a transaction is “not a sale of stock. A sale of
stock means a transfer of stock after the stock has been issued, or
an agreement to transfer the same. Such original issues of stock
as are occasionally spoken of as being sales of stock might better
be considered as informal subscriptions arising by the acts or dec-
larations of the parties, and payable in property by the terms of
the contract.!

§ 18. English statutes on issues of stock for property.—In Eng-
land the payment for stock in property, labor or contract work is
- regulated largely by act of parliament. The statute requires that
payment shall be in cash, unless the contract allowing payment in
property is registered at a specified public registry.?, Nevertheless,

even where no registry is made, the courts have held that a pay-_

ment in property is equivalent to a payment in cash, where the

property has been actually delivered.

Burlington R. R. Co., 3 Blatch., 25;
S. C., 24 Vt., 660; Troy & Greenfield R.
R. Co. v. Newton, 8 Gray, 596 (1857);
McMahon v. N. Y., etc., R. R. Co., 20
N. Y., 463 (1859), construing such a
contract. If the corporation prevents
the completion of the contract the con-
tractor may recover as damages the
value of the work already done and also
the profits lost. Myers v. York & Cum-
berland R. R. Co., 2 Curtis, 28 (1854).
If the corporation refuse to issue the
-stock according to contract the con-
tractor may recover as damages the
market value of the stock. Porter v.
Buckfield Branch R. R. Co., 32 Me., 539
(1851); Barker v. Rutland & Washing-
“ton R. R. Co., 27 Vt., 766 (1855). If
- the contract provides for payment to
the contractor in stock, without stating
that the stock is to be taken at its par
value, the contractor may demand the
stock at its market value; and, if it is
worthless, he may then demand money
in lieu thereof, Hart v. Lauman, 29
Barb., 410. The contractor cannot,
however, complain because the capital
stock has been increased, nor is a ten-
der ‘of the stock to him necessary,
Moore v. Hudson River R. R. Co., 12
Barb., 156 (1851). See, also, §19,n. A

Such a payment in prop-

member of the construction company
may demand an accounting from his
associates. Gould v. Seney, N. Y. L. J.,
May 20, 1889. :

1See Weiss v. Mauch Chunk Iron Co.,
58 Penn. St., 295 (1868); St. Paul, etc.,
R. R. Co. v. Robbins, 23 Minn., 440
(1877); Clark v. Continental Improve-
ment Co., 57 Ind., 135 (1877).

2Companies Act, Amendment 1867,
30 and 81 Vic., ch. 181, § 25.

3 Under this statute, three classes of
cases of unregistered contracts arise:
First, where payment is actually made
in property, if fairly made, it is upheld,
under the principles laid down in sec-
tion 16. See Jones’ Case, L. R., 6 Ch.
App., 48 (1880); Maynard’s Case, 22 W.
R., 119 (1877); payment by colliery, Re
Boylan Hull Colliery Co., L. Rv, 5 Ch.
App., 846 (1870); Drummond’s Case,
L. R., 4 Ch. App., 772 (1869); Schroder’s.
Case, L. R., 11 Eq. Cas., 131 (1870);
Pell’s Case, L. R., 5 Ch., 11 (1869); by
services, Ex parte Clarke, L. R.,7 Eq.,
550. The amounts on each side must
be payable presently and in cash.
Fothergill’s Case, L. R., 8 Ch. App.,
270.(1878); so that the transaction is in
the nature of a set-off. Forbes’ Case,
L. R., 5 Ch. App., 270 (1870); Convey-

25

he
8§ 19, 20.]

METHODS OF ISSUING STOCK. .

[oH. I.

‘

erty, however, is as a matter of favor, and not.as a matter of right.t ”
It is to be distinguished from the payment in property which the
subscriber may not yet have made, but has a right to make in the

future.
an executory contract.

The one is an executed contract.

The other may still be

§ 19. Performance of contract of payment in property.— Sub-
scriptions payable in property are not subject to calls, and a de-
mand for the property must be made by the corporation.? Upon
failure of the subscriber to furnish the property, or upon insolvency
of the corporation, such subscriptions become payable in cash.’ A
payment of part of the subscription in cash does not waive the

right of the subscriber to pay the balance in property.*

The stock

may be issued to a contractor béfore his work in payment therefor

has been completed.’

§ 20. Third method of issue: By stock dividend.— The third
method of issuing stock is by a stock dividend. It is allowable
when an amount of cash or property equal to the amount of the

ance of a lease held to be a good pay-
ment. Spargo’s Case, L. R., 8 Ch. App.,
407 (1873). A second class of unregis-
tered agreements, to take pay in prop-
erty, turn upon the question whether
the agreement that payment shall be in
property is a condition precedent or
subsequent to the subscription. If the
condition is precedent, and must be per-
formed before the subscription can be
enforced, none of the parties are bound,
even though the corporation becomes
insolvent. Pellatt’s Case, L. R., 2 Ch.,
527 (1867); Stace’s Case,’ L. R., 4 Ch.
App., 682 (1869). The third class is
where the contract to pay in property
is construed to be a condition subse-
quent. The condition being subse-
quent, the party must pay; and, if the
corporation becomes insolvent, he must
pay in cash. Elkington’s Case, L. R.,
2 Ch. App., 527 (1867); Simpson’s Case,
L. R., 4 Ch. App., 184 (1868); Bridger’s
Case, L. R., 5 Ch. App., 305 (1870);
Thomson’s Case, 84 L. J. (Ch.) 525
(1865); Fisher’s Case, 53 Law Times
Rep., 882 (1886); Sherrington’s Case,
34 Weekly Rep., 49 (1865). See, also,
§§ 35,78. :

1See § 16.

2See § 89, infra.

3 See § 89, infra.

41d,

5 Pendleton, etc., Co. v. Mahan, 18 Pac.
Rep., 563 (Creg., 1888). Ifa corporation
accepts an absolute order upon it by the
contractor to deliver to a third person
certain stock, it cannot afterwards de-
cline to issue the stock on the ground
that the contractor has not performed
his work. Appeal of Hite, etc., Co., 12
Atl. Rep., 267 (Pa., 1887).

The courts of Massachusetts will not,
at the suit of a foreign construction
company, enjoin a foreign railroad
company and a resident from the issue
by the railroad company to the resident
of bonds and stock which the railroad
company has contracted to deliver to-
the construction company. The suit
should be at the residence of the rail-
road company. Kansas Con. Co. v. To-
peka, etc., R. R., 185 Mass., 34 (1883).

Where property is deeded to trustees
to deed to a corporation for part of the
stock, the remaining stock to be for
working capital, the cestui que trust are
entitled to the stock before the rest is
sold. The statute of limitations does

not run. Philes v. Hickies, 18 Pac.
Rep., 595 (Ariz., 1888). See, also, cases
in § 1%, n.

26
CH. 11. | METHODS OF ISSUING STOOK.

[$$ 20a, 208.

par value of the stock so divided is added permanently to the cap-
ital stock of the corporation. A stock dividend can be made only
when the whole of the capital stock has not been issued, or when
it may be increased. It can never increase the capital stock be-
yond the amount as limited by legislative enactment. An issue
of stock by a stock dividend is prohibited by constitutional or leg-
islative enactment in some states. In England it has been a ques-
tion of doubt whether stockholders can be compelled to accept a
dividend of stock. These questions, however, are discussed’ else-
where.!

§ 20a. Pledge af stock by a corporation.— It is now settled that a
corporation may pledge its unissued stock to secure the debts of
the corporation.” It is also clear that, for non-payment of the debt —
so secured, the pledgee may sell the stock; and such sale is legal
even though the stock does not sell for its full par value.*

§ 20. Issue of stock for partnership property.— A copartner-
ship may, of course, sell its stock to a corporation and take shares
of stock in payment. But if the partnership is in a failing condi-
tion at the time of the transfer, the creditors of the firm may disre-
gard the sale and levy an execution on the property itself.

1See §§ 51, 587.

2See § 465, infra.

3See § 476, infra.

4See § 27, infra.

5 Booth v. Bunce, 33 N. Y., 189 (1865);

Partners who merge their partner-
ship into a corporation and take stock
in payment, thereby waive liens which
existed in the partnership. Francklyn
v. Sprague, 121 U. S., 215 (1887).

San Francisco, etc., R. R. v Bee, 48
Cal., 398 (1874). Or by a bill in: equity.
Blair v. St. Louis, etc., R. R., 22 Fed.
Rep., 36 (1884).

Where a firm turns all its property
into a corporation for stock, a firm
creditor cannot reach the stock of one
member of the firm in preference to
other creditors of that member. Singer,
etc., Co. v. Carpenter, 17 N. E. Rep., 761
(Ill., 1888),

As regards the power of the corpora-

‘tion to: assume the obligations of the

copartnership, see McClellan v. Detroit,
etc., Works, 56 Mich., 579 (1885).

If the ‘partnership is insolvent, then
the stock issued is ‘“‘ watered,” and the
subscribers are liable as though no pay-
ment was attempted, Sayler v. Simp-
son, 4 Ry. & Corp. L. J., 195 (O., 1888).

27
CHAPTER III.

“WATERED” STOCK.— STOCK MAY BE ISSUED ILLEGALLY FOR
MONEY, PROPERTY, OR BY, A STOCK DIVIDEND. IT IS THEN
CALLED ‘““WATERED” OR FICTITIOUSLY BAD UP STOCK,

 

§ 21. Objects of such issues. ' 1 § 38. Right of the corporation to com-
22. Methods of issue. plain. °
23. Unsatisfactory dicta of the courts 39. Right of the participating stock-
as to their legality. holders to complain.
24. The important questions in- 40. Right of the transferees of the
volved herein. participating stockholders to
25. ‘‘ Watered” stock not void. complain.
26-28. Constitutional and statutory 41. Right of the dissenting stock-
provisions against ‘‘ watered” holders to complain.
stock. _ 42-44, Right of the corporate credit-
29. ‘‘ Watered” stock may be void- ors to complain.
able, 45. Liability of the corporation.
30. Issue by first method: Ata 46-47. Liability of the person receiv-
discount in cash, ing the stock.
81-82. Dangers of this method. 48. Liability of the officers of the
88. Second method: Issue for prop- corporation.
erty at an overvaluation. 49, Liability of transferees with no-
84. New York rule, tice. '
35. English statute and rule. 50. Liability of bona fide transferees.
36. Liability on ‘‘ watered” stock, 51. Third method: Issue by stock
and who may enforce it. dividend.
87. Right of the state to complain. 51a. Issue of bonds at a discount.

§ 21. Oljects of issuing fictitiously paid up stock.— The issue of
shares of stock as “paid up,” when in fact they are not paid up,
gives rise to some of the most complicated questions connected
with the law of corporations.

A share of stock is supposed, in theory, to represent its par value
in money or money’s worth, paid i in or to be paid in to the corpo-
ration. Accordingly, when it is issued as paid up, it is bought and
sold in open market, on the supposition that the corporation has
received its full par "value, Upon this basis, transactions in paid-
up stock, involving many millions of dollars, are of daily occur-
rence in the commercial centers of the country. The facilities
which exist for the sale of properly issued stock are equally avail-
able for the sale of fictitiously paid up stock, until it has become
well understood and expected that railroad and business corpora-
tions will make these issues of stock.! The issue is generally to

1“ According to the estimate of the $8, 700, 000,000 of purely paper values
most widely acknowledged statistical have been sold to the public.” Hudson
authorities upon railways, through the on The Railways and The Republic, 274
methods of sale or hypothecation, (1886), a book that deals with the rail-

28
OH. IIr.] “WATERED” STOOK.

AG [§ 22.
the organizers or other co-operators, in ostensible’ payment for
property or construction work. It is no unusual thing for a newly-
organized railroad corporation to issue to a construction company
bonds and stock whose par value is many times the value of the
construction work done.! These bonds and the stock are then sold
to the public at a profit, large or small, according to the prospects
of the enterprise and the skill of the parties who are manipulating
the corporation. Soon, however, default is made in the payment
of the interest on the bonds, and this is followed by corporate in-
solvency, foreclosure, receivership and re-organization. The issue
of fictitiously paid up stock is the favorite device of corporate pro-
moters, organizers and manipulators in carrying out their plans
of realizing enormous gains from small investmemts, and in ac-
cumulating great fortunes at the expense of the public. Occasion-
ally, too, the issue is made for the purpose of concealing large and
unreasonable profits, which, if known, might cause the public to
regulate and diminish the source of income. In such cases a stock
dividend is generally resorted to.
§ 22. Methods of issuing “watered” stock.— All stock which has
been issued as paid-up stock, but whose full par value has not been
paid in to the corporation in money or money’s worth, is watered
to the extent that the par value exceeds the value actually paid in.
There are three different ways in which watered stock may be and
is issued: It may be by issue of certificates of stock for an amount
of money less than the par value of the stock, the certificates as-
serting on their face that the full value has been paid in; or it may
be for property or construction work taken at a fraudulent over-
valuation;? or it may be by a stock dividend, the equivalent par

way problems of the day from an anti-'

railway point of view. See, also, Pref-
ace to Poor’s Manual for 1884.

lJeans on Railway Problems, 311
(1887), says: “In 1872 the difference
between. the total. cost of American
railways and their equipment, and the
total capital of the system, was
$85,250,000, In 1884 this sum had been
increased to upwards of $162,000,000.
In 1872 the watered capital amounted
to an average of about $1,800 per mile,
but in’ 1884 the average of such capital
was only $1,348 per mile. At the end
of 1884 fully ten per cent. of the total

capital embarked in American lines’

was additional to the actual cost of the
railways and their equipment, and the

greater part of it may be regarded as
representing ‘ watered’ stock.”

Atkinson on the Distribution of Prod-
ucts, (2d ed., 1886), page 259, says: ‘‘ The
elimination of what has been called
‘watered stock and bonds’ against
which the silly crusade of the so-called
anti-monopolists has been directed, is
therefore in.process of accomplishment
by methods far more potent than any
possible legislative acts, namely, by
the triple competition of water-ways.
Second. The competition of one rail-
way with another. Third. The com-
petition of product with product in the
greater markets of the world.”

2Mr. Simon Stern, in the Cyclopeedia
of Political Science, Political Economy
29
“WATERED” STOCK. [oH. 11.

§ 23.]
value of which has not been permanently added to the capital stock.
Each of these three methods, as was shown in the preceding chap-
ter, may be the means of issuing stock which has been paid up in
good faith. Each, also, is available for the issue of “ watered”
stock. The second method particularly — that of taking property at
an overvaluation — is well calculated to conceal the fictitious charac-
ter of the issue, and to accomplish the purposes of the participants.

Where, however, a corporation has acquired shares of its own
capital stock, either by purchase or by forfeiture for non-payment
of calls, it may re-issue and sell the same at market prices.'

§ 23. Dicta in regard to such issues.— There are various opin-
ions, generally décta, contained in the cases, as to the character of
stock issued as paid up, when in fact it has not been paid for.
The customary expression is that such an issue is a fraud upon the
law and upon the stockholders; or that it is against public policy;
or is a fraud on subsequent purchasers of the stock so issued.’

eA

and United States History, vol. ITI,
p. 527, describes this method of issuing
“ watered” stocks and bonds as follows:

“A line from one point to another,
say a distance of one hundred miles, is
surveyed. It is ascertained that it will
cost about $15,000 a mile to build, in-
cluding acquisition of land, and about
$5,000 a mile to equip; a total’ of
$20,000 a mile. Application is then made
for town and county aid, which aid is
generally represented by investment in
the stock of the road. The first purpose
is to give as little as possible in the way
of value in return for such money aid,
and it is therefore necessary to inter-
pose between the stock and the prop-
erty a sufficient number of mortgages
to make prospective value of the stock
of little or no value. A construction
company is then organized, which takes
the town and county aid as part of its
capital; and the railway corporation,
instead of making its contract on the
basis of cash, issues to the construction
company, say first-mortgage bonds of
$20,000 a mile, or possibly $25,000 a
mile; second-mortgage bonds of $20,000
a mile, and stock of an equal value —
making a total capitalization of $65,000
a mile, instead of $20,000 at which the
road could be constructed. The con-

struction company is composed gener-
ally, directly or indirectly, of the offi-
cers of the road and their friends, who
build the road upon the basis of cash ob-
tained by negotiating through bankers
the securities represented by'the bond
issues of the railroad company; they’
acquire the stock for little or nothing,
and also frequently alarge proportion,
if not the whole, of the second mort-
gage; and in prosperous times they
may succeed in building and equip-
ping the road on the issue of the bonds
secured by the first mortgage alone.
By this system the road comes into
existence laboring under the necessity
to earn, over and above operating ex-
penses, interest on a funded debt about
double the cost of the enterprise, and,
if possible, to earn dividends on the
stock beyond that sum.”

1Ramwell’s Case, 50 L. J. (Ch.), 827
(1881), where the stock had been for-
feited. See, also, to same effect, dic-
tum in Otter v. Brevoort, etc., Co., 50
Barb., 247 (1867).

2In Barnes v. Brown, 80 N. Y., 527,
534 (1880), the court said in a dictum:
“Tt is not.claimed, and could not be
claimed, that the corporation or its di-
rectors could create any valid stock by

issuing the same without any consider-
30

é

‘
CH. 111.]

“ WATERED” STOOK.

[§ 23.

Other cases, however, and cases of high authority, hold that an
issue of stock as full paid-up stock, under an agreement that the
fufl par value shall not be paid, is not necessarily a fraudulent
transaction, but that as between the parties thereto is a legal and

valid agreement, and violates no

ation. The directors assuming to issue
stock in that way would perpetrate a
wrong upon the corporation and its
stockholders, and a fraud upon every
person who took such stock as full-
paid stock, relying upon the appear-
ances, and deceived thereby.” In the
case of Sturges v. Stetson, 1 Biss., 246
(1858), the court said: ‘‘The subscrip-
tion of stock by plaintiff, for less than
the price of the shares fixed in the
charter, was void, as against law and
the power of the directors.” See, also,
Ex parte Daniell, 1 De G. & J., 372
(1857) ; Oliphant v. Woodhaven, etc.,
Co., 63 Iowa, 332 (1884); Tobey v. Rob-
inson, 99 IIL, 222, 228 (1881); Osgood v.
King, 42 Iowa, 478 (1876).

1In Scoville v. Thayer, 105 U. S., 148
(1881), the court say: ‘‘It is conceded
to have been the contract between him
and the company that he should never
be called upon to pay any further as-
sessments upon it [the stock]. The
same contract was made with all the
other shareholders, and the fact was
known to ail.
the company this was a perfectly valid
agreement. It was not forbidden by
the charter or by any law or public
policy.” Inthe case of In re Ambrose,
etc., Co., L. R., 14 Ch, Div., 390, 394-5,
where paid-up stock was issued for
property taken at a gross overvalua-
tion, the court said: ‘‘ It seems to me
impossible to say that, however wrong
the transaction was in respect.to other

persons, there was anything wrong as.

between the company and the vend-
ors.” In Fiinn v. Bagley, 7 Fed. Rep.,
785 (1881), the court held that it was
only as a fraud upon future creditors
that exception could be taken to an
issue of stock at a discount. In Loril-
lard uv, Clyde, 86 N. Y., 384 (1881), the

As between them and.

principle of public policy.

court held it legal for the parties, as
between themselves, to issue paid-up
stock for property taken at a valuation
agreed upon between themselves. The
court said: “If it had appeared that
the organization of the corporation in
this way was a device to defraud the
public, by putting valueless stock on
the market, having an apparent basis
only, a different question would: be pre-
sented.” See, also, Otter v. Brevoort
Co., 50 Barb., 247-256 (1867), dictum;
Spring Co. v. Knowlton, 103 U. S.,
49-58 (1880), dictum:

There have also been various dicta in
the cases and text-books that the issue
of “watered” stock by mining com-
panies is a customary, and hence legal,
issue. There is no reason, however,
why stock issued for a mine. should be
issued more recklessly than stock issued
for a patent-right.

The case generally cited as holding
that mining companies may legally
issue watered stock is Re South Mount- :
ain Consol. Min. Co., 7 Saw., 30 (1881);
8. C., 4 Fed. Rep., 403. In this case,
however, it is stated that corporate
creditors were protected ‘‘by the per-
sonal liability of each shareholder for
his pro rata share of the indebtedness
of the corporation.”  Aff’d, 14 Fed.
Rep., 347 (1882).

Under the Minnesota statute author-
izing mining corporations to sell their
unissued stock as the corporation may
see fit, and providing that if it is issued
thus, as paid up, no further liability:
shall exist, the sale of shares of a par
value of $2 for six cents exempts the
purchaser from further liability to any
one, including corporate creditors. Ross
v. Silver, etc., Co., 29N. W. Rep., 591
-(Minn., 1886); Ross v. Silver, etc., Co.,
31 N. W. Rep., 219 (Minn,, 1887). See,

81
§3 24-26. ] “WATERED” STOCK.

§ 24. The important questions ‘inwolved.— These statements of
the law, however, throw little light upon the important questions
of the rights, risks and liabilities growing out of such issues of
stock. The stockholder and the practitioner wish to know whether

such stock is void or is voidable, or is valid. They wish to know,

also, what are the rights and remedies of the various parties in-
volved. If the stock is valid, then the question arises whether any
one is liable for that part of the par value which has not been paid,
and also who may bring suit to enforce that liability.

§ 25. Fictitious stock is not void.— Is stock void when fictitiously
issued as paid up? It is settled that it is not; and it may be stated,
as a well-established rule, that stock issued as paid up, when it has
not been fully and fairly paid up, is not absolutely void, unless it
is declared to be void by constitutional or statutory provisions.
Nearly all the cases assume this to be the rule, and do not discuss
it. Even when a constitution or statute declares such stock to be
void, it is rarely possible to apply the statutory law. A few cases
speak of such stock as being void; but, inasmuch as the remedies
given in those cases were remedies for the rescission of contracts
for fraud, they do not establish the proposition that the issue was
void absolutely.!

§ 26. Constitutional provisions making it void.— There have been
various constitutional and statutory provisions on this subject in
the different states. In some the state constitution provides that
stock shall not be issued except for money, labor done, or money
or property actually received, and that all fictitious increase of
stock shall be void.? Such a provision is held to be applicable and
effective only when the issue is entirely fictitious. It does not in-
terfere with the customary methods of starting the corporate enter-
prise by the issue of stock and bonds in payment for the construc-
tion of the corporate works. It may be said that these constitutional
provisions have decidedly failed to remedy the evil which.they were
expected to cure.’ They are so sweeping in their effects, and so

[cH. TIL

in general, Kimberly v. Arms, 129
U.S., 512, 580 (1889).

1 Sturges v. Stetson, 1 Biss., 246 (1858) ;
Fosdick v. Sturges, 1 Biss.; 255 (1858);
Gilman, etc., R. R. Co. v. Kelly, 77 IL,
426 (1875); Campbell v. Morgan, 4
Bradw. (Ill.), 100 (1879).

2Constitution of Ill. (1870), art. XI,
§ 18; Neb. (1875), art. XI, § 5; Mo.
(1875), art. XII, § 8; Penn. (1875), art.
XVI, § 7; Texas (1876), art. XII, § 6;
Colorado (1876), art. KV, § 9; Arkansas,
art, XII, § 8; Alabama, art. XIV, § 6;

Louisiana (1879), art. 238. In the last
state any corporation issuing such stock

shall forfeit its charter.

3 Peoria, etc., R, R. Co. v. Thompson,
108 Tll.,. 187 (1882). In this case bonds
and cash were given to the contractors
in payment for the construction of the
road. The transaction was upheld. In
California, the supreme court, in Stein
v. Howard, 65 Cal., 616 (1884), has held
that the constitutional prohibition does
not prevent the issue of stock at less
than its par value. The meaning of

32
CH. I.]

“WATERED ”

STOCK.

(8 26.

disastrous to innocent holders of corporate securities, that the courts
are reluctant. te declare void the stock and bonds issued by the

corperation.

The trouble with such remedies is, that they attempt

‘to cure the evil after it has been consummated, instead of attempt-

ing to prevent its occurrence.!

“fictitious ” is defined to be that given
in Webster's Dictionary. The court said:
“Of the shares proposed to be issued
there is wo one share upon which a per-
son can place his finger and say, that
share is or will be feigned, imaginary,
not real; counterfeit, false, not gen-
uine.” An injunction to restrain such
an issue of new increased stock was re-
fused. In New Castle R. R. Co. v.
Simpson, 21 Fed. Rep., 535 (1884), the
court, in passing on the provision in the
Pennsylvania constitution, held that a
contract giving a construction com-
pany $300,000 of stock and $300,000 of
bonds for work worth but $180,000, will
be set aside, although $40,000 of work
has been done. The construction com-
pany will be repaid the $40,000 in cash.
See 8. C., 28 Fed. Rep., 214 (1885), hold-
ing that the contractor may recover
back not only this, but also a reasonable
compensation and interest.

Receiving the subscriber’s note in pay-
ment for stock does not render the stock

void, under this constitutional provis-

ion. Pacific Trust Co. v Dorsey, 13
Pac. Rep., 148 (Cal., 1887); Pacific Trust
Co; v. Dorsey, 12 Pac. Rep., 49 (Cal.,
1886).

The supreme court of the United
States in Memphis, etc., R. R. Co. v.
Dow, 120 U. S., 287 (1887), held that this
provision did not invalidate a transac-
tion upon the reorganization of a com-
pany after a foreclosure of its property,
and a purchase of the property by a
committee for the bondholders, whereby
they took in payment of such property
the bonds and stock of the new corpo-
ration, even though the stock alone of
the new company thus taken was, atits
par value, equal to the value of the prop-
erty involved.

(8)

A stock dividend has been held to be-
illegal, where the constitution prohibits
the issue of stock,‘ except for money,
labor done, or money or property act-
ually received.” A stockholder may en-
join the issue. Fitzpatrick v. Dispatch
Pub, Co., 2 South. ‘Rep., 727 (Ala.,
1887), :

The issue of stock in violation of this
provision of the constitution renders the
charter liable to forfeiture by the state.
State v. Atchison, etc, R. R., 88 N. W..
Rep., 43 (Neb,, 1888). '

A contractor who receives bonds im
pay ment of construction work, and sells.
them cannot claim that they are void!
as contrary to the statute, prohibiting.
“watered” bonds, Reed’s Appeal,. 16,
Atl. Rep., 100 (Pa., 1888),

Where a consolidated company of
New York and Pennsylvania issues
bonds in New York, fictitiously, such.
bonds cannot be enforced in Pennsyl-
vania, since they are void by its consti-
tution. A foreclosure in New York. of
the mortgage securing the bonds. may
be set aside and the bonds declared
void. Pittsburgh, etc., R. R. Co.’s. Ap-
peal, 4 Atl. Rep., 385(Penn., 1886).

1J¢ is believed by the author that.
there is but one way of preventing the
issue of ‘‘ watered” stock. The law
should prohibit all issues of stock. for
labor, property or contract work, un- |
less, before such issue, it shall have been
decided by a commission appointed by
a specified court, or regularly elected.
or appointed by the governor for a term
of years, that the labor, property or
contract work so received is equal in
value to the par value of the stock is-
sued for it. The method of procedure,
appointment, powers and duties of such
a commission could be made to. corre-

33
§ 27.) -
§ 27. Many of the states have

“WATERED” STOOK.

' [oH IIL.

statutes affecting the validity of

stock issued as paid up, when its par value has not been actually

paid in!

In New York, under the statute allowing ‘the incorpora-

tion of manufacturing companies, it has been assumed that an issue
of stock as paid up for cash, at less than its par value, is void.?

_ In Ohio, by statute, an issue of stock to a director, directly or
indirectly, for less than the par value thereof, is void.°

spond largely with those of the various
railroad commissions now existing in
the different states. Sucha plan seems
to exist in Massachusetts in regard to
manufacturing corporations. See Pub-
lic Statutes of Mass., 1882, p. 579.
1 Gen. Stat. of Mo., ch. 62, § 11, p. 328;
2 Rev. Stat. of N. Y., 507, § 49; 504,
§ 38; 505, $8 40, 41; N. Y. Session Laws,
1848, ch. 40, §§ 38, 40, 41, 49. In Wis-
consin the following remarkable statute
exists (R. 8. 1878, § 1753, as amended
by ch. 938, Laws 1881): ‘No corpora-
tion shall issue any stock, or certificate
-of stock, except in consideration of
money or labor, or property estimated

‘at its true money value, actually re- .

ceived by it, equal to the par value
‘thereof; . . . and all stocks and
bonds issued contrary to the provisions
-of this section, and all stock dividends
‘or other fictitious increase of the capi-
tal stock of any corporation, shall be
‘void; provided, however, that any cor-
;poration whose stock or bonds have
been, or shall hereafter be, admitted to
the stock exchange of Chicago, New
York, Boston or Philadelphia, or of
either of said cities, may sell such stock
or bonds so admitted at the best price or
. prices current for the time being ob-
tainable therefor on any of the said ex-
changes at which the same shall be
offered for sale.”

Spring Co. v. Knowlton, 103 U. S.
49 (1880); Knowlton v, Congress & Em-
pire Spring Co., 14 Blatch., 364 (1877);
Knowlton v. Congress, etc., Co., 57
N. Y., 518 (1874), These three decisions
arise from the litigation of asingle case.
After being reversed in the New York
court, it was removed into the federal

court. In all three decisions the in-
validity of the stock was conceded by
both parties. The federal courts dif-
fered from the state courts, and held
that a person partly paying for such
illegal stock may recover back such pay-
ment, although he had allowed the
stock to be forfeited for non-payment
of further calls,

A statute prohibiting the sale of stock
below par does not prevent the cor-
poration from pledging it, and a sale of
the stock by the pledgee below its par
value is legal. Peterborough, ete., R. R.
Co. v. Nashua, etc., R. R. Co., 59 N. H.,
885 (1879).

In New York, by statute, directors in
manufacturing corporations are per-
sonally liable for all corporate debts, if,
in the required reports which they file,
they misstate facts. Accordingly, if they
state the capital stock to have been
paid up, when in fact it was paid for
by property taken at a fraudulent over-
valuation, then the penalty applies.
Most of the New York cases on watered ‘
stock have arisen under this statute.
By the same statute the stockholders
are liable to double the amount of their
stock until a certificate is filed to the
effect that the capital stock is all paid
in. It has been held that an issne of
$300,000 of full-paid stock for a right to
apply for patents, if found by the jury to
be an intentional overvaluation of that
right, subjects a transferee of any of
the shares, taking with notice of all the
facts to this statutory liability in New
York to an amount equal to the par
value of the stock. Nat'l, etc,, Co, v.
Gilfillan, 45 Hun, 248 (1887),

5 Section 3313 of the Revised Statutes
84 :

bo
QH. 111. ] “WATERED” STOCK. [S$ 28, 29.

In some cases where the issue of paid-up stock, in similar cor-
porations, was for property taken at an overvaluation, it was as-
sumed that the statute did not make the issue void.!

§ 28. In England, in 1863, the Companies Clauses Consolidation -
Act? prohibited the issue of new stock for a price less than its par
value. An amendment thereto in 1869* struck out this probibition,
and gave power to the directors to issue stock on such terms and
conditions as they saw fit. The Railway Companies Act‘ of 1867
is to the same effect.

§ 29. Fictitious stock may be voidable.— Is stock voidable when
fraudulently issued as paid up? There are few cases on this ques-
tion, but the tendency of the courts is to hold that such issues of
stock may be avoided by a withdrawal of the issue and a cancella-
tion of the certificates. Thus a court of equity, on the application
of a dissenting stockholder, has decreed that stock falsely issued as
paid-up stock should be delivered up to the corporation for cancel-
lation.’ Where, however, the stock has passed into the hands of
‘bona fide purchasers for value, such purchasers are entitled to re-
tain the stock. Some cases intimate that the stock fictitiously
issued may be canceled, except a part whose par, value would
equal the amount actually paid in by the persons receiving it.®
Many cases hold also that the transaction is in the nature of a

of Ohio sets forth that ‘‘all capital 1See § 84.
stocks, bonds, notes or other securities 2 See 26 & 27 Vict., ch. 118, § 21.
of a company purchased of ‘a company 3 See 82 & 33 Vict., c. 48, § 5.
by a director théreof, either directly or 4See 30 & 31 Vict., c. 127, § 27.
indirectly, for less than the par value 5 Gilman, etc., R. R. Co. v. Kelly, 77
thereof, shall be null and void.” In IIL, 426 (1875). In this case it was ad-
Zabriskie v. Cleveland, C. & C. RB. R. mitted that the stock was issued gra-
Co., 23 How., 381 (1859), this provision tuitously, and for the purpose of en-
was held not to affect the liability of a abling the construction company to own
guarantor of such bonds. a majority of the stock, thereby con-

But in Union Trust Co. v. N. Y., etc., - trolling the corporation. :
R. RB. Co, 1 By. & Corp. L. J.,50 (Ohio Sturges v. Stetson, 1 Biss., 246, 254
‘Com. Pl., 1887), the court, in applying (1858). The court said, in a dictum,
this statute, held that, where fifty mill- that stock taken at less than par, with
ions of paid-up stock and fifteen mill- knowledge, is subject to the right of
ions of bonds are given toasyndicate, other stockholders, being such at the
of which a director is a member, for, time of its issue, ‘to have it reduced
eighteen millions of money, the stock to the charter value of the shares. This
and bonds and the mortgage securing would take from him nearly one-third
the bonds are void. of his shares.” In Fosdick v. Sturgis,

By statute, in Massachusetts, in- 1 Biss., 255.(1858), the court say there
creased capital stock must be sold at can be no question that this remedy is
public auction if it is worth more than available,
par. See Att’y-Gen. v. Boston, etc, R,
R. Co., 109 Mass., 99 (1871). ;

3
.

§3$ 30, 31.] “WATERED” STOCK. [cH rT.

fraudulent contract, and that it may be rescinded for fraud — in

which case the stock would have to be returned to the corpora-
tion.

So far as the right of the corporation to issue stock below par is

concerned, the courts have frequently held that the issue is an wltra
vires act! But an ultra vires act is not always void absolutely, and
it is voidable only at the instance of persons standing in a certain
relation towards the act. Who can avoid the act will be explained
hereafter. '

§ 30. First method of issue: By discount in cash.— As already
stated, paid-up stock may be improperly issued in three different
methods: by part cash payment; by taking property at an over-
valuation; by an invalid stock dividend.

An issue of paid-up stock for cash, upon payment of only: part
of the par value of the stock, is not often made, inasmuch as the
real nature of the transaction is readily discovered and easily rem-
edied. Sometimes the corporation makes the issue under a contract
with those receiving it that no more than a certain percentage of
the par value will be called for. Again, a release is sometimes made
by a resolution of the directors or stockholders, after subscriptions
have been made and partly paid, discharging the subscribers from
any further liability on such subscriptions. The proceedings are
generally spread upon the corporate records; certificates are issued,
asserting on their face that they are paid up; and all inquiries at
the corporate office are answered by a substantiation of that asser-
tion. !

§ 31. Dangers attending this method.— There are various dangers
and liabilities growing out of such a transaction.’ The stock is
liable to be canceled.? The person to whom it was issued,’ or his
transferee with notice,’ or the corporate officers participating in
the act,’ may, under certain circumstances, each be held liable per-
sonally for the unpaid par value of the stock. They may be liable

1¥Fisk v. Chicago, etc., R. R. Co, 53
Barb., 518 (1868), where the court says:
“Tt is not a question of good faith, or

Daniell, 1 De G. & J., 872, the court
says: ‘‘It was very properly admitted
that the directors of the com-

of honest intention, or of wise policy,
or skilful or discreet management on
the part of the directors. It is a ques-
tion of power.” In West., etc., R. v.
Mowatt, 12 Jur., pt. 1, 407 (1848), the
court sustained a demurrer to a bill for
specific performance of a contract to
take shares from the corporation at a
discount, the court holding that the
contract was ultra vires, In Ex parte

pany had no power to pass the resolu-
tion” issuing the stock for less than its
par value. In Brown’s Case, 2 De G.,
F. & J., 275, 295 (1860), it is held to be
“beyond the functions and in excess of
the powers” of the directors,

2See § 29, é

3 See §§ 46, 47, 167,

4See § 49,

5See § 48,

86
OH. 111] ““WATERED” sTocK.

[$ 32:

to the corporation itself,! or to the corporate creditors,? or to bona
Jide transferees of the stock. ;

A. bona fide transferee of such stock, however, is not liable.‘
But it has been held that the corporation may refuse to allow a
transfer on the corporate transfer book of stock so issued.

§ 32. In England there has been great doubt on this subject.* It
formerly was held that, where a contract for the issue of stock for
cash at a discount is regularly registered with the public registrar,
as provided by statute, then the person to whom the stock is-thus
issued by contract as paid-up stock is not liable to the corporation,
nor corporate creditors, nor any other person, for the unpaid par

value of the stock, and his transferee is likewise protected.

The latest authority in England

, however, is in accord with the

American rule, and holds that stock cannot be issued for cash ata

discount.8

1See § 38,

2See §§ 42-44,

3 See § 40.

4See § 50.

5 People v. Sterling Mfg. Co., 82 IIL,
457 (1876).

6See § 44,

7Re Ince Hall Rolling Mills Co., 30
W. R., 945 (1882); 8. C., L. R., 28 Ch. D.,
545. The court refused to hold liable
the person receiving the stock, but ina
dictum said: ‘‘ Assuming that the con-
tract was ultra vires, what would be
the result? If it is wltra vires it must
be set aside in toto, the consequence
being that these géntlemen would be
entitled to be relieved of their shares
and receive back the money paid upon
them.” In the case of Guest v. Wor-
cester R. R. Co., L. R., 4 C. P., 9 (1868),
where stock had been issued as paid-up
stock to a corporate creditor as security
for his debt, nothing having been paid
on such stock, the court said it did
“not entertain a shadow of a doubt,”
and that the holder was not liable
thereon. In Baron De Beville’s Case,
L. R., 7 Eq. Cas., 9 (1868), ‘‘ paid-up”
shares had been issued: to De Beville,
who had subscribed for ‘‘ paid-up”
shares, but had paid no part of the par
value thereof. The court held him not
liable. In this case the corporation had

authority to issue ordinary shares for
37

cash, and “paid-up” shares for prop-
erty or services. See, also, Gold Co.,
L. R., 11 Ch. D., 701; James v. Eve, 6
H. L. Cas., 885; Plaskgnaston Tube Co.,
L. R., 23 Ch. D., 542. Ex parte Daniell,,
1 De Gex & Jones, 372 (1857), is not
strictly in accordance with the preced-
ing authorities, but in Daniell’s case
the issue was to a director who was
acting in a fiduciary capacity. The
case is so distinguished in Carling’s _
Case, L. R., 1 Ch. D., 115 (1875).

In Re Dronfield Silkstone Coal Co.,
L. R., 17 Ch. Div., 76 (1880), on page 97,
the court says: ‘If the company could ,
not question it, neither can a creditor;
for he can obtain nothing but what the
company can get from the sharehold-
ers.” See, also, Re Ambrose Lake T. &
C. Min. Co., L. R., 14 Ch. D.,; 390 (1880);
Re Ince Hall Rolling Mills Co., 80 W.
R., 945 (1882), where the court said the
same as in the preceding case. In
Waterhonse v. Jamieson, L. R., 2 H. L.
(Sc.), 29, the court said, page 87: ‘‘I
take it to be quite settled that the
rights of creditors against the share-
holders of a company, when enforced
by a liquidator, must be enforced by
him in right of the company; what is
to be paid by the shareholders is to be
recovered in that right.” Cf. remarks
of the lord chancellor, page 382.

8 Re Addlestone, etc., Co, 58 L. TY
8§ 383, 34.] “WATERED” STOCK.

[OH 11.

§ 33. Second method: Issue of stock for property taken at an
overvaluation.— A second method of issuing stock as paid up, when
itis not actually paid up, is by its issue for property taken at an
overvaluation. This method is the most frequently employed, the
most difficult to prove, and the least easy to remedy. A large
amount of litigation and confusion has been experienced and gone
through with in determining the principles of law which should
govern such transactions. The two questions which have perplexed
the courts were, first, what constituted an overvaluation sufficient
to invalidate the contract; second, what remedy should be applied
-when the contract was invalidated.

§ 384. New York rule-— In New York the court of appeals were
at first in doubt whether proof of a mere overvaluation of the
property was sufficient to set aside the payment as a ful! payment,
or whether it was necessary for the plaintiff to prove also that the
overvaluation was intentional and fraudulent.!

Later cases, however, as well as cases in other states, have firmly
established the principle that not only must proof be given that
there was an overvaluation of the property or. services rendered,
but proof also must be given that such overvaluation was inten-

tional and consequently fraudule

Rep., 428 (1887). In Ea parte Stephenson,
15 L. R., Ir., 51 (1885), it was held that,
upon dissolution of the corporation, the
stockholders are entitled to the remain-
ing assets in proportion to the amounts
paid by them, without regard to the
“ water ” in the stock.

An issue of stock in England for
cash at less than par is invalid, even
though the contract is duly registered
under the Companies Act. The hold-
ers are liable for the unpaid par value.
Re London, etc., Co., 59 L. T. Rep., 109
(1888).
_ In England an issue of stock for cash
at a discount is illegal, and a holder
may sue to rescind the issue to him
and for repayment of the money paid.
Re Almado, etc., Co., 59 L. T. Rep., 159
(1888), overruling Re Ince, etc., Co., 23
Ch. D., 545, n., and Re Plaskgnaston,
etc., Co., id., 542.

1Boynton v. Hatch, 47 N. Y., 225
(1872), Three of the judges held that

proof of fraud was necessary, and three

that it was not necessary. ' All con-

nt.”

curred in holding that proof of over-
valuation was competent and neces-
sary.

2 Douglas v. Ireland, 738 N. Y., 100
(1878); Schenck v. Andrews, 57 N, Y.,
183 (1874); Boynton v, Andrews, 63 N.
Y., 93 (1875); Lake Superior Iron Co. v.
Drexel, 90 N. Y., 87 (1882); Brant v.
Ehlen, 59 Md., 1 (1882). In the last case
the court said: ‘‘So long as the trans-
action stands unimpeached for fraud,
courts will treat as a payment that _
which the parties themselves have

- agreed shall be a payment, and this, too,
in cases where the rights of creditors
are involved.” New Haven, etc., Co.
v. Linden Spring Co., 142 Mass., 349
(1886), ,

‘Where the plaintiff does not allege
fraud in the valuation the action fails,
An action framed on the theory of un-
paid subscriptions is ineffectual as a
remedy. Coffin v. Rausdell, 11 North-
east. Rep., 20 (Ind., 1887),

In Phelan v. Hazard, 3 Dill., 45 (1878),
Judge Dillon thoroughly reviews the

388
CH. IL] “WATERED” STOCK. [§ 34.

The property is not to be considered as overvalued merely be-
cause, subsequently, it turns out to be so. The various circum-
stances under which the valuation was made should be considered:
in determining the bona jides of the transaction.!

The questions as to whether there was an overvaluation of the
property, and whether that overvaluation was intentional and
fraudulent, are generally questions of fact to be submitted to the
jury.

Where, however, the é6vervaluation is so great as to bear evidence
upon its face that it was intentional and fraudulent, the court will
hold that, unless the transaction is reasonably explained, there is
no question of fact for the jury, but that, as a matter of law, the

overvaluation was fraudulent.*:

authorities, and says: ‘‘ The contract is
valid and binding upon the corporation
and the original shareholders uniess it
is rescinded or set aside for fraud; and
while the contract! stands un-
impeached, the courts, even where the
rights of creditors are involved, will
treat that as a payment which the parties
have agreed should be payment.” See,
also, Brant v. Ehlen, supra, fully ex-\
plairting the meaning of the term trust

fund as applied herein. ~ Crawford v. ..

Rohrer, 59 Md., 599 (1882).

1l§chenck v. Andrews, 57 N.-Y., 183
(1874). In Coit v, North Car. Gold
Amal. Co., 14 Fed, Rep., 12 (1882), the
court said corporators ‘‘ ought not to be
made liable individually for the debts
of the company at the instance of cred-
itors, because, at a later day, the esti-
mate fairly put upon the property at
that time has become modified by sub-' .
sequent events, and will not amount to
the value which they set upon it.”

On appeal the court, in affirming the
judgment below (see 119 U. S., 348,
(1886), said: ‘Where full-paid stock is
issued for property received, there must
be actual fraud in the transaction to
enable creditors of the corporation to
call the stockholders to account.” To
same effect, Mege’s Case, 10 W. N.
(Eng.), 208 (1875).

In Carr v. Le Fevre, 27 Pa. St., 413
(1856), the court said that if the direct-
ors “took lands at a prospective value,

never realized, it is nothing more than
many individuals and_ corporations
have done before. Such an error in
management or in their judgment of
the value of a purchase, made without
fraud, forms no ground for rescinding
the contract.” See, also, Schroder’s ,
Case, L. R., 11 Eq. Cas., 181 (1870).
2Boynton v. Hatch, 47 N. Y., 225°
(1872); Lake Superior Iron Co, v. Drexel,
90 N. Y., 87 (1882). , :

3 Thus, where stock for $300,000 was
issued for property which the jury
found to be worth $64,000, the court
held, as a presumption of law, that the
transaction was fraudulent. Douglas
v. Ireland, 73 N. Y., 100 (1878). In an-
other case, involving the same facts,
the trial court submitted the question
to the jury. Brockway v. Ireland, 61
How. Pr., 372 (1880). :

In another case, where stock for
$100,000 was issued for property worth
not more than $50,000, the -court held
that, in the absence of evidence to ex”
plain the presumption of fraud, there
was no question for the jury, and that
the transaction was fraudulent upon its
face. Boynton v. Andrews, 63 N. Y.,
93 (1875). An issue of $190,000 of stock
for property worth $27,500 was heid to
be a fraudulent overvaluation, as a
matter of law. Osgood v. King, 42
Towa, 478 (1876). “The case of Lake Su-
perior Iron Co. v. Drexel, 90 N. Y., 87,
tends to make the valuation of the

89
§ 85.]

“WATERED” STOCK.

[OH. II.

§ 35. English statute and rules.— In England the issue of stock
for property or services is largely regulated by statute. On ac-
count of the many frauds perpetrated upon the public by the issue
of stock for property taken at a gross overvaluation, parliament, in
1867, passed an act requiring all contracts whereby stock was is-
sued for property or services to be publicly registered; under pen-

alty of the payment being void.

property a question for the jury ex-
clusively. In that case, © st ‘k for
$2,500,000 was issued for property in a
patent; $900,000 of the stock’ was re-
turned to the corporation asa gift. The
court held that the question of fraud
was for the jury. This case was fol-
lowed in Draper v. Beadle, 16 Weekly
Dig., 475 (1883), Supm. Ct. N. Y., Gen. T.
In Bolz v. Ridder, 19 Weekly Dig., 463
(1884), N. Y. Com. Pl., the remarkable
. rise in value of a patent-right from
$1,000 to $100,000, when sold for stock
issued in payment therefor, was held
to be only presumptively fraudulent,
and may be explained sufficiently to
raise a question for the jury. The direct-
orsin estimating the value of property
may take the opinion of experts, and
rely thereon, Brockway v. Ireland, 61
How. Pr., 372 (1880). See, also, Knowles
v. Duffy, 40 Hun, 485 (1886). Cf. Thurs-
ton v. Duffy, 388 Hun, 327 (1885).

In Thurber v. Thompson, 21 Hun, 472
(1880), the court said the jury should
have before them ‘‘ evidence of the prob-
able enhanced value growing out of the
contemplated improvements made and
to be made by the company, and of the
public improvements which were ex-
pected to add largely to the value of
the land for the new objects and pur-
poses to which it was to be devoted. It
would be: extremely unjust to such a
company as this to hold that farming
jands upon which the site of a city or
town is about to be established, and
which are bought for that purpose, and
mapped, platted and subdivided into
city or village lots, are to be viewed,
upon a question of overvaluation,
merely as agricultural lands,”

.

‘only one-fifth of that amount.

Difficulty then arose as to what

Where a mine is turned it at a large
valuation for stock, no fraud is proved
by the mere fact that the mine subse-
quently turns out to have been worth
Fraud
exists only when intentional overvalu-
ation, ‘‘ or such reckless conduct in the
placing of this value, without regard to
its real. worth, as would indicate, with-
out explanation, an intent to defraud.”
Young v. Erie Iron Co., 31 N. W. Rep.,
814 (Mich., 1887).

See, also, Huntington v. Attrell, 42
Hun, 459 (1886), where land costing
$80,000 was turned in for $700,000 of
stock. The finding of the jury that
the act was fraudulent was sustained
on appeal. And where property worth
but $60,000 is turned in for $1,000,000
of stock and $200,000 of bonds, the act
is fraudulent. . Blake v. Griswold, 108
N. Y., 429 (1885), sustaining a finding
of the special term to that effect.

130 & 31 Vict., ch. 131, § 25, ‘Every
share in any company shall be deemed
and taken to have been issued and to
be held subject to the payment of the
whole amount thereof in cash, unless
the same shall have been otherwise de- .
termined by a contract duly made, in
writing, and filed with the registrar of
joint-stock companies at or before the
issue of such shares,” Where the stock-
holders apply long after incorporation
for leave to file with the public register
the contract, whereby stock is issued
for property, the court will require
them first to provide for existing debts.
Re Darlington, etc., Co., 56 L. T. Rep.,
627 (1887).

Amere vote of stock to a director in
compensation for his services does not

40
cH. m1.] “WATERED” STOCK.

[$$ 36, 37.

was the status and liability of a person receiving stock for prop-
erty, in case the contract therefor was not publicly registered, as
required by act of parliament. The courts finally decided that, if
the sums due reciprocally were expressly offset, then that the stock
was to be deemed paid for, notwithstanding the statute! Buta
mere general understanding that the property is payment for the
stock is insufficient. The prohibition in the statute then applies,
and payment in cash will have to be made upon a winding up?

The point: decided by these cases seems to have been misappre-
hended in a few American cases.’

§ 36. Liability on'“ watered” stock, and who may enforce it.—
When it has been established that the overvaluation of the prop-
erty taken in payment for® stock was intentional and fraudulent,
and that the transaction was invalid, the questions then arise, what
liability has been incurred, who is liable, and what is the remedy ?
The clearest method of investigating and presenting the law in
answer to these questions is by considering, first, who may com-
plain of the transactions — who may be the party plaintiff or com-
plainant; second, who is liable in such a transaction — who is to
be made the defendant. Incidentally also there arise questions as
to the extent of that liability, and the remedy to be appa.

§ 87. Who may complain of an issue of stock as “ paid up,” when
it has not been fully paid ? — The state— As already indicated, the
issue of stock as paid up, when not actually paid up, is an act ultra
vires of the corporation. The commission of.%léra vires acts by a
corporation, to the.detriment of the public, renders its charter
liable to forfeiture, at the instance of the state.

The issue of fictitiously paid up stock, with a view to defrauding
the public, might constitute a misuse of the corporate rights and
privileges. In such a case, however, it has been held that the state

render him liable thereon for failure
to register the contract, unless he knows
of the entry of his name as holder of
the shares or accepts certificates for the
same, Arnot’s Case, 57 L. T. Rep., 353
(1887).

1Pell’s Case, L. R., 5 Ch. App., 11
(1869); Ex parte Clarke, L. R., 7 Eq.
‘Cas., 550 (1869); Nicoll’s Case, L. R., 7
Ch. Div., 533 (1878). See, also, § 18. In
Spargo’s Case, L. R., 8 Ch. App., 407
(1873), the court said: ‘‘If the parties
account with each other, and sums are
stated to be due on one side, and sums
to an equal amount due on the other

~

side on that account, aud those accounts
are settled by both parties, it is exactly
the same thing as if the sums due on
both sides had been paid.” See, also,
Maynard’s Case, 22 Week. R., 119; Re
Vulcan Iron Works, Law Times, May,
1885, p. 61.

2 Dent’s Case, L. R., 15 Eq. Cas., 407 |
(1878); Fothergill’s Case, L, R., 8 Ch.
‘App., 270 (1878); Crickmer’s Case, L.
R., 10 Ch. App., 614 (1875); Rowland’s
Case, 42 L. T., N. S., 785 (1880).

3See Wetherbee v. Baker, 35 N. J.
Eq., 501 (1882).

41
“WATERED” STOCK. [ou. 11.

8 38.]

\

would not forfeit the charter of the corporation. But a very pal-

pable case of fraud will justify the forfeiture.!

Moreover, when a corporation is guilty of an ultra vires act, and
such act is detrimental to the interests of the public, it is possible
that it is competent for the attorney-general to file an information
for the purpose of enjoining or setting aside such act.2 Such an
action, however, is ditticult to maintain.

§ 38. Right of the corporation itself to complain.— The corpora-
tion itself, after issuing its stock as paid-up stock, and declaring it
so to be, cannot subsequently repudiate that declaration and agree-
ment and proceed to collect, either from the person receiving the

stock or his transferee, the unpaid part of the par value.

estopped from so doing.’

1 Quo warranto does not lie against a
corporation nierely because it issues its
stock below par. State v. Minn., etc.,
Co., 41 N. W. Rep., 1020 (Minn., 1889).

In Holman v. State, etc., 5 North-
east. Rep. (Ind., 1886), the state caused
a charter to be forfeited because the
subscribers for stock were insolvent at
the time of ‘subscribing, thereby perpe-

' trating a fraud on the public. See, also,
Jersey City G. L. Co. v. Dwight, 29 N.
J. Eq., 242; State v. Atchison, etc., R.
R., 88 N. W. Rep., 43 (Neb., 1888).

The state may bring an action to for-
feit a charter where the corporation
commences business before the full
capital. stock is subscribed. People v.
Natl. Sav. B’k, 11 Northeast. Rep., 170
(U1, 1887). a

The state cannot en join private par-
ties from dealing in ‘‘ watered” stock.
State v. American Cotton Oil Trust, 3
S. Rep., 409 (La., 1888); People v. Natl.
Sav. B’k, 11 N. E. Rep., 170 (ILL, pene

2See § 635, infra.

3 In the case of Scoville v. Thayer, 105
U. §&., 143 (1880), the court said, in a
dictum: “ No call could have been made
by the company under its agreement
with the shareholders, unless to pay its
creditors, The shares were is-
sued as paid up, on a fair understand-
ing, and that bound the company.” The
issue had been at a discount.

It is

See, also, Union, etc., Co. #. Frear,
etc., Co., 97 Il]., 587 (1881), dictum. In
the case of Granite Roofing, etc., Co. v.
Michael, 54 Md., 65 (1880),, stock was is-
sued as paid up for cash, although not
actually paid. The corporation passed
under the control of purclrasers of the
stock, who caused the corporation to
sue the original subscribers for the un-
paid par value of the stock. The court
said: ‘‘While the law may reject, as
illegal and fraudulent, that which the
parties have agreed upon, . . it
will not arbitrarily incorporate, in lieu
thereof, terms in the contract to which
the parties have never’ assented.” In
the case of Re Ambrose, etc., L. R., 14
Ch. Div., 390 (1880), where all the stock-
holders acquiesced and there were no
creditors’ rights involved, the court held
that the corporation could not hold the
directors liable for the profits made by
them. In Zirkel v. Joliet Opera House
Co., 79 Ill., 834 (1875), the corporation
had released the subscriber after the
subscription had been made. The re-
lease being without consideration, and
not a contract, was held void, and the
corporation was allowed to recover.
The case of The Society of Prac. Knowl.
v. Abbott, 2 Beav., 559 (1840), was dis-
tinguished in Re British S. P. B. Co.,
L. R., 17 Ch. D., 467 (1881), the latter
case holding that no one is liable on fic-

42

a
OH. 11.] “WATERED” STOCK.

[§ 38.

Where, however, fraud enters into the transaction, then, it seems,
the corporation is not estopped from having the agreement set
aside. The person receiving the stock can then be compelled to
return the stock, or its’ market value, and take back that which he
gave to the corporation for it. But the corporation cannot hold
him liable for the par value of the stock.

The corporation has'also a remedy.herein against its directors
who issued the stock either fraudulently or in an wtra vires man-
ner? This liability is similar to their general liability to the cor-
poration for fraudulent, negligent or ultra vires acts on their part.*

The measure of their liability herein is not the par value of\the

stock, less the value actually received therefor by the corporation,
but it is the actual or market value of the stock, less the property

or cash actually received by the corporation on the stock so issued.’

It has also been held that the corporation cannot, in a court of

titiously paid up stock where all acqui-
esced and there was no intent to bring
in new stockholders. This is held to be
the rule even though new stockholders
were subsequently brought in.

In the case of Harrison v. Union Pac.
R’y Co., 18 Fed. Rep., 522 (1882), where
plaintiff sued to recover on bonds guar-
anteed by the defendaht, the court said:
“ The intention of the Arkansaw Valley
Railway Company was to sell the stock
to Harrison for less than its par value;
4 e@, to give him $15,000 in stock
(twenty bonds of the company), guar-
anteed by the Kansas Pacific Company,
and the Clay county bonds, all for
$15,000 in cash. There is nothing in
the statutes of Colorado, where the cor-
poration was created, to forbid the sale
of stock at less than par; nor was Har-
rison forbidden to purchase the stock
by reason of the fact that he was al-
ready a stockholder and director in the
Kangas Pacific Railway Company. The
transaction was therefore valid as be-
tween the corporation and Harrison,
whatever the right of the creditors of
the corporation as against Harrison may
be.” See, also, Harrison v. Arkansas,
etc., R. R., 8 South. L. R., 182 (U.S.

6. G., 1882).

In St. Louis, etc., R. R. Co. v. Tier-

nap, 15 Pac. Rep., 544 (Kan., 1887), it

was held that an issue of $3,600,000 of
stock and the payment of $200,000 to
directors for an old road-bed which had
cost then $15,000, was legal, since all
the stockholders and directors, except a
few nominal holders of stock, were fully
informed of the facts, and no other
stockholders came in until several
months subsequently. The corporation
was held incompetent to complain.
See, also, Flinn v. Bagley, 7 Fed. Rep.,
485 (1881); Re Glen Iron Works, 17 Fed.
Rep., 24 (1883). Cf. People v. Sterling
Mfg. Co., 82 Ill., 457 (1876),

1See 8§ 47, 48. Itis to be noticed, how~
ever, that there are few well-defined
cases on this principle of law. Most of
the cases on the liability of the director
herein involved the additional fact that
the director received some of the stock

himself. In the case of Continental Tel. _

Co. ». Nelson, 49 N. Y. Super. Ct., 197
(1883), the president was sued by the cor-
poration itself for issuing stock in pay-
ment of labor, the par value of the stock
being worth over twice the value of the
labor. The court held that he was lia-
ble only for the actual market value of
the stock in excess of the value of the
labor, and submitted the question to
the jury. See, also, § 48, infra,

2See § 48.

3See Part IV,

43
§§ 39, 40.] “WATERED” STOOK. [oH. Imr.
equity, compel a person, who agreed to take stock at a discount,
to carry out the contract, inasmuch as it is wléra vires.

§ 89. Stockholders participating im the act cannot complain.—
Stockholders in a corporation, who participate or aid in the issue of
paid-up stock, upon payment of less than its par value, or who have
knowledge of the act and acquiesce therein, cannot afterwards
complain of the transaction, either in their own behalf or in behalf
of the corporation. They are bound by estoppel or acquiescence.’

The cases are in conflict on the question whether the party re-
ceiving stock at a partial discount of its par value may repudiate
the transaction and recover from the corporation the money he
has already paid thereon.’ It is certain, however, that where the
stockholders participating in the issue use the stock to rob a rail-
road and bribe a judge, and then disagree among themselves, the
courts will not render aid to one as against the otuers.*

§ 40. Transferees of participating stockholders cannot complain.—
Not only the participating and acquiescing stockholders, but also
their transferees, are bound by the participation or acquiescence.
The transferee cannot claim to have greater rights than his trans-
ferrer, as regards a general remedy invalidating the whole transac-
tion. He cannot bring suit in behalf of the corporation and other

1 West. R. R. Co. v. Mowatt, 12 Jur.,
pt. I, 407 (1848).
2In Re Gold Co., L. R., 2 Ch. Div.,
701, 712, the court says: ‘‘ It could not
‘be a fraud upon, or a wrong to, the ex-
isting stockholders, because every one
of them was a party to the transaction.”
See, also, Scoville v. Thayer; 105 U. &.,
148 (1881). But in the case of Knowlton
v. Congress, etc., Co., 14 Blatch., 364,
368 (1877), the court said, in a dictum:
** Can there be any doubt that, up to the
time of the abandonment of the scheme
by the defendant, the plaintiff could
have resorted to a court of equity and
restrained further proceedings and va-
cated the proceedings already taken?
The cases are numerous where courts
of equity have interfered to prevent the
consummation of a wrong, upon the
motion of a party who was instrumental
in its inception.” Aff’d, 103 U. S., 49,
The issue of stock in that case was held
to be absolutely void by statute.
3The case of Clarke v, Lincoln Lum-
ber Co., 49 Wis., 655 (1884), holds that a

participating subscriber cannot with-
draw and recover back sums already
paid. See, also, Goff v. Hawkeye, etc.,
Co., 62 Iowa, 691 (1883). Knowlton v.
Congress & Empire Spring Co., 57 N. Y.,
518, 587 (1874), holds the same, the court
saying: ‘‘Such parties are left in the
position they have placed themselves.”
The latter case was decided otherwise in
the federal courts (14 Blatch., 364, and
103 U. S., 49), it being there held thata
recovery might be had where others
are repaid. A person to whom stock is
issued for cash at a discount may sue
to have his subscription canceled. Re
Goedone Co., 60 L. T. Rep., 888 (1889).
Mandamus will not issue to compel
the issue of stock at a discount, in per-
formdnce of a resolution by the stock-
holders that such issue shall be made.
Equity will not aid the fraud. State v.
Timken, 28 N. J. Law, 87 (1886).
4Tobey v. Robinson, 99 Ill., 202 (1881).
The courts will not aid a. stockholder
as against directors’ breaches of trust,
where the business is illegal and. the

44
CH. 1] |

“ WATERED” SsTOOK.

[8 40.

stockholders against the party or parties participating in the issue,

inasmuch as his own title is tai
can he bring an action against
feree is by no means without ar

nted with the same fraud! Nor
the corporation.? But the trans-
emedy.. He may bring an action

for damages against those who, knowing the facts, induced him to

purchase, or those who made it
ticed, or who actually assisted in

stock fictitious and ‘‘watered.” Le
Warnev. Meyer, 38 Fed. Rep., 191 (1889).

1Parsons v. Hays, 14 Abb. N. C., 419
(Super. Ct., 1883); Nott v. Clews, 14
Abb. New Cases (N. Y.), 487; Ffooks v.
Southwestern R’y, 1 Sm. & G., 142
(1853); Re British, etc., Co., L. R., 17 Ch.
D., 467 (1881); Flagler Co, v. Flagler,
19 Fed. Rep., 468 (1884, Circ, Ct. Mass.);
S. C., 14 Abb. New Cases (N. Y.), 435;
In re Syracuse, etc., R. R. Co., 91 N.
Y., 1 (1883); Kent v. Quicksilver, etc.,
Co., 78 N. Y., 159, 188 (1879). See, also,
Langdon v. Fogg, 18 Fed. Rep., 5 (1883).
In the late case of Foster v. Seymour,
23 Fed. Rep., 65 (1885, U. 8. Cire. Ct.
Wallace, J.), an issue of stock for prop-
erty at an overvaluation is distinctly
held to be no fraud upon the corpora-
tion, nor upon the stockholders, all of
whom participated. ‘A purchaser of
the stock would not be injured by the
transaction unless he paid more for it
than it was worth; and every purchaser
would stand upon the particular cir-
cumstances of his purchase.” <A suit
against the guilty parties, who were

the directors, to compel them to account,

for a fraudulent disposition of corporate
property, will notlie. The fraud is not
corporate; it is personal. See, also, § 783.

2In Re Gold Mo., L. R., 11 Ch. D., 701
(1879), the court said: ‘“‘It was not a
wrong done. by the company or to the
company.” In Re Ambrose Lake T. &
C. Min. Go., L. R., 14 Ch. D., 390, 897
(1880), the court says: “There would
be no liability on the part of the com-
pany, as such.”

3'The leading case on this principle of
law is Cross v. Sackett, 6 Abb. Pr. R.,
247 (1858), argued by eminent counsel

possible for the fraud to be prac-
perpetrating tle fraud upon him.’

and decided by learned judges. A bona
fide purchaser, in open market, from
an innocent holder, of stock issued as
paid up for property taken at an over-
valuation, sued a director, being also
an original stockholder, for damages,
The court in its decision said: ‘‘ When a
party projects and publicly promulgates
the scheme of a joint-stock company;
when he causes the usual books to be
opened, and allows or causes the in-
scription of a person as an owner of an
interest to a definite amount and value
therein, which is false within his own
knowledge; when he embodies such
false statements in a certificate of this
right directly issued and of the same
effect as if signed by himself; when he
accompanies that certificate by a writ-
ten power authorizing a transfer at
large by the party to whom he has
given the certificate; when that repre-
sentation induces an innocent person to
advance his money,—the defendant’s
own individual act has created the priv-
ity of contract, and he must
be held responsible to any one who has
been deceived.”

The plaintiff must prove that a rep-
resentation was niade that the stock
was paid up, and that he relied thereon,
and that the representation was false
and fraudulent. McAleer v. McMur-
ray, 58 Penn. St., 126 (1868); Priest v.
White, 18. W. Rep., 361 (Mo., 1886).

The court, in Jn re Ambrose Lake
Tin & Cop. Min. Co., L, R., 14 Ch. D.,
890, 897 (1880), said that the transferee
has a remedy against the person who,
in any way, made the misrepresenta-
tionstohim. Re Gold Co., L. R., 11 Ch.
D., 701, pp. 718, 714, is to the same effect.
45 '
~

§§ 41, 42.] “WATERED” STOCK. [CH. 11,

The transferee has other remedies. If the transfer to him was
from one of the participants, he may rescind the transfer and re-
cover back the price paid by him;1 or, if the contract of purchase
is not yet completed, he may refuse to take the stock.?

§ 41. Stockholders dissenting at the time of the issue may com-
plain.— Stockholders, being such when an issue of paid-up stock is
improperly made, and not assenting to or acquiescing in it, may
bring suit in a court of equity to annul and set aside the whole
transaction. It has been held that the issue may be canceled.
The dissenting stockholders’ rights and remedies herein, in their
scope and details, are similar to the rights and remedies of:stock-
holders in other cases of wléra vires acts or fraud to the injury of
the corporation —a subject fully treated in the fourth part of this
work.®

§ 42. Corporate creditors as complainants where the issue is for
money.— According to well-established rules of law in America,
corporate creditors may object to certain transactions, which, as

In Barnes v. Brown, 80 N, Y., 527( 1880), 1 Biss. , 255, 259'(1858), the court in dicta

the plaintiff, being under contract to
receive paid-up stock from defendants,
received such, and afterwards discov-
ered that its par value had not been
paid in to the corporation. The court
held that he could recover damages
from the defendant for the fraud.

1 Fosdick v. Sturges, 1 Biss. , 255 (1858).

In this casé the certificate was brought’

into court to be disposed of as the court
should direct.

2Sturges v. Stetson, 1 Biss., 246, 253
(1858), the court holding that an action
for the price of such stock is in the nat-
ure of a billin equity for the specific
performance of a contract, and the de-
fendant may defeat it by avoiding the
contract altogether, although the cer-
tificates have been transferred to him.
To same effect, Coolidge v. Goddard, 77
Me., 579,

3In Fisk v., Chicago & Rock Isl. R. R.
Co., 53 Barb., 518 (1868), the court en-
joined any transfer of the stock, and
appointed a receiver to receive what
the corporation had realized from the
stock, and to use the funds in retiring
the stock and paying damages caused
thereby. In Sturges v. Stetson, 1 Biss.,

246, 254 (1858), and Fosdick v. Sturges,

said that the issue could be withdrawn,
leaving with the guilty parties so much
stock as the money paid by them would
equal the par value thereof. An issue
of $50,000 of stock and $65,000 of bonds
to a director in payment of property
worth $65,000 may be enjoined by a
stockholder, although a majority of the
stockholders favor the issue. Gamble
v. Queens, etc., Co., 5 N. Y. Supp., 124
(1889); 5. O., N. Y. Daily Reg., April
25, 1888. a

Stockholders may restrain the issue
of deferred ‘‘ bonds,” 7% e., irredeem-
able bonds entitling the holder to inter-
est after a certain dividend, is paid to
the stockholders, it being merely a
scheme to issue stock below par. Tay-
lor v. Phil., etc., R. R. Co., 7 Fed. Rep.,
886 (1881). Compare § 687, infra.

In New York, by statute, income
bonds with voting privileges may be
issued. Laches on the part of the dis-
senting stockholder will bar his rem-
edy. Taylor v. South, etc., R. R. Co.,
13 Fed. Rep., 152 (1882).

4 Campbell v. Morgan, 4 Bradw. (iIl.),
100 (1879); Gilman, Peoria & Spring.
R. R. Co, uv. Kelly, 77 Ill, 426 (1875).

5They cannot have the corporation
46
[8 42.

between the corporation and its stockholders and third persons,
may be valid and binding. This right of corporate creditors is an
essentially American doctrine. It is based on the: principle, first
enunciated by Judge Story, that the capital stock of the corpora-
ition is a trust fund, to be preserved for the benefit of corporate
creditors. That principle of law, when applied to a transaction
whereby stock is issued as paid up, when it is in fact not paid up,
enables corporate creditors to object to the act, and, in certain
cases, to undo what has been done, and, in other cases, to compel
payment of the actually unpaid part of the par value of the stock.
Where the issue of stock was for cash, under an agreement that only
part of the par value need be paid, corporate creditors may compel
the persons receiving the stock to pay the unpaid full par value.!

wound up therefor. In re Gold Co., ern Tel. Co. v. Gray, 14 N. E. Rep., 214
L. R., 11 Ch. D., 701; Morrison v, Globe (IIl., 1887). This series of cases estab-

CH. i11.] “WATERED” STOCK.

Panorama Co., 28 Fed. Rep., 817 (1886).
See, also, § 701, infra.
1The leading case on this point is
Sagory v. Dubois, 3 Sandf. Ch. Rep.,
466, 499 (1846), where the court said:
“The defendant being liable by force
of his subscription for the stock, the res-
olution of the directors not to
make any further calls upon the shares
was unavailing to discharge his liabil-
ity in respect of the association and its
creditors.” In Scoville v, Thayer, 105
U. §., 148 (1881), the court said that a
contract whereby stockholders are to
pay but part of the par value of their
stock to the corporation, ‘‘ though bind-
ing on the company, is a fraud in law
on its creditors, which they can set
aside; when their rights intervene and
their claims are to be satisfied, the
stockholders can be required to pay their
stock in full.” Upton v. Tribilcock, 91
U. S., 45 (1875), is the first of a series
of cases growing out of the failure
of the Great Western Insurance Com-
- pany of Illinois, The other cases are
Sanger v. Upton, 91 U. §., 56 (1875);
Webster v. Upton, 91 U. S., 65 (1875);
Chubb v. Upton, 95 U.S., 666 (1877);
Pullman v. Upton, 96 U. S., 828 (1877);
Hawley v. Upton, 102 U. 8., 814 (1880);
‘Upton v. Burnham, 8 Biss., 481 (1878);
S. C., 8 Biss., 520, and Upton v. Hans-
brough, 8 Biss., 417 (1878); Great West-

t

lished for the federal courts the rule
given above. See, also, Flinn v. Bag-
ley, 7 Fed. Rep., 785 (1881), giving full
review of the American and English
doctrine herein. In re Glen Iron Works,
17 Fed. Rep., 874 (1883); Union M. L.
Ins. Co. v. Frear Stone Mfg. Co., 97 IL,
587 (1881), also reviewing the doctrine;
Hickling ‘v. Wilson, 104 Il, 54 (1882);
Northrop v. Bushnell, 38 Conn., 498
(1871); Fisher v. Seligman, 7 Mo. App.,
383 (1879); Eyerman v. Krieckhaus, 7
Mo, App.; 455 (1879); Skrainka v. Allen,
% Mo. App., 484 (1879); Pickering v.
Templeton, 2 Mo. App., 424 (1876);
Christensen v, Eno, 21 Weekly Dig.,
202 (1885); Mann v. Cooke, 20 Conn.,
178 (1850); Myers v. Suley, 10 Natl.
Bank, Reg., 411.

Where the directors of an insurance
company issue to themselves all the
stock at one-third of its par value, and
upon an increase of the capital vote to
themselves, for services in selling the
increase, one share for every two shares
sold, they are liable tipon corporate in-
solvency for the unpaid par value of
the first issue, and the par value of the
stock received as compensation. Their
transferee with notice was held not
liable, Freeman’s Assignee v. Stine,
15 Phil., 37 (1881).

But where the corporation is insolv-
ent, and a creditor agrees to and does

47
§ 42.)

“WATERED” STOCK.

[ox. 1m.

But the amount collected must be to the extent and for the pur-
pose of paying corporate creditors’ claims only.! A resolution dis-
charging stockholders from all liability on stock after thirty per
cent. of the par value has been paid, and then suffering a forfeiture
of the stock, is void so far as corporate creditors are concerned.’

accept in payment of his claim unissued
stock at the rate of twenty cents on
the dollar, such creditor and stock-
holder cannot afterwards be made lia-
ble for the other eighty cents on the dol-
lar; he cannot be held liable even by
a corporate creditor who became such
after such issue of stock. Clark v.
Bever, 31 Fed. Rep., 670 (Iowa, 1887).
See, also, note at end of case. Not even
the Iowa statute renders such a holder
liable. Ibid. :

Stock, however, which is purchased
by the corporation, after its original is-
sue, may be sold by the corporation at a
discount. The corporation may then sell
the same as an individual stockholder.
Otter v. Brevoort, ete., Co., 50 Barb., 247
(1867) ; Ramwell’s Case, 50 L. J. (Ch.), 827
(1881), where the stock came to the cor-
poration by forfeiture. In many cases
stock is issued to a patentee for his pat-
ent, and he then donates and turns back
to the corporation a part of this stock
to be sold at a reduced price for the
benefit of the corporate treasury. This
transaction is legal; and it is not at all
necessary that the stock so donated be
placed in the names of trustees for the
benefit of the corporation. It may be
transferred to the corporation direct.
In Stribling v. Bank of the Valley, 5
Rand. (Va.), 182, where the bank took a
note for its own stock at a price in ex-
cess of the market value of the stock,
the court held the note to be usurious,

A distribution gratis of stock among
the stockholders has been held to be an
unauthorized reduction of the capital
stock, and it will be ordered to be re-
turned, Holmes v. Newcastle, etc., Co.,
45 L. J. (Ch.), 883 (1875),

But'in New York it is held that un-
issued shares of stock may be issued
gratuitously-to stockholders; also bonds

of the company; and they are not liable
for the par value or any part thereof to
the corporation or corporate creditors,
unless they agree’to pay therefor or the
statute requires payment. A subscrip-
tion is otherwise, since it is a contract.
Even though the stockholder has sold ,
such stock and bonds, he is not liable to
corporate creditors for the amount re-
ceived from the sale. He has received
nothing from the corporation except a
promise to pay. (Skrainka v. Allen, 7
Mo., 484;8.C., 76 id., 384, not followed.)
Christensen v. Eno, 106 N. Y., 97 (1887).

It is a question for the jury whether
fraud exists in sale cf stock, represented
to be paid up, when part of the pay-
ments had been by dividends from the
corporation, ‘Kruger v. Andrews, 385
N. W.'Rep., 245 (Mich., 1887).

‘But where the corporation has an ac-
cumulated profit, and that profit is by
agreement with the stockholders ap-
plied to unpaid subscriptions, such stock
is then paid up. Kenton, etc., Co. v.
McAlpin, 5 Fed. Rep., 787 (1880).

But where the capital stock is re-
duced, and subscribers cancel unpaid
subscriptions and take paid-up stock to
the extent of their payments on the old
stock, old corporate creditors may hold
them liable on the former. In re State
Ins. Co,, 14 Fed. Rep., 28 (1882).

As affecting corporate creditors here-
in, the statute of limitations does not
commence to run until judgment is’
recovered by the corporate creditors
against the corporation. Christensen
v, Quintard, 86 Hun, 884 (1885),

For other cases on the right-of corpo-
rate creditors to sue, see § 735, infra.

1§coville v. Thayer, 105 U. 8., 143,
156 (1881).

2Slee v. Bloom, 19 Johns, Rep., 456
(1822).

48
CH. 11. ] “ WATERED ”

STOCK.

. ES 44,
In New York this liability to corporate creditors is embodied in
the statutes.' In order to enforce this liability it is not necessary
to prove that fraud entered into the transaction, where the issue
was for cash, since there is no possibility of mistaken judgment in
the value of the thing received in payment.2 Where the capital
stock of the corporation is increased, the increase is not a trust
fund for the benefit of corporate creditors who were such before
the increase was made.’ It bas been held that the custom of the
country will exempt stockholders from liability on stock issued as
paid up when it was not paid up. Such a decision, however, is in-
consistent with the great weight of authority, and must be consid-
ered poor law.!

§ 44. Corporate creditors as complainants where the issue is for
property or construction work.— The rights of corporate creditors
are not clear and certain where paid-up stock bas been issued in
consideration of property taken at an overvaluation, In order to
reach the person receiving paid-up stock for property the corporate
creditor must prove three things. He must prove that the prop-
erty was overvalued, and un reasonably overvalued, since, if the esti-
mate was a fair one when made, subsequent events cannot impeach
it, even for the benefit of corporate creditors.®

The corporate creditor must also prove that the overvaluation
was intentional and fraudulent. Until that is done the courts re-
fuse to interfere with or set aside the discretion which has been
exercised by the corporate authorities in valuing the property re-
ceived.® In the third place the corporate creditor must prove that

6In Phelan v. Hazard, 8 Dill, 45
(1878), Judge Dillon thoroughly reviews

11 R. &, ch. 18, title 8, § 5; N. Y.
Session Laws,-1850, ch. 140, § 10; id.,

1854, ch. 282, § 16.

2¥Flinn vw. Bagley, 7 Fed. Rep., 785
(1881).

3 Coit v-North Car. Gold Amal. Co.,
14 Fed. Rep., 12 (1882); aff'd, 119U. S.,
343 (1886).

4Re South Mountain Consol. Min,
Co., 7 Sawyer, 30 (1881). In this case it
is stated that corporate creditors were
protécted ‘‘ by the personal liability of
each shareholder for his pro rata share
of the indebtedness of the corporation.”
See comments on this case, supra, § 23.
The English rule is now the same as
the American. See § 28, supra.

5 Coit v. North Car. Gold Amal. Co.,
14 Fed. Rep., 12 (1882); aff'd, 119 U.S.,
348 (1886). See, also, § 34.

(4) 49

. the authorities, and says: ‘‘The con-
tract is valid and binding upon the cor-

poration and the original shareholders
unless it is rescinded or set aside for
fraud; and . + while the contract
stands unimpeached, the courts, ever
where the rights of creditors are in-
volved, will treat that as a payment
which the parties have agreed should
be payment.” See, also, Braut v. Ehlen,
59 Md.,1 (1882), fully explaining the
meaning of the term trust fund as
applied herein. Crawford v. Rohrer,
59 Md., 599 (1882).

The corporate creditor’s bill may be
by one, but must be in behalf of all.
Cleveland, etc., Co. v. Texas, etc., R’y
Co., 27 Fed. Rep., 250 (1886). Corporate
§§ 45, 46.] , “WATERED” STOCK. [cH. m1.
the person so receiving the stock has made a profit therefrom. The
transaction, being a fraudulent one, is rectified by the corporation
returning the property, and the stockholder returning the stock or
the real market or actual value thereof. The better rule is that he
cannot be made liable for the par value of the stock less the real
value of the property.’

In England, also, many cases sustain the rule that, where fraud
enters into an issue of stock for property, the party receiving the
stock cannot be held liable for the par value thereof. The trans-
action, like other fraudulent agreements, may be set aside, and the
parties restored to their original positions; but it must be rescinded
in toto or adopted in toto.”

A corporate creditor who knew that the capital stock had been
paid for by land at an overvaluation cannot afterwards hold the
stockholders liable on their stock.’

§ 45. Who is liable, and the character of the liability — Liability
of the corporation.— The corporation itself, it has been intimated,
is not liable to any person by reason of the issue of its stock as
full-paid stock, when, as a matter of fact, it has not been fully
paid! It is very certain that the stockholder has no remedy herein
against the corporation, since his remedy is against the corporate
officers, as in other cases of breach of trust by them. As regards
corporate creditors, they cannot complain provided the corporation
remain solvent and able to pay its debts. If, on the other hand, it
becomes insolvent, it would be no object to them to bring suit
against the corporation.

§ 46. Liability of the persons receiving the stock from the cor-
poration.— These are the ones against whom suit is generally
brought. Their liability under the various circumstances of the
particular issue of stock has been explained elsewhere. Where the
issue was for cash, they are liable,.in America, to corporate creditors
for the unpaid par value of the ‘stock.’ In England also they now
are 50 liable. Where the issue was for property taken at an over-
valuation, the rules in America and England are the same. The
pany as such.” In Re Gold Co, L. B.,

11 Ch. D., 701 (1879), where the pro-
ceeding was to compel a winding up of

creditor’s remedy herein is not by an
action at law for fraud and deceit.
Priest v. White, 1S. W. Rep., 361 (Mo.,

1886). the company on account of an improper
‘See §§ 47, 48, issue of paid-up stock, the court re-
2See § 35. fused to support the proceeding, and

3 Bk. of Fort Madison v, Alden, 129
U. S., 878 (1889).

4In the case of In re Ambrose L, T.
& Cop. Min. Co, L. R., 14 Ch. D., 890,
897 (1880), the court says: '‘ There would
be no liability on the part of the com-

said, pp. 713, 714, “it was not a wrong
done by the company or to the com-
pany.” See, also, Lewis v. Meier, 14
Fed. Rep., $11 (1882), Cf. § 157, infra.
5 See § 42,
6 See § 48.

50
OH. II.) “WATERED” STOCK.

[§ 47.

transaction stands, and no liability is incurred unless an intentional
overvaluation is proved. In that case a dissenting stockholder,
being such at the time of the issue, may have the transaction set
aside, and the person receiving the stock compelled to return it or
pay over its actual or market value, less the value of property given
for it? A corporate creditor in America may likewise bring an
action for that purpose upon the insolvency of the corporation.’
The person receiving stock at a discount is liable also to a bona fide
transferee of that stock. A representation of the corporate agents
to the person receiving the stock, that full payment will not be re-
quired, is immaterial, and constitutes no defense.

§ 47. Many attempts have been made, in cases where stock was
issued for property taken at an overvaluation, to hold the party
receiving such stock liable for its full par value, less the actual value
of the property received from him. These attempts have not been
successful. As already seen, the transaction is upheld as legal,
valid, and binding on all parties and persons, unless there is an
overvaluation, and that overvaluation is shown to have been fraud-
ulent. When this’is proved, then the contract is to be treated like
other fraudulent contracts. It is to be adopted in toto, or rescinded

in toto and set aside.®

1See § 84 ef seq. For the remedy in
that case, see § 44,

2 See § 41.

3 See § 44,

4See § 40, and Fisher v. Seligman, 7
Mo. App., 383 (1879).

5Upton v. Tribilcock, 91 U. 8., 45
(1875); Ogilvie v. Knox Ins. Co., 22
How., 380 (1859).

6In Anderson’s Case, L. R., 7 Ch. D.,
45, stock was issued to a promoter for
property taken at an overvaluation.
This action was to render him liable for
the par value of the stock, less the real
value of the property. The court said,
pp. 94, 95, 104: “I am not going to
alter men’s contracts unless the pro-
visions of an act of parliament compel
metodoso. . You cannot alter
the contract tosuch an extent as to say,
though you have bargained for paid-up
shares, we will change that into a bar-

gain to take shares not paid up, and

put you on the list of contributories on
that ground. . . . If youset aside
this allotment of shares, you must set

Both parties are to be restored as nearly as

it aside altogether, and then you can-
not make them a contributory; and if
you do not set it aside altogether you
moust adopt it, and the utmost you can
do is, as, I said before, that you can
take away any profit from the person
who has improperly made it.” In Cur-
rie’s Case, 3 De G., J. & S., 367 (1868),
the court said that the transaction
‘* was either valid or invalid. If valid,
it is clear that neither he [the person.
receiving the stock] nor his alienees can
be called upon to contribute in respect
of those shares. If invalid, I cannot
see my way to hold that either a court
of law or a court of equity could do
more than treat the purchase as void,
and undo the transaction altogether.
It could not, as I apprehend, be com-
petent either to a court of law or to a
court of equity to alter the terms of
the purchase, or treat as shares not paid
up shares which were given as paid-up
shares in part consideration of. the pur-
chase. Fraud—assuming there was
fraud — would of course warrant the

51
§ 47]

‘““ WATERED” STOCK.

[CH. 11.

possible to their original positions. The property or its value is to

be returned to the person receiv

court in treating the purchase as void,
or in undoing it; but it could not, I
conceive, authorize any court to sub-
stitute other terms.” See, also, Bar-
nett’s Case, L. R., 18 Eq., 507 (1874),
where the issue had been canceled by
the corporation. In Van Cott v. Van
Brunt, 82 N. Y., 585 (1880), a case very
similar in its facts to those of the pre-
ceding case, the court said: “The con-
clusion of law was erroneous that the
echeme was fraudulent as against the
company and against the creditors, and
that the defendants were only entitled
to credit for the actual outlay, paid or
incurred, and were liable for the amount
unpaid on the stock. The result must
be that the defendant was not liable to
pay the par value of the stock received
by him under the contract for building
and equipping a portion of the road.”
Page 542. This case has been severely
criticised as being contrary to estab-
lished principles of law. It would
seem, On the contrary, that it not only
is in accordance with general principles
of law governing the rescission of con-
tracts, but that it-is in strict accordance
with the authorities and cases on the
subject of paid-up stock. See, also,
Continental Telegraph Co. v. Nelson, 18
Weekly Dig., 48 (1883); S. C., 49 N. Y.
Super. Ct., 197; Crawford v. Rohrer,
59 Md., 599 (1882); Brant v. Ehlen, 59
Md., 1 (1882); Morrison v. Globe Pano-
rama Co., 28 Fed. Rep., 817 (1886).
Judge Dillon, in Phelan v. Hazard,’ 5
Dill, 45, reviewed the authorities and
sustained the principles enunciated
herein. Before any recovery can be
had in this class of cases the transac-
tion must be set aside. Scoville v,
Thayer, 105 U. 8, 148, 156 (1881):
Wood’s Claim, 9 W. R., 866 (1861). It
has been held that the person receiving
the stock becomes liable for profits
made thereby. Four Mile V. R. R. Co.
v. Bailey, 18 O. St., 208 (1868),

ing the stock, and he must return

In Coffin v. Ransdell, 1 Corp. & L. J.,
326 (Ind., 1887), the court sustained the
rule given in the text, and said: ‘‘Sup-
pose it to be true that, in consummating
the arrangement, the property of Un-
thank & Coffin was turned into the cor-
poration at an overvaluation, and that
the defendant and the other corporations
participated in the alleged wrong. The
transaction was the result of an agree-
ment which the parties had:the right, |
as between themselves, to make. Shall
he be capriciously punished by being
made liable ex contractu upon a con-
tract which he never made? If the
defendant has participated in a fraud
whereby creditors of the corporation
who exercised ordinary business sagac-
ity had suffered damages, whatever re-
dress such creditors may now obtain
while their representative retains the
defendant’s property must be sought by
an action ex delicto.”

A few cases seem to be in conflict
with the above authorities, Thus, in
Wetherbee v. Baker, 35 N. J. Eq., 501
(1882), the defendant neither owned nor
conveyed to the corporation the prop-
erty which he alleged constituted pay-
ment. In Jackson v. Traer, 64 Iowa,
469 (1884), overruling S. C., 16 Northw.
Rep., 120 (1884), the stock was not issued
to the construction company for the
purpose of constructing the corporate
works, but was issued after the con-
struction was finished, and a cash debt
was due them, which was paid by an
issue of the stock to pay that debt al-
ready due. Savage v. Ball, 17 N. J.
Hq., 142 (1864), held that the validity of
an election is not affected by the ques-
tion whether the stock voted was issued
for value or not. In Chisholm Bros. v.
Forney, 85 Iowa, 140 (1884), where full-
paid stock was issued for a patent-
right, in good faith, but the patent-
right subsequently turned out to be
worthless, the stockholders were held

62
OH. m1]

“WATERED” STOCK.

(§ 48.

the stock or its real value. Its real value is ascertained, not by its
par value, but by its selling market value. In Iowa and Missouri

a different rule is favored.!

Frequently actions herein are against ‘corporate officers who
directly or indirectly received the stock. This class of cases is con-

sidered in the next section.

§ 48. Liability of the officers of the corporation.— There is great
difficulty in defining clearly and accurately the liability of the

corporate officers herein: This

is because the officers may have

committed an ultra vires or fraudulent act; or may have partici-

liable to corporate creditors as though
no payment had been made. This case
does not coincide with the authorities,
although it seems to accord with the
tendency of the Iowa, decisions.
In regard to this case it has been well
said by Mr. H. G. Stone: ‘‘ Courts do

not have good facilities for estimating -

the value of property which may be
overvalued in good faith at reasonable

prices to pay for stock, and hence have -

not tried to make a new bargain for the
parties. But where parties try to pay
for stock, not by reasonably overvalued
property, but by that which has little
value or no value whatever, there would
certainly be a distinction in good,sense,
and, unless [ am mistaken, there would
be in the law; and the supreme court of
Iowa probably meant this distinction
when it held that stockholders who at-
tempted to pay for their stock by that
which was worthless could not return
the stock but’ must pay for it in cash.”

In Osgood v. King, 42 Iowa, 478 (1876),
where stock was issued for land grossly
overvalued, the court held the vendor
liable for the par value of the stock, less
the actual value of the land. The per-
son receiving the stock was a director
at the time. In Missouri a contractor
- who was ‘paid in bonds and stock was
held liable to corporate creditors for the
par value of the stock over and above
the market price of all the bonds and
stock so given, where such value was
greater than a reasonable price for the
contract work. The court said “that
where an agreement is entered into be-

tween a contractor and a corporation,
whereby the former is to perform work
‘for, or furnish material to, the latter,
and to take unpaid stock in part or in full,
payment, thatsuch contractor, whether
for labor or material, can only charge
therefor the reasonable market value
for such labor or material thus given
in exchange; and that all agreements by '
the corporation to pay more than such
reasonable compensation will be disre-
garded and held for naught by the .
courts, where the rights of creditors in-
tervene; and this is the caseeven though |
no fraud be proven.” Shickle v. Watts,
7S. W. Rep., 276 (Mo., 1888).
Where a railroad worth $112,000 is
‘sold to a new corporation for $1,120,000
of bonds and all its capital stock, the
transaction is fraudulent. The bond-
holders may obtain judgment against
the company on their bonds and then
compel the stockholders to pay the full
par value of their stock. Preston v. Cin-
cinnati, etc., R. R. Co., 36 Fed. Rep., 54
(1888). ©
Where an insolvent partnership trans-
fers its assets to a newly-created corpo-
ration in payment for its shares of stock,
and the corporation assumes all the
debts of the partnership, the payment
for the stock is fraudulent per se. A
corporate creditor may hold the stock-
holders liable on the subscription as
though no payment had been attempted.
Sayler, Assignee, v. Simpson, 4 Ry. &
Corp. L. J., 195 (O., 1883),
1d,

: 53
§ 48.] “WATERED” STOOK. [oH. U1,
pated in the profits as promoters; or may have received a gift
of part of the stock from the parties to whom they issued it.

There are few cases holding a director liable for loss to the corpora-
tion where an issue of its stock for money or property less in value
than the par value of the stock was made. Such an action would
be similar in its character to the numerous cases against directors
for their frauds and ultra vires acts.1

In a suit of this character, however, against an officer of the
corporation, he is liable not for the par value of the stock, less the
value of the property or labor received therefor, but at the most
he can be held liable only for the market value of the stock, less
the value of the labor or property received by the corporation.’

Where, however, the directors receive a part of the stock them-
selves, either by its issue directly to themselves, or by being secret
partners with those to whom it is issued, or by a gift to them from
‘the parties ‘to whom it is issued, then the directors may be com-
pelled to account to the corporation for the stock actually received
by themselves. In no case, however, can the directors, as such, be
made liable on the watered stock issued to third persons and still
retained by them. The directors are liable only to the extent that
they themselves received stock. This liability arises from the
‘principle of law that a director must account to his corporation
for any secret gift that may be made to him by persons contract:
ing with the corporation; and must account also for profits made
by his secret participation in contracts between the corporation
and third persons.’ In such cases the director is liable to the cor-
poration or its creditors, not for the par value of the stock re-
ceived by him, but for the actual value of the stock, or for the
profit or price which he received therefor.‘

}

1See Part IV.

2 Continental Tel. Co. v. Nelson, 49 N.
Y. Super. Ct., 197 ( 1883), where the ques-
tion as to what was the market value
was submitted to the jury. See, also,
Nott v. Clews, 14 Abb. N.C. (N. Y.), 487,
overruling a demurrer. In this case,
however, the directors had received part
of the stock as a gift. See, also, Os-
good v. King, 42 Iowa, 478 (1876); but
see Flagler, etc., Co. v. Flagler, 19 Fed.
Rep., 468 (1884); Langdon v, Fogg, 18
Fed. Rep., 5 (1888); S. ©. in state court,
14 Abb. N. C. (N. Y.), 485.

3See §§ 649, 650, and cases in notes
thereto.

‘In Carling’s Case, L. R., 1 Ch. D., 115

(1875), where the person receiving stock
for property taken at an overvaluation
gave part of it to a corporate director,
the court held that the corporation
could demand of the director either the
stock, or the profits realized by him, or
the profits thereby lost by the corpora-
tion, but could not compel him)to pay
the full par value of the stock. In De
Ruvigne’s Case, L. R., 5 Ch. D., 316
(1876), where shares of stock were is-
sued as paid up to a person for services
palpably overvalued, and he transferred
a part of the stock to a ditector, De
Ruvigne, the court said: “If the com-
pany attempt to make the appellant
[director] a contributory, and they al-

54
CH. 10.]

“WATERED” STOCK.

[$ 48.

There is still another class of cases, in which a director acts also
as a promoter of the company and receives stock for his services.
He then is liable to account to the porponaiion therefor, not only
as a director, but also as a promoter.

Another class of cases may exist where the directors waa stock
to themselves in payment for their services to the company.?

Whether the directors are liable herein to purchasers of stock or
to corporate creditors in an action for deceit is an open question.’

lege fraud in the original agreement by
which he was to take the shares, they
must either throw over the agreement
altogether, or they must take it alto-
gether; they cannot adopt it as to one
part and reject it as to the rest.” The
court said the director could be held
liable for breach of trust and be made
to pay to the corporation the selling
value of the shares; and since some of
the stock was sold at par, he was charge-
able with the par value of the stock so
received by him.

In Anderson’s Case, L. R., 7 Ch. D.,
75, 94, the court held that, if shares were
improperly issued to a director at a dis-
count, the contract might be set aside
and the consideration returned, or the
profits realized by him might be re-
covered. In Currie’s Case, 3 De Gex,
J. & &., 367 (1863), where shares were
taken both directly and indirectly by
the corporate officers for property and
services grossly overvalued, the court
held that the transaction might be un-
done altogether for fraud, but there
was no liability on their part to con-
tribute anything on the shares, The
only remedy is to set aside the transac-
tion and recover the profits thereof.
Langdon v. Fogg, 18 Fed. Rep., 5 (1883);
8. C., 14 Abb. N. C. (N. Y.), 485, hold-
‘ing that the directors are not liable to
the corporation for the par value of
stock issued to their, dummy for prop-
erty and.then transferred to themselves.
See,. also, § 650, infra, and cases in
notes.

In the case of Re Ambrose Lake T.
& CO. Minn. Co., L. R., 14 Ch. D., 390
(1830), it was held that where all the

e

stockholders acquiesced, and there were
no creditors’ rights involved, the cor-
poration cannot recover from its direct-
ors profits realized by them from shares
issued to them as paid up in considera-
tion of property taken at a gross over-
valuation. The corporation was held
to be in no position to complain. In
Van Cott v. Van Brunt, 82 N. Y., 535
(1880), where the facts were very much

‘the same as in the preceding case, the

55

court said: ‘‘ If the defendant [director

and president] had realized a sum be-

yond the amount actually expended,

there might have been, perhaps, some

ground for claiming that, the arrange- -
mentsvould inure to and for the bene-
fit of the company.” Page 541.

\See the important case of Chandler
v. Bacon, 30 Fed. Rep., 588 (1887): also,
§ 651, infra, and cases cited.

2 See § 657, infra.

3 See §$ 157, 158, 355.

In Bartholomew v. Bentley, 15 O.,
659 (1846), certain persons incorporated
a bank, incurred large debts, then sold
their stock to the bank and left the
creditors nothing. A creditor brought
an action on the case for fraud. The
court sustained the action, and said:
“Tf the defendants, with the design
to defraud the public generally, have
knowingly combined together and held
forth false and deceptive colors, and
done acts which were wrong, and have
thereby injured the plaintiff, they must
make him whole by refunding to the
full extent of that injury; and ‘they
cannot place between him and justice,
with any success, the'charter of the
German Bank of Wooster, whether it.
§§ 49, 50.] “WATERED” STOCK. [CH. IIL.

The officers of the corporation who participate in the issue of stock
as paid up, when it has not been fully paid, are liable to persons pur-
chasing such stock for damage thereby suffered.’ In Massachusetts,
by statute, corporate officers are made liable for corporate debts, if
they issue stock for property at an unfair valuation of the latter.’

§ 49. Liability of the persons purchasing the stock with notice.—
It seems to be gencrally assumed, as a matter of course, that per-
sons purchasing stock, with notice that it had not been paid up,
although in fact it had been issued as paid up, are liable on such
stock to the same extent that their transferrers were liable.®

§ 50. Liability of the bona fide transferees without notice —A
bona fide purchaser for value and without notice of stock issued by
a corporation as paid up cannot be held liable on such stock in any
way, either to the corporation, corporate creditors, or other persons,
even though the stock was not actually paid up as represented. Such
a purchaser has a right to rely on the representations of the corpora-
tion that the stock is paid up. Difficulty sometimes arises in deter-
mining what will constitute a sufficient representation that the stock
is paid up. A representation by the corporate agents that the full
par value will not be required is insufficient. The word “ non-
assessable,” stamped or printed or written on the face of the cer-
tificate, is not a sufficient representation that the stock is paid up,
so as to protect a bona fide purchaser thereof, where the certificate
also shows that only twenty per cent. has been paid thereon.’

be valid or void, forfeited or in esse. Creditors of a corporation cannot hold
' Neither a good nor a bad thing may be the directors liable for fraud, deceit,
falsely used for purposes of deception, etc., in forming a sham corporation,
and made a scapegoat for responsibil- when no misrepresentations can be
ity. Norisit materialthatthereshould traced tothem. Mere statements as to
have been an intention to defraud the the amount of capital stock are insuffi-
plaintiff in particular. If there was a cient. Brackett v. Griswold, 112 N. Y,,
general design to defraud all such as 454 (1889).
could be defrauded by taking their 1 Cross v. ‘Sackett, 6 Abb. Pr., 247
paper issues, .it is sufficient, and the (1858); Re Gold Co., 11Ch. D., 701 (1878).
plaintiff may maintain his suit, pro- See, also, § 48, supra.
vided he has taken the paper and suf- 2 Statutes of Mass., Acts of 1875, ch.
fers from the fraud. . . . The act 177, § 2
incorporating the president and direct- 8Upton wv. Tribilcock, 91 U. S., 45°
ors of the German Bank of Wooster, (1875). But they are not liable if any
admitting it to be in force, conferred no prior owner was bona fide and without
authority upon any person to hold out notice. Barrow's Case, L. R., 14 Ch. D.,
false colors to deceive the public, no 482 (1880),
authority to issue bills without the 4 Webster v, Upton, 91 U. S., 65
means of redeeming them; and those (1875); Upton. v. Tribilcock, 91 U. S., 45
who combined to use it for the pur- (1875).
poses of swindling acted for themselves 5 Webster v. Upton, 91 U. S., 64, 71
rather than as agents of the bank.” (1875); Sanger v. Upton, id., 56 (1875).
56
CH. 111. | “WATERED” STOCK.

‘[§ 50.

Where, however, a statement is made on the face of the certifi-
cate that it is paid- -up stock, the bona fide purchaser of the certifi-
cate need not inquire further, but may rely on that representation,
and is protected thereby against liability.

A purchaser of stock is entitled to rely on statements in the cor-
porate books that the stock is paid up.? A few cases go still fur-
ther, and hold that where a person in open market, in good faith
and without notice, purchases certificates, such stock is to be deemed
“paid up” in his hands, and he is protected as a bona jide pur-
chaser, even though there is nothing on the face of the certificates

stating that they are paid up.?
established rule.

_1 This principle of law was clearly laid
down, explained and sustained in the
recent case of Young v. Erie Iron Co,, 31
N. W. Rep., 814(Mich., 1887). In Water-
house v. Jamieson, L. R., 2 H. L. (Sc.),
29, where the stock was purchased in
open market, the court said: ‘‘ Here the
appellant is a bona fide holder of shares
upon which, no doubt, there was a false
statement made by the company, of
- which he had no knowledge, and as to
which he' was under no obligation to
inguire, and therefore he cannot be sub-
jected to liability by having imputed to
him a knowledge of the falsehood.” In
Brant v. Ehlen, 59 Md., 1 (1882), the
court said: ‘‘ Where shares are issued
by the company to the subscriber as
full-paid shares, and are sold by the
subscriber as such, there is no ground
on which a promise can be implied, on
the part of the purchaser without no-
tice, to be answerable either to the com-
pany or its creditors, should the repre-
sentations on the faith of which he
purchased prove to be false. He could

not be held liable on the ground of con-.

tract, because he never agreed to pur-
chase any other shares than full-paid
shares; and if it be said that the shares
were fraudulently issued, he could not
be held liable on the ground of fraud,
because he was in no sense a party to
the fraud.” In Steacy v. Little Rock &
Ft. Smith R. R. Co., 5 Dill., 348 (1879),
Judge Dillon examined, at considerable
length, the reasons of the rule protect-

57

This can now be laid down as the
It is based on sound public policy, favoring,

ing bona fide purchasers of stock issued
as paid up, and sustained the rule itself.
See, also, Burkinshaw v. Nichols, L. R.,
3 App. Cas., 1004 (1878). One case,
Myers v. Seeley, 10 Natl Bankr. Reg.,
411, lays down a different doctrine.
The court says: ‘‘ The assignee’of shares
can be in no better condition than the
assignor. . . The question is simply
whether the stock has been really paid
in full to the corporation. The assignee
may have paid for it to the assignors,
and may have relied on the representa-
tions of the latter, and of officers of the
company, that the shares bought were
fully paid, yet creditors are not bound
thereby; and if the stock was not fuily
paid, the holder is liable to creditors
for the amount remaining unpaid.”
This case must be considered poor law.

2 Erskine v. Loewenstein, 11 Mo. App.,
595 (1884).

3 Keystone Bridge Co. v. McCheney, 8
Mo. App.; 496 (1880); Foreman v. Bige-
low, 4 Cliff., 508 (1878), as explained in
8 Mo. App., 496; Johnson v. Sullivan, 15
Mo, App., 55 (1884), where the court says:
‘Tf any presumption of fact arises from
the face of astock certificate in custom-
ary form, as was the one in this case, —
it is. that the stock is fully ©
paid. up.” See, also, Erskine v. Loewen-
stein, 82 Mo., 301 (1884); Cleveland, etc.,
Co. v. Texas, etc., R’y Co., Bt Fed. Rep.,
250 (1886).

If a certificate of stock is silent on its
face as to whether it is full paid or not,
“WATERED” STOOK. - fou. mm,

§ 50.]
as it does, the transfer of personal property, and the guast-nego-
tiability of stock, and discountenancing secret liens and construct-
ive notice.

A purchaser in open market of stock represented to be paid up
by a statement to that effect on the certificate is presumed to
be a bona fide purchaser. Hence there has arisen the well-estab-
lished rule, both in America and England, that a dona fide pur-
chaser for value, and without notice, of stock issued as paid up, is
not liable for any part of the par value which may not have been

paid!

a bona fide purchaser is protected in
considering it full-paid stock. West
Nashville, etc., Co. v. Nashville Sav.
Bk, 6 S. W. Rep., 340 (Tenn., 1888).
Cf. Burkinshaw v, Nicolls, L. R., &
App. Cas. 1004, 1017 (1878). In Brant v.
Ehlen, 59 Md., 1 (1882), the court say:
“The purchaser is not bound to suspect
fraud when everything seems fair.

Any other doctrine would virtually de-
stroy the transferable nature: of such
shares, and paralyze the whole of the
dealings in the stock of the corpora-
tions.”

* 1In Re British Farmers’ Pure Linseed
Cake Co., L, R., 7 Ch. D., 533 (1878);
aff'd, L. R., 3 App. Cas., 1004 (1880), the
court held that, if the bona fide pur-
chaser were not protected, ‘‘no person
buying shares in the market, as paid-up
shares, would be safe, for he would get
nothing more than a certificate to show
they are paid up. Obviously
such a construction would destroy the
transferable nature of shares alto-
gether.” See, also, Foreman v. Bige-
low, 4 Cliff., 508 (1878); McCracken v.
McIntyre, 1 Duv. (Can.), 479; Stacey v.
Little Rock & Ft. S. R. R. Co., 5 Dill.,
348 (1878); Jackson v. Sligo, ete., Co., 1
Lea (Tenn.), 210; Brant v. Ehlen, 59
Md., 1 (1883); Waterhouse v. Jamieson,
L. R., 2H. L. (Sce.), 29. Cf. Crickmer’s
Case, L. R., 10 Ch. App., 614. Contra,
Myers v. Seeley, 10 Nat’l Bank. Reg.,
411. It is immaterial that the payment
in stock issued as paid up turns out to
have been valueless, The bona fide
purchaser is protected, and the corpora-

tion must allow registry by him. -Pro-
tection Life Ins. Co. v. Osgood, 93 IIL,
69 (1879). In the case of Wintringham
v. Rosenthal, 25 Hun, 580 (1881), the
court held that a bona fide purchaser
of stock, which be purchased supposing
it to be paid up, is not liable for thie un-
paid par value. The stock was issued
by a bank, evidently or a cash sub-
scription. This case practically overs
rules Mann v. Currie, 2 Barb., 294 (1848),
The general railroad act of New York
(Laws 1850, ch. 140, § 10) prescribes
that each stockholder shall be liable
‘to an amount equal to the amount
unpaid on the stock held by him.” * In
the case of Tasker v. Wallace, 6 Daly,
364, 374 (1876), the court held that under
this statute, ‘‘ as between a stockholder
and a creditor, it is wholly immaterial
whether he was a bona fide and inno-
cent purchaser of stock which the
vendor assured him had been paid.”
This remark was, it seems, a dictum,
and being by an inferior court is doubt-
fulas ap authority. The representation,
moreover, was not on the face of the
certificate, nor was it made by the cor-
poration. In the case of Hubbell v.
Meigs, 50 N. Y., 480, 489 (1872), where
the, purchaser of Wisconsin railroad
stock sued his vendor for damages for
deceit on the ground, among others,
that the stock had been issued ficti-
tiously as paid up, the court said: “It
is unnecessary to determine whether
the corporation was authorized by its
charter to sell its stock at less than par,
or whether, in so selling, its officers did

58
“TR BL.

Where a subscriber who has not yet taken out his certificate of
stock instructs the corporation to issue the certificates to a desig-
nated transferee, the latter has been held to be the original allottee
of that stock, and, if the stock was irregularly issued as paid up
stock, he cannot claim tobe a bona Jide transferee without notice.!

A contrary rule has been laid down in other cases, however, and
would seem to be more in accordance with justice.?

§ 51. Third method: Issue by stock dividends.— The third method
of issuing fictitiously paid up stock is by a wrongful use of the
power to issue stock dividends. It seems to be generally conceded
that if the capital stock and the actual property of the corpora-
tion is not permanently increased to the extent of the par value of
the stock distributed as a dividend, then that the issue of stock by
such dividend is irregular, and under certain circumstances fraudu-

CH, 111.] “WATERED” STOOK.

lent.?

In some of the states stock dividends are prohibited by constitu-

tional or statutory provisions.

not violate their duty. The plaintiff

was a bona. fide purchaser, and, being

such, acquired a valid title to the stock
transferred to him.”

1Rowland’s Case, 42 L. T., N. S., 785

~ (1880); Potter’s Appeal; Weekly Notes,

1878, p. 81; Re Vulcan Iron Works, Law

Times, 1885, p. 61.

.2 Young v. Erie Iron Co., 31 N. W.
Rep., 8i4 (Mich., 1887); Carling’s Case,
L, R., 1 Ch. D., 115 (1875). See, also,
§ 61, infra. ,

3In Williams v. Western Union Tel.
Co., 93 N. Y., 189 (1883), the court said
that a stock dividend ‘‘ could be declared’
by a corporation without violating its
letter, its spirit, or its purpose.
There is no public ‘policy which, in ‘all
cases, condemns such dividends.
“No harm is done to any person, provided
‘the dividend is not a mere inflation of
‘the stock of the company, with no cor-
responding values to answer to the stock
distributed. . . 4 So long as every
dollar of stock issued by a corporation is
-yepresented by a dollar of property, no
harm can result to individuals or the
public from distributing the stock to
‘the stockholders.” Howell v. Chicago &
Northw. R’y Co., 51 Barb., 378 (1868),
is to the same effect, In Bailey v. Rail-

road Co., 22 Wall., 604, the court said
that net earnings, however expended or
invested, “‘belong to the stockhelders,
and may be distributed as they may di-
rect, in dividends of stock or by a sale
of property.” See, also, § 537.

4Tll. Const., art. XI,§13. In Wiscon-
sin by statute. R. S. 1878, § 1758,
amended by ch. 93, Laws 1881. In Mas-
sachusetts railway corporations are by
statute prohibited from declaring astock
dividend except by authority of the gen-
eral court. Pub. Stat. of Mass., ch. 112,
§ 61. It has been held not a violation of
this statute for a railway company to dis-
tribute among its shareholders, without
the assent of the general court, shares
of its own stock which it had purchased

. -from the commonwealth, when it had

legislative authority for such purchase
and distribution. Commonwealth »v.
Boston & Albany R. R. Co., 142 Mass.,
146 (1886). See § 287.

A constitutional provision prohibiting. -

the issue of stock, ‘‘ except’ for money,
labor done, or money or property actu-
ally received,” has been held to prohibit
a stock dividend. Fitzpatrick v. Dis-
patch Pub. Co., 2 South. Rep., 727 (Ala.,
1887).

In one point of view stock dividends

59 :
§ Bla}

“WATERED” STOCK.

(CH. 111.

§ 51a. Issue of bonds at a discount.—It is usurious for a corpo-

are objectionable. They are issued to
represent the increased value of the cor-
porate property as it stands. In the
case of railroads, this increase of value
arises very largely from the increased
value of the eminent domain franchises
which the corporation is using. These

franchises belong to the people, and the

people are entitled to the increased
value of them. Such an increased value
could be readily secured to the people
by a reduction of railroad charges.
But by stock dividends, based on this in-
creased value of the franchise, the rail-
road is able, by increasing its stock, to
divide all profits and yet not declare
more than a six or eight per cent. divi-
dend. The smallness of the dividend
prevents a legislative reduction of rates.
If, however, no stock dividend were
allowed, and the increased earning ca-
pacity of the railroad gave large profits,
such profits would have to be employed
in improving the property or in making
extravagant dividends, which would
justify a reduction of railroad rates. It is
urged, in reply to this view, that about
three out of four railroad enterprises
are the cause of total loss to their pro-
jectors, and that the fourth should be
made to pay more largely, by reason of
the risk incurred; also that large capi-
tal and great ability in managing enter-
prises of such magnitude should be more
fully compensated.

Mr. Swan, in Investors’ Notes on
American Railroads (1886), p. 42, pre-
sents an ingenious argument on this
question when he says: ‘‘ The assertion
by a state of a right to fix rates and
limit dividends by ex post facto legisla-
tion, without regard to existing charters
and without compensation or indem-
nity, is, in fact, the barely disguised as-
sertion of a right to confiscate to a
greater or less extent the increment of
value legitimately accruing to a going
concern. In connection with a railroad
the increment of value cannot with any
semblance of propriety be described as

an ‘unearned’ increment. In a vast
number of instances an American rail-
road may be said to create the settle-
ment of population which is destined
to furnish passengers and to produce
freight. Reflex activities are of course
stimulated, and contribute in their turn
to the development of traffic; but in
many instances the railroad itself pri-
marily constitutes the determining con-
dition of settlement in a particular
place, and of the transportation of pas-
sengers and merchandise through a par-
ticular channel. Subject to the re-
straints of equitable regulation, the
tight of a constructing company to the
increasing benefit of the business which |
it builds up by its outlay and its skill is
no less real than that of the founder of
a purely commercial or professional
business to the increasing benefit of his
capital or ability.”

Alexander on Railway Practice (1887),
p. 87, says with some force: ‘‘It is.as-
serted that much of the stock of our
railroads is not legitimate, but is water.
Such an argument may apply against
any particular railroad that earns ex-
orbitant dividends, but against the sys-
tem as a whole it does not. For it
would be easy to show that for every
dollar of water in existing stocks, two
dollars of the money of railroad in-
vestors has been lost like water spilt
in the sand. Much of it was lost, doubt-
less, by bad judgment; but the fact
remains that our existing system of rail-
roads, as a whole, has cost fully as
much as it is capitalized at. Scarcely
one of them was originally built as it
stands to-day. The earlier ones have
been rebuilt ‘and re-equipped three or
four times, as experience pointed out
necessary improvements, Many of
them, too, were built before the busi-
ness really demanded them, and the loss
from this source has been enormous,
If the state would guaranty
the interest upon money legitimately in-
vested in railroad construction, invest-

o 8 8

60
 

CH. 11.}

ration to issue its bonds for cash at a discount.

ors would readily furnish all that might
be desired, and railroads could and
would be built without watered stock.
But the state very properly refuses to
assume any risk, and leaves it to be
borne entirely by the investor. The lat-
ter, then, having all the risk, naturally
demands to havealso all the chances of
profit if the road turns out a success.
He discounts the future, and takes

watered stock to represent what he

hopes will be his earnings, That is the
only way that communiti.s wanting
railroads can induce investors to supply
the funds. But I record my
conviction that tle practice of stock
watering should be prohibited, without
much hope of ever seeing it done, and
more on the ground that it is against
public policy to make it easy for men to
build railroads, or float any enterprises
with other people’s money, than from
the fear of railroads being enabled to
practice extortion by the possession of
watered stock,” :

1 Commissioners of Craven v. Atlantic,
etc., R. R. Co., 77.N. C., 289 (187%), where
a stockholder brought action to have
declared void railroad bonds so issued.
In the case of Schermerhorn v. Talman,
14N. Y., 98 (1856), the court came to the
same conclusion, and said that the sale
of the securities (certificates of deposit
in that case) is not a sale, but a loan,
and ‘‘that neither individuals nor cor-

porations can sell their mere promises.

to pay.” That which is called a sale is
nothing but a loan. Pageil7. “If it
appears that, at the end of all the pay-
ments, the lender will have received
more than his principal, with lawful
interest, the contract
Page 121.' See, also, Neuse, etc., Co.
v. Commissioners of Newburgh, 7
Jones’ L. R. (N.C.), 275 (1859).

In the case of Junction Railroad ».
Bank of Ashland, 12 Wall., 226 (1870), the
court held a sale of bonds below par to
be valid because the statute expressly:
authorized it, In White Water Valley

“WATERED? sTOOK.

is usurious,”.

)

This rule, how-

Co. v. Vallette, 21 How., 414 (1862), the
court held a sale of bonds below par to
be valid because the legislature had ex-
pressly approved the particular transac-
tion. In Sherlock v. Winnetka, 68 Il,
580, the court held a sale of municipal
bonds below a fixed price to be unlaw-
ful. In Sturges v. Stetson, 1 Biss., 246
(1858), McLean, J., in a railroad case,

says: ‘‘From the authority given to.

the directors to sell notes, bonds, scrip
and certificates for the payment of
money or property which the company
had previously received as donations,

or in payment of the subscriptions to |

the capital stock, above or below par,
an argument is drawn that stock may
be disposed of to subscribers for less
than $50 a share, It appears to me the
provision authorizes an inference in
conflict with the one drawn. If bonds
or other instruments for the payment
of money be transferred at less than
their face, with legal interest on the
entire sum, in payment for the money
loaned, it would be usurious, and this
was the reason for the above provision.
Without it the sale of the bonds, etc.,
would have been illegal.” |
Bonds may be issued at a discount
where the statute allows the directors
to borrow on such terms as they see
fit. Traders’ Nat'l B’k v. Lawrence,

etc., Co., 3S. E. Rep.; 363 (N. C., 1887),

An agreement of a corporation to
issue bonds to a subscriber as a
‘‘ponus” is void, The subscription
may be enforced. Morrow v. Nash-
ville, etc., Co,, 10 8. W. Rep., 495
(Tenn., 1889). Cf. Christensen v, Eno,
106 N. Y., 97 (1887). See, also, Gamble
v Queens, etc., Co, 5 N. Y. Supp., 124

[$ Bla.

\

(1889), where an issue of stock and.

bonds at a discount to a director was
enjoined by a stockholder. The excel-
lent brief of Mr. Hornblower in that
case brings out clearly the principle of
law that, under the New York statute
prohibiting corporations from setting
up the defense of usury, a corporation
61

4
’

| § Bla.)

“WATERED” STOCK.

[cH. 11,

ever, is evaded by issuing the bonds for construction work.’ It is
illegal to issue municipal bonds at a discount.’ The bonds, how-
ever, of both municipal and railroad corporations may be made
negotiable, and usually are so worded. When they are negotiable,
and when they have passed into bona jide hands, it is no defense
to their enforcement to allege that they were issued at a price

below ‘par.

In England debentures may be issued at a discount in cash.*

in that state cannot, on the ground of
usury, repudiate the payment of its
bonds which have been issued for cash
at less than their par value. See Curtis
uv. Leavitt, 15 N. Y., 1, 66 (1857); Cen-
tral Gold, etc., Co. v. Platt, 3 Daly, 263;
Graham v. Atlanta, etc., Co, N. Y.
Daily Reg., Oct. 14, 1884.

1An issue of bonds for construction
work below par was upheld in White
Water, etc., Co. v. Vallette, 21 How.,
414 (1858).

2See § 98, infra.

3Ellsworth v. St. Louis, etc, R. R.
Co., 98 N. Y., 553 (1885), where the
issue bélow par was even prohibited by
statute; Ha parte Chorley, L. R., 11

6

Eq., 157 (1870); Phil., etc., R. R. Co. v,
Lewis, 33 Pa. St., 83 (1859)— two cases
in which the corporation received noth-
ing for the bonds; Woods v. Lawrence
County, 1 Black, 386 (1861); Mercer
County v. Hacket, 1 Wall., 83 (1863);
Whitney v. Peay, 24 Ark., 22 (1862), a
case of pledge of bonds.

4Campbell’s Case, L. R., 4 Ch. D., 470
(1876), where the issue was to a director;
In re Regents’, etc., Co., id., 3 Ch. D.,
48 (1876), where pledgees of debent-
ures shared equally with purchasers,
on winding up, to extent of pledge;
In re Anglo, etc., Co., L. R., 20 Eq., 839
(1875); In re Inns, etc, Co., L. RB, 6
Eq., 82 (1868),
2
CHAPTER IV.

METHOD OF SUBSCRIBING —PARTIES TO SUBSCRIPTIONS— ACTION
TO ENFORCE SUBSCRIPTIONS.

A. METHODS OF SUBSCRIBING. § 64. Commissioners, directors, part-
‘ dis . ners, etc., as subscribers.
§§ 52-54. Generally no formalities nec 65. Married women as subscribers,
y- 66. Infant as subscriber,

§ 55. Proof of subscription, 67
56. The English rule. ”
5%. Subscriptions taken by commis-
sioners. ’

58. Subscriptions in excess of the
capital stock, /

59. Subscriptions delivered in es-

Agent as subscriber.

68. Subscriptions taken by an un-
authorized agent of corpora-
tion.

C, AN ACTION LIES TO COLLECT SUB-

oe SCRIPTIONS.

80, Liability of, corporation for re- | § 69, A subscription implies a promise
fusal to issue a certificate of to pay, ‘which is enforceable
stock. 5 without proof of any particular

61. Substitution of subscribers before OaeaGroR. a
the incorporation. 70. Such is the rule for subscriptions

62. Right to recover money advanced before incorporation as well
on shares upon a failure to or- as those after.
ganize the company. ° 71. In New England an express

B, WHO IS COMPETENT TO SUBSCRIBE Dronting Gr emptor Statute 35°
FOR STOCK. necessary to support an action

to collect subscriptions.

 

§ 63. Corporations generally not,
A. METHODS OF SUBSCRIBING.

§ 52. Generally no formalities necessary The contract of sub-
scription for shares of stock in an incorporated company may be
entered into in various ways. Whenever an intent to become a
subscriber is manifested, the courts incline, without particular ref-
erence to formality, to hold that the contract of subscription sub-
sists. It is, as in the'case of other contracts, very much a question
of intent. Formal rules are for the most part disregarded. And
in general a contract of subscription may be made in any way in
which other contracts may be made.) Any agreement by which a
person shows an intention to become a stockholder is sufficient to
bind both him and the corporation.2, When one accepts or assumes
the position and duties, and claims the rights and privileges and

1Blunt v. Walker, 11 Wis., 884, 319 Gill v. Kentucky, etc., Co., 7 Bush,
(1860). 635 (1870); Oler v. Baltimore, etc., R. R.

2Fry v, Lexington, etc., R, R. Co.,2 Co., 41 Md., 583 (1874); Schaeffer v,
Mete. (Ky.), 314 (1859); Wellersburg, Missouri, etc., Co., 46 Mo., 248 (1870).
etc,, Co, vu. Young, 12 Md., 476 (1858) A
§ 52.] sUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT. [CH. Iv.

emoluments, of a stockholder, and the corporation accepts or ac-
quiesces therein, such person is estopped to deny that he is a sub-
scriber, even though there may have been something irregular or
defective in the form or manner of his subscription, or there may
have been no formal subscription at all.1

There have been various dicta to the effect that a subscription
cannot be entered into by parol,” but the later and better opinion ‘
is that such a subscription is valid and binding.

1Sanger v. Upton, 91 U. §., 56 (1875);
Upton v. Tribilcock, 91 id., 45 (1875);
Wheeler v. Millar, 90 N. Y., 853 (1882);
Hamilton, etc., Co. v. Rice, 7 Barb., 159
(1849); Dorris v. French, 4 Hun, 292
(1875); Boston, etc., R. R. Co. v. Wel-
lington, 118 Mass., 79 (1878); Ha parte
Besley, 2 Mac. & G., 176 (1850); Clark
v. Farrington, 11 Wis., 306 (1860); Jew-
ell v, Rock River, etc., Co., 101 IL, 57
(1881); Haynes v. Brown, 86 N. H., 545
(1858); Chaffin v. Cummings, 87 Me.,
76 (1853); Chester, etc., Co. v. Dewey,
16 Mass., 94 (1819); Griswold v. Selig-
man, 72 Mo., 110 (1880); Boggs v. Ol-
cott, 40 Ill., 303 (1866); Musgrave v.
Morrison, 54 Md., 161 (1880); Phoenix,
etc., Co. v. Badger, 67 N. Y., 294 (1876);
8. C., 6 Hun, 298 (1875); Palmer v.
Lawrence, 8 Sandf., 161 (1849); Phila.,
etc., R. R. Co. v. Cowell, 28 Penn. St.,
829 (1857); Cheltenham, etc., R’y Co. v.
Daniel, 2 Q. B., 281; West Cornwall v.
Moffatt, 15 Q. B., 521 (1850). And see
the dissenting opinion of Lord St.
Leonards in Spackman v. Evans, L. R.,
3H. of L. Cas., 171, 197 (1868); Harri-
son v. Heathorn, 6 Man, & G., 81 (1848);
Ness v. Angas, 3 Exch.,, 805 (1849); Ness
v. Armstrong, 4 id., 21 (1849); Moss v.

Steam Gondola Co., 17 C. B., 180 (1855);.

Bailey v. Universal Provident Life As-
sociation, 1 C. B. (N. 8.), 557 (1857).

It has been held that, where a di-
rector is required to be a stockholder,
the act of serving as a director is an
implied subscription for stock to the
amount required in order to be a di-
rector. See Harwood’s Case, L. R., 18
Eq., 80 (1871); Stephenson’s Case, 45
L, J. (Ch.), 488; In re British & Amer-

ican Telegraph Co., L. R., 14 Eq., 316
(1872); In re Empire Assurance Co.,
L. R., 6 Chan., 469 (1871). But a con-
trary rule now exists in England. On-
slow’s Case, 65 L. T. Rep., 612 (1881),
and cases cited. And see summary in
Healey’s Company Law and Practice,
185, 189. Resignation releases the lia-
bility. In re Self-Acting,' etc., Co., 54
L. T. Rep., 676; Marquis of Abercorn’s
Case, 4 De G., F. & J., 78 (1862); Em
parte Jobling, 58 L, T. Rep., 828 (1888).
See, also, § 620.

2 Pittsburgh, etc., R. R. Co. v. Gaz-
zam, 82 Pa. St., 840 (1858). In this case
an attempt was made to make defend-
ant liable upon his signature to a paper
by which the signers agreed to subscribo
for stock ina railroad company, but the
signatures were shown to have been
copies and not originals, Vreeland v.
N. J. Stone Co., 29 N, J. Eq., 188. Tho
decision was on the question of fraud in
inducing defendant to take the stock.
Thames Tunnel, etc., v. Sheldon, 6 Barn.
& C., 241, holding that one who had
subscribed a preliminary paper and had
paid the sum required in advance, but
who had not signed the contract re-
ferred to in an act of parliament, was
not a subscriber within the meaning of
that act.

Fanning v, Ins, Co., 87 Ohio St., 339
(1881), a suit upon a note secured by a
mortgage claimed to have been’ given in
payment for stock. The proof showed
that defendant verbally agreed with a
canvasser to take the stock, but did not
sign any subscription book or other con-
tract, and never received certificates of
stock, Held, that there was no subscrip-

64
CH. Iv.] SUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT.

[§ 53.

§ 53. A subscription in a small pocket memorandum book has
been held sufficient to bind the subscriber.' So, a subscription on
a single sheet, of paper may be binding,’ even though the charter
provides for the opening of books.* A signature to the certificate
required by statute to be filed in order to obtain the charter of in-
corporation, with the number of shares placed opposite to the sig-
nature, is a sufficient subscription to bind: both the corporation and
the subscriber.‘

But a subscription to an incomplete copy of the articles of asso-
ciation will not bind the subscriber;® and where articles are mate-
rially altered without the consent of all the subscribers, after their
subscription and before the complete organization of the company,
such articles are not binding upon the non-consenting subscribers.®
Again, a subscription paper in which the names of directors were
left blank has. been held not. enforceable against a subscriber after
the blank has been filled without his consent or concurrence,’

tion and no sufficient consideration for
the note.

Galveston Hotel v. Bolton, 46 Texas,
633 (1877). In this case defendant had
signed an informal paper as a subscrip-
tion for stock, and had offered excuses
for not paying the first call, asking for
tite, etc. The informal paper was lost,
and defendant’s name did not appear on
the company’s books in any capacity.
After the organization of the company
he acknowledged to its secretary his ob-
ligation to pay the call. Held, that he
was not a stockholder liable to calls.

In Towa it is denied that parol sub-
scriptions are void. Hence, where a per-
son present at a corporate meeting di-
rected the secretary to subscribe certain
stock, and the secretary did so on aloose
sheet of paper, the court held the sub-
scriber bound; also that the corporate
records reciting the facts were compe-
tent to show acceptance, though re-
corded subsequently. Colfax Hotel Co. v.
Lyon, 29 N. W. Rep., 780 (Iowa, 1886). A
verbal subscription suffices. Thestatute
of frauds does not apply. Bullock v. Fal-
mouth, etc, Co., 8 8S. W. Rep., 129

(Ky., 1887), Where a person orally tells

a director that he will subscribe a speci-
fied amount of stock, and gives a check
in part payment, he is liable as a stock-

6)

holder. Cookney’s Case, 3DeG. & J., 170
(1858). And see, also, various cases in
the notes herein, thee somewhat
similar facts.

1 Buffalo, etc., R. R. Co. v. Gifford, 87
N, Y., 294 (1882); Brownlee v. Ohio, etc.,.
R. R. Co., 18 Ind., 68 (1862). Contra,
McClelJand v, Whiteley, 11 Biss., 444
(1883); S. C., 15 Fed. Rep., 322. The
full christian name need not be sub-
scribed. State v. Beck, 81 Ind., 501
(1882),

2Towa, etc., R. R. Co. v. Perkins, 28
Iowa, 281 (1869) ; Hamilton, etc., v. Rice,
7 Barb., 157 (1849). Cf. Bucher v. Dills-
burg, etc., R. R. Co., 76 Penn. St., 306
(1874); Hawley v. Upton, 102 U. S., 314
(1880).

3 Mexican Gulf, etc., R. R. Co. wv.
Viavant, 6 Rob. (La.), 305 (1848); Ash-
tabula, etc., R. R. Co, v. Smith, 15 Ohio
St., 828 (1864).

4Phoenix, etc., Co. v. Badger, 67 N.
Y., 294 (1876); S. C., 6 Hun, 295; Nulton
v. Clayton, 54 Iowa, 425 (1880); Herries.
v. Wesley, 18 Hun, 492 (1878).

5 Dutchess, etc., R. R. Co. v. Mabbett,
58 N, Y., 397 (1874).

6Burrows v. Smith, 10 N. Y., 550
(1858).

7 Dutchess, etc., R. R. Co, v. Mabbett,
58 N. Y., 397 (1874), the court saying:

65
§ 53.] sUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT. ([CH. Iv.

Equity will not, however, in the absence of fraud, relieve a sub-
scriber merely upon the ground that he by mistake subscribed for
more stock than he intended, in a case where he suffered the corpo-
ration to act upon the faith of his subscription.’ But if one signs an
agreement to subscribe, on a subscription paper, entirely misunder-
standing the nature of the contract he is entering into, his subscrip-
tion must, on general principles, be treated as null and void for
want of mutual consent. Cases of this nature may arise without
involving the question of fraud.?

Many cases are given in the notes which will throw some light
on the various principles of law as applicable to the facts in actions
to collect subscriptions.*

“A signature to an incomplete paper, stock, and that the maker of such an
wanting in any substantial particular, agreement was not a subscriber.

when no delegation of authority is con- 1 Diman v. Providence, etc., R. R. Co.,
ferred to supply the defect, does not 5 R. I., 180 (1858).

bind the signer without further assent ?Jackson v. Hayner, 12 Johns,, 469:
on his part to the completion of thein- (1815); Throughgood’s Case, 2 Rep., 9;
strument.” To same effect, Consol’s Foster v. Mackinnon, L. B.,4C. P., 704
Ins. Co. v. Newall, 3 Foster & F., 180 (1869); Rockford, etc., R. R. Co. v.
(1862), where the number of shares was Schunick, 65 Ill., 223 (1872),— not stock
left in blank. See also, Eakright v. cases, but sustaining the general prin-
Logansport, etc., 13 Ind., 404 (1859), In ciple,

this case the charter required that di- Reed v. Richmond, etc., 50 Ind., 342
rectors should be named in the articles (1875). In this case the statute author-
of association. The adoption of the izing the organization of street railway
articles at the time of electing directors companies required that the articles of
was held to be a substantial compliance association should, among other things,
with the charter, the requirement being state the number of directors and their
considered as only directory. names. Neither of these requirements

But where an actual subscription is was observed; and in an action to re-
made, with a view to influencing other cover a subscription the court held the-
subscriptions, but the number of shares subscription void, saying: ‘‘If one of
to be taken is left blank, so that the these requirements can be dispensed.
subscription itself might be subse- with, or held to be directory merely,.
quently withdrawn, it was held that we do not see where we are to stop.
the corporate agents might fill up the The case of Eakright v. The Logans-
blank, and therehy bind the subscriber. port, etc., R. R. Co., supra, went as far
Jewell v. Rock River, etc., Co., 101 Ill, in this direction as we are willing
57 (1881). to go.”

The case of Clark v. Continental, etc., 3Boggs v. Olcott, 40 Ill, 303 (1866),
Co., 57 Ind., 185 (1877), held that an holding that the payment of calls by
agreement to pay in instalments a cer- one whose name appears to a subscrip-
tain sum to a contractor as the work tion to the stock of a corporation is an
progressed, in consideration of stocks to admission that his signature and sub-
be delivered by the corporation, after scription were authorized and binding
full payment has been made in this upon him. Musgrave v. Morrison, 54
way, was not a subscription to capital Md., 161 (1880), to same effect, A prom-

66 :
CH. IV.] SUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT. [§ 54.

§ 54. There are various defenses to the validity and enforceability

of a subscription which have been treated of elsewhere.

Thus, a

subscriber to the capital stock of an incorporated company is, in

ise to. subscribe for a certain amount of
stock, for the purpose of inducing the
company to adopt a certain route, is en-
‘forceable, though no formal subscriptioa
ever was made. Rhey v. Evensburg,
etc., Co., 27 Pa. St., 261 (1856); Hawley
v. Upton, 102 U. S., 314 (1880). Where
the paper signed was a bond in consid-
eration of shares received, but which
were in fact never issued, the signer
was held to be a stockholder. Cayuga,
etc., v. Kyle, 64.N. Y., 185 (1876). Where
the articles of association were defective
in not distinetly stating the termini of
the road nor the counties through which
it passed, it being held that such defect
could not avail the defendant in an ac-
tion for a balance of an unpaid sub-
scription, the person agreeing to place
stock is not liable as stockholder. Gor-
risen’s Case, L. R., 8 Ch., 507 (1878).
Boston, etc., v. Wellington, 113 Mass.,
79 (1878), in which the railroad was not
divided into sections as contemplated
by the subscription paper, the change,
however, being a merely formal irregu-
larity. In an old case in Massachu-
setts it was held that a statement,
made at a public meeting of the corpo-
ration, by one of the stockholders, that
he would spend half his estate, or
enough of it to make the enterprise
undertaken by the corporation a suc-
cess, did not render him liable for a
failure to do so. Andover, etc., Co. v.
Hay, 7 Mass., 102 (1810).

The validity of a subscription depends
upon the law of the state creating the
corporation, unless payment is to be
made elsewhere. Penobscot, etc., Co.
v. Bartlett, 78 Mass., 244 (1858).

Burlington, etc., v. Palmer, 42 Iowa,
222, was an action upon a subscription
note to a railroad, which, by agreement,
was not to be delivered until a right of
way had been secured, when a contract

should be executed by the railroad to

67

construct an extension upon certain
conditions, Held, that the fact that.the
contract last referred to did not con-
tain one of the conditions, which had,
however, been complied with, did not
constitute a defense to the action.

Lane v, Brainerd, 80 Conn., 565 (1862),
where one who had subscribed in an

. irregular way, but had acted as a stock-

holder and accepted the office of di-
rector, was held to have waived all
objection to the form of his subscrip-
tion. To same effect, Danbury &.Nor-
walk Railroad Co. v. Wilson, 22 Conn.,
435 (1858).

Where the name of an individual ap-
pears upon the stock-book of a corpora-
tion as astockholder, the presumption is
that he is regularly and lawfully the
holder and owner of the stock, and, in
the absence of evidence that the stock
has come to him by transfer, that he
was regularly a subscriber.. Turnbull
v. Payson, 95 U. S., 148 (1877); Pitts-
burgh, etc., R. R. Co. v, Applegate, 21
W. Va., 172 (1882); McHose v. Wheeler,
45 Pa. St., 32 (1863), and many cases in
8 55, infra. '

_ The fact that a subscription paper
does not correctly designate the termint
of a railroad already built is no defense
to asubscriber. Boston, etc., R. R. Co.
v. Wellington, supra. Legislature can-
not make a person a subscriber in op-
position to his will. Richmond, etc.,
Co. v. Clarke, 61 Me., 351 (1873). Merely
accepting and holding a certificate of
stock is sufticient to constitute one a
stockholder. Upton v. Tribilcock, 91
U. S., 45 (1875); McLaughlin wv. Detroit,
etc., R. R. Co., 8 Mich., 100 (1860). See,
also, McHose v, Wheeler, 45 Pa. 'St., 82
(1863); Clark v. Continental, etc., Co.,
57 Ind., 185. Person taking stock from
a corporation on its original issue: is
liable without subscription, Shickle v,
Watts, 7S. W. Rep., 274 (Mo., 1888).

'
: .
§54.] sUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT. [CH. IV.
\

general, bound to know the legal effect of his subscription; and false
and even fraudulent representations made to him at the time of.
taking his subscription, as to the legal effect of his contract of sub-

One who never subscribes in writing
for stock, nor assumes the position or
rights of a stockholder, but gives a bond
to repay the subscription price, which is
loaned to him, is not liable on the bond.
Butler University v. Scoonover, 16 N. E.
Rep., 642 (1888).

Where the corporation contracts with

the ‘subscriber to give him indefinite -

time in which to pay for his stock the
subscription is void. McComb v. Credit
Mobilier, etc., Co., 13 Phila., 468 (1878);
Van Allen »v. Illinois, etc., R. R. Co.,
7 Bosw., 515 (1861). It is otherwise
when only a reasonable credit is given.
Mitchell v. Beckman, 64 Cal., 117.

The fact that the subscriptions to
various subscription lists of the same
character are cut off from the headings
and pasted under one heading does not
release the subscribers. It is not a mu-
tilation. Sodus Bay, etc., R. .R. Co. v.
Hamlin, 24 Hun, 390 (1881).

Charlotte, etc., v. Blakely, 3 Strobh.,
245 (1848). In this case one who sub-
scribed a paper agreeing to take certain
railroad stock ‘‘ provided the road comes
to Columbia,” but did not sign the sub-
scription. books when opened, was held
not to be a stockholder.

Erie, etc., R. R. Co. v. Owen, 32 Barb.,
616 (1860). In this case it is said that
there are two modes in which a person,
under the general railroad act of the
state of “New York, may become a
stockholder in a railroad corporation,
viz.: by subscribing the articles of as-
sociation, and becoming a member of
the corporation as the act provides
(§§ 1 and 2), or by subscribing to the
capital stock, in the book opened by the
directors, after the corporation is in ex-
istence; and that no one who has only
signed the articles of association, be-
fore the corporation came into being, is
a corporator or member of the corpora-
tion, unless the articles so signed by

him have been duly filed in the office
of the secretary of state, as required
by the statute. It is doubtful whether
this can be considered good law. This
case is distinguished in Buffalo, etc., R.
R. Co. v. Clark, 22 Hun, 359, 362, and
Sodus, etc., R. R. Co. v. Hamlin, 24
Hun, 390, 394.

Although the statute provides for
subscription books, yet a subscription
on a subscription paper will be valid.
People v. Stockton, etc., R. R. Co., 45
Cal., 306 (1878); Ashtabula, etc, R. R.
Co. v. Smith, 15 Ohio St., 328 (1864);
Brownlee v. Ohio, etc., R. R. Co., 18
Ind., 68 (1862); Buffalo, etc., R. R. Co.
v. Gifford, 87 N. Y., 294 (1882); Hamil-
ton, etc., Co. v. Rice, 7 Barb., 157 (1849);
Stuart v. Valley R. R. Co., 32 Gratt.,
146 (1879). Especially where the loose
sheets are subsequently bound up into
a volume and make part of the records
of the corporation. Woodtuff v. Mc-
Donald, 33 Ark., 97 (1878).

Ex parte Besley, 2 Mac. & G., 176, in
which the defendant was liable to be a
subscriber and liable to creditors of a
railway although he had not signed any
subscription paper or book, but had
attended meetings of the provisional
committee as a member thereof, and had
paid small assessments ordered by it.

Carlisle v. Saginaw, etc., 27 Mich.,
815 (1873). Where the law required sub-
scriptions to be made ‘‘in the manner
to be provided by its by-laws,” a sub-
scription made before such by-laws
were adopted was declared to be void.

New Brunswick, etc., v. Muggeridge,
4 Hurl. & N., 160 (1859), Defendant had
agreed in writing to accept shares he
desired to subscribe for, and had paid
the sum required in advance, but he
did not sign the articles of association
subsequently sent to him for his signa-
ture. In an action for calls he was held
not to be a shareholder although his

68
.

“18 55.

scription, are not sufficient to release him.! Parol ‘conditions or
agreements in reference to subscriptions which are absolute on
their face are generally not sustained.? The right of a stockholder
to withdraw from his subscription is also discussed elsewhere in
this volume.? And many other defenses will be found to have been
raised to defeat actions for the collection of subscriptions.

§ 55. Proof of subscription.— It is presumptive evidence that one
is a subscriber or stockholder when his name appears on the books
of the company in either of these capacities.’ And so also it is
said that the commissioners’ books are prima facie evidence of
the subscriptions found in them,® and likewise as to the original
subscription paper.’’ And again, entries in the proper books by
commissioners duly appointed to take subscriptions are evidence
against the subscribers. So corporate books to which a subscription
has been transferred by authority of the subscriber are evidence of

CH. Iv. | SUBSCRIPTIONS —- METHOD — PARTIES —- ENFORCEMENT.

name had been placed as such upon the
company’s register. The decision rested
upon a clause in the Joint-stock Com-
panies Act, 1856, to the effect that no
person shall be deemed to have accepted
any share unless his acceptance be in
writing. ,

Tilsonburg, be ., Co. v. Goodrich, 8
Ontario Rep., 565 (1885), which was an
action for calls on shares. ‘‘ The de-
fendant” (although one of the project-
ors and original subscribers) ‘‘ was not
a party to the petition, and he is not by
the terms of the [general] statute a
member of the company, and he has
done nothing since the patent, by at-
tending meetings or otherwise, which
can have relation to his agreement to
take stock.” The court with regret held
that he was not a stockholder.

1See § 196, infra.

2See chapter IX. A defendant, it is
said, however, who is sued on a sub-
scription absolute, may show that he
agreed orally to subscribe conditionally,
and placed his name on blank paper,
and that the secretary of the corporation
subsequently, without his knowledge;
subscribed the name unconditionally to
asubscription paper. See § 187, infra.
And it is held that when a corporation
invites and accepts subscriptions as a
loan, to be repaid in full and the sub-

scription: canceled, it cannot repudiate
such a contract and treat the subscrip-
tion so induced as absolute. Beagert: ni;
infra.

8 See §§ 167-170, infra.

4See chapter X. :

5 Hoagland v. Bell, 36 Barb., 57 (1861);
Turnbull v. Payson, 95 U.8., 418 (1877);
Hamilton, etc., Co. v. Rice, 7 Barb., 157;
Pittsburgh, etc., R. R. Co. v. Applegate,
21 West Va., 172 (1882); Taylor v,
Hughes, 2 Jones & Lat.-(Irish Chan.),
24, 55 (1844); McHose v. Wheeler, 45
Penn. St., 32 (1863). Cf. Coffin v. Col-
lins, 17_Me., 440 (1840); Whitman v.
Proprietors, etc., 24 id., 236 (1844); Rock-
ville, etc., Co. v. Van Ness, 2 Cranch,
C. C., 449 (1824); Mudgett. v. Horrell,
83 Cal., 25 (1867). Or when a certificate
has been issued. to him which he pro-
duces. Boardman v. Lake Shore, etc.,
R. R. Co., 84 N. Y., 157 (1881); Agricult-
ural Bank v. Burr, 24 Me., 256; Van-
derwirken v. Glenn, 6 S. E. Rep., 806
(Va,, 1888); Lewis, Adm’r, v. Glenn, 6
S. E. Rep. 866 (Va., 1888).

6 Rockville, etc., Co. v. Van Ness, 2
Cranch, C. C., 449 (1824); Wood v. Coosa,
etc., R. R. Co,, 32 Ga., 278 (1861).

7 Partridge v. Badger, 25 Barb., 146
(1857).

8 Wood v. Coosa, etc., R. R. Co., 82
Ga., 278 (1861).

69
SUBSCRIPTIONS —- METHOD — PARTIES —- ENFORCEMENT. [cH. Iv.

§ 55.)
the subscription,! and also the books that contain the original sub-
scriptions.? But the presumption that one is a stockholder, arising
from the fact of his name being found in the stock and transfer book,
is a disputable one.’ When, however, the books of the corporation
have been destroyed or lost, a certified copy of the recorded list of
the names of shareholders, required by statute to be filed in the.
office of the register of deeds, is prima. facie evidence as to the fact
of subscription and ownership of the shares. So it is said that the
stock-book of a corporation is not admissible in evidence in an ac-
tion by a creditor of the corporation against one claimed to be a
stockholder for the purpose of proving that he is such stockholder.
In order to let in secondary evidence of a subscription, there must
be proof of an original subscription and of the loss of the book or
paper, or the absence of the original paper satisfactorily accounted
for.6 But parol evidence is admissible to show that a certificate has
been issued to one by a wrong christian name.’?' The mere erasure
of a subscription will not of itself prevent a recovery upon it.®

lTowa, etc., R. R. Co. v. Perkins, 28
Iowa, 281 (1869); Hawley v. Upton, 102
U.S., 314 (1880). Cf. Whitman v. Pro-
prietors, etc., 24 Me., 236 (1844).

2 Marlborough, etc., R. R. Co. v. Ar-
nold, 9 Gray, 159 (1858). Of. Mudgett
v. Horrell, 33 Cal., 25 (1867).

3 Mudgett v. Horrell, 33 Cal., 25 (1867).
Cf. Brewers’, etc., Ins. Co. v. Burger, 10
Hun, 56 (1877). Where there is no law
authorizing a paper containing the sub-
scriptions to the capital stock of a cor-
poration to be filed in the office of the
secretary of state, a copy thereof, certi-
fied under the seal of the secretary of
state, is not admissible as evidence, in a
suit by the corporation, to charge the
defendant as a stockholder. Troy, etc.,
R. R. Co, v, Kurr, 17 Barb., 581, 600
(1854); Tilsonburg, etc., Co. v. Good-
rich, 8 Ontario (Q. B. Div.), 565 (1885).
Cf. Bouchaud v. Dias, 3 Denio, 238
(1846); Dick v. Balch, 8 Peters, 30 (1834),

4Cleveland v. Burnham, 55 Wis., 598
(1885). A corporation may, by suit,
compel its agents to deliver up subscrip-
tion lists, or in lieu thereof be liable
themselves on the subscriptions. Peo-
ple’s, etc., Co. v. Babinger, 4 South.
Rep., 82 (La., 1888).

5 Mudgett v. Horrell, 38 Cal., 25 (1867).

4%

8 Pittsburgh, etc., R. R. Co. v. Gaz-
zam, 32 Penn. St., 340 (1858); Graff «.
Pittsburgh, etc, R. R. Co., 31 id., 489
(1858); Hays v. Pittsburgh, etc, R. R.
Co., 38 Penn. St., 81 (1860).

7 Cleveland v. Burnham, 55 Wis., 598.

8 Johnson v. Wabash, etc., Co., 16
Ind., 399 (1861). And where one took a
book for subscriptions from an agent of
the corporation, and subscribed himself
and persuaded others to subscribe, and
kept the book some months, but finally,
because of a difference with the agent
about the payment for his services, cut
his name out of the book and returned
it to the company, it was held, in an
action by the company for the amount
of his subscription, that he was bound
thereon just as though he had left his
name on the list of subscribers. Greer,
v. Chartiers R. R. Co., 96 Penn. St., 391
(1880); Railroad Co. v. White, 10 8. C.,
155 (1878), ‘

It has been held, however, in New.
York, that where the statutory certifi-
cate required by law to be filed in order
to obtain incorporation remains in the
hands of a subscriber, or either of them,
a subscriber may erase or modify his
subscription as he sees fit, even though

he had previously induced others to
0
CH. Iv.| SUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT. [$ 56.

Various other principles of evidence relative to proving one to be a
subscriber have already been given elsewhere.

§ 56. The English rule.—In England the contract of subserip-
tion for shares is entered into in a somewhat more technical or
formal manner. An application, in the first instance, is made in
writing for a specified number of shares, which application is held

to be a mere offer, open for acceptance by the corporation for only ||

a limited time? If the application be accepted, the corporation
formally allots to the applicant the desired number of shares, and
gives him a notice of the allotment. The notice is of the essence
‘of the contract. An allotment without notice is not sufficient to
bind the applicant as a contributory or a shareholder.’ If the no-

subscribe. Burt v. Farrar, 24 Barb.,
518 (1857).

1See cases in notes to the preceding
sections of this chapter; also the follow-
ing cases:

Galveston Hotel Co. v. Bolton, 46
Tex., 633 (1877), where the original
subscription paper was lost and the
name of the defendant did not appear
on the books of the company, and he
had not paid the stipulated advance, nor
participated in any action of the com-
pany, but had acknowledged verbally
to the secretary his obligation to pay.
Held, that the evidence was not suffi-
cient to establish that he was not a
legal subscriber.

Pittsburgh, etc., v. Applegate, 21 W.
Va., 172 (1882), where, in the absence
of the subscription list, the company’s
stock-book was held to be admissible in
evidence as tending to show that de-
fendants were stockholders. » Citing
cases.

Iowa, etc., v. Perkins, 28 Iowa, 281
(1869). Defendant attended a township
meeting called to obtain subscriptions
to arailroad company. The names of
subscribers were written by the parties
soliciting upon aslip of paper, being au-
thorized.to do so by the subscribers. The
meeting then gave authority to an offi-
cer of the company to transcribe the
subscriptions into the company’s book.
Held, that the book thus became the
original contract of subscription, and

‘due on unpaid subscription.

was admissible in evidence without
proof of loss of the slip.

Haynes v. Brown, 36N. H., 545 (1859).
The absence of records being sufficiently
accounted for to make parol evidence
admissible, defendant's attendance at
meetings of the corporation and his act-
ing as president were accounted compe-
tent proof of his being a stockholder.

Corporate stock-book, containing list
of stockholders, number of shares owned
by each, amount paid and amount due,
and containing defendant’s name among
others, is sufficient evidence of balance
Glenn v.
Orr, 28. E. Rep., 5388 (N. C., 1887).

2 Ramsgate, etc., Co. v. Montefiore, L.
R., 1 Exch., 109 (1866); Im re Bowron,
L. R., 5 Eq., 428 (1868), and the cases
generally cited, infra, in this section.

3 Hebbs’ Case, L. R., 4 Eq., 9 (1867);
Gunn’s Case, L. R., 3 Chan., 40 (1867);
In re Peruvian R’y Co., L.'R., 4 Chan.,
822 (1869); Pellatt’s Case, L. R., 2 Chan.,

527 (1867); Ward’s Case, L, R., 10 Eq.,

659 (1870); Harris’ Case, L. R., 7 Chan.,
587 (1872); Household, etc., Co. v. Grant,
L. R., 4 Exch. Div., 216 (1879). The
mere act of signing the memorandum
of association does not make one a
stockhoider. Mackley’s Case, L. R., 1
Ch, Div., 247 (1875). A mere allotment
without an entry of the name on the
stock registry does not render the per-
son liable as a stockholder. Nicoll’s

Case, L. R., 29 Ch. Div., 421 (1888),
71 .,
\
§ 57.] sUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT. [CH. Iv.

tice of allotment is sent by mail, the allottee becomes bound from
the time of posting the letter, whether he received it or not.! And
if the allottee knew in fact of the allotment, and especially if he
acted or suffered others to act upon the assumption that he was a
shareholder, a formal notification may be unnecessary to bind him.?
The application, being in the nature of an offer or a proposition,
may be withdrawn at any time before it has been regularly ac-
cepted, and it must be accepted within a reasonable time, or the ~
party making it cannot be held bound;* and although the applica-
tion should be in writing, the withdrawal of it may be oral.* It
seems to be well settled in England, that, in order to make the con-
tract to take up shares completely binding, there must be the ap-
plication in writing, the allotment of the shares to the applicant,
and a communication to him of notice of the allotment.

§ 57. Subscriptions taken by commissioners.— Although the stat-
ute provides for subscription, either by an original subscription to
the articles of association, or, after the incorporation, by asubscrip-
tion in books to be opened by commissioners, nevertheless it has
been held that a subscription in some other way is binding.’ The

Nor is one a stockholder unless he signs
the deed of settlement. Irish Peat Co.
v. Phillips, 1 Best & 8., 598 (1861). Nor
will a certificate be issued till then.
Wilkinson v. Anglo, etc., G. M. Co., 18
Q. B., 728 (1852).

1 Harris’ Case, L. R., 7 Chan., 587
(1872); Household, etc., Co. v. Grant,
L. R., 4 Exch. Div., 216 (1879); Town-
send’s Case, L. R., 18 Eq., 148; Hebbs’
Case, L. R., 4 Eqg., 9 (186%). Contra,
British, etc., Telegraph Co. v. Colson,
L. R., 6 Exch., 108 (1871); Im re Con-
stantinople, etc., Co., 19 W. R., 219
(1870).

2 Levita’s Case, L. R., 8 Chan., 36
(1867); In re Peruvian R’y Co., L. R., 4
Chan., 322 (1869); Richards v. Home,
etc., Assoc., L. R., 6 C. P., 591 (1871);
Pellatt’s Case, L. R., 2 Chan., 527 (1867).

3Ward’s Case, L. R., 10 Eq,,. 659
(1870); Best’s Case, 2 DeG., J. & S.,
650 (1865); Ramsgate, etc., Co. v. Monte-
fiore, L. R., 1 Exch., 109 (1866); Chap-
man’s Case, L. R., 2 Eq., 567 (1866);
Ritso’s Case, L. R., 4 Chan. Div., 774
(1877); Wilson’s Case, 20 L, T. (N. S.),
962 (1869).

72

4Wilson’s Case, 20 L. T. (N. 8), 962
(1869).

5 Adam’s Case, L. R., 18 Eq, 474;
Hebbs’ Case, L. R., 4 Eq., 9 (1867); Pel-
latt’s Case, L. R., 2 Chan., 527 (1867);
Roger's Case, L. R., 3 Chan., 687 (1868);
Tucker’s Case, 20 W. R., 89 (1871). Cf.
Bloxam’s Case, 83 Beav., 529, distin-
guished in Pellatt’s Case, supra. But
under the twenty-third section of the
Companies Act of 1862, the decisions are
uniform that whenever one signs the
memorandum of association he becomes
a share owner, and must be put on the
list of contributorics, although no shares
may have been allotted to him. In-re
London, etc., Co., L. R., 5 Chan. Div.,
525 (1877); Evan’ 8 Case, L R., 2 Chan.,
427 (1867) ; Sidney’ s Case, L. R., 18 Eq..
228 (1871); Levick’s Case, 40 L. J. (Chan.)
180 (1870); Hall’s Case, L. R., 5 Chan.,
707 (1870), distinguishing Snell’s Case,
L. R., 5 Chan., 22 (1869).

6 Buffalo, etc., R. R. Co. v. Gifford,
87 N. Y., 294 (1882); Stuart v. Val-
ley R. R. Co., 32 Gratt., 146 (1879).
Contra, Troy, etc., R. R. Co. v, Tib-
bits, 18 Barb., 297 (1854); Parker uw
fe
CH. Iv.] SUBSCRIPTIONS —- METHOD — PARTIES — ENFORCEMENT.

[§ 58.
commissioners may themselves be subscribers to the stock,! but
they can have no priority of right to subscribe over others, and no
subscriptions can lawfully be taken with closed doors. The books
must be open, and the public must have an opportunity to subscribe.
The commissioners have only such general powers as are necessary
to validate the subscriptions to the stock. Their authority and
functions cease upon the organization of the corporation.’

§ 58. Subscriptions in ‘excess of the capital stock.— In general,
after the full amount of stock provided for in the act of incorpo-
ration has been subscribed, any further subscriptions are void.!
Where, by statute, the commissioners do not properly apportion
stock, in cases involving an excess of subscriptions, an aggrieved

subscriber may apply to a court of equity for relief.

Northern, -etc., R. R. Co., 83 Mich., 23
(1875); Unity Insurance Co. v. Cram, 48
N. H., 636 (1862); Schultz v. School-
craft, etc., R. R. Co., 9 Mich., 269 (1861).
But when the statute provides for com-
missioners, it is said that they must all
be present in order to the valid perform-
ance of the judicial duties assigned to
them, Crocker v. Crane, 21 Wend., 211
(1839). It is said that in the taking
of subscriptions the commissioners act
ministerially, but in the distribution or
allotment of shares they act judicially ;
and that a distribution of shares by com-
missioners, not sufficient in number to
constitute a legal board, is void. Crocker
uv. Crane, supra.

, 1t has been held that the commission-
ers may limit the amount of stock which
any one subscriber may take, and will,
in a proper case, be sustained therein
on grounds of publie policy, although
the power so to act is not specifically
conferred upon them by the statute.
Brower v. Passenger R. R. Co, 3
Phila., 161 (1858). And accordingly fic-
titious subscriptions for the purpose of
evading such alimitation of the amount
of stock to be taken by a single sub-
scriber are illegal and void. Perkins v.
Savage, 15 Wend., 412 (1836).

1 Walker v. Devereaux, 4 Paige, 229
(1888).

2Brower v. Passenger R’y Co., 3
Phila., 161 (1858). When the amount of
the subscription is not limited, the com-

missioners, in the absence of other ex-
press provision, may usually decide
when enough stock has been subscribed,
and their decision is practically conclu-
sive as an exercise of discretion, Sau-
gatuck, etc., Co. v. Westport, 39 Conn.,
337, 348 (1872). Their failure to take
the statutory oath will not invalidate

' the subscriptions taken by them, if they

are in other essential ‘respects regular.
Hollman v. Williamsport, ete., Co., 9
Gill & J., 462 (1838),

3 James v. Cincinnati, etc., R. R. Co. -

2 Disney (Cin. Super. Ct.), 261 (1868);

Peninsular, etc., R. R. Co. v. Duncan, 28
Mich., 130 (1878) ; Hardenburgh v. Farm-

ers’, etc., Bank, 3 N. J. Eq., 68 (1834); °

Walker v. Devereaux, 4 Paige, 229
(1888); Crocker v. Crane, 21 Wend., 211
(1839); Wellersburg, etc., Co. v. Hoff-
man, 9 Md., 559 (1834); Smith v, Bangs,
15 Ill., 399 (1854); State v. Lehre, 7 Rich.
Law, 284 (1854).

The corporation may by suit set aside
illegal subscriptions —the subscribers
not being qualified. Union Bank v.
McDonough, 5 La., 63 (1833).

4Lathrop v. Kneeland, 46 Barb., 482
(1866); Mackley’s Case, L. R., 1 Chan.
Div., 247 (1875).

5 Walker v. Devereaux, 4 Paige, 229
(1888); Meads v., Walker, Hopk. Ch.,
587 (1825). Cf. Haight v. Day, 1 John.
Ch., 18 (1814).

Where an apportionment is provided

“for in the event of an excess of subscrip-

73

.
$59.] | suBscRIPTIONS — METHOD — PARTIES — ENFORCEMENT. [OH. Iv.

But, after the organization of the corporation, the duty to appor-
tion the stock, if there has been an oversubscription, belongs to the
corporation and not to the commissioners.’ And, in the absence of
statutory authority, the commissioners, even before organization,
have no general power, if they receive excessive subscriptions, to
reduce proportionally all the subscriptions and apportion the stock.
It is their only duty to take subscriptions up to the full:‘amount of
the prescribed capital, and to refuse anything beyond that.” Neither
can the corporation, if it has issued the full amount of the stock,
recover on subscriptions in excess. The subscriber acquires no title
by such a subscription, and corporate creditors can enforce no lia-
bility thereon.’

§ 59. Subscriptions delivered in escrow. — Subscriptions for shares
may be made and delivered in escrow to an agent of the corpora-
tion who is engaged in taking subscriptions,’ or toa director of
the corporation But a delivery i in escrow to a commissioner is
bad, and a subscription so delivered is absolute.’ Delivery of a

tions, it is said that the contract of sub-
scription is not complete until the appor-
tionment is made; that there can be
neither stockholders nor corporation
prior to the apportionment. Walker v.
Devereaux, 4 Paige, 229 (1833); Crocker
v. Crane, 21 Wend., 211 (1839); Burrows
v. Smith, 10 N. Y., 550 (1858). Cf. Buf-
falo, etc., R. R. Co. v. Dudley, 14.N. Y.,
336, 346 (1856).

Where a resolution was passed by a
board of directors, entitling a promoter
to have a certain number of shares
allotted to him, and the available shares
had been disposed of before his bill for
specific performance was filed, held, he
had no ground for coming into equity.
Ferguson v. Wilson, L. R., 2 Ch. App.,
7%, 87 (1866).

18tate v. Lehre, 7 Rich. Law, 234
(1854), where an application for man-
damus to compel commissioners to re-
apportion stock agreeably to the charter

‘of a company, and for quo warranto

against officers claimed to have been
illegally elected, was refused, the ap-
pellate court holding that the commis-
sioners had no power to re-apportion
stock after the subscribers had become
a body corporate. Smith v. Bangs, 15
Tll., 899 (1854). In this case, after the

commissioners had closed the subscrip-
tion books and called a meeting, at
which directors were chosen, they re-
opened the books to receive further sub-
scriptions. On the application of one
of the directors they were restrained by
injunction, the court holding that their
powers were at an end.

2Van Dyke v. Stout, 8 N. J. Eq., 333
(1850).

3Burrows v. Smith, 10 N. Y., 550
(1853); Oler v. Baltimore, etc., R. R. Co.,
41 Md., 583 (1874). When the corporation
has accepted subscriptions in excess of
the capital stock, corporate officers can-
not buy in shares of the stock at a dis-
count and then re-issue them to provide
for the oversubscription, charging the
corporation par for the stock bought in,
and thereby realizing a profit to them-
selves individually on the transaction.
East New York, etc., R. R. Co. v. El-
more, 5 Hun, 214 (1875).

4Cass v. Pittsburgh, etc., R. R. Co.
80 Penn. St., 31 (1875).

5 Ottawa, etc., R. R. Co. v. Hall, 1
Bradw. (Ill.), 612 (1878).

6 Wight v. Shelby R. R. Co., 16 B.
Mon., 4 (1855). Itis the rule in Ken-
tucky that, to become effectual as an
escrow, the delivery must be to a third

74
CH. Tv. | SUBSCRIPTIONS — METHOD — PARTIES ——- ENFORCEMENT.

[§ 60.

subscription in escrow, to become absolute on performance of cer-
tain conditions by the corporation, differs from a conditional sub-
scription in this: that a subscription in escrow is, strictly speaking,
no subscription. As in the case of a deed delivered in escrow, no
estate passes until the second delivery. So, in the case of a sub-
scription delivered in escrow, there is no subscription until a second
delivery, and the depositary can only deliver it up on pérformance
of the condition.! So, also, a subscriber may show by parol an
agreement with an-agent of the corporation that his subscription
to blank paper should not be a subscription until he had seen and
approved the heading of the subscription paper.’

§ 60. Liability of the corporation for refusal to issue a certificate
of stock.— The corporation is bound, upon demand, to deliver to a
stockholder a certificate of stock representing his interest in the
corporation.’ If it refuses to issue the certificate the stockholder
may bring suit in equity to compel its issuance,* or he may recover
of the corporation in assumpsit the value of the shares at the time
of the. demand.’ In case the full capital stock has been issued,
then, of course, specific performance of an agreement to issue more

shares cannot be had.°®

person. Wight v. Shelby R. R. Co.,

supra. But in Pennsylvania it seems
the rule is otherwise. Cass v. Pitts-
burgh, etc., R. R. Co., supra. And so
in Illinois. Ottawa, etc., R. R. Co. uv.
Hall, supra. Of. Price v. Pittsburgh,
etc., R. R. Co., 34 Ill, 18, 36 (1864).

1 Ottawa, etc., R. R. Co. v. Hall, 1
Bradw. (I1.), 612 1878). It is compe-
tent to show by parol that a subscrip-
tion was delivered in escrow. The court
of appeals of Illinois declares that a con-
trary rule is not sustained by any re-
spectable authority. Ottawa, etc., R. R.

Co. v. Hall, supra. Cf. Tonica, etc.,-

R. R. Co. v. Stein, 21 Ill., 96 (1859).

2 Bucher v. Dillsburg, etc., R. R. Co.,
76 Penn. St., 306 (1874). This, however,
amounted to a parol condition —a sub-
ject fully treated in chapter IX, infra.

" 3Fletcher v.- McGill, 10 N. E. Rep.,
651 (Ind., 1887).

4 Appeal of Rowley, 9 Atl. Rep., 329
(Pa., 1887); Chester Glass Co. v, Dewey,
16 Mass., 94 (1819); Ferguson v. Wilson,
L. R., 2 Ch., 77 (1866). Cf. Thorp v.
Woodhull, 1 Sand. Ch., 411 (1844).

The liability of a corporation to issue

5 Wyman v. American Powder Co., 62
Mass., 168 (1851). But to entitle one to
recover back money advanced to a cor-
poration for shares, upon the grounds
of a failure to issue the certificate, the °
subscriber must, before suit, rescind
the contract and demand the money.
Swazy v. Choate, etc., Co., 48 N. H.,
200 (1868).

6 Finley, étc., Co. v. Kurtz, 34 Mich.,
89 (1876). Where a bank contracted to
give a person a certain amount of stock
if he would do business with it, and he
did so, the bank is liable in damages for
refusal to deliver the stock. Rich v,
State Nat’l B’k of Lincoln, 7 Neb., 281.
For the refusal of the, corporation to
issue original stock to a subscriber, the
measure of damages is the difference

between the price contracted for and

the market value on the day when the
issue ought to have been made. Van .
Allen v. Illinois, etc., R. R. Co., 7 Bosw.,
515 (1861). For another rule as to the
measure of damages, and one more in
favor of the plaintiff, see Baltimore, etc.,
R’y Co. v, Sewall, 35 Md., 288 (1871); and

75
SUBSCRIPTIONS — METHON — PARTIES —- ENFORCEMENT. [oH. Iv:

§ 61.]

stock to the subscribers thereof does not necessarily devolve upon
another corporation which succeeds to its debts, liabilities and fran-

cchises.}

§ 61. Substitution of stockholders before the incorporation —
There has been some controversy as to the legality of one person
being substituted for another as a subscriber before the incorpora-
tion and issue of the stock. If the facts are such that a cancella-
tion of the subscription is legal, then doubtless the substitution is
legal.?- But where such, is not the case, then it would seem that
the substitution is merely a transfer of the stock, and the trans-

_ferrer, in-that case, should be held liable to the same extent. as in

other cases of transfer of stock.?

In California it is held that no substitution of stockholders is
legal; but the weight of authority clearly sustains a contrary rule.!
If the vendor afterwards obtains the certificates and sells them
again to others, he is liable to the first person to whom,he sold his
interest,’ and is liable also to the Jatter if the corporation is never
formed.* If the corporation is duly formed, the vendor may com-

818 (1872).

pel the vendee to pay for the subscription transferred.’

see chapter XXXV. In Louisiana the
universal legatee may pay for, and de-
mand, the certificate of, stock subscribed
for by his ancestor. The executor has
no power to cancel the subscription, and
the stock cannot be appropriated by a
subsequent subscriber, who subscribed
for it by consent of the executor. State
v. Crescent’ City, etc., Co., 24 La. Ann.,
Cf. Wallace v. Townsend,
43 Ohio, 587. If a mistake has been
made by which the certificates and
stock have been issued to the wrong
person, a court of equity will remedy
it. O’Meara v. North Am. Min. Rev.,
2 Nev., 112 (1866).

1 Conant v. National, etc., Co., 8 Jones
& S. (N. Y. Super. Ct.), 83 (1875).

In England it seems that directors are
not individually liable to subscribers for
the breach by the corporation of its
agreement to issue stock. Ferguson v.
Wilson, L. R., 2 Chan., 77 (1866). But
see, also, Swift v. Jewsbury, L. R., 9
Q. B., 301; Betts v. De Vitre, L. B., 3
Chan., 429, 441 (1868); Henderson v.
Lacon, L, R., 5 Eq., 249 (1867); Eagles-
field v. Marquis of Londonderry, 25
Week. Rep., 190.

‘tion.

2See §§.167-170, infra, on cancella-
See, also, dictum in Ryder v. Al-
ton, etc., R. R. Co., 18 IIL, 516, 521
(1851). Of. Selma, etc, R. R. Co. v.
Tipton, 5 Ala., 787 (1848), to the effect
that a subscriber cannot withdraw.

3See chapter XV.

4 Baltimore City R’y Co. v. Sewell, 35
Md., 238 (1871); Tempist v. Kilmer, 3
C. B., 249 (1846); Hunt v. Gunn, 18 C.
B. (N. §.), 226 (1862); Merrimac, etc.,
Co. v. Levy, -54 Penn. St., 227 (1867).
Contra, Hawkins v. Mansfield Gold
Mining Co., 52 Cal., 513 (1877); Mor-
rison v. Gold Mountain G. M. Co., 52
Cal., 306; Coleman v. Spencer, 5 Blackf.
(Ind.), 197: (1839). See, also, Chater v.
San Francisco S. F. Co., 19 Cal., 219
(1861). See, also, § 50, supra.

*Beckitt v. Bilbraugh, 8 Hare, 188
(1850),

6Kempson v, Saunders, 4 Bing., 5
(1826). But the latter is not liable to
take the shares nor to indemnify his
vendor. Jackson v. Cocker, 4 Beay.,
59 (1841). :

‘Mahan v. Wood, 44 Cal., 462 (1872).
And may collect a note given in pay-
ment.

i 76
CH. Iv.]. SUBSCRIPTIONS—METHOD—PARTIES—ENFORCEMENT. [§§ 62, 63.

§ 62. Right to recover back money advanced on shares upon a
failure to organize the company. Where one has advanced money,
in good faith, to the promoters of a company, as a deposit or assess-
ment upon shares subscribed for to be subsequently issued, and the
enterprise contemplated by the proposed incorporation is aban-
doned, or the company for any reason fails to be incorporated such
subscriber may recover back the money so advanced.! Nor is he
obliged to submit to the deduction of any part thereof to be ap-
plied to the payment of the expenses incurred by the promoters in
attempting the incorporation.?

B. WHO IS COMPETENT TO SUBSCRIBE FOR STOCK.

§ 63. Corporations generally not.— Upon general common-law
principles, any one who is competent to enter into ordinary con-
tracts may make a valid subscription for stock in an incorporated
company. A subscription for stock is a contract; and, in general,
any one who can contract may subscribe. ‘The corporation itself,
however, cannot be a subscriber to its own stock.? It is con-
clusively settled that municipal corporations may lawfully sub-

1Nockels v. Crosby, 3 Barn. & C.,
814 (1825); Ward v. Lord Londesbor-
ough, 12 C. B., 252 (1854); Asphitel v.
Sercombe, 5 Exch., 147 (1850); Williams
v. Salmond, 2 Kay & J., 463 (1856);
Chaplin v. Clarke, 4 Exch., 403 (1849).
Cf. Vallans v. Fletcher, 1 Exch., 20
(1847); Grand Trunk, etc., R’y Co. uv.
Brodie, 9 Hare, 823 (1852); Kempson v.
Saunders, 4 Bing., 5, where a vendee
“ recovered from his vendor money paid
for stock in a company which was never
organized. And see, also, Williams v.
Page, 24 Beav., 654 (1857). ‘A bill in
equity lies to recover back money paid
on a bubble.” Colt v. Woollaston, 2
P. Wums., 154 (1723); Green v. Barrett,
1 Sim., 45 (1826). See, also, ‘‘the bub-
ble act,” 6 Geo. I., ch. 18; also § 705,
etc., infra.

2Nockels v. Crosby, supra. But see,
contra, Williams v. Salmond, supra.

38 Thus, where a number of individuals
attempted to organize a corporation
with a capital stock of seventy-two
thousand: five hundred shares, of the
par value of $100 each, and six differ-

7

ent persons subscribe for one share each,
and one person then subscribes for the
corporation as follows: ‘‘ Oregon Cen-
tral Railroad Company, by G. L. Wood,

-Chairman, seventy thousand shares,

seven million dollars,” it was held that
this subscription was void, and that the
corporation could not be created by
such subscriptions. Holladay v. Elliott,
8 Oregon, 84 (1879). See, also, § 251,
infra. And againit has been held that
where the directors of a company, in
order to make up the required amount
of capital stock, subscribed as trustees
for the corporation itself, they are liable
for calls on the amount so subscribed.
In the same case a bill by a member of
the corporation on behalf of himself,
and all the other members except the
defendants, praying that this transac-
tion, although it had been sanctioned
unanimously at a meeting of the com-
pany, might be declared fraudulent and
void, was sustained, although some of
the members, on behalf of whom the

‘bill was filed, had been present and

voted at that meeting. Preston v,
'

§ 64.] SUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT. [CH. Iv.

scribe for the stock of private corporations, when authorized by
statute to do so.’ It is not equally clear that one private corpora-
tion may subscribe for the stock in another such corporation. On
the contrary, such subscriptions are wltra vires and void, unless
clearly within the ordinary objects and business of the subscribing
corporation.? A railroad corporation cannot subscribe for shares
of stock in another railroad company ;* nor can a steamship com-
pany be held liable upon a subscription for stock in a dry-dock
company ;‘ nor can a manufacturing company legally subscribe to .
the stock of a bank, for the purpose of carrying on the banking busi-
ness.© All such contracts are, in general, wtra vires and not en-
forceable.6 A construction company, however, is presumed to have
power to subscribe for the stock of a railroad which it is building.”
§ 64. Commissioners, directors, partners, etc., as subscribers.
Commissioners may be subscribers to the capital stock.’ So also
may directors and corporate officers subscribe; and a director, in
the absence of fraud or fraudulent intent, may subscribe for the
whole of the unsubscribed stock in his own name and for his own

Grand Colliery, etc., Co., 11 Sim., 827
(1840).

Allibone v. Hager, 46 Pa. St., 48 (1868),
where the court held it no defense tq
an action by a creditor of a corpora-
tion that defendants had subscribed for
stock in their own names, but really as
agents for the corporation itself.

1Sharpless v. The Mayor, 21 Penn.
St., 147 (1853), and the long train of de-
cisions following. The matter of mu-
nicipal subscriptions is fully considered
in chapter VI. /

2 Thus, for example, a banking corpo-
ration cannot lawfully subscribe for
stock in a railway corporation, Nassau
Bank v. Jones, 95 N. Y., 115 (1884),
holding that the bank could not re-
cover the profits on such subscription
which was made in the name of its
agent; nor for stock in any other cor-
poration, the business of which is
wholly other than banking. Franklin
Co, v. Lewiston Bank, 68 Me., 48 (1877);
Mechanics’ Bank v, Meriden Agency, 24
Conn., 159 (1855); Talmage v. Pell, UN.
Y., 328 (1852). Of. First National Bank
v. National Exchange Bank, 92 U. S.,
122 (1875); and see Royal Bank of In-

8

dia’s Case, L. R., 4 Chan., 252 (1869);

‘Joint-stock, etc., Co. v Brown, L. R.,

8 Eq., 381 (1869); Berry v. Yates, 24
Barb., 199 (1857), holding that one in-
surance company cannot subscribe to
another. For a failure of proof to show
that a corporation was a subscriber for
stock, see McMillan v. Carson, etc,
Co., 12 Phil., 404 (1878). An owner of
land cannot defeat its condemnation by
showing that a corporation subscribed
to part of the capital of the: corporation
seeking to take the land. In re Roch- °
ester, etc., R. R., 110 N. Y., 119 (1888);
Union Hotel v. Herr, 79 N. Y., 454
(1880). See, also, §§ 315-817, infra.

3 Maunsell v. Midland Great Western
R’y Co., 1 Hem. & M., 180 (1868); and
see chapter XIX.

4 New Orleans, etc., Steamship Co.
Dry Dock Co., 28 La, Ann., 178 (1876).

5Sumner v, Marcy, 3 Woodb, & M.,
105. ;

6 See Part IV, on ultra vires contracts
in general,

7In re Rochester, etc., R’y Co.,; 45
Hun, 126 (1887), .

8 Walker v. Devereaux, 4 Paige, 229
(1838).
CH. Iv. | SUBSCRIPTIONS —- METHOD -- PARTIES —- ENFORCEMENT.

[§ 65.
benefit." A partner, if the act be within the scope of the partner-
ship business, may bind his firm by a subscription in the firm name.
But if it is not within the scope of the partnership business, the
person so signing is liable personally; and whether or not the sub-
scription was within the scope of the partnership business is a ques-
tion for the jury.®

§ 65. Married women as subscribers At common law a mar-
ried woman could not subscribe for stock, and any person subscrib-
ing in her name was himself personally liable on the subscription.‘
But now, in England, and generally in the United States by statute,
a married woman may bind her separate estate by such a subscrip-
tion;° and when it appears that the contract was with the wife,
having been made directly and solely with her, the husband is not

bound.$
is, in such a case,

The recourse of the corporation or the corporate creditors
to her separate estate only.”

In England a husband has been held liable on his wife’s sub-
scription to the capital stock of an incorporated company, the a
scription having been made before marriage.§ 5

1Sims v. Street Railroad Co., 37 Ohio
St., 556 (1882). See, also, § 653. But
neither the commissioners (Brower v.
Passenger R’y Co., 3 Phila., 161), nor
any original stockholder (Curry v. Scott,
54 Penn. St., 270—1867), have any
priority of right over the other sub-
scribers, or the public generally, in the
matter of subscription for stock.

2Maltby v. Northwestern, etc., R. R.
Co., 16 Md., 422 (1860); Ogdensburgh,
etc., R. R. Co. v. Frost, ‘21 Barb., 541
(1856); Union Hotel Co. v. Hersee, 79
N. Y., 454 (1880), Otherwise if not
within the partnership business. Liv-
ingston v Pittsburg, etc., R. R. Co., 2
Grant’s Cas., 219; State v, Beck, 81 Ind.,
501 (1882). Where partners are stock-
holders, and all stockholders join in
sureties to notes to aid the corporation,
one partner may bind the firm by sign-
ing its name also as surety. Morse v.
Hagenah, 32 N. W. Rep., 6384 (Wis.,
1887).

3Id.

4Pugh & Sharman’s Case, L. R.,'13
Eq., 566 (1872).

5 Witters v. Sowles, 82 Fed. Rep., "67
(1887); Mrs. Matthewman’s Case, L. R.,

3 Eq., 781 (1866); Luard’s Case, 1 De G.,
F, & J., 533 (1860); Pugh & Sharman’s
Case, supra; Butler v. Cumpston, L. R.,
% Eq., 16 (1868); In the Matter of the
Reciprocity Bank, 22 N. Y., 9 (1860).-
See §§ 319, 250.

6 Angas’ Case, 1 De G. & Sm., 560
(1849); Dalton v. Midland, etc., R’y Co.,
18 C. B., 474 (1858); 8. C., 22 L. J. (C. P.),
177; Luard’s Case, supra; Ness v. An-
gas, 3 Exch.,-805 (1849).

7 Biggart v. City of Glasgow Bank, 6
Rettie (Scotch Ct. of Sessions Cases), 470
(1879); Mrs. Matthewman’s Case, L. R.,
3 Eq., 781 (1866). ,

8 Burlington’s Case, 3 De G. & Sm.,
18 (1849), where the husband was held
liable, although he had not fulfilled the
conditions of the deed of settlement
entitling him to become a member, but
had only received dividends on the
wife’s shares,

Luard’s Case, 1 De G., F. & J., 538
(1860), holding that where a woman,
being a registered owner of stocks be-
fore marriage, attempted to deed them
in trust so, as to exclude the husband,
but the trustees did not accept, and
they continued in her name until the

"9
8 66.]

SUBSCRIPTIONS —- METHOD —, PARTIES —- ENFORCEMENT.

[cH. IV,

§ 66. Infant as subscriber.— A subscription for stock by an infant
is a contract to be governed by the general rules of law that apply
to the contracts of infants generally. In general, the subscriptions
of infants are voidable rather than void. He may repudiate it at

majority, and thereby entirely escape liability; or he may ratify it,

and thereby become as fully bound as though the subscription had
been made after majority.' Accordingly it is a settled rule that,

liquidation of the company, the hus-
band should be placed with the wife on
the list of contributories,

White’s Case, 3 De G. & Sm., 157
(1850), was decided on special facts
under the terms of a deed of settlement
which regulated the rights of the hus-
band and wife as toishares in her name.
In this case a restricted liability for a
limited time was imposed upon the hus-
band, he having done some acts in rela-
tion to the shares, but not sufficient to
constitute an entire acceptance,

Sadler’s Case, 3 De G. & Sm,, 36 (1849),
holding the husband liable when the
shares came to the wife by legacy be-
fore marriage, although neither she nor
the bushand paid the covenanted calls,
received any dividends, or otherwise
acted as members,

Kluht’s Case, id., 210 (1850), where
the husband was held liable for losses
during, but not for losses before and
after, the coverture. He had not com-
plied with necessary, preliminaries for
becoming a member, although he had
done some acts in relation to the shares
of the wife, :

And also upon a legacy of stock to
her during coverture, where it appeared
that the stock had been transferred to
her, and the transfer duly accepted by
her and her husband, and that she only
had signed the dividend warrants and
drawn the dividends, the proceeds being
applied to ordinary household expenses.
Thomas v. City of Glasgow Bank, 6
Rettie (Scotch Ct. of Sessions Cases),
607 (1879).

1Lumsden’s Case, L. R., 4 Chan., 31
(1868), where an infant transferred

shares after coming of age, and did not
attempt to repudiate his remaining
shares until four months after the wind-
ing-up order, being nine months after
his majority. ~He was held to have af-
firmed his holding.

Ebbett’s Case, L. R., 5 Chan., 302
(1870), where a holding for fourteen
months after majority without repudi-
ating the shares was held to be an ac-
quiescence, though the shareholder had
never acted as such.

Baker’s Case, L. R., 7 Chan., 115
(1871), where a company was in process
of being wound up, when an infant,
holding .shares as trustee, attained his
majority, and he promptly repudiated
the shares when the notice of a call
was sent him four months afterwards,
Subsequently he, by letter, authorized
the official liquidator to use his name in
proceedings against the cestui que trust.
Held, that by the letter he had not re-

tracted his repudiation of the shares.

Mitchell’s Case, L. R., 9 Ey., 363
(1870). An infant holding shares as
trustee, who took no steps to repudiate
them for two years after coming of
age, was held to be a contributory.

Wilson’s Case, L. R., 8 Eq., 240 (1869).
An infant holding shares in a trust, who
came of age after the winding-up order
was made, was held’ not to be a con-
tributory, though he had made no for-
mal repudiation, but had not done any
act of acquiescence, except that his so-
licitors, acting for him and others, had
opposed an order for a call.

Hart’s Case, L. R., 6 Eq., 512 (1868).
Where notice of intention to put the
name of a female infant upon the list

80
|
CH. Iv.] SUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT. [§ 67.
4

where one subscribes for shares in the name of an infant, he is liable
personally to the corporation or the corporate creditors on the sub-
scription.! An infant’s subscription must be repudiated within a
reasonable time after coming of age or he will be held to have

ratified it.?

§ 67. Subscription by agent— A valid subscription may, of
course, be made through an agent.? The subscriptions of the orig-

of contributories of a corporation in
process of being wound up was served
during infancy, and more than two
years after her majority a summons
for a call was made, when she applied
to have her name removed from the
list, it was held she was not precluded
by the delay.

Pim’s Case, 3 De G. & Sm., 11 (1849),
where a son who, after the death of his
father, discovered that shares had been
taken in his own name, was held not to
be a contributory, although, at the re-.
quest of an officer of the company, he
had surrendered the shares for ex-
change for others.

See §§ 250, 318.

1 Weston’s Case, L. R., 5 Chan., 614
(1870); Richardson’s Case, L, R., 19 Kq.,
588 (1875); Reaveley’s Case, 1 De G. &
Sm., 550 (1848); Ex parte Reavely, 1
Hall & Tw., 118 (1849); Capper’s Case,
L. R., 3 Chan., 458 (1868); Castelo’s
Case, L. R., 8 Eq., 504 (1869); Symon’s
Case, L, R., 5 Chan., 298 (1870); Reid’s
Case, 24 Beav., 318 (1857); Curtis’ Case,
L, RB, 6 Eq., 455 (1868).

2Dublin, etc., Ry Co. v. Black, 7
Railway & Canal Cas., 434 (1852); 8. C.,
8 Exch., 181. Infancy is a personal de-
fense. Beardsley v. Hotchkiss, 96 N. Y.,
201 (1884). Where an infant allows his

name to remain on the register after he
becomes of age, he thereby ratifies his
subscription, Cork, etc., R’y Co. v.
Cazenove, 10 Q. B., 985 (1847). , A court
will not presume that an “infant sub-
scriber has avoided his contract; and
hence a defense of infancy, in an action
ona subscription, without an allegation
of avoidance, is ineffectual, and the

: (6)

plaintiff may have judgment. Leeds,
etc., R’y Co. v. Fearnley, 4 Exch., 26
(1849). But it has been held that repu-
diation before coming of age avoids the
contract of subscription ab initio; and
hence a plea of infancy and of repudia-
tion while an infant, and of notice to
the company that the stock was at
their disposal, is a good defense'to an
action on a subscription. Newry, etc.,
R’y Co. v. Coombe, 3 Exch., 565 (1849);
8S. C., 18 L. J. (Exch.), 325; Parson’s
Case, L. R., 8 Eq., 656.

8 Musgrave v.. Morrison, 54 Mo., 161
(1880); Burr vw. Wilcox, 22 N. Y., 551
(1860); Rhey v. Evensburg, etc., 27 Pa,
St., 261; In re N. Y., etc., Co., 35 Hun,
220 (1885). ;

If both the principal and agent are
incorporators, and the agent subscribes
in his own name, the principal cannot
claim the stock, inasmuch as he has
sworn in the articles of incorporation
that all the incorporators were bona
fide subscribers. Appeal of Rowley, 9 —
Atl. Rep., 329 (Pa., 1887).

In re Whitely Partners, L. R., 32 Ch.
D., 387. A subscription by one of
several heirs in the name of the “‘es-
tate” is not binding on any of the heirs
where a statute requires such subscrip-
tion to be several. Troy, etc, R. R, Co.
vy. Warren, 18 Barb., 310 (1854).

‘Davidson v. Grange, 4 Grant’s Ch.
(U. Can.), 877 (1854). In this case a sub-
scription by an agent in his own name
was held to constitute him a trustee for
his principals.

State v. Lehre, 7 Rich. Law, 234
(1854), holding that a statute forbidding
any person from subscribing for shares

81
‘

§ 67.] sUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT.

[cH. Iv.

inal incorporators may be made by an agent.! No person can be
made a subscriber to the capital stock of a corporation, and be
subjected to the liabilities of a subscriber, by a subscription in his
name, made by another without authority, but assuming to act as
his agent. Such a subscription is not binding, on the principal.’

in the name of another person did not
exclude a subscription by an agent for
his principal.

Cox’s Case, 4 De G., J. & S., 53 (1863),
was decided under the Companies Act,
but the court was inclined to think the
result would have been the same inde-
pendent of that statute. It was there
held that where a subscriber, in addi-
tion to his own shares, had caused a
large number to be registered in the
names of mere nominees for him, in
order to delude the public as to the
number of members, hé was rightly
placed on the list of contributories for
all the shares when the company was
wound up. This case was distinguished
in King’s*Case, L. R., 6 Ch. App., 196:
(1871).

On this question of ‘‘dummies,” see
chapter XIV. See, also, brief in 15
O. St., 332,

If such subscriptions are prohibited
by the corporate charter, the principal
cannot recover back money which he
has given to the agent to subscribe.
Perkins v. Savage, 15 Wend., 412 (1836).

Mere authority to an agent to sub-
scribe is not a subscription in itself.
Granger, etc., Co. v. Vinson, 6 Oregon,
172 (1876). Also, New Brunswick, etc.,
Co. v. Muggeridge, 4 Hurl. & N., 160
(1859).

In New York it is a penal offense for
a person to subscribe for another who
does not intend to pay, or to subscribe
in the name of a fictitious person. N.Y.
Penal Code, § 590.

Where one subscribes for stock in his
own name, in pursuance of a verbal
agreement between himself and an-
other that the stock should belong to
them jointly, and that he should hold

it on joint account, and, the company
subsequently becoming insolvent, the
stockholders are called on to contribute
an amount equal to their stock, it was
held, in New York, that the nominal
owner of the stock might have contri-
bution from the joint owner. Stover v.
Flack, 30 N. Y., 64 (1864); Orr v. Bige-
low, 14 N. Y., 556 (1886). The parties
had covenanted that ‘plaintiffs should
subscribe for stock, pay ten per cent.
thereon, and then assign it to defend-
ant, who engaged to indemnify them
from further liability. Defendant re-
fused to take the shares, and the cor-
poration recovered judgment against
plaintiffs for the balance of the subscrip-
tion. In this action plaintiffs had judg-
ment against defendant upon the cove-
nant, the measure of damages being
held to be the balance paid by them, and
not that sum less the market value of the
stock. A state subscribing through its
officers is bound by their acts as direct-
ors. State v. Jefferson T. Co., 8 Humph.
(Tenn.), 805 (1842). Colt v. ‘Clapp, 127
Mass., 476 (1879), where one who had
verbally agreed to purchase stock for
the joint benefit of himself and others
refused to divide the stock, he was
held accountable, to the others for
their respective shares of dividends paid
thereon in actions for money had and
received. i

lIn re N. Y., etc., R’y Co., 99 N. Y.,
12 (1885).

2Ticonic, etc., Co. v. Lang, 63 Me.,
480 (1874); Pim’s Case, 8 De G. & Sm.,
11 (1849); Henessey’s Case, 8 id., 191
(1850); Ea parte Hall, 1 Macn. & G.,
307 (1849). ‘

Drover v. Evans, 59 Ind., 454, holding
that where an agent to make a sub-

82
’ O8. Iv.]

But such an unauthorized subscrip

SUBSCRIPTIONS — METHOD — PARTIES — ENFORCEMENT. [§ 68.

tion may be adopted and ratified

by the person in whose name it was made without warrant of au-

thority, in such a way as to make

it valid and binding.! A person

subscribing for shares as agent for another, and in that other’s
name, but without authority, thereby becomes himself a subscriber
in place of the person whose name he signs, or his unauthorized
subscription may subject him to an action of damages.’

§ 68. Subscriptions taken by an

unauthorized agent of the cor-

poration.— A subscription taken by a person who has no authority

scription exceeds his authority the
principal is not bound by it. ~

Cf. Chapman & Barker’s Case, L. R.,
3 Eq., 361 (1867). And this is equally
the rule when it is sought to charge
one by such a subscription, not in his
individual capacity, but only in the
‘capacity of trustee for another. Ex
parte Hall, supra.

1 Musgrave v. Morrison, 54 Md., 161
(1880); Mississippi, etc., R. R. Co. v.
Harris, 36 Miss., 17 (1858), where the
defendant promised to pay; Jones v.
Milton, etc., Co., 7 Ind., 547 (1856),
where the principal subscribed over
again; Philadelphia, etc.,- R.-R. Co. v.
Cowell, 28 Penn. St., 329 (1857), where
the defendant acquiesced for seven
years; Putnam v. City of New Albany, 4
Biss., 365 (1869), where the city: ratified.

What acts or omissions, short of ex-
press ratification, will in law suffice to
bind one upon such a subscription, ‘is,
in general, a question for the jury.
Philadelphia, etc., R. R. Co. v. Cowell,
28 Penn. St., 329 (185%). Cf. Fox v.
Clifton, 6 Bing., 776, (1830). It is held
that silence or failure to object to the»
subscription for a considerable time
after knowledge of it is brought to
the subscriber is evidence of a ratifi-
cation. McHose v. Wheeler, 45 Pa.
St., 82 (1863); Thompson v. Reno Sav-
ings Bank, 10 Am. & Eng. Corp.
Cas., 208 (1885); Sanger v. Upton,
91 U. 8., 56 (1875). Contra, Hume v.
Commercial Bank, 9 Lea, 728 (1882).
And giving a proxy to vote, the stock
may be sufficient to ratify such a
subscription. McCully v. Pittsburgh,

. 88

etc., R. R. Co., 32 Pa. St., 25 (1858).
Contra, McClelland v. Whiteley, 11
Biss., 444 (1883). Buta mere declara-
tion to strangers, by the person in
whose name the subscription had been

‘made, that he had taken that amount

of stock, is not a ratification of the sub-
scription. Rutland, etc., R. R. Co. wv.
Lincoln, 29 Vt., 206 (1857). And even
the fact that one whose name had been
in this way put down as a ,subscriber
was a director in the corporation was. |
held not, in se, toimply knowledge that.
his name was on the books as a sub-.

scriber. In re Wincham, etc., Co.,.
L. R., 9 Chan. Div., 329 (1878). Cf. Fox.
v. Clifton, 6 Bing., 776 (1830). Butas a

rule it is believed that accepting the
office of a director would, in this: coun-
try, be held a sufficient ratification of
such a subscription, in the absence of
any other. This is expressly declared
to be the rule in Tennessee and else-
where. Moses v. Ocoee Bank, 1 Lea,
398 (1878); Danbury, etc, R. R. Co. v.
Wilson, 22 Conn., 435 (1858). Cf. Fry v.
Lexington, etc., R. R. Co., 2 Metc.
(Ky.), 314 (1859). Contra, Hume v.
Commercial Bank, 9 Lea, 728 (1882).

But where’an agent takes stock‘ as
agent, ‘on condition that it is to be sub-
mitted to the principal, and, “if ap-
proved, to be taken out in the purchase
of thread,” the principal is not bound
where he declines to accept, even
though he did not notify the corpora-
tion of his refusal. Merrick, etc., Co.
v. Philadelphia, etc., Co., 8 Atl. Rep.,
794 (Pa., 1887).

2Salem, etc., Corp. v. Ropes, 9 Pick.,
’

SUBSCRIPTIONS — METHOD — PARTIES — EN FORCEMENT. Kea Ty.

§ 69.]
from the corporation to take subscriptions is not in general enforce-
able.! Butit has been held that such a subscription may, by accept-
ance and ratification on the part of the corporation, be validated,
and the subscriber made liable as though the subscription had
been regularly taken.’

Cc. AN ACTION LIES TO COLLECT SUBSCRIPTIONS.

§ 69. A subscription for shares implies a promise to pay for them,
and this promise sustains an action to collect, without proof of any
particular consideration— This rule of law is sustained by the
great weight of authority. The signing of the subscription paper
is an implied promise to pay the subscription.’

There have been various opinions of the courts as to the consid-
eration supporting this implied promise which sustains an action
to collect the subscription. It has been held that the right to mem-
bership in the proposed corporation, and the probable advantages.
to be derived from membership in the company, constitute the con-

sideration.

187 (1829).: In some jurisdictions it is
held that by such a subscription the
subscriber makes himself personally
liable.as a subscriber. Union Hotel Co.
v. Hersee, 79 N. Y., 454 (1880); State v.
Smith, 48 Vt., 266 (1876). See, also,
Troy, etc., R. R. Co. v. Warren, 18
Barb., 310 (1854); Pugh & Sharman’s
Case, L. R., 138 Eq., 566 (1872). See,
also, McHose v. Wheeler, 45 Pa. St., 32:

Thompson v. Reno, etc., Bank, 10 Am..

& Eng. Corp. Cas., 203 (Nev., 1885);
§ 249, infra.

1Essex, etc., Co. v. Collins, 8 Mass.,
292 (1811); Shurtz v. Schoolcraft, etc.,
R. R. Co., 9 Mich., 269 (1861); Carlisle
v. Saginaw, etc,, R. R. Co., 27 id., 315
(1873). Contra, Northeastern R. R. Co.
v. Rodriques, 10 Rich. Law, 278 (1857).

2 Walker v. Mobile, etc., R. R. Co.,
84 Miss., 245 (1857); Mobile, etc., R. R.
Co. v. Yandal, 5 Sneed, 294 (1858);
Judah v, American, etc., Co., 4 Ind.,
333.

3Upton v. Tribilcock, 91 U. S., 45
(1875); Hawley v. Upton, 102 U. S., 314
(1880); Webster v. Upton, 91 id., 65
(1875); Buffalo, etc., R. R. Co. v. Dud-
ley, 14 N. Y., 836 (1856) ; Small v. Her-

kimer, etc., Co., 2 N. Y., 380 (1849);
Lake Ontario, etc., R. R. Co. v. Mason,
16 id., 451 (1857); Dayton v. Borst, 31 id.,
435 (1865); Northern R. R. Co. v.'Miller,
10 Barb., 260, 268 (1851); Waukon, etc.,
R. R. Co. v. Dwyer, 49 Iowa, 121 (1878);
Nulton v. Clayton, 54 id., 425 (1880);
Miller v. Wild Cat, etc., Co., 52 Ind., 51
(1875); Mitchell v. Beckman, 64 Cal.,
117 (1888); Merrimac, etc., Co. v. Levy,
54 Penn. St., 227 (1867); Beéne v. Ca-~
hawba, etc., R. R. Co., 8 Ala., 660 (1842);
Fry v. Lexington, etc., R. R. Co., 2
Metce. (Ky.), 314 (1859); Gill v. Kentucky,
etc., Co., 7 Bush, 685 (1870); Mt. Ster-
ling, etc., Co. v. Little, 14 id., 429 (1879);
Chase v. East Tenn, R. R. Co., 5 Lea
(Tenn.), 415 (1880), Even: though the
corporation has the power to forfeit the
shares for non-payment. Hughes Vv
Antietam, etc., Co., 84 Md., 816 (1870);
Dexter, etc., Co. v. Millerd, 3 Mich., 91
(1854),

4Lake Ontario, ete., R. R, Co. v. Ma-
son, 16 N. Y., 451 (1857); Fort Edward,
etc,, Co, v, Payne, 17 Barb., 567 (1854);
Hamilton, etc., Co. v. Rice, 7 id., 157
(1849); Schenectady, etc., R. R. Co. w
Thatcher, 11 N. Y., 102,. 108 (1854);-

84
CH. rv. | SUBSCRIPTIONS —- METHOD — PARTIES — ENFORCEMENT.

[§ 69.

It has been held; also, that the stock to be received and the prob-
able dividends thereon constitute the consideration.

Again, the consideration has been said to be the mutual obliga-
tion of all the subscribers to take and pay for their stock.?

And, again, it has been heid that a consideration is conclusively
implied from the fact of subscription itself; that it is implied by
law; and that the law thereby creates a duty and liability to pay

for the stock.?

The particular motive of a subscriber inducing him to subscribe

Barnes v. Perine, 12 id., 18 (1854); Os-
born v. Crosby, 63 N. H., 583 (1885);
Bullock v, Falmouth, ete., Co., 3S. W.
Rep., 129 (Ky., 1887). See, also, Stewart
v. Trustees of Hamilton College, 2
Denio, 48 (1845); Hamilton College v.
Stewart, 1 N. Y., 581 (1848); Dutcher’s
Manuf’g Co. v. Davis, 14 Johns., 238;
‘Whittlesey v. Frantz, 74 N. Y., 456.
“Ttis well settled,” said Hand, J., in the
./case of Fort Edward, etc., Co. v. Payne,
17 Barb., 567 (1854), ‘‘that_a subscrip-
tion to the capital stock of any com-
” pany, from the membership of which a
shareholder may derive pecuniary ad-
vantage, gives to the subscriber such an
interest, or will support a promise to
pay for the shares. Such an enterprise
is a combination of means for mutual
profit, and isin no sense a gift or promise
without consideration.” And elsewhere
it is said that ‘‘the advantage to be de-
rived from being a member of sucha
company, and of the consequent right
to participate in the pecuniary divi-
dends, is a positive benefit; and where
the agreement secures that advantage
to the subscriber, on the organization of
the company, the objection of a want
_ of consideration cannot be made with
success.” Hamilton, etc., Co. v. Rice,
7 Barb., 157 (1849), adopted by Brown,
J., in Lake Ontario, etc., R. R: Co. v.
Mason, 16 N. Y., 451, 463 (1857).
1§chenectady, etc, R. R. Co. wv.
Thatcher, 11 N. Y., 102, 107 (1854);
Bish v. Bradford, 17 Ind., 490 (1861);
New Albany, etc., R. R. Co. v. Fields,
10 id., 187 (1858); Fry v. Lexington, etc.,

R. RB. Co., 2 Mete. (Ky.), 314 (1859), That
85

+

the interest acquired by subscribing for
shares of the capital stock is a good con-
sideration for the promise to pay for
them. Union, etc., Co. v. Jenkins, 1
Caines, 881 (1803); Selma, etc., R. R. Co.
v. Tipton, 5 Ala., 787 (1843) —a full and
learned opinion. Cf. Goshen, etc., Co.
v. Hurtin, 9 Johns., 217 (1812); Danbury,
etc., R. R. Co. v. Wilson, 22 Conn., 435
(1853); East Tennessee, etc., R. R. Co. v.
Gammon, 5 Sneed, 567, And again,
that the prior proceedings and acts of
the parties are a legal basis for the prom-
ise to pay; also, that the partial execu-
tion of the purpose designed by the
charter is a sufficient consideration.
Kennebec, etc., R. R. Co. v. Palmer, 34
Me., 866 (1852); McAuley v. Billenger,
20 Johns., 89 (1822); Amherst Academy
v. Cowls, 23 Mass., 427 (1828); Ohio, etc.,
College v. Higgins, 16 Ohio St., 20
(1864). Cf. McCully v. Pittsburgh, etc.,
R. RB. Co., 32 Penn. St., 25 (1858), In
Minnesota the implied promise to issue
the stock is declared to be the considera-
tion for the promise to pay for it. St.
Paul, etc., R. R. Co. v. Robbins, 23
Minn., 439 (1877). And in Kentucky it
is held that the promise by each of the
subscribers is a sufficient consideration
for the promises of the others. Twin
Creek, etc., Co. v. Lancaster, 79 Ky.,
552.

2Spear v, Crawford, 14 Wend., 20
(1835); Cole v. Ryan, 52 Barb., 168
(1868); Upton v. Tribilcock, 91 U. S., 45
(1875); Northern, etc., KR. R. Co wv
Miller, 10 Barb., 260 (1851),

3 East Tenn., etc., R. R. Co. v. Gam-
mon, ,5 Sneed (Tenn.), 567.
§ 70.]

is immaterial.

SUBSCRIPTIONS —- METHOD — PARTIES —- ENFORCEMENT.

[cH. Iv.

The consideration which exists in law cannot be

allowed to be governed by the ideas of the subscriber.’

§ 70. This rule prevails in regard to subscriptions taken before
incorporation as well as to those taken after incorporation.— Such,
undoubtedly, is the rule sustained by the great weight of authority.’

1M. River R. R. Co. v. Zimmer, 20
Ill., 654 (1858); Miller v. Wild Cat, etc.,
Co., 52Ind., 51, 64 (1875); Andover, etc.,
Co. v. Gould, 6, Mass., 39, 44 (1809);
Parker v. Northern, etc., R. R. Co., 38
Mich., 23 (1875).

2 Minneapolis, etc., Co. v. Crevier, 40
N. W. Rep., 507 (Minn., 1888); Re-
formed, etc., Church v. Brown, 17 How.
Pr., 287 (1859); Penobscot, etc., R. R.
Co. v. Dummer, 40 Me., 172 (1855);
Athol, etc., Co. v. Carey, 116 Mass., 471
(1875); Ashuelot, etc., Co. v. Hoit, 56
N. H., 548 (1876); Cross v. Pinckneyville,
eic., Co., 17 ILL, 54 (1855); Griswold v.
Trustees, etc., 26 id., 41 (1861); Stone v.
Great Western, etc., Co., 41 id., 85
(1866); Proprietors, etc., v. Dickinson, 6
Gray, 586 (1856); Heaston v. Cincinnati,
etc., R. R. Co., 16 Ind., 275 (1861); Mil-
ler v. Wild Cat, etc., Co., 52 Ind., 51
(1875) ; Eastern, etc., Co. v. Vaughan,
14.N. Y., 546 (1856): Buffalo, etc., R. R.
Co. v. Gifford, 87 id., 294 (1882); Same wv.
Clark, 22 Hun, 359 (1880); Peninsular,
etc,, R. R. Co. v. Duncan, 28 Mich., 180
(1878); Buffalo, etc., R. R. Co. v. Dud-
ley, 14 N. Y., 336 (1856); Dayton v,
Borst, 31 id., 485 (1865); Rensselaer,
etc., Co. v. Barton, 16 id., 457 (1854);
Lake Ontario, etc., R. R. Co. v. Mason,

_16 id., 451 (1857); Essex, étc., Co. 2.
Tuttle, 2 Vt., 898 (1830); Kirksey v.
Florida, etc., R. R. Co., 7 Fla., 28 (1857);
Beene v. Cahawha, etc., R. R. Co., 3
Ala., 660 (1842); Selma, etc., R. RB. Co.
v. Tipton, 5 id., 787 (1848); Hartford,
etc., R. R. Co. v. Kennedy, 12 Conn.,
499 (1838); Thigpen v. Mississippi, etc.,
R. R. Co., 32 Miss., 847 (1856); Gill v,
Kentucky, etc., Co., 7 Bush (Ky.), 635
(1870); Instone v. Frankfort, etc., Co.,
2 Bibb (Ky.), 576 (1812); Cucullu v.
Union Ins, Co., 2 Rob, (La.), 578 (1842);
Union, etc., Co. ». Jenkins, 1 Caines,

881 (1803); Goshen, etc., Co. v. Hurtin,
9 Johns., 217 (1812); Dutchess, etc., Co.
v. Davis, 14 id., 238 (1817); Spear v.
Crawford, 14 Wend., 20 (1835); Har-
lem, etc., Co. v. Seixas, 2 Hall (N. Y.
Super. Ct.), 504 (1829); Nulton v. Clay-
ton, 54 Iowa, 425 (1880); Worcester,
etc., Co, v. Willard, 5 Mass., 80 (1809);
Stanton v. Wilson, 2 Hill, 153 (1841);
Sagory v. Dubois, 3 Sandf. Chan., 466
(1846); Palmer v. Lawrence, 3 Sandf.
Super. Ct., 161 (1849); Twin Creek, etc.,
Co.;v. Lancaster, 79 Ky., 552 (1881);
Minn., etc., Co. v. Davis, 41 N. W. Rep.,
1026 (Minn., 1889). Cf. Thompson v.
Page, 1 Metc. (Mass.), 565 (1840); Ives v.
Sterling, 6 id., 310 (1848); Robinson v.
Edinboro’ Academy, 8 Grant’s Cas., 107

_ (1861); Edinboro’ Academy v. Robinson,

37 Penn. St., 210 (1860); Hutchins v.
Smith, 46 Barb., 235 (1865); Valk v.
Crandall, 1 Sandf. Chan., 179; People’s,
etc., Co. v. Balch, 8 Gray, 303 (185%);
Chater v. San ‘Francisco, etc., Co., 19
Cal., 219 (1861); Highland, etc., Co. v.
McKean, 11 Johns., 98 (1814); Tar River,

etc., Co. v. Neal, 3 Hawks (N. C.), 520 _

(1825); Klein v. Alton, etc., R. R. Co., 13
Tll., 514 (1851); Banet v. Same, 18 id.,
504 (1851); Sanger v. Upton; 91 U.S., 56
(1875); Kidwilly, etc., Co. v. Roby, 2
Price (Eng.), 93 (1816); Weiss v. Mauch
Chunk, etc., Co., 58 Pa, St., 295 (1868).
The bringing of a suit by the corpora-
tion to collect a subscription constitutes
an acceptance of the subscription by
the corporation. Buffalo, ete, R. R.
Co. v. Clark, 22 Hun, 359 (1880), It has
been held that a corporation can defeat
a subscriber’s action for stock by prov-
ing that it never accepted his subscrip-
tion. Starrett v. Rockland, etc., R. R.
Co., 65 Me., 374 (1876), But no formal
acceptance by the corporation is neces-
sary in order to enforce a subscription.

86
OH. IV. ]
*

SUBSCRIPTIONS —- METHOD —— PARTIES —- ENFORCEMENT.

Is 70.

. It has been held by the New York court of appeals, however,
where the preliminary subscription did not purport to run to the
company, but was merely an agreement among the signers to sub-
scribe to its stock, that the company could not enforce the agree-
ment as a subscription. 1 It has been held, also, that the corporation
may bring an action at law for damages against a subscriber to a pre-
liminary subscription list who refuses to take and pay for the stock ;?

and that the measure of damages

for such a:breach of contract to

subscribe for stock is the difference between the par and market

value of the stock involved.®
Strasburg R. R. Co. v. Bicliternaoht: 21
Pa. St., 220 (1853); Miller v. Wild Cat,
etc., Co., 52 Ind., 51 (1875); Thrasher v.
Pike County, 25 Ill, 393; Mt. Sterling,
etc., Co. v. Little, 14 Bush, 429 (1879);
California, etc., Co. v. Schafer, 57 Cal.,
396 (1881); Poughkeepsie, etc., Co. v.
Griffin, 24 N. Y., 150 (1860); Troy, etc.,
R. R. Co. v. Tibbits, 18 Barb., 297;
_Charlotte, etc., R. R. Co. v. Blakely, 3
Strobh. L., 245 (1848); Pittsburgh, etc.,
R. R. Co. v. Gazzam, 32.Pa. St., 340
(1858); Wallingford, etc., Co. v. Fox, 12
Vt., 304 (1840); Stowe v.' Flagg, 72 Ill,
897 (1874); Goff v. Winchester College,
6 Bush, 443 (1869); Perkins v. Union,
etc., Co., 12 Allen, 273 (1866); Dayton,
etc., Co. v. Coy, 13 O. St., 84 (1861).
‘See, also, various cases in first part of
this chapter, and Brownlee v. Ohio, etc.,
R. R.! 18 Ind., 68 (1862); Kilner v. Bax-
ter, L. B., 2 C. P., 174 (1866). A sub-
scription before incorporation enforce-
able, where defendant paid for one or
more shares after incorporation. Bell’s
Appeal, 8 Atl. Rep., 177 (Penn., 1887).
1Lake Ontario, etc., R. R. Co. v. Cur-
tiss, 80 N. Y., 219.(1880). See, also, § 705,
etc., infra, on promoters’ contracts gen-
erally. As to enforceability of subscrip-
tions, not for stock, but as a gift, to en-
terprises, see Smith v. Sowles, 10 Atl.
Rep., 536 (Vt., 1887); McCabe v. O’C n-
ner, 28 Northwest. Rep., 573 (Lowa, 1886) ;
Broadbent v. Johnson, 13 Pac. Rep., 83
(Idaho, 1882), where subscription was
to a railroad; Gaus v. Reimensnyder, 2
Atl. Rep., 425 (Pa.), note; Grand Lodge
v. Farnham, 11 Pac. Rep., 592 ae

1886); Roberts v. Cobb, 9 N. E. Rep.,
500 (N. Y.), note (1886); Utica, ete., R.
R. Co. v. Brinkerhoff, 21 Wend., 139
(1839); Watkins v. Evans, 63 Mass., 5387
(1852). See, also, 117 id., 456 (1875); Pres-
byterian Church v. Cooper, 20 N. E,
Rep., 352 (N. Y., 1889); Cottage, etc.,
Church v. Kendall, 121 Mass., 529; Liv-
ingston v. Rogers, 1 Caines, 585 (1804);
Trustees, etc., v. Stewart, 1 N. Y., 581
(1848); Amherst Academy v. ons, 23
Mass., 427 (1828).

2Quick v, Lemon, 105 IIL, 578 (1888);
Thrasher v. Pike Co., etc., R. R. Co., 25
id., 393 (1861); Rhey v. Ebensburg, etc.,
R. R. Co., 27 Pa. St., 261 (1856); Mt.
Sterling, etc., R. R. Co. v. Little, 14
Bush, 429 (1879).

3 Thrasher v. Pike Co., etc., R. R. Co.,
25 Til, 898 (1861). It seems, also, that
such an action of damages might ‘be
brought by one of the signers of the pre-
liminary agreement against any other
signer who refused to take-and pay for
stock after the incorporation of the
company, and that the measure of dam-
ages in this case would be, not the
amount subscribed, but the damage |
sustained by the person suing. Lake
Ontario, etc., R. R. Co. v. Curtiss, 80 N.
Y., 219(1880). In Pennsylvania a statute
which authorized a corporation to trans-
fer asubscription from one enterprise to
another has been held unconstitutional.
Pittsburgh, etc., R. R. Co. v. Gazzam,
82 Pa. St., 340 (1858). It is elsewhere
said that a subscription preliminary to
organization is no contract, but merely
a means of bringing the parties to-
§ 71.] suBSCRIPTIONS — METHOD — PARTIES —— ENFORCEMENT. [CH. Iv.

§ 71. In New England a subscription for stock cannot be en-
forced unless the subscriber expressly promised to pay, or the charter
expressly obligated him to do so.— Such is the rule in New England.
It grew out of the peculiar charters of the early turnpike companies,
which had shares of stock not limited in amount, but indefinite,
so that, as a result, if a subscriber were liable at all, he was liable
for the whole capital stock, except so far as it had already been
paid in by himself and others. Consequently, inasmuch as these
charters gave to the corporation the right to forfeit stock for non-
payment of subscriptions, the courts held that an action to collect
did not lie, and that the remedy by forfeiture was the only remedy
of the corporation.! This rule has become firmly established in the
New England states, and still prevails in its application to all classes

 

of corporations.”

gether. Poughkeepsie, etc., R. R. Co.
v. Griffin, 24 N. Y., 150 (1860).

1 Worcester, etc., Turnpike Co. v.
Willard, 5 Mass., 80 (1809); Andover,
etc., Turnpike Co. v. Gould, 6 Mass.,
40 (1809); New Bedford, etc., Turnpike
Co. v. Adams, 8 id., 188 (1811); Essex
etc., Co. v. Collins, 8 id., 292 (1811);
Franklin, etc., Co. v. White, 14 id., 286

- (1817).

2 Kennebec, etc., R. R. Co. v. Kendall,
81 Me., 470 (1850); Belfast, etc., R. R.
Co. v. Moore, 60 id., 561 (1871); New
Hampshire, etc., R. R. Co. v. Johnson,
30 N. H., 390 (1855); White, etc, R. R.
Co. v. Eastman, 34 id., 124 (1856); Essex,
etc., Co. v. Tuttle, 2 Vt., 393 (1880); Con-
necticut, etc., R. R. Co. v. Bailey, 24 id.,
465; Atlantic, etc., Mills v. Abbotts 9
Cush., 423 (1852); Katama, etc., Co. v.
Jernegan, 125 id., 156 (1879); Boston,
etc., R. R. Co. v. Wellington, 118 id., 79
(1878) ; Buckfield, etc., R. R. Co. v. Irish,
89 id., 44 (1854); Russell v. Bristol, 49
Conn., 251-(1881). Cf. Odd Fellows, etc.,
Co. v. Glazier, 5 Harr. (Del.), 172 (1848);
Stokes v. Lebanon, etc., Co., 6 Humph.,
241 (1845); City Hotel v. Dickinson, 6
Gray, 586 (1856); Belfast, etc., R. R. Co.
v. Cottrell, 66 Me., 185 (1876); Katowa

88

Land Co. v. Holley, 129 Mass., 540 (1880);
Mechanics’, etc., Co. v. Hall, 121 id.,
272 (1876). In Maine an agreement to
“take and fill” a number of shares has
been held equivalent to an express prom-
ise to pay for them. Buckfield, etc.,
R. R. Co. v. Irish, 39 Me., 44 (1854);
Penobscot, etc., R. R. Co. v. Bartlett,
12 Gray, 244 (1858). See, also, Seymour
v. Sturgess, 26 N. Y,, 184 (1862); Fort
Edward, ete., Co. v. Payne, 17 Barb.,
567 (1854); Pittsburgh, etc., R. R. Co. v
Gazzam, 32 Pa. St., 340 (1858), It is to.
be noticed that this rule was established
before the announcement of that great
principle of American law, that the capi-
tal stock of a corporation is a trust fund
for the benefit of its creditors. ,

‘When ‘‘ neither the general laws nor
the act by which the plaintiffs were
incorporated, nor any by-laws of the
company, created any forfeiture of the
shares for the non-payment of the as-
sessments, . . . the legal effect of
his (defendant’s) subscribing for the
stock is to render him liable in assump-
sit even where there is no express prom-
ise to pay.” Essex, etc., Co. v. Tuttle,
2 Vt., 893 (1880).
CHAPTER V.

CONDITIONAL SUBSCRIPTIONS.

§ 7%. Definition.
%8. Conditions subsequent,
79. Conditional subscriptions before

incorporation.

In New York such subscription
is void; in Pennsylvania the
condition is void.

81. Parol conditions are void.

82. Conditional subscriptions after

incorporation.

80.

§ 77. Definition of conditional subscription.—

§ 83. What may be the condition.

84, Acceptance of the subscription
by the corporation.

85. Construction of the condition.

86-87. Performance of the condition.

88. Waiver.

89. Notice and calls on conditional
subscriptions.

A conditional sub-

scription is one on which payment can be enforced by the cor-
poration only after the occurrence or after the performance by the
‘corporation ‘of certain things specified in the subscription itself.!
Oral agreements made with the subscriber to the effect that pay-
ment will not be required except on certain events or contingen-
cies are sometimes spoken of as conditions to the subscription,
but more properly are mere variations of a written contract, and

are treated elsewhere.”

§ 78. Conditions precedent and conditions subsequent— A con-
ditional subscription is also to be distinguished from a subscription

on a condition subsequent. .

A subscription on a condition subse-

quent contains a contract between the corporation and the sub-

scriber, whereby the corporation agrees to do some act.

It thereby

combines two contracts: one the contract of subscription, the other
an ordinary contract of the corporation to perform the specified

- acts.?

1A conditional subscription has often
been spoken of as ‘a continuing offer
which is final and absolute when ac-
cepted.” Taggart v. Western. Md. R.
R. Co., 24 Md., 563 (1866); Ashtabula &
New London R. R. Co, v.. Smith, 15
Ohio St., 328 (1864); Lowe v. Edgefield
& K. BR. R. Co.,1 Head (Henn. ), 659
(1858).

2See chapter IX; also § 81.

3 Thus, adding to a subscription the
words, ‘‘to be expended between the
Connecticut river and the east line of

The subscription is valid and enforceable whether the con-

the state,” has been held to form a con-
tract to that effect, but not to make
the subscription conditional. Lane v.
Brainerd, 30 Conn., 565 (1862); Hender-
son & Nashville R. R. Co. v. Leavell, 16
B. Monroe (Ky.), 358 (1855). So also of
words requiring a certain location or
route to be adopted. Henderson &
Nashville R. R. Co. v Leavell, supra;
the court saying, however, that if the
route is laid out otherwise, before pay-
ment, probably the subscriber would be
discharged; if changed after payment,

89

\
§ 78. ,

CONDITIONAL SUBSCRIPTIONS.

[cH. v.

ditions are performed or not.!| The condition subsequent is the
same as a separate collateral contract between the corporation
and the’ subscriber, for breach of which an action for damages is

the remedy.’

The distinction between such a contract and the or-

dinary conditional subscriptions — that is, subscriptions on conditions
precedent — is sometimes difficult to determine. The supreme court
of Maine, has said that the question whether a condition in a sub-

it could be enjoined. Laches will bar
the right to such aninjunction. Chap-
man v. Mad River & Lake Erie R.
R. Co. 6 O. St, 119 (1856). A more
frequent requirement is a certain loca-
tion of the route, and also the con-
struction of a part of the whole of the
road. The first requirement is con-
strued to be a condition precedent; the
second a condition subsequent, since the
payment of the subscription itself is
necessary to carry out the requirement.
‘Chamberlain v. Painesville & Hudson
R. BR. Co., 15 O. St., 225 (1864); Belfast
& Moosehead Lake R’y Co. v. Moore, 60
Me., 561, 576 (1871); North Mo. R. R.
Co. v. Winkler, 29 Mo., 318; Bucksport
& Bangor R. R. Co, v. Inhabitants of
Brewer, 67 Me., 295 (1877); McMillan v.
Maysville & Lexington R. R. Co., 15 B.
Monroe, 218 (1854); Swartout v. Mich.
Air LineR, R. Co., 24 Mich., 889 (1872),
where Judge Cooley says: ‘‘It is only
reasonable to infer that they would
have expressed that intent more clearly,
and would have indicated with definite-
ness what stage the work should reach,
before their liability should become
fixed.” So also in Miller v. Pittsburgh
& Connellsville R. R. Co., 40 Pa. St.,
237 (1861), where the court say: ‘It is
a most extraordinary defense; for it
presupposes that the company were to
build their road without money, and
to deliver it, a finished work, to the
stock subscribers, who were then to pay
their subscriptions.” In Pittsburgh &
Steubenville R. R. Co. v. Biggar, 34 Pa,
St., 455 (1859), a condition, “ provided
the road goes within half a mile of
' Florence,” was held to bea condition
subsequent, A condition that altera-

tions shall be ordered only by a vote of
the directors is a condition subsequent,
Bucksport & Bangor R. R. Co. v. Buck,
68 Me., 81 (1878). So also of a condi-
tion that commissioners should be ap-
pointed to see that other conditions are
complied with. Shaffner v. Jeffries, 18
Mo., 512 (1853). And a condition that
the money subscribed shall be expended
on a certain part of the road. Lane v.
Brainerd, 30 Conn., 565 (1862), A con-
dition that a depot shall be established
at a certain place is a condition subse-
quent. Paducah, etc., R. R. v. Parks,
8S. W. Rep., 842 (Tenn., 1888), A con-
dition that bonds will be issued as a
“bonus” to a stockholder is void, It
is a condition subsequent. The sub-
scription is enforceable. Morrow v.
Nashville, etc., Co., 10 5. W. Rep., 495
(Tenn., 1889). Condition construed sub-
sequent. Johnson v. Georgia, etc., R.
R. Co., 8 8. E. Rep., 581 (Ga., 1889).
For the English cases on. conditions
precedent and subsequent to subscrip-
tions for stock, see ch. II, § 18, n. 3.

1A condition subsequent “ will not
defeat an action for the recovery of the
money, notwithstanding it had not been
performed when the action was com-
menced.” Belfast & Moosehead Lake
R’y Co. v. Moore, 60 Me., 561, 576 (1871).
‘A failure to perform an independent
stipulation, not amounting to a condi-
tion precedent, thongh it subject the
party failing to damages, does not ex-
cuse the party on the other side from
the performance of all stipulations on
his part.” Mill Dam Foundry v. Hovey,
88 Mass., 417, 437 (1839).

2 The subscriber is left to the ordinary
remedies for breaches of contracts.

90

ee

 
OH. V.] ‘CONDITIONAL SUBSCRIPTIONS.

[S§ 79, 80.
scription “be precedent or subsequent is ‘a question purely of in-
tent, and the intention must be determined by considering not only
the words of the particular clause, but also the language of the
whole contract, as well as the nature of the act required and the
subject-matter to which it relates.”! The courts, in accordance

_with well-established rules, favor conditions subsequent.’

§ 79. Conditional subscriptions not allowed in subscriptions to
obtain incorporation.— Conditional subscriptions, made before the
incorporation of a company, and taken for the purpose of secur-
ing such incorporation, as prescribed by statute, are of doubtful
validity. The weight of authority holds that subscriptions taken
for the purpose of complying with a statute which grants a charter
only upon a ‘certain amount of stock being subscribed cannot be
conditional, but must be absolute.’ This is clearly the rule in New
York and Pennsylvania, and.is founded in justice.‘

§ 80. In New York the subscription is void, in Pennsylvania the
condition is void.— The New York and Pennsylvania cases differ,
however, in regard to the effect of a conditional. subscription to
stock before and for the purpose of incorporation. ‘In New York

the whole subscription is void absolutely.

1Bucksport & B. R. R. Co. v. Inhab-
itants of Brewer, 67 Me., 295 (1877).
‘“‘The situation and relation of the par-
ties to each other, the object sought to
be attained, and the subject-matter to
which the agreement relates, are mate-
rial . and indispensable aids”
in deciding whether the condition be
precedent or subsequent. Chamberlain
v. Painesville & Hudson R. R. Co., 15
Ohio St., 225 (1864).

2Chamberlain v. Painesville & Hud-
son R, R. Co., 15 Ohio St., 225 (1864);
Swartout v. Mich. Air Line R. R. Co.,
24 Mich., 389 (1872).

3‘ A subscription to the stock of a
public corporation, made before letters
patent aré issued and an organization
effected, must be considered: absolute
and unqualified, and any condition at-
tached thereto void. Commissioners
have no authority to receive conditional
subscriptions.” Boyd v. Peach Bottom
R’y Co., 90 Pa. St., 169 (1879). “ Any
other rule would lead to the procure-
ment from the commonwealth of valu-
able charters without any absolute cap-

ital for their support, and thus give rise
, 91

It is as though not

to a system of speculation and fraud
which would be intolerable.” Caley v.
Phila. & Chester County R. R. Co., 80
Pa. St., 868 (1876). See, also, Erie, etc.,
Co. v. Brown, 25 Pa. St., 156 (1855);
Nippenose Mfg. Co. v. Stadton, 68 Pa.
St., 256 (1871); Pittsburgh, etc., R. R.
Co. v. Stewart, 41 Pa. St., 54 (1861);
Troy & Boston R. R. Co. v. Tibbits, 18
Barb. , 297 (1854). ' That conditional sub- ,
scriptions are not to be counted in as-
certaining whether the whole capital.
stock has been subscribed, which must
be shown before another absolute sub-
scriber can be made liable, see § 180.

4Some of the old cases uphold condi-
tional subscriptions made previous to
and for the purpose of incorporation.
Chamberlain v, Painesville & Hudson
R. RB. Co., 15 Ohio St., 225 (1864). It is
doubtful, however, whether any well-
considered case, ‘under the present gen-
eral laws allowing the incorporation of. |
railroads, would sustain such a sub~
scription. The weight of authority. ia
decidedly in favor of absolute subscrip-
tions.
§§ 81, 82.] CONDITIONAL SUBSCRIPTIONS. [cH. v.
made, and cannot be enforced either by the corporation or by the
would-be subscriber! In Pennsylvania a different rule prevails.
The condition is void, but the subscription itself is treated as an
absolute unconditional subscription, and may be enforced by the
corporation? The commissioners are held to have only limited
statutory powers, of which the subscriber is bound to take notice,
and the express powers do not give authority to the commissions
to take conditional subscriptions. They have no right to receive
various kinds of subscriptions, and any conditions are held to be
void as a fraud upon the state, upon corporate creditors, and upon
other subscribers.’

§ 81. Parol conditiens are void.— Under the general rule of evi-
dence that a written agreement cannot be varied or added to by
parol, it.is not competent for a subscriber to stock to allege that he
is but a conditional subscriber.4 The condition must be inserted in
the writing in order to be effectual. Where, however, the parol
agreement or condition is made subsequently to the making of the
contract, and upon a sufficient consideration, it has been upheld.

§ 82. Conditional subscriptions after incorporation are valid.—
A conditional subscription to stock, taken and accepted by a corpo-
ration after its incorporation, is legal and valid by the common law
of all the states. In Pennsylvania the legality of such conditional
subscriptions is clearly declared and sustained. In New York, also,

ter. Ligonier Valley R. R. Co. v. Will-
iams, 35 Leg. Intel., 40 (1878). In the

1Troy & Boston R. R. Co. v. Tibbits,
18 Barb., 297 (1854); In re Rochester,

etc., R. R. Co., 50 Hun, 29 (1888), whexe
the subscription was to be paid in land.

2 Where one subscribes to the stock
of a public corporation, prior to the
procurement of its charter, such sub-
scription is to be regarded as absolute
and unqualified, and any condition at-
tached thereto is void.” Caley v. Phila.
& Chester Co. R. R. Co., 80 Pa. St., 863
(1876). ‘‘The subscription is valid and
binding, and the condition null and
void.” Boyd v. Peach Bottom R’y Co.,
90 Pa. St., 169 (1879). To the same
effect, see Bedford R. R. Co. v, Bowser,
48 Pa, St., 29 (1864); Barington v. Pitts-
burgh & Steubenville R. R. Co., 44 Pa.
St., 358; Pittsburgh & Steubenville R.
R. Co. v. Biggar, 84 Pa. St., 455 (1859);
Same v, Woodrow, 3 Phil., 271 (1858).
The subscription itself, however, is not
binding if it is not reported by the com-
missioners and used to obtain the char-

federal courts, Burke v. Smith, 16 Wall.,
890, 396 (1872), favors the Pennsylvania
rule, while Putnam v. City of New Al-
bany, 4 Biss., 365, 383 (1869), favors the
New York rule. In both cases the
opinions are dicta. See, also, Ellison
v. Mobile & O. R. R. Co., 86 Miss., 572
(1858). ’

3 Same cases,

4See $$ 187, 188.

51d. !
§**It is no longer to be doubted that
anincorporated company, after it has
obtained its letters patent and effected
its organization, may receive conditional
subscriptions to its stock.” Pittsburgh
& Connellsville R. R. Co. v. Stewart, 41
Pa. St., 54 (1861); Caley v. Phila. &
Chester County R. R. Co., 80 Pa. St.,
863 (1876); Phila, etc, R. R. Co. v
Hickman, 28 Pa. St., 818 (1857). After
incorporation conditional subscriptions

92
CH. ve] CONDITIONAL SUBSCRIPTIONS.

[§ 83.
conditional subscriptions have been upheld,! but not where the con-
dition is one that affects the route of a turnpike or railroad com-
pany. In other states the legality of such subécriptions is ee
questioned, but is generally assumed to be admitted.

§83. What condition may be attached. to a subscription — Any
condition which can be legally performed or complied with by the
corporation may be the condition to a subscription for stock.? The
condition may be that payment shall be in labor or materials;‘ it
may require the expenditure of the subscription on a particular
part of the enterprise;*® it may stipulate that a certain amount or
the whole of the capital stock shall be subscribed before calls are
made on the subscriptions; ® or it may limit the time within which

may be received, although the letters
patent have not been issued and cannot
be until ten per’ cent. of the ‘capital
stock is subscribed. The conditional
subscription cannot, however, form any
part of such percentage. Hanover
Junction & Susquehanna R. R. Co. v.
Haldeman, 82 Pa. St., 36 (1876). _

1Ordinary conditional subscriptions
were treated as valid in Union Hotel
Co. v. Hersee, 79 N. Y., 454 (1880);
Burrows v, Smith, 10 N. Y., 550 (1853);
Morris Canal & Bkg. Co. v. Nathan, 2
Hall, 239 (1829). But the condition that
@ particular location of the proposed
road should be adopted has been held to
be contrary to public policy, since im-
proper means would thereby influence
the question of location. Butternuts &
Oxford Turnpike Co. v. North, 1 Hill,
518 (1841); Fort Edward, etc., Co. v. _
Payne, 15 N. Y., 583 (1857); Macedon &
Bristol Plank Road Co. v, Snediker, 18
Barb., 817 (1854); dictum in Dix wv
Shaver, 14 Hun, 392 (1878). However,
in the case of Lake Ontario Shore R. R.
Co. v. Curtiss, 80 N. Y., 219 (1880), a
condition of this kind was involved, and
no objection was made to its validity.
Subscriptions conditional, in that pay-
ment is to be permitted in property,
labor or contract for construction, have
been repeatedly, passed upon in New
York and upheld. See chapter IT.

2« Except in New York, conditional |
subscriptions, in the absence of a special

prohibition, so far as we have observed,
) 93

have been sustained as authorized and
not in conflict with public policy.”
Ashtabula & New London R. R. Co. v.
Smith, 15 Ohio St., 328 (1864). See, also,
New Albany & Salem R. R. Co. v
McCormick, 10 Ind., 499 (1858); McMil-
lan v. Maysville & Lexington R. R. Co.,
15 B. Monroe, 218 (1854); Dayton, etc.,
R. R. Co, v. Hatch, 1 Disney, 84 (1855),
If the condition is: ultra vires of the
corporation, the subscription is not en-
forceable, there having been no per-
formance. Pellatt’s Case, L. R., 2 Ch.,
527 (1867).

‘3The subscriber “ may agree to take
and pay for the stock absolutely or
upon such conditions as he may choose
to incorporate into his subscription.”
Penobscot & Kennebec R. R. Co. wv.
Dunn, 39 Me., 587 (1855).

4 See chapter II..’

5 Milwaukee & Northern Il. R. R. Co.
v. Field, 12 Wis., 340 (1860); Hanover
Junction & Sus. R. R. Co, v. Haldeman,
82 Pa. St., 36 (1876).

6 Phil. & West Chester R. R. Co. v.
Hickman, 28 Pa. St., 318; Penobscot &
Kennebec R. R. Co. v. Dunn, 39 Me.,
587 (1855);, Hanover Junction & Sus.
R. R. Co. v. Haldeman, supra; Union
Hotel Co. v. Hersee, 79 N. Y., 454
(1880). Even though the charter allowed
the commencement of business upon
the subscription of a less sum.- Ridge-
field & N.Y. R. R. Co, w Brush, 43
Conn., 86 (1875).

4
CONDITIONAL SUBSCRIPTIONS. [cx. Ve

§ 84.]
certain things specified therein must be done! In most states the
condition to a subscription may require the route of a railroad to
be located on a particular line? In New York such a conditional ,
subscription has been held to be void, on the ground of public pol-
icy, inasmuch as the discretion of the directors, in laying out the
route, would thereby be influenced by considerations other than
those of a purely public nature.’

In general, however, subscriptions to the capital stock of a cor-
poration may be conditional as to the time, manner or means of
payment, or in any other ‘vay not prohibited by statute, or the
rules of public policy, and not beyond the corporate powers of the

corporation to comply with.‘

§ 84. Acceptance by the corporation is necessary.— The soups :
ance by the corporation of a conditional subscription is necessary

1Ticonic Water-power & Mfg. Co. wv.
Lang, 63 Me., 480 (1874), holding also
that time herein is of the essence of the
contract. See, also, Morris Canal &
Bkg. Co. v. Nathan, 2 Hall (N. Y.), 239
(1829). See, also, § 87.

2¥isher v. Evansville, etc., R. R. Co.,
%Ind., 407 (1856); Conn. & Passumpsic
R. R. Co. v. Baxter, 82 Vt., 805 (1860);
Cumberland Valley R. R. Co. v. Baab,
9 Watts, 458 (1840); Evansville, etc., R.
R. Co. v. Shearer, 10 Ind., 246 (1858);
Jewett v, Lawrenceburgh, etc., R. R,
Co., 10 Ind., 539 (1858); Missouri Pacific
Ry Co. v. Taggard, 84 Mo., 264 (1884);
Wear v. Jacksonville, etc., R. R. Co.,
24 Ill, 595 (1860); Taggart v. Western
Md. R. R. Co., 24 Md., 563 (1866); Ra-
cine County B’k v. Ayers, 12 Wis., 512
(1860). See, also, Caley v. Phil. &
Chester County R, R. Co., 80 Pa. St.,
363 (1876). Location may be required
to be subject to the approval of the sub-
scriber. Roberts’ Case, 3 De Gex & Sm.,
205 (1850); aff'd, 2 Mac. & G., 196. See,
also, Mansfield, etc., R. R. Co, v. Brown,
26 Ohio St., 224 (1875); Same v. Stout,
26 Ohio St., 241 (1875); Chamberlain v..
Painesville, etc., R. R. Co., 15 O. St,
225 (1864); North, etc., R. R. Co. v.
Winkler, 29 Mo., 318 (1860); Spartan-
burgh, etc., R. R. Co. v. De Graffensied,
12 Rich. L., 675 (1860); Des Moines, etc.,
R. BR. Co. v. Graff, 27 Iowa, 99 (1869), A
subscription or note, not for stock,, but

absolutely as a gift to the corporation,
in consideration of a particular route
being adopted, has been upheld. Stow-
ell v. Stowell, 45 Mich., 364; First Nat'l

‘BE v. Hendrie, 49 Iowa, 402 (1878).

A subscription or donation to a railroad,
conditional on the location of a depot,
is enforceable by the company. ‘Berry-
man ¥. Cincinnati 8, R’y, 14 Bush (Ky.),

"755 (1879). See § 650. A construction

company, under contract to construct a
road by the shortest route, cannot col-
lect a sum promised by a third person
for a deflection of the route. "Wood-
stock Iron Co. v. Extension Co., 129
U. §., 642 (1889).

3See § 82, n. i

4 Conditions Stinondlatent with the
charter are void. Thigpen v. Miss., etc.,
R. RB, Co., 82 Miss., 847 (1856). The con-
ditions which may be legally made to a

_ Subscription are practically limited only

by the power of the corporation to con-
tract. A few of the conditions which
have been passed upon by the courts
have been given. Many minor ones are
involved in the cases, and present a

great variety of conditions, correspond-

ing, as they do, to the wishes and mo-
tives of individuals subscribing to the

stock of the different kinds of joint-

stock corporations. The condition of a
subscription may be that the subscriber
is made secretary. Mogridge’s Case, 58
L. T. Rep., 801 (1888),

94
CH. v.] CONDITIONAL SUBSCRIPTIONS.

[§ 85.

to the formation of the contract. 1 Until such acceptance the con-
ditional subscription is but a continuing offer. After acceptance
.. the subscriber is bound, until performance of the condition by the
corporation, to await such performance; he cannot withdraw the
conditional subscription after it has been accepted. It seems, how-
ever, that if the performance of the condition is delayed unreason-
ably by the corporation, the conditional subscriber will be thereby
released from his obligation?

§ 85. Construction of conditional subscription.— Gonditional sub-
scriptions, like other contracts, are to be construed reasonably and
according to the intent of the parties, as indicated by the language

used in the contract.®

1 Junction R. R. Co. v. Reeve, 15 Ind.,
236 (1860), where the subscription was
payable in land. See, also, Galt’s Ex’rs
v. Swain, 9 Gratt. (Va.), 633 (1853).
*“When the offer was accepted the
minds of the parties met and the con-
tract was complete. The ac-
ceptance by the plaintiff constituted a
sufficient legal consideration for the en-
gagement on the part of the defend-
ants.” Taggart v. Western Md. R. R.
Co., 24 Md., 568 (1866). By the entry
of the subscription on the corporate
record an acceptance is iniplied. New
Albany & Salem R. R. Co, v. McCor-
mick, 10 Ind., 499 (1858). Acceptance
by the president of the corporation, and
a subsequent ratification by the direct-
ors of all his acts, is sufficient. Pitts-
burgh & Connellsville R. R. Co. v.
Stewart, 41 Pa. St., 54 (1861). The de-

livery and acceptance may be proved.

by parol. Mansfield & New Lisbon R.
R. Co. v. Smith, 15 O. St., 828 (1864).
Where it is delivered in escrow to the
agent of the corporation, there can be
no acceptance of it by the corporation,
so long as such delivery continues. Cass
». Pittsburgh, Va. & Charleston R’y Co.,
80 Pa. St., 31 (1875). It may be revoked
while still in the hands of a corporate
agent. Lowe v. Edgefield & K, RB. R.
Co., 1 Head (Tenn.), 659 (1858).

2 Where, the condition not being per- :

formed, the subscriber notifies the sec-

The circumstances under which the sub-
scription was made are also to be taken into consideration.!

If two

retary of his withdrawal from the sub-
scription, he is released. "Wood’s Case,
L. R., 15 Hq., 236 (1873). ‘‘The objec-
tion to a continuing offer, that it sus-
pends indefinitely the liability of the
conditional subscribers, is sufficiently
answered by the consideration that all
such offers are subject to retraction,
and may be recalled if their acceptance
is unreasonably deferred.” Taggart v.
Western Md. R. R. Co., 24 Md., 563
(1866). See query and briefs in Mans-
field, Coldwater & Lake Mich. RB. R.
Co. v. Stout, 26 O. St., 241 (1875), which
holds that the question of acceptance is
immaterial where performance of the
condition has been completed by the
corporation, |

3The whole contract is to be taken
together, and is ‘‘ to have a reasonable
construction according to the intent
of the parties.” People’s Ferry Co. v.
Balch, 74 Mass., 303 (1857). ‘‘ The lan-
guage was chosen by them to express
their mutual intent, and such construc-
tion must be given thereto as will carry
into effect that mutual understanding.

: We are to ascertain what the
parties understood and intended by’
this language, and may not deviate
therefrom, whether that contract, as so
interpreted, be wise or unwise for either
party.” Memphis, Kan. & Col. R. R. Co.
v. Thompson, 24 Kan., 170 (1880).

4*‘The contract must be interpreted
95
§ 86.]

CONDITIONAL SUBSCRIPTIONS.

Lox. v.

interpretations are possible, that which facilitates the enterprise is
preferred to that which retards it.1. If the meaning is ambiguous,
it is for the jury to say what the interpretation is to be.’

§ 86. Performance of the condition.— A condition to a subscrip-
tion-for stock must be performed or complied with before the sub-
scriber can be compelled to pay such subscription.? A substantial
performance of the condition is sufficient. A failure to perform
is not excuséd by reason of unforeseen difficulties arising from

by the light of the circumstances which
existed at the time it was made, and
not of those which arose afterwards.”
Monadnock R. R. v. Felt, 52 N. H., 879
(1872); Detroit, L. & L. M. R. R. Co. v.
Starnes, 88 Mich., 698 (1878).

1 Ashtabula & New Lisbon R. R. Co.
v. Smith, 15 O. St., 328 (1864). See,
', also, § 51.

2Connecticut R. R. Co. v. Baxter, 32
Vt., 805 (1860).

3 Porter v. Raymond, 58 N. H., 519
(1873); Monadnock R. R.. v. Felt, 52
N. H., 879 (1872); Montpelier & Wells
River R. R. Co, v. Langdon, 46 Vt., 284
(1873); Ashtabula & New Lisbon R. R.
Co. v. Smith, 15 O. St., 828 (1864); Phil.
& West Chester R. R. Co. v. Hickman,
28 Pa. St., 318 (1857); Burrows v, Smith,
10 N. Y., 550. ‘‘Upon the perform-
ance of the condition by the promisee
the contract is clothed with a valid con-
sideration, which relates back, and the
promise at once becomes obligatory.”
Des Moines Valley R. R. Co. v. Graff,
27 Iowa, 99 (1869).

4O'Neal v. King, 3 Jones’ L. (N. C.),
517 (1856), See, also, Virginia, etc., R.
R. Co. v. County Comm’rs, etc,, 8 Nev.,
68 (1870); Springfield St. R’y Co. vu.
Sleeper, 121 Mass., 29 (1876); People »v,
Holden, 82 Ill., 93 (1876). Performance
must be within a reasonable time.
Stevens v. Corbitt, 83 Mich., 458 (1876).
Subscription on express condition that
it shall be payable only in case the
whole amount is subscribed cannot be
collected, where the whole amount was
made up by including the subscriptions
of married women who had not paid.
Appeal of Hahn, 7 Atl. Rep., 482 (Pa.,

1886). Condition that subscription shall
be payable only when a sum deemed
sufficient by the directors has been sub-
scribed is not fulfilled when the direct-
ors fixed a sum, and then later reduced
the sum to the amount subscribed,
Only unconditional subscriptions are
to be counted. Brand v. Lawrence-
ville, etc., R. R. Co., 1 8, E. Rep., 255
(Ga., 1887). If performance turns on
a writing, question is for the court.
Id. Reasonable performance is all
that is required. Thus completion of
a blast furnace, as a condition, is satis- -
fied by completion by lessee. Appeal
of Cornell, 6 Atl. Rep., 258 (Pa., 1886).
Condition that company shall construct
a road from and to specified points is
not fulfilled by construction of part of
the way and running over another rail-
road for the remainder of the distance.
Brown v. Dibble, 82 N. W. Rep., 656
(Mich., 1887). Contra, People v. Holden,
82 Ill., 93. In the case of Martin v.
Pensacola & Geo. R. R. Co., 8 Fla., 370,
890 (1859), it is stated, in a dictum, that
astrict compliance is necessary. But see
Branham v. Record, 42 Ind., 181 (1878).

_A subscription to an enterprise, condi-

tional upon the performance of that en-
terprise by certain named parties and a
conveyance of the results to a corpora-
tion, may be enforced by such parties
upon due performance. Brewer v. |
Stone, 77 Mass., 228 (1858), A subscrip-
tion to a railroad, conditional upon its
completing the road, is,not. enforceable
by a consolidated company which suc-
ceeds to and completes the road, Toledo,
etc., R. R. v. Hinsdale, 15 N. E. Rep.,
665 (O., 1888).

96
CH. v.] CONDITIONAL SUBSCRIPTIONS.

[§ 87.
floods and natural causes.' A conditional subscriber is not a stock-
holder or member of the corporation until after the condition is
performed.? Whether or not the condition has been performed is
a question of fact. Performance may be proved by parol or by
the records of the corporation.‘

§ 87. Where the condition is that the work shall be begun, con-
tracted for, or completed within a certain time, time is of the es-
sence of the contract, and any failure to perform within the time
so specified defeats the subscription.® A condition that the road
shall be “ permanently ” located on a specified route is satisfied by
the adoption of that route by the directors.’ Where the question
of whether performance has been completed rests in the decision
of the directors, their conclusion cannot be questioned, unless fraud
or bad faith is proved.’ A condition that the subscription shall be
applied to a particular portion of the road is satisfied by the com-
pletion of that portion. Any fraud on the part of the corporation

1 Memphis, Kan. & Col. R. BR, Co. v.
Thompson, 24 Kan., 170 (1880).

2Chase v. Sycamore & Courtland R.
R. Co., 38 Tll., 215 (1865); Slipher v. E Ear-
hart, Adm., 83 Ind., 178 (1882); Evans-
ville, Ind. & Cleveland 8. L. RB. RB. Co.
v. Shearer, 10 Ind., 244 (1858).

3 Jewett v. Lawrenceburgh & U. M.
R. R. Co., 10 Ind., 589 (1858). And isa
question for the jury. St. Louis &
Cedar Rapids R. R. Co. v. Eakins, 30
Iowa, 279 (1870).

4By parol. St. Louis & Cedar Rapids
R. R. Co. v. Eakins, 80 Iowa, 279 (1870).
By corporate records. Penobscot &
Kennebec R. R. Co. v. Dunn, 39 Me.,
587 (1855). Contra, Phil. & West Ches-
ter R. R. Co. v. Hickman, 28 Pa. St.,
318 (1857). Performance must be al-
leged in the complaint or declaration.
Trott v. Sarchett, 10 {O. St., 241 (1859) ;
Roberts v. Mobile '& O. R. R. Co., 32

Miss., 873 (1856); Henderson & Nash-.

ville R. R. Co. v. Leavell, 16 B. Monroe,
358 (1855).

5 Burlington, & Missouri River R. R.
Co. v. Boestler, 15 Iowa, 555 (1864), per
Dillon, J.; Freeman v. Mack, 67 Ind.,
99 (1879); Memphis, Kan. & Col. R. R.
Co. v. Thompson, 24 Kan., 170 (1880);
Portland & Oxford Central R. R. Co. v.
Inhabitants of Hartford, 58 Me., 28

%)

(1870). If the directors certify that the
condition was performed within the
specified time, the subscriber may prove
the falsity of their certificate. Morris
Canal & Bkg. Co. v. Nathan, 2 Hall (N.
Y.), 239 (1829). Upon the failure of the
corporation to comply with this condi-
tion the subscription ceases to have any
vitality ‘‘ by its own limitation.” Ti-
conic Water-power & Mfg. Co. v. Lang,
63 Me., 480 (1874). In the case, how-
ever, of Missouri Pacific R’y Co. v. Tag-
gard, 84 Mo., 264 (1884), a completion
of the road within a reasonable time
after the time specified in the condition
was held to be a substantial perform-
ance, and sufficient, the grading having
been completed in the specified time.
See, also, Moore v. Campbell, 12 N. EB.
Rep., 495 (Ind., 1887), where the condi-
tion was inserted in a promissory note.

6Smith v, Allison, 23 Ind., 366 (1864);-
and see cases in § 78. So also a condi-
tion that the road shall cross another at
acertain point.is satisfied by its being
so located. Wear v.. Jacksonville &
Savannah R. R. Co., 24 Ill., 593 (1860).

7Cass v. Pittsburg, Va. & Charleston
R’y Co., 80 Pa. St., 31 (1875).

8 Nichols v. Burlington & Louisa
County Plank-road Co., 4 Greene (Iowa),
42 (1853), 28 /

97. :
CONDITIONAL SUBSCRIPTIONS. [cH. v.

§ 88.]

in the performance of the condition may be shown.by parol. All
of several conditions must be performed before calls are made.’
But if one part of the subscription be free from condition, that
part may be collected independently.’ Where, after part payment
by the conditional subscriber, the corporate plans are changed, so
that the condition is not complied with, the money, it has been
held, may be recovered back.’

§ 88. Waiver of the condition— A conditional subscriber to the
stock of a corporation may waive the condition and performance
thereof, and thus become liable on his subscription, as though it
had been originally an absolute one. The waiver may be by an
oral statement or agreement of the subscriber.’ Certain acts of the
subscriber have been held to indicate an intent to waive a condition
to the subscription, and to be equivalent to a direct waiver. Thus
acting as a director,’ or as president of the corporation,’ paying the
whole of the subscription,® giving an absolute promissory note with-
out conditions in payment of the subscription,® have each been held
to constitute a waiver of the condition to a subscription. But mere
silence is not a waiver,” nor payment of part of the subscription,”

1New York Ex. Co. v. De Wolf, 31
N. Y., 271 (1865).

2 Porter v. Raymond, 53 N. H., 519,
(1878).

3§t. Louis, etc., R. R. Co. v. Eakins,
80 Iowa, 279 (1870).

4 Jewett v. Lawrenceburgh & U. M.
R. BR. Co., 10 Ind., 539 (1858).

5 Hanover Junction & Sus. R. R. Co.
v. Haldeman, 82 Pa. St., 36 (1876). See,
also, Woonsocket Union R. R. Co. wv,
Sherman, 8 R. I., 564 (1867).

6Lane v. Brainerd, 80 Conn., 565
(1862).

7Dayton & Cincinnati R. R. Co. v
Hatch, 1 Disney (O.), 84 (1855).

8Parks v. Evansville, Ind: & Cleve-
land S. L. R. R. Co., 23 Ind., 567 (1864).

®Chamberlain v. Painesville & Hud-
son 'R. R. Co., 15 O. St., 225 (1864); Sli-
pher v. Earhart, Adm., 83 Ind., 173
(1882); Evansville, etc., R. R. Co. v.
Dunn, 17 Ind., 608 (1861); Keller v. John-
son, 11 Ind., 337 (1858); O’Donald v. Ev-
ansville, etc., R. R. Co., 14 Ind., 259
(1860). But not where the note was
given by reason of false representations
that the condition had been complied
with. Parker v, Thomas, 19 Ind., 213:

(1862); Taylor v. Fletcher, 15 Ind., 80
1860).

10 Burlington & Mo. River R. R. Co. v.
Boestler, 15 Iowa, 555 (1864); Bucks-
port & Bangor R. R. Co. v. Inhabitants
of Brewer, 67 Me., 295 (1877). In Ore-
gon it is held that where the condition
was the subscribing of a certain amount
within a certain time, which was not
done, but was performed soon after
that time, the conditional subscriber is
bound, where he did not cause his sub-
scription to be stricken from the books.
Lee v. Granger, etc., Co., 11 Pac. Rep.,
270 (1886). Subscribers obtaining stock
on condition that a building contract be
given to them cannot rescind for non-
performance by the company, where
the subscribers have long delayed re-
scission, after such refusal of the com-
pany to perform, Rankin v. Hop, etc.,
Co., 20 L. T. Rep., 207 (1869). Failure
of a subscriber conditionally, fora long
time, to have his name taken off the
list, renders him liable on the wind-up.
Wheatcroft’s Case, 29 L. T, Rep., 324
(1873).

11 Pittsburgh & Connellsville BR. R.
Co. v. Stewart, 41 Pa. St., 54 (186!);

98
CH. v.] CONDITIONAL SUBSCRIPTIONS.

[§ 89.
nor aid in the attempt to start the enterprise, by soliciting sub-
scriptions and being elected to a corporate office.!

§ 89. Notice of performance and calls— There is some doubt as
to whether, upon performance of the condition, the subscriber is
entitled to notice of such performance. The better rule seems to be
that he is entitled to such notice, and that a general “call” for the
payment of part or all of the subscriptions for stock does not ap-
ply to conditional subscribers, unless the condition has been per-
formed, and the fact of performance has been brought to the
attention of the subscriber.’ |

Subscriptions payable in property are not subject to calls, and a
demand for the property must be made by the corporation.’ Upon
failure of the subscriber to furnish the property, or upon insolvency

of the corporation, such subscriptions become payable in cash.4

Robert’s Case, 2 Mac. & G., 196 (1850);
Jewett v. Lawrenceburgh & U. M. R,
R. Co., 10 Ind., 539(1858). But see Ap-
peal of Mack, 7 Atl. Rep., 481 (Pa., 1886),
where, however, a substantial perform-
ance had been made.

1 Ridgefield & N. Y. R. R. Co. v. Rey-
nolds, 46 Conn., 375 (1878). .

2 Chase v. Sycamore & Courtland R.
R. Co., 38 Ill, 245 (1865); Trott v. Sar-
chett, 10 O. St., 241 (1859). Contra,
Nichols v. Burlington & Louisa County
Plank -road Co., 4 Greene (Iowa), 42
(1858); Spartanburg & Union R. R. Co.

‘». De Graffenreid, 12 Rich. L. (S. C.),
675 (1860), holding that no “call” is
necessary, and that interest runs from
the time of performance. '

Ohio, etc., R. R. Co. v. Cramer, 23

Ind., 490 (1864), Payment cannot be
required in instalments. Id. But upon
demand the subscriber must ascertain
when and where the materials are to
be delivered. McClure v. People’s R. R.
Co., 90 Pa. St., 269 (1879).

4Haywood, ete., R. R. Co. v. Bryan,
6 Jones (N. C.), 82 (1858); Sperry v.
Johnson, 11 O., 452 (1842). See § 18,
n. 8. In one case, however, it was held.
that the subscriber was liable only in
damages to the extent of the market.
value of the stock. Dayton & Cin. R..
R. Co. v. Hatch, 1 Disney, 84 (1855).
Subscription on condition of being ap-
pointed secretary is not enforceable on
wind-up, the appointment not having
been made, Rogers’ Case, L. R., 3 Ch.,
633 (1868).

99 -
CHAPTER VI.

MUNICIPAL SUBSCRIPTIONS.

 

$90. A municipal corporation has no § 96. What officer or agent of the mu-
implied power or authority to nicipality may make the con-
subscribe for stock in any other tract. of subscription. ;
corporation. ; 97. Municipal subscriptions may be

91. The legislature may authorize conditional, = ;
municipal subscriptions to pub- 98. Whenmaya municipal subscrip-
lic, but not to private, enter- tion be paid in bonds instead
prises. 3 . k of money? Mee

92. Constitutional provisions prohib- 99. A municipal corporation as a
iting municipal subscriptions. stockholder.

93. Change in the state constitution, | 100. A municipality may enforce de-
or the general statutory laws, livery of stock to itself in a
after the municipal corporation ; proper case.

_ has voted to subscribe. 101. Division of the municipality

94. Statutory formalities must be after the subscription.
substantially complied with. 102. Consolidation of companies after

95. ‘Submission to popular vote. the municipal aid is voted.

§ 90. A municipal corporation has no implied power or authority
to subscribe for stock in any other corporation.— A municipal corpo-
ration, being in its nature and purposes a very different legal institu-
tion from an ordinary private corporation, being indeed but a mode
or department of government — “an investing the people of a place
with the local government thereof,” !— it is plain.that the general
rules of law applicable to private corporations having capital stock
are, for the most part, inapplicable when the rights, duties, powers
and liabilities of municipal corporations are sought to be accurately
determined.

It is proposed to consider the right of a municipality to enter
into the contract of subscription to the capital stock of other
corporations, and of the liabilities, rights and duties growing out
of such a subscription. The subject practically narrows itself to
the right of municipal ‘corporations to subscribe to the stock of
railway corporations, inasmuch as this right, wherever it exists, is
almost universally exercised in favor of these corporations, and the
adjudicated cases almost all present phases of the question applying
to them. .

It is a well settled rule of law that municipal corporations have

1Cuddon v. Eastwick, 1 Salk., 183 (1871); State v. Leffingwell, 54 Mo., 458
(1704); Dillon on Munic. Corp., §§ 19, 20. (1873); Norton v. Peck, 3 Wis., 714 (1854);
2People v. Morris, 138 Wend., 325 Ottawa v. Carey, 108 U.S., 110 (1883).
(1835); People v. Hurlbut, 24 Mich., 44
100
’ he
CH. VI.] MUNICIPAI, SUBSCRIPTIONS. [§ 90.

no implied right or authority to subscribe for the stock of any other
incorporated company.! In order, therefore, to establish the valid-
ity of a municipal subscription to the stock of a railway company,
an express grant of authority from the legislature must “be shown?
The right to subscribe is derived from the legislative enactment;
and whether or not an enabling act is sufficient to validate a sub-
scription is a question of law for the court, not for the jury.’

Every holder of municipal bonds issued to raise money to pay
such a subscription, whether he receives them directly from the
town or county, or from the railway company to which they may
have been delivered, or takes them from some prior holder in the
ordinary course of business, is chargeable with notice of the stat-

utory provisions under which they were issued.*
The right to make a donation to a railroad or other work of

1‘*To become stockholders in private
corporations,” says Judge Dillon, ‘is
manifestly foreign to the usual purposes
intended to be subserved by the creation
of corporate municipalities.” Dillon on
Munic. Corp., § 161; Kelley v. Milan, 127
U. S., 189 (1888). See, also, Kenicott v.
Supervisors, 16 Wall. , 452 (1872); Thomp-
son v. Lee County, 3 id., 327 (1865); Bell
v. Railroad Co., 4 id., 598 (1866); Wells

v. Supervisors, 102 U. S., 625 (1880); La- -

moille, etc., R. R. Co. v. Fairfield, 51 Vt.,
257 (1878); Barnes v. Lacon, 84 Ill., 461
(1877), holding that a vote of the people
of a town to-subscribe for stock with-
out the authorization of law is not bind-
ing upon thetown. Tosame effect, Allen
v. Louisiana, 103 U. S., 80 (1880); Penn-
sylvania R. R. Co. v. Philadelphia, 47
Penn. St., 189 (1864); City of Jonesboro’
v. Cairo, etc., R. R. Co., 110 U. &., 192
(1883), holding that a general power to

- borrow money and issue bonds therefor.

does not confer the right to subscribe for
stock, even with the sanction of the vot-
ers at ageneralelection. Cf. Gelpcke v.
Dubuque, 1 Wall., 220 (1863); Campbell
v. Paris, etc., R. R. Co., 71 Ill., 611 (1874);
East Oakland v. Skinner, 94 U. S., 255
(1876); City of Lynchburg v. Slaughter, 75
Vaz, 57 (1880); Brodie v. McCabe, 38 Ark.,

690 (1878). A municipal corporation
cannot enforce a penal bond given to it
by a plank-road company, conditioned

that the latter will use to build its road
certain bonds issued by’ the former, it
appearing that the aid to the plank-road
company was ultra vires of the munici-
pality. City Council, etc., v. Montgom-
ery, etc., Co., 31 Ala., 76 (1857). Attor-
ney-general may restrain municipality
from illegally issuing bonds to a rail-
road company. State v. Saline, etc.,
Court, 51 Mo., 350 (1873); reviewing
the English and American cases.

2 Sharpless v. The Mayor, 21 Penn. St.,
147 (18583); Leavenworth Co. v. Miller, 7
Kan., 479 (1871). Cf. Welch v. Post, 99
Tl., 471 (1881); Marsh v. Fulton Co., 10
‘Wall., 676 (1870), holding that the power
to sutiscribe to the stock of a railroad
is not sufficient to authorize a subscrip-
tion to a new incorporation of a part of
it; La Fayette v. Cox, 5 Ind., 38 (1854);

-Dillon on Munic. Corp., § 161; Ottawa

v. Carey, 108 U. 8., 110 (1883): Lewis v.
City of Shreveport, 108 id., 282 (1883).

3Post v. Supervisors, 105 U. S., 667
(1881); Leavenworth Co. v.Miller, supra.

4 Ogden v.’ County of Daviess, 102
U. S.. 684 (1880); Lewis wv. City of
Shreveport, 108 id., 282 (1883); City of
Ottawa v. Carey, 108 id., 110 (1883);
McClure v. Township of Oxford, 94 id,
429 (1876). This is the settled rule of
the supreme court of the United States:
on this point.

101
§ 91.] [cH. vI.
international improvement must equally be derived from the act
of the legislature. Without such express authority of law, a dona-
tion or issue of bonds as a gift to a railroad company is invalid and
void.

$91. The legislature may authorize municipal subscriptions to
' public but not to private enterprises.—It was long a question
whether the legislature had the constitutional right to authorize a
municipality, to subscribe money, : or donate it, in furtherance of
any enterprise not governmental in its nature. It has been con-
tended with great ability and learning that such a right does not
inhere in the legislative branch of the government in this country,
and consequently that such assumed grants are unconstitutional and
void.’ But it is now a well-settled rule that the legislature has the
constitutional power to authorize a municipal corporation, by its
charter or an express act, to subscribe to the stock of a railway.
or other guasi public corporation, and to issue and sell its bonds
for that purpose. The inclination of municipalities to repudiate

MUNICIPAL SUBSCRIPTIONS.

1 Dixon County v. Field, 111 U. 8., 83
(1884).

The power of the legislature to au-
thorize a municipality to donate funds
or bonds herein is absolutely denied in
Hanson v, Vernon, 27 Iowa, 28; Sweet
v. Hulbert, 51 Barb., 312 (1868). Cf.
Com’rs v, Miller, 7 Kan., 479. The rail-
road cannot collect, as a donation, money
which was voted as a subscription.
Crooks v. State, 4 Northeast. Rep., 589
(Ind., 1886).

2Cooley on Const. Lim., pp. 261-266;
Dillon on Munic. Corp., §§ 12, 117, 153,
For the rule in Michigan, Iowa and
New York, see next note,

3So held by the supreme court of the
United States. Knox County v. Aspin-
wall, 21 How., 539 (1858); Zabriskie v.
Railroad Co., 23 id., 881 (1859); Amey
v. Mayor, 24 id., 364, 876 (1860); Curtis
v. Butler Co., 24 id., 435 (1860); Gelpcke
v. Dubuque, 1 Wall., 175 (1863); Mercer
Co. v, Hackett, 1 id., 83 (1863); Seybert
v. Pittsburgh, 1 id., 272 (1863); Van
Hastrup:. 7. Madison, 1 id., 291, (1863):
Havemeyer v. Iowa Co., 3 id., 294
(1865); Thompson v. Lee County, 3 id.,
827 (1865); Rogers v. Burlington, 3 id.,
654 (1865), holding that power “to bor-
row money for any public purpose”

gives authority to borrow to aid a rail-
road company; Mitchell v. Burlington,
4 id., 270 (1866); Von Hoffman v.
Quincy, 4 id., 535 (1866); Campbell v.
Kenosha, 5 id., 194 (1866), holding that
a subscription may be validated by sub-
sequent legislation, and such validation
may be by implication; holding that
levy of tax and payment of interest
validates bonds irregularly issued;
Meyer v. Muscatine, 1 id., 384 (1868);
Lee County v. Rogers, 7 id., 181 (1868);
Beloit v. Morgan, 7 id., 619 (4868); City
of Kenosha v. Lamson, 9 id., 477 (1869);
Railroad Co. v. County of Otoe, 16 id.,
667 (1872); 8. C., 1 Dillon, 388, holding
that, unless restrained by provisions of
the constitution of astate, its legislature
may authorize a county to issue bonds
and donate them to a railroad com-
pany which will give it a valuable con-
nection with some other region; Woods
v. Lawrence Co., 1 Black, 880 (1861),
holding that where, by statute, the
grand jury of a county is required to
fix the amount of the subscription, their
act in pursuance thereof cannot. after-
wards be questioned by the county as to
such amount; and if payment is to be
made as may be agreed upon, an issue
of bonds for that purpose is binding

102
CH. VI.]

their obligations after receiving

has been thwarted by the courts.

upon the county ; Gilman v. Sheboygan,
2 Black, 510 (1862), holding that a statute
authorizing a city to borrow money,
and to tax property to pay it, does not
constitute such a contract with the
bondholders that the state cannot after-
wards modify the taxation even by the
exemption of portions of taxable prop-
erty; Olcott v. Supervisors, 16 id., 678
(1872); Rock Creek v. Strong, 96 U. S.,
271 (1877); Hickory v. Ellery, 103 id.,
423 (1880); Clay Co. v. Society for Sav-
ings, 104 id., 579 (1881); Taylor ».
Ypsilanti, 105 id., 60 (1881); Lewis v.
Barbour Co., 105 id., 789 (1881); Amos-
keag National Bank v. Ottawa, 105 id.,
667 (1881); Woods v. Lawrence Co., 1
Black, 386; Gilman v. Sheboygan, 2 id.,
510; Town of Scipio v. Wright, 101
U. S., 665 (1879). And in the circuit and
district « urts of the United States.
Long v. New London, 9 Biss., 539 (1880);
Sibley v. Mobile, 8 Woods, 585 (1876);
United States v. New Orleans, 2 id.,
230 (1876).

Alabama — Stein v. Mayor, etc., 24
Ala., 591 (1854); Opelika v. Daniel, 59
Ala., 211 (1877); Ha parte Selma, etc.,
R. BR. Co., 45 id,, 696 (1871); Gibbons v.

Mobile, etc., R. R. Co., 36 id., 410 (1860). -

Arkansas — Mississippi, etc., R. R. Co.
v. Camden, 23 Ark., 300 (1861); Fnglish
vy, Chicot Co., 26 id., 454 (1871); Jack-
sonport v. Watson, 33 id., 704 (1878).

California — Robinson v. Bidwell, 22
Cal., 379 (1863); People v. Coon, 25 id.,
635 (1864); Napa Valley R. R. Co. w,
Napa County, 80 id., 485 (1866); Stock-
ton, etc., R. RB. Co. v. Stockton, 41 id.,
147 (1871).

Colorado — People v. Pueblo Co., 2
Col., 860 (1874).

Connecticut — Bridgeport v. Housa-
tonic R. R. Co., 15 Conn., 475 (1848),
holding that a subscription made by a
city without authority may be made
valid by subsequent legislative action;
in this case the validating statute was

MUNICIPAL SUBSCRIPTIONS.

[§ 91.

the benefits of those obligations
And the result is a satisfactory

passed upon the application of the city
making the subscription; Beardsley »v.
Smith, 16 id., 368 (1844); Society, etc.,
v. New London, 29 id., 174 (1860); Doug-
lass v. Chatham, 41 id., 211 (18'74).

Florida — Cotton v, Leon Co., 6 Fla.,
610 (1856).

Georgia — Winn v. Macon, 21 Ga.,
275 (1857); Powers v. Inferior Court of
‘Dougherty County, 23 id., 65 (1857).

Illinois — Shaw v. Dennis, 5 Gilm.,
405 (1849); Prettyman v. Tazewell Co.,
19 IIL, 406 (1858), holding that an in-
junction on the ground of fraud at an
election authorizing a subscription will
not be granted to one who delays until
others have acted upon the faith that
the municipal corporation will aid an
enterprise; Robertson v. Rockford, 21
id., 451 (1859); Supervisors of Schuyler
Co. v. People, 25 id., 181 (1860); Butler
v, Dunham, 27: id., 474 (1861); Dunno-
van v. Green, 57 id., 63 (1870); Madison
Co. v. People, 58 id., 456 (1871); Chicago,
etc., R. R. Co. v. Smith,, 62 id., 268
(1871); ‘Decker v. Hughes, 68 id., 33
(1873); Quincy, etc., R. R. Co. v. Mor-
ris, 84 id., 410 (1877); Chicago,. etc., R.
R. Co. v. Aurora, 99 id., 205 (1881);
Olcott v. Supervisors, 16 Wall., 678
(1872). But see Weightman v. Clark,
103 U. S., 256 (1880).

Indiana — City of Aurora v. West, 9
Ind., 74 (1857); 8. C., 22 id., 88; Evans-
ville, etc., R. R. Co. v. Evansville, 15
id., 395 (1860); Board of Bartholomew
Co. v, Bright, 18 id., 93 (1862); Thomp-
son v. City of Peru, 29 id., 305 (1868);
Lafayette, Muncie, etc., R. R. Co. uv
Geiger, 34 id., 185 (1870); John v. Cin-
cinnati, etc., R. R. Co., 35 id., 589 (1871);
Commissioners of Crawford Co, v. Louis-
ville, etc., R. R. Co., 39 id., 192 (1872);
Mt. Vernon v. Hovey, 52 id., 563 (1876);
Indiana, etc., R. R. Co. uv. Attica, 56 id.,
476 (1877); Williams v. Hall, 65 id., 129
(1879); Bittinger v. Bell, 65 id., 445
(1879); Brocaw v, Gibson Co., 78 id.,

108° :
§ 91.]

MUNICIPAL SUBSCRIPTIONS.

[cH. vz.

one. Any other decision would have checked the growth of the
country, unsettled investments, and brought upon American munici-

848 (1881); Peed v. Millikan, 79 id., 86
(1881).

Iowa — “In Iowa, up to 1858, it was
held that such acts were constitutional ;
but from that time up to 1869 they were
held to be unconstitutional, when the
court seems to have undergone a radi-
cal change, and from that time to the
present the constitutionality of such
measures has been sustained.” "Wood
on Railways, p. 264, citing Dubuque Co.
v. Dubuque, etc., R. R. Co., 4 Greene
(owa), 1 (1853); State v. Bissell, 4 id.,
828 (1854); Clapp v. Cedar Co., 5 Iowa,
15 (1857); McMillen v. Lee Co., 6 id.,
891 (1858). The above authorities, prior
to 1858, hold these acts constitutional,
as do the following, handed down since
1869: Stewart v. Polk Co., 30 Iowa, 9

(1870); Bonnifield v. Bidwell, 32 id.,.
149; Jordan v, Hayne, 36 id., 9 (1872);

Muscatine, etc., R. R. Co. v. Horton, 38
id., 88 (1873); Wapello v. B. & M. R. R.
Co., 44 id., 585 (1876); McMillen v.
Boyles, 6 Iowa, 304 (1858); Games v.
Robb, 8 id., 198 (1859); Chamberlain v.
Burlington, 19 id., 395, holding that a
charter authorizing a city to borrow
money for ‘any public purpose” does
not confer power to aid in constructing
arailroad; particularly King v. Wilson,
1 Dillon, 555 (1871); as to how far the
federal courts will follow the state
courts as to the constitutionality of such
statutes. While the following cases,
decided between 1858 and 1869, hold
such acts unconstitutional and void:
Stokes v. Scott, 10 Iowa, 166 (1859);
State v. Wapello, 13 id., 888 (1862);
Myers v. Johnson, 14 id., 47 (1862).
Kansas — City of Atchison v. Butcher,
8 Kan., 104 (1865); Leavenworth Co. v.
Miller, 7 id., 479 (1871); Southern, etc.,
R. R. Co. v. Towner, 21 Pac. Rep., 220
(Kan., 1889); Morris v. Morris Co., 7
id., 576 (1871); State v. Nemaha Co., 7
id., 542 (1871); Barnes v. Atchison, ‘2
id., 454 (1864); Leavenworth, etc., RB. R.

Co. v. Douglass Co., 18 id., 169 (1877);
Turner v. Commissioners, etc., 27 Kan.,
814 (1882), holding that, where the
amount of bonds voted to be issued was
in excess of the amount which a town-
ship might legally issue, the vote was a
nullity only as to the excess.

Kentucky — Talbot v. Dent, 9 B.
Mon., 526 (1849); Slack v.. Maysville,
etc., R. R. Co., 18 id., 1 (1852); Maddox
». Graham, 2 Metc., 56 (1859); Shelby
Co. Court v. Cumberland, etc,, R, R.
Co., 8 Bush, 209 (1871), holding that a
subscription not authorized by law may
be validated by later legislation; Alli-
son v. Versailles, etc., R. R. Co., 10 id.,
1 (1878).

Louisiana — Police Jury v. McDon-
ough, 8 La. Ann., 341 (1858); Parker v,
Scogin, 11 id., 629 (1856). Cf. Wilson
v. Shreveport, 29 id., 673 (1877).

Maine— Augusta Bank v. Augusta,
49 Me., 507 (1860); Stevens v. Anson, 73
id., 489 (1882). *

Massachusetts — Supervisors v. Wis-
consin, etc., R. R. Co., 121 Mass., 460
(1877), holding that the legislature of
Wisconsin bas power to authorize
counties to subscribe for stock in aid of
railroads and to issue bonds therefor.

Michigan —In Michigan the courts
hold that statutes authorizing munici-
pal corporations to subscribe to the
stock of a railroad or vote bonds to it
are void, and the subscription and
bonds are void. People v. Salem, 20
Mich., 452 (1870); Thomas v. Port Hud-
son, 27 id., 320 (1878); Bay City v. State
Treasurer, 23 id., 499; People v. Detroit,
28 id., 228 (1873). But see Talcott v
Pine Grove, 1 Flippin (U. S.), 120 (1871),
where the position taken by the court
of Michigan was held to be so contrary
to precedent and so unexpected as to
operate as a surprise upon the commu-
nity; 8. C. affirmed, sub nom.; Town-
ship of Pine Grove v. Talcott, 19 Wall.,
660 (1878), which was adhered to in

104
}

CH. vi.]

MUNICIPAL SUBSCRIPTIONS.

[§ 91.

palities the disgrace and disastrous loss of credit which arise from

repudiation.

Taylor v. Ypsilanti, 105 U. S., 60 (1881).
See, also, Chickaming v. Compenien, 106
U. S., 663 (1882).

Minnesota — Davidson v. Ramsey
Co., 18 Minn., 482 (1872); State v. Clark,
23 Minn., 422 (1877). =

Mississippi — Strickland v. Railroad
Co., 27 Miss., 209; New. Orleans, etc.,
R. R. Co. v. McDonald, 53 Miss., 240
(1876); Wells v. Supervisors, 102 U. 8.,
625 (1880).

Missouri — St. Louis v, Alexander, 23
Mo., 483 (1856); St. Joseph, etc., R. R.
Co. v, Buchanan Co., 39 Mo.. 485 (1867);
State v. Macon Co. Court, 41 id., 453
(1867); Chillicothe, etc., R. R. Co. vu,
Brunswick, 44 id., 553 (1867); State v.
Linn Co., 44 id., 504 (1869); Same wv. Sul-
livan Co., 51 id., 522 (1873); Osage Val-
ley, etc., R. R. Co. v. Morgan Co., 53
id., 156 (1873); Smith v. Clark Co., 54
id., 58 (1878); State v. Greene Co., 54
‘id., 540 (1874). :

Nebraska — Hallenbeck v, Hahn, 2
Neb., 377 (1878); Reineman v. Coving-
ton, etc., R. R. Co., 7 id., 310 (1878);
holding that, if a county votes aid toa
railroad in excess.of the sum allowed
by the law, such act is void and will not
authorize the issue of any bonds what-
ever; Railroad Co. v. County of Otoe,
16 Wall., 667 (1872).

Nevada — Gibson v. Mason, 5 Nev.,
283 (1869); Dixon County v. Field, 111
Uz S., 83 (1884).

New Hampshire — Perry v. Keane,
66 N. H., 514 (1876).

New York —In New York the courts
have unwillingly sustained the validity
of such grants. Clarke v. Rochester,
28 N. Y., 605 (1864); Grant v. Courter,
24 Barb., 282 (1857); Benson v. Albany,
24 id., 248 (1857); People v. Henshaw,
61 id., 409 (1870); Ea parte Tax-payers
of Kingston, 40 How. Prac., 444 (1870);
Gould v. Town of Oneonta, VIN. Y.,
298 (1877); Sweet v. Hurlburt, 51 Barb.,
312 (1868), denying the constitutional-

ity of a donation of bonds. Cf. People
v. Batchellor, 53 N. Y., 128 (1873), hold-
ing that a municipal corporation cannot
be compelled by the legislature, against
its consent and that of its tax-payers, to
become a stockholder in a corporation
which is private in character (as here, a
railroad); a statute for such a purpose
is void; Queensburg v. Culver, 19 Wall.,
82 (1873), in which the New York doc-
trine is denied by the supreme court of
the United States.

But the law is clear, in New York,
that such statutes and subscriptions
thereunder are constitutional. Bank of
Rome v.. Rome, 18 N. Y., 38 (1858);
Starin v. Genoa, 23 N. Y., 489 (1861);
Town of Solon v, Williamsburg Sav.
B’k, 21 N. E. Rep., 168 (N. Y., 1889);
Alvord v. Syracuse Sav. B’k, 98 N. Y.,
599 (1885), holding that the legislature
may give to the bonds a negotiability
which is not given to them by the court;
Craig v. Town of Andes, 93 N. Y., 405
(1883), holding that bonds, even,in bona
fide hands, are void where part of the
consents thereto were conditional, even
though the bond. recites that all legal
steps to comply with the law were
taken; Town of Lyons v. Chamberlain,
89 N. Y., 578 (1882), where the person
to whom illegal bonds were issued was
held to account for them; Cagwin v.
Town of Hancock, 84 N. Y., 532 (1881),
holding that the town may set up that
a majority did not vote for the issue of
the bonds; that the federal decisions
will not be followed; that an innocent
holder is not protected, and that ‘‘the
bonding acts are now regarded as hos-
tile to asound public policy;” Town
of Springfort v. Teutonia Sav. B’k, id.
403 (1881), also holding that the affidavit
of assessors as to the vote is only prima
facie evidence. To same effect see
Dodge v. County of Platte, 82 N. Y., 218
(1880), declaring void certain Missouri
municipal bonds; Duanesburgh wv, Jen-

105
§ 91.]

MUNICIPAL SUBSCRIPTIONS,

[coH. VL

The act of the legislature authorizing a municipal subscription,
however, will not avail to validate such a contract, unless it is duly

kins, 57 N. Y., 177 (1874), sustaining the
constitutionality of bonding acts and
reviewing the New York cases; People
v. Mitchell, 35 id., 551 (1866); 8. C., 45
Barb., 208; People v. Spencer, 55 N. Y.,
1 (1878); Williams v., Duanesburgh, 66
id., 129 (1876), Horton v. Thompson, 71
id., 518 (1878); affirmed, 101 U. 8., 665.
In New York an effectual remedy
against the illegal bonding of a town in
‘aid of a railroad is found in holding lia-
ble to the town the parties who pro-
moted the aid, for all sums paid by the
town to bona fide holders of the bonds.
Farnham v. Benedict, 107 N. Y., 159
(1887). A suit in equity to cancel ille-
gal municipal bonds does not lie, except
where the defendant tails to allege that
there is a remedy at law. Town of
Mentz v. Cook, 108 N. Y., 504 (1888).

North Carolina — Taylor v. Newberne,
2 Jones’ Eqg., 141 (1855); Caldwell v.
Burke Co., 4 id., 823 (1858); Hill v.
Commissioners of Forsyth Co., 67 N. C.,
367 (1870); Wood v. Com’rs of Oxford,
28. E. Rep. (N. C., 1887); McDowell v.
Rutherford, etc., Co., id., 351 (N. C.,
1887); Goforth v. Same, id., 361 (id.).

Ohio — Cincinnati, etc., R. R. Co. v.
Clinton Co,, 1 O. St., 77 (1852); Steu-
benville, etc., R. R. Co. v. North Town-
ship, 1 id., 105 (1852); Cass v. Dillon, 2
id., 607 (1853); Thompson v. Kelley, 2
id., 647 (1853) ; State-v. Union Township,
8 id., 394 (1858); State v, Com’rs, etc.,
11 O. St., 183 (1860); Commissioners of
Knox Co, v. Nichols, 14 id., 260 (1868);
Fosdick v. Perrysburg, 14 id., 472 (1863);
Same v. Goshen, 14 id., 569 (1868);
Walker v. Cincinnati, 21 id., 14 (1871);
8. C., sub. nom. Cincinnati v. Walker,
1 Cin., 121 (1871).

Pennsylvania — Commonwealth vw.
McWilliams, 11 Penn. St., 61 (1849);
Brown v. Commissioners, 21 Penn. St.,
37 (1853); Sharpless v. Philadelphia, 21
id., 147 (1853); Moers v. Reading, 21 id.,
188 (1853); Commonwealth v, Allegheny

\

Co., 82 id., 218 (1858); Same v, Pitts-
burgh, 84 id., 496 (1859); Same v. Same,
41 id., 278 (1861); Same v. Perkins, 48
id., 400; Pennsylvania R. R. Co. v. Phil-
adelphia, 47 id., 189 (1864); Riddle »,
Philadelphia, etc., R. R. Co., 1 Pittsb.,
158 (1872); County vw. Brinton, 47 Pa, St.,
367 (1864).

South Carolina — Copes v. Charles-
ton, 10 Rich. Law, 491; County of Lan-
caster v. Cheraw, etc., R. R., 5 8. E.
Rep., 338 (S. C., 1888); State v. White-
sides, 9S. E. Rep., 661 (S. C., 1889).

Tennessee — Tax-payers of Milan v.
Tennessee, etc., RR. Co., 11 Bax., 329;
County of Wilson v. National Bank, 103
U. S., 770 (1880); Nichols v, Nashville, 9
Humph., 252 (1848); Louisville, etc., R.
R. Co. v. County Court, 1 Sneed, 637
(1854); Williams v. Duck River, etc., R.
R. Co., 9 Bax., 488 (1876); Clay v. Haw-

kins, 5 Lea, 137 (1880); Lauderdale Co. v,

Fargason, 7 id., 153 (1881); Winston v.
Tennessee, etc., R. R. Co., 57 Tenn, (1
Bax.), 60 (1878).

Texas— San Antonio v. Jones, 28
Texas, 19 (1866); Same v. Lane, 32 id.,
405 (1869); Same v. Gould, 34 id., 49
(1870).

_ Vermont— Bennington v.‘ Park, 50
Vt., 178 (1877); First National Bank of
St. Johnsbury v. Concord, 50 id., 257
(1877). ‘

Virginia—Goddin »v. Crump, 8
Leigh, 120 (1837). See, also, Goshorn
v, Ohio County, 1 West Va., 308 (1865).

Wisconsin — Clark v, Janesville, 10
Wis., 186 (1860); Bushnell v. Beloit, 10
id., 195 (1860); Foster v. Kenosha, 12
Wis., 616; Veeder v. Lima, 19 id., 280
(1865); Fisk v. Kenosha, 26 id., 23 (1870);
Phillips v. Albany, 28 id., 340 (1871);
Rogan v. Watertown, 30 id., 259 (1872);
Lawson v. Milwaukee, etc., R. R. Co.,
30 id., 597 (1872); Oleson v. Green Bay,
etc., 36 id., 383 (1874). Cf. Whiting v.
Sheboygan, etc., R. R. Co., 25 id., 167
(1870). °

106
CH. VI.]

MUNICIPAL SUBSCRIPTIONS.

[§ 91.

*

passed in accordance with all the constitutional formalities ;! and
after a subscription is made, any act of the legislature restricting
or abridging the taxing power so as to deprive the municipality of
the power to pay the bonds is unconstitutional and void.? In Cali-
fornia the courts go even to the extent of holding that the legis-
lature may compel a municipality to subscribe to the stock of a
railway company, and to issue its bonds in payment thereof? But
this extreme view is disapproved in New York‘ and in Illinois,
the courts in these states taking the better ground that, while it is
competent for the legislature to authorize a municipal subscription
in a proper case, there is no power any where to compel such a

subscription or donation.

While it may be conceded that, from a constitutional sisi Soin
as well as from that of public policy and expediency, there are grave
objections to the existence or exercise of this power, which has plainly
been monstrously abused,' it is clear that the courts, almost univers-
ally, as has been shown, have ‘taken and will continue to hold the
most liberal views as to the legislative prerogative in this respect.”
Such authority inhering in the legislature is generally conceded.

A municipality which has not yet been incorporated cannot hold
an election and vote a subscription for stock. The subscription is

void.’

It is, however, no objection to the validity of the legislative

act, or the municipal subscription, thatthe subscription is made to
"a railway company not yet in existence.’

The leading cases upon this point are
Goddin v. Crump, 8 Leigh, 120 (1837) —
which is said by Judge Dillon to be the
first in the long series; Leavenworth
County *. Miller, 7 Kan., 479 (1871);
Slack v. Maysville & Lexington R. R.
Co., 18 B. Mon., 1 (1852); Knox Co. wv.
Aspinwall, 21 How. (U. 8.), 589 (1858);
Sharpless v. Mayor, 21 Penn. St., 147
(1858).

1 Amoskeag Nat’] Bank v. Town of
Ottawa, 105 U. S., 667 (1881).

2 Wolff v. New Orleans, 103 U. S., 358
(1880). | Cf. Edwards v. Williamson, 70
Ala., 145 (1881) ; Hays v. Dowes, 75 Mo.,
250 (1881).

8Napa Valley R. R. Co. v, Napa
County, 30 Cal., 435 (1866).

4People v. Batchelor, 53 N. Y., 128
(1873). Cf. Queensburg v. Culver, 19
Wall. (U. 8.), 82 (1878).

5Cairo, etc.,.R. R. Co, v. Sparta, 77
Tll., 505 (1875).

6 Dillon on Munic. Corp., §§ 12, 117,
157; Cooley on Const. Lim., § 261 et seg.

7Clark v. Janesville, 18 Wis., 414
(1861); S. C., 10 id., 186; Rochester v.
Alfred, 18 id., 482 (1861); Berliner v.
Waterloo, 14 id., 378 (1861). See Lewis ~
v. Clarendon, 5 Dillon, 329 (1878), to ef-
fect that, if authority is given “to any
incorporated town or city ” to subscribe
for stock, it is not limited to such towns
as are incorporated when the act was
passed.

§In the County of Daviess v. Huide-
koper it is held that county bonds in the
hands of a bona fide holder for value
are not rendered void by the fact that,
at the time the vote authorizing the
subscription was taken, the company
to be benefited was not created accord-
ing to law, 98 U. S., 98 (1878). To
same effect, James v. Milwaukee, 16
Wall., 159 (1872). See, also, Concord vy
Portsmouth Savings Bank, 92 U. S., 625

107
g 91.)

MUNICIPAL SUBSCRIPTIONS.

[CH. VI.

It must not be overlooked, however, that municipalities never
have the power, by virtue of any of these legislative enactments,
to tax themselves for the benefit of enterprises or objects which

are private in their nature.

Municipal subscriptions can only

be made to the stock of companies of an essentially public char-
acter. This is a rule conclusively settled and plainly salutary.!
Questions involving the distinction between public and private uses
are constantly arising when the validity of municipal bonds is the
issue, and the courts very consistently adhere to the rule that mu-
nicipal aid can lawfully be extended only to railways, or other
enterprises of a distinctly public or guvasz public character.’

(1875); Railroad Co. v. Falconer, 103 id.,
821 (1880). Contra, Rubey v. Shain, 54
Mo., 297 (1878); People v. Franklin, 5
Lans. (N. Y.), 129 (1871).

l1Loan Association v. Topeka, 20
Wall., 655 (1874); Weismer v. Village of
Douglass, 64 N. Y., 91 (1876); Bissell v.
Kankakee, 64 Ill., 249 (1872); Brewer
Brick Co. v. Brewer, 62 Me., 62 (1878);
Allen v. Inhabitants of Jay, 60 id., 124
(1872); Lowell v. Boston, 111 Mass., 463
(1878); State v. Osawkee Township, 14
Kan., 418 (1875); McConnell v. Hamm,
16 id., 228 (1876); Union Pacific R. R.
Co. v. Smith, 23 id., 745 (1880); Clark v,
Des Moines, 19 Iowa, 199 (1865); -Fred-
erick v. Augusta, 5 Ga., 561 (1848);
Commercial Bank v. City of Iola, 2
Dillon, 353 (1878); Savings Assoc. v.
Topeka, 3 id., 376 (1874). Cf. Bloodgood
v. Mohawk, etc., R. R. Co., 18 Wend.,
9, 65 (1837). [Compare with this case
Chapman v. Gates, 54 N. Y., 1382, 144
(1873).] Osborne v. Adams Co., 109 U.
S., 1 (1883); S. C., 106 U.S., 181; Ot-
tawa v. Carey, 108 U. S., 110 (1888);
Freeland v. Hastings, 10 Allen, 570
(1865): Jenkins v. Andover, 103 Mass.,
94 (1869); People v. Salem, 20 Mich., 452
(1870); Curtis v. Whipple, 24 Wis., 350

(1869); Cook v. Manufacturing Co., 1:

Sneed (Tenn.), 698 (1854); Cooley on
Const. Lim., § 212.

2A municipal donation to a private
manufacturing concern is void. Cole v,
La Grange, 118 U. S., 1 (1884). Aid to
bridge manufacturing and iron-works
company held void. Loan Assoc. v.

the army.

Topeka, 20 Wall., 655 (1874). Same as
to hydraulic works. Weismer v. Doug-
lass, 64 N. Y., 91 (1876). Also to linen
company. Bissell v. Kankakee, 64 IIl.,
249 (1872). Also exempting manufact-
uring companies from taxes for ten
years. Brewer Brick Co. v. Brewer, 62
Me., 62 (1878). Also loan of credit te
saw-mill and box factory. Allen v, In-
habitants, 60 Me., 124 (1872). Also to
loan to persons rebuilding after a fire.
Lowell v. Boston, 111 Mass., 454, Or to
relieve the destitute poor. State v.
Osawkee, etc., 14 Kan., 418 (1875), Or
to aid in constructing a woolen mill.
McConnell v. Hamm, 16 Kan., 228
(1876). Or to buildadam. Union Pac.
R. R. Co. v. Smith, 23 id., 745 (1880). Or
to construct a toll-bridge. Clark v. Des
Moines, 19 Iowa, 199 (1865). ” To aid a
company which manufactures bridges,
plows, stoves, etc. Commercial Bank
v. City of Iola, 2 Dill,, 353 (1873); Sav-
ings Ass’n v. Topeka, 3 Dill., 376 (1874).
Cf. Bloodgood v. Mohawk, etc., R. BR.
Co., 18 Wend., 9, 65 (1837);.Chapman v.
Gates, 54.N, Y., 182, 144 (1873). Or to aid
a steam grist-mill. Osborne v. Adams
Co., 109 U. S., 1 (1883); 8. C., 106 U. S.,
181. Or to aid the development of a
water-power. Ottawa v. Carey, 108 U.
S., 110 (1883). Or to repay to persons
money paid by them for substitutes in
Freeland v. Hastings, 10
Allen, 570. As to tax for a school-house,
see Jenkins v. Andover, 103 Mass., 94
(1869), As to payment of money on ac-
count of drafting of soldiers, see Thomp-

108

'
 

on. vi.]

MUNICIPAL SUBSCRIPTIONS.

[$ 92.

§ 92. Constitutional provisions prohibiting municipal subscrip-

tions.—

The unchecked exercise of this power on the part of the

state legislatures has entailed upon the people of the states such a
burden of taxation! that.in many states are found constitutional
prohibitions rendering it unlawful for municipal corporations to
make subscriptions or lend their credit to any incorporated com-
pany or enterprise, not strictly and exclusively governmental in
its nature ‘and constitution. This is the case in Pennsylvania,’
Ohio,? Illinois,t New York,> Indiana,’ Missouri,” Mississippi,’ and in

son v. Pittston, 59 Me., 545; Tyson v.

School Directors, 51 Pa. St., 9 (1868).’

Aid to a private school is void (Curtis’
Adm’r v. Whipple, 24 Wis., 850); or
to a manufacturing company. Cook
v. Manuf’g Co., 1 Sneed mee 698 ;
Cooley on Const. Lim., § 212. A munic-
ipality has no power to invest in the
stock of a steamship company (Penn.,
etc., v. Philadelphia, 47 Pa. St., 189);
nor to operate free ferries (Jacksonport
v. Watson, 88 Ark., 704); but a sub-
scription to a turnpike company has
been held legal. Clark v. Leathers, 5
S. W. Rep., 576 (Ky., 1887); City of
Aurora v. West, 9Ind., 74; 8. C., 22
id., 88. And to obtain a water supply.

Frederick v. Augusta, 5 Ga., 561 (1848). .

1 Dillon on Munic. Corp., 8§ 156, 160.
The sum of municipal indebtedness in
‘this country is said ‘to exceed one
thousand millions of dollars, and the
amount is constantly increasing.

.2 Amend. to Const. 1857, § 7, art. II;
Pennsylvania R. R. Co. v, Philadelphia,
47 Penn. St., 189 (1864),

3Const., ‘art. VIIT, § 6; Walker v.
Cincinnati, 21 O, St., 14 (1871); Cass v.
Dillon, ‘2 id., 607 (1853);. Fosdick v.
Perrysburg, 14 id., 472 (1863); Thomp-
son v. Kelly, 2 id., 647 (1853); Wyscaver
v. Atkinson, 37 id., 80 (1881).

4Const. 1870; Concord v. Portsmouth
Savings Bank, 92 U. S., 625 (1875);
Louisville v. Savings Bank, 104 U. S.,
469 (1881); Harter v. Kernochan, 108
U. S., 562 (1880); Fairfield v. County of
Gallatin, 100 U. S., 47 (1879); Chicago,
__ete., R. RB. Co. v. Pinckney, 74 IL, 277
(1874); County of Moultrie v. Rocking-

ham Ten Cent Savings Bank, 92 U. §.,
681 (1875); Robertson v. Rockford, 21
Ill., 451. The constitutional prohibi-
tion in Mlinois against lending credit
applies to the state only, and not to
counties or cities.

5 Amend. Const. Jan. 1, 1875; Peo-
ple v. Fort Edward, 70 N. Y., 28 (1877);
Dodge v. County of Platte, 82 id., 218

°(1880), reversing 8S. C., 16 Hun, 285,

6Const., art. X, §.10; Lafayette, etc.,
R. BR. Co. v. Geiger, 84 Ind., 185 (1870);
John v. Cincinnati, etc., R. R. Co., 35’
id., 589 (1871) ; Aspinwall v. Jo Daviess
Co., 22 How. (U.8.), 864 (1859); Bracaw
v. Board of Commissioners, 73 Ind. , 543
(1881).

7Const., art. XI, § 14; ‘County of
Schuyler v. Thomas, 98’U. S., 169 (1878);
Smith v, County of Clark, 54 Mo., 58
(1873); County of Macon v. Shores, 97
U. S., 272 (4877); County of Ray v.
Vansycle, 96 id., 675 (1877); County of
Scotland v. Thomas, 94 id., 682 (1876).

8 Const., art. XII, § 14; Supervisors v.
Galbraith, 99 U. S., 214 (1878); Hayes v.
Holly Springs, 114 id., 120 (1885); Gren-
ada Co. v. Brogden, 112 id., 261 (1884).
Cf. State of Minnesota “v. Young, 20 _
Minn., 474 (1881). Where municipal
aid bonds were issued under an uncon-
stitutional statute, but are enforced by .

‘the United States courts in favor of
bona fide holders, the municipality may

recover back from the~railroad com-
pany or its successor the amounts so
paid to such bona fide holders. Town of
Plainview v, Winona, etc., R. R. Co,, 32
N. W. Rep., 745 (Minn., 1887). In the
case of Walker v. Cincinnati, 21 0, St.,

109
MUNICIPAL SUBSCRIPTIONS. [cH. VI.

§ 92.)
some other states! In general it will be found that these consti-
tutional provisions forbid in terms any subscription or lending of
credit by any municipality in the state, or by the state itself, to any
company, association or corporation whatsoever. Sometimes the
prohibition is absolute, and at other times two-thirds or a majority
of the qualified electors of the municipality must vote to render
such aid. The constitutional or statutory provisions which prohibit
municipal subscriptions are construed to be prospective only, un-
less they contain express words making them retroactive.’ This
principle is frequently applied when the constitutional enactment is
passed after a municipal subscription is voted, but before it is act-

ually completed.’

14 (1871), the building of the Cincinnati
Southern Railway by the city of Cin-
cinnati was held legal, notwithstanding
the state constitution forbade the legis-
lature from authorizing any city, etc.,
from becoming ‘‘a stockholder in any
joint-stock company, corporation or as-
sociation whatever.”

1 Walker v. Cincinnati, 21 O. St., 14
(1871); 8. C., 8 Am. Rep., 24, and 11 Am.
Law Reg. (N. 8.), 846, and the note by
Judge Redfield. Where the statutes

. limit the amount of debt which a county
may incur in aid of railroads, and aid is
voted to the full amount, subsequent aid
is void. Chicago, etc., R’y Co. v. Free-
man, 16 Pac. Rep., 828 (Kan., 1888). .

2County of Moultrie v. Rockingham
Ten Cent Savings Bank, 92 U. 8., 631
(1875); Grenada Co. v. Brogden, 112 id.,
261 (1884); Fairfield v. County of Gal-
latin, 100 id., 47 (1879); County of Ran-
dolph v. Post, 93 U. S., 502 (1876);
Ralls v. Douglass, 105 U. 8., 728 (1881);
County, etc., v. Nicolay, 95 U. S., 619
(1877), holding that when authority had
been granted to a county in Missouri to
subscribe, the power was not subject to
a constitutional amendment requiring
the assent of two-thirds of the voters of
the county; County, etc., v. Gillett, 100
U. S., 585, following and approving last
case; County, etc., v. Foster, 93 U. S.,
567 (1876), to same effect, same consti-
tution; Louisiana v, Taylor, 105 U. S.,
105 U. S., 454, to same effect, same
constitution; Durkee v. Board of Liqui-

dation, 103 id., 646 (1880); Howard
County v. Paddock, 110 id., 384 (1884);
Dallas County v. McKensie, 110 id.,
686 (1884). The legislature cannot,
after the adoption of a constitutional
amendment prohibiting municipalities
from voting aid, remedy defects in
votes taken before the amendment was
adopted. Katzenberger v. Aberdeen,
121 U.S., 172 (1887); Decker v. Hughes,
68 Ill., 33 (1873), holding that, where
a new state constitution has been
adopted, the old one governs as to
bonds issued under its authority though
not actually issued until after the adop-
tion of the new one. County v. Moul-
trie, 105 U. S., 370 (1881), holding that:
where a donation in aid of a railroad
had been voted by a county, before the
adoption of the new constitution of
Illinois, bonds to pay it might be is-
sued after its adoption. In Louisville
v. Savings Bank, 104 U.S., 469 (1881),
it was held that the court would even
take cognizance of the fractions of a
day in order to do justice in such a
case. Schall v. Bowman, 62 IIL, 321
(1872); Richards v. Donagho, 66 id., 73
(1872); Wright v. Bishop, 88 id., 302
(1878). Contra, Jeffries v. Lawrence,
42 Iowa, 498 (1876); Falconer v. Buffalo,
etc., R. R. Co., 69 N. Y., 491 (187%);
List v. Wheeling, 7 West Va., 501
(1874). Cf. Hayes v. Holly Springs, 114
U.S.; 120 (1885); Hendricks v. Jackson
Co., 2 McCrary, 615 (1880),

3 For cases involving a construction of

110
CH. vi.] MUNIOIPAL SUBSCRIPTIONS.

[§ 93.

It has been held that a provision restricting the power of a state
to make subscriptions in aid of railroads cannot be construed so as
to prohibit the municipal subdivisions of the state from subscrib-
ing.' And a restriction as to the power of a county will not be held
applicable to a city.? School districts have no power to subscribe
to the stock of a railway, and bonds issued to pay such a subscrip-
tion are void.

§ 93. Change in the state constitution or the general statutory law
after the municipal corporation has voted to subscribe.— Constitu-
tional provisions or general statutes prohibiting municipal corpora-
tions from subscribing to the stock of other corporations, or from
lending their credit thereto, are, as we have seen,‘ prospective in
_ their application.

That which a corporation has the constitutional or statutory”
right to do, and which it has done in pursuance of that right or
authority, cannot be affected or undone by subsequent constitu-
tional change or amendment, or by the passage of general statutes.:

This is a fundamental rule of constitutional law.’

the Illinois constitution and its effects
on previous donations, see Fairfield v.
Gallatin Co., 100 U.S., 47 (1879); Chi-
cago, etc., R. R. Co. v. Pinckney, 74
IH., 277 (1874); Lippincott v. Pana, 92
id., 24 (1879); Middleport v. Attna Ins.
Co., 82 id., 562 (1876). Cf. County of
Moultrie v. Fairfield, 105 U. S., 370
(1881); Enfield v. Jordan, 119 U. S., 680
(1887).

1 Pattison v. Supervisors, 18 Cal., 175
(1859); New Orleans v. Graihle, 9 La.
Ann., 561 (1854); Slack v. Maysville,
etc., R. R. Co., 18 B. Mon., 1 (1852);
Leavenworth Co, v, Miller, 7 Kan., 479
(1871); Prettyman v. Supervisors, 19
Ill, 406 (1858). The courts are inclined
to hold that a limit on the rate of tax-
ation that a city may levy does not ap-
ply to a tax in aid of municipal sub-
scriptions to railroads. Cf. People v.

State Treasurer, 28 Mich., 499 (1871);-

. Pitzman v. Freeburgh, 92 Ill, 111 (1879).

2Thompson v. City of Peru, 20 Ind.,
305 (1868); City of Aurora v. West, 9
Ind., 74. Statute. may prescribe that
the aid voted shall not bind property
outside of a town in the county, unless
the residents outside of the town vote
in favor of it. Kentucky Union R’y Co.

If it be held

v. Bourbon Co., 2S. W. Rep., 687 (Ky.,
1887); Dillon on Munic. Corp., § 162, cit-
ing Butz v. Muscatine, 8 Wall., 575
(1869); Learned v. Burrington, 2 Am.
Law Reg. (N. S.), 394, and note; Leaven-
worth v. Norton, 1 Kan., 432 (1863);
Barnes v. Atchinson, 2 id,, 454 (1864).
And see Commonwealth v. Pittsburgh,
84 Penn. St., 496 (1859); Amey v. Al-
legheny City, 24 How. (U.8.), 364; Fos-

‘ dick v. Perrysburg, 14 O. St., 472 (1863);

Cumberland v. Magruder, 34 Md., 381
(1871); Assessors v. Commissioners, 3
‘Brewst. (Pa.), 333 (1869) ; State v. Gutten-
burg, 38. N. J. L., 419.

3 Weightman v. Clark, 103 U. &., 256
(1880).

48 92.

5 See, in regard to the Illinois consti-
tution, County of Clay v. Society for
Savings, 104 U. S., 579 (1881); People v.
Logan County, 63 IIL, 374 (1872); County
of Moultrie v. Savings Bank, 92 U. 8.,
631 (1875) ; Louisville v. Savings Bank,
104 id., 469 (1881). But where the orig-
inal subscription was conditional the
condition cannot be waived after a con-
stitutional provision prohibiting these
subscriptions has been passed. Richi-
son v. People, 5 Northeast. Rep., 121

111
MUNICIPAL SUBSCRIPTIONS. & [ox. VIL

§ 94.]
that a popular vote does not give the company proposed to be ben-,
efited a vested right to the subscription by the municipality, and
that until the subscription is actually made the contract is unexe-
cuted, and therefore obligatory upon neither party, there is ground
for holding that a constitutional prohibition, taking effect after the
election, but before the subscription is made pursuant to authority
conferred by the popular vote, will be sufficient to invalidate the
subscription. This was the view taken by the supreme court of
the United States in the case of Aspinwall v. Commissioners of the
County of Daviess,! and affirmed in some later cases? There are
cases of authority, however, in favor of the rule that, after the cor-
poration has, by a popular vote at an election lawfully held, voted
to subscribe for stock, subsequent changes of the constitution or
the general statutes will not affect the right of the municipality to
go on and complete the contract, to make the formal subscription,
and to issue the bonds or levy the special tax to pay the calls.’

§$ 94. Statutory formalities must be substantially complied with._—
A substantial compliance with the formalities prescribed by a stat-
ute authorizing a municipal subscription to stock is all that the law
requires; but such a compliance is requisite to the validity thereof.

(1ll., 1886). To the same effect, with
regard to the constitution of 1875 of
Nebraska, see State v. Lancaster Co., 6
Neb., 214 (1870); and as to constitution
of Missouri of 1865, see Louisiana v.
Taylor, 105 U. S., 454 (1881); County
‘of Cass v. Gillett, 100 id., 585 (1879);
County of Scotland v. Thomas, 94 id.,
682 (1876); County of Ray v. Vansycle,
' 96 id., 675; County of Calloway v. Fos-
ter, 93 id., 567 (1876); County of Ralls v.
Douglass, 105 U. S., 728 (1881), in which
bonds issued under a city charter with-
out a popular vote were held valid not-
withstanding the provisions of a consti-
tution adopted afterwards, but in force
when the bonds were issued, required a
submission of such matters to a vote;
State v. Macon Co., 41 Mo., 458 (1867),
to the same effect; State v. County
‘Court, etc., 51 Mo., 522 (1878), to the
same effect. Cf. State v. Dallas Co., etc.,
72 Mo,, 829 (1880), where a later statute
was held to have taken away the power
under a former one. A statute passed
subsequently to a constitutional prohi-
bition may legalize irregular subscrip-

field, 120 U. S., 759 (1887). The repeal
of the act authorizing a tax for munici-:
pal aid before any money has been ex-
pended by the railroad, excepting a
small sum for surveys, prevents a lessee
of the railroad enforcing payment when
the taxes were not assigned to the lessee.
Barttel v. Meader, 33 Northwest. Rep.,
446 (Iowa, 1887), ,

122 How., 364 (1859).

2Norton v.f Brownsville, 129 U. S.,
479 (1889); Wadsworth v. Supervisors,
102 U. S., 584 (1880). See, also, Railroad
Co. v. Falconer, 103 id., 821 (1880); Ger-
man B’k v. Franklin County, 128 U. S.,
526 (1888); Eddy v. People, 20 N. E.
Rep., 88 (IIl., 1889).

3 United States v. Jefferson Co., 5 Dil-
lon, 310 (1878); Maenhant v, New Or-
leans, 3 Woods, 1 (1876); Sibley v, Mobile,
3 id., 535 (1876); Nicolay v. St. Clair
County, 3 Dillon,’ 163 (1874); Huideko- :
per v. Dallas County, 3 id., 171 (1875).
Cf. Red Rock v. Henry, 106 U. S., 596
(1882), and cases in note 5, supra.

4Hoff v. Jasper Co., 110 U. S., 58
(1884), following the ruling in Anthony

,

_tion before prohibition. Bollesv. Brim- v, Jasper Co., 101 U. S., 698 (1879), -
112
CH. VI. |

MUNICIPAL SUBSCRIPTIONS.

[§ 94.

But not every failure to observe all the formalities prescribed
by the statute is sufficient to invalidate a subscription. "When the

where it was held that a bona fide
holder of bonds could not maintain an
action on bonds not registered with the
state auditor as required by statute;
Bissell v. Spring Valley, etc., 110 U. S.,
162 (1884), holding that when a stat-
ute required bonds to be attested by
the county clerk under the seal of the
county, bonds issued without his signa-
ture were not valid; Hamlin v. Mead-
ville, 6 Neb., 227 (1877), holding that
a vote authorizing a subscription gives
no power to make a donation; Cairo,
etc., v. Sparta, 77 Ill., 505 (1875), where
bonds were authorized by\a vote upon a
proposition that they should run twenty
years, when the statute submitted a

- proposition to be voted upon for bonds”

to run not exceeding ten years, The
court refused to compel the city to issue
them; Mustard v. Hoppers, 69 Ind. 324,
where an election, and a tax voted and
levied in pursuance of it, were held not
invalidated on account of a canvass of
the votes which was not entirely regu-
lar; People v. Dutcher, 56 Ill, 144
(1870), holding that when the statute
does not prescribe a mode of election it
should be held in Accordance with the
law of the organization of the muni-
cipality; People v. Logan Co.,, 63 IIl.,
874 (1872). This case was an application
for mandamus to compel a subscription.
A demurrer to an answer alleging that
the vote in favor of subscription was
obtained by fraudulent votes with the
knowledge of the corporation to be ben-
efited was overruled; Pana v. Lippin-
cott, 2 Bradw. (IIL), 466 (1877), where a
vote taken at a special town meeting,
when the statute required it to be taken
at a regular meeting, was held not to
confer authority to subscribe; People,
etc., v. Smith, 45 N. Y., 77 (1871), holding
that, when the act requires a petition of
tax-payers, the power is personal to them
and cannot be exercised by an agent;
Wetumpka v. Wetumpka, 63 Ala., 611

(8)

(1879), holding that a judgment on bonds
issued by a municipality is conclusive
upon it as to the validity of the bonds
and as to all defenses which ‘might have
been urged against it at law; but in a
bill in equity to enforce a statutory
trust by which the property, etc., of the
municipality was pledged to pay them,
it may show that the bonds were issued
in violation, of the conditions of the
statute; Munson v. Lyons, 12 Blatch.,
539 (1875), holding that’ an objection
which would be good in a direct review
of the proceedings —as here that the
petition of tax-payers gave the authori-
ties no jurisdiction— may be of no
avail as against bona fide holders of
bonds; Thompson v. Perrine, 103 U.
S., 806 (1880); County of Jasper v. Bal-
lou, 103 U. S., 745, holding that a sub-
sequent statute may correct errors. See,
also, Carroll Co. v. Smith, 111 U. S.,
556 (1884); Hawley v. Fairbanks, 108
U.S., 543 (1888); Buchanan v. Litch-
field, 102 U.S., 278 (1880); People wv.
Hurlburt, 46 N. Y., 110 (1871); People —
v. Suffern, 68 N: Y., 321 (1877); Wilson
», Cancadia, 15 Hun, 218 (1878); Angel
v. Hume, 17 Hun, 374 (1879); People v.
Hutton, 18 Hun, 116 (1879); People v.
Barrett, 18 Hun, 206 (1879); Wheatland
v. Taylor, 29 Hun, 70 (1883). Municipal :
subscription, authorized by statute, to
corporation to construct locks and
dams, and duly made, cannot be en-
forced to pay for repairing old locks
and dams. Jessamine Co. v. Swigert’s
Adm’r, 3 S. W. Rep., 18 (Ky., 1887)..
Where judgment is taken by default
the facts alleged cannot be disputed in
the mandamus proceedings. Harsh-
man v. Knox County, 122 U.S., 306
(1887). Vote of municipal aid is void if
grantee is in alternative. State v. Rog-
gen, 33 N. W.'Rep., 108 (Neb., 1887).
In Kangas a.tax-payer cannot enjoin the
board from declaring the vote on munic-
ipal aid. He must wait and enjoin the

118

'
§ 94.

MUNICIPAL SUBSCRIPTIONS.

(oH. vr.

omission is a matter of form more than of substance, it will not

invalidate the subscription.’

Many of these defenses, however, are defeated by the fact that
the municipality is estopped from setting up the illegality, there
having been long delay, or the recitals on the bonds themselves

having represented that the legal

subscription. State v. County of Ba-
baunsee, 12 Pac. Rep., 942 (Kan., 1887).
People v. Town of Santa Anna, 67 IIL,
57 (1878), where an election was held’
illegal because held without a registra-
tion of voters as required by law; Peo-
ple v. Town of Laena, 67 Ill, 65 (1873),
a similar case; Chicago, etc., v. Mal-
lory, 101 Ill, 588, where an election
presided over by one moderator with
one clerk, when the law required three
judges and two clerks, was held void,
conferring no authority upon a town to
issue bonds. f
1 Pana v. Bowler, 107 U. &., 529 (1882),
holding that the fact that an election
was irregularly conducted could not
avail as a defense to bonds in the
hands of a bona fide holder, the court
refusing to follow the ruling of the Ili-
nois stipreme court in Lippincott v.
Pana, 92 Ill., 24 (1879), which declared
the bonds void; Commissioners, etc., v.
Thayer, 94 U. S., 631 (1876), where the
court said: ‘‘ Defects, irregularities or
informalities which do not affect the re-
sult of the vote do not affect its valid-
ity;” Belfast, etc., v. Brooke, 60 Me.,
568 (1872), where a call for a town meet-
ing ‘‘to see if the town will loan its
credit to aid in the construction” of a
railroad named was held to give reason-
able notice that a proposition to sub-
scribe for its stock would be acted upon;
Draper v. Springport, 104 U. S., 501
(1881), in which the absence of'a seal
was held not to affect the right of a
bona fide holder to recover upon bonds
issued in payment of a subscription;
Clarke v. Hancock Co., 27 Ill., 805 (1862),
where the informality consisted in sub-
mitting two propositions by one vote,
and it was held not to invalidate bonds
in hands of bona: fide holders; Super-

formalities were duly observed.?

visors v. Schenck, 5 Wall, 772 (1866),
where bonds issued under a vote or-
dered by a ‘‘ county court,” instead of
by the ‘‘board of supervisors,” were
held valid because taxes had been levied

and interest paid upon them by the

proper authorities for nine years before
the claim was made that they were void.
Cf. County of Jasper v. Ballou, 103 U.
S., 745 (1880); Pana v. Bowler, 107 U.
S., 529 (1882); Johnson v. Stark, 24 Iil.,
75 (1860); Singer Manuf’g Co. v. Eliza-

beth, 42 N. J. L., 249; New Haven, etc.,

v. Chatham, 42 Conn., 465 (1875), where
a vote which should have been by bal-
lot was taken by division of the house,
and no objection was made thereto until
arailroad had in good faith issued bonds
which were to be guarantied by the
town.

*> Nugent v. Supervisors, 19 Wall., 241
(1873), is the leading case. It holds that
the delivery of the municipal bonds to
the railroad in exchange for the stock,
together with the levy of a tax to pay
the interest on the bonds, and the act
of the municipality in voting as a share-
holder, estop it from denying the legal-
ity of the subscription. Menesha »v.
Hazard, 102 U. §&., 81 (1880), where
bonds were issued to be valid when it
was certified on them that certain con-
ditions had been performed. Such a
certificate was held to estop the town
from denying their validity; Whiting
v..Town of Potter, 2 Fed. Rep., 517
(1880), in which it was held that retain-
ing railroad stock received for bonds,
and paying interest on the bonds for
along time, estopped a municipality
from questioning their validity, such
acts being a direct ratification of the
issue; Lamb wv. Burlington, etc., 39
Iowa, 333 (1874), holding that voting a

114

\
CH. VI.]

MUNICIPAL SUBSCRIPTIONS.

[8 94.

The meeting must be duly called and by the proper officer;!
the notice of the meeting | must be duly posted for the full time

provided in the act.?

tax in aid of a railroad, and remaining
silent for a year, during which the road
was completed upon the faith of the

tax, and until’ the benefits accruing ©

from the completion were realized,
estopped a township from denying the
validity of the tax; Leavenworth, etc.,
v. Douglas Co., 18 Kan., 169 (1877),
where the failure of a railroad to com-
ply with the conditions of an agree-
ment by which it was to receive bonds
was a matter of public knowledge, and
the county issuing the bonds made no
objection, but paid interest on the
bonds for years, these circumstances
were considered a ratification of the acts
of the county officers in issuing them;
Lyons v. Munson, 99 U.S8., 684 (1878),
holding that where, under the act of
New York, the county judge decides
upon an application of tax-payers, his
judgment recited in the bonds cannot
be attacked by the town in an action
on bonds by a bona fide holder, and the
town is estopped to deny their validity
on that account; Hackett v. Ottawa,
99 U. S., 86, holding that, when bonds
purport on their face to have .been is-
sued to provide for a loan for munici-
pal purposes, the city is estopped from
setting up against an innocent pur-
chaser for value that they were void
because the proceeds were appropriated
to other purposes—as for a donation
to a private corporation; Pendleton
Co. v. Amy, 18 Wall., 297 (1871), hold-
ing that where the issue of bonds by
county officers, without previous ful-
fillment of conditions, would be a mis-
demeanor, the presumption is that the
conditions were fulfilled; and the re-
ceiving of stock in payment and hold-
ing it for seventeen years work an
estoppel ; First Natl, etc., v. Wolcott, 19
Blatch., 370 (1871), where the retaining
of stock received for bonds, and paying
interest on the bonds, was held, as

'

against bona fide holders, to be a ratifi- .

cation of the act of commissioners in
issuing them, the recital on them being
that they were issued in pursuance of
a certain statute; Block v. Commis-
sioners, 99 U. S., 686 (1878), in which a
county was held estopped from assert-
ing that a majority of the electors had
not voted in favor of the issue of bonds,
the bonds having been issued three
years after the vote was declared and
recorded; Carroll Co, v. Smith, 111
U.S., 556 (1883), holding that a recital
in a bond that it is authorized by a par-
ticular statute does not estop the mu-
nicipality from setting up that it was
not authorized by a proper majority of
voters,— in this case two-thirds. See,.
also, [Amey v. Allegheny, 24 How., 364;
Cagwin v. Hancock,'84 N. Y., 532 (1861),
revg S. C., 22 Hun, 291; Orleans v.
Platt, 99 U. S., 676 (1878).

1Town of Windsor v, Hallett, 97 Ill,
204 (1880); County of Richland v. Peo-
ple, 3 Bradw. (Ill), 210 (1878); Jackson-
ville, etc., R. R. Co. v. Virden, 104 IIl.,
339 (1882); Bowling Green, etc., R. R.
Co. v. Warren Co., 10 Bush (Ky.), 711
(1874). But see Sauerhering wv: Iron
Ridge, etc., R. R. Co., 25 Wis., 447
(1870); Commissioners -v, Baltimore,
etc., R. R. Co., 87 O. St., 205 (1881).
.2McClure v. Township, etc., 94 U. S.,
429; Harding v. Rockford, etc., 65 IIL,
90 (1872),. where bonds were held in-
valid because tht notice of election was
posted less than thirty days, as required

by law; Packard v. Jefferson Co., 2Col., :

838 (1874), holding that a change in the
proposition to vote bonds which is in
effect a new proposition cannot be le-
gally voted upon at an election already
called, there not being sufficient time
remaining before the election to give
‘the required notice; McClure v. Town-
ship, etc., 94 U. S., 429 (1876), in which
bonds were declared void because the

115
§ 95.]

MUNICIPAL SUBSCRIPTIONS.

[oH. VI.

$95. Submission to popular vote— While the legislature may
authorize a municipality to make a subscription to the stock of a
railway or other corporation without submitting the question to a
vote of the people, it has the power to direct that the question
shall be so submitted. Such an act does not amount to a delega-
tion of legislative powers.? When it is provided that a subscrip-

election by which théy were authorized
was not held pursuant to a notice of
thirty days, as required by the act; An-
derson v. Beal, 113 U. S., 227 (1884),
holding that, if the bonds on their face
recite that they were issued: in pursu-
ance of a vote held on a certain day,
the statement is equivalent to one that
the vote was regular in form as to prior
notice, and the municipal corporation
is estopped from showing that it was
held without proper notice in an action
by a bona fide holder; George v. Ox-
_» ford, ete., 16 Kan., 72 (1876), holding
that when an election authorizing the
issue of bonds was held upon insufficient
notice, and the facts appeared upon the
' face of the bonds, the bonds were void’;
Williams v. Roberts, 88 Ill, 11 (1878),
where an election called by twelve vot-
ers instead of twenty, as required, upon
a ten days’ notice, where the statute re-
quired twenty days, was held a nullity.
. See, also, Wells v. Pontiac Co., 102 U.
S., 625 (1880); Lincoln v. Cambria Iron
Co., 103 U. S., 412 (1880). But where the
notice was required by the statute to be
“posted by the town clerk or supervis-
ors,” it was held that this did not require
a posting by these-officers in person, but
that it was sufficient if they procured
others to post the notice. Lawson v.
Milwaukee, etc., R. R. Co., 30:Wis.,
597 (1872); Phillips 7. Albany, 28 id.,
340 (1871); Jones v. Hurlburt, 13 N. W.
Rep., 5 (1882).
10toe County v. Baldwin, 111 U. s.,
1 (1883); Thompson v, Lee County, 3
~ Wall., 327 (1865); County of Ralls v,
Douglass, 105 U. S., 728 (1881); State v.
Macon County Court, 41 Mo., 453 (1867) ;
State v. County Court of Sullivan
County, 51 id., 522 (1878). Cf. State v.

Dallas County, 72 id., 829 (1880); Mc-
Callie v. Chattanooga, 3 Head (Tenn.),
817 (1859); Chicago, etc.,*R. R. Co. v.
Aurora, 99 IIL, 205 (1881); Burr v.
Chariton Co., 2 McCrary, 603 (1880),
In this case a charter of a railroad au-
thorized it to receive subscriptions from
counties without a vote of the people.
Bonds so issued were held valid though
a prior special act required a vote of
tax-payers as a condition precedent to
such subscriptions.

2Starin v. Town of Genoa, 23 N. Y.,
489 (1861); Gould v. Town of Sterling,
23 id., 456 (1861); Bank of Rome v. Vil-
lage of Rome, 18 id., 38 (1858); S. C..~”
19 id., 20 (1859); People v. Batchellor,

‘58 id., 128, 188 (1873); Town of Duanes-

burgh v, Jenkins, 57 id., 177, 192 (1874);
Hobart v. Supervisors, 17 Cal., 23 (1860);
Slack v. Maysville, etc., R. R. Co., 18
B. Mon., 1 (1852); Winter v. City Coun-
cil of Montgomery, 65 Ala., ‘403 (1880).
In Harrington v. Plainview, 27 Minn.,
224 (1880), it is held that, where a sub-
mission to the people is provided for, it
must be to the legal voters of the mu-
nicipality, and cannot lawfully be con-
fined to resident tax-payers, whether
legal voters or not. Cf. Babcock v.
Helena, 34 Ark., 499 (1879); Walnut v.
Wade, -103 U. S., 688 (1880). Again,
where a popular vote, taken in accord-
ance with a statute, authorized a sub-
scription-to a designated railway, and
the bonds were issued to a consolidated
road including the first — these facts
appearing on the face of the bond — the
invalidity of the transaction was held
to appear on the face of it. County of
Bates v. Winters, 97 U.S., 88 (1877).
Cf. Chicot Co. v. Lewis, 108 id., 164
(1880); Schaeffer v Bonham, 95 IIL,

116
CH. vI.]

MUNICIPAL SUBSCRIPTIONS.

[§ 95.

tion can be made only upon the petition of a certain proportion of
the legal voters,! there must be a substantial compliance with the
spirit as well as the letter of the act.? .

When the enabling act provides for municipal aid to railways
and other gus: public enterprises upon the assent of a majority or
two-thirds of the legal voters of the town or county, this is con-
strued universally to mean that the measure is to be approved by
a majority or a two-thirds vote, as the casé may be; that is to say, _
by a majority or two-thirds of the voters who vote at the election
called fot the purpose, and not two-thirds or a majority of all the

368 (1880). But where a town is au-
thorized to subscribe not exceeding a
certain sum to a designated railroad,
several subscriptions made at different
times and authorized by as many elec-
tions, the aggregate not exceeding the
amount named in the act, are valid.
Empire v. Darlington, 101 U. S., 87
(1879). See, also, Hurt v. Hamilton, 25
Kan., 76 (1881); Society for Savings v.
City of New London, 29 Conn., 174
(1860); First Nat. Bank v. Concord, 50
Vt., 257.

1#.g., in New York. People v. Hul-
bert, 59 Barb., 446; People v. Peck, 62
id., 545; People v. Oliver, 1 Thomp. &
C., 570 (1873); People v. Hughitt, 5
Lans., 89 (1871); People v. Franklin, 5
id., 129. (1871); People v. Smith, 45
N. Y., 772 (1871); Wellsborough v. New
York, etc., R. R. Co., 76 id., 182 (1879).
Cf. St. Joseph Township v. Rogers, 16
Wall., 644 (1872); Syracuse Savings
Bank v.'Seneca Falls, 21 Hun (N. Y.),
304 (1880); Faris v. Reynolds, 70 Ind.,
360 (1880).

2 People v. Smith, 45 N. Y., 772 (1871);
Craig v. Andes, 93 N. Y., 405; People
v. Oldtown, 88 IIl., 202 (1878). If the stat-
ute requires a written application by ten
legal voters before the clerk should call
an election, such application is neces-
sary to the validity of the election, and
without proof of it the municipality
cannot be compelled to issue bonds.
Monadnock R. R. Co. v. Petersboro,
etc., 49 N. H., 281 (1870), holding that a
town cannot delegate its power to au-
thorize subscriptions to a committee ;

!

and a statute requiring the vote of
“two-thirds of the legal voters present”
and voting at” the meeting must be
strictly obeyed. Mercer Co. v. Pitts-
burgh, etc., 27 Pa, St., 389 (1856), in
which a statute designated the grand
jury of a county to decide upon a sub-
scription. It was held that the grand
jury could not delegate the power so
conferred to county commissioners, and
that the commissioners could only.sub-
scribe in accordance with the decision
of the grand jury. Where municipal
bonds recite that the vote was on ap-
plication of fifty voters, where the stat-
ute required that the application should
be by voters and tax-payers, held, that
the bonds were void, where the appli-
cation was not by tax-payers. Gilson
v. Dayton, 123 U. S., 59 (1887), Munic-
ipal bonds issued on a vote of a minor-
ity of the voters, instead of a majority
as required by the statute, in aid of a
railroad, are void. Onstott v. People,
15 N. E. Rep., 84 (Ill, 1888). In Pretty-
man v. Supervisors, 19 Tll., 406, 414
(1858), a case of subscription by a
county to railroad stock, a tax-payer
waited four months before alleging
fraud in the election. Held. equivalent
to acquiescence, and too late. See, also,
People v. Van Valkenburg, 63 Barb.,
105 (1872); Evansville, etc., R. R. Co. v.
Evansville, 15 Ind., 895 (1860); Chicago,
etc., R. R. Co, v. Mallory, 101 TL, 583.
(1882), For the manner in Indiana of
contesting an election, see Goddard vu.
Stockman, 74 Ind., 400 (1881).

117
8 95.]

qualified electors in the territory.

MUNICIPAL SUBSCRIPTIONS.

[cH. VIL

Those who fail to vote against

the measure are not considered nor counted as having the power to

vote.! .

The legislature may render effective a prior vote of a munici-
pality, taken without statutory authority, in aid of a railroad. If
the state courts vary in their decisions on municipal aid to rail-
roads the federal court will decide upon its own judgment.?

1County of Cass v. Johnson, 95 U. &.,
860 (1877); Carroll Co. v. Smith, 111 U.
8., 556 (1884); County of Cass v. Jordan,
95 id., 878 (1877); Hawkins v. Carroll Co.,
50 Miss., 735 (1874); Louisville, etc., R.
R. Co. v. Tennessee, 8 Heisk., 663 (1875) ;
State v. Brassfield, 67 Mo., 331 (1878);
Webb v. La Fayette Co., 67 id., 353
(1878); People v. Chapman, 66 IIL, 137
(1872); People v. Harp, 67 id., 62 (1878);
Dunnovan v. Green, 57 Ill, 68, holding
that a statute which authorizes a sub-
scription, provided a majority of votes
are in favor of it, means a majority of
votes cast, not a majority of all voters;
Culver v. Fort Edward, 8 Hun, 340
(1876), holding that, if the statute re-
quires a vote of the majority of taxable
inhabitants, the consent of a majority
who attend the meeting is not suffi-
cient; Walnut v. Wade, 103 U. S., 683
(1879), holding that ‘‘ inhabitants,” as
used in an enabling act, meant legal
voters; St. Joseph v. Rogers, 16 Wall.,
644 (1872), where a law of Illinois, re-
quiring the vote of ‘‘a majority of the
legal voters of any township” in one
section, and a majority ‘voting at
such election,” was construed to mean
a majority of those voting at the elec-
tion; People v, Oliver, 1 T. & C. (N. Y.),
570 (1878), holding that ‘‘ tax-payers”
includes all persons whose names are
on the assessment roll as such, though
wrongfully taxed—as non-residents;
Milner v. Pensacola, 2 Woods, 632 (1875),
where a statute required the ‘‘ consent
of a majority of the corporation com-
prising ” the city. A defense to an ac-
tion on the bonds by an innocent holder,
that only a minority of citizens voted,
was held not good; Melvin v. Lisenby,

72 Ill., 63 (1874), holding that the pre-
sumption is that the vote cast at an elec-
tion held according to law is the vote
of the whole number of legal voters;
Reiger v. Beaufort, 70 N. C., 319 (1874),
where a majority of votes cast at an
election was held sufficient under a
statute requiring a ‘majority of the
voters qualified to vote, although a ma-
jority of all the voters of the town did
not vote. If petition must be signed by
a majority of freeholders, minors and
married women, etc., are to be counted.
State v. City of Kokoma, 8 Northeast.
Rep., 718 (Ind., 1886). See, also, Cagwin
v. Hancock, 84 N. Y., 532 (1881). And for
a contrary rule, well argued out, see
Harshman v. Bates Co., 92 U. S., 569
(1875) [overruled, however, in County of
Cass v. Johnson, 95 U. S., 360 (1877),
and the dissenting opinions of Miller
and Bradley, JJ., in County of Cass vu
Johnson, 95 U. S., 360, 370 (1877). As to
the right of a voter or signer to revoke
his consent once granted, see Spring-
port v. Teutonia Savings Bank, 84 id.,
403 (1881); People v. Sawyer, 52 N. Y.,
£96; People v. Wagner, 1 Thomp. & C.,
221 (1873); People v. Hatch, 1 id., 113
(1878). Cf. First Nat. Bank v. Dorset, 16
Blatch., 62 (1879); Noble v. Vincennes,
42 Ind., 125 (1873); and see Hannibal v.
Fountleroy, 105 U. 8., 408 (1881).
2Anderson v. Township of Santa
‘Anna, 116 U.S&., 356 (1886). Cf. State v.
Holladay, 72 Mo., 499; Smith v. City of
Fond du Lac, 8 Fed. Rep., 289; McCall
v. Town of Hancock, 10 id., 8. The
fact that the proposition to vote afd is
defeated at one election does not prevent
the calling of another election to sub-
mit the question again. Supervisors v.

118

NN

1
[$ 96.

§ 96. What officer or agent of the municipality may make the
contract of subscription.— In the absence of any express provision
in the enabling act the proper persons to execute the contract of
subscription for a municipal corporation are those whose duty it is
to execute other contracts for and in the name of the municipality.
A subscription is a contract, to be executed in general in the ordi-
nary way in which any other contract may properly be made. But
the act authorizing the subscription frequently provides by whom
and in what manner the contract shall be executed. When this is
the case the provisions of the statute are to be strictly complied

CH. vi. ] MUNICIPAL SUBSCRIPTIONS.

with.!

It has been held that, in order to constitute a valid municipal
subscription to the stock of a railway ¢ company, it is not necessary
that there be an actual act of subscribing?

Galbraith, 99 U. S., 214 (1878); Society,
etc., v. City, etc., 29 Conn., 174. Nor does
a vote of aid to one railroad prevent a
subsequent vote of aid to another rail-
road. Chicot Co. v. Lewis, 103 U. S., 164.

1Walnut v. Wade, 108 U. 8., 688
(1880); Town of Douglass v. Niantic
Savings Bank, 97 IIL, 228 (1881); Town
of Windsor v. Hallett, 97 Ill., 204 (1880).

The commissioners cannot ‘bind the

municipality by a modification of the
subscription voted by it. Bell v. R. RB.
Co., 4 Wall., 598 (1866). A subscription
for a municipality by officers in a sup-
posed office which does not constitu-
tionally exist is void. Norton v. Shelby
County, 118 U.8., 425 (1886). So, for
example, where the act provides for
the appointment of a board of commis-
sioners to make the subscription, they
only are competent to make it; they
are for this purpose the agents of the
municipality for which they act; they
may insert conditions into the contract
which, unless repudiated by the corpo-
ration, are valid, and will bind all par-
ties concerned; their powers ‘are to be
exercised jointly, and therein all must
act —a majority not being sufficient by
their act to bind the municipality;
their acts, when once fully performed,
are final and binding, and cannot be
recalled or revoked. Danville v. Mont-
pelier, etc., R. R, Co., 48 Vt., 144 (1870).

‘Cf. First Nat. Bank v. Arlington, 16
Blatch., 57 (1879); Bank v. Concord, 50
Vt., 257; People v. Hitchcock, 2 T.
& C. (N. Y.), 184 (1873); State v. Han-
cock Co., 11 O. St.,'183 (1860); S. C.,
12 id., 596. Cf. Jackson Co. v. Brush,
7% Il, 59' (1875); Kankakeé v. Attna
Life Ins. Co., 106 U. 8., 668 (1882); Bis-
sell v, Township of Spring Valley, 110
U. 8., 162 (1884); In re Bradner, 87
N. Y., 171 (1881) If the officers or
agents of a municipality have a discre-
tion with reference to the subscription
to make it or not, as they may think
best under the circumstances, their ex-
ercise of that discretion is final, and
cannot be reviewed or questioned.
Mercer Co. v. Pittsburgh, etc, R. R.
Co., 27 Penn. St., 389 (1856). Of. Fal-
coner v; Buffalo, etc., R. R. Cd., 69
N. Y., 491 (1877); First Nat. Bank
Concord, 50 Vt., 257 (1877).

2 Nugent v. Supervisors, 19 Wall., 241
(1873), holding, also, that a resolution

by a duly authorized board of agents, —

declaring a subscription made, is, upon
the acceptance of .the subscription in
that shape by the railway company,
and a notice to the municipality of the

acceptance, a good and binding sub-.

scription, although there was no sub-
scription made ,in the books of the
company. To same effect, see County
of Moultrie v. Rockingham Ten Cent

119
“

(cH. vi.

8 97]

MUNICIPAL SUBSCRIPTIONS.

But the vote of the tax-payers or inhabitants, as the case may
be, is not a subscription, nor does it amount to a subscription; nor
does it in general vest in the company, for whose proposed benefit
the vote was taken, a right to have a subscription made.

It has been held that the officers authorized to make the sub-
scription have a certain amount of discretion in fixing the terms of
payment.’

$97. Municipal subscriptions may be conditional. A municipal
corporation may annex to its subscription any condition that an in-
dividual subscriber might lawfully prescribe, and may, in conse-
quence, make the payment of the subscription depend upon the
performance thereof.’ Moreover, a municipal corporation is en-

Sav. Bank, 92 U. S., 631 (1875); County
of Cass v. Gillett, 100 id., 585 (1879).
Cf. State v. Jennings, 4 Wis., 549. The,
board whose duty it is to make the sub-
stitution may do so through the county
clerk. Chicago, etc., R. R. Co. v. Put-
nam, 12 Pac. Rep., 593 (Kan., 1887).
The bonds, if signed on Sunday, will
be invalid, although the signature is
by the proper officer. De Forth v.
Wisconsin, etc., R. R. Co., 52 Wis., 320
(1881); Bank, etc., v. Town, etc., 84
N. C., 169 (1881), where an omission of
commissioners to sign bonds was held
not fatal, the requirement being direct-
ory.

1Cumberland, etc., R. R. Co. v. Bar-
ren Co., 10 Bush (Ky.), 604 (1874); Bates
Co. v. Winters, 97 U. S., 83. (1877). A
mere vote of.the municipality is not a
subscription. If the road is foreclosed
before subscription, no suit lies to col-
lect. B’d of Com’rs v. Cottingham, 17
N. E. Rep., 855 (Ind., 1888); County of
Bates v. Winters, 97 U. S., 83 (1877),
holding that where, after an election in
favor of making a subscription, the
‘county court made an order for a sub-
scription, and its agent reported that
the railroad company had no stock-
books, for which, and other reasons, he
did not make the subscription, it was
held that these acts were not final and
self-executing, and did not constitute a
subscription; Wadsworth v. St. Croix
Co., 4 Fed. Rep., 378 (1880).

2 Syracuse, etc. v. Seneca, etc., 86 N.
Y., 317 (1881), where it was held that
after regular proceedings’ had been
taken to bond a town, the commission-
ers, under the law, had a right to make
the bonds payable at one time or at dif-
ferent times; Winter v. City Council,
etc., 65 Ala., 403 (1880), where a vote
authorized the issue of bonds to an
amount not exceeding $1,000,000, and it.
was held that the corporate authorities

‘had discretionary power to issue them

for a less amount.

3 Brocaw v. Gibson Co., 73 Ind., 543.
(1881); Portland, etc., R. R. Co. v. In-
habitants of Hartford, 58 Me., 23 (1870);
Chicago, etc., R. R. Co, v. Aurora, 99
Tll., 205 (1881), holding that if of two
conditions one is legal and ‘the other
unauthorized, and they are severable,
the illegal one may be rejected and the
bonds issued held good as to the other;
Noesen v. Port Washington, 87 Wis..
168 (1875); Perkins v. Port Washington.
37 id., 177 (1875); Town of Platteville v.
Galena, etc., R. R. Co., 43 id., 493 (1878),
holding that, where a town accepted a
written proposition froma railroad com-
pany, the terms and construction of it
were not allowed to be modified by rea-
son of representations made by the com-
pany to the voters before the election.
Foote v. Mount Pleasant, 1 McCrary.
101 (1878). In this case the proceeds of
city bonds issued in payment of a sub-
scription to a railroad were to be ex-

120
cH. vi.|

MUNICIPAL SUBSCRIPTIONS.

[§ 97.

titled to the benefit of any implied conditions to which an individ-

ual subscriber would be entitled.!

Where a condition precedent has not been fulfilled the subscrip-
tion is not enforceable, and bonds issued in payment will be invalid
even in the hands of bona jide holders; as, for example, where the
location of a railway in a certain place is the condition, and the
location is not made as required by the condition.2 But if it be a
condition subsequent, as where a town subscribed for stock in a rail-
way company upon condition that the road should “ be built through
the town on the line as run by the engineer, with a suitable depot
for the convenience of the public,” a failure to perform is not a de-
fense to an action to collect assessments.’

pended within the county limits. It
was held that as between the city and
the road, or its assignees with notice,
the bonds could not be enforced if no
part of the proceeds had been so ex-
pended. Atchison, etc., R. R. Co. v.
Phillips Co., 25 Kan., 261 (1881). Cf.
Memphis, etc., R.. R. Co. v. Thompson,
24 Kan., 170 (1880); Red Rock v. Henry,
106 U.S., 596 (1882); Shurtleff v. Wis-
casset, 74 Me., 180 (1882); State v.
Hancock Co., 11 O. St., 188 (1860). In
this case commissioners who were au-
thorized to subscribe for stock in a rail-
road to run through their county and to
issue bonds therefor, and who had sub-
scribed for the stock, were allowed, as
against a proceeding to compel them to
issue bonds, to set up the defense that
the road had not been located in their
county. A certificate of the municipal
authorities that the condition has been
complied with renders the bonds issued
on that certificate valid and enforci-
ble, though the certificate was a fraud
on the municipality. Oregon v. Jen-
nings, 119 U. S., 74 (1886); People, etc.,
v. Holden, 82 Ill., 93 (1876). In this case
completing a road, except about one
mile, and operating its trains for that
distance over another road so as to sup-
ply all the wants of the public, was
held a substantial compliance with a
condition requiring its completion.
Hodgman v. St. Paul, etc., 23 Minn.,
158 (1876), holding that a condition call-
ing for the completion of a road toa

certain point did not require the build-
ing of a bridge across a river, other
facilities for crossing it being provided..
See, also, on conditional subscriptions, .
Concord v. Portsmouth, etc., 92 U. 8.,
625 (1875); Railroad Co, v. Falconer, 103
U. S., 821 (1880); ch. V, supra. In the
case of Madison County Court v. Rich-
mond, etc., R. R. Co., 80 Ky., 16 (1882),
it is held that, while a county may make
such conditions as may seem proper to
it before submitting the question of a

subscription to a popular vote, the
county court cannot, after the vote is

taken, require other conditions, or alter
those already imposed, or by a second
election change. the terms of the con-
tract of subscription as originally made
and entered into. See, also, Carroll v.
Smith, 111 U. S., 556 (1884).

lLamb v.. Anderson, 54 Iowa, 190
(1880).

2Mellen v. Towh of Lansing, 19
Blatch., 512 (1871); Chicago, etc., R. R. |
Co. v. Marseilles, 84 Tll., 145 (1876);
Bucksport, etc., R. R. Co. v. Brewer,
67 Me., 295 (1877).

3 Belfast, etc., R. R. Co. v. Brooks, 60
Me., 568 (1872). Cf. Chicago, etc., R. R.
Co. v. Schewe,, 45 Iowa, 79 (1876), As
to a subsequent breach of a condition
attached to the subscription, see Peo-
ple v. Rome, etc., R. R. Co., 103 N. Y.,
95 (1886), Lessees of purchaser of, rail-
road purchased at foreclosure sale are
not bound by contract of first railroad
company, made with municipalities vot-

121
“MUNICIPAL SULCSCRIPTIONS. . [cx. VIL

88 98, 99.]

§ 98. When may a municipal subscription be paid in bonds instead
of money?— The express power of a municipality to subscribe for
stock does not authorize it to issue negotiable bonds therefor.’ But
where a municipal corporation is authorized to subscribe to the
stock of a railway or other corporation, or to lend its credit thereto,
and to issue bonds to that end, it may, in the exercise of its proper
discretion, instead of selling the bonds and applying the proceeds
to the payment of the subscription, deliver the bonds themselves to
the railway company in exchange for an equivalent amount of the

stock.?

In New York a contrary view =r anaeaile, and there is force in the
New York argument that only thus can the full par value of the
bonds be realized for the purposes of the enterprise.’

§ 99. A municipal corporation as a stockholder—When. a mu-

-nicipal corporation'subscribes to the stock of a railway company, it

ing aid in reference to.depots. People
v. Louisville, etc., R. R. Co., 10 North-
east. Rep., 657 (Ill., 1887). See, also,
People v. Holden, 82 Ill, 93 (1876);
Hodgman v. St. Paul, etc., R. R. Co.,
23 Minn., 153 (1876); State v. Town of
Clark, 23 id., 422 (1877); State v. Lime,
28 id., 521 (1877). See, also, § 78, supra.
In New York it is held that, where a
town imposes as a condition precedent
to its subscription that the road be lo-
cated and constructed through the town,
the commissioners have no power to ac-
cept any agreement from the company
or any substitute in lieu of full compli-
ance. Falconer v. Buffalo, etc, R. R.
Co., 69 N. Y., 491 (1877). As to the
right to revoke a consent by popular
vote, see § 94, supra.

1Norton v. Dyersburg, 127 U. 8., 160
(1888).

2Meyer v. The City of Muscatine, 1
Wall., 384, 392 (1863); Seybert v. Pitts-
burgh, 1 Wall., 272 (1863); Evansville,
etc., R. R. Co. v. City of Evansville, 15
Ind., 395 (1860); Curtis v. County of
Butler, 24 How. (U. S.), 435; Common-
wealth v. Pittsburgh, 41 Penn. St., 278;
Town of Concord v, Portsmouth Sav-
ings Bank, 92 U. S., 625 (1871); Aspin-
wall v. Jo Daviess Co., 22 How., 364
(1852), where, before the authorized
subscription was made, a new constitu-

tion was adopted making such subscrip-
tions void unless paid in cash; held, that
bonds issued to pay a subscription made
after the new constitution was adopted
were void. ; Statutory authority to raise
money by tax and appropriate it to aid
of railroad does not authorize issue of
bonds by the municipality therefor,
Concord v. Robinson, 121 U.8., 165 (1887).
Where a town issues bonds instead of
paying money, as required by statute,
and the bonds are declared void, the
holder is not subrogated to the right of
the railroad to the money itself. Aitna,
etc., Ins. Co. v.' Middleport, 124 U.S.,
534 (1888),

3Starin v. Genoa, 28 N. Y., 439 (1861);
Bk of Rome v, Village of Rome, 19 id.,
20 (1859); Horton v. Town of Thomp-
son, 71 id., 513 (1863), holding that, if
the bonds were turned over to the rail-
road, the latter would sell them for
what they would bring, which would
generally be less’ than par. For de-
cisions to the effect that, at common
law, a municipal corporation cannot
sell its bonds at less than par, see
Neuse River Nav. Co. v. Com’rs, 7 Jones
(N. C.), 275; Dan. Neg. Instr. (8d ed.),
§ 1538; County of Armstrong v. Brin-
ton, 47 Pa. St., 367 (1864). See, also,
§ 5la, supra; Gould v. Town of Ster-
ing, 23 N. Y., 456, 460 sina

122
eH. VIL] | + MUNICIPAB SUBSORIPTIONS. [§§ 100, 101.

: te
becomes a stockholder in just the same sense as any individual sub-
scriber; is entitled to the same rights, privileges and emoluments;
and is subject to the same burdens of duty and liability as other
holders of the stock.1

This doctrine is established as an unquestioned rule of law by the
long line of cases, both in the state and federal courts, which in-
volve the validity of municipal bonds issued in ad of railway or
other corporations.

§ 100. A municipality may enforce delivery of a to itself in
@ proper case.— Under the same circumstances and conditions, and
to the same extent, as any other subscriber, a municipal corporation
may compel a railway or other corporation to deliver to it stock to
which the subscribers in general are entitled. Whatever would
prevent an individual subscriber from enforcing such delivery will
equally prevent a municipality in a like case? A municipal cor-
poration, as a subscriber, is in no better position than an individual
subscriber in this respect.’

§ 101. Division of the municipality after the subscription.—We
find a line of cases in the reports of some of the western states
which deals with the questions which have grown out of the subdi-
vision of towns and counties in those states, after a donation or sub-
scription has been made to some railway or other corporation, and
before the bonds have been ‘issued, or before they have become

due and payable.

It is, of course, not competent for the legislature so to divide a

1Shipley v. The City of Terre Haute, |

74 Ind., 297 (1881); Kreiger v. Shelby
R. BR. Co. (Ky., 1886); 25 Am. & Eng.
R. BR. Cas., 528 (1886); Gray v. The
Staté, 82 Ind., 567 (1880); 1 Dan. Neg.
Instr., § 436 ; Murray v. Charleston, 96 U.
S., 432 (1877). See, also, Curran v. The
State, 15 How., 304; Robinson v. B’k
of Darien, 18.Ga., 65; County of Mor-
gan v, Allen, 103 U.S., 498 (1880); U.S.
v. Planters’ Bank, 9 Wheat., 904; Mor-
gan County v. Thomas, 76 IIl., 120 (1875) ;
State v. Holladay, 72 Mo., 499; Mar-
shall v. Western, etc., R. R., 92 N.C,
822 (1885); County of Morgan v. Allen,
108 U. 8., 498 (1880), holding that the
creditors of an insolvent corporation
may enforce the liability of municipal
corporations upon their bonds; Robin-
son v. Bidwell, 22 Cal., 379; People v.
Coon, 25 Cal., 685, holding that the
individual members of a municipal cor-

poration have no such interest.in stock ‘
in a railroad subscribed for by it as will
disable the legislature from authorizing
it to compromise with the railroad. A
foreclosure of the railroad on a mort-
gage closes out the stock which a mu-
nicipality has therein. Spurlock v. Mis-
souri Pac. R’y Co.,2 8. W. Rep., 219
(Mo., 1886). See, also, § 608. A judg-
ment creditor may reach a municipal
subscription payable in bonds by man-
damus, after acquiring the company’s
right thereto. Smith v. Bourbon County,
127 U. S., 105 (1888).

2Wapello Co. v. Burlington, etc., R.
R. Co., 44 Iowa, 585 (1876). In this case
the stock was to be issued only when
fully paid.

3 Pittsburgh, etc., R. R. Co. v. Alle-
gheny Co., 79 Pa. St., 210 (1875). Of.
State v. Garoutte, 67 Mo., 445 (1878).

128
[CH. v1.

§ 102.] MUNICIPAL SUBSCRIPTIONS.

municipality as to release all or any part of it from the obligation
of any contract into which the whole had previously entered.!
When a town or county is divided, or some part of it annexed to
some other town or county, after the undivided municipality has
voted a subscription, and it is provided in the act by which the di-
vision is accomplished that each part shall remain liable for the
previous municipal indebtedness, such provision is held to mean
nothing more than that, as concerns the subscription voted, each
part is liable for its proportion only of the debt according to the
valuation of the property of the undivided municipality at the time
the vote was taken.? This rule, however, cannot affect the cred-
itor’s right to hold liable the whole of the old municipality.

§ 102. Consolidation of companies after the municipal aid is
‘voted.— When the company proposed to be benefited unites or is
consolidated with another company or companies of a similar char-
acter, after the aid of a municipality has been voted and before
the subscription has been paid — the company having before the elec-
tion the right to consolidate—the bonds may law fully be aesued to
or sold for the benefit of the new or consolidated company.’ When,

1 Sedgwick Co. v. Bailey, 11 Kan., 631
(1873). Cf. State v. Lake City, 25 Minn.,
404 (1879); Marion Co. v. Harvey Co.,
26 Kan., 181 (1881); Henderson v. Jack-
son Co., 12 Fed. Rep., 676 (1881).

2 Hunt v. Hamilton, 25 Kan., 76 (1881).
See, also, Eagle v. Beard, 83 Ark., 497
(1878), holding that, in the absence of
statutory provision, the detached part of
a county is released from liability for the
debts of the county; but the legislature
may apportion the debt between the old

‘and the new counties; McBride v. Har-
din Co., 58 Ta., 219 (1882), holding that
a county is not responsible for expenses
incurred by one of the townships com-
prising it in voting taxes in aid of a rail-
road.

3 Livingston County v. Portsmouth
Brk, 128 U. S., 102 (1888); New Buffalo
v. Tron Company, 105 U. S., 78 (1881);
Bates Co. v. Winters, 97 U. 8., 83;
County of Scotland »v. Thomas, 94 id.,
682 (1876); Town of East Lincoln v.
Davenport, 94 id., 801 (1876); Wilson v.
Salamanca, 99 id., 499 (1878); Empire
v. Darlington, 101 id., 87 (1879), holding
that, where stock-in a railroad had been

subscribed for by a township under
statutory authority, an additional sub-
scription after it was consolidated with
another road and under a new name
was valid; Menasha v. Hazard, 102 id.,
81 (1880); Harter v. Kernochan, 103 id.,
562 (1880), holding that where township
records showed that bonds wete di-
rected to be issued and delivered to a
consolidated company, although the
act authorizing them and the vote un-—
der it contemplated the issue to one of
the consolidated companies, the town-
ship was estopped to deny their valid-
ity; County of Tipton v. Locomotive
Works, 103 id., 523 (1880); State v. Green,
Co., 54 Mo., 540 (1874); Vernon v. Ho-
vey, 52 Ind., 568 (1876). See, also, Nu-
gent v. Supervisors, 19 Wall., 241 (1873);

County of Henry v. Nicolay, 95 U. 5.,

619 (1877). In this case a railroad com-
pany had, after the subscription, trans-
ferred its franchises to another com-
pany. In a suit upon the bonds, paid
for the stock, in hands of an innocent
purchaser, the bonds were upheld.
County of Schuyler v. Thomas, 98 id.,
169 (1877). Cf. Harshman v. Bates

124
CH. wel

MUNICIPAL SUBSCRIPTIONS.

[§ 102.

however, the consolidation works such a fundamental change in
the constitution and purpose of the original corporation that indi-
vidual subscribers are thereby released, a subscription by a munic-

ipality will be invalidated,! but otherwise not.’

It is accordingly

said that municipal bonds voted and delivered to a corporation
under a changed name are not by such change invalidated.’

County, 92 U. S., 569 (1875), A munic-
ipal aid cannot be enforced where. the
railroad company sells all its property
to another company. Cantillon v, Du-
buque, etc., R. R. Co., 35 N. W. Rep.,
620 (Iowa, 1887).

1 Lynch v. Eastern, etc., R. R. Co., 57
Wis., 4380 (1883). Harshman v. Bates
County, supra, will hardly be followed.
It does not accord with the current de-
cisions. See Crooks v..State, 4 North-
east. Rep., 589 (Ind., 1886).

2 Atchison, etc., R. R.:'Co. v. Phillips
.Co., 25 Kan., 261 (1881); Society, etc.,
— London, 29 Conn., 74 (1860).
‘this last case the new company was ae
stantially the same as the one to which
the subscription was made. The court
held the issue of the bonds to the new
company valid; Illinois, etc., v. Bar-
nett, 85 Il]., 318 (1861), holding that the
legal purchase of another road will not
invalidate subscriptions; Howard Co.
v. Booneville, etc., 108 U. S., 314, hold-
ing that the defense, after paying inter-
est for several years, that the road con-
structed was not the one to whose stock
the subscription. was authorized, was
not good, it appearing that it was a
branch of the road referred to in the
act; Commonwealth v. Pittsburgh, 41

Penn. St., 278 (1861); Lewis v. Claren-
don, 5 Dillon, 329 (1878); Chickaming
v. Carpenter, 106 U. S., 663 (1882).

3 Town of Reading v. Wedder, 66 II1.,
80 (1872); Commonwealth v. Pittsburgh,
41 Pa. St., 278. In the case of Marsh
v. Fulton Co., 10 Wall., 676 (1870),
where the legislature so amended the _
charter of a railway company as to di-
vide the road into three divisions, and
each division was made a new com-
pany, so that there were three distinct
corporations in place, of the original
corporation, it was held by the federal
supreme court that a subscription of
stock and issue of county bonds, au-
thorized by a popular vote to be made
to the original corporation, could not
legally be made to one of the three new
corporations. Consolidation with an-
other railroad no defense to the county,
where the statute authorizing it existed
at time of county vote. Chicago, etc.,
R. R. Co. v. Putnam, 12 Pac. Rep., 593
(Kan., 1887); County, etc., v. Locomo-
tive, etc., 103 U. S., 523 (1880), holding
that if a municipal corporation consents
to a consolidation of roads it is estopped
from denying the validity of its bonds
in the hands of a bona fide holder.

125
CHAPTER VII.

CALLS.
$104. Definition of call. § 118. Stockholder cannot question ad-
105. Call is generally necessary. visability of call. _
106. When a call is unnecessary. 114, Calls must be impartial and uni-
107. In New York no call is required. form. .
108. In case of corporate insolvency 115. Method of making calls —No
no call is necessary. formalities necessary.
109. Who has authority to make 116. Time, place, amount and per-
calls. ! son to whom payable.
110. Calls by directors. 117. Notice of calls — Cases holding
111. Assignment of subscriptions by it not necessary. —
corporation before or after | 118. —— Cases holding it to be nec-
call. essary.
112. Interest runs from the time the | 119. Methods of serving notice of
call is due. calls.
An? 120. Demand, waiver, pleadings, etc.

8 104. Definition of. call— A “call” may be defined to be an offi-

cial declaration, by the proper corporate authorities, that the whole
or a specified part of the subscriptions for stocks ‘is required to be
paid! The term, however, is used with different meanings, and
may refer to the resolution of the officials that a part or the whole
of the subscription must be paid, or to the resolution and notifica-
tion thereof, or the combination of facts making the parties called
on liable to an action for the non-payment of the money called? An
assessment is a term often used to designate the same thing as a
call, but sometimes refers to payments sought to be recovered from
the stockholders, above and in addition to the par value of the
stock. An instalment is one of the several part payments into
which a single call may be divided.

1Braddock v. Phil., Marlton & Med-
ford R. R. Co., 45 N. J. L., 363 (1888),
holding also that a direction by the di-
rectors to the president to collect the
subscriptions is a call. In the case of
Spangler v. Ind. & Ill. Central R. R.
Co., 21 Ill, 276 (1859), a call or assess-
ment is rather vaguely defined as ‘‘a
rating or fixing of the proportion by
the board of directors, which every sub-
scriber is to pay of his subscription,
when notified of it and when called in.”
Newry & Enniskillen R’y Co. v. Ed-

munds, 2 Ex. Rep., 118 (1848), holds that
a call is an application to each share-
holder for a proportion of his share.

2 Queen v. Londonderry & Coleraine
R’y Co., 18 Q. B., 998. In Ambergate,
N. & B. & E, J. R’y Co. v. Mitchell, 4
Ex. Rep., 540 (1849), it issaid ‘the word
call is capable of three meanings: it
may either mean the resolution, or its
notification, or the time when it be-
comes payable. It must mean either
one of these three,”

- 126
CH. VII] ‘OALLS. [§§ 105, 106.

§ 105. Call is generally necessary.— As a general rule, a call must
be made in order to render a subscription or any part thereof due
and payable to the corporation. A contract of subscription, unlike
other contracts to pay money, is a promise to pay; but, by implica-
tion of law, the payment is to be only at such times, and in such
part payments, as may be designated by the corporate authorities
in a formal declaration known as a “call.”! In other words, the
subscription is a debt payable at a future time.? The time when
it shall be paid is indefinite until fixed by a call. :

§ 106. When a call is unnecessary.— If, however, a subscription
contains a promise to pay upon a certain day, no call is necessary;
but the subscriber is bound to pay, at all events, upon the day

1“*No action can be maintained
against a stockholder for an instalment
on his subscription until the board has
directed the call tobe made.” Banet v.
Alton & Sangamon R. R. Co., 13 ITIL,
504 (1851); Spangler v. Ind. & Tli. Cen-
tral R. R. Co., 21 Tll., 276 (1859); Brad-
dock v. Phil., Marlton & Medford R. R.
Co., 45 N. J. L., 363 (1883). In the case
of Grosse Isle Hotel Co. v. L’Anson’s
Ex’rs, 42 N. J. L., 10 (1880); affi’d, 43 N.
J. L., 442 (1881), the court said a sub-
scription for stock “imports an agree-
ment not to pay at once the whole sum
representing the value ot the shares
subscribed for, but a stipulation to pay
such sum when called for by the direct-
ors, in amounts duly assessed.” And in
B’k of South Australia v. Abrahams, L,
R., 6 Privy Council App., 262 (1875), the
court said: ‘“ The company has no abso-
lute right, and the shareholder is under
no absolute liability, to pay. The right
only arises if, and when, calls are made
'’ by the directors. . The due mak-
ing of the call by the resolution of a
board of directors is an essential condi-
tion precedent.” To the same effect, see
Wilbur v. Stockholders of the Corpn.,
18 Bankr. Reg., 178. Where, by statute
or charter, payment is to be in such
manner and proportion and times as
the directors may order, there can be
no suit to collect until after a call. Gris-
sel’s Case, L. R.,1Ch. App., 528, 585
(1866); Ala, & Fla. R. R. Co. v, Rowley,

!

9 Fla., 508 (1861). Even where the stock
is fraudulently issued as paid up, in
payment for property, and the transac-
tion is impeached for fraud, a call is nec-
essary before the subscription can be en-
forced. Granite Roofing Co. v. Michael,
54 Md., 65 (1880). Where, however, for
failure to furnish the property due on
a subscription, a suit for damages is
brought by the corporation, no call
need precede such suit. An allegation
of a general demand suffices. Cheraw
& Chester R. R. Co. v. Garland, 14 8. C.,
63 (1879); Ohio, Ind. & Ill. R. R. Co, v.
Cramer, 23 Ind., 490 (1864). A call is
not applicable to stock which was sub-
scribed for after the call was made.
Pike v. Shore Line, 68 Me., 445 (1878).

2 The subscription ‘‘is a present debt,
payable at afuture day.” Pittsburgh &
Connellsville R. R. Co. v. Clarke, 29 Pa,
St., 146 (1857). The subscription ‘‘cre-
ates a debt, but the debt does not ac-
crue due until a call is made.” Gris-
sell’s Case, L. R., 1 Ch. App., 528, 535
(1866); In re China Steamship & Coal
Co., 38 L, J. (Ch.), 512 (1869), the court
say: “ The moment a call is made itis
a debt due in every respect,” although
it cannot be collected by suit until later.
The bankruptcy act does not release an
applicant thereunder from liability for
calls made after his release in bank-
ruptcy. Glenn v. Howard, 3 Atl. Rep.,
895 (1866).

127
§ 107.) . CALLS. [CH. VIL
named.! So, also, if by statute or the charter the subscription be-
comes payable at a certain specified time, a call is hereby dispensed
with, and is not required.? A stockholder, on the other hand, is not
obliged to wait for a call even when entitled to it. He may pay at

‘any time.®

8 107. New York rule—In New York it seems that a different
rule prevails. In that state there is a tendency to hold that no call
is necessary before suit is brought on a subscription for stock. The
subscriber’s obligation to pay, and the time and manner of pay-
ment, must be sought for in the contract itself. Unless the contract
provides for calls, the subscription is payable absolutely and at once,
or as soon as the corporation is duly organized.* Accordingly, in an
action brought to collect a subscription, it is not necessary to allege
that a call has been made, unless the terms of the subscription or
the provisions of the corporate charter expressly provide for calls.
These rules, however, seem not to have been directly passed upon
in New York, and it is doubtful whether they can be considered as

clearly established in that state.°

| Estell v. Knightstown & Middlétown
Turnpike Co., 41 Ind., 174 (1872); New
Albany & Salem R. R. Co. v. Pickens,
5 Ind., 247 (1854); Ross v. Lafayette &
Indianapolis R. R. Co., 6 Ind., 297 (1853) ;
Breedlove v. Martinsville & F. R. R. Co.,
12 Ind., 114 (1859); Waukon'& M. R.-R.
Co. v. Dwyer, 49 Iowa, 121 (1878).

2 Phoenix Warehousing Co. v. Badger,
67 N. Y., 294 (1876).

3 Marsh v. Burroughs, 1 Woods, 463
(1871); Poole’s Case, L. R., 9 Ch. D.,
322 (1878). But if such payment is by
the directors ‘themselves, and it is im-
mediately repaid to them for fees, the
corporation being insolvent, the trans-
action will be set aside. Syke’s Case,
L. R., 13 Eq. Cas., 255 (1871). So, also,
a@ payment in advance, on an agreement
that such payment shall be only a loan
if the-corporation is successful, but shall /
be a payment of the subscription if the
corporation becomes insolvent, is held
to be a loan, though insolvency occurs.
Barge’s Case, L. R., 5 Eq. Cas., 420
(1868). Frequently a subscription is
paid, before a call, by applying to its
payment money due the subscriber from
the corporation. Adamson’s Case, L. R.,
18 Eq. Cas., 670 (1874).

4 Lake Ontario, Auburn & N. Y. BR. R.
Co. v. Mason, 16 N, Y., 451 (1859); Phoe-
nix Warehousing Co. v. Badger, 67
N.Y., 294, 300 (1876). In the former
case, however, calls were made and no-
tice given by advertisement in a news-
paper. In the latter case, by the terms
of the charter, all subscriptions were
due at the time when suit was com-
menced. Hence, in both cases, the
statements in reference to calls have the,

appearance of dicta. In Mann v. Pentz,.

3 N. Y., 415 (1850), it was held that a
receiver could not collect uncalled sub-
scriptions, since ‘‘the only condition
upon which he (the subscriber) could
have been made liable to the corpora-
tion was by regular calls made in pur-
suance of the charter.” See, also,
Bauton v. Dry Dock, etc., Co., 4 BE. Dy
Smith, 420 (1855); Seymour v. Sturgess,
26 N. Y., 184 (1862); Savage v. Medbury,
19 N. Y., 32 (1859); Williams v. Meyer,
41 Hun, 545 (1886). See, also, How-
land v. Edwards, 24 N. Y., 807 (1862).
.5These rules seem to be peculiar to
New York. The decisions‘in some of
the other states hold, however, that no
notice of calls is necessary. . See § 117.
Practically, such a rule is equivalent to

128
CH. vir. ]

CALLS.

,

[§ 108.

§ 108. In case of corporate insolvency no call is necessary.—
When a corporation becomes insolvent, and there exist subscriptions

which have not been full
or refuse to make the call

paid in, the directors frequently neglect
s necessary for the purpose of paying the

corporate debts. In such cases a court of equity will disregard the
formality of a call, and will order the unpaid subscriptions to be
paid to a receiver for the benefit of the corporate creditors.!_ The

requiring no call at all, since in both
cases collection is made only by direc-
tion of the directors or other officers,
and in both cases the subscriber need
not be informed of such directions.
1**T¢ is well settled that when stock
is subscribed to be paid upon call of the
company, and the company refuses or
neglects to make the call, a court of
equity may itself make the call, if the
interests of the creditors require it.”
Scoville v. Thayer, 105 U. S., 143 (1881);
Glenn v. Williams, 60 Md., 93; Glenn v.,
Sample, 80 Ala., 159 (1885). ‘‘A com-
pany call is but a step in the process
of collection, and a court of equity
may pursue its own mode of collec-
tion, so that no injustice is done to
the debtor.” Hatch v. Dana, 101 U.S.,
205 (1879). See, also, Myers v. Seeley,
10 Natl. Bank. Reg., 411; Sanger v.
Upton, 91 U. S., 56 (1875); Wilbur v.
Stockholders, etc., 18 Bank. Reg., 178.
Where the corporation, being indebted,
has the power to call, and does not
choose to exercise it, equity at the in-
stance of creditors will exercise it.
Marsh v. Burrougtis, 1 Woods, 463 (1871);
Boeppler v. Menown, 7 Mo. App., 447
(1885); Adler v. Milwaukee Pat. B, Mfg:
Co., 18 Wis., 57 (1860); Glenn v. Dodge,
3 Cen. Rep., 283 (1886); Great W. Tel.
Co. v. Gray, 14.N. E. Rep., 214 (IIL, 1887);
Ward v. Griswoldville Mfg. Co., 16
Conn., 598 (1844); Miller’s Case, 54 L, J.
(Ch.), 141 (1885); Henry v. Vermilion &
Ashland R. R. Go., 17 O., 187 (1848); Ogil-
vie v; Knox Ins. Co., 22 How., 880 (1859);
Curry v. Woodward, 58 Ala., 371 (1875) ;
Chandler v. Keith, 42 Iowa, 99 (1875);
Shackley v. Fisher, 75 Mo., 498 (1882).
The filing of the bill in the suit in
equity is equivalent to a call. Hatch

(9) 129

v. Dana, 101 U. S., 205 (1879); Thomp-
son v. Reno Sav. Bank, 7 Pac. Rep., 68;
19 Nev., 108, 171, 242, 291, 293 (1886).
See, also, Yeager v. Scranton, etc., B’k,
14 Weekly N. Cas., 296 (1884), A late
case holds that a decree in a chancery
suit is equivalent to a call. Glenn v.
Saxton, 68 Cal., 853 (1886). If the
court orders that notice of the call be
given, the receiver cannot collect by
suit unless such notice is given, Frank-
lin Savings Bank wv. Fatzinger, 4
Atl. Rep., 912 (Pa., 1886). Where the
whole of the unpaid subscriptions are
needed to pay corporate debts, no as-
sessment, even by the court, is neces-
sary. But, unless the evidence clearly
shows such necessity, it is for the jury
to say whether the whole unpaid sub-
scription shall be paid. Citizens’, etc.,
Co. v. Gillispie, 9 Atl. Rep., 73 (Pa.,
1887, citing cases). See § 207. Where an
assignment is made by the corporation
for the benefit of creditors, the statute of
limitations begins to run within a rea-
sonable time, even if no call is made.
Glenn v. Dorsheimer, 24 Fed. Rep., 536,
Cf. § 195. In Missouri it has been held
that there can be no garnishment of an
unpaid subscription until after a call
has been made, Parks v. Heman, 7
Mo, App., 14(1879). In New York there
are a few dicta to the effect that calls
by the directors are necessary before
unpaid subscriptions can be enforced
for the benefit of corporate creditors.
Seymour v. Sturgess, 26 N. Y., 184
(1862); Mann v. Pentz, 3 N. Y., 415
(1850), But the prevailing rule is sus-
tained in Sagory v. Dubois, 3 Sandf.
Ch., 466 (1846), where the court say:
“The articles, it is true, in effect re-
quire that calls should be made by the
i

§ 109.] CALLS, : (cH. vit.

courts very properly hold that it is not discretionary with the di-
rectors to say whether the company’s debts shall be paid or not.
And this is the rule even though the statute provides that calls shall

be made by the directors.’

There has been some doubt as to whether the writ of mandamus.

would lie to compel the directors to make the call,’ but the au-
thorities seem to hold that the writ will not lie for this purpose.
The usual procedure to collect unpaid subscriptions is an order of
a court of equity made in a suit brought by corporate creditors for
the purpose of applying corporate assets to corporate debts.

§ 109. Who has authority to make calls.— A call, in order to be
legal and enforceable, must be made by the proper corporate au-
thorities. Generally, the power to make calls is vested in the
directors or in the stockholders at large. Unless the charter or a
statute makes provisions therefor, the question as to who shall
make calls is.a question of internal arrangement. If no provision
whatever is made for the exercise of the power it devolves upon
the directors, on the general principle that they alone have power

directors, and probably the association
could not maintain an action at law un-
til such calls were regularly made; but
that does not impair the remedy in be-
half of the receiver.”

1Glenn v. Saxton, supra; Crawford
v. Rohrer, 59 Md., 599 (1882). Contra,
Paper Co. v. Waples, 3 Woods, 34 (1877),
where the charter prescribed that calls
should be only by a three-fourths vote
of the stockholders.

2“ A chancellor will compel the di-

rectors. to make the calls. required by.

the charter whenever his aid is invoked
by creditors or the representatives of
creditors,” Germantown Passenger R’y
Co. v. Fitler, 60 Pa. St., 124 (1869), The
three English cases usually cited on
this point do not hold that a man-
damus lies herein. Queen v. Victoria
Park Co., 1 Ad. & El., N. S., 544; Queen
v. Ledyard, id., 616; King v. Katharine
Dock Co., 4 Barn, & Ad., 360 (1832). In
the case of Dalton & Morgantown R.
R. Co. v, McDaniel, 56 Ga., 191 (1876),
the court held that a mandamus was
unnecessary, on the ground that the
remedy by bill was easier and more

complete,’ and that justice would be.

better administered in this way by an

account of all the corporate debts, and
of all liabilities of solvent stockholders,
taken by a master in chancery. In
Hatch v. Dana, 101 U. S., 205 (1879),
the court say a mandamus ‘can avail
only when there are directors.
remedy in equity is. more complete.”
In Ward v. Griswoldville Mfg. Co., 16
Conn., 593 (1844), the court refused a
mandamus because it would enforce the
collection of only a few debts, whereas
the remedy in equity would enforce all
proportionately.

3** Under such circumstances, before
there is any obligation upon the stock-
holders to pay without an assessment
and call by the company, there must, be
some order of a ‘court of competent
jurisdiction, or, at the very least, some
authorized demand upon him for pay-
ment.” Scoville v. Thayer, 105 U. S.,
148 (1881). In bankruptcy, it seems,
the assignee, by succeeding to all the
rights of the corporation, may’ make a
call and enforce it. Hatch v. Dana, 101
U. S., 205 (1879), See, also, $§ 202, 207,
infra. At common law a court of
equity could not make calls for benefit
of corporate creditors. Dictum, Grain’s
Case, L. R., 1 Ch, D., 307, 828 (1875),

130

The -

 
CH. Vit. | CALLS.

[§ 110.

to manage and superintend the financial matters of the corporation
and to exercise all corporate powers, except those required to be
exercised at corporate meetings.! Even though the statute author-
izes calls by the stockholders, yet the directors also have the same
power.” ‘

$110. Calls by directors.— Where the power to make calls is
vested in the directors, a call made by those who are directors de
_facto will be upheld.* The directors, in whom the power to make
calls is vested, cannot delegate their authority.‘ It is a power the

sy

(

1Budd v. Multnomah St. R’y Co.,
15 Pac. Rep., 659 (Oreg., 1887). The di-
rectors may make calls ‘‘as they may
do all things, except snch as are to be
done by the shareholders at a general
meeting.” Ambergate, N. & B. & E. J.
Ry Co. v Mitchell, 4 Ex. Rep., 540
(1849),

21d. In Ee parte Winsor, 2 Story,
CO. C., 411 (1844), it was held, however,
that where the charter gave to the cor-
poration the power to assess stock it
must be exercised exclusively by the
stockholders in meeting assembled. On
the other hand, in Rives v. Montgom-
ery S. P. R. Co., 80 Ala., 92 (1857), the .
court held that stockholders who, by
charter, have power to make calls, may
delegate that power to the directors. _
See, also, Healey, Law and Pr. of Com-
panies, 109.

3** An illegal election of diréctors
cannot be set up in resistance of the
payment of stock, but would be a case
for a quo warranto to oust the illegally
elected directors.” Hakright v. Logans-
port & N. Ind. R. R. Co., 13 Tl., 404
(1859); Johnson v. Crawfordsville R, R.
Co., 11 Ind., 280 (1858); Fairfield C. T.
Co. v. Thorp, 13 Conn., 178 (1839); Stein-
metz v. Versailles R. R. Co., 57 Ind.,
457 (1877); Macon R. R. Co. v. Vason,
57 Ga., 314 (1876); Atherton v. Sugar,
etc., Co., 67 Ind., 334 (1879). In the
case, however, of People’s Mut. Ins.
Co. v. Westcott, 80 Mass., 440 (1860), a
call by directors elected at a meeting
held without notice was declared in-
valid and not enforceable. A call may
Le enjoined on the ground that the di-

rectors were illegally elected. Moses
v. Tompkins, 4 South. Rep., 763 (Ala.,
1888). In England. the courts will in-
quire into the right of directors to their
office, in cases involving the validity of
calls. Swansea Dock Co, v. Lewien, 20
L. J. (Ex.), 447 (1851). If the directors
were not legally elected, their calls and
forfeitures of stock based thereon will
be set aside. Garden Gully, etc., Co. v.
McLister, L. R., 1 App. Cas., 39 (1875).
See Healey on Companies, 110. If the
corporate organization was not reg-
ular, and the directors were not legally
elected, their call is not enforceable.
Howbeach, etc., Co. v. Teague, 5 H. &
N., 151 (1860). 5
Rutland & Burlington R. R. Co. wv.
Thrall, 35 Vt., 536 (1863), the court say-
ing: ‘‘ Where the charter requires the
directors to do some specific act, there
seems to be a stronger reason why they
should be held incapable of delegating
such authority than when mere general
powers are conferred on them.” See,
also, Banet v. Alton & Sangamon R. R.
Co., 18 Ill, 504 (1851); Pike v. Shore
Line, 68 Me., 445 (1878); Silver Hook
Road v. Greene, 12 R. I., 164 (1878),
where it,was delegated to the treasurer ;
Mut. Ins. Co. v. Chase, 56 N. H., 841
(1876), citing authorities; Monmouth
Mut. F. Ins. Co. v. Lowell, 59 Me., 504
(1871). But where the power is dele-
gated and exercised, the call may be
ratified by the directors, and will then
be valid. Read v. Memphis Gayoso Gas
Co., 9 Heisk. (Tenn.), 545 (1872); Rut-
land & B. BR. R. Co, v. Thrall, 35 Vi.,
636 (1863). Although the directors can-

131
- by others.

.

CALLS. -[cH. vi.

§ 111]
exercise of which involves a discretion which cannot be exercised
A call by a minority meeting of the directors, no quo-
rum being present, is void."

§ 111. Assignment of subscription by corporation before or after
call.— The unpaid and uncalled subscriptions for stock cannot be
mortgaged or sold by the corporation. If the transfer by the di-
rectors were allowed, “‘the consequence would be that the discre-
tion which they are bound to exercise would be wholly defeated and
put an end to.”? The power of making calls, being a discretionary
one, cannot be transferred to. other parties. The transfer is void.
The subscribers are bound to pay their subscriptions only when,
in the opinion of the proper corporate authorities, or of a court of
equity, the money is needed for corporate purposes. This power
of ascertaining and determining the extent of the corporate needs,
being a discretionary power, cannot be transferred or delegated to

others.

A different rule prevails, however, after a call has been

made, but not yet collected, and an assignment of the amount al--

ready called is legal and valid.*

not delegate the power to make a call,
yet they may delegate the power “to
determine the amount of some of the
instalments, and to designate the times

of paynient.” Banet v. Alton & 8. R. R.-

Co. (1851), supra. It is not necessary
to allege that the directors were duly
elected. Miller v. Wild Cat G. Road
Co., 52 Ind., 51 (1875); Steinmetz v.
Versailles & O. T. Co., 57 Ind., 457 (1877).
But proof must be given that the proper
authorities made the call. N. J. Mid-
land R’y Co. v. Strait, 35 N. J. L., 322
(1872).

1Price v. Grand Rapids & Ind. R. R.
Co., 18 Ind., 58 (1859); Hamilton v. Same,
18 Ind., 347 (1859); Bottomley’s Case, L.
R., 16 Ch. D., 681 (1880). But may be
confirmed by a quorum. Phosphate of
Lime Co., 24 L. T., 932.

? Ex parte Stanley, 33 L. J. (Ch.), 585
(1864). To same effect, see N. J. Mid-
land R’y Co. v. Strait, 85 N. J. L., 322
(1872); Wells v. Rodgers, 50 Mich., 294
(1883); 8. C., 44 Mich., 411; 27 Northw.
Rep., 671 (1886), involving the consolida-
tion of two railroads. See, also, Crooks
v. State, 4 Northeast. Rep., 589 (Ind.,
1886); Wallingford Mfg. Co. v. Fox, 12
Vt., 804 (1840); B’k of South Australia

v. Abrahams, L. R., 6 P. C. App., 262
(1875); Hurlbert v. Root, 12 How. Pr.,
511 (1855); Hill v. Reid, 16 Barb., 280
(1858); Hurlbert v. Carter, 21 Barb., 221
(1855). Cf. Smith v. Hallett, 34 Ind.,
519 (1870), where the subscription was
not for stock, but as a bonus. See, also,
§8§ 668-671, infra.

3 Humber Iron-works Co., 16 Weekly
Rep., 474, 667 (1868); Hills v, Rodgers,
50 Mich., 294 (1888); Miller v. Maloney,
3 B. Monr. (Ky.), 105 (1842), where the
call was assigned to the railroad con-
tractor who owed the subscriber for
work done; Downie v. Hoover, 12 Wis.,
174 (1860); Morris v. Cheney, 51 Ill., 451
(1869), where, however, it is not clear
that a call had been made. A call which
has been determined upon, but not defi-
nitely made, may be transferred if it is
afterwards duly made by the directors.
Re Sankey Brook Coal Co., L. R., 9 Eq.,
721 (1870), See L. R., 10 Eq., 381. As
to the enforcement of a subscription
by a subsequently-created corporation
formed by consolidation, see § 670, A
mortgage on all the land, property and
effects of the corporation does not in-
clude uncalled subscriptions. Pickering
v, Ilfracombe R’y Co., 37 L. J. (C. P.),

132
¥

CH. vit.] _ CALLS. [$$ 112,113..

§ 112. Interest runs from the time the call is due.— A subscriber
who has failed to pay for his shares according to the terms of his
contract is properly chargeable with interest from the time of the
default.1. The company cannot be compelled to issue the stock until

principal and interest are paid.

§ 113. Stockholders cannot question advisability of calls— The *

necessity or advisability of making a call is a matter which rests
exclusively within the discretion of the corporate authorities who
have power to make the call.?- A stockholder, when sued upon an
unpaid call, cannot set up in defense that there was no occasion or
use for the money. The call, however, must be for the bona fide
purpose of raising money for corporate purposes. It must not be for
thé purpose of enabling the stockholders to use the money to the
detriment of the creditors of the failing corporation.’ Moreover,
a court of equity will set aside calls and payments made. and
managed with a view to discharging the stockholders’ liability,
and preventing the proceeds from being applied to the general
corporate debts. Equity, however, will not interfere with a call
merely because the money received may be diverted by the di-
rectors to an act or enterprise beyond the powers of the corpora-
tion.t The corporation cannot contract to postpone indefinitely

118 (1868); Lishman’s Claim, 23 E. T.
Rep. (N. S8.), 759 (1870); King v. Mar-
shall, 33 Beav., 565 (1864). Cf. Re Ma-
rine M. Co, L. R.,; 4 Eq., 601 (1867);
British Prov. L. Ins. Co., In re, 4 DeG.,
J. & S., 407; Gardner v. London, etc.,
R’y Co., L. R., 2 Ch., 201, 215, An as-
signee of unpaid subscriptions may as-
sign to still another. Rand v. Wiley, 29
N. W. Rep., 814 (Iowa, 1886). Right of
one road built on line of abandoned
road, to recover on private donation to
latter, see Sickels v. Anderson, 30 N. W.
Rep., 78 (Mich., 1886)..

1Gould v. Oneonta, 71 N. Y., 298
(1877); Rikhoff v. Brown’s Rotary, etc.,
Co., 68 Ind., 388 (1879); Casey v. Galli,
94 U. S., 673 (1876). See, also, Burr v.
Wilcox, 22 N. Y., 551 (1860). Cf Stock-
en’s Case, L. R., 5 Eq., 6 (1867); Cleve-
land v. Burnham, 55 Wis., 598 (1886).

2The question of the necessity for the
call ‘‘ was a matter for the determina-
tion of the board of directors.” Chou-
teau Ins. Co. v. Floyd, 74 Mo., 286 (1883).
“The question whether these necessi-

ties demanded the payment of the
money was for the directors.” Judah

v, American L. 8, Ins. Co., 4Ind., 333

(1858); Budd v. Multnomah St. R’y Co.,
15 Pac. Rep., 659 (Oreg., 1887).

3 Habertson’s Case, L. R., 5 Eq., 286°

(1868). Thus, where the amount paid
in is immediately paid out to the direct-
ors for fees, the transaction is fraudu-
lent, and is set aside. Syke’s Case, L.
R., 13 Eq. Cas., 255 (1871). On the other
hand, the directors cannot delay calls
in order to enable themselves to trans-
fer their stock and avoid liabilities. Gil-
bert’s Case, L. R., 5 Ch., 559 (1870);
Preston v. Grand Collier Dock Co.; 11
Sim., 327 (1840).

4In the case of Bailey v. Birkenhead,

L, & C. J. R’y Co., 12 Beav., 483 (1850),
the court said: It is not within the juris-

diction of courts ‘‘ to take the accounts
and make the inquiries necessary for
the purpose of ascertaining whether,
under the circumstances to which the
company is reduced, and in a continu-
ing concern, itis proper, in the due man-

188
CALLS. [CH. VIL.

§§ 114, 115.]
a call. To allow such postponement would be unjust to corporate
creditors and other stockholders.

§ 114. Calls must be impartial and uniform.— A call cannot be
made so as to affect a part only of the subscribers. It must be
made on all alike, or it will be void.?, The courts will not allow the
directors of a company so to proceed as to require some stockhold-
ers to pay calls, and not to require others todothesame. Any such
attempt will be promptly set aside and rectified.’

§ 115. Method of making call — No formality necessary.— — There

are no prescribed or established rules stating how a call shall be |

made by the corporate authorities empowered t ‘to make it. Any act
or resolution which, in a court of law, would prove a clear official
intent to render due and payable a part or all of the unpaid -sub-
scriptions, seems to be sufficient. The call need not indicate when,

or to whom, or where payment is required to be made.
to be stated in the notice of the call.
regarded, and will not invalidate the call.

agement of the affairs of the company,
to raise money by way of calls from the

' shareholders.” Corporate meetings are
the places for such complaints. See,
also, Yetts v. Norfolk R’y Co., 8 De G. &
Sm., 293 (1849),

1 McComb v. Credit Mobilier of Amer-
ica, etc., 18 Phil. Rep., 468 (1878); Van
Allen v. Ill. Central R. R. Co., 7 Bosw.
(N. Y.), 515 (1861) — the last case hold-
ing, however, that this principle does
not prevent the issue of bonds convert-
ible into stock whenever the stockholder
desires.

2Pike v. Bangor & Calais 8. L. RB. BR.
Co., 68 Me., 445 (1878). Cannot object
to call on ground that motives of di-
rectors were wrong. Oglesby v. Attrill,
105 U. S.. 605 (1881).

3 Preston v. Grand Collier Dock Co. ;
11 Sim., 827 (1840). If directors use
power to make calls oppressively they
will be restrained. Cannon v. Trask,
L. R., 20 Eq., 669. As where the object
is to disguality from voting those who
cannot pay. Anglo, etc., Bank v. Barag-
non, 45 L. T., 862.

4Budd v. Multnomah St. R’y Co., 15
Pac. Rep., 659 (Oregon, 1887); Citizens’
Ins. Co. v. Sortwell, 10 Allen, 110, 112
(1865).

These are
Mere irregularities‘are. dis-
The substantial fact

5 Fox v. Allensville, C. 8. & V. Turn-
pike Co., 46 Ind., 31 (1874); Andrew »v.
Ohio & M. R. R. Co., 14 Ind., 169 (1860).
In the case of Great North of Eng.
R’y Co. v. Biddulph, 7 M. & W., 248
(1840), Baron Parke held that the reso-
lution for a call need not state the place
of payment nor the person to whom it
was payable. See, also, Marsh v. Bur-
roughs, 1 Woods, 463 (1871), holding
that the call need not specify either
time or place. See, also, Rutland &
Burlington R. R. Co. v. Thrall, 85 Vt.,

856 (1863), that the place need ‘not be

stated.

Call made in a new name, legally as-
sumed by the corporation, is binding on
subscribers who knew of the change of
name. Shackleford v. Dangerfield, ie
R., 8C. P., 407 (1868).

@leperalacition are no defense. The
remedy is to revoke or set aside the call:
‘Callin fact made means that if made,
and notice be given, a party
shall not wait to take advantage of any
irregularity at the trial.” Re British
Sugar Ref. Co., 83 K. & J., 408 (1857);
Southampton Dock Co. v. Richards, 2
Railw. Cas., 215, 284 (1840); 8. C, 1
Man. & Gr., 448. See, also, Shackleford
wv. Dangerfield, L. R., 8 C. P., 407 (1868).

184

St fF
CH. VIL] CALLS. [$ 116.
must exist that the proper corporate officers voted or declared that
payment be required. Hence the elements of a call seem to be
that it shall be by the proper persons acting officially; and that a
resolution, susceptible of legal proof,! be passed that a certain
amount, either the whole or part,’ of the subscriptions for stock
shall be paid in. '

§ 116. Time, place, amount and person to whom payable.—'The
time and place and person to whom calls are to be paid need not
necessarily be designated or fixed by the persons authorized to make
the call? These are duties which may be performed by other offi-
cers of the corporation, and frequently either the president or treas-
urer of the corporation performs this work. The time of payment

should be reasonable,‘ as also should be the place.

An error in the call may be corrected
and cured by a subsequent call made
after the first liability accrued, but be-
fore suit. Phil. & West Chester R. R.
Co. v. Hickman, 28 Pa. St., 318 (1857).
A director who participated in making
the call cannot set up informalities for
the purpose of defeating it. Hays v.
Pittsburgh, etc., R. R., 38 Pa. St., 81
(1860). Payment and acquiescence in
informality as to one call ‘waives ‘itas
to another call. Macon & Augusta R.
R. Co, v. Vason, 57 Ga., 314 (1876).

1A call by the directors is valid, al-
though no entry of the resolution is
made in the minutes of the directors’
meeting. Hays v. Pittsburgh & S. R.
R. Co. (1860), supra. An entry of the
resolution, made by the secretary in'the
book containing the minutes, is suffi-'
cient. Fox v. Allensville C. S. & V.
T. Co., 46 Ind., 31 (1874). An author-
ized subsequent call is competent proof
of the validity of a previous call. Bar-
rington v. Pittsburgh & 8. R. R. Co., 34
Pa. St., 358 (1859). The corporate books
are competent to prove both the call
and the mode of payment. Barrington
v. Pittsburgh, etc., R. R. Co., supra;
Comfort v. Leland, 8 Whart. (Penn.), 81
(1837).

2The call may be for the whole sub-
scription. Fox v. Allensville C8. &
V. T. Co., 46 Ind., 31 (1874). May be for
the ‘whole or for part.

Hann v. Mul-°

If no place or |

berry & Jefferson G. R. Co., 33 Ind., 103
(1870); Stone v. Great Western Oil Co.,
41 Ill., 85 (1866); Spangler v. Ind. & IIL
‘Central R.-R. Co., 21 Il., 276 (1859);
Ross v. Lafayette & Indianapolis R. R.
Co. 6 Ind., 297 (1855). Even though it
be ‘expressly provided that only a cer-
tain sum shall be assessed at one time,
yet several assessments, each one not in
excess of the stated sum, may be or-
dered by a single vote. Penobscot R.
‘R. Co. v. Dummer, 40 Me., 172 (1856);
Penobscot R. R. Co. v. Dunn, 39 Me,,
587 (1855).

8See § 115, note 5. The directors
themselves may fix the time, place and
manner of payment, even at a meeting
subsequent to the meeting ordering a
call. The call may be prospective, The
directors may order that on a certain
date a call payable at a later date shall
be made. Sheffield & Manchester R’y
Co. ‘v. Woodcock, 7 Mees. & W., 574
(1840). The subscription itself may reg-
ulate the time of payment. N. J. Mid-
land R’y Co. v. Strait, 35 N. J. L., 322
(1872); Roberts v. Mobile & O. R. R. Co.,
32 Miss., 378 (1856), Even though the
statute provides otherwise. Iowa &
Minn. R. R. Co. v, Perkins, 28 Iowa, 281
(1869).

4Fairfield County Turnpike Co. vw
Thorp, 18 Conn., 178 (1839), The time
between payments of instalments is en-
tirely within the discretion of the direct-

185
§ 117]

CALLS.

(oH. vir.

person to receive payment is designated, it is to be paid to the
treasurer at his office! The amount called need not be made pay-
able in one sum at one time, but may be made due in instalments.?

§ 117. Notice of calls — Cases holding it not necessary.— There is
a wide and irreconcilable difference of, opinion among the authori-
ties on the question whether notice of a call must be given to a
stockholder before suit can be brought for the collection of a call.

Frequently either the charter, or a statute, or the by-laws of the
corporation, require notice to be given; and in such cases notice is,

of course, necessary, in order to sustain suit.

But where there is

no provision in the charter, or statute, or by-laws, or subscription
itself, prescribing that notice of calls shall be given to the stock-
holders, the weight of authority holds that no notice is necessary,
and that an action to collect the call may be maintained without
averring or proving such a notice.*

ors, there being no provision regulating
the subject. Hall v. U. S. Ins. Co., 4
Gill (Md.), 484 (1860).

1 A resolution of the directors that the
instalments should be paid in at the
times therein designated ‘‘imports that
payments should be made to the treas-
urer, who is the proper and only officer
to receive and keep the moneys of the
corporation.” Danbury & Norfolk R.
R. Co. v, Wilson, 22 Conn., 485 (1858).
As to a ténder to the president, see
Mitchell v. Vermont, etc., Co., 67N. Y.,
280 (1876),

2London & North West. R’y Co. v.
McMichael, 6 Ex., 278 (1851); Birken-
head L. & C, R’y Co. v, Webster, id.,
461 (1851); Ambergate R’y Co. v. Nor-
cliff, id., 461 (1851); not following Strat-
ford & M. R’y Co. v. Stratton, 2 B. &
Ad., 519 (1831), In Birkenhead L. & E.
R’y Co. v. Webster, as reported in 6 Ex.,
277, the court say: “We are unani-
mously of opinion that a call payable by
instalments is good, although debt will
not lie for one instalment until all the
instalments are due and payable.” In

.Hays v. Pittsburgh & Steubenville R.
R. Co., 88 Pa. St., 81 (1860), the court
held that the directors by one resolu-
tion could call in the balance of the sub-
scriptions, making the call payable in
instalments, due at different times. To

the same effect see Rutland & Burling-
ton R. R. Co. v. Thrall, 35 Vt., 536
(1863); Lewis’ Case, 28 L. T. (N. 8.}, 396,
holding that several assessments, pay-
able at different times, may be made by.
one vote, where the call was by the
court. :

3In many of the states there exist
statutes, very similar in their terms,
that notice shall be given of calls, and
that in case of non-payment the stock
may be forfeited. .These statutes have
received different interpretations in dif-
ferent states. The usual construction is
that the notice required therein refers
only to the forfeiture proceedings, and
does not necessitate notice before bring-
ing a suit at law for the collection of the
call, Smith v, Ind. & Ill. R’y Co., 12
Ind., 61 (1859); Lake Ontario, Auburn
& N. Y. R. R. Co. v. Mason, 16. N. Y.,
451, 464 (1857). In other states such a
statute is construed to require notice
before suit. Hughes v. Antietam Mfg.
Co., 34 Md., 816 (1870); Granite Roofing
Co. v. Michaels, 54 Md., 65 (1880); Dexter
& Mason P. R. Co. uv. Millerd, 8 Mich.,
91 (1854). Ill. River R. R. Co. v. Zimmer,
20 Tll., 654 (1858), holds that a statute
regulating notice of calls does not re-
lease the stockholder,

4 Wilson v. Wills Valley R. R. Co., 83
Ga., 466 (1863); Eppes v. Miss,, Gaines-

136
CH. VII. ]

CALLS.

[$§ 118, 119.

$118. Notice of calls — Cases holding it necessary. There is,
however, strong authority for the rule that notice of calls must be
given before suit is brought for their collection.!_ The reason for this
rule seems to accord with sound legal principles and with business
expediency. It is a well-established principle of law that, when the
fact or circumstances upon which the performance of a contract
depends lie more particularly in the knowledge of the promisee than
the promisor, the former must give the latter notice. Hence it-
would seem that since a subscription is not due absolutely, but only
on call, and the time, place and amount of the call is fixed by per-
sons other than the subscribers, the better and more reasonable rule
would be that notice ofthe call should be required and must be

given.

§ 119. Methods of serving notice of calls— The manner and mode
of giving notice has given rise to some controversy. Unless pro-
vision is expressly otherwise, the notice must be given by handing
to the subscriber a written notice, or by informing him orally that
the call has been made, giving the amount, time, place and person

ville & Tuscaloosa R, R. Co., 35 Ala., 38
(1859); Grubb v. Mahoning Nav. Co., 14
Pa. St., 802 (1850); Gray v. Mononga-
hela Nav. Co., 2 W. &S. (Pa.), 156 (1841);
Grubbe v. Vicksburg & Brunswick R,.
R. Co., 50 Ala., 398 (1878); Eakright v.
Logansport & Northern Ind. R. R. Co.,
13 Ind., 404 (1859); Johnson v. Craw-

. sfordsville R. R. Co., 11 Ind., 280 (1858);

New Albany & Salem R. R. Co. v.
McCormick, 10 Ind., 499 (1858); Fisher
v. Evansville & C. R. R. Co., 7 Ind., 407
(1856); Ross v. Lafayette & Indianapolis
R. R. Co., 6 Ind., 297 (1855); Hill v. Nis-
bit, 100 Ind., 341 (1884); Smith v. Ind. &
Hl. R’y Co., 12 Ind., 61 (1859). In the
last case the court says: ‘‘ These decis-
ions rest upon the ground that the con-
tract to pay by instalments is in effect
a promise to pay on demand, and the

’ ”* demand involved in the suit itself was

alone sufficient.” Notice of calls is re-
quired by the Pennsylvania railroad
act. McCarty v. Selinsgrove, etc., R.
R., 85 Leg. Intel., 410 (1878). In New
York, since no call is necessary, no no-
ticeis necessary. Cf. Macon & Augusta
R. R. Co. v. Vason, 57 Ga., 314 (1876).

1 Wear v. Jacksonville & Savannah R.
R. Co., 24 IIL, 593 (1860); Spangler v.

Ind. ‘& Ill. Central R. R.-Co., 21 Ill., 276
(1859). Cf. Peake v. Wabash R. R. Co.,
18 Tll., 88 (1856), holding that notice is
unnecessary. Inthe case of Carlisle v.
Cahawba & Marion R. R. Co., 4 Ala. (N.
8.), 70 (1842), the court'say that notice
must be given, since ‘‘ the times, amount
of instalments and manner of payment
were all to be prescribed by the presi-
dent and directors of the corporation,
depended upon their volition and action,
and consequently were more properly
within their knowledge.” See, also,
Scarlet v. Academy of Music, 43 Md., 208
(1875); Essex Bridge Co. v. Tuttle, 2 Vt.,
893 (1830); Rutland & Burlington R. R.
Co. v. Thrall, 35 Vt., 586 (1863); Miles
v. Bough, 3 Q. B., 845 (1842); Edinburgh,
etc., R’y v. Hibblewhite, 6 M. & W.,
707 (1840); Alabama & Florida R. R. Co.
v. Rowley, 9 Fla., 508 (1861). In Hughes
v. Antietam Mfg. Co., 34 Md., 316 (1870),
the court say: ‘‘To say that it [notice]
is unnecessary, because the subscribers,
who may be living in different parts of

‘the county, and perhaps the state, are
presumed in law to know all that is done

by the directors, seems to us to be rais-
ing a presumption against the truth
itself.”

137
§ 119.]

=
CALLS.

i

[oH. vir.

to whom payment is to be made.! Where the notice is served, not
personally, but by mail, the notice is effective only in case it is
ere received.” Whether it was so received is a question for the

jury.’

A publication of a notice in a newspaper is not binding and

effectual, unless it be proved that the subscriber who is sued act-
ually read the notice as published.* A personal notice is sufficient,

1 The notice need not be written. Ver-
bal notification suffices. Smith v. Tal-
lahassee Plank-road Co., 30 Ala., 650,
666 (1857). Notice to pay to the treas-
urer sufficiently indicates the place of
payment. It is understood to be at his
office. Muskingum Valley T. Co. v.
Ward, 18 O., 120 (1844). Contra, Dex-
ter & Mason P. R: Co. v. Millerd, 3 Mich.,
91 (1854). It must be proved to have
been sent by authorized persons. Miles
v. Bough, 3 Q. B., 845 (1842), Notice to
various parties in the neighborhood is not
sufficient. New Jersey Midland R’y Co.
». Strait, 85 N. J. L., 322 (1872). No par-
ticular form of notice is necessary. The
only question is ‘“‘ whether the notice
gives the shareholder to understand that
a callhas been made, and that he is re-
quired to pay the amount on a given
day.” Shackleford v. Dangerfield, L.
R., 3C. P., 407 (1868).

2 Constructive notice by mail is not
a personal notice, although in some cases,
by express statutory provision, it is suf-
ficient to bind parties.” Hughes v. An-
tietam Mfg. Co., 34 Md., 316 (1870).

3 A notice of a call may be by mail.
If the subscriber denies that he received
it, the question is for the jury. Brad-
dock v. Phil., Marlton & Medford R. R.
Co., 45 N. J. Law Rep., 363 (1883), Only
the person actually mailing the notice
can testify to that fact. Jones v. Sisson,
72 Mass., 288 (1856).

‘In Alabama & Fla, R. R. Co. vu. Row-
ley, 9 Fla., 508 (1861), the court say such
a mode of notice ‘might be attended
with irreparable injury to innocent
parties.” See, also, dictum in Lake
Ontario, Auburn & N. Y. RB. RB. Co: v.
Mason, 16 N, Y., 451 (1857). In the case
of Schenectady & S. P. R. R. Co. v.

Thatcher, 11 N. Y., 102 (1854), where
the character prescribed notice by pub-
lication or by mail, a director who aided
in giving the notices was held to have
had personal notice and to be bound.
‘* Personal service of due notice is clearly
more advantageous to the defendant
than either an advertisement in a news-
paper or a notice sent by mail.” See,
also, Lexington & West Cambridge R.
R. Co. v. Chandler, 18 Mete., 311 (1847).
See, also, § 130,

In the case of Lincoln v. Wright, 23
Pa. St., '76 (1854), not a corporation case,
Judge Jeremiah Black said that.a notice
by publication in a newspaper was no
notice,,unless actually read by the per-
son charged with the notice. ‘‘It must
be proved that he read it; otherwise it
is no strohger than proof that the fact
was orally and publicly uttered ‘at a
place where he was not present. . .
Where the law requires notice to be
given to a party before a liability can
be fixed. upon him, and thewmode of giv-
ing such notice is left. undetermined, it
should be given personally and in fact,
and so proved.” On the other hand, in
Hall v, U. S. Ins. Co., 4 Gill (Md.), 484
(1847), notice of a call ‘by newspaper was
held sufficient. The court'said: ‘There
is no proportionate object attained by
the great inconvenience, labor and ex-
penses incident to personal notice. The
substitution of such newspaper publica-
tion in lieu of personal notice has so
long been an universal usage, and of a
notoriety equal to that of a publication
of newspapers themselves, that the cus-
tom of doing so has becomea part of the
law of the land.” See, also, Louisville
& HE. T. R. RB, Co. v. Meriwether, 5 B.
Monr, (Ky. )s 18 (1844), to the same effect,

188
OH. vil. | CALLS.

[§ 120.

although the charter, statute or by-laws provides for notice by pub-
lication.’ An express promise of the subscriber to pay a call which
has been already made is presumptive evidence that he had notice
of that call? Notice by publication, given under the authority of
a statute, charter or by-law, must strictly comply with the provis-
ions prescribed as to the time and formalities. ‘

§ 120. Demand, waiver, pleadings, etc-— After notice, has been
given, no demand is necessary before bringing a suit to collect the
subscription! The subscriber may, by his acts or express agree-
ment, waive the call itself, or informalities in its making, or notice

thereof.6

and dictum in Danbury & Norfolk R. R.
Co, v. Wilson, 22 Conn., 485 (1858), and
§§ 180, 131, infra. ;

1In the case of Miss., etc., R. R. Co. v.
Gaster, 20 Ark., 455 (1859), the statute
prescribed sixty days’ notice by publica-
tion. Actual personal notice was given,
and no publication washad. The court
sustained the notice and said: ‘‘ One of
the criterions by which to determine
whether the requirements of a statute
are imperative or merely directory is
that those acts which are of the essence
of the thing required to be done are im-

“perative, while those which are not of
the essence are directory. The
giving of sixty days’ notice is impera-
tive and must be strictly complied with,
because it is of the essence of the thing
required to be done; the mode of doing
so is directory, because not of the es-
sence, and may be either by publication
in the manner prescribed by the charter
or by actual personal notice.” Cf,
semble, in Tomlin v. Tonica & Peters-
burg R. R. Co., 23.11, 429 (1860).

2Miles v. Bough, 3 Q. B., 845 (1842);
Fairfield County Turnpike ‘Co. v. Thorp,
18 Conn., 173 (1839).

8 Where twenty days’ notice was re-
quired, proof of sending notice is insuffi-
cient. Must prove the time of sending.
Cole v. Juliet Opera House Co., 79 IIl., 96
(1875). Notice by publication “ at least
sixty days” is satisfied by. one publica-
tion sixty days or more before the time
of payment. Muskingum Valley T.
Co, v. Ward, 13 O., 120 (1844); Marsh v.

It is immaterial that other shareholders have had no

Burroughs, 1 Woods, 463 (1871); Fox v.-
Allensville Co., 46 Ind., 81 (1874). Fifty-
nine days is insufficient where sixty days
is prescribed. Macon & Augusta R, R.

‘Co. v. Vason,. 57 Ga., 314 (1876), The

printed notice must be put in evidence.
Rutland & Burlington R. R. Co. v.
Thrall, 35 Vt., 536 (1863), Proof of sev-
eral insertions is by copy of first inser-
tion and the testimony of the publisher
that the others were made. Unthank
v. Henry County T. Co., 6 Ind., 125
(1855), The secretary of the corpora-
tion cannot, by a certificate, prove pub-
lication of notice. Tomlin v. Tonica &
P. R. R. Co., 28 Ill, 429 (1860).

4 Penobscot R. R. Co. v. Dummer, 40
Me., 172 (1856); Goodrich v. Reynolds,
81 Ill., 491 (1863); Winters v. Muscogee
R. BR. Co., 11 Ga., 438 (1852). Cf.
Spangler v. Ind. & Ill. Central R. R.
Co., 21 Ill., 276 (1859), holding that one
demand made for several assessments
suffices.

5Macon & A. R. R. Co. ‘v. Vason, 57
Ga., 314 (1876). Payment of part of
subscription is no waiver of right to

have a call made for the balance before

payment. Grosse Isle Hotel Co. v
Ex’rs of L’Anson, 48 N. J. L., 442 (1881),
The vote of a city to pay a call is no
waiver of its invalidity. Pike v. Ban-
gor & Calais Shore Line R. R. Co., 68
Me., 445 (1878). The waiver must be
clearly: proved. Rutland & B. R. R,
Co, v. Thrall, 35 Vt., 586 (1868). Di-
rector participating in call cannot object
thereto. York Tramways v. Willows,

139
§ 120.]

CALLS.

[OH. Vir.

notice of the call! The proof of calls and of notice, when required,
must be clear and complete.? The pleadings in an action on calls
must allege the various facts which complete the obligation of the

subscriber to pay.’

'

L. R., 8 Q. B. D., 685. Where a sub-
scriber, upon receiving notice of a call,
denies that he is a stockholder, he
thereby waives further notice. Cass
v. Pittsburg, etc., R’y, 80 Pa. St., 31
(1875).

1 Newry & Enniskillen R’y Co. v. Ed-
munds, 2 Ex. Rep., 118 (1848); Shackle-
ford v. Dangerfield, L. R., 3 C. P., 407
(1868). /

2Scarlett v. Academy of Music, 48
Md., 203 (1875). This case holds also
that calls may be proved by reading ex-
tracts from the minutes of the directors’
meetings, without putting the books in
evidence.

' 8Must allege that the instalments are
all due and payable, where several are
sued on. Bethel & Hanover T. Co, v,
Bean, 58 Me., 89 (1870). At common
law the count set out in the declara-
tion should be not on the contract of
subscription, but in indebitatus assump-
sit for calls or instalments due. Peake
v. Wabash R. R. Co., 18 IIl., 88 (1856).
For the customary averments, see
Spangler v. Ind. & Ill. Central R. R. Co.,
21 IIL, 276 (1859). For the defendants’
pleading, see South Eastern R’y ».
Hibblewhite, 12 A, & E., 497 (1840).

140
CHAPTER VIII.

FORFEITURE OF SHARES FOR NON-PAYMENT.

:
§ 121. The various remedies. § 129. Statutory formalities and gen-
123. The remedy by forfeiture and eral method of forfeiture.
sale of stock is by statutory 130. Notice in cases of forfeiture.
authority only. 131. Notice is not the same thing as
, 124. The remedy by forfeiture is cu- . _ forfeiture.
mulative. 132. Tender, by stockholder, before
125. When one remedy is exhausted forfeiture.
the corporation cannot resort 183, Surplus after valid forfeiture
to another. belongs to the corporation.
12%. Forfeiture relieves the share- 134, Equity will relieve a shareholder
holder whose shares are for- from an unauthorized forfeit-
feited from liability to cor- ure. :

porate creditors.

§ 121. The various remedies When a subscriber fails or refuses
to pay for the shares of stock for which he has subscribed, the cor-
poration generally has several methods of enforcing the contract.
First, there is the common-law action to collect the subscription as
a debt. This remedy always exists, except in a few states where it
is available only when the subscription itself or the charter creates
a liability to pay.!. Second, the corporation may sue on the sub-
scription, obtain judgment, and then proceed to sell the stock under
an execution levied to.collect the judgment.’ Third, the corpora-
tion may bring an action at law for breach of contract, the measure
of damages being the difference between the value of the stock at
the price which the subscriber was to pay and the market value at
the date of the refusal to pay. A fourth and very important rem-
edy is that of forfeiture. It is the subject of this chapter. It is
effected in one of two ways: the forfeiture may be by a strict fore-
closure of the stockholder’s stock — that is, the taking of his stock
by the corporation itself; or it may be by a public sale of the stock
for non-payment of the subscription.

§ 123. The remedy by public sale of stock is by statutory authority
only.— In addition to the remedy of an action at law to compel
payment of a subscription for stock, there frequently is given to the
corporation the right to sell the subscriber’s stock for non-payment
of his subscription and apply the proceeds to the payment of that
subscription. This is what is generally known as a forfeiture of

1See § 71, supra. 3 Rand v, White Mountains R. R. Co.,
2 Chase v. East Tenn., etc., R. R. Co., 40N. H., 79 (1860).

5 Lea, 415 (1880).
141
§ 124.] FORFEITURE OF STOOK. [oH. vir.

the stock. It is not a common-law remedy, and, consequently, can
be resorted to by the corporation only when power to make the
sale is given to the corporation by statute or by the act of incor-
poration! The right to forfeit may, however, be created by the
consent of the stockholders, and be indorsed on the certificates of
stock.

The authority to forfeit shares for non-payment of the subscrip-
tion cannot be created by a by-law.’ Such a forfeiture would be
wholly void, and transfers based thereon would confer no rights
upon the transferee.‘

§ 124. The remedy by forfeiture is cumulative— Frequently,
when a corporation is authorized by statute to forfeit shares for
non-payment of the subscription, the question arises whether the
statutory remedy of forfeiture is exclusive, thereby preventing a
resort to the common-law remedy of an action of asswmpsit on the

contract.

1 Westcott v. Minnesota, etc., Co., 23
Mich., 145 (1871); Budd v. Multnomah
St. R’y Co., 15 Pac. Rep., 659 (Oreg.,
1887). In the last case the statute gave
the corporation power to make by-laws
for forfeiture of stock. There being no
by-law, a forfeiture was attempted by
a resolution of the board of directors.
Held, this could not be done. Barton’s
Case, 4 De G. & J., 46 (1859), is similar
and stronger, as public notices and ad-
vertisements were made of the threat-
ened forfeiture. Perrin v. Granger, 30
Vt., 595 (1858); Clarke v. Hart, 6 H. of
L. Cases, 633 (1858); Stanhope’s Case,
L. R., 1 Chan., 161 (1865). In Kelk’s
Case, L. R., 9 Ey., 107 (1869), the forfeit-
ure was provided for in deed of settle-
ment, and hence regular. If the cor-
poration purchases at forfeiture sale, as
it may by statute in California, execu-
tion against the corporation cannot be
levied on such stock. Robinson v.
Spaulding, etc., Co., 72 Cal., 82 (1887).
A building association cannot provide
that it will discount a subscriber’s stock,
loan him the amount thus discounted,
and forfeit the whole if he does not pay.
It-is usury. Henderson, ete., Assoc. v.
Johnson, 10 S. W. Rep., 787 (Ky., 1889).

2 Weeks v, Silver, etc., Co., 55 J. & 8,
(N. Y.), 1 (1887).

It is the well-established rule that it does not.

A grant

3 Matter of the Long Island R. R. Co.,
19 Wend., 37 (1837); S. C., 32 Am. Dac.,
429; Kirk v. Nowill, 1 Term Rep., 118
(1786). Cf. Kennebec, etc., R. R. Co, v.
Kendall, 31 Me., 470 (1850); Rosenback
v. Salt Springs National Bank, 53 Barb.,
495, 506 (1868).

‘Matter of the Long Island R. R. Co.,
supra. Yet, where such a power was
conferred by a by-law adopted at a
meeting of the stockholders, a stock-
holder whose stock had been declared
forfeited under the by-law, and who is
shown to have assented to the by-law,
will not be heard to question the valid-
ity of the forfeiture. He is estopped.
Lesseps v, Architects’ Co., 4 La. Ann.,
816 (1849). The corporation cannot, by
a by-law, forfeit shares temporarily
until penalties or fines shall have been
paid. Adley v. Reeves, 2 Maule & &.,
53 (1818), by Lord Ellenborough. Cf.
Cartan v. Father Mathew, etc., Society,
3 Daly, 20 (1869); Pentz v. Citizens’ Fire,
etc,, Co., 85 Md., 73 (1871). But only
the stockholder can object to a forfeit-
ure on the ground that it is by by-law.
Detweiler v. Breckenkamp, 83' Mo., 45

(1884). Of. $§ 181,184, As to the effect

of acquiescence or waiver by the stock-
holder, see § 129, infra. Cf. § 448.

142
CH. VIII. ] FORFEITURE OF sTOCK.

[§ 194.

of the power to declare a forfeiture of the shares of a subscriber
for non-payment of calls does not, by implication, deprive the cor-
poration of its option of remedies; and the corporate agents may,
in their discretion, upon the failure of the subscriber to pay for
his stock, either proceed against him by suit to collect the unpaid
calls, or may forfeit his shares of stock. The corporation, by such
a statute, is given its choice of remedies, and may pursue either.
The remedy by forfeiture is additional.!

It is to be borne in mind, however, that in the New England
states the right to forfeit stock for non-payment of assessments
does not imply a right in the corporation to sue for such assess-
ments. The latter right does not exist at all, unless it is given by

1Delaware, etc., Co. v. Sansom, 1
Binn., 70 (1803); Instone v. Frankfort
Bridge Co., 2 Bibb, 576 (1812); Rens-
selaer, etc., T. Co. v. Barton, 16 N. Y.,
457 (1854); Lake Ontario, etc., R. R. Co.
v. Mason, 16 id., 451 (1857); Buffalo, etc.,
R. R. Co. v. Dudley, 14 id., 336 (1856);
Harlem, etc., Canal Co. v. Seixas, 2 Hall
(N. Y. Saper. Ct.), 504 (1829); Fort Ed-
ward, etc., Co. v. Payne, 17 Barb., 567
(1854); Rensselaer, etc., R. R. Co. w
Wetsel, 21 id., 56 (1855); Sagory v. Du-
bois, 8 Sandf, Chan., 466 (1846); Troy,
etc., R. R. Co. v. McChesney, 21 Wend.,
296 (1889); Herkimer, etc., Co. v. Small,
21 id., 273 (1839); Ogdensburgh, etc., R.
R. Co. v. Frost, 21 Barb., 541 (1856);
Northern R. R. Co. v. Miller, 10 id., 260
(1851); Troy, etc:, R. R. Co. v. Tibbits,
18 id., 297 (1854); Troy, etc., v. Kerr, 17
‘id., 581 (1854); Union Turnpike Co. v.
Jenkins, 1 Caines’ Cas., 86, 95 (1804);
Goshen, etc., Co. v. Hurtin, 9 Johns.,
217 (1812); McDonough v, Phelps, 15
How. Prac., 372 (1856); Freeman v. Win-
chester, 18 Miss., 577 (1848); Hartford,
etc., R. R. Co. v. Kennedy, 12 -Conn.,
499 (1888); Mann v. Cooke, 20 id., 178
; (1850); Connecticut, etc., R. R. Co. v.
Bailey, 24 Vt., 465 (1852); Rutland, etc.,
R. R. Co. v. Thrall, 35 id., 536 (1863);
New Hampshire, etc., R. R. Co. v. John-
son, 30 N. H., 390 (1855); White Mount-
ains R. R. Co. v. Eastman, 34 id., 124,
147 (1856); Piscataqua Ferry Co. v.
Jones, 39 id., 491 (1859); Hightower v.

Thornton, 8 Ga., 486, 502 (1850); Hughes
14

v, Antietam, etc., Co., 34 MG., 816 (1870);
Beene v. Cahawha, etc., BR. R. Co, 8
Ala., 660 (1842); Selma, etc., R. R. Co.
v. Tipton, 5 id., 787 (1848); Gratz v.
Redd, 4 B. Mon. (Ky.), 178 (1848); Bos-
ton, etc., R. R. Co. v, Wellington, 113 -
Mass., 79 (1873). [Compare with this case
Worcester, etc., Co. v. Willard, 5 Mass.,
80 (1809); Andover, etc., Co. v. Gould, 6
id., 40 (1809); New Bedford, etc., Co. v.
Adams, 8 id., 188 (1811); City Hotel v.
Dickinson, 72 Mass., 586 (1856); Me-
chanics’, etc., Co. v. Hall, 121 Mass., 272
(1876).] Mexican Guif, etc., R. R. Co. v.
Viavant, 6 Rob. (La.), 305 (1848); New
Orleans, etc., Co. v. Briggs, 27 La. Ann.,
318 (1875); Greenville, etc., R. R. Co. v.
Cathcart, 4 Rich. Law, 89 (1850); Klein
v. Alton, etc., R. R. Co., 18 ILL, 514
(1851); Peoria, etc., R. R. Co. v. Elting,
17 id., 429 (1856); Kirksey v. Florida,
etc,, Co., 7 Fla., 23 (1857); Tar River,
etc., Co. v. Neal, 3 Hawks (N. C.), 520
(1825); Stokes v. Lebanon, etc., Co., 6
Humph., 241 (1845); South Bay, etc.,
Co. v. Gray, 80 Me., 547 (1849); Frank-
lin-Glass Co. v. Alexander, 2 N, H., 380
(1821); S. C., 9° Am. Dec., 92, and the
note at pp. 96-104, For a learned dis-
cussion of the general question how far
the jurisdiction of a courtof equity may
be affected by statutes conferring simi-
lar jurisdiction upon the courts of law —
an inquiry germane to the matter of the
present section—see the note to the
case of Payne v. Bullard, 23 Miss., 88

(1851), in 55 Am. Dee., 74, 7%
3
§ 125.] FORFEITURE OF STOCK. [ox. VIII.
statute or by the express promise of the subsoviben! But where
both remedies exist, the corporation has its election which remedy
to pursue.?

§ 125. When one remedy is exhausted the corporation cannot re-
sort to another.— Although a corporation having the right to declare
a forfeiture of shares for non-payment of calls may generally, at
its option, either forfeit the stock or bring an action to collect the
amount due, it does not follow that it can forfeit the stock and then
bring an action for the unpaid calls, or any part thereof that may
remain unsatisfied by the forfeiture. The corporation, when a
shareholder is in default, may pursue either the one remedy or the
other in its discretion; but it cannot forfeit the stock and after.
wards sue atlaw. The first remedy excludes the second.? In order,
however, to bar the remedy of an action on the contract, the for-
feiture must be complete and actual. Consequently, a mere threat
that a forfeiture will be made if the call be not paid on or before
a day named, or an unsuccessful attempt to sell the shares, will not
be sufficient to bar the action. So long as the stockholder’ s right
to the shares and to the immunities and emoluments attached

thereto remain, his obligation to pay is not extinguished.

1See § 71.

2See §§ 125, 126.

Small v. Herkimer, etc., Co., 2.N. Y.,
330 (1849}, reversing Herkimer, etc.,
Co. v, Small, 21 Wend., 278 (1839); S.C.,
2 Hill, 127 (1841); Northern R. R. Co.
v. Miller, 10 Barb., 260, 271 (1851); Og-
densburgh, etc., R.,R. Co. v. Frost, 21
id., 541 (1856); Mills v. Stewart, 41
N. Y., 384 (1869); Macauly v. Robinson,
18 La. Ann., 619 (1866); Allen v. Mont-
. gomery, etc., Co., 11 Ala., 487 (1847);
Athol, etc., R. R. Co. v. Inhabitants of
Prescott, 110 Mass., 213 (1872); Mechan-
ics’, etc., Co. v. Hall, 121 id., 272 (1876).
With these later Massachusetts cases
compare Andover, etc., Co. v, Gould, 6
Mass., 40 (1809); Franklin, etc., Co. v.
White, 14 id., 286 (1817); Rutland, etc., R.
R. Co. v, Thrall, 35 Vt. , 536 (1868); Macon,
etc., R. R. Co. v. Vason, 57 Ga., 314 (1876);
Ashton v. Burbank, 2 Dill., 485 (1878).
Such, also, seems to be the rule in Eng-
land. King’s Case, L. R., 2 Chan., 714
(1867); Knight’s Case, id., 321 (1867);
Snell’s Case, L. R., 5 Chan., 22 (1869).
By statute in England the right to for-
feit and the right to sue may be exer-

cised together; and shares may be for-

‘ feited for non-payment of calls, whether

those calls have been sued for. or not.
Great North., etc., R’y Co. v. Kennedy,
4 Ex., 417 (1849); Inglis v. Great North.
R’y Co., 1 Macg., 112 (1852). But there
is a line of cases in England where, by
the terms of the deeds of settlement,
only an option is given to sue or to for-
feit, and it is then held that the cor-
poration is concluded by its election.
Inglis v. Great North. R’y Co., 1 Macq.
(Scotch Ap.), 112 (1852), where, not-
withstanding the forfeiture and cancel-
lation of shares and the issue of new
ones, the right to recover in an action
for calls was held to remain unimpaired
in the company. See, also, Birming-
ham, etc., R’y Co. v. Locke, 1 Q. B.,
256 (1841); Edinburgh, etc., R’y Co. v.
Hebblewhite, 6 M. & W., 707 (1840);
London, etc., R’y Co. v. Puirolough, 2
Man. & Gr., 674 (1841).

4Macon, etc., R. R. Co. v. Vason, 57
Ga., 314 (1876). See, also, cases cited
supra and infra, § 181.

5Instone v. Frankfort Bridge Co., 2
Bibb, 576, 581 (1812). Cf. Buffalo, etc.,

144
\

OH. vir. FORFEITURE OF STOCK.

(§ 197.

There is, however, a line of cases in which a contrary rule is sus-
tained. In these cases it is held that the forfeiture of shares of
stock is like the foreclosure of a mortgage; and, that, just as a
mortgagee may have judgment against the mortgagor for a de-
ficiency, so may a corporation have its action of asswmpsit against
a subscriber whose stock, having been forfeited, has failed to sell
for enough to pay his entire indebtedness to the corporation on the
subscription.'. This rule is held to apply equally to original sub-
scribers or their transferees; and any stockholder is liable, under
this rule, for the balance due upon assessments, after deducting the
amount realized at the forfeiture sale.

§ 127. Forfeiture relieves the shareholder whose shares are for-
feited from liability to corporate creditors.—In the absence of
fraud and collusion it is a settled rule that, where a corporation
has authority to declare a forfeiture of shares for non-payment of
calls, and a forfeiture is regularly declared, such formal declaration
puts an end to the liability of the shareholder, and corporate cred-
itors cannot subsequently hold such an expelled or released share-

holder liable.’

R. R. Co. v. Dudley, 14 N. Y., 336, 347
(1856). It has been held, also, that an
action to collect a subscription, when
prosecuted to judgment, is a bar to the
remedy by forfeiture. Giles v. Hutt,
8 Ex., 18 (1848). -

1 Carson v. Arctic Mining Co., 5 Mich.,
288 (1858); Danbury, etc., R. R. Co. v.
Wilson, 22 Conn., 435 (1853); Great
Northern R’y Co. v. Kennedy, 4 Exch.,
417, 425 (1849).

2Merrimac Mining Co. v. Bagley, 14
Mich., 501 (1866). Cf. Hartford, etc.,
R. R. Co. v. Kennedy, 12 Conn., 499
(1838); Brockenbrough v. James River,
etc., Co., 1 Patton & H. (Va.), 94 (1855);
Mann v, Currie, 2 Barb., 294 (1848). It
is sometimes so provided expressly by
statute or by the charter of the com-
pany. Brockenbrough v. James River,
etc., Co., 1 Patton & H., 94 (1855);
Danbury, etc., R. R. Co. v. Wilson, 22
Conn., 435, 456 ( 1853); Great Northern

_R’y Co. v. Kennedy, 4 Exch., 417 (1849);
Mann v. Cooke, 20 Conn., 178 (1849).
But, see Athol, etc,, R. R. Go. v. In-
habitants of Prescott, 110 Mass., 213
(1872); Kénnebec, etc, R.‘R. Co. v,
Kendall, 31 Me., 470 (1850); Allen v.

(10)

This is the rule even though the debt was contracted

Montgomery R. R. Co., 11 Ala, 437
(1847); Stokes v. Lebanon, etc., Co., 6
Humph. (Tenn.), 241 (1845); Mills «..
Stewart, 41 N. Y., 384 (1869). Or that
any shareholder whose shares shall.
have been forfeited for non-payment of
assessments shall nevertheless be liable -
to pay to the company all cas owing
on such shares at the time of the for--
feiture. This seems to be a common
provision in the articles of association.
of English companies. Creyké’s Case,
L. R., 5 Chan., 68 (1869); Stocken’s
Case, L. R., 5 Eq., 6 (1867). But in
such a case interest is not collectible.
Stocken’s Case, supra. It is otherwise
in ordinary defaults. Gould v. Oneonta,
V1 N. Y., 298 (1877); Rikhoff v. Brown,
etc., Co., 68'Ind., 388 (1879).

3 Allen v. Montgomery R. R. Co., 11
Ala., 487, 450 (1847); Macauly v. Robin-
son, 18 La. Ann., 619 (1866); Mills wv.
Stewart, 41 N. Y., 884 (1869); Woollas-
ton’s Case, 4 De G. & J., 487 (1859); Hx.
parte Beresford, 2 Macn.. & G., 197
(1850); Kelk’s Case, L. R., 9 Eq., 107
(1869); Dawes’ Case, L. R.,:6 Eq., 282
(1868); Snell’s Case, L. R., 5 Chan., 22
(1869), Nor, on the other hand, can the

145
f

(cH. vim.

§ 129.] FORFEITURE OF STOCK.

by the company before the stock was forfcited.1_ The same prin-
ciple of law that prevents the corporation from suing on,a sub-
scription after the stock has been forfeited prevents the corporate
creditors also from doing the same. But, on the other hand, inas-
much as fraud vitiates all acts into which it enters, a forfeiture of
shares by collusion between a shareholder and tho board of direct-
ors of the corporation will not releasc him from ees to con-
tribute in the event of the insolvency of the company.? In such
a case the creditors may invoke the interposition of a court of
equity to prevent the consummation of an inchoate forfeiture, or
to set aside one already accomplished.? Hence, it is well settled
that the power of forfeiture cannot lawfully be exercised for the
purpose of enabling members to escape from their liability on their
stock, either to the corporation or its creditors. A stockholder,
by mere abandonment of his shares, cannot forfeit them himself,
.and thus, by his own act, discharge himself from his obligation on
.the subscription.®

§ 129. Statutory formalities and general method of forfeiture.—
The general method of forfeiting shares for non-payment of calls
Js usually prescribed in detail by the statute authorizing the for-

stockholder claim, after the forfeiture,
any of. the rights of stockholdership.
St. Louis, ete., Co. v. Sandoval, etc.,
o., 116 IIL, 170 (1886).

1 Mills vu. Stewart, supra.

2Slee v. Bloom, 19 Johns., 456 (1822);
‘Burke v. Smith, 16 Wall., 390 (1872);
Mills v. Stewart, 41 N. Y., 884 (1869);
‘Walters’ Second Case, 3 De G. & Sm.,
244 (1850); Richmond’s Case, 4 Kay &
J,, 805 (1858); Spackman’s Case, 11 Jur.
(N. 8.), 207 (1865); Stanhope’s Case,
L. R., 1 Chan., 161 (1866); Stewart's
Case, L. R., 1 Chan., 511 (1866); Gower’s
Case, L. R., 6 Kq., 77 (1868).

3Germantown, etc., R’y Co. v. Fitler,
60 Pa, St., 124 (1869). See, also, Grand
Rapids Savings Bank v. Warren, 52
Mich., 557 (1884). The fact that the
corporation might have forfeited the
stock, but in fact did not, is no defense
as against the corporate creditors. If a
transaction between a shareholder and
the directors is irregular, but is alleged
to have been acquiesced in, it is incum-
bent upon the stockholder to support
such allegation by showing that the
transaction was fully made known to

the general body of the shareholders.
Spackman’s Case, 11 Jur. (N. &.), 207
(1865).

4Spackman v, Evans, L. R., 3 H. of
L., 171 (1868); Stanhope’s Case, L. R., 1
Ch., 161 (1866); Richmond’s Case, 4 Kay
& J., 805 (1853); Manisty’s Case, 17 So-
licitor’s Jour., 745; Gower's Case, L. RB.,
6 Iig., 77 (1868); Lx parte Jones, 27 L. J.
Chan., 666 (185~); Hall’s Case, L, R., 5
Chan., 707 (1870); Mills v, Stewart, 41
N. Y., 384 (1869). Cf. Dixon v. Evans,
L. R., 6 H. of L,, 606 (1872); Lord Bel-
haven’s Case, 11 Jur. (N. 8.), 572 (1865);
8. C., 12 L. T. (N. S.), 595 (1867); Clarke
v. Hart, 6 House of Lords Cases, 633
(1853); Garden Gully, ete., Co. v. McLis-
ter, L. R., 1 App. Cas,, 89 (1875); Sweny
v. Smith, L. R., 7 Hq., 824 (1869); Chou-
teau v. Dean, 7 Mo, App., 211 (1879).
Cf. Bedford R. R. Co. v. Bowser, 48 Pa.
St., 29 (1864),

5 Rockville, etc., Turnpike Co. v.
Maxwell, 2 Cranch, ©, C., 451 (1824).
For sundry illustrations of what will or
will not justify a forfeiture, see, partic-
ularly, Sweny v. Smith, L. R., 7 Eq.,
824, (1869); Stocken’s Case, L. R., 8

146
CH. VIL] FORFEITURE OF STOCK.

[$ 129.
feiture. In the earlier cases there may be observed some tendenéy.
to hold that a substantial, in distinction from a strict, compliance
with the requirements of the statute is all that is necessary to a
valid forfeiture But in later cases, English? and American,’ it is
plainly declared, and it may be taken as a settled rule, that the va-
lidity of the forfeiture and sale of the shares of a subscriber in
arrears depends upon a strict and formal compliance with the re-
quirements of the enabling statute.

Thus a sale of the shares at private sale, when a sale by public
auction was prescribed, has been held to invalidate the forfeiture.®
There must be a properly constituted board of directors to declare

Chan., 412 (1867); Count Pahlen’s Case,
L. R., 9 Eq., 107 (1869); Thomas’ Case,
L. R., 18 Eq., 487. No defense that de-
fendant supposed that he could pay
balance of subscription or have a for-
feiture of stock. Ross v. B’k, etc., 19
Pac. Rep., 243 (Nev., 1888).

1Catchpole v. Ambergate, etc., R’y
Co., 1 Ellis & B., 111 (1852); Nolan wv.
Arabella, ete., Co., 6 W. W. & A. B.
(Australian), 88. Cf. Woollaston’s Case,
4DeG. & J., 487 (1859); Knight’s Case,
L. R., 2 Ch., 321 (1867).

2Clarke v. Hart, 6 House of Lords
Cases, 638 (1858); Johnson v. Lyttle’s
Tron Agency, 46 L. J. (Chan.), 786 (1877),
Cf. Knight’s Case, L. R., 2 Chan., 321
(1867) ; Garden Gully, etc., Co. v. McLis-
ter, L. R., 1 App. Cas., 89 (1875); Lon-
don & B. Ry Co. v. Fairclough, 2 Mann.
& G., 674 (1841). In England a forfeit-
ure may be made after a eall, and be-
forethecallisdue. The call is ‘‘owing”
from the time whenitis made. Faure,
etc., Co. v. Phillapart, 58 L. T. Rep.,
525 (1888), where the forfeiture was
made on two calls, one past due and one
not yet due. :

3 Portland, etc., R. R. Co. v. Graham,
52 Mass., 1 (by Shaw, C. J., 1846); Ger-
mantown, etc., R’y Co. v. Fitler, 60
Penn. St., 124 (1869); Hastern, etc.,
Plank-road Co. v. Vayghan, 20 Barb., 155
(1855); York, etc., R. R. Co. v, Ritchie,

40 Me., 425 (1855); Lewey’s Island R. R.

Co. v. Bolton, 48 id., 451 (1860); Down-
‘ing v. Potts, 28 N. J. Law, 66 (1851);
Matter of the Long Island R. R. Co., 19

Wend., 37 (1837); Mitchell v. Vermont
Copper Mining Co., 40 N. Y. Super. Ct.,
406 (1876); Occidental, etc., Assoc. v.
Sullivan, 62 Cal., 394 (1882). Cf. John-
son v. Albany, etc., R. R. Co., 40 How.
Prac., 193 (1870); Rutland: etc., R. R. :
Co. v. Thrall, 35 Vt., 586 (1863); Perrin
v. Granger, 30 id., 595 (1858).

4Garden Gully, etc., Co. v. McLister,
L, R., 1 App. Cas., 39 (1875); German-
town, etc., R’y Co. v. Fitler, 60 Penn.
St., 124 (1869).

5 Lewey’s Island R. R. Co. v. Bolton,
48 Me., 451 (1860). As to what is, in
general, sufficient to satisfy the require-
ments of the rule that powers of for-
feiture are to be construed strictly and
exercised or pursued strictly, see Giles
v. Hutt, 8 Exch., 18 (1848); Catchpole
v. Ambergate, etc., R’y Co., 1 Ellis &
B., 111 (1852); Birmingham, etc., R’y
Co. v. Locke, 1 Q. Bi, 256 (1841); Gra- |
ham v. Van Diemen’s Land Co., 1 Hurl.
& N., 541 (1856); Sweny v. Smith, L. R.,
7 Eq., 324 (1869); Stockton’s Case, L. R.,
3 Chan., 412 (1867); Count Pahlen’s Case,
L. R., 9 Eq., 107 (1869); Thomas’ Case, L.
R., 18 Eq., 487; Gower’s Case; L. R., 6
Eq., 77 (1868). It has, however, been held
in an English case — In re North Hallen-
beagle Mining Co., Knight’s Case, L. R., |
2 Chan., 321 (1867); 8. C.,15 L. T.(N.
8.), 546 (1869),— that, when it is a mat-
ter of mere form rather than of sub-
stance that has not been strictly fol-
lowed, in proceedings to forfeit shares,
the forfeiture will not necessarily be
thereby invalidated.

‘

147
§ 129.] .

FORFEITURE OF STOCK.

[CH. vit.

a forfeiture of shares! It is held, in general, that, in the’ absence
of statutory provisions as to order or details, the mode of forfeit-
ure must be reasonable and just.? The forfeiture may be regu-
larly effected by a resolution of the board of directors, ordering a
sale of all stock on which assessments shall remain unpaid at a day

named in the future.®

It is a well-established rule, also, that a forfeiture of shares,
where the forfeiture was irregular or defective in its form, is not
void, but voidable, and that, by subsequent knowledge and acqui-
escence, the shareholder and the company are alike estopped. to

deny its validity.*

1Garden Gully, etc., Co. v. McLister,
L. R., 1 App. Cases, 89, 55 (1875). A
stockholder may enjoin a forfeiture on
the ground that the directors were
illegally elected. Moses v. Tompkins, 4
South. Rep., 763 (Ala., 1888),

2Rutland, etc., R. R. Co. v. Thrall, 35
“Vt., 536 (1863); Mitchell v. Vermont
Copper Mining Co., 67 N. Y., 280 (1876).

3 Rutland, etc., R. R. Co. v. Thrall, 35
Vt., 586 (1863). See, also, Woollaston’s
Case, 4 De G. & J., 487 (1859), Under
such a resolution a sale of the stock is
not necessary to complete the forfeiture
where the effect of the forfeiture is to
release the stockholder from any future
liability, and where he is not entitled to
the surplus, if any there be, after sale.
Rutland, etc., R. R. Co. v. Thrall, supra.
Tt is, however, said elsewhere that a
general resolution, not specifying the
stock which is forfeited, but merely as-
suming to forfeit any and all stock
whose owners are in arrears, does not
effect a valid forfeiture. Johnson v.
Albany, etc., R. R. Co., 40 How. Prac.,
193 (1870) When, after default made
in the payment of assessments, notice
is given by the corporation that the
shares of owners in arrears will be for-
feited unless full payment of what is
due be made by a day named, there is
a presumption that the subsequent pro-
ceedings of the company looking to
perfecting the forfeiture are valid and
regular. Knight's Case, 15 L. T. (N.S.),
546 (1867), holding that where, by the
articles of association, provision is made

for forfeiture by resolution with notice
upon default, the court will assume that
the requisite steps have been taken to
make a valid forfeiture, even thongh it
does not appear that such resolution was
passed or that notice was sent. The
notice is a notice that the forfeiture has
already been declared, not that it will be
made on further default. That notice
is a condition precedent.

4King’s Case, L. R., 2 Ch., 714, 731
(1867); Woollaston’s Case, 4 De G. & J.,
437 (1859); Webster’s ‘Case, 32 L. J., Ch.,
185 (1862); Knight’s Case, L. R., 2 Ch.,
821 (1867); Kelk’s Case, L. R., 9 Eq,
107 (1869); Austin’s Case, 24 L. T.
(N. 8.), 932 (1871); Prendergast v. Tur-
ton, 1 Y. & C. (Ch,), 98 (1841). Cf
Lyster’s Case, L. R., 4 Eq., 233 (1867);
Teasdale’s Case, L. R., 9 Ch., 54 (1873);
Phosphate, etc., Co. v. Green, L. R., 7
C. P., 48 (1871). Here the company had
power to forfeit shares for non-pay-
ment and to compromise debts, but
were prohibited from purchasing their
own shares. The transaction in issue
was held to be such a purchase, and
hence ultra. vires, but the members
were estopped by knowledge and acqui-
escence. In this case it was also said
that, to show assent and acquiescence in
such a case, it is not necessary or pos:
sible to prove the acquiescence of each
individual shareholder. It is enough
to show circumstances which are rea-
sonably calculated to satisfy the court
ora jury that the thing to be ratified
came to the knowledge of all who chose

148
CH. vir.)

FORFEITURE OF STOCK.

[§ 180.

§ 180. Notice in cases of forfeitwre.— A notice to the delinquent
subscriber that his shares will be forfeited at a day named is gen-

erally requisite to effect a forfeiture.

The subscriber is entitled to

full knowledge of the fact that, unless he pays up within a specified
time, he will lose his stock. The requirements of the statute or
charter,' with respect to the contents of the notice, and the length
of time which is to elapse between the notice and the forfeiture,

must all. be strictly complied with.!

__to inquire, all having full opportunity
and means of inquiry. Houldsworth
v. Evans, L. R., 3 H. of L,, 263 (1868);
Spackman tv. Evans, L. R., 8 H. of L., 171
(1868). Here the terms of the withdrawal
were not in accordance with the deed of
settlement, and it was held. after years
that the party was still liable as a con-
tributor. Evans v. Smallcombe, id.,
249, where a member withdrawing
under a like arrangement was held not
liable on the double ground of lapse of
time and a clear presumption of knowl-
edge and acquiescence. Houldsworth
v. Evans, id., 263, where an irregularity

in the condition of withdrawal was held .

substantial.and the transaction ultra
vires. (One lord dissented, that years of
acquiescence retrospectively sanctioned
it.) Brotherhood’s Case, 31 Beav., 365
(1862). ‘Dissentiert members were al-
lowed to withdraw, by resolution, upon
terms which were certainly ultra vires,
The master of the rolls said that the
transaction might have been set aside
at the time; but all parties having had
.. full knowledge, and having acquiesced
for more than twelve years, the court
would not, after such a lapse of time,
touch the transaction. In Lesseps v.
Architects’ Co., 4 La, Ann., 316 (1849),
the court regarded a general acquies-
cence in a by-law for a forfeiture, itself
ultra vires, as a matter of contract, and
refused: equitable relief. Cf, Lindley
ou Partnership, p. 750, saying: “If
there is power to forfeit, and the shares
intended to be forfeited are treated by
the company and the shareholders as
forfeited, the company will be pre-

It is accordingly held that

cluded from afterwards insisting that
no forfeiture ever took place.” Garden
Gully, etc., Co. v. McLister, L. R., 1
App. Cas., 39, 55 (1875), holding that
mere laches does not, of itself, disen-
title the holder of shares to equitable
relief against an invalid declaration of
forfeiture.

1Heaston v. Cincinnati, etc., R. R.
Co., 16 Ind., 275 (1861); Lewey’s Island
R. R. Co. v. Bolton. 48 Me., 451 (1860);
Rutland, etce., R. R. Co. v. Thrall, 35
Vt., 586, 546 (1868); Lake Ontario, etc.,
R. R. Co. v. Mason, 16 N, Y., 451 (1854);
Sands v. Sanders, 26 id. 239 (1863); Mis-
sissippi, etc., R. R. Co. v. Gaster, 20
Ark., 455 (1859); Hughes v. Antietam,
etc., Co., 34 Md., 317 (1870); Johnson v.
Lyttle’s Iron Agency, 46 L. J. (Chan.),
786 (1877); Cockerell v. Van Diemen’s
Land Co., 26 L. J. (C. P.), 208 (1857);
Watson v. Eales, 23 Beav., 294 (1856).
Cf. Eppes v. Mississippi, etc., R. R. Co.,
85 Ala., 33 (1859); Schenectady, ete.,
R. R. Co. v. Thatcher, 11 id., 102 (1854);
Harlaem, etc., Co. v. Seixas, 2 Hall (N.
Y. Super. Ct.); 504 (1829); Mitchell v.
Vermont Copper Mining Co., 40 N. Y.
Super. Ct., 406 (1876); New Albany, ©
etc., R. R. Co. v. McCormick, 10 Ind.,
4y9 (1858). Cf. Lexington, etc, R. R.
Co. v. Chandler, 54 Mass., 311 (1847),
where notice, provided for by a by-
law, was held not a condition prece-
dent, but only directory, and substan-
tial compliance was sufficient. Knight’s
Case, supra, issometimes wrongly cited,

,for the reason that there are two no-

tices_provided for: (1) notice that for-
feiture will be made on default at

149
§ 181.]

FORFEITURE OF STOCK.

(cH. vir.

the notice must state correctly the amount due for non-paymert of

which the stock is to be, forfeited.

The time, also, within which

payment is to be made must be accurately stated,? and also the

place where the sale is to be made.’

The mode of giving notice

of a contemplated forfeiture of stock is generally specified in the

statute authorizing the forfeiture.‘

§ 131. Notice is not the same thing as forfeitwre.— A notice ofa
probable or certain forfeiture in the future, ora threat of forfeiture,

future time, and (2) notice after forfeit-
ure that it has been made. The former
is essential, the latter not.

1So where the notice stated that un-
less the amount of a certain call, to-
gether with lawful interest from the
date of the call, was paid on or before
a certain day, the shares would be liable
to forfeiture, it was held that, as inter-
est was only payable from the day fixed
for payment, and not from the date of
the call, the notice was irregular, and
that a forfeiture founded on a non-
compliance with such a notice was bad.
Johnson v. Lyttle’s Iron Agency, 46 L.
J. (Ch.), 7&6 (1877).

2 A notice that the stock will he for-
feited “on Monday, the 9th,” when in
point of fact the 9th comes on Friday,
is not a sufficient notice. Watson v.
Eales, 23 Beav., 294 (1856).

3 Accordingly, a notice in all other
respects regular, which does: not state
the place of sale, is insufficient, al-
though it name the day of sale, and the
auctioneer, who was and had long been
an auctioneer in the place at which the
notice was dated. Lexington, etc., R.
R. Co. v. Staples, 71 Mass., 520 (1855).
In the absence of a statutory provision
as to time, it is said that three days’
notice of the time and place of the sale
of shares for non-payment of assess-
ments is too short and, unreasonable,
where the owner of the shares lives at
a distance in another state. Lexing-
ton, etc., R. R. Co. v. Staples, supra.
In Rutland, etc., R. BR. Co. v. Thrall, 35
Vt., 536 (1863), a thirty days’ notice is
said to be sufficient and reasonable.

And where the charter provided that
notice of an assessment should be given
to the subscriber thirty days before the
order of the directors to sell the shares,
a notice thirty days before the sale was
held insufficient. Lewey’s Island R. R,
Co. v. Bolton, 48 Me., 451 (1860); Louis.
ville, etc., Turnpike Co. v. Meriwether,
5 B. Mon., 13 (1844). A printed notice
in designated newspapers, published i in
cities where the subscribers ‘reside, is
good notice of acall. Louisville, etc.,
Turnpike Co. v. Meriwether, supra.

4In Mississippi (Ouachita & Red
River R. R. Co. v. Gaster, 20 Ark., 455
1859) — it is said that the mode ef giving
a notice in these cases is directory
rather that mandatory, and that, where
the charter provided that notice be
given in certain newspapers, a personal
notice would be sufficient. See, also,
Knight's Case, L. R., 2 Chan., 321 (1867).
So, where a by-law provided for notice
by letter, it was held that personal no-
tice sufficed. Lexington, etc, R. R.
Co. v. Chandler, 54 Mass., 811 (1847).
But see Lewey’s Island R. R. Co. v.
Bolton, 48 Me., 451 (1860). In general,
as to the effect of a notice left at one’s
residence or place of business, but
which never reaches the person for
whom it is intended, see Cockerell v.
Van Diemeén’s Land Co., 26 L. J. (C. P.),
203 (1857); 1 C. B. (N. S.),. 782. Of.
Birmingham, etc., R’y Co. v. Locke, 1
Q. B., 256 (1841); Graham v, The Van
Diemen’s Land Co., 1 Hurl. & N., 641
(1856). See, also, South Staffordshire
R’y Co. v. Burnside, 5 Exch., 129 (1850),
and § 119. '

150
cH. vu] FORFEITURE OF STOOK. [§§ 132, 138.
is not forfeiture, and dees not become forfeiture merely by non-
payment of the call or assessment within the time specified in the
notice.' A forfeiture is void if declared for the non-payment of
assessments, when all or any one of the assessments were illegal or
unauthorized.’

§ 132. Tender, by stockholder, before forfeiture Where’ the
amount due on a subscription for non-payment of which a forfeit-
ure is about to take place is tendered to the proper officer of the
corporation at any time before the sale actually takes place,’ the
forfeiture is not valid. This rule is based in justice, and, while pro-
tecting the corporation and the public, it relieves the stockholder
from the hardship of a harsh and summary remedy.

§133. Surplus, after valid forfeiture, belongs to the corporation.—
Upon a sale of the stock forfeited, if the amount realized is more
than the debt due the corporation, the surplus belongs to the cor-
poration.! The purchaser at the forfeiture sale, if the stock has

1Macon, etc., R. R. Co. v. Vason, 57
Ga., 314 (1876); Bigg’s Case, L. R.,1
Eq., 309 (1865); Cockerell v. Van Die-
men’s Land Co., 26 L. R. (C. P.), 203
(1857); Water Valley Mfg. Co. v. Sea-
man, 53 Miss., 655 (1876), where only a
threat was made. Cf. § 125. But see
Knight’s Case, L. R., 2 Chan., « 321
(1867), In Knight's Case it was further
provided that the declaration of forfeit-
ure should be at once entered in the
register. Entry was duly made of the
date of the forfeiture, but not of the dec-
laration itself. All essentials being reg-
ular, and there being no strict require-
ment of a written resolution, the court
held the forfeiture valid because the
entry of forfeiture could not have been
properly made without a resolution of
the directors, which would hence be as-
sumed. In Austin’s Case, 24 L. T. (N.
§.), 932 (1871), it is said that a corpora-
tion, after forfeiting shares, cannot set
the forfeiture aside, and hold the owner
liable as a subscriber, on the ground
that the notice given him was irregu-
lar. It is for the subscriber alone to
raise that objection to the validity of
the forfeiture. Cf. § 123. Cf. Birming-
ham, etc., R’y Co. v. Locke, 1Q. B., 256
(1841),

2Stoneham, etc., R. R. Co. v. Gould,

68 Mass., 277 (1854); Lewey’s Island
R. RB. Co. v, Bolton, 48 Me., 451 (1860).
Mitchell v. Vermont Copper Min-
ing Co., 67 N. Y., 280 (1876); Sweny v.
Smith, L. R., 7 Eq., 324 (1869). In
Sweny v. Smith a bill was filed to an-
nul the forfeiture, which was made .
because the tender (although in time
and place) was accompanied by a pro-
test. Held, the protest did not vitiate
the tender. .Walker v. Ogden, 1 Biss.,
287 (Ill, 1859), where the articles of a
private joint-stock company provided
for a forfeiture, but in no express mode,
and a forfeiture was declared of certain
shares which thereafter remained un-
distributed. No rights of third parties
were vested in consequence; and the
court of equity, never favoring forfeit-
ures, decreed that upon payment of the
whole amount due, principal and in-
terest, the complainant should be al-
lowed to redeem his stock. The court
did not rule, but was ‘inclined to the
opinion,” that ‘‘the mere declaration

of the trustees” could not ‘‘have the

effect to foreclose all Walker’s inter-
est,” and ‘‘that a judicial decree of
foreclosure upon a bill filed by the
trustee was necessary in order to bar
his right to redeem his stock.”

4Small v. Herkimer, etc,, Co.,2N. Y.,

151
§ 134] FORFEITURE. OF. STOOK. [oH. vir. .
been only partially paid for, must pay the instalments due and to
come due, and if he fail to make these payments the stock must be
sold again.!

$134. Equity will relieve a shareholder from an unauthorized
Sorfeitwre.—- The share-owner himself, as well as a corporate cred-

-itor} may, in a proper case, invoke the aid of a court of chancery
when his shares have been forfeited in an unauthorized or unlaw-
ful manner. Usually, in such a case, the shareholder may, by bill
in equity, obtain a decree annulling-the forfeiture.’

So, also, equity will sometimes set aside a forfeiture upon purely
equitable grounds; as, for example, where a forfeiture was declared
for non-payments of calls, which, it was shown, were not paid, be-
cause the shareholder had died, and no administrator bad been
appointed before the time for payment had fully elapsed.? But it
seems that the weight of authority is to the effect that a forfeiture
of shares, lawful and regular, for non-payment of assessments, is

_one of those forfeitures from which equity will not afford relief,

except in very exceptional cases. When the shareholder has lost

Y., 380 (1849); and see Sturges v. Stet-
. son, 1 Biss., 246 (1858); Gt. North. R’y
Co. v. Kennedy, 4 Ex., 417, 426 (1849),
by Rolfe, B. (ruling on the language of
a special act): ‘‘The company are not
to sell more of the shares than will be
sufficient, as nearly as can be ascer-
tained, to pay arrears of calls, together
with interest and expenses; and, if there
be any surplus, it is to be paid to the
defaulter, who has a right to redeem
at: the last moment before sale. That
shows that the forfeited shares are a
security only until payment.” ‘It is
clear that the declaration of forfeiture
is in the nature of a mortgage.” Cf.
Freeman v. Harwood, 49 Me., 195, 198
(1859), dictum.
! Sturges v. Stetson, 1 Biss., 246, 251
(1858).
2Sweny v. Smith, L. R., 7 Eq., 824
(1869); Mitchell v. Vermont, etc., Co.,
67 N. Y., 280 (1876); Adley v, Whit-
stable Co., 17 Ves., 815 (1810, by Lord
Eldon); Sloman v. Bank of England,
14 Sim., 475 (1845); Norman v. Mitchell,
5 DeG., M. & G., 648 (1854), Thus, a
forfeiture of shares for non-payment of
calls, declared at a meeting held out of
the state in which the company was

incorporated, the meeting being in con-
sequence an unlawful meeting, may be
set aside upon a proper application to a
court of chancery at any time within
the period prescribed by the statute of
limitations for bringing an action for
conversion. Ormsby v. Vermont, etc.,
Co., 56 N. Y., 623 (1874). Injunction
not granted to restrain sale of stock for
non-payment of assessments, though
notice thereof was illegal, where the
plaintiff does not offer to pay ,the calls.
Burnham v. San F. & Co., 17 Pac. Rep.,
939 (Cal., 1888). See, also, Same v.
Same, id., 940 (Cal., 1888). Forfeiture
may be enjoined. Moore v.N. J., etc.,
Co., 5 N. Y. Supp., 192 (1889).

§Glass v. Hope, 16 Grant (Up. Can,
Chan.), 420 (1869). Cf. Walker v. Og-
den, 1 Biss,, 287 (1859).

4Sparks v. The Company of Proprie-
tors of the Liverpool Water-works, 13
Ves., 428 (1807); Prendergast v. Turton,
1 Y. & C. (Ch), 98 (1841); Germantown,
etc., R’y Co. v. Fitler, 60 Penn, St., 124
(1869); Clark v. Barnard, 108 U. S., 486,
456 (1882). Equity will not relieve
where, on the re-organization of a com-
pany, old stockholders fail to use their
options fur securing new shares before

162
CH. vu.)

FORFEITURE OF 8TOOK.

[§ 184.

his shares by an irregular or unlawful forfeiture, his suit should be ~
for the recovery of his shares, and not for an undivided interest in

the property of the company.

Acquiescence or delay, as we have

seen, on the part of the shareholder, will usually bar his right ina
court of equity to have the forfeiture set aside.’

the expiration of a fixed time limit.
Vatable v. N. Y., L. E. & W. RB. R., 96
N. ¥., 49, 57 (1984), Equity will not
relieve from such forfeiture, because to
do so would, it is said, be in contraven-
tion of the direct expression of the leg-
islative will. Small v. Herkimer, etc.,
' €o., 2 N, Y., 830, 340 (1849).
can a share-owner have a forfeiture set
aside merely because the calls which
he refused to pay were for the purpose
of paying debts which the company
would not have owed but for the pre-
vious misappropriation of the corpo-
rate funds of the trustees. Marshall v.
Golden Fleece, etc., Co., 16 Nev., 156,
179 (1881); Weeks v. Silver, etc., Co.,
55 J. & S,(N. Y.), 1 (1887); Taylor v.

Neither
_R. Co., 21 Beav., 43 (1855).

North, ete., Co., 21 Pac. Rep., 753 (Cal.,
1889).

1 Smith v. Maine Boys Tunnel Co., 18
Cal., 111 (1861). The suit to set aside
the forfeiture must be brought in the
state where the corporation is incorpo-
rated. North State, ete., C. v. Field,
64 Md., 151 (1885); Sudlow v. Dutch R,
See Wilkins
v. Thorne, 60 Md., 253 (1883).

2 Vide § 129, supra. It will, more-
ever, sometimes be found that a gen-
eral statute, or the charter of the cor-
poration, fixes or limits the time within
which a shareholder will be allowed to
make such an application to a court of
chancery. Thus, in California, such an
application must be made within six
months; Civ. Code, § 347.

153
CHAPTER IX.

DEFENSE OF PAROL AGREEMENTS AND FRAUDULENT REPRESEN-
TATIONS INDUCING SUBSCRIPTIONS FOR STOCK.

§ 135. The subject. § 149. Immaterial misrepresentations.
136. Definitions. 150. Subscribers not bound to inves-
137-88. Parol agreements. tigate.

139-40. Corporations are chargeable} 151. Subscr iption not void, but void-
with the fraudulent repre- able.
sentations of their agents. | 152. Remedies. \
141. The misrepresentations must be | 153. Remedy by rescission without
by the authorized agents. legal proceedings.
142. Misrepresentations at public) 154. Remedy by defense to action for
meetings. calls.
143. Mistepresentations by prospec- 155-56. Remedy by bill in equity.
tuses. 157-58. Remedy by action at law for ,
144, Misrepresentations by reports. deceit.
145. What misrepresentations| 159. Remedy by action for money
amount to a fraud. \ had and received.
146. Statements as to questions of | 160. Ratification as a bar.
law. 161-62. Laches as a bar.
147, Misrepresentations by suppres-| 163-64. Corporate insolvency as a
sion of the truth. bar. :
148. Misrepresentations without | 165. Necessary allegations, etc.
knowledge of their falsity.
+

 

§ 135. The subject Parol agreements and fraudulent represen-
tations inducing subscriptions to stock have been a prolific source
of litigation both in this country and in England. As a defense to
actions brought for the collection of subscriptions, and as the basis
of suits in equity to set aside subscriptions and compel a repay-
ment of money already paid on such subscriptions, the agreements
and representations made to induce persons to subscribe for stock
have given rise to InUEaNe) principles of law peculiar to this sub-
ject.

§ 136. Definitions A parol agreement includes all representa-
tions and stipulations made before or at the time of subscribing,
but not included in the written subscription, whereby the corpora-
tion is to do something or refrain from doing something in the
future. A fraudulent representation, on the other hand, is a state-
‘ment ‘as to past acts or existing facts, or the omission of such a
statement, which amount to a fraud on one who, relying thereon,

subscribes to the stock of the company. Difficulty sometimes arises.

in determining whether a statement by a corporate agent inducing
a subscription | is merely a parol agreement or is a fraudulent repre-
sentation. This question is one which must be decided first of all;

since the rules of law applicable to parol agreements, as a defense
154
OH. 1x.]

DEFENSE OF PAROL AGREEMENT AND FRAUD.

(8 137.

‘to an action on a subscription, differ greatly from those applicable

to fraudulent representations.

§ 137. Parol agreements.— Where a subscription contract is ab-
solute on its face, it is well settled, both in equity and at law, that
parol evidence of previous or contemporaneous negotiations, stipula-
tions, terms or agreements is.not admissible to vary or add to the
contract, except for the purpose of proving that the parties, at the
time of consummating the agreement, intended and understood that
such terms and stipulations would be incorporated in the contract,
but omitted the same by accident, fraud or mistake.’ This rule,

1Piscataqua Ferry Co. v. Jones, 39

N. H., 491 (1859); Kennebec & Portland.

R. R. Co. v. Waters, 34 Me., 369 (1852);
Cincinnati Union & Ft. Wayne R. R.
Co. v. Pearce, 28 Ind., 502 (1867); Scar-
lett v. Academy of Music, 46 Md., 132
(1876); Dill v. Wabash Valley R. R. Co.,
21 Ill, 91 (1859); East Tenn. & Va. R. R.

Co. v. Gammon, 5 Sneed (Tenn.), 567.

(1858); Corwith v. Culver, 69 Tll., 502
(1873); Jack v. Naher, 15 Iowa, 450
(1863); Thornburgh v. Newcastle & D.
R. R. Co., 14 Ind., 499 (1860); Gelpcke
v. Blake, 15 Iowa, 387. (1863), holding
that it is immaterial that the agent
acted in good faith; Johnson v. Pensa-
cola & Ga. R. R. Co., 9 Fla., 299 (1860);
Miss., O. & R. R. R. Co. v. Cross, 20 Ark.,
443 (1859); Ridgefield & N. Y. R. RB. Co.
v. Brush, 43 Conn., 86 (1875); Phoenix
Warehousing Co. v. Badger, 6 Hun, 293
(1875); aff'd, GY N. Y¥., 294; Whitehall
& P. R. BR. Co. v. Myers, 16 Abb. Pr.
(N. S.), 84(1872). But see Brewers’ Fire
Ins. Co. v. Burger, 10 Hun, 56 (187%),
holding that where the original sub-
scription contract is verbal and com-
plete, and a part only of it is afterwards
reduced to writing, it is competent to
prove the whole agreement. See, also,
Hendrix v. Academy of Music, Georgia,
1885. Cf. Eighmie v. Taylor, 98 N. Y.,
288 (1885).

In Georgia, under § 8803 of the code,
where the subscription does not purport
to contain the whole contract, parol
evidence is admissible. Hendrix v,
Academy of Music, 73 Ga., 487 (1884).

In Pennsylvania the case of McClure v.

People’s Freight R’y Co., 90 Pa. St., 269
(1879), sustains the general rule, and ex-
cludes a parol agreement or condition
allowing payment in property. But
Rinesmith v. People’s Freight R’y Co.,
90 Pa. St., 262 (1879); Caley v. Phil. &
Chester R. R. Co., 80 Penn. St., 363
(1876); Miller v. Hanover Junc. & Sus.
R. R. Co., 87 Penn. St., 95 (1878); and
McCarty v. Selinsgrove & N. B. R. RB.
Co., 87 Penn. St., 332 (1878), allow parol
evidence to contradict the subscription
contract where it is shown that but for
the parol agreement the subscription
would not have been made; the last two
cases saying, however, that the evi-
dence is inadrnissible if other stockhold-
ers are interested in opposition to such
parol agreement. This unusual rule
probably has its origin in an old Eng-
lish case (Pulsford v. Richards, 17 Beav.,
87, 1853), which holds that a represen-
tation is to be considered fraudulent
when, “if the real truth had been
stated, it is reasonable to believe the
plaintiff would not have entered into
the contract.” Thus a parol agreement

that ‘part payment in contract labor.
should be allowed was held to be void, ~'

inasmuch as it varied the terms of a
written agreement. Ridgefield & N. Y.
R. R. Co. v. Brush, 48 Conn., 86 (1875).
Contra, Louisville & Nash. R. R. Co. uv,
Thompson, 18 B. Monr., 785 (1857);
McConahy v. Centre & Kish Turnpike
R. Co., 1 Penn. & W., 426 (1830), fol-
lowed in Swatara R. R. v. Brune, 6 Gill,
41 (1847); overruled by Nippenose Mfg.
Co. v. Stadon, 68 Pa, St., 256 (1871). See,

155

~
[cH. rx.

§ 138.] DEFENSE OF PAROL AGREEMENT AND FRAUD.

forbidding the introduction of parol evidence to explain, contradict,
or vary @ written instrument, applies to a subscription contract for
stock in a’corporation. Neither party is permitted to prove a dif-
ferent contract from that expressed in the written instrument.
Under the rule, not even a separate written contemporaneous con-
tract is admissible to change the subscription contract.!

§ 188. Thus, an agreement that a certain location will be adopted,?
or that payment may be made in a certain way or at a certain
time,’ or that the subscription shall be merely nominal, for the pur-
pose of inducing others to subscribe,* or that the subscription shall

also, Weber v. Fickey, 52 Md., 501;
Leibke v. Knapp, 79 Mo., 22 (1883).
Parol condition that others were to
sign is not admissible. Minn., etc., Co.
v. Davis, 41 N. W. Rep., 1026 (Minn, -
1889). But it has been held that a

parol agreement herein, made after the

subscription, and on a new considera-
tion, is valid. Pittsburgh & Connells-
ville R. R. Co. v. Stewart, 41 Pa. St.,
54 (1861). See, also, Tonica, etc., R. R.
Co, v. Stein, 21 IL, 96 (1859). Cf
Bucher v. Dillsburg, etc., R. R. Co., 76
Penn. St. 306 (1874); Brewers’, etc., Ins,
Co. v. Burger, 10 Hun, 56 (1877); Eigh-
mie v. Taylor, 98 N. Y., 288 (1885).

The subscriber’s remedy is against
the person who made the agreement
which has not been kept. Felgate’s
Case, 2 De G., J. & §., 456 (1865). An
action for damages for breach of con-
tract lies against the corporation if the
agreement amounts to a condition sub-
sequent. See chapter V.

1 Brownlee v. O., Ind. & Ill. R. R.
Co., 18 Ind., 68 (1862); White Mts.

R. R. Co. vw. Eastman, 84 N. H., 124
(1856).
2North Car. R. R. Co. v. Leach, 4

Jones’ Law (N. C.), 340 (1857); Wight
v, Shelby R. R. Co., 16 B. Monr., 4 (1855) ;
Ellison v. Mobile & O. R. R. Co., 36
Miss., 572 (1858); Miss., O. & R. R. R.
Co. v. Cross, 20 Ark., 443 (1859); Evans-
ville, Indianapolis & C. 8. R. R. Co. v.
Posey, 12 Ind., 363 (1859); Eakright v.
Logansport & N. Ind. R. R. Co., 13
Ind., 404 (1859); Carlisle v. Evansville,
Ind. & 0.8. R. R. Co., 18 Ind., 477

(1859); Miller v. Wild Cat Gravel Road
Co., 52 Ind., 51 (1875); S. C., 57 id.,

241; Miller v. Hanover Junc. & Sus.

R. R. Co., 87 Pa. St., 95 (1878); Gelpcke
v. Blake, 15 Iowa, 387 (1863); Braddock
v. Phil., M. & M. RB. BR. Co., 45 Nu J.
Law Rep., 363 (1883); Killer v. Johnson,
11 Ind., 3837 (1858), holding it immate-
rial that fraud was actually intended.
Contra, Rives v. Montgomery S, P. R.
Co., 30 Ala., 92 (1857).

3 Noble v. Collender, 20 O. St., 199
(1870); Henry v. Vermilion & A. R. R.
Co., 17 O., 187 (1848); Stewards of M. E.
Church v. Town, 49 Vt., 29 (1876);
Ridgefield & N. Y. R. R. Co. v. Brush,
43 Conn., 86 (1875); Thigpen v. Miss.
Central R. R. Co., 32 Miss., 347 (1856).

4 Downie v. White, 12 Wis., 1'76 (1860);
Wetherbee v. Baker, 85 N. J. Eq., 501
(1882); Kishacoquillas & Centre T. R.
Co, v. McConahy, 16 S. & R, (Pa.), 140
(1827); Phoenix W. Co. v. Badger, 6
Hun, 293 (1875); aff’d, 67 N. Y., 294;
Psychaud v. Hood, 23 La. Ann., 732
(1871); Cleveland Iron Co. v. Ennor, 12
Am. & Eng. Corp. Cases, 88 (Ill., 1886);
Robinson v. Pittsburgh'& C. R. R. Co.,
82 Pa. St., 834 (1858) ; Graff v. Pittsburgh
& SR. R. Go., 31 Pa. St., 489 (1858);
Mann v. Cooke, 20 Conn., 178 (1849);
Conn. & Pass. Rivers R. R. v. Bailey, 24
Vt., 465; Davidson’s Case, 3 De G. &
S., 21 (1849), holding it to be a ‘fraud
on other subscribers, without requiring
proof that there were such; Bridger’s
Case, L. R., 9 Eq. Cas., 74 (1869); New
Albany & Salem R. R. Co, v. Slaughter,
10 Ind., 218 (1858); Blodgett v, Morrill,

156 “

 
CH. Ix.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [§ 138.
be in fact only a pledge of stock by the corporation to the sub-
scriber, or that the stock may be surrendered,! or that certain prop-
erty would be purchased by the corporation,’ or that the subscriber
might keep his stock, but should not be liable for the full par value
thereof, * or that: payment would not be demanded until certain
work had been completed,‘ or that the money would be applied to
a particular part of the road,’ or that a certain part of the road
would be completed within a certain time,® or that the road will
be extended to a certain point,’ or any other parol condition,® or
other similar executory contracts,—are held to be no defense to an
action to collect the subscription, ® Where, for the purpose of ob-
taining’ a subscription, a promise was made in behalf of the cor-
poration that a branch road would be built, it was held that this
promise was but an expression of an existing intention which was
liable to be changed, and was no defense.” It is also held that a

20 Vt., 509 (1848); Minor v, Mechanics’
B’k of Alexandria, 1 Peters, 46 (1828);
Bates v. Lewis, 3 O. St.,
Litchfield B’k v. Church, 29 Conn., 187
(1860); Mangles vw. Grand Collier Dock
Co., 10 Sim., 519 (1840); Preston wv.
Grand Collier Dock Co., 2 Rail. Cas.,
835 (1840); Chouteau Co. v. Floyd, 74
Mo., 286 (1881). These cases hold that
parol agreements are void as a fraud on
corporate creditors and on other sub-
scribers, and that the subscription is en-
forceable absolutely. =

1Melvin v. Lamar Ins. Co., 80 IIL,
446 (1875); White Mts, R. R. Co. vw.
Eastman, 84 N. H., 124 (1856).
§§ 247, 465, infra. Or that the sub-
scriber be released. Gill v. Balis, 72
Mo., 424 (1880),

2Kelsey v. Northern Light Oil Co.,
45 N. Y., 505 (1871).

3Custar v. Titusville Gas & Water

Co., 68 Pa, St., 881 (1869); Union Ins, Co. :

v. Frear 8. Mfg. Co., 97 Tll., 537 (1881);
Upton v, Tribilcock, 91 U. 8., 45 (1876).

4La Grange & M. P. R. Co.'v. Mays,
29 Mo., 64 (1859); Clem v. Newcastle &
D. R. BR. Co., 9 Ind., 488 (1857), holding
that such a promise is contradictory of
the legal ‘effect of the subscription;
Cincinnati U..& Ft. Wayne BR. R. Co.
v. Pearce, 28 Ind., 502 (1867),

459 (1854) ;.

Ch.

5Smith v. Tallahassee Branch of C,
P. R. Co., 80 Ala., 650 (1857).

§ Blair v. Buttolph, 33 N. W. Rep., 349
(iowa, 1887). ;

-' Low v, Studebaker, 10 .Northeast.
Rep., 301 (Ind., 1887).

8 Topeka, etc., v. Hale, 17 Pac. Rep.,
601 (Kan., 1888); Marshall, etc., Co. v.
Kellian, 6 S. E. Rep., 680 (N. C., 1888).
Parol cannot add to a condition of a
conditional subscription. Miller v. Pres-
ton, 17 Pac. Rep., 565 (N. M., 1888).
An oral argument to take stock in pay-
ment of a note is no defense to the
note. The corporation must pay it.
Tuscaloosa, etc., Co, v. Perry, 4 South,
Rep., 635 (Ala., 1838),

9 Piscataqua Ferry Co, v, Jones, 39
N. H., 491 (1859); Crossman v. Penrose
Ferry Bridge Co., 26 Pa. St., 69 (1856);
New Albany & Salem R. R. Co. wv
Fields, 10 Ind., 187 (1858); East Tenn.
& Va. R. R. Co. v, Gammon, 5 Sneed
(Tenn.), 567 (1858); Saffold v. Barnes,
89 Miss., 399 (1860); Payson 7. Withers,
5 Biss., 269 (1873); Goff vu. Hawkeye
Pump & W. M. Co., 62 Iowa, 691 (1884);
Corwith v. Culver, 69 TIl., 502 (1878), |
Contra, Mahan v. Wood, 44 Cal., 462
(1872), where the par value of the shares
was not what was promised,

10 McAllister v. Indianapolis & Cin. R,
R. Co., 15 Ind., 11.(1860),

“157
§§ 189, 140.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [ox. Ix.
promise which, if carried out, would necessitate an wléira vires act
by the corporation, is not binding, and is no defense.!

§ 139. Corporations chargeable with the fraudulent representations
of their agents.— At an early day in England it was held ina num-
ber of cases that corporations were not bound by the frauds of their
agents in obtaining subscriptions to stock.’ This doctrine rested
on the theory that the corporation gave the agent no power or au-
thority to commit a fraud, and that, consequently, the fraud ren-
dered the agent liable personally, but did not release or affect the
subscription. .

§ 140. The modern doctrine, however, both in this country and
in England, has completely exploded the theory that corporations
are not chargeable with the frauds of their agents in taking sub-
scriptions. The well-established rule now is that a corporation
cannot claim or retain the benefit of a subscription which has been
obtained through the fraud of its agents. The misrepresentations
are not regarded as having actually been made by, the corporation,
but the corporation is not allowed to retain the benefit of the con-
tract growing out of them, being liable to the extent that it has
profited by such misrepresentations.*? The question of the author-
ity of the agent taking the subscription is immaterial hercin. It
matters not whether he had any authority, or exceeded his author-
ity, or concealed its limitations.‘ The corporation cannot claim

1 Johnson v. Crawfordsville, F. K. &
Ft. W. R. R. Co,, 11 Ind., 280 (1858),

Exchange Co. v. Drew, 82 Eng. L. & Eq.,
1(1853); Henderson v, Lacon, L. R., 5 Eq.

where aid from another railroad was
promised; Peters v. Lincoln & N. W.
R. Co., 14 Fed. Rep., 319 (1882), where
an ultra vires lease was promised;

Baile v, Calvert C. E, Soc, 47 Md., 117-

(1877). ;

2Dodgson’s Case, 3 De G. & Sm., 85
(1849); Bernard’s Case, 5 De G. & Sm.,
283 (1852): Gibson’s Case, 2 De G. & J.,
275 (1858); Holt’s Case, 22 Beav., 48
(1856); Felgate’s Case, 2 De G.,.J. & S.,
456 (1865); Mixer’s Case, 4 De G. & J.,
575, where a prospectus was issued by
the directors; Ayres’ Case, 25 Beav., 513
(1858), the court holding that the corpo-
ration is bound by the misrepresenta-
tion only where it expressly authorized
the particular statement made. Cf.
Barry v. Craskey, 2 Johns. & Hem., 1
(1861). ;

3Western B’k of Scotland v. Addie,
L. R., 1 Sc. App. Cas,, 145 (1867); Nat’l

Cas., 249 (1867); Ea parte Linger, 5 Irish
Ch. Rep., N.8., 174; Montgomery 8, R’y
Co. v, Matthews, 77 Ala., 357 (1884),
The principles governing these contracts
are thesame as the principles governing
contracts between private individuals.
Directors, etc., of Central R’y v. Kisch,
L. R., 2 H. L. App. Cas., 99 (1870); An-
derson v. Newcastle & Richmond R. R.
Co., 12 Ind., 876 (1859); Vreeland v. N.
J. Stone Co., 29 N. J. Eq., 188 (1878);
Ranger v. Great W..R’y, 5 H. L. G., 72
(1859); Mackay uv. Com. B’k, 5 P, C,
894, As regards representations in ref-
erence to bonds secured by mortgage
and the right of a purchaser of bonds
to complain, see Van Weel v. Winston,
115 U. S., 228 (1885).

4Crumbe v. U.S. Min, Co., 7 Gratt.
(Va.), 353 (1851), Provided, of course,
that the misrepresentations were made
by persons legally connected’ with the

158
CH. 1x. | DEFENSE OF PAROL AGREEMENT AND FRAUD.

[§ 141.
the benefits of his fraud without assuming also the representations
which procured those benefits. Parol evidence is admissible to
show the fraud, since it does not vary or contradict the contract,
but shows that no contract was properly formed.!

§ 141. The misrepresentations must be by authorized agents.—
False representations by persons who do not act as intermediaries
between the corporation and the subscriber in forming the con-
tract cannot bind the corporation nor affect the subscription.
are statements of outside parties.2, The subscriber may have his
action for damages against such persons for deceit, but he cannot
charge the corporation with their misrepresentations. Sometimes,
also, the misrepresentations even of persons connected with the
corporation do not bind the corporation, inasmuch as their powers
are purely statutory, or have nothing to do with the taking of sub-
scriptions. Thus, while there has been considerable controversy. in
this country over the question of fraudulent representations by
commissioners having statutory powers to take subscriptions, it is
quite well settled that the subscriber is bound to know that the
commissioners have no power to make representations, and that
the corporation is not bound thereby.’ So, also, it has been held
that the representations by the president of the corporation do not

bind it where he had no authority to take subscriptions.* - In Indi- -

ana it is held that an agent taking subscriptions before the incorpo-

They

taking of the subscription. An agent
to obtain subscriptions may use the or-
dinary means of accomplishing the ob-
ject of his appointment, guch as repre-
senting the location and quality of the
lands, and the like. ; Sandford v. Hand ys
23 Wend., 260 (1840). See, also, Nelson
v. Cowing, 6 Hill, 336 (1844),

1N, Y. Exchange Co. v. De Wolf, 31
N. Y., 271 (1865); Jewett v. Valley R’y
Co., 84 O. St., 601 (1878), In Pennsyl-
vania the peculiar rule prevails that the
agent’s misrepresentations affect the

subscription, and are a defense only

when the agent actually had or reason-
ably appeared to have authority to make
representations, . This was the ancient
English doctrine, long since abandoned.
Custar v. Titusville Gas & Water Co.,
63 Pa. St., 381 (1869).

2Cunningham v. Edgefield & Ky. R.
R. Co., 2 Head, 23 (1858). The repre-
sentations made to him by other sub-

scribers or outsiders are immaterial
herein. His remedy is. against them
personally. Duranty’s Case, 26 Beav.,
268 (1858); Hx parte Frowd, 80 L. J.
(Ch.), 822 (1860). °

3 Nippenose Mfg. Co. v. Stadon, 68 Pa.
St., 256.1871); Barington v. Pittsburgh
& Steubenville R. R. Co., 84 Pa. St., 858
(1859); Wight v. Shelby R, R. Go., 16 B.
Monr., 4 (1855); Rutz v. Esler & R. Mfg.
Co., 3 Bradw., 81 (1878); Syracuse, P. &
O. R. RB. Co. v. Gere, 4 Hun, 3892 (1875) ;
North Car. R. R. Co. v. Leach, 4 Jones’
L. (N. C.), 840 (1857). !

4Crump v. U.-S. Mining Co., 7 Gratt.
(Va.), 353 (1851); Rives v. Montgomery
South Plank R. Co., 30 Ala., 92 (1857).
In all such cases, however, if the cor-

poration accepts a subscription taken’

by an unauthorized agent, it cannot re-
tain the subscription and ,repudiate the
representations. It must assume both
or neither,

159

,

|
t

8§ 142, 148.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [OH. Ix,
©

ration of the company cannot bind it by his misrepresentations.!
If there is conflicting testimony as to the authority and status of
the agent, the question is to be submitted to the jury.”

8 142. Corporation not bound by misrepresentations of officers at
a public meeting.— There is a difference of opinion among the au-
thorities as to whether fraudulent representations made by one or
more of the company’s officers, at a public meéting called to pro-
mote the procuring of subscriptions, are chargeable against the cor-
poration where such representations were not expressly authorized
by the corporation. In New York, Iowa, Alabama and Louisiana,
such misrepresentations do not bind the corporation.’ In Georgia
and Wisconsin, on the other hand, such fraudulent representations
are held to be admissible in evidence.’ The former rule seems to

-accord most with the modern tendency of the decisions, which go

very far towards the enforcement of subscriptions after corporate
creditors and other subscribers have become interested in the enter-
prise.

§ 143. The misrepresentations may arise by prospectuses.— A
prospectus issued by the authority of the directors or the stock-
holders of a corporation may be relied upon by a person in subscrib-
ing for stock; and if the prospectus contains a false representation,
and the subscription is made by reason thereof, such representation
is binding upon the corporation.’ In this class of corporate instru-

1 Miller v. Wild Cat Gravel Road Co.,
57 Ind., 241 (1875). po

2 Kelsey v. Northern Light Oil Co., 45
N, Y., 505 (1871); Crump v, U.S. Mining
Co., 7 Gratt. (Va.), 853 (1851.

3 Buffalo & N. Y. City R. R. Co. v.

_ Dudley, 14.N. Y., 336 (1856); First Natl.

B’k v. Hurford, 29 Iowa, 579 (1870);
Smith v. Tallahassee Branch of C. P. R.
R. Co., 30 Ala., 650 (1857), on the ground
of a want of authority, which the sub-
scriber is bound to know; Vicksburg,
8. & T. R. R. v. McKean, 12 La, Ann.,
638 (1857), on' the ground that, if the rule
were otherwise, ‘‘there will be very lit-
tle security to those who loan money or
render assistance to institutions of this
kind.”

4 Atlanta & West Point R. R. Co. v.
Hodnett, 36 Ga., 669 (1867); McClellan »,
Scott, 24 Wis., 81 (1869).

5Oakes v. Turquand, L. R.,2 H.L.
App. Cas., 825 (1867) ;-Ross v, Estates In-

vestment Co., L. R., 3 Ch. App., 682
(1868); Reese River Silver Min. Co. v.
Smith, L. R., 4 H. L., 64 (1869); Blake’s
Case, 384 Beave, 629 (1865); Henderson v.
Lacon, L. R., 5 Eq, Cas., 249 (1867). In
England it is enacted, by section 38 of
the Companies Act, 1867, ‘Every pros-
pectus of a company, and every notice
inviting persons to subscribe for shares
in any joint-stock company, shallspecify
the dates and names of the parties to
any contract entered into by the com-
pany, or the promoters, directors or
trustees thereof, before the issue of such
prospectus or notice, whether subject
to adoption by the directors or the com-
pany or otherwise; and any prospectus
or notice not specifying the same shall
be deemed fraudulent on the part of
the promoters, directors and officers of
the company knowingly issuing’ the
same, as regards any person taking
shares in the company on the faith

160
'

CH. IX.] DEFENSE OF PAROL AGREEMENT AND FRAUD. ([§§ 144, 145.

ments, however, it is held that some high coloring and even exag-
geration is allowable. “In an advertisement of this description,
some allowance must always be made for the sanguine expectations
of the promoters of the adventure; and no prudent man will accept
the prospects which are always held out by the originators of every
new scheme without considerable abatement.”! So, also, if the
language used in the prospectus admits of two meanings, the sub.
scriber relying on it must ascertain which meaning is intended.’
Unless. the representation distinctly refers to what is actually exist-
ing at the time, it must be taken to represent what will result when
the enterprise is carried out, and will then be merely an expression
of opinion.

§ 144. Or by reports.— So, also, a report made by the corporate
officers to the stockholders may be relied on by one who contem-
plates subscribing for stock.? The corporation cannot say that such
reports were intended for the stockholders alone.“ The law holds
that the report is known, and is intended to be known, to all per-
sons who contemplate becoming stockholders, and is the same as
though published to the world.

8 145, Misrepresentations amounting to fraudulent representa-
tions.— Any false statement by the authorized agents of a corpo-
ration in regard to the past or present status of the corporate
enterprise or material matters connected therewith, whereby sub-
scriptions are obtained, is a fraudulent representation.

Thus, a false statement that a certain amount of stock had been

such prospectus, unless he shall have
had notice of such contract.” For the
application of this very important and
commendable statute, see Cornell v.
Hay, 8 C. P., 328 (1878); Gover’s Case,
L. R., 20 Eq., 114 (1875); Davidson v.
Tulloch, 1 Macqg., 783 (1860); Arkright
v. Newbold, L. R., 17 Ch. D., 311 (1880);
Twycross v. Grant, L. R., 2 C. P. D.,
469 (1877); Emma Min. Co. v. Lewis, L.
RK, 40 P.D., 396 (1879); Bagnall v.
Carlton, L. R., 6 Ch. D., 871 (1877);
Plympton Min. Co. v. Wilkins, 1882,
W.N., p. 66; Sullivan v. Metcalfe, L.
R., 5C. P. Div., 455 (1880). But a pros-
pectus.containing statements based upon
a report of the vendor of property to
the corporation, which report is ap-
pended to the prospectus, is no ground
for rescission, even though the report is
totally false. All the stockholders and
the company relied equally thereon.
(11)

Ex parte Vickers, 56 L, T. Rep., 815
(1887).

1 Directors, etc., of Central R’y Co. v
Kisch, L. R., 2H. L. App. Cas., 99 (1870).

2Smith v. Chadwick, L. R., 9 H. L.,
187; Hallows v. Fermie, L. R., 3 Ch.
App., 467 (1868), where the court say:
“Tf they may be construed in a.differ-
ent manner by different minds, it will
be impossible to test the truth of any
one man’s assertion that he understood
them in the sense in which they in-
volved a misrepresentation.” See, also,
8 852, 853.

3'Western B’k of Scotland v. Addie,
L. R., 1 Sc. App. Cas., 145; New Bruns-
wick ‘& C. R’y Co. v. Conybeare, 9H.L.
Cas., 711 (1862).

4 Natl, Exchange Co. v. Drew, 32 Eng,
L. & Kq., 1 (1855); Scott v. Dixon, 29 L.
J. (Ex.), 62, n.; explained and adopted
in L. R., 6 H. L., 377.

161
§ 145.]

DEFENSE OF PAROL AGREEMENT AND FRAUD.

[OH. Ix.

subscribed for;! or that certain property had been purchased ;* that
the corporate property is unincumbered;* that the corporation is
solvent and prosperous;‘ that the directors have subscribed for
stock;* that certain individuals are directors ;* or as to the nature of
the business to be undertaken; or, in England, where the memo.
randa or articles of the association are different from the prospec-
tus;® or that work on the enterprise had reached a certain stage of
completion ;° or that a certain price had been paid for property

1Ross v. Estates Investment Co., L.
R., 3 Ch., 682 (1868); Henderson v. La-
con, L. R., 5 Eq., 249 (1867). A state-
ment that £200,000 had been subscribed,
when in fact ‘owners of property had
contracted to convey the same to the
company for £200,000 of stock, is a ma-
terial misrepresentation. Arnison v
Smith, 59 L. T. Rep., 627 (1888).

2 Also that the property contained val-
uable mines, in full operation, and with
large daily returns. Reese River Silver
Min. Co. v Smith, L. R.,4 H. L., 64
(1869); Waldo v. Chicago, St. P. & F. D.
L. BR. R. Co., 14 Wis., 575 (1861); Ross v.
Estates Investment Co., supra. ‘Repre-
sentation that a certain patent-right
owned by the company had been tested,
and found to be valuable, held not a
misrepresentation, although it turns out
to be worthless. Denton v. Macneil, L-
R., 2 Hq., 352 (1866). Representation in
good faith that title to land was good
when in fact it was bad is not a misrep-
resentation. New Brunswick & C. R’y
Co. v. Conybeare, 9 H. L. Cas., 711
(1862). But misrepresentation that a
government guaranty had been ob-
tained is material. Kisch v. Central R’y
of Venezuela, 34 L. J. (Ch.), 545.

3 McClellan v. Scott, 24 Wis., 81 (1869) ;
Water Valley Mfg. Co. v. Seaman, 53
Miss. , 655.

4Bell’s Case, 22 Beav., 35 (1856); Me-
lendy v. Keen, 89 Ill., 895 (1878); West-
ern B’k of Scotland v. Addie, L. R., 1
Sc. App. Cas., 145 (1877). Not 80, how-
ever, where the directors honestly fig-
ured in debts which afterwards turned
out tobe bad. Jackson v. Turquand, L.

1

R., 4 H. L., 305 (1869). Directors held
liable to depositors for fraudulent repre-
sentations as to the bank’s solvency.
‘Seale v. Baker, 7S. W. Rep., 742 (Texas,
1888).

5Henderson v. Lacon, L. R., 5 Eg.
Cas., 249 (1867).

6 Blake's Case, 34 Beav., 639 (1865);
Munster’s Case, 14 W. R., 957 (1866).
Persons who have accepted are direct-
ors, although without the qualification
shares. Hallows v, Fernie, L. R., 3 Ch.
App., 467 (1868). -

7Blackburns’ Case, 3 Drew., 409 (1856).

8 Downes v. Ship, L. R., 3 H. L., 343
(1868);. He parte Briggs, L. R., 1 Eq.
Cas., 488 (1866).

*Peel’s Case, L. R., 2 Ch. App., 674
(1867); Ogilvie v. Currie, 87 L. J. (Ch.),
541 (1868); Lawrence’s Case, L: R., 2 Ch.

.App.; 412 (1867); Kincaid’s Case, id.,

(1867); ‘Wilkinson’s Case, L. R., 2 Ck.
App., 586 (1867); Ashley’s Case, L, R., 9
Eq. Cas., 263 (1870); Stewart’s Case, L.
R., 1 Ch. App., 574; Whitehouse’s Case,.
L. R., 3 Eq., 790 (186%); Taite’s Case, L.
R., 3 Eq., 795 (1867); Upton v, Hans-
braugh, 3 Biss., 417 (1878); Re Cachar
Co., 86 L. J. (Ch.), 490 (1867) ; Ship v.
Cresskill, L. R., 10 Eq. Cas., 73 (1870).
Cf. Ex parte Briggs, L. R., 1 Eq. Cas.,
483 (1866); Stewart’s Case, L. R.,-1 Ch.,
574 (1866). False representation that
sufficient funds were at hand to build a
specified part of the road, being a differ-
ent part from that which the defendant
required by his subscription to be com-
pleted before payment, is immaterial.
Blair v. Buttolph, 838 N. W. Rep., 849
(Iowa, 1887), —

162
CH. Ix. ] DEFENSE OF PAROL AGREEMENT AND FRAUD.

[§ 146.

-

when in fact a large part of the price went to promoters;! or that
steam could be used where only horse-power was allowed;? or
that the objects of the enterprise set forth in the subscription con-
tract were of a certain nature, the subscriber not reading or hear-
ing, and not being able to read, the contract,3— have been held to
constitute a fraudulent representation, entitling the subscriber in-
duced thereby to subscribe to the remedies provided for him, by
law in such cases. In all these cases, however, the distinction be-
tween statements relative to the prospects and capabilities of the
enterprise, and statements specifically specifying what does or does
not exist, must be carefully borne in mind. The former are mat-
ters of opinion; the latter are material representations, and are
fraudulent if false.‘

§ 146. Statements as to questions of law.— Where a subscription
is obtained by a false representation as to the legal effect of the
subscription contract, or ef corporate rights or liabilities, the sub-
scriber has no remedy. He is bound to take notice of the law.?
Thus, a misrepresentation as to the extent to which the subscriber
would be liable on his stock,® or that he may allow his stock to be
forfeited,’ or that payment would not be demanded until the enter-
prise was partly or wholly completed,’ is a statement as to the law.
_It states that something can be done which the law prohibits from

being done.

1 Capel v. Sims, etc., Co,, 58 L, T. Rep.,
(1888).

2Peek vu. Derry, 59 L. T. Rep., 78
(1888).

3 West v. Crawfordsville & A, T. Co., ’

19 Ind., 242 (1862).

4Whether the statement refers to a
“ possibility or a contingency, or an in-
tention,” or to an existing fact, is a ques-
tion sometimes for the jury, sometimes
for the judge; generally the latter. Edg-
ington v. Fitzmaurice, L. R., 29 Ch. D.,
459 (1885). All the statements, together
with the circumstances and history of
the matter, are to be considered in de-
ciding whether a misrepresentation was
made. It is sufficient if the subscriber
relied partly on the misrepresentation.
He need not have relied on it exclu-
sively. Id. See, also, Nicol’s Case, 3
De G. & J., 420 (1858).
may, by contract, waive his right to rely

The subscriber '

onarepresentition. Brownlee v. Camp--

bell, L. R., 5 App. Cas., 925 (1880).

5 Parker v. Thomas, 19 Ind., 218 (1862)..

6Upton v. Tribilcock, 91 U. S., 4%
(1875), where the representation was that
only a certain percentage could be
called for. In Upton v. Englehart, 3
Dill., 496 (1874), this representation was
held to be a defense, where it was made
in one state with reference to the laws
of another state. See, also, Accidental
Insurance Co. v. Davis, 15 L. T., 182
(1866), where it was represented that
further calls were not contemplated.

™N. E. R. R. Co. vu. Rodriques, 10
Rich. (8. C.), 278 (1857), _

8Clem v. Newcastle & Danville R. R.
Co., 9 Ind., 488 (1857); New Albany,
etc, R. R. v. Fields, 10 id., 187 (1858).
For representation as to the route, see
Ellison v. Mobile, etc., R. R. Co., 36
Miss., 572 (1858); Wight v. Shelby R, R.
Co., 16 B. Mon., 4 (1855).

168
§§ 147, 148.] DEFENSE OF PAROL AGREEMENT AND FRAUD. oH. rx.

8 147. Misrepresentation may be by suppression of the truth.—
The misrepresentation entitling the subscriber to his remedies
may consist in the suppression of what is true as well as in the as-
sertion of what is false.1 Where any statement is made at all, it
must be a fair and full statement of all the. material facts. The
corporate authorities, in issuing a prospectus, are “bound to state
everything with strict and scrupulous accuracy, and not only to ab-
stain from stating as fact that which is not so, but to omit no one
fact within their knowledge, the existence of which might, in any
degree, affect the nature or extent or quality of the privileges
and advantages which the prospectus holds out as inducements to
take shares.”? Thus, an omission to state that a very large sum
had been paid for property, :the merits of which were fully set
forth, has been held to be equivalent to a fraudulent representation.’
On the other hand, a failure to state that large sums were paid to
the directors to induce them to act as such was held not to be
a fraudulent omission.!

§ 148. Misrepresentation may be by statements made without
knowledge of their falsity. Statements need not be intentionally
false in order to amount to a fraudulent representation.®> -A false

1**No misstatement or concealment
of any material facts or circumstances
ought to be permitted, The sup-
pression of a fact will often amount to
a misrepresentation.” Directors, etc.,
of Central R’y v. Kisch, L. R., 2 H. L.
App. Cas., 99 (1867). In Oakes. v. Tur-
quand, L. R., 2 H. L. Cas., 825 (1867),
the court say the prospectus is objec-
tionable, ‘‘ not that it does not state the
truth as far as it goes, but that it con-
ceals most material facts’ with which
the public ought to have been made
acquainted, the very concealment of
which gives to the truth which 1s told
the character of falsehood.”

2New Brunswick & Con. R’y Co. v.
Muggeridge, 1 Dr. & Sm., 363, 381
(1860).

3 Directors, etc., of Central R’y Co.
v. Kisch, supra. In Gover’s Case, L.
R., 1 Ch. D., 182 (1875), under different
circumstances, the contrary was held.

4Heymann v. European Central R’y
Co., L. R., 7 Eq. Cas., 154 (1868). State-
ment need not be made that stock had

been given to the, directors and prornot-
ers in payment for services. Pulsford
v, Richards, 17 Beav., 87 (1853). Noras
to the amount of stock already sub-
scribed. Vane v. Cobbald, 1 Ex., 798
(1848).

'Corporate agents, making represen-
tations in order to.obtain subscriptions,
are bound to know the truth or falsity
of such statements. Reese River Co. v.
Smith, L. R., 4 H. L., 64 (1869); afPg
L. R., 2 Eq., 264; Glamorganshire Iron,
etc., Co. v. Irvine, 4 F. & F., 947 (1866),
applying the same rule at law. The
English case of Kennedy v. Panama, N.
J. & A.R. M. Co, L. R., 2 Q. B., 580,
(1867), holds, however, that ‘‘ where
there has been an innocent misrepre-
sentation or misapprehension, it does
not authorize a rescission, unless it is
such as to show that there is a complete
difference in substance between what
was supposed to be and what was taken,
so as to constitute a failure of consit-
eration,” and that to hold otherwise
would be to make a warranty out of the

164
cu. 1x.] DEFENSE OF PAROL AGREEMENT AND FRAUD. [§$ 149.
statement, made in good faith, but in ignorance, is, in a legal point
of view, the same as an assertion which the party knew to be un-
true. Thus, a prospectus issued by the directors, representing the
corporate property as containing valuable mines, all of which was
in good faith, but false, is the same as though the statements were
made with knowledge of their falsity. Where, however, the state-
ment in good faith was that the corporation had a government
contract, which, upon litigation, was found to be untrue, the rep-
resentation was held not to be fraudulent.?

§ 149. Misrepresentations that are insufficient It is not every
misrepresentation that enables a subscriber to set up that he was
induced to subscribe by fraud.? Thus, an honest mistake of judg-
ment, on the part of the directors, as to the collectibility of certain
debts, whereby a company represented to be solvent turns out to
be: insolvent, is not a fraudulent representation. So, also, of. a
representation as to the value of a patent-right, which, it was
stated, would be tested further. On the other hand, a statement

made with the intent to defraud the subscriber, but without that

representation. In the recent case of
Edgington v. Fitzmaurice, L. R., 29 Ch.
D., 459 (1885), the court say that a state-
ment of fact, which the person making
does not know the truth of, is, ‘‘ in the
eye of the law, a fraudulent statement
as much as if the parties making it had
known it to be false.” In this country
the cases seem to favor a different rule.
The party making the representations
must be proven ‘‘to have had a fraudu-
lent purpose in contemplation, or at
least to have known that the statements
were untrue.” Nugent v. Cin., Harri-
son & Indianapolis 8. L. R. R. Co., 2
Disney, 302 (1858); Selma, M. & M. R.
R. Co. v. Anderson, 51 Miss., 829 (1876);
Cunningham v. Edgefield, & Ky. R. R.
Co., 2 Head, 23 (1858). See, also, Chitty
on Contracts, 682, and Montgomery,
etc., R’y Co. v. Matthews, 77 Ala., 357
(1884). The vigorous case of Henderson
v. RB. RB. Co., 17 Tex., 560 (1856), how-
ever, effectively presents the opposite
view ; and see § 356, infra. See, also, 1

Story, Eq. Juris, § 193; Story on Agency, '

8§ 127, 185, 187, 452.
1Reese River Co. v, Smith, L. R., 4
H. L., 64 (1869).

2 Kennedy v. Panama, N. Z. & O. RB.
M, Co., L. R., 2 Q. B., 580 (1867),

3 Mere. matters of opinion as to
whether the enterprise can be com-
pleted, or when it will be completed,
or the prospects of profits, cannot be
misrepresentations. The subscriber is
bound to know that these are all mat-
ters of mere conjecture. Brownlee v.
O., Ind. & Ill R. R. Co, 18 Ind., 68
(1862); Pickering v. Templeton, 2 Mo.
App., 424 (1876); Hughes v. Antietam
Mfg. Co., 34 Md., 316 (1870); Hardy v.
Merriweather, 14 Ind., 203 (1860); An-
drews v. O. & Miss. R. R. Co., 14 Ind.,
169 (1860); Bish v. Bradford, 17 Ind.,
490 (1861); Walker v. Mobile R. R. Co.,
34 Miss., 245 (1857); Coil v. Pittsburgh
College, 40 Penn. St., 489 (1861). See,
also, § 92. In the cases, however, of
Gerhard v. Bates, 17 Jur., 1097 (1853),
and Taylor v. Ashton, 11 M. & W., 401
(1848), it was held that a false guaranty
of the promoters, that a certain divi-

dend would result from the enterprise,

constituted a false representation. In
re Nat'l, etc., Fuel Co., Hw parte North,
4 Drew., 529 (1859), held, that one
sued as contributory cannot plead

165
DEFENSE OF PAROL AGREEMENT AND FRAUD. [cH. IX,

§ 150.]
effect, is immaterial; mere intent without damage is insufficient.!
A misstatement as to the contents of the subscription contract
which the subscriber signs is immaterial, where he can read but
does not.2 And where false representations are made, but before
the subscription is completed the representations are made good
by intervening events, the subscribers cannot complain.’ Frauds
of the directors which are not the subject of a representation are
not to be remedied by the principle oF law governing the subject
of false representation. !

-§ 150. Subscriber is not bound to aunesigaee the truth of repre-
sentations.— If a subscriber has used reasonable caution and judg-
ment in accepting the statements of corporate agents, it is no
answer to his claim that he was induced to subscribe | by fraudulent
representations to say that by proper inquiry he might have learned
the truth, or by more vigilance he might have discovered the de-
ception.* Where the representations are by a prospectus, he is not
obliged to examine documents referred to, even though such exam-
ination would have shown the falsity of the representations.’ It is

fraudulent misrepresentation on part of
company because it was arranged be-
tween directors and shareholders that
certain shares (of which these were a
part) should havea preference. A state-
ment as to the purpose for which the
proceeds of bonds will be used by the
company is immaterial. The bond-
holder cannot rescind. Banque, etc.,
v. Brown, 34 Fed. Rep., 145, 198 (1888),
Stock may be issued before payment
by machinery is made. An action by
another stockholder for cancellation of
the stock, on the ground of fraud, fails
unless there is clear proof that the
person agreed that the machinery
would succeed. Pendleton Mfg. Co. v.
Mahanna, 18 Pac. Rep., 563 (Oreg.,
1888). “See 21 N. E. Rep., 12 (Ill., 1889),

1 Killer v, Johnson, 11 Ind., 387 (1858);
Cunningham v. Edgefield & Ky. R. R.
Co., 2 Head, 23 (1858).

2Thornburgh v. Newcastle & 'Dan-
ville R, R. Co., 14 Ind., 499 (1860).

3 Ship v. Cresskill, L. R., 10 Eq. Cas.,
73 (1870).

4 Hornaday v. Ind. & Il. Central R.
R., 9Ind., 263 (1857); Heymann v. Euro-
pean Central R’y Co., L. R., 7 Eq. Cas.,
154 (1868),

5New Brunswick & Can. R’y Co. v.
Muggeridge, 1 Dr. & Sm. 363 (1860);
Upton v. Englehart, 3 Dill., 496 (1874);
Directors, etc., of Central R’y v. Kisch,
L, R., 2 H. L. App. 'Cas., 99 (1870); Ea
parte West, 56 L. T. Rep., 622 (1887).
Cf. Hallows v. Firmie, L. R., 3 Ch.
App., 467 (1868). The subscriber is not
bound to investigate the truth of state-
ments which the other jparty with full
knowledge of the facts makes. McClel-
lan v. Scott, 24 Wis., 81 (1869), False
statements as to who are the other sub-
scribers are no defense where the sub-
scriber has, opportunity to ascertain.
Haskell v. Worthington, 7 8S. W. Rep.,
481 (Mo., 1888).

6 Kirsch v. Central R’y, 84.L. J. (Ch.),
545 (1865); S. C., supra. In New
York the general principle of law
governing cases of misrepresentation
is clearly ‘stated to be that ‘every
contracting person has an absolute right
to rely on the express statement of an
existing fact, the truth of which is
known to the opposite party, and un-
known to him, as a basis of a mutual
engagement; and he is under no oblige-
tion to investigate and verify state-
ments, to the truth of which the other

166
:
\

CH. Ix.] | DEFENSE OF PAROL AGREEMENT AND FRauD. ([§§ 151, 152.

_not incumbent upon him to institute inquiries, and to suspect fraud
when all seems fair. But where the means of information are open
equally to. both parties, the subscriber has no right to rely upon the
representations of the corporate agent, unless “the latter dissuades
the subscriber from investigation.! So, also, where the subscriber
reads several documents, he cannot rely on representations in one
which are corrected and limited by statements in the others, even
though he claims to have overlooked such corrections.

§ 151.* Subscriptions induced by fraudulent representations are
not void, but only voidable— The principle of law that fraud viti-
ates all contracts applies to a contract of subscription; but this
principle means, not that the contract is void per se from the
formation of the contract, but that the contract is voidable at the
option or election of the person defrauded.’ Until such election is
exercised, the contract is enforceable by both or either of the par-
ties. Hence a subscription to stock, obtained by fraudulent repre-
sentations, is not void from the time when it was made, nor is it void
until it is ratified and confirmed by the defrauded subscriber, but
it is valid until it is expressly rescinded and repudiated by the sub-
scriber.4 This principle is important in determining the method of
rescission, and particularly the time within which a rescission must
be made.

§ 152. Remedies of a subscriber induced to subscribe by fraudu-
lent representations.— There are, in general, five different remedies
which are open to a subscriber induced to subseribe by fraud. He
may, upon discovering the fraud, rescind the subscription by notifi-
cation to the corporate authorities, without taking legal proceed-
ings; or he may wait until sued upon the subscription, and then set
up the fraud as a defense to the action at law; or he may file a bill
in equity to restrain such suits at law, and to set aside the subscrip-
tion contract, and also, if he wishes, to recover back payments
already made on the subscription; or he may bring an action at
law against the parties fraudulently inducing the subscription, and
recover damages for the deceit; or.he may sue for money had and
received.

party to the contract, with full means Oakes v. Turquand, L. R., 2H. L
of knowledge, has deliberately pledged App. Cas,, 325 (1867); Upton v. Engle-
his faith.” Mead v. Bunn, 32 N. Y., 274 hart, 3 Dill., 496 (1874); Reese River
(1865). Min, Oo. v. Smith, L. R., 4 H. L., 64

lJennings v. Braughton, 22 L. J, (1869).
(Ch.), 583 (1853); Walker v. Mobile& 0. ‘Tennant v. City of Glasgow B’k, L.
R. R. Co., 34 Miss., 245 (1857). R., 4 App. Cas., 615 (1879).

2Scholey v. Central R’y Co., L. R., 9
Eq. Cas., ‘766, n. (1870).

167
§§ 153-155.] DEFENSE OF PAROL AGREEMENT AND FRAUD.  [CH. Ix.

§ 153. Rescission without legal proceedings.— It is the duty and
‘the right of directors, without waiting for a bill in equity or other
legal proceedings, to revoke a subscription contract, and remove
from the stockholders’ list the name of a subscriber who reasonably
proves that he was induced to subscribe by fraudulent representa-
tions chargeable to the corporation, and who requests a rescission
of the subscription.!. The directors are not bound to make a hope-
less defense. It is an ordinary business act within the pqwers of
the directors, and their discretion is not to be controlled unless un-
reasonably exercised. Where, however, upon such a demand being
made by the subscriber, the directors refuse to dissolve the subscrip-
tion contract, the subscriber must resort to a bill in equity to have
the contract set aside for fraud.? A mere notification to the cor.

poration is insufficient.

§ 154. False representation as a defense to an action at law for
calls.— The most common remedy of a subscriber induced by fraud
to subscribe is to wait until the corporation brings suit to collect
the subscriptions, and then to set up the fraud asa defense. Nearly
all of the cases in this country are cases where this remedy has
been adopted.’ It is subject, however, to the danger that the cor-
poration may become insolvent, and thereby bar the defense. The
decided tendency of the law to preserve the rights of third persons
will probably and properly tend to defeat this defense in all cases
where the subscriber has not filed a bill in equity promptly upon
discovering the fraud, but has waited to be sued by the corporation.
The intervening rights of stockholders and corporate creditors call
for prompt action on the part of a subscriber who seeks to avoid
his liability on the ground of fraud.

§ 155. Remedy by bill in equity. This is the most fair, safe and
complete remedy that the subscriber has. It is a decisive notice
to the corporation and all third parties not to rely upon the sub-
scription in question. It avoids the risk of future corporate insolv-

1 Wright’s Case, L. R., 2 Eq., 331; S. to allow the rescission. See, also, Hare’s
/C.,, L. R,, 7 Ch., 55 (1871); Blake’s Case, Case, L. R., 4 Ch,, 508 (1869),

84 Beav., 639 (1865); Reese River Co. v. 3 “Tt isa good answer at common law
Smith, L. R.,4 H. L., 64 (1869), aff’g L. toan action for calls that the defendant
R., 2 Eq., 264; Altna Ins. Co. v. Shields, was induced to become the holder of
Ir. R., 7 Eq., 264; Bath’s Case, 8 Ch. the shares by the fraud of the plaint-
Div., 384 (1878). See, also, Fox’s Case, iffs.” Bwlch-y-plwm Lead M. Co. vw
L. R., 5 Eq., 118 (1868). Contra, Steel’s Baynes, 36 L, J. (Ex.), 183 (1867); De-
Case, 49 L. J. (Ch.), 176 (1879). posit Life A. Co. v. Ayscough, 6 E. &

* Mere repudiation, not followed upby B., 761 (1856); Sandford v, Handy, 28
anything more, is insufficient. Re Scot- Wend., 260 (1840). Cf.. 21 N, W. Rep.,
tish Petroleum Co., L. R., 23 Ch. Div., 304 (Cal. , 1889),
413 (1882), where the directors refused

168
‘

CH. 1x. | DEFENSE OF PAROL AGREEMENT AND FRAUD.

[$$ 156, 157.
ency. It enables the subscriber to set aside the contract, to enjoin
actions at law for calls, and to recover back payments made before
discovery of the fraud.’ It is the customary, and it seems favorite,
remedy in England, and has been clearly upheld in this country?
§ 156. The complainant in a bill in equity to set aside a subscrip-
tion obtained by fraud cannot sue in behalf of himself and others
who may wish to come in.’ But several subscribers, defrauded in
the same way, may join in the bili as co-complainants. The corpo-
ration is to be a defendant, and if merely a cancellation of the sub-
scription and an injunction against suits at law are sought, the
corporation, it seems, may be the sole defendant.? A court of equity
in these actions will give complete relief by decreeing that the
directors guilty of the fraud shall refund to the subscriber payments
made by him before discovering the fraud.‘ This relief dispenses
with an action at law for damages for deceit, and when sought for

in the bill in equity the guilty directors must be made parties.

The

bill is not multifarious by reason of its blending prayers for these

various kinds of relief.

!

§ 157. Remedy by an action at law for deceit.— An action at law
for damages for deceit lies, at the instance of a subscriber for stock,
fraudulently induced to subscribe, against the persons guilty of the

1But the injunction to restrain the
action at law will not be granted if the
subscriber delays until the case is about
to be tried. Thorpe v. Hughes, 3 Myl. &
Cr., 742(1888), And where the stock has
been fully paid, and no injury can come
from the delay, equity will not sustain
the subscriber’s bill to compel repay-
ment, but will send him to a court of
law, where a jury may pass upon the
question of fraud. Askew’s Case, L. R.,
9 Ch., 664 (1874), . Equity, however, un-
questionably has concurrent jurisdiction
if it cares to exercise it, Hill v. Lane,
L. R.; 11 Eq., 215 (1870), criticising Ogil-
vie v. Currie, 37 L. J., 541 (1867). See,
also, § 356, infra. And will enjoin the
collection of the subscription pending
the suit. Walsh v. Seager, 1886 (N. Y.
Sup. Ct.). And the equitable action
will not be enjoined merely because the
corporation subsequently becomes in-
solvent, and a receiver is appointed. Id.

2Banque, etc, v. Brown, 34 Fed.
Rep., 145, 198 (1888) ; Waldo v, Chicago,
St. Paul, etc., R. R. Co., 14 Wis., 575

560 (1856);

(1861); Henderson v. R. RB. Co., 17 Tex.,
Rawlins v. Wickham, 3
De G. & J., 304 (1858). ,And see the
various English cases in this chapter.

3Smith v. Reese River, etc., Co., L. R.,
4H. L., 64 (1869); Hallows v, Fermie,
L. B., 8 Ch. App., 467 (1868), A trans-
feree of the shares cannot bring the
suit. The fraud is personal to the orig-
inal subscriber. Duranty’s Case, 26
Beav., 268 (1858),

4Vreland v. N. J. Stone Co., 29N. J.
Eq. R., 188 (1878); Reese River Silver
Min. Co. v. Smith, L. R., 4 H. L., 64
(1869). Where subscribers bring suit to
set aside subscriptions and for repay-
ment thereof, for fraud, and join the
directors as co-defendants, the directors
are not nominal parties. Seddon v. Vir-
ginia, etc., Co., 36 Fed. Rep., 6 (1888).

5Nor is it multifarious because it
joins such a suit with one by the cor-
poration to compel the directors to ac-
count to the ear for the same

Bia

287 (1857).

169
§ 157.]

DEFENSE OF PAROL AGREEMENT AND FRAUD.
.

[oH. Ix.

fraud.! The fraudulent representation, however, which must be
proved to sustain this action must be a more intentional fraud than

the one which suffices to rescind the contract.

The subscriber must

prove that a material false misrepresentation was made by the de-
fendant, that the defendant knew the representation to be false
when he made it, that the plaintiff subscribed by reason, partially
at least, of that representation, and that he was thereby injured.’
The gist of the action is fraudulent intent.’ It cannot be main-
tained against the corporation, because the corporation, though

1Clarke v. Dickson, 6 C. B. (N. 8),
453 (1859): Miller v. Barber, 66 N. Y.,
558 (1876); Paddock v. Fletcher, 42 Vt.,
389 (1869). In England the liability of
the directors herein is enforced gener-
ally in connection with a suit in equity,
and asa part of the equitable decree.
This is under a statute. Western B’k
of Scotland v. Addie, L. R., 1 Se. App.
Cas., 145. <A false affirmation, made by
the defendant with intent to defraud
the plaintiff, whereby the plaintiff re-
ceives damage, is the ground of an
action upon the case in the nature of
deceit. In such an action it is not nec-
essary that the defendant should be
benefited by the deceit, or that he should
collude with the person thus benefited.
1 Smith’s Leading Cases (8th Eng. ed.),
66-94, as applicable to misrepresenta-
tions inducing subscriptions. Brewster
v. Hatch, 10 Abb. N. C., 400 (1881), sus-
tains an action by subscribers for stock,
for damages, for false representations
by promoters as to the real cost of
property purchased by the latter for the
corporation. There is no remedy at
law or in equity against the estate of
a deceased director herein except for
property received by him, Peek v.
Gurney, 6 H. of L., 877 (1873), Sub-
scribers to debentures may recover back
the difference between the actual value
of the debentures and the price paid.
Arnison v. Smith, 59 L. T. Rep., 627
(1888). .

2Ship v. Cresskill, L. R., 10 Eq. Cas.,
73 (1870). To sustain the action for de-
ceit the plaintiff must show “ that the
defendants intended that people should

“act on the statements, that the state-

ments are untrue in fact, and that the
defendants knew them to-be untrue, or
made them under such circumstances
that the court must conclude that they
were careless whether they were true or
not;” also that the statements were re-
lied upon, acted on, and damage sus-
tained. Edgington v. Fitzmaurice, L. R.,
29 Ch. D., 459 (1885). When the pros-
pectus stated that the company were
authorized to use steam for propelling
street cars, when in fact it could only
use horses, a subscriber relying thereon
may hold the directors who issued the
prospectus liable for deceit, upon proof
that they knew the statement was false
or were reckless in making it. Peek v,
Derry, 59 L. T. Rep., 78 (1888). Must
show reliance on the misrepresentations.
Priest v. White, 1S. W. Rep., 861 (Mo.,
1886).

8 Scienter is fixed on the directois,
making them liable in damages upon
proof of incorrect representations,
known to them to be incorrect, know-
ingly stated by them, and acted on by
the plaintiff subscriber. Henderson v.
Lacon, L. R., 5 Eg. Cas., 249 (1867);
Cargill v. Bower, L. R., 10 Ch. D., 502
(1878). See, also, Bale v. Cleland, 4 F.
& F., 118 (1864); and see p. 36, n. 3,
supra. Must allege knowledge and in-
tent to deceive on their part. ‘‘ Falsely
and fraudulently represented ” does not
properly plead the scienter. Mahey v.
Adams, 3 Bosw., 846 (1858). In case the
representations are not fraudulent as
against the corporation, they are not
sufficient to entitle the subscriber to re-

170
DEFENSE OF PAROL AGREEMENT AND FRAUD.

on. 1x,] [$$ 158, 159.

liable to refund fraudulently acquired property, is not capable of a
fraudulent intent.

§ 158. The directors are not liable to an action for deceit by. rea-
son of the frauds of their agents,’ nor is an innocent director liable
for the fraudulent representations of his co-directors — not even
though the evidences of their fraud were entered on the corporate
books, there being no ground for suspicion on his part.?

A director cannot be held liable for false representations con-
tained in the articles of association, which were made before he
became a director.‘ But a director who stands by and allows a co-
director to make the false representations is chargeable equally
with the injury done thereby.’ The false representations support-
ing an action for deceit may have been by corporate reports or
prospectuses, or by personal statements.

$159. Remedy by action for money had and received.—Where a
subscriber pays his subscription in part or wholly, and afterwards
discovers that the representations whereby he was induced to sub-
scribe were fraudulent, he may bring an action at law for money
had and received, and recover back from the corporation the
money so received. If the money has not yet passed into the
hands of the corporation he may recover it from the person who

cover from the directors. Heymann v. 122; Lubricating Oil Co. v. Standard Oil

European Central R’y Co., L. R., 7 Eq. Co., 42 Hun, 153 (1886); also, § 45.

Cas., 154 (1868). ; 2 Weir v. Burnett, 26 Week. Rep., 147,
1 Mixer’s Case, 4 De G. & J.. 575; Du-, (1877); Weir v. Bell, L. R., 3 Ex. Div.,

ranty’s Case, 26 Beav., 268 (1858); West- 238 (1878); Haglesfield v.. Marquis of

ern B’k of Scotland v. Addie, L. R., 1
Sc. App. Cas., 145; Abrath v. North-
eastern R’y Co., 55 L. T. R. (N. S.), 63
(1886); Houldsworth v. City of Glas-
gow B’k, L. R., 5 App. Cas., 317;, Ben-,
jamin on Sales, 4th Am. ed., § 467a.
Contra, Peebles v. Patapsco Guano Co.,
77 N. C., 288 (1877); Barwick v. English
Joint-stock B’k, L. R., 2 Ex., 259 (1867);
Mackay v. Com. B’k of New Brunswick,
L. R., 5 P. C., 394, not stock cases, but
distinctly holding that a corporation is
liable to an action for damages for de-
ceit. Where, however, the old corpora-
tion organizes a new corporation, and
has the latter build a competing road
on a new line, a stockholder of the old,
who contributed lands, etc., may have
an action for damages against it. Chap-
man v. Railroad Co., 6 O. St., 119 (1856).

Londonderry (H. L.), 26 W. R., 540
(1878). See, also, Cargill v. Bower, L,
R., 10 Ch. D., 502 -(1878); Watson v.
Earl Charlemont, 12 Q. B., 856 (1848);
Arthur v. Griswold, 55 N. Y., 400 (1874).

3 Re Denham & Co, L. R., 25 Ch.
Div., 752 (1883).

4 Mahey v. Adams, 3 Bosw., 346 (1858).

5 Vreeland v. N. J. Stone Co., 29 N. J.
Eq., 188 (1878).

6 Grangers’ Ins. Co. v. Turner, 61 Ga.,
561 (1878); Hamilton v. Grangers’ L. &
H. Ins. Co., 67 Ga., 145 (1881). But the
subscriber cannot retain the stock and
alsosue. Houldsworth v, City of Glas-
gow B’k, L. R., 5 App. Cas., 317 (1880).
See Jarrett v. Kennedy, 6 C. B., 319
(1848), Assumpsit for money had and
received, brought against the directors
to compel them to repay money paid.on

See, also, article in 1 R’y & Corp. L. J., a subscription obtained by fraud, was
171
§$ 160, 161.] DEFENSE OF PAROL AGREEMENT AND FRAUD. (OH. IX.

has it. If, however, he would be barred from suing in a court of
equity by reason of his laches or corporate insolvency, he would
fail equally in this remedy at law."

8 160. ‘Ratification as a bar to the subscriber's remedies.— A sub
scription contract obtained by fraudulent representations may cease
to be voidable and may become absolutely binding by acts of
ratification. Any act of the subscriber, inconsistent with an in-
tention to disaffirm the contract, will constitute a ratification of
the subscription and a waiver of the right to avoid it by reason of

_fraud, provided the subscriber knew of the fraud at the time of such
ratifying act. . Thus, where the subscriber, after knowledge of the:
fraud, receives dividends, sells part of the stock,? instructs his broker
to sell,’ participates in the meetings,* pays calls,’ or, in general, ac-
cepts any corporate benefit or continues to act as a stockholder,’
he will be held to have waived all objections to the fraud, and to
have ratified the subscription contract. But mere attendance at a
stockholders’ meeting,’ or demanding a dividend,’ or voting his
shares by proxy,’ is insufficient.

§ 161. Laches as a ber to the subscriber's remedies.— Where a
subscriber for stock, who was induced to subscribe by fraud, neg-
lects for an unreasonable time after the discovery of the fraud to
have his subscription canceled, and, in the meantime, the interests
of third persons become involved, and would be injured by the can-

sustained, without involving the ques-
tion of a fraudulent intent. See Bruce
v, Nickerson, 5 Northeast. Rep., 647
(Mass., 1886). The action for money
had and received cannot, be brought
against other stockholders for the fraud
of a promoter. Perry v. Hale, 143
Mass., 540 (1887).

1Scholey v. Central R’y Co., L. R., 9
Eq., 266, n. (1870); Ayres’ Case, 25
Beav., 518 (1858); Mixer’s Case, 4 De G.
& J, 575.

‘2 Ayres’ Case, 25 Beav,, 513 (1858).
But a sale of part of the stock before
the subscriber discovers the fraud is no
bar to a rescission | as tothe rest. Ea
parte West, 56 L. ‘p. Rep., 622 (1887).
A subscriber to stock cannot rescind for
fraud, when he has had the stock trans-
ferred to his infant children, unless
their right thereto is also tendered
back, Francis v. N. Y., etc., R. R., 108
N. Y., 98 (1888),

3 Ex, parte Briggs, L. R., 1 Eq., 483
(1866).

4 Harrison v. Heathorn, 6 Man. & G.,
84 (1848); Chaffin v. Cummings, 36 Me.,
76 (1858).

5 Scholey v. Central R’y Co., L. R., 9
Eq., 266, n. (1870).

6 Ogilvie v. Knox Ins, Co., 22 How.,
380 (1859); Chubb v. Upton, 95 U.S.,
665 (1877); Litchfield B’k v. Church, 29
Conn., 137 (1860); Kishacoquillas Centre
Co. v. McCanahy, 16S. & R., 140 (1827).
Waiver of one misrepresentation is not
a waiver of others. Ea purte Hale, 55
L. T. Rep., 670 (1886).

7Stewart’s Case, L. R., 1 Ch. App.,
574 (1866); Wontner v. Shairp, 4 C. B.,
404 (1847).

8 Phil. R. R. Co. v. Cowell,
329 (1857).

9McCully v. Pittsburgh, etc., R. R.
Co., 22 Pa. St., 25 (1858); Greenville,
etc., R. R, Co. v. Coleman, 5 Rich. L,
118 (1851).

28 Pa. St,

172
CH. 1x. ] DEFENSE OF PAROL AGREEMENT AND FRAUD.

[§ 162.
cellation of such subscription, the subscriber’s laches is a bar to re-
lief, and a court of equity will refuse to set aside the subscription.!
Equity does not allow the subscriber to say, “I will abide by the
company if successful, and I will leave the company if it fails.” ?
Immediately upon receiving information of the fraud, it is his duty
to decide whether he will rescind the contract or waive the fraud.*
Nevertheless delay is not fatal, unless circumstances and third par-
ties’ rights have so changed or been acquired that the rescission
would be inequitable. Consequently, the decision of each case de-
pends largely on the facts of the case. Thus it has been held that
a delay of one,‘ two,’ three,® four’ or six months,’ or of two or

six ° years, was fatal under the circumstances of the case, while,.

under different facts, a delay of two months," or even seven years,”
was held not to be a bar. In the remedies by actions at law, the
statute of limitations governs, and, by analogy, courts of equity
are inclined to follow the same period, unless there be an equitable
reason to the contrary.

§ 162. The date from which laches begin te run is the time when
the subscriber first is chargeable with notice that a fraud has been
perpetrated upon him. Mere suspicions or random statements
heard in public or in stockholders’ meetings do not necessarily con-

stitute notice.”

1City Bk of Macon ». Bartlett, 71
Ga., 797 (1883). Asa bar in an action
at law. Schwanck v. Morris, 7 Rob.
(N.. Y.), 658 (1868). But it is no bar

that other subscribers may have been .

induced to subscribe by reason of this
subscription. Western B’k of Scotland
v. Addie, L. R.,1 Scotch App. Cas., 145.
Cf, Bavbans Casey 3 De G. & Sm., 43
(1849).

2 Re London & Staffordshire Fire Ins.
Co., L. R., 24 Ch. Div., 149 (1888); Ash-
ley’s Case, L. R., 9 Eg. Cas., 263 (1870).

3Heymann v. European Contra Ry
Co., L. R., 7 Eq. Cas., 154 (1868); Peek
v Gari, L. R.,6 H. L., 377 (1878)..
The last case overrdies Bagshaw v. Sey-
mour, 18C. B., 908 (1856), and Bedford
v. Bagshaw, 4 H. & N., 538 (1859),

4Taite’s Case, L. R., 3 Eq. Cas., 795
(1867), the delay evidently being to see
which course would be most. profitable;
Peel’s Case, L. R., 2 Ch. App. 674

But after a subscriber’s suspicions are reasonably

(1867); Kincaid’s Case, L. R., 2 Ch., 412
(1867).

5 Wilkinson’s Case, L. R., 2 Ch. APP ss "
536 (1867).

8Heymann v, European Central fe
Co., L. R., 7 Eq. Cas., 154 (1868).

‘T Ee parte Lawedics, 36 L. J (Ch.),
490 (1867).

8 Whitehouse’s Case, L. R., 3 Eq. Cas.,

_ 790 (1867).

9Farrar v. Walker, 3 Dill., 506, n.
(1874); Ashley’s Case, L. R., 9 Eq. Cas.,
263 (1870). Threeyears. State v. Jeffer-
son Turnpike Co., 3 Humph. (Tenn.),
805 (1842).

Denton v, Macneil, L. R., 2 Eq., 352
(1866).

N Directors, etc., of Central R’y v
Kisch, L. R., 2 H. L. App. Cas., 99
(1870).

12 McClellan v. Scott, 24 Wis., 81 (1869),

13 Directors, etc.,.of Central R’y Co. v.
Kisch, L. R., 2 H, L. App. Cas., 99
(1870).

173
DEFENSE OF PAROL AGREEMENT AND FRAUD. [cH. Ix,

8§ 163, 164.]

aroused, it is his duty to investigate at once.' The corporation has
the buden of proof in asserting that the subscriber had notice and
was guilty of laches.’

§ 163. Corporate insolvency as a bar to the subscriber's remedies.
In England the principle has become well established that, after the
statutory proceedings for winding up a corporation by reason of
corporate insolvency have been commenced, a subscriber cannot
rescind his subscription on account of fraud.* He is too late. It
matters not that he did not discover the fraud until after the wind-
ing up has commenced. The rights of corporate creditors prevail,
then, over the equities of the subscriber.* If, however, he com-
menced proceedings to rescind the contract before the winding up
was commenced, he may be released, although the proceedings are
not completed until after-such winding up.’ So, also, where there
are several similar cases, and by agreement with the corporate
solicitors all the cases are to follow a test case, this agreement pre-
vails, although a winding up is commenced before the test case is
fully decided. The highest court in England in one case. goes fur-
ther, and intimates that corporate insolvency is a bar to rescission
of a subscription for fraud, even though a winding up has not been
commenced.’

§ 164. In this country the effect of corporate insolvency upon

1 Ogilvie v. Currie, 37 L. J. (Ch.), 541
(1867); Ashley’s Case, L. R., 9 Eq. Cas.,
263 (1870).

2Re London & S§, F. Ins, Co., L. R.,
24 Ch. Div., 149 (1883).

3 Wright’s Case, L. R., 12 Eq. Cas.,
331; Kent v. Freehold, L. & B. M Co.,
L. R., 3 Ch. App., 493 (1868); Hender-
son v. Royal British B’k, 7 El. & BL,
356 (1857); Powis v. Harding, 1 C. B.
(N. 8.), 533 (1857); Daniell v, Off. Man-
agers of B’k, 1 H. & N., 681 (1857);
Oakes v. Turquand, L. R., 2H. L. App.
Cas. , 325 (1867); Mixer’s Case, 4 De G. &
J., 575; Clarke v. Dickson, 27 L. J.
(Q. B.), 223 (1858). So, also, where
there is'a voluntary winding up by rea-
son of corporate insolvency. Stone v.
City & County B’k, L. R., 3 C. P. Div.,
282 (1877); Collins v. Same, Id. But not
if the proceedings for rescission were
commenced in good faith and in igno-
rance of the winding-up proceedings.

Hall v. Old. T. L. Min. Co., L. R., 3 Ch.
D., 749 (1876).

4Turner v. Grangers’ L. & H. Ins. Co.,
65 Ga., 649 (1880).

Radu River Co. v. Smith, LR, 4
H. L., 64 (1869); affirming S.C,, L. R., 2
Ch., 604; L. R., 2 Eq., S04: ceveieing
8.C., H. L., 36L. J. (Ch.), 885.

6Pawle’s Case, L. R., 4 Ch., 497;
MeMill’s Case, L. R., 10 Eq., 503 (1870),
But mere attendance at the meeting
where such stipulation is made is insuf-
ficient. The subscriber must plainly in-
dicate an intention’ to abide by the test
case. Ashley’s Case, L, R., 9 Hg, Cas.,
263 (1870).

7Tennent v. City of Glasgow B’k, L,
R., 4 App. Cas., 615. See, also, Burgess’
Cas., L. R., 15 Ch. D., 507. But the fact
that the company is unable to meet its
engagements at the time of rescission is
no bar, if the subscriber is ignorant
thereof. Ex parte Carling, 56 L, T.
Rep., 115 (1887).:

174
CH. 1X.] DEFENSE OF PAROL AGREEMENT AND FRAUD.

[§ 165.
the right,of a subscriber to rescind his contract for fraud has not
been so clearly determined. The decided tendency of the de
cisions, however, is that corporate insolvency is a bar to such re-
scission.’ In the bankruptcy courts, under the late bankruptcy
law, such a rule was upheld?

§ 165. Essential allegations in legal proceedings to remedy a fraud
inducing subscription.— The essential allegations, especially in a
suit in equity, necessarily vary according to the peculiar facts of
each case. Yet there are certain elements common to all the cases.
It is necessary to allege that a material misrepresentation of a ques-
tion of fact was made, setting out fully the fact misrepresented;
that the person making the misrepresentation thereby bound the.

corporation; that the subscriber was thereby induced to make the
subscription; and that, upon discovery of the fraud, he immediately
disaffirmed the contract. 8 That the representation was false cannot
be proved by statements made by the directors in stockholders’
meetings.‘ The burden of proving that the representation was
false, and that the subscriber relied thereon, is upon the subscriber.’

1Ruggles v. Brock, 6 Hun, 164 (1875) ; -

Saffold v. Barnes, 89 Miss., 399 (1860).
After the corporation becomes: insolv-
ent a subscriber cannot repudiate for
fraud. Duffield v. Barnum, etc., Works,
31 N. W. Rep., 310 (Mich., 1887). In
Chubb v. Upton, 95 U. S., 665, 667
(1877), the court say it has often been
held that the defense of false and
fraudulent representations will not pre-
vail against a receiver, especially where
there has not been a prompt discovery
of the fraud, followed by arepudiation ;
citing Upton v. Tribilcock, 91 U. S., 45
(1875); Webster v. Upton, id., 65 (1875);
Sanger v. Upton, id., 56 (1875); Ogilvie
v. Knox Ins. Co., 22 Hun, 380 (1859),
Cf. Litchfield Bank v. Beck 29 Conn.,
884 (1860).

2Farrar v. Walker, 13 Nat. Bankr.
‘Reg., 82 (1876); Michener v. Payson,
id., 49 (1876). ,

3Bwlch-y-plwm L. M. Co, v. Baynes,
36 L. J. (Bx.), 183 (1867); Deposit Life
A. Co. v. Ayscough, 6 E. & B., 761
(1856); Upton v. Englehart, 3 Dill., 496

(1874); Hallows v. Fermie, L. R., 8 Ch.
App., 467 (1868); Selma, M. & M. R. R.
Co. v, Anderson, 51 Miss., 829 (1876) —
the last case holding it necessary to al-
lege also that the fact misrepresented
was not a charter matter. Carey v.
Cin. & Chicago R. R. Co., 5 Iowa, 357
(1857), indicates that an allegation that
the certificates are brought into court
for disposal is proper. See, also, Ore-
gon Central R. R. Co. v. Scoggin, 3
Oreg., 161 (1869); Gilfillan v. Mawhin-
ney, 21 N. E. Rep., 299 (Mass., 1889).

4In Re Devala Prov. G. M. Co., L. R.,
22 Ch. Div., 593 (1888). Cf. Phil. W. &
B. R. R. Co. v. Quigley, 21 How., 202
(1858). Contra, Jarrett v. Kennedy, 6
C. B., 319 (1848).

5Jennings v. Broughton, 22 L. J.
(Ch.), 585 (1853). In New York, proof
of other similar cotemporaneous frauds
is admissible. Miller v. Barber, 66 N.
Y., 558 (1876), In Alabama it is not ad-
missible. Montgomery 8. R’y Co. v.
Matthews, 77 Ala., 357 (1884),

175
CHAPTER X.

MISCELLANEOUS DEFENSES TO SUBSCRIPTIONS FOR CAPITAL STOCK.

§ 166. Defenses to subscriptions not | § 188,

favored by the courts.

167-70, Release, withdrawal, cancel-
Jation or rescission. \

171. Compromise.

172-75. Non-payment of percentage
required by statute.

176-81. Full capital stock not sub-
scribed.

182, Capital stock not definitely re-
solved upon.

183-86. Irregular, incorporation.

187. Ultra vires acts.

Fraud and mismanagement of
directors.

189. Delay and abandonment of en-

terprise.

190. Failure of corporate enterprise.

191. Other subscribers released.

192. No certificates of stock issued.

198-94, Set-off and counter-claim, —

195. Statute of limitations,

196. Ignorance or mistake.

197. Miscellaneous defenses.

198, Waiver of defenses,

§ 166. Defenses to subscriptions not favored by the cowrts.— It is
a common saying and “a well-recognized fact that the subscribers to
certain corporate enterprises, especially railroads, rarely realize a
profit from their investment, but, on the contrary, lose the whole
amount of the subscription which they have made. These subscrip-
tions are generally not called in until after corporate insolvency
has occurred. Then the reluctance of the subscriber to pay a sub-
scription from which there is no hope of a return leads him to
search out and build up all possible defenses to defeat any action
for the collection of the amount due from him. Some of these de-
fenses are just, and have been sustained; but most of them have
not been allowed. On the theory that, having taken the chances
of large gains, the subscriber takes also. the risk of total loss, and
that the hardship of the subscriber is not equal to the superior
equities and rights of corporate creditors, the courts have uniformly
discountenanced such defenses, and have rigidly enforced the sub-
scriber’s liability.

§ 167. Release, withdrawal, surrender, cancellation or rescission.
These terms are frequently used as synonymous, although tech-
nically they have different meanings. The term release, especially,
has led to considerable confusion. It has been applied to cases
where the subscriber withdraws his offer to subscribe, the contract
not yet having been closed;! second, to cases where the subscriber
retains his stock, but is not required to pay the full par value
thereof ;? third, to cases where the subscription contract is dissolved

‘1 For this class of cases, see chapter IV. 2 For this class of cases, see §§ 30, 31.
oe 176
ou. x.] MISCELLANEOUS DEFENSES. f§ 168.
by mutual agreement. The last class of cases forms the subject of
this section. The term rescission is more properly applied to the
defense of fraudulent representations.’ Probably the term cancel-
lation describes most accurately the dissolution of a subscription
contract by the mutual consent of ali parties concerned?

§ 168. A subscription contract, like any other contract, may be
waived, canceled or dissolved by the mutual consent of all the
parties interested. The interested parties are the subscriber him-
self, the other stockholders, and the corporate creditors existing at
the time of the cancellation. Frequently the directors of the cor-
poration attempt to usurp this right and power of the genera! stock-
holders. The’ well-established rule, however, is that corporate
directors have no power to agree with a subscriber that his sub-
scription shall be canceled, unless such power is given to them by
charter or statute or the by-laws of the corporation.’ The cancel-

1See chapter IX.
2 For a definition of the words “ sur-
render ” and “cancellation,” see Green’s
Brice’s Ultra Vires (2d ed.), 181, 189. Re
Dronfield Silkstone Coal Co., L. R., 17
Ch. D., 76 (1880); Colville’s Case, 48 L.
J. (Ch.), 688 (1879), . Cancellation cannot
be objected to on the ground that it re-
duces the capital stock. It no more re-
duces the capital stock than a forfeiture
does, Re Dronfield Silkstone Coal Co.,
supra.
3In the case of Bedford R. R. Co. v.
Bowser, 48 Pa. St., 29, where, just before
the expiration of their office, the diréct-
ors fraudulently released part of the
subscribers, the court said: ‘‘It is an
abuse of their trust, wholly unauthor-
ized, and at war with the designs 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.” Tothesame
effect, Rider v. Morrison, 54 Md., 429
(1880); Hughes v. Antietam Mfg. Co.,
34 Md., 816 (1870); Ryder v. Alton etc.,
R. RB. Co., 18 Lil., 516 (1851); Tuckerman
v. Brown, 33 N. Y., 297 (1865); Esparto
Trading Co., L. R., 12 Ch. D., 191 (1879) ;
Hall’s Case, L. R., 5 Ch., 707; Re Lon-
don & Prov. Consol. Coal Co., L. R., 5
Ch. D., 625 (1877); Re Argyle C. & C.
Co., Exe parte Watson,’ Law Times,
(12)

April 17, 1886; Ex parte Fletcher, 37
L. J. (Ch.), 49 (1867); Addison’s Case, L.
R., 5 Ch., 294; Spackman v, Evans, L.
R., 3 H. L,, 171 (1868); Thomas’ Case,
L. R., 138 Eq., 487 (1872), where the di-
rectors had power to ‘‘ enter into, alter,
‘rescind or abandon contracts:” Rich-
mond’s Case, 4 K. & J., 3808 (1858), hold-
ing that power to forfeit does not give
‘power to cancel; Adam’s Case, L. R.,
18 Kq., 474 (1872), holding that power to
compromise gives no power to cancel.
“Tt would be putting into the hands of
directors an almost unlimited power.
. . . It might happen in cases where
‘it would be impossible to fix fraud on.
them.” A cancellation of shares is void,
and the subscriber is liable, though ten
years have elapsed. Hx parte Watson,
54 L. T., 238 (1885). Cf. Plate Glass Ins.
Co, v. Sunley, 8 El. & BL., 47 (1857); Koll-
man’s Carriage Co. v. Beresford, 2 M. &
G., 197 (1850); Lord Belhaven’s Case, 34
L. J. (Ch.), 503; Hx parte Blake, 32 L.
J. (Ch.), 278; Fox’s Case, L. R., 5 Hg,
118 (1868); Dixon’s Case, L. R., 5 Ch.,
79, rev’don another point, L. R., 5 H.
L., 606; Burt v. Farrar, 24 Barb., 518
(1857); Gregory v. Lamb, 16 Neb., 205
(1884); Erskine v. Peck, 88 Mo., 465
(1884). See, also, § 153. The express
power of the directors todo all things
“conducive to the attainment of the

IT
§ 169.]

MISCELLANEOUS DEFENSES.

(om. x.

lation of a subscription differs little from a purchase by the corpo-

ration of shares of its own stock.

The rules of law governing such

a transaction are laid down elsewhere.!

§ 169. A subscriber for stock in a corporation cannot obtain a
cancellation of his subscription except by the unanimous consent
of the other subscribers.? Even a majority of the stockholders can-

objects for which it was established”
does not enable them to agree to a can-
cellation. Re Dronfield Silkstone Coal
Co., L. R., 17 Ch. D., 76 (1880), Cannot
be canceled by a corporate solicitor,
although the work in which the sub-
scription is due can no longer be done.
Wheatcroft’s Case, 29 L. T., 824 (1878).
Sometimes the directors agree in ad-
vance to release or cancel a part or all
of the subscriber’s contract. Such agree-
ments are void, not only as ultra vires,
but as frauds on other subscribers,
Melvin v. Lamar Ins. Co., 80 IIL, 446
(1875); Robinson v. Pittsburgh & Con-
nellsville R. R. Co., 82 Pa. St., 384 (1858);
Minor v. B’k of Alexandria, 1 Pet., 65
(1828); Jewett v. Valley R’y Co., 34 O.
St., 601 (1878); White Mts, R. R. Co. v.
Eastman, 34 N. H., 124 (1856). See,
also, Pickering v. Templeton, 2 Mo. App.,
425; Downie v. White, 12 Wis., 176
(1860); Blodgett v. Morrill, 20 Vt., 509
(1848); Davidson’s Case, 3 De G. & S.,
21; Bridger’s Case, L. R.,.9 Eq., 74;
Litchfield Bank v Church, 29 Conn.,
187 (1860). Where, however, the issue
itself is ultra vires, being fictitious paid
up stock, the directors may agree toa
cancellation. Barnett’s Case, L. R., 18
Eq., 507 (1874), Or an ultra vires stock
dividend. Hollingshead v. Woodward,
85 Hun, 410/(1885). They may cancel it
for mistake in ‘registering the wrong
man, Lx parte Knightley, W. M. (1874),
18, 47, See, also, Hartley’s Case, L,
R., 10 Ch., 157. In England an express
power given by the articles of associa-
tion of the corporation may authorize
cancellation by the directors. Colville’s
Case, 48 L, J. (Ch.), 633: Snell’s Case,
Wright's Case, L. R., 12 Kq., 384, rev’d
in L. R.,7 Ch, 55 (1871); Teasdale’s

Case, L. R., 9 Ch., 54, Healey on Com-’

panies Law & Practice (Eng.) says:
“There is no inherent power in direct-
ors to accept a surrender of shares, nor
is the acceptance of a surrender a
matter lying between the majority and
minority. Every shareholder must ex-
pressly . . or impliedly joinin the
release; though a company may be pre-
cluded by knowledge and acquiescence
from disputing the validity of the sur-
render.” Citing many cases, and dis-
cussing what constitutes notice and
acquiescence.

1See §§ 251, 309, 310, ete., infra.

2 Kidwelly Canal Co. v. Raby, 2 Price,
98 (1816); Lake Ontario, etc., R. R. Co.
v. Mason, 16 N. Y., 451, 463 (1857);
Hughes v. Antietam Mfg. Co., 34 Md.,
816 (1870); Johnson v. Wabash & Mt.
Vernon P. R. Co., 16 Ind., 389 (1861);
United Soc. v. Eagle B’k, 7 Conn., 457
(1829); Bishop’s Fund v. Eagle B’k, id.,
476; Selma & Tenn. R. R. Co. v, Tip-
ton, 5 Ala. (N. S.), 787 (1843); Garrett».
Dillsburg, etc., R. R. Co., 78 Penn. St.,
465 (1875), holding that at any time be-
fore the filing of the articles a sub-
scriber may withdraw. Cook v, Chit-
tenden, 25 Fed. Rep., 544 (1885), allow-
ing a withdrawal where no others have
subscribed in reliance thereon, nor cred-
itors’ debts incurred. Gulf C., etc., Ry
Co. v. Neely, 64 Texas, 844 (1885), hold-
ing that there can be no withdrawal
after an acceptance by the corporation.
Cf. Tilsonburg, etc., Co. v. Goodrich, 8
Ontario (Q. B. Div.), 565 (1885); Ross v
San Antonio, etc., R. R. Co., 81 Tex,
49 (1868). See, also, Goff v. Flesher, 33
O. St., 107 (1877). The plea in defense
need not allege that the other stoct-
holders assented to the cancellation.
Gelpcke v. Blake, 19 Iowa, 263 (1863).
Where, however, by the articles of as-

178

'
CH. x. | MISCELLANEOUS DEFENSES. [§ 169.
not withdraw and refuse to proceed.!
based_upon a sound public policy.

The consent of all the other stockholders, however, need not be
express. If the means of notice are sufficient, so as to raise a clear
presumption of knowledge and acquiescence, and the arrangement
is left unimpeached by any one for many years, no objection can
be made. The stockholders are bound by the cancellation? But
where a subscription has been canceled, and calls already paid are
refunded without the consent of the other stockholders, any stock-
holder may, by a bill in equity, have the money refunded to the
corporation, and the subscriber made liable upon his canceled sub-
scription.’ Moreover, the directors are personally liable to the cor-
poration for loss occasioned by their improper cancellation of
subscriptions.‘ When, however, a subscriber fails to pay his sub-
scription or exercise his rights, it has been held that the corpora-

These rules are just, and

sociation, acts of the directors ratified
at stockholders’ meetings were to be
valid, a cancellation so ratified is legal,

and the unanimous consent is not nec- '

essary. Marshall v. Glamorgan Iron &
Coal Co., L. R., 7 Eq., 129 (1868). Cor-
poration is bound by agreement of
agent that a person taking stock in the
corporation and giving note in payment
may return the stock at any time and
be released from payment. B’k of Ly-
ons v. Demmon, Hill & Denio Supp.
(N. Y.), 398 (1844). In Pennsylvania a
subscriber for stock may withdraw at
any time before the charter is applied
for. Muncy, etc., Co. v. De La Green,
18 Atl. Rep., 747 (Pa., 1888). It is legal
for a corporation, by common consent,
to issue to its stockholders full-paid
stock to the amount of cash actually
paid in on a larger subscription, the
first subscription being canceled; such
arrangement being made before debts
are incurred. Hill v. Silvey, 88. E.
Rep., 808 (Ga., 1889). Where property is
sold to a corporation for stock, and
other, stockholders are dissatisfied, the
bargain may be rescinded. The stock-
holder will then no longer be liable.
Morgan v: Lewis, 17 N. E. Rep., 558
(O., 1888). Cancellation is a question of
fact. If there is no record of it, and
the stockholder continues to act, he is

af ”

bound. Topeka, etc., Co. v. Hale, 17
Pac. Rep., 601 (Kan., 1888). An offer or
agreement to subscribe is revoked by
death where it has not yet been accepted
by the corparation. Wallace v. Town-
send, 43 O. St., 537 (1885); Sedalia, W
& §. R’y Co. v. Wilkinson, 83 Mo.,
235 (1884). The company may ‘be com-
pelled to issue a certificate to one who
acquires his interest by the death of the
original subscriber. State v. Crescent
City, étc., Co., 24 La. Ann., 318 (1872).

1Busey v. Hooper, 385 Md., 15 (1871).

2Evans v. Smallcombe, L. R., 3H. L.,
249 (1868). So, also, where the corpora-
tion retains the benefits of a cancella-
tion, no objection can be made. Miller
v. Second J. B. Ass’n, 50 Pa. St., 32
(1865). Proof of cancellation need not
necessarily be by the corporate records.
May be proved by evidence that the
subscriber was not regarded ‘ by him-
self or by the company as a stock-
holder.” Stuart v. Valley R. R. Co., 32

Gratt., 146 (1879).

3 Melvin v. Lamar Ins. Co., 80 Ill., 446
(1875). .

'4Hodgkinson v. Nat'l Co., 26 Beav.,
473 (1859); B’k of St. Mary’s v. St. John,
25 Ala., 566 (1882). The subscriber, also,
may set up this defense. Southern Ho-
tel Co. v. Newman, 30 Mo.,, 118 (1860).

t

179
$$ 170, 171.]

MISCELLANEOUS DEFENSES. [cH. x.

‘

tion may treat his subscription as abandoned and allow others to
fill it.!

§ 170. A cancellation of a subscription, to the detriment of cor-
porate creditors, may be impeached by the latter and set aside?
Especially is this the rule when the cancellation is made after the
corporation has become insolvent.’ In the United States courts it
is established that the governing officers of a corporation cannot,
by agreement or other transaction with the stockholder, release the
latter from his obligation to pay, to the prejudice of its creditors,
except. by fair and honest dealing, and for a valuable considera-

tion.4

§ 171. Compromise.— A compromise differs from a cancellation
in that the subscriber pays to the corporation a part of the subscrip-

tion price in order to'be released from the balance.
delivered back to the corporation.

The stock is
The corporate authorities —- gen-

erally the directors — have power to compromise any corporate debt;

1 Perkins v. Union B. H. & E. M. Co.,
12 Allen, 273 (1866). Cancellation may
be by the substitution of another person
for the subscriber at the latter’s request.
This occurs where regular transfer is
not yet ‘possible. The signature of the
first subscriber must be erased and that

‘of his substitute inserted. Otherwise
the substitution fails. Ryder v. Alton
& 8. BR. R. Co., 18 Tll., 516 (1851). And
see § 75,

2One who is a corporate creditor be-
fore the cancellation is made may object
to it. Vick v. La Rochelle, 57 Miss., 602
(1880); Appeal of Miller, 1 Penn. Sup.

Ct., 120, in which stock in an insurance .

company was subscribed for in order to
enable the company to undergo an ex-
amination by the commissioner, a divi-
dend being paid on it during their hold-
ing, and the notes given in payment
being published as assets. It was held
that, although after the emergency had
passed the stock was taken back by the
company and the notes canceled, the
subscribers were liable to its creditors,
the transaction being looked upon as a
fraud upon them. Cancellation by with-
drawal is not legal as against corporate
creditors existing at the time of the
withdrawal, even though all the stock-
holders assent thereto. Farnsworth »,

Robbins, 31 N, W. Rep., 349 (Minn,
1887), Where a corporation takes land
in payment for stock, then rescinds, and
eighteen months afterwards becomes
insolvent, rescission is binding. Sander-
son v. Atna, etc., Co., 8 Cent. L. J.,
266 (O., 1879). So, also, if the debt was
incurred after the cancellation. John-
son v. Sullivan, 15 Mo. App., 55; Ers-
kine v. Peck, 18 Mo. App., 280; 21.N. E.
Rep., 514 (Ill, 1889). The plea in de-
fénse, it has been held, need not allege
that there were no corporate creditors
at the time of the cancellations Gelpcke
v, Blake, 19 Iowa, 263 (1863). In England
a different rule prevails. ‘If the com-
pany could not question it, neither can
acreditor ; for he can obtain nothing but
what the company can get from the
shareholders.” Re Dronfield Silkstone
Coal Co., L. R., 17 Ch. D., 76 (1880).

3 Chouteau Ins, Co, v. Floyd, 74 Mo.,
286; Gill v. Balis, 72 Mo., 424, holding,
also, that it is immaterial that enough
subscriptions remain to pay the corpo-
rate debts.

4Burke v. Smith, 16 Wall., 390 (1872);
New Albany v. Burke, 11 Wall, 96
(1870). So, also, in Illinois. See Zirkel
v, Joliet Opera House Co., 79 Ill, 834
(1875),

180
OH. x.] MISCELLANEOUS DEFENSES.

[$§.172, 173.
and if, in the collection of subscriptions, there is reasonable doubt
as to the liability of the subscriber, or if the subscriber is insolv-
ent, the corporation may compromise the liability, and release a
part for the purpose of securing the residue. All that is required
is good faith.’ A receiver, however, cannot compromise a subscrip-
tion; nor can a court of equity give him power so to do, unless all
the stockholders are parties to the equitable suit in connection with
which the receiver is appomted.? A compromise is not binding if
there is no controversy.!

§ 172. Non-payment of a percentage required by statute— The
charter or statute governing a corporation often prescribes that
each subscriber to the capital stock shall, at the time of subscrib-
ing, pay to the corporation a fixed sum or a specified proportion of
the subscription. These statutes vary somewhat in their provisions,
some declaring the subscription to be void unless the percentage is
paid, others merely prescribing that it shall be paid.

In the actual taking of the subscriptions, it frequently happens
that the subscriber has not the ready money requisite, and is al-
lowed to subscribe without paying the same. When an attempt is
made’ to collect such a subscription, the subscriber, if the enter-
prise has resulted disastrously, sets up the defense that he did not
pay the statutory percentage, and that the subscription is void and
not enforceable. A long list of cases, dating from the early litiga-
tion over railroads, has turned upon this defense. In some of the
states the defense has been held insufficient; in others a contrary
rule prevails; and in still others, first one rule and then the other
has been adopted.

§ 173. The decided weight of authority and the most, carefully
considered cases hold that a subscriber for stock ‘cannot escape the
responsibilities of a stockholder by showing that he never paid the
percentage or fixed amount required by the charter or statute to be ©

Grummond, 36 N. W. Rep., 62 (Mich.,
1888).

1Bath’s Case, L. R., 8 Ch. D., 334
(1878); Lord Belhaven’s Case, 3 De G.,

J. &S., 41 (1865).

2Phil. & W.C. R. R. Co, v. Hickman,
28 Pa. St., 318 (1857). Power may be
given by statute. Pearson’s Case, L.
R., 7 Ch., 309, holding that, under the
English statute, the court may allow,
but cannot compel, a receiver to com-
promise. Where a stockholder denies
his liability, and the directors compro-
mise with him by reducing the amount
of his subscription, the compromise is
binding on all parties, Whitaker v.

3 Chandler v. Brown, 77 IL, 833 (1875).

4 Phosphate, etc., Co. v. Green, L. R.,
q C.P., 43 (1871); Spackman v. Evans,
L. BR, 3 H. L,, 171, 188, 231 (1868). In
Dixon v, Evans, L. R., 5 H. L., 606 (1872), .
the subscription was made pon a con-
dition, which remaining unfiled a com-
promise was made permitting the with-
drawal of the subscriber. Held, after
two appeals, that directors had power
to enter into such a compromise, and
the subscriber was not held in the wind-

ing up.

181
8 173.]

paid at the time of subscribing."

MISCELLANEOUS DEFENSES.

[cH. x.

He will not thus be permitted to

take advantage of his own wrong and default to the prejudice of
others. In some instances the percentage was paid in notes? or

lIHinois River R. R. Co. v. Zimmer,
20 IIL, 654 (1858), holding that the com-
missioners may waive payment. The
court say: ‘‘ This indulgence is a most
ungracious defense, which should not
be allowed unless it is strictly required
by some inflexible rule of law.” Hay-
wood & P, P. R. Co. v. Bryan, 6 Jones’
L. (N. C.), 82 (1858), the court saying:
“It would be a strange rule which
would allow him to take advantage of
the other stockholders’ forbearance and
‘his own neglect.” Pittsburgh, W. &
K. BR. R. Co. v. Applegate, 21 W. Va.,
172 (1882). On the theory that the stat-
ute is ‘“‘to insure good faith, and to
avoid shams in enterprises that so vi-
tally affect the public,’ but not to
change the liability of stockholders to
corporations. Minnesota & St. L. R’y
Co v. Bassett, 20 Minn., 5385 (1874),
where the court said of the statute:
‘““While it confers upon plaintiff the
right to insist upon the payment, it does
not make the successful exercise of this
right indispensable to the validity of
thesubscription.” Water Valley Manuf.
Go. v. Seaman, 53 Miss., 655 (1876),
where the requirement was provided
for in the subscription itself. Barring-
ton v. Miss. C. R. R. Co., 32 Miss., 370
_ (1856), where payment was made be-
fore the subscription. See, also, Vicks-
burg, 8. & T. R. R. Co. v. McKean, 12
La. Ann., 688 (1857); Wright v.Shelby
R. R. Co., 16 B. Monr. (Ky.), 4 (1835);
Smith v, Plank-road Co., 80 Ala., 650
(1857); Mitchell v. Rome R. R. Co., 17
Ga., 574 (1855); Henry v. Vermillion &
A. R. R. Co., 17 O., 191 (1848); Chamber-
lain v. Painesville & H. R. R. Co,, 15 O.
St., 225 (1864); Napier v. Poe, 12 Ga.,
170 (1852); Fiser v. Miss, & Tenn..R. R.
Co,, 82 Miss., 359 (1856); Ryder v. Alton
& SR. R. Co., 13 IIL, 516 (1851), where
the subscriber was one of the commis,
sioners; Klein v. Alten & S, R. R. Co.,

18 IlJ., 514 (1851), where payment was
made before the subscription books
were closed; Stuart v. Valley R. R.
Co., 32 Gratt. (Va.), 146 (1879); South-
ern L. Ins. Co. v. Lanier, 5 Fla., 110
(1853); Sehna & Tenn. R. R. Co. wv.
Roundtree, 7 Ala. (N. 8.), 670 (1845);
Spartanburg & A. R. R. Co. v. Ezell, 14
S. C., 281 (1880), where a few subscrib-
ers paid in more than their percentage,
and enough to make up for :those not
paying; Oler v. Baltimore R. R. Co.,
41 Md., 583 (1874), where the percentage
was ‘‘ payable,” the court saying that
this merely made it ‘‘due and collect-
ible,” like a call. To same effect, Ash-
tabula & N. L. R. R. Co. v. Smith, 15
O. St., 828 (1864), Payment by the sub-
scriber’s agent is sufficient. Litchfield
Bank v. Church, 29 Conn., 187 (1860).
The following cases hold that non-pay-
ment of the required’ percentage is a
good defense: Charlotte & 8. C. BR. R.
Co. v. Blakeley, 3 Strobh. Eq., (S. C.),
245 (1848); State Ins, Co. v. Redmond, 1
McCrary, 808 (1880). The requirement
herein was by by-law.. People v. Cham-
bers, 42 Cal., 201 (1871), holding a check
to be insufficient; Farmers’ & M. B’k
v. Nelson, 12 Md., 85 (1857); Taggart uv.
Western Md. R. R. Co., 24 Md., 588
(1866); Wood v. Coosa & C. R. R. Co.,
82 Ga., 278 (1861); the statute pre
scribing that the subscription should be
“ void.”

2Vt. Central R. R. Co. v. Clayes, 21
Vt., 80 (1848). A bond so given is col-
lectible, as it would be if given to carry
out a parol contract for the sale of land
void by statute of frauds. McRea v.
Russell, 12 Ired. (N. C.), 224 (1851), the
court saying that the statute ‘‘was
meant to protect stockhalders from men
of straw. It was, moreover, meant to

,protect men from the consequences-of

making such subscriptions under the
influence of momentary excitement,

182
\ ,

CH. x.] MISCELLANEOUS DEFENSES.

{§ 174.
checks! instead of cash; in others, payment in cash was made at
some period subsequent to the act of subscribing;? in still others,
no payment at all was made on the subscription, and suit was
brought for the whole amount.? In England ’a failure to pay such
a percentage is held not to affect the liability of the subscriber, but
to restrict his right of transferring his stock.

§ 174. In New York there has been doubt and a strong tendency
to change the rule laid down at an early day by the court. The
case of Jenkins v. The Union Turnpike Company, in 1804,> decided
that a failure by the subscriber to pay a required percentage at
the time of subscribing was a good defense to an action on the sub-

scription.
doubted by the courts.
!

which they could not fulfill.” The stat-
ute made the subscription void. In the
case of Home Stock Ins. Co. v. Sher-
wood, 72 Mo., 461 (1880), payment by
note and mortgage was sustained.
Hayne v. Beauchamp, 18 Miss., 515
(1846), holds that the payment by note
amounted to an informal subscription,
the statutory subscription being void..
Pine River B'k v. Hadsdon, 46 N. H.,
114 (1865).

1 People v. Stockton & V. R. R. Co.,
45 Cal., 306 (1873), there being funds in
the bank to meet it.

2Payment of a judgment, in an ac-
tion for one call, estops the subscriber
from setting up this defense. Hall v.
Selma & Tenn. R. R. Co., 6 Ala. (N. 8S.),
TAL (1844).

3 In the case of Piscataqua Ferry Co. v.
Jones, 39 N. H., 491 (1859), the require-
ment‘ was by by-law, not by charter.
The subscription was to be void for
non-payment, The court thought other-
wise. The effect of non-payment is
that “it is due and liable to be called
for at any time — payable on demand,
whenever needed by the corporation.”
Greenville & C. R. R, Co. v. Woodsides,
"5 Rich, L. (8. C.), 145. (1851), where the
subscriber also voted the stock,

4 East Gloucestershire R’y Co.-v. Bar-
tholomew, L. R., 3 Ex., 15 (1867); Pur-
o 3 Case, 16 W. R., 660 (1868); McEwen

:, West, L. W. & W. Co., L. R., 6 Ch.,

This decision has “been distinguished, questioned aud
The latest authority, however, in New

655 (1871) — the statute stating that the
stock should not ‘‘issue” or ‘ vest”
until one-fifth should, be paid. See,
also, Morton’s Case, L. R., 16 Eq., 104
(1878). 4 ;

51 Caines’ Cases in Error, 86, revers-
ing Union Turnpike Co. v. Jenkins, 1
Caines’ Rep., 381.

6 Highland Turnpike Co. v. McKean.
11 Johns., 98 (1814), the court saying:
“Tt is a little difficult to ascertain the
point upon which the court of errors
grounded their decision.” A subscriber,
who is also the commissioner, need not
pay the required percentage to himself.
In Crocker v. Crane, 21 Wend., 211
(1839), payment in checks was held not
to be good, they evidently not having
been given in good faith. The court
say: ‘Receiving an occasional check
might have been a fair substitute.”
Thorp v. Woodhull, 1 Sandf. Ch., 411
(1844), sustains the validity of a bond
and mortgage in payment of asubscrip-
tion in which the percentage had been
paid by a worthless check. Eastern
Plank-road Co, v. Vaughan, 14 N, Y.,
546 (1856), holds it not to be necessary
‘that each subscriber should pay five
per cent. upor his subscription, but
only that five per cent. on the amount
of the stock. subscribed should be act-
ually paid by some one. To the same
effect, Lake Ontario A. & N. Y. R. Re
Co. v. Mason, 16 N. Y., 451 (1857), the

183
t

§ 175.] MISCELLANEOUS DEFENSES. (ou. x.
York, undoubtedly holds that if the subscriber merely signs the
subscription contract, and does not pay the percentage, he may
thereby defeat his liability on such subscription.!

§ 175. In Pennsylvania a similar state of doubt has existed. The
case of Hibernia Turnpike Co. v. Henderson,” in 1822, decided that
a failure by the commissioners taking subscriptions to stock to
require payment of the statutory percentage made the subscription
void and not enforceable. Later decisions do not overthrow the
rigid rule, but distinguish and practically destroy it by holding
that this defense is barred by a subsequent statute curing the de-
fect;* or by a waiver in attending corporate meetings and voting; !
or by transferring the shares;* or that the provision applies only
to subscriptions taken by the commissioners;® or, under the-act of

court saying that the object was “to
insure the organization of real substan-
tial companies in good faith, animated
by an honest purpose, and having some
degree of ability at least to undertake
‘the proposed improvement.” In the
case of Rensselaer & W. P. R. Co. v.
Barton, 16 N. Y., 457, n. (1857), the court,
in speaking of the decision in Jenkins
v. Union T. Co., say: “It may well be
doubted whether the reasoning upon
which it was based is sound, and
whether, were the question to be again
directly presented, this court would
feel bound to follow it.” Black River
& Union R. R, Co. v. Clarke, 25 N. Y.,
208 (1862), holds that ‘‘the subscription
one day, with payment the next, would
satisfy the statute, and so would act-
ual payment at any period after syb-
scription with intent to effectuate and
complete the subscription.” See, also,
Beach v, Hazard, as stated in 80 N. Y.,
118. Ogdensburgh, C.& R. R. R. Co.
v, Wooley, 3 Abb. Ct. of App., 398
(1864), holds that the requisite percent-
age for all may be paid by a few sub-
scribers, and that a promissory note is
good payment, Beach v. Smith, 30
N. Y., 116 (1864), affirming 8. C., 28
Barb., 254, holds that payment in serv-
ices performed under a contract with
the company suffices. Excelsior G. B.
Co. v. Stayner, 25 Hun, 91 (1881),
that payment by check, on which pay-

holds’

ment is, stopped, is insufficient. Syra-
cuse, P. & O. R. R. Co. v. Gere, 4 Hun,
392 (1875), sustains a suit by the cor-
poration to collect such a check. See,
also, Ogdensburgh R. & C. R. R. Co.
v, Frost, 21 Barb., 541 (1856). Certified
check is good, payment. Re Staten I.
R. T. R. R. Co., 87 Hun, 422 (1885); 38
Hun, 381.

1 New York & O. M. R. R. Co, v. Van
Horn, 57 N. Y., 473 (1874), holding also
that a subsequent statute cannot cure
such omission to pay. and thereby ren-
der the subscriber liable. See, also,
Perry v. Hoadley, N. Y. .Daily Reg.,
May 6, 1887.

28S. & R., 219. See, also, Leighty
v. Pres. of S. & W. T. Co., 14'S. & RB,
434,

3Clark v. Monongahela Nav. Co., 10
Watts, 364 (1840).

‘frie & W.P.R. Co. v. Brown, 25
Pa. Sts, 156 (1835), the court saying:
“There is no merit in such a defense.
. The subscriber himself is under
the highest moral obligations faithfully
to perform the promise he has distinctly.
made.” In the case of Cam v. West-
chester R. R. Co., 3 Grant’s Cas., 200
(1855), the court held that failure to pay
the percentage did not render the char-
ter forfeitable.

4 Everhart v. Westchester & Phil. R.
R. Co., 28 Pa. St., 839 (1857),

6 Phil, & W, C. R. R, Co. vu. Hickman,

184

 
CH. x.] MISCELLANEOUS DEFENSES. [§ 176.
1868, that the percentage must be paid on subscriptions after, but
not on those before, incorporation;! or that the requirement does
not apply to a conditional subscription;? or that it is waived by
any acts indicating an intent to be bound as a stockholder.’

§ 176. Failure of the corporation to obtain subscriptions to the
extent of the full capital stock.— It is an implied part of a contract
of subscription that the contract is to be binding and enforce-
able against the subscriber only after the full capital stock of the
corporation has been subscribed. This condition precedent to the
liability of the subscriber need not be expressed in the corporate
charter nor the subscription itself. It arises by implication from
the just and reasonable understanding of a subscriber that he is
to be aided by other subscriptions. This rule is supported also by
public policy, in that corporate creditors have a right to rely upon
a belief that the full capital stock of the corporation has been sub-

scribed.!

28 Pa. St., 318 (1857). Contra, under the
act of 1863. Sec Butcher v. Dillsburg,
& M. kh. BR. Co.. 76 Pa. St.,-806 (1874).

‘Garrett v. Dillsburg & M. RB. R. Co.,
78 Pa. St., 463 (1875).

2Hanover J. & 8. R.’R. Co. v, Halde-
man, 82 Pa. &t., 36 (1876),

3Boyd v. Peach. B. R’y Co., 90 Pa.
St., 169 (1879), holding, however, that

payment cannot be by promissory neler:

gouge a demand note.
41The leading case on this defense is
Salem Mill-dam Corporation v. Ropes,
23 Mass., 23 (1827), and 26 Mass., 187
(1829). In the case of Livesey v. Omaha
Hotel, 5 Neb., 50 (1876), Judge Redfield
in the brief says: ‘‘ This rule has been
held inflexible in all cases, both for the
security of the public and also of the
subscribers;” Shurtz v. Schoolcraft &
T. R. RB. Co., 9 Mich., 269 (1861); New
York, H. & N. R. R. Co. v, Hunt, 39
Conn., 75 (1872); Hale v. Sanborn, 16
Neb., 1 (1884); Haskell v, Worthington,
7S. W. Rep., 481 (Mo., 1888); Halsey,
ete, Co. v. Donovan, 57 Mich., 318
(1885); Peoria & R, I. R. R. Co. v. Pres-
ton, 85 Iowa, 118 (1872), the court say-
-ing that this is the fule, “uniess a
contrary intention appears, expressly or
by implication, either in the charter or
the contract of subscriptions ;” Stone-

If the corporation commences business before the full

ham Branch R. R. Co. v. Gould, 68
Mass., 277 (1854), the court saying:
‘* This is no arbitrary rule; itis founded
on a plain dictate of justice, and the
strict principles regulating the obliga-
tion of contracts;” Bray v. Farwell, 81
N. Y., 600, 608 (1880), where the court
say the directors ‘had no authority to
go on with insufficient means, and thus
wreck the company ;” Selma, M. & M.
R. R. Co. v. Anderson, 51 Miss., 829
(1876); Hughes v. Antietam Mfg. Co.,
34 Md., 218, 832 (1870); Topeka Bridge
Co. v. Cummings, 8 Kan., 55 (1864);
Allman v. Havana R. & E. R. R. Co., 88
IIL, 521 (1878); Temple v. Lemon, 112
I., 514 (1884): Littleton Mfg. Co.
Parker, 14 N. H., 548 (1844); Hendrix v.
Academy of Music, 73 Ga., 487 (1884);
Contoocook Valley R. R. Co. v. Barker,
32 N. H., 363 (1855); Prop. of N. Bridge
v. Story, 6 Pick., 45 (1827); Belfast &
M. L. R. R. Co. v. Cottrell, 66 Me., 185
(1875); Rockland, etc., Co. v. Sewall, 14. |
Atl. Rep., 9389 (Me., 1888); Memphis
‘Branch R. R. Co. v. Sullivan, 57 Ga.,
240; Fox v. Allensville C. S. & V. T.
Co., 46 Ind., 31 (1874); Hain v. North
W..G. BR. Co., 41 Ind., 196 (1872), hold-
ing also that the corporation in suing
must aver that the full capital stock has
been stibscribed; Central Turnpike Co,

185
[on. x.

§ 177.]

MISCELLANEOUS DEFENSKHS.

capital stock is subscribed, the state may bring an action for the
forfeiture of its charter.'. The subscriber, however, is liable for
his proportion of the necessary expenses, preliminary to the incor-
poration and organization of the company.’

$177. The act of incorporation may, of course, vary this rule.
Thus, it is well established that, where the charter authorizes the
organization of the company, and the commencement of corporate
work after a certain amount of the capital stock has been sub-
scribed, such a charter provision is equivalent to an express author.
ity to the corporation to call in the subscriptions as soon as this
organization is effected.’ Subscriptions to the full amount of the
capital stock are held not to be necessary. The defense is not good.

y. Valentine, 10 Pick., 142 (1880), hold-
ing also that the corporation has the
burden of proving subscriptions for the
full capital stock; Warwick R. R. Co.
vw. Cady, 11 R. I., 181 (1877), where the
charter said that the capital stock
should not exceed a specified sum.
Fry’s Ex’rs v. Lexington & B.S. R. RB.
Co., 2 Met. (Ky.), 814 (1859), holding
also that the corporation must aver full
subscription; Lewey’s Island R. R. Co.
v. Bolton, 48 Me., 451 (1860); Lail v.
Mt. Sterling C. B. Co., 18 Bush (Ky.),
34 (1877), holding that the corporation
need not aver full subscriptions. Cf.
Monroe v. Fort W. J. & S. R. R. Co., 28
-. Mich., 272 (1873). Where, also, the cor-
poration is incorporated with a less
capital stock than was proposed when
the defendant subscribed, he is not
bound by the subscription. Santa,Cruz
R. R. Co. v. Schurtz, 53 Cal., 106 (1878).
A few cases seem to hold a contrary
doctrine. New Castle & A. T. Co. v.
Bell, 8 Blackf. (Ind.), 584 (1847); Ore-
gon Central R. R. Co. v Scoggin, 8
Oreg., 161 (1869); xork & C. R. R. Co.
v. Pratt, 40 Me., 447 (1855); Cheraw &
C. RB. R. Co. v. White, 10S. C., 155 (1878).
See, also, Chubb v. Upton, 95 U. S.,
665, 668 (1877), probably a dictum. .In
the late case of Skowhegan & A. R. R.
Co. v. Kinsman, 77 Me., 870 (1885), the
court seem to hold that,, where there is
in the subscription an express promise
to pay, it is enforceable even though
the whole capital stock is not subscribed.

If such a condition is expected, the court
says it must be inserted in the subscrip” :
tion. It has been held that, where a
subscription is made before incorpora-
tion, on a paper not fixing the capital
stock; a failure to secure full subscrip-
tion to the capital stock as fixed in the
charter is no defense, Belton, etc.,
Co. v. Sanders, 68. W. Rep., 184 (Tex.,
1887). Subscribers are not liable until
the whole amount is subscribed. They
may recover back what they have. paid.
Winters v. Armstrong, 87 Fed. Rep.,
508 (1889). See, also, 42 N. W. Rep., 226
(Wis., 1889). By organizing and pro-
ceeding, stockholders waive the defense
that the full capital stock was not sub-
scribed. allemand v. Odd Fellows’, |
etc., B’k, 16 Pac. Rep., 497 (Cal., 1888).

1 People v. Nat. Sav. Bank, 11 N. E.
Rep., 170 (1ll., 1887).

2Salem Mill-dam Corp. v. Ropes, 23
Mass., 23 (1827).

3Schenectady & 8S P. R. Co. v
Thatcher, 11 N. Y., 102 (1854); Rensse-
laer & W, P. R. Co. v. Wetsel, 21 Barb.,
56 (1855); Hamilton & D. P. R. Co. ».
Rice, 7 Barb., 166 (1849); Sedalia, War-
saw, etc., R’y Co. v. Abell, 17 Mo. ‘App.,
645 (1885): Perkins v. Saunders, 56 Miss.,
733 (1879); Hunt v. Kansas & M. B. Co.,
11 Kan., 412 (1873), the court saying that
otherwise there would be no propriety
in allowing the organization before the
full capital was subscribed; Hoagland
v, Cin, & F. W. R. BR. Co., 18 Ind., 452
(1862); Hanover, J. & 8. R, R. Co.

186
cH. x.] [S$ 178, 179.
§ 178. Where the subscription itself specifies how much of the
capital stock must be subscribed before payment may be enforced,
such specifications are legal and effective, and until they are fully
complied with the subscriber is not liable! A subscription of this
kind is a conditional subscription.? A condition that the subscrip-
‘tion shall be payable only when sufficient subscriptions for the
corporate purpose have been secured has been held to require funds
sufficient to put the enterprise in full operation.? On the other
hand, a subscription to pay “when required” renders the sub-
scribers liable before the full capital stock is subscribed.

§ 179. In England statutory provisions have almost entirely dis-
placed the common-law rule. The principle that a subscriber is
not liable until the full capital stock has been subscribed is recog-
nized as having been the original rule at law. A few cases, how-
ever, seem to favor an opposite rule. Yet an eminent English
authority says that, in all the cases in which the subscribers were
held bound, they “had entered into a contract which precluded
them from maintaining that the subscription of the whole of the
originally proposed capital was an express or implied condition to
their becoming shareholders.” The English courts seem to have
no clearly defined rule in this matter, but allow cach case to turn
largely on its own facts; releasing the subscriber if the discrepancy

MISCELLANEOUS DEFENSES,

Haldeman, 82 Pa. St., 36 (1876); Penob-
scot & K. R. R. Co. v. Bartlett, 12 Gray,
244 (1858), holding so, even though no
contracts for building the road were to
be made until a larger subscription was
obtained; Boston, B. & G. ‘R. R. Co. ue
Wellington, 113 Mass., 79 (1878); Minor
v. Mechanics’ B’k, 1 Peters, 46; New
Haven & D. R. R. Co, v. Chapman, 38
Conn., 65 (1871); Illinois River R. R, Co.
v. Zimmer, 20 II, 654 (1858); Lexington
& W.C.R. RB. Co. v. Chandler, 54 Mass.,
811; Willamette F. Co. v. Stannus, 4
Oreg., 261 (1872); Jewett v. Valley R’y
Co., 84 O. St., 601 (1878). A vigorous
case to the contrary is Galveston Hotel
Co. v. Balton, 46 Tex., 633 (1877). The
court says: ‘‘ There were good reasons
for organizing the company to be found
in the increased facility of thereby rais-
-ing the, subscriptions to the amount
fixed for the capital stock and of other
preliminary preparations for the execu-
tion of the work, when the subscription
should reach that amount.” A contrary

rule ‘‘ would render nugatory the most
important provision of the charter,
which is the amount of its capital
stock.” When the capital stock is to
be fixed by the corporation between
two limits, the subscription of the full
amount as fixed is a subscription of the
full capital stock. Kennebec & P. R.
R. Co. v. Jarvis, 34 Me., 360 (1852).

1 Where, by its terms, it is not to be
binding until a certain amount is sub-
scribed, it is enforceable when that
amount is secured, although less than
the full capital stock. Bucksport & B.
R. R. Co. v. Buck, 65 Me., 586 (1876).
See, also, Iowa & Minn. R. R. Co. v.
Perkins, 28 Iowa, 281 (1869).

2See chapter V.

3 People’s Ferry Co. v. Balch, 74 Mass.,
203 (1857), the court holding that funds
for the land, structures and boats must
be in hand before the defendant be-
comes liable.

4Cheraw & C. R. R. Co. v. Garland,
148, C., 63 (1880).

187
. i
§ 180.] MISCELLANEOUS DEFENSES. (on. x.,

in the subscriptions is very large, and holding him liable if it is
small, or if he in any way has aided the company in beginning
basinese

§ 180. Some difficulty has been experienced in determining what
subscriptions shall be counted in ascertaining whether the full cap-
ital stock has been subscribed. Conditional “subscriptions, the con-
dition to which has not yet been performed by the corporation, are
clearly not to be counted among the rest, since such subscriptions

may never become enforceable.’

1Norwich & L. Navigation v. Theo-
bold, 1 Moody & M., 151 (1828), required
full subscription in accordance with a
statute. Fox v. Clifton, 6 Bing., 776
(1830), the earliest common-law English
case on this subject, holds that the sub-
scriber is not liable to corporate, cred-
itors unless the full capital stock has
been subscribed/ Pitchford v. Davis, 5
Mees. & W., 2 (1839), also fully agrees
with the rule that prevails in this
country. Wontner v. Shairp, 4 C. B.,
404 (i847), sustained a recovery back of
amounts paid on a subscription, under
misrepresentations that the whole stock
had been subscribed. Waterford, W.
W.-& B. R’y Co. v. Dalbiac, 4 Eng. L.
& Eq., 452 (1850), refused to allow the
defense, since the charter allowed the
corporation to purchase land before the
full capital stock was subscribed. Watts
v, Salter, 10 C. B., 447 (1856), holds the
same, the subscriber having aided in
the incorporation, and given the direct-
ors power to proceed. Galvanized Iron
Co. v. Westoby, 21 L. J. (Ex.), 802 (1852),
per B. Parke, says that at common law
the subscriber is not liable unless the
full capital stock is subscribed. Contra,
Lyons’ Case, 35 Beav., 646 (1866); John-
ston v. Goslett, 3 C. B., N. 8., 569 (1857),
makes the directors liable to the sub-
scriber for his deposit when they so pro-
ceed. London & C. Ins. Co. v. Redgrave,
4C.B., N. S., 524 (1858), holds the sub-
scriber liable, he having aided in the
incorporation. Ornamental P. W. Co.
v. Browne, 2 Hurl. & C., 63 (1863), holds
the subscriber liable, under the statute
of 19 and 20 Vic., ch. 47, similar to the

This rule, if strictly insisted upon,

American statutes. See, also, McDou-,
gall v. Jersey I. H. Co., 10 Jur,, N.S,
1043 (1864). Peirce v. Jersey W. Co.,
L. R., 5 Ex., 209 (1870), required a cer-
tain amount to be subscribed, the char-
ter itself so prescribing. Elder v. New
Zealand L. I. Co., 80 L. T., N. S., 285

' (1875), the most important case on this

subject, holds that, where the directors

are about to proceed with only one-

fourteenth of the capital stock sub-

scribed, a subscriber may apply to the

court and have his name removed from

the subscribers’ list. The court say that

the case of McDougall v. Jersey I. H.

Co., supra, would have been decided

otherwise had not two-thirds of the

stock in that case been subscribed.

See, also, Howbeach Coal Co, v. Teague,

5 H. &N., 151 '(1860); dictum in Re

Jennings, 1 Irish (Ch.), 654 (1851),

' 2Troy & G. RB. R. Co. v. Newton, 74°
Mass., 596 (1857), the condition being

that the subscriber be allowed to pay

in construction work; Oskaloosa Agri.

Works v, Parkhurst, 54 Iowa, 857 (1880);

Brand v. Lawrenceville, etc., R. R. Co.,

158. E. Rep., 255 (Ga., 1887); New York,

ete., R. R. Co. v. Hunt, 39 Conn., 75

(1872); Cabot & W. 8) B. v. Chapin, 60 .
Mass., 50 (1850), where a subscription
payable in other stock at par, when the
market value was less, was not counted;
Ticonic Co. v. Lang, 63 Me., 480 (1874),
Subscription on condition that interest
shall be paid iscounted. Rutland & B,
R. R. Co. v. Thrall, 35 Vt., 536 (1863).
Cf. Greenville & C. R. R. Co. v, Cole-

man, 5 Rich. (8. C.), 118 (1851). Invalid

subscriptions are not counted. Belfast

188
CH. x.] MISCELLANEOUS DEFENSES.

[§ 180..
would probably occasion great inconvenience to the corporation in
enforcing the subscriptions for stock.

The subscriptions of married women, infants or persons of un-
sound mind are to be excluded from the count.! So, also, the sub-
scriptions of insolvents are excluded, unless at the time of subscribing
they were apparently able to pay the subscription.2 Considerable
difference of opinion exists as to whether subscriptions payable by
their terms in labor or materials or contract work are to be in-
cluded in the count.’ The better rule seems to be that the necessity
of employing this method of carrying out many modern corporate
enterprises requires that such subscriptions should be counted if
the contract is made in good faith and the contractors are reason-

ably responsible men.‘
otherwise.

The weight of authority, however, holds
The records of the corporation are sufficient and com-

petent evidence that the full capital stock has been subscribed.

& M.L. R. R. Co. v. Cottrell, 66 Me.,
185 (1875). . Cf. Swartwout v. Mich.
Air Line R. R. Co., 24 Mich., 389 (1872);
§ 79, supra.

1 Phillips v. Covington & Cin. Bridge
Co., 2 Metc. (Ky.), 219 (1859), holding
that subscriptions of infants, married
women or insolvents are not to be
counted unless already paid in. Fic-
titious paid up stock, and stock convert-
ible into corporate bonds, counted. See,
also, Appeal of Habm,.7 Atl. Rep., 482
(Pa., 1886), excluding subscriptions of
married women. Cf. Litchfield B’k v.
Church, supra. Payment of part with

knowledge that married woman’s sub-,

scription was counted is a waiver. Ap-
peal of Cornell, 6 Atl, Rep., 258 (Pa.,
1886). Ultra vires subscriptions of other
corporations are not counted, Berry v.
Yates, 24 Barb., 199 (1857).

2Lewey’s Island R. R. Co. v. Bolton,
48 Me., 451 (1860); Belfast, etc., R’y Co,
v. Inhab. of Brooks, 60 Me., 568 (1872).
The subsequent failure of some of the
subscribers is immaterial. Salem M. D.
‘Corporation v. Ropes, 26 Mass., 187
(1829).

3Not counted where the contractor
failed to complete the work. New York,
H. & N. BR. R, Co. v. Hunt, 39 Conn., 75
(1872); Troy & G. R. R. Co. v, Newton,
74 Mass, 596 (1857), the court saying:

‘The receipt of the stock by them de-
pended entirely upon a contingency, as
the contractcrs might fail to do the
work, and so no stock be earned;” Old-
town & Lincoln R. R, Co. v. Veazie, 89
Me., 571 (1855), where the contract work
was not completed. In the case of
Ridgefield & N. Y. R. R. Co. v, Brush, -
48 Conn., 86 (1875), such subscriptions
were counted, the contract for payment
in work being parol, and not allowed to
vary the apparently ‘absolute subscrip-
tion.

4Phillips v. Covington & Cin. Bridge
Co., 2 Mete. (Ky.), 219 (1859).

5 Penobscot R. R, Co. v. Dummer, 40
Me., 172 (1855); Same v. White, 41 Me.,
§12(1856). Unless proof be introduced to
destroy their effect, A call is notice that
the full amount has been subscribed.
Harlem Canal Co. v. Seixas, 2 Hall (N.
Y.), 504 (1829); Same v. Spear, 2 Hall,
610; Litchfield B’k v. Church, 29.Conn.,
187 (1860), holding that the certificate of
the commissioners that the full stock
had been subscribed would not be ques-
tioned, even though they had counted
married women’s subscriptions. To
same effect see Lane v, Brainerd, 30
Conn., 565 (1862); Marlborough Branch
R: R. Co, » Arnold, 9 Gray, 159 (1857),
If the corporate records are destroyed or
lost there should be other clear evi-

189
nN

§$ 181, 182.] MISCELLANEOUS DEFENSES. [om. x.

g 181. A subscriber may waive the defense that the full capital
stock of the corporation has not been subscribed. This. waiver
may be either express or implied from the acts or declarations of
the subscriber Many different facts have been passed upon by
the courts, and held either to constitute or not to constitute a
waiver of this defense. Thus, it has been held to amount to a
waiver for the subscriber to act as a director, attend meetings and
contract corporate debts;? or to pay assessments for several years,
with full knowledge of all the facts;* or to write to the directors,
requiring them to call a meeting;* or to participate as a stock-
holder and committee-man for several months;° or to act as presi-
dent of the corporation.6 But a subscriber does not waive this
defense by paying a deposit;’ or by attending a meeting;® or by
participating in preliminary work and paying a statutory poreent-
age required to be paid at the time of subscribing;® or by paying
assessments for surveys.’°

§ 182. Failure to fix definitely the capital stock, where the amount
is left in the discretion of the corporation.— Sometimes corporate
charters, especially in the New England states, are granted with-
out specifying the exact amount of the capital stock, but either
fixing the outside limit or allowing the corporate authorities to fix
it between certain specitied limits. Where the charter leaves the
amount of the capital stock indefinite, it is the duty of the proper
corporate authorities to determine what it shall be; and no sub-
scriber can be held liable on his subscription until such determina-

1

dence. Central Turnpike Co. v. Valen-
tine, 10 Pick., 142 (1830).

iEmmitt v. Springfield J. & P. BR. BR,
Co,, 81 O. St., 23 (1876); Hager wv. Cleve-
land, 36 Md., 476 (1872).

2 Hager v. Cleveland, supra. .

3Morrison v. Dorsey, 48 Md., 461
(1877),

4Tredwen v. Bourne, 6 Mees. & W.,
461 (1840), holding it to be evidence of
waiver.

5Sharpley v. Louth & E. C, R’y Co.,
L. R., 2 Ch. Div., 663 (1876), A stock-
holder who receives and retains a cer-
tificate for increased stock cannot, after
corporate insolvency, set up that the
full increased capital was not subscribed,
Butler v. Aspinwall, 33 Fed, Rep., 217
(1887).

§Corwith v, Culver, 69 TIL, 602 (1878),

7Pitchford v. Davis, 5 Mees, & W., 2

(18389),

8 Wontner v. Shairp, 4 C. B, 404

(1847); New H. Central R. RB. Co, v

Johnson, 30 N. H:, 890 (1855),

SLivesey v. Omaha Hotel, 5 Neb., 50
(1876); Oldtown ‘& L. R, R. Co, v, Vea
zie, 89 Me., 571 (1855), where as an offi-
cer the aubseriber aided in preliminary
work. This case goes further, and holds
that there can be no waiver under any
state of facts.

10 Memphis Branch R. R. Co. v. Sulli-
van, 57 Ga., 240 (1876), Atlantic Cotton
Mills v. Abbott, 63 Mass., 423 (1852),
holds that paying assessmehts and at-
tempting to transfer is not a waiver.
May v. Memphis B. R. R. Co., 48 Ga.,
109 (1878), holds that paying an assess-
ment with notice of this defense is no
waiver of it,

190
CH. x.] MISCELLANEOUS DEFENSES, [$ 183.

tion is made.’ After the capital stock is once fixed, there seems
to be no rule preventing its being varied subsequently, provided
the specified charter limits are observed.? It has been held that
even subscriptions to the amount of the lowest limit allowed by
the charter are insufficient, unless that limit has been designated
by the corporate authorities as the amount of the capital stock.?
After.the capital stock is so determined, the full amount thereof
must be subscribed before any subscriber is liable.t It is not nec-
essary that the amount of the capital stock be fixed by formal dec-
laration of the corporate authorities. It may be done by acts
equivalent thereto. Thus, a resolution to close the books on a given
day,® or limiting the time of subscription and then closing the sub-
scription books,’ or voting that a certain amount of stock i in addi-
tion to existing subscriptions shall be issued,’ are the same as, and
are equivalent to, an express resolution that the capital stock ‘shall
be the amount of subscriptions thus taken.

§ 183. Irregular incorporation of the company.— Under the laws
of most of the states, charters of incorporation are obtained by com-
plying with the provisions of what are called general incorporating
acts. Usually these acts provide that a specified number of persons,
by filing ata public registry a certificate setting out certain facts,
may thereby form a corporation for the purposes named in such cer-
tificate. The various steps to be taken, and the contents of each cer-
tificate, are prescribed by thestatute. It frequently happens, however,
that in the formation of a corporation under the statute some part
of the proceeding, through inadvertence or mistake, is not strictly

complied with. The same thing

1 Worcester & N. R. R, Co. v. Hinds,
62 Mass., 110 (1851); Troy & G. R. R.
Co. vu. Newton, 74 Mass., 596 (1857); Pike
v. Shore Line, 68 Me., 445 (1878); Som-
erset R. R. Co. v. Clarke, 61 Me., 384
(1871). Contra, Warwick R. R. Co. v.
Cady, 11 R. IL, 181 (1875); City Hotel v.
Dickinson, 72 Mass., 586 (1862). In the
case of Kirksey v. Florida & G. P. R.
Co., 7 Fla., 23 (1857), it was held that
the corporate charter need not mention
any capital stock or shares of steck, and
yet subscriptions may be taken and en-
forced. In the case of Ward. v. Gris-
woldville Mfg. Co., 16 Conn., 593 (1844),

.where the charter allowed the capital

stock to vary from ' $5,000 to $50,000, it
was assumed that the subscriptions were
enforceab‘e, although no fixed capital

happens, also, under a special act

stock had been settled upon. In the
case of White Mts. R. R. Co. v. East-
man, 84 N. H., 124 (1856), the charter
allowed assessments when the lower
limit of the capital stock was reached.

2Somerset & K. R, R, Co. v. Cushing,
45 Me., 524 (1858); Troy & G, R, R. Co.
v. Newton, 74 Mass., 596 (1857) — dicta,
however, in both of these cases.

3 Pike v. Shore Line, 68 Me., 445 (1878).

4 Somerset & K. R, R. Co. v. Cushing,
45 Me,, 524 (1858); Kennebec, ete, R.
R. Co. v. Jarvis, 34 Me., 360 (1852).

5Lexington & W. C. R. BR. Co. vu
Chandler, 54 Mass., 811 (1847).

6 Bucksport & B, R. R. Co. v. Buck,
65 Me., 536 (1876). :
_ 7Penobscot & K, R. R. Co. v. Bartlett,
78 Mass.,. 244 (1858).

191
MISCELLANEOUS DEFENSES. [om x,

g8 184, 185.]

incorporating a certain company, and requiring it to perform speck: é

fied things in order to render the incorporation complete. These
defects may render the corporate charter forfeitable at the instance
of the state. Accordingly, the question has arisen whether such
defects in the process of becoming incorporated are a gooil and suffi-
cient defense to an action by the corporation to pollest subscrip-
tions to its stock.

§ 184. When an action is brought to collect a sarin either
direatly or indirectly for the benefit of corporate creditors, it is well
established that the subscribers cannot defeat such action by the
defense that the corporation was not an incorporation, by reason
of its not having fully complied with the terms of the statute. pro-
viding for such an incorporation.' Not only is the subscriber es-
topped, by the act of subscribing, from setting up this defense, but
he is bound also by the rule that the existence of a corporation can-
not be inquired into, except by a direct proceeding in behalf of the
state. It is sufficient that the corporation exists de facto. If there
is no authority of law for such a corporation, the members are liable
as partners.’

§ 185. As between the corporation itself and the subscribers,
there i is more difficulty and doubt in determining the rule. The
great weight of authority lays down the broad rule that “ where
there is a corporation de facto, with no want of legislative power
to its due and legal existence; where it is proceeding in the per-
formance of corporate functions, and the public are dealing with it
on the supposition that it is what it professes to be; and the ques-
tions suggested are only whether there has been exact regularity
and strict compliance with the provisions of the law relating to in-
corporations,— it is plainly a dictate alike of justice and of, public

1 Hickling v. Wilson, 104 IIL, 54 (1882);
Wheelock v. Kost, 77 IlL, 296 (1875);
Casey v. Galli, 94 U. 8, 673; Upton v.
Hansbrough, 8 Biss., 317 (1878), the
court saying: ‘‘I understand the rule
to be well settled that, where, papers
having color of compliance with the
statutes have been filed with the

proper state officers and meet their ap-.

proval, but are in fact so defective as to
be incapable of supporting the corpora-
tion as against the state, they are, as
against a subscriber to its capital, held
sufficient to constitute a corporation de
facto, if supported by proof of user;”
Clark ¥, Thomas, Rec., etc, 84 O. St.,
46 (1874); Voorhees v. Receiver of B’k,

etc.,, 18 O., 464 (1850); Ossipee Co. v.
Canney, 54 N. H., 295 (1874); McCune
Min. Co. v. Adams, 10 Pac. Rep., 468
(Kan., 1886), Thompson v. Reno Sav.
B’k, 7 Pac. Rep., 68 (Nev., 1885), says:
“The certificate is made for the benefit
of the public, not for the corporation or
its stockholders. Those who partici-,
pated in the incorporation of this bank,
and, by a certificate made in pursuance
of the statute, announced the amount
of its capital stock, cannot, as against
the creditors of the corporation, contra-

dict their own certificate.” See, also, -

chapter XIII.
2 See chapter XIII,

192
OH. x.|

‘MISCELLANEOUS DEFENSES.

[8 185,

policy, that, in controversy between the de facto corporation and
those who have entered into contract relations with it, as cor-
porators or otherwise, such questions should not be suffered to
be raised.”! This, doubtless, is the law of the land, although a

1Cooley, J., in Swartwout v. Mich.
Air Line R. R. Co., 24 Mich., 389 (1872).
An important case on this subject is Tar
River Nav. Co. v. Neal, 3 Hawks (N. C.),
520 (1825), where the court say that
‘even where it is shown that such
charter bas been granted upon a condi-
tion precedent, and persons are found
in the quiet possession and exercise of
those corporate rights as against all
but the sovereign, the precedent condi-
tion shall be taken as performed.” In
this case the subscriber had participated
in corporate meetings, Wilmington C.
& R.,R. R. Co. v. Thompson, 7 Jones’
L. (N. C.), 887 (1860); Brookville & G.
T. Co. v. McCarty, 8 Ind., 392 (1856),
holding also that the subscriber cannot
set up that the corporation had for-
feited its charter for misuser and non-
user. Central A. & M. Ass. v. Alabama
G. L. Ins. Co., 70 Ala., 120 (1881), where
the court say: ‘Whoever contracts
with a corporation having a de facto
existence, the reputation of a legal cor-
poration, in the actual exercise of cor-
porate powers and franchises, is es-
topped from denying the legality of the
existence of the corporation, or inquir-
ing into irregularities attending its for-
mation, to defeat the contract, or to
avoid the liability he has voluntarily
and deliberately incurred.” It also
holds that a subsequent statute curing
the defect is constitutional and effect-
ive. Appleton Mut. Fire Ins. Co, v,
Jesser, 87 Mass., 446 (1862), the court
saying that where ‘‘ persons were found
with the consent and under the author-
ity of the designated corporators, and
without objection on the part of the
sovereign power, actually exercising

the corporate powers and claiming and.

using the franchise, they constituted a
corporation de facto; and the lawless-
ness of their organization cannot be

(18)

impeached collaterally in an action to
recover an assessment.” McCarthy v.
Lavasche, 89 Ill, 270 (1878), holding
that the defense is not allowable, even
though the statute creating the corpo-
ration be unconstitutional. See St.
Louis Ass. v, Hennessey, 11 Mo. App.,
555; Slocum v, Prov. S. & G. P. Co., 10
R. 1, 112 (1871); McHose v. Wheeler,
45 Pa. St., 82 (1863); Tarbell v. Page, 24
Il., 48 (1860), where no certificate was
filed; Wallworth v. Brackett, 98 Mass.,
98 (1867); Hanover J. & S. R. R. Co. v.
Haldeman, 82 Pa. St., 36 (1876), hold-
ing that non-user rendering the charter
forféditable is no defense; Rowland vw.
Meader Furniture Co., 88 O. St., 269
(1882), holding that actual judgment of
forfeiture is no defense; Meadow v,
Gray, 30 Me., 547 (1849); Danbury & N.
R. R. Co, v. Wilson, 22 Conn., 435 (1853),
where the subscriber acted as a director;
@entral P. R. Co. v. Clements, 16 Mo.,
359 (1852); Maltby v. Northwestern Va.
R. R. Co., 16 Md., 422 (1860), where the
subscriber had already paid calls; Craw-
ford R. R. Co. v. Lacey, 3 Y. & J., 80
(1829), where incorporation was ob-
tained by a false representation to par-
liament; Rockville & W. T. Co. vu. Van
Ness, 2 Cranch, ©. C,, 449 (1824), where
the subscriber had taken part in an
election; Monroe v. Fort W., J. & 8. BR.
R. Co., 28 Mich., 272 (1873), where only’
three instead of five signed the certifi-
cate; Rice v. Rock I. & A. R. R. Co., 21
Ill., 93 (1859); Hunt v. Kansas & M.
Bridge Co., 11 Kan., 412 (1873), where
the subscriber acted as director; Home
Stock Ins. Co. v. Sherwood, 72'Mo., 460

880); Evansville, etc., Co. v. Evans-
ville, 15 Ind., 395 (1860); Stoops vw.
Greensburgh, etc., Co., 10 Ind. 47
(1857); Kishacoquillas,. etc., Co. v.
McConahy, 16 8S. & R., 140 (182%), and
cases in chap, XX XVIII on this subject,

193
‘ou. x,

§ 186.] MISCELLANEOUS DEFENSES.

carefully-considered case in Missouri held to the contrary, and al-
lowed a subscriber who had not done more than merely subscribe
to set up this defense against the corporation, no creditor’s rights
being involved; and the court declared that all the cases denying
the defané were cases where the subscriber had acquiesced, “either
by the payment of part of the subscription or by becoming a di-
rector, or by attending meetings of stockholders, or by any r other
act indicating an acquiescence in the validity of his subscription.” !

§ 186. There is a different class of cases in which a subscriber

Gill v. Ky. & C. G. & S. Min. Co., 7%
Bush, 635 (1870); Wood v. Coosa & C.
R. R. Co,, 82 Ga., 278 (1861); Hager v,
Bassett, 86 Md., 476 (1872); Hast P.
Hotel Co. v. West, 18 La. Ann., 545
(1858). See, also, Oregon, etc., v. Scog-
gin, 3 Oreg., 161, holding, under a stat-
ute, that the subscription may be sued
on before the organization is completed.
It is no defense that the corporation
was organized on a fourteen-day notice
instead of fifteen days. Ossipee, etc.,
Co. v. Canney, 54 N. H., 295 (1874).
Stockholders, when sued on their stat-
utory liability, cannot impeach the or-
ganization of the company. Aultman
v. Waddle, 19 Pac. Rep., 7380 (Kan.,
1888). The subscriber cannot set up
that the charter was unconstitutional.
Dows v. Napier, 91 Tll., 44 (1878). In
New York the first case is Dutchess
Cotton Manufactory v. Davis, 14 Johns.,
238 (1817); then came Schenectady &
8. P. R. Co., v. Thatcher, 11 N. Y., 102
(1854); Eaton v. Aspinwall, 19 N. Y.,
119 (1859); Methodist E. U. Ch. v. Pick-
ett, 19 N. Y., 482 (1859), the court say-
ing it is sufficient for the corporation to
be de facto. ‘‘Two,things are neces-
sary in order to establish the existence
of a corporation de facto, viz: (1) The
existence of a charter, or some law
under which a corporation with the
powers assumed might lawfully be cre-
ated ; and (2) a user, by the party to the
suit, of the rights claimed to be con-
ferred by such charter or law. The
tule established by law as well as by
reason is, that parties recognizing the
existence of corporations ° by dealing

194,

‘

with them have no right to object to
any irregularity in their organization.”
Black R. & U. RB. R. Co. v, Clarke, 25
N. Y., 208 (1862); Leonardsville B’k v,
Willard, 25 N. Y., 574 (1862); Buffalo &
Allegany R. R. Co. v. Cary, 26 N. Y.,
75 (1852); Aspinwall v. Sacchi, 57 N. Y.,
331 (1874); Dorris v. French, 4 Hun, 292
(1875). Not, however, where, at the
time of signing the articles, the names
of the directors, required to be inserted,
were not inserted. Dutchess & C. C.
R. R. Co. v. Mabbett, 58 N; Y., 397
(1874); Cayuga Lake R. R. Co. v. Kyle,
64 N. Y., 185 (1876); Phoenix Ware-
housing Co. v. ‘Badger, 67 N. Y., 294
(1876); De Witt v. Hastings, 69 N. Y.,
518 (1877), admitting the defense on the
ground that there was no user of a cor-
porate franchise; ‘Ruggles v. Brock, 6
Hun, 164 (1875); Mead v. Keeler, 24
Barb., 20 (1857); Abbott v. Aspinwall,
26 Barb., 202 (1857); Childs v. Smith, 55
Barb., 45 (1869); and see Childs »,
Smith, 46 N. Y.,.34 (1871); McFareon v.
Triton, 4 Denio, 392 (1847). This is also
the rule in the federal courts. Webster
v. Upton, 91 U. S., 65 (1875); Chubb v.
Upton, 95 U. S., 665 (1877). Contra,
Thompson v, Guion, 5 Jones’ Eq. (N. C.),
118 (1859). Cf. Katama Land Co. ».
Holly, 129 Mass., 540 (1880), The lapse
of the charter, by limitation of time
within which work must be com-
menced, is good deferise. McCully v.
Pittsburgh & OC. R. R. Co., 32 Pa. St.,
25 (1858).

1 Kansas City Hotel Co. v. Hunt, 57
Mo., 126 (1874).
OH. x. ] [§ 187.

MISC ELLANEOUS | DEFENSES.

for stock is allowed to make the defense that the corporation has
not been regularly and legally incorporated. Where the subscriber
made his contract of subscription previous to and in anticipation
of the incorporation, and does not, by his subsequent acts, acquiesce
in the mode of incorporation, he may set up that the corporation
cig not been incorporated, and that he is not liable. The rule that
a iperson contracting with a corporation recognizes thereby its
capacity to contract, and cannot afterwards deny it in that’ trans-
action, does not apply to one who subscribes before incorporation.
He may insist upon the organization of a regular and legal corpo-
ration.
§ 187. Ultra vires acts of the directors of the corporation.— A
subscriber for stock in a corporation cannot defeat.an action to col-
lect such subscription by the defense that the directors or the cor-
poration itself have done corporate acts which are beyond the

corporate powers.”
scriber.

1Dorris v. Sweeney, 60 N. Y., 463
(1875); Rikhoff v. Browne, R. 8. S. M.
Co., 68 Ind., 888 (1879); Indianapolis F.
& Min: Co. v. Herkimer, 46 Ind., 142
(1874); Nelson vw. Blakey, 47 Ind., 38
(1874); McIntyre v. McLane D. Ass’n,
40 Ind., 104 (1872); Richmond Factory
Ass, v. Clarke, 61 Me., 351 (1873); Reed
v. Richmond Street R. R. Co.; 50 Ind.,
342 (1875); Taggart v. Western Md.
R. R. Co., 24 Md., 563 (1866), the court
saying: ‘‘The preponderance of au-
thority in favor of a strict compliance
with the provisions of the charter, in
cases of subscriptions prior to the or-
ganization of the company, is such as is
not to be disregarded.” Cf. Buffalo,

ete., v. Hatch, 20 N. Y., 157 (1859), The »

“records, books and minutes” of a cor-
poration are sufficient evidence of its
incorporation. Glenn v. Orr, 2S. E.
Rep., 588 (N. C., 1887). A subscriber
may.deny that a consolidated company
which succeeds his own was legally
incorporated. Mansfield, etc., R. R. v.
Stout, 26 O. St., 241 (1875); Brown v.
Dibble, 32 N. be Rep., 565 (Mich.,
1887),

2 First Municipality of N. O. wv. Or-
leans Theatre Co., 2 Rob, (La.), 209

There are other remedies open to the sub-
He may either enjoin such wltra vires acts, or may have
them set aside if already accomplished.’

This defense is clearly

(1842); Hannibal R. C. & P. P. R. Co..
v. Menifee, 25 Mo., 547 (1857); Vicks-.
burg, 8S. & T. R. R. Co. v. McKean, 12
La. Ann., 688 (1857); Smith v. Talla-
hassee, etc., Plank-road Co., 30 Ala.,
650 (1857); Prop. of City Hotel v. Dick-
inson, 72 Mass., 586 (1856); Courtright
v. Deeds, 37 Iowa, 508 (1878); TIL Grand
T. RB. R. Co. v. Cook, 29 Ill., 237 (1862);
Hammett v. Little Rock & N. R. RB. Co.,
20 Ark., 204 (1859). In the case, how-
ever, of Macedon & B, P. R..Co. v. Lap-
ham, 18 Barb., 315 (1854), an ultra vires
extension of the line was held to be a
good defense. Subscriber cannot set
up that corporation has not complied
with charter. Toledo, etc., R. R, Co. v.
Johnson, 49 Mich., 148 (1882).

3 « The stockholder has his remedy by
injunction not to enjoin the collection
of calls due upon his stock, but to re-
strain the corporation from the partic-
ular violation or abuse of its charter
complained: of.” Miss,, O. & Red R.
R. BR. Co. v. Cross, 20 Ark., 443 (1859).
In Ex parte Booker, 18 Ark., 338 (1857),
an application for an injunction to re-
strain the corporation from enforcing
the payment of a subscription, on the
ground that the corporation had com-

195
MISCELLANEOUS DEFENSES, [oH. x,

§ 188.]

distinguishable from the common defense of amendments to .the
charter, by the fact that the acts here complained of have no sane-
tion from the legislative authorities.’ Thus, it has been held that
a subscriber cannot defeat an action to collect his subscription by
showing that the corporation has, without authority of law, and
in excess of its powers, executed a lease or sale of the road;? or
illegally issued its bonds;* or purchased shares of its own stoak,!
or the stock of another corporation; ° or changed the location or
route of the road. The last instance, especially, has been a fre-
quent defense; but it has been uniformly discountenanced by the
courts where the change in the route was made, not by an amend-
ment to the charter, but by the arbitrary, unauthorized act of the
corporate authorities.

§ 188. Frauds and mismanagement of directors.— This defense
is very similar to the preceding one, and is governed by the same
rules of law. A stockholder cannot defeat an action to collect his
subscription by the defense that the corporate affairs have been
managed, fraudulently or recklessly or negligently.? The stock-

holder’s remedies for such evils are of a different. nature.

For

fraud, he may bring the guilty parties to an accounting;® for mis-

management, his only remedy is the corporate elections.
{ '

mitted ultra vires acts, was refused.
And see, also, §§ 668, etc., infra.

1Caley v. Phil. & C. C. R. R. Co., 80
Pa, St., 863 (1876). For the principles
of law herein relative to amendments
to the charter, see § 502, etc.

2 Hays v. Ottawa, O. & F.R. V.R. R.
Co., 61 Ill, 422 (1871); Ottawa, O. & F.
R. V. R. R. Co. v. Black, 79 HI. 262
(1875); Chicago, B, & Q. R. R, Cov.
McGinnis, 79 Ill, 269 (1875); Ill. Mid.
R’y Co. v. Supervisors, etc., 85 Ill., 318
(1877); South Ga. & Fla. R..R. Co. v.
Ayres, 56 Ga., 230 (1876). See, also,
Tuttle v. Mich. Air Line R. R. Co., 35
Mich., 247; Troy & Rutland R. R. Co. v.
Kerr, 17 Barb., 581 (1854). Or the whole
of a business. Plate Glass Ins. Co. v.
Sunley, 8 El. & BL, 47 (1857).

3Merrill v. Reaver, 50 Iowa, 404
(1879).

4 Re Republic Ins. Co., 3 Biss., 452
(1878).

5Cheltain v. Republic Life Ins, Co.,
86 Tll., 220 (1877).

®Central P. R. Co. v. Clemens, 16

In no

‘Mo., 359 (1852); Miss., O. & Red R. R. R.

Co. v. Cross, 20 Ark., 443 (1859); Rives
v. Montgomery, South P. R. Co., 30
Ala., 92 (1857). Where, however, the
terminus was made two thousand feet
away from the location designated by
charter, this fact was held to constitute
prima facie a good defense. “Chartiers
R. R. Co. v. Hodgens, 77 Pa, St., 187.
See, also, § 82, supra.

7People v. Barnett, 91 ILl., 422 (1879);
Cheltain v. Republic Life Ins. Co., 86
Til., 220 (1877); Merrill v. Reaver, 50
Iowa, 404 (1879). Depreciation of the
stock, by reason of mismanagement, no

defense. People v. Barnett, 91 Ill, 422
(1879).
8 See chapter XXXIX. In thecase of

Hodgkinson v. Nat. Live Stock Ins. Co.,
26 Beav:, 473 (1859), equity restrained
the enforcement of calls already made,
by reason of the fraud of the directors;
but’ it was conceded in this case that
the subscriber was still liable on his
subscription.

196
OH. x.] MISCELLANEOUS DEFENSES. [§ 189.

case has he been allowed to escape liability on his subscription by
reason thereof. Thus, it is no defense that the corporate authorities
fraudulently placed an overvaluation on property purchased by
them for the corporation;! nor that they have made a fraudulent
contract with a construction company.

§ 189. Delay and abandonment of the enterprise.— As a general
rule, it is no defense to an action on a subscription to allege that
the enterprise has been unduly delayed. The defense frequently
is that there has been a non-user of the corporate franchises.‘ It
is, however; a well-established principle that non-user of corporate
franchises can be complained of only by the state or in the name
of the state. A subscriber has been held not to be discharged by
the fact that the corporation was engaged thirteen years in com-
pleting its enterprise —a turnpike.’ Nor does a temporary abandon-
ment of the work release the subscriber.* But when the corporate:
work was not commenced for nine years, and in the meantime the
subscriber had acted on the supposition of an abandonment and
had sold property which the road was expected to benefit, he was
held not liable on the subscription.’ An abandonment of part of
the enterprise, however, is no defense.

‘A subscriber cannot defeat the subscription by the fact that the
corporation has not completed, and has no intention of completing,
the road in its entirety ;° nor by the fact that the road has been

but the court in a

1 Hornaday v. Ind. & Ill. Central R.
R. Co., 9 Ind., 263 (1857); Dorris v.
French, 4 Hun, 292 (1875), where a pat-
ent-right was purchased by the direct-
ors from themselves, for the corpora-
tion, at an exorbitant price.

2 People v. Logan County, 63 II, 374,
387 (1872).

3 Pickering v. Templeton, 2 Mo. App.,
424 (1876); Miller v. Pittsburgh & C. R.
RB. Co., 40 Pa. St., 287 (1861), where
there was a delay of two and one-half
years, the court saying: ‘‘ Until it can

‘be shown how railroads can be built
without money, no such defense as is
here set up can prevail.” First Nat’l
Bank v. Hurford, 29 Iowa, 579 (1870),
where there was a delay in the perform-
ance of a condition subsequent to the
subscription. See, also, Union Hotel
Co. v. Hursee, 79 N. Y., 454 (1880); re-
versing 15 Hun, 371. Boyle’s Case, 54
L. J. (Ch.), 550 (1885), holds that after a
winding-up has commenced there can

be no withdrawal ;

dictum clearly says that an unreason-
able delay in organizing will authorize
a withdrawal by the subscriber. But
where the charter has lapsed by reason
of not complying with its terms, the
stockholder is not liable. Sodus Bay,
etc., R. R. Co. v, Lapham, 48 Hun, 314
(1887).

4Quachita & Red R. R. R. Co. v.
Cross, 20 Ark., 443 (1855); Hammett v.
Little Rock & N. BR. R. Co., 20 Ark.,
204 (1859). ”

5Gibson v. Columbia & N. R., T. &
B. Co., 18 O. St., 396 (1868).

6 McMullen v. Maysville & Lex. R. R.
Co., 15 B. Monr. (Ky.), 218 (1854).

7Fountain Ferry T. R. Co. v. Jewell,
8 B. Monr. (Ky.), 147 (1848). ~

8Dorman v. Jacksonville & A. P, R.
Co., 7 Fla:, 265 (1857).

9 Buffalo & J. R. R. Co. v. Gifford, 87
N, Y., 294 (1882); affirming 22 Hun,
359.

197

\
(oH. x.

§$ 190, 191.] MISCELLANEOUS DEFENSES.

sold under foreclosure.! In Pennsylvania, a failure on the part of
the corporation to make a call for the subscription within six years,
thé statutory time of limitations on the collection of ‘parol debts,
is held to constitute an abandonment of the subscription, and to be
a good defense.” If the corporation is insolvent, and the subserip-
tion is needed to pay corporate creditors, abandonment cannot be
set up.’

$190. Failure of the corporate enterprise.— The entire failure of
the enterprise and the insolvency of the corporation constitute no
defense to an action on calls. This defense would seem on the
face of it to be frivolous, and yet is occasionally set up. Under the
American doctrine a subscription is enforceable most of all when
it is needed to pay corporate creditors. This defense is closely
allied to those that precede, and differs in little from the defense of
abandonment of the enterprise.

§ 191. Subscriptions of other subscribers released or canceled, or
given on special terms.— It is no defense for one subscriber, when,
sued upon his subscription, to allege that the subscriptions of other
subscribers have been canceled, or that secret and more favorable
terms were given to them than to him. If.there has been a legal
cancellation of other subscriptions the defendant cannot complain:
If he has the same right to a cancellation he may obtain it bya |
suit for that purpose.’ Moreover, a secret agreement of the corpo-
ration with certain subscribers to stock, whereby they are to be re-
leased from payment, or to have some other advantage not common

1See note 9, supra.

? Pittsburgh & C. R. M. Co. ,v. Byers,
32 Pa. St., 22 (1858).
stated less broadly in McCully v. Pitts-
burgh, etc., J. R. R. Co., 82 Pa, St., 25
(4858), where the court say, ‘‘if the de-

lay was not satisfactorily accounted for,

subscribers would be at liberty after
that lapse of time to consider the enter-
prise abandoned.” In this case an act-
ual abandonment and return of sub-
scription money to other subscribers
was held to release all the subscribers,
In Delaware, etc., R. R. Co. v. Row-
land, 9 Atl. Rep., 929 (Penn., 1887), it
was submitted to the jury whether the
subscriber had been released by an
abandonment of the enterprise.

§ Phoenix Warehousing Co. v, Badger,
67 N. Y., 294 (1876); Smith v. Gower, 2
Duv. (Ky.), 17 (1865); Hardy v. Merri-

The same rule is.

weather, 14 Ind., 208; and see the de-
fense in § 190,

4 Bish v. Bradford, 17 Ind., 490 (1861);
Morgan County v. Thomas, 76 Ill., 120,
141 (1875); Four-mile V. R. R. Co. »,
Bailey, 18 O. St., 208 (1868). Assess-
ments are collectible though the work
is not completed. Red W. Hotel Co. v.
Friedrich, 26 Minn., 112 (1879). See,
Buffalo, etc., R. R. Co. v. Gifford, supra.

5 Rensselaer & W. P. R. Co. v. Wetsel,
21 Barb., 56 (1855), If, however, the
cancellation is on account of an aban-
donment of the enterprise, any other
subscriber, when sued subsequently on
his subscription, may set up such aban-
donment and cancellation, and thereby
defeat the action. McCully v. Pitts-
burgh & Erie R. R. Co., 82 Pa. St., 25
(1858).

6 County of Crawford v. Pittsburgh &
Erie R. R, Co., 82 Pa. St., 141 (1858).

198
’

-

cH. x.] . [§ 192.

MISCELLANEOUS DEFENSES.
to all the subscribers, is no defense to a subscriber who was not
promised the same advantages! All such secret agreements are
void, and the subscribers receiving them are liable on their sub.
scriptions absolutely, as though no special advantages had been
promised. Being so, a subscriber, though he did not participate
therein, cannot complain. The fact that the corporation has for-
feited the stock of. other subscribers, and has compromised with
still others, is no defense to a subscriber sued for calls? So, also,
the failure of another subscriber to pay the percentage required'by
statute is not a defense.?

§ 192. Failure of the corporation to tender a certificate— It is no
defense to an action on,a subscription to allege that the corpora-
tion has not delivered nor tendered to the defendant the certificate
of stock to which he is entitled The certificate is merely the

1Anderson uv. Newcastle & R. BR. R.
Co., 12 ~Ind., 376 (1859); Jewett v. Val-
ley R’y Co., 34 O. St., 601; Agri. C, Ins.
Co. v. Fitzgerald, 15 Jur., 489 (1850);
Memphis Branch R. R. Co. v. Sullivan,
57 Ga., 240 (1876); Hall v. Selma R. R,
Co,, 6 Ala., 74; Conn., etc., R. R. Co. v.
Bailey, 24 Vt., 465; Jewell v. Rock R,
P, Co., 101 Il., 57 (4881). In the case
of Galena Iron Co. v. Ennor, 116 Ill, 55
(1886); the court said: ‘Such secret
agreement was fraudulent as to the
other subscribers, and was void and of
no avail, and the subscription is to be
regarded as a valid one for the amount
subscribed.” See, also, Thompson »v.
Reno Sav. B’k, 19 Nev., 103, 171, 242,
291, 293 (1885), The subscriber has the
burden of proof that other subscriptions
are colorable and fictitious. Hayden v.
Atlanta Cotton Factory, 61 Ga., 233

. (1878). ‘The case of Rutz v. Ester & R.

Mfg. Co., 83 Bradw. (Ill.), 83 (1878), is
contrary to the general rule. The case

_ of New York Exchange Co. v. De Wolf,

31 N. Y., 270 (1865), reversing 5 Bosw.,

593, holds that a subscriber may defeat

an action on his subscription by showing
that other subscriptions were unau-
thorized, and not enforceable. See, also,

Berry v. Yates, 24 Barb., 199; Nicker-

son v. English, 142 Mass., 267 (1886).
2Dorman v, Jacksonville & A. P. R.
Co., 7 Fla., 265 (1857).

’Swartwout v. Mich. Air Line R. R.
Co., 24 Mich., 389 (1872).

4Burr v. Wilcox, 22 N. Y., 551 (1860),
aff’g 6 Bos., 198; Chandler v. Northern
Cross R. R. Co., 18 Ill., 190 (1858); Mil-
ler v. Wild Cat G. R. Co., 52 Ind., 51
(1875); New Albany & S. R. R. Co. v.
McCormick, 10 Ind., 499 (1858); Slipher
v. Earhart, 83 Ind., 1'78 (1882); Paducah,
etc., Bk v. Parks, 8 S. W. Rep., 842
(Tenn., 1888); Heaston v. Cincinnati &
Ft. W. R. R. Co., 16 Ind., 275 (1861);
Kennebec, etc., R. R. Co. v. Jarvis, 34°
Me., 360; Chaffin v. Cummings, 37 Me.,
76 (1853). In behalf of corporate cred-
itots, where the corporation is insolv-
ent, a person is often held to be a stock-
holder although no certificate has been
issued to him, and the ordinary indicia
of stockholdership do not indicate that
he isa stockholder. Sanger v. Upton,
91 U. S., 56 (1875); Upton v. Tribilcock,
91 U. S., 45 (1875); Slee v. Bloom, 19
Johns., 456 (1822); Dorris v. French, 4
Hun,' 292 (1875); ‘Hamilton, etc., R. R.
Co. v, Rice, 7 Barb., 157-167 (1849);
Clark v. Farrington, 11 Wis., 306, 327
(1860); Haynes v. Brown, 36 N.. H.,
545-563 (1858); Chesley v. Cummings,
37 Me., 76-83 (1853); Griswold v. Selig-
man, 72 Mo., 110; Boggs v. Olcott, 40
Ill., 308 (1866); Re South Mountain, etc.,
7 Sawy., 20 (1881); Upton v. Burnham,
3 Biss., 481 (1878); Johnson v. Albany,

199
§ 193] «

MISCELLANEOUS DEFENSES.

[ou. x.

stockholder’s evidence of title to his stock. It is not the stock it--

self, but only a convenient representative of it.

He would bea full

stockholder, with all the rights of one, even if the certificate were
never issued at all.1 Consequently, since it is for him to demand
the certificate when he wishes it, and not for the corporation to
tender it, it is no defense for him to allege that he has never re-'
ceived the paper representative of his stock. The corporation must,
however, be in a position to issue such certificate.’ If certificates
for the whole capital stock have already been issued, the defendant
subscriber, by this fact, may defeat the action to collect his sub-
scription. It has also been held that the plaintiff corporation
must aver a readiness and willingness to deliver the certificate of

stock.!

§ 193. Set-off and counter-claim.— It seems to be well established
that, when a corporation has become insolvent, and the subscrip-
tions for stock are being enforced for the benefit of corporate cred-
itors, a subscriber cannot, in the suit brought to collect his subscrip-
tion, set up a counter-claim or set-off. This rule is founded in equity -

etc., R. R. Co., 40 How. Pr., 193; Payne
v. Elliot, 54 Cal., 339 (1880). The sub-

scriber may stipulate otherwise in his.

subscription, Summers v. Sleath, 48
Ind., 598 (1874); Schaeffer v. Mo. Home
Ins. Co., 46 Mo., 248 (1870); South Ga.
& Fla, R. R. Co. v. Ayers, 56 Ga., 234
(1876); Vawter uv. Ohio & Miss. R. R.
Co., 14 Ind., 174 (1860); Spear v.-Craw-
ford, 14 Wend., 20 (1835); Chester Glass
Co. v. Dewey, 16 Mass., 94 (1819); Ful-
gam v. Macon & B. R. R. Co., 44 Ga.,
597 (1872); Minnesota Harvester Works
@ Libby, 24 Minn., 327 (1877); Blyth’s
Case, L. R., 4 Ch. Div., 140 (1876); Ag-
ricultural B’k v. Burr, 24 Me., 256
(1844); Hawley v. Upton, 102 U. S., 314
(1880); Wheeler v. Millar, 90 N. Y., 353
(1882), aff’g 24 Hun, 541; Wemple v.
St. Louis, etc., R. R. Co., 11 N. E. Rep.,
906 “(IIl., 1887). The case of Clark v.
Continental Imp. Co., 57 Ind., 135
(1877), holds that, where the action is for
the whole subscription or the last in-
stalments, a tender of the certificate, on
condition of payment, is necessary. St.
Paul, etc, R. R. Co. v. Robbins, 28
Minn., 440 (1877), holds that a tender is
necessary where the issue is of preferred

stock, after the whole original capital
stock has been issued. Where a sub-
scriber, has tendered his subscription
and demanded a certificate and is re-
fused, a receiver cannot, upon insolv-
ency of the company, hold him Tiable.
Potts vs Wallace, 32 Fed. Rep., 272
(1887).

1Fulgam v. Macon & Brunswick R.
R. Co., 44 Ga., 597 (1872),

2McCord v. Ohio & Miss. R. R. Co.,
18 Ind., 220 (1859). The subscriber may
compel the corporation to issue a cer-
tificate to him. , Buffalo, etc., R. R. v.
Dudley, 14 N. Y., 386, 847 (1856);
Mitchell v. Beckman, 64 Cal., 117 (1888).

3Burrows v. Smith, 10. N. Y., 650:
(1858).

4James v. Cincinnati, H. & D.R. R.
Co., 2 Disney, 261 (1858).

5 Sawyer v. Hoag, 17 Wall., 610 (1878);
Shickle v. Watts, 7S, W. Rep., 274 (Mo.,
1888); Government S. Ins, Co. v. Demp-
sey, 50 L. J. (Q. B.), 199 (1881). The
leading case in England on this subject
is Grissell’s Case, L. R., 1 Ch., 528 (1866),.
where the court say, “‘if a set-off were
attained against a all, it would have
the effect of withdrawing altogether ,

200
cu. x.] MISCELLANEOUS DEFENSES. [§ 194.
and wise public policy. The stockholder is not deprived of his
remedy for the debt due him from the corporation; but he is obliged
to proceed in the same manner, and is allowed to participate in the
final corporate assets to the same extent and at the same time, as
other creditors.!

Where, however, payment of a subscription is demanded or en-
forced for the benefit of the corporation itself, and not for corporate
creditors, it is competent for the subscriber to set up, in defense of
the action, a set-off or counter-claim.

‘8 194. In New York it has recently been established that, where
a corporate creditor brings an action at law to enforce an unpaid
subscription, the subscriber may set up, in defense to the action, a
set-off or counter-claim, consisting of.a debt due from the corpora-
tion to him, but that such a defense is not allowable in a suit in
equity.? The distinction is based on the fact that a general ac-
counting of all corporate debts and assets is possible by the latter

remedy, but is impossible in the action at law.!

from the creditor’s part of the funds
applicable to the payment of debts.”
See, also, Black’s Case, L. R.,8 Ch., 254
(1872); Mudford’s Case, L. R., 14 Ch. D.,
634 (1880), spoken. of in Government 8S.
I. Co. v. Dempsey, supra, as holding
that no counter-claim is to be allowed;
Gill’s Case, L. R., 12 Ch. Div., 755
(1879); Calisher’s Case, L. R., 5 Eq., 214
(1868); Barnett’s Case, L. R., 19 Eq.,
449 (1875); Re Whitehouse & Co., L. R.,
9 Ch. Div., 595, (1878), disapproving
Brighton Arcade Co. v. Dowling, L. R.,
8 C. P., 175. See, also, Matthews v.
Albert, 24 Md., 527 (1866). Garnett &
M. G. Min. Co. v: Sutton, 3 B. & §., 321,
allowing set-off, was based on a statute
repealed by Companies Act, 1862. See
Hiller v. Allegheny Mutual Ins. Co., 3
Pa, St., 470 (1846); Long v. Penn. Ins,
Co., 6 Pa. St., 421 (1847). Cf. Scammon
v. Kimball, 92 U. S., 362 (1875); Osgood
v. Ogden, 4 Keyes, 40 (1868); Lawrence
v, Nelson, 21 N. Y., 158 (1860). In
Scovill v. Thayer, 105 U. S., 143, 152
(1881), the court say: “It is a general
rule that a holder of claims against an
insolvent corporation cannot set them
off against his liability for an assess-
ment on his stock in the corporation
in a suit by an assignee in bankruptcy.”

To same effect, Thebus v. Smiley, 110
Ill., 316 (1884); Williams v. Traphagen,
38 N. J. Eq., 57 (884). Payment of
subscriptions in advance of calls, by
turning in a debt thereon, is not pay-
ment, upon corporate insolvency and
winding-up. Ex parte Kent, 58 L. T.
Rep., 372 (1888); 59 id., 449 (1888). Cf.
Healey on Law & Pr. of Companies,
117, 729, 560, 599. Creditors who are
stockholders cannot claim any part of
the assets until their unpaid subscrip-
tion is paid, but may claim their part
before it is certain that any of the stat-
utory liability will be required. Ap-
peal of Sahlendecker, 14 Atl. Rep., 229
(Pa,, 1888).

1Grissell’s Case, supra. Cf. Lang v.
Penn. Ins. Co., supra.

2 Barnett’s Case, supra.

3 Richards v. Kinsley, N. Y. Daily)
Reg., Dec. 27,° 1887 (Com. PI, Gen.,
Term), where the rule is clearly laid
down; also, Christensen v. Colby, 43
Hun, 862 (1887). In both of these cases
the rule is based on analogous decisions
in regard to the stockholder’s statutory
liabilities. See § 227, infra. ;

4Tallmadge v, Fishkill Iron Co., 4
Barb., 382 (1848). Inthe case of Wheeler
v, Millar, 90 N. Y., 858 (1882), the stock-

201
§ 195.] MISCELLANEOUS DEFENSES. [cH. x.

8 195. Statute of limitations.— After a call has been made, and
the subscription or a part of the subscription is thereby rendered
dre and payable, the statute of limitations beginstorun. Difficulty,
however, arises in determining whether the statute begins to run
before the call is made. In Pennsylvania there formerly was an
inclination to hold that the call must be made before six years
have elapsed after the call is possible; otherwise the right to col-
lection is barred.'! But the better rule, and the one supported by-
the weight of authority, is that the statute of limitations begins to
run on a subscription for stock only after a call has been made.and
is due It has been held that where the statute is a bar against
the corporation, it is a bar against corporate creditors.’ Butamore.

holder’s subscription and statutory lia-
bility combined were sufficient to pay
his own and the other debts involved in
the case.

See Sacketts Harbor R. R. Co. v.
Blake, 8 Rich. Eq., 225 (1851) ; Grose v.
Hilt, 86 Me., 22 (1853); Whitman v. Por-
ter, 107 Mass., 522 (1871), a joint-stock
company case; Poole’s Case, L. R., 9
Ch. Div., 822. Cf. Eastman v. Crosby,
90 Mass., 206 (1864).

\McCully v. Pittsburgh & C. R. R.
Co., 32 Pa. St., 25 (1858); Pittsburgh &
C. R. R. Co. v. Byers, 32 id., 22 (1858);
Same v, Graham, 36 id., 77 (1859);
Shackamason B’k v. Disston, 2 R’y and
Corp. L. J., 62 (Pa., 1887. Cf. Pitts-
burgh & C. R. R. Co. v. Plummer, 37
Pa. St., 413 (1860). A contrary rule
seems to have been followed in Appeal
of Mack, 7 Atl. Rep., 481 (1886). And
it is now held in Pennsylvania that the
statute of limitations runs against an
unpaid subscription from the date of
the assignment by the corporation for
the benefit of creditors, and not from
the time of a call. Franklin Sav. B’k
v, Bridges, 8 Atl. Rep., 611 (Pa., 1887).
Cf. Allibone v. Hagar, 46 Pa, St., 48,
where a plea of the statute of limita-

tions in a suit for unpaid subscriptions”

was not allowed, because by statute the
liability of stockholders continued until
the whole capital was paid in.
2Taggart v. Western Md. R. R. Co.,
24 Md., 563 (1866); Western R. R. Co,
vw, Avery, 64 .N. C., 489 (1870); Glenn v,

Williams, 60 Md., 93 (1882); Baltimore,
etc., Turnpike Co. v. Barnes, 6 H. & J.
(Md.), 57 (1823); Salisbury v. Black’s
Adm’r, id., 298; Curry v. Woodward,
53 Ala., 376 (1875); Glenn v. Soule, 22
Fed. Rep., 417 (1884); Glenn v. Foote,
36 id., 824 (1888); Great Western Tel.
Co. v. Gray, 14 N. E. Rep., 214 (IIL,
1887). Cf. § 227, infra; Gienn v. How-
ard, 8 S. E. Rep., 636 (Ga., 1889). “Ifa
subscription is conditional, the statute
of limitations runs only from the time
of performance. Appeal of Cornell, 6
Atl. Rep., 258 (Pa,, 1886). In New
York, since | no call is necessary, but
subscriptions are due at once without
it, the statute of limitations begins. to
run from the time of subscription, even
against corporate.creditors. “Williams
v. Meyer, 41 Hun, 545 (1886). Merely
authorizing a receiver to collect sub-
scriptions held not a call sufficient to
set the statute of limitations running.
Glenn v. Macon, 82 Fed. Rep., 7 (1887).
The statute of limitations begins to run
on unpaid subscriptions from the disso-
lution of the corporation. Garesche vu
Lewis, 6 8S. W. Rep., 54 (Mo., 1887).
Statute of limitations runs against un-
paid subscriptions only from the time
of a call by the court, not from the
time of an assignment to a trustee.
Vanderwerken v. Glenn, 6 S. E. Rep.,
806 (Va., 1888); Lewis, Adm’r, v. Glenn,
65S. E. Rep., 866 (Va., 1888). 131 U.S,319.

3 Stelphen v, Ware, 45 Cal., 110 (1872);
Davidson v. Rankin, 84 Cal., 503 (1868),

202
cH. x.| MISCELLANEOUS DEFENSES,

[§ 196.
just rule prevails in New York, to the effect that, inasmuch as the
corporate creditor’s right to enforce the unpaid subscription, ac-
crues only after judgment against the corporation is obtained, the
statute of limitations runs only from the date of such judgment.
Courts of equity will generally apply the same period of limita-
tion, unless there be special and equitable reasons for doing other-
wise.2, Where a subscriber defeats even a part of the action on his
subscription by setting up the statute of limitations, he cannot
claim the stock, at least unless he pays the part which was barred

by the statute.*

§ 196. Ignorance or mistake.—It is no defense to an action for
a subscription that the subscriber at the time of subscribing was

in probate matters; Thompson v. Reno
Sav. B’k, 19 Nev., 103, 171, 242, 291, 293
(1885); South Car. Manuf. Co. v. B’k of
8. C., 6 Rich. Eq. (S. C.), 227 (1854): First
Nat. B’k v. Greene, 17 N. W. Rep., 86
(Iowa, 1883); affirmed on rehearing, 20
id., '754 (1884). The statute applicable
to written contracts applies, although
the subscription is partly in writing.
Falmouth, etc., Co. v. Shawhan, 5
Northeast. Rep., 408 (Ind., 1886). It is
well to suggest here that the creditor,
before enforcing this liability, must first
obtain judgment against the corpora-
tion (see § 200, infra), The corporation
can defeat the action against it by set-
ting up the statute of limitations, if suffi-
cient time has elapsed. If the corpora-
tion fails to set up that defense, the
stockholder may set it up in behalf of
the corporation when he issued. Such,
at least, is the rule in some jurisdictions.
(See § 209, infra.)

1 Christensen v. Quintard, 36 Hun, 334
(1885); Christensen v. Colby, 43 Hun,
362 (1887). See, also, § 225, infra, notes.

2B’k of U.S. v. Dallam, 4 Dana (Ky.),
574 (1886). In the cases, however, of
Payne v. Ballard, 23 Miss., 88 (1851), and
Hightower v. Thornton, 8 Ga., 486 (1850),
it was held that the statute of limita-
tions has no application by analogy to
the equitable actions to collect subscrip-
tions. In Terry v. B’k of Cape Fear, 20
Fed. Rep., 7771884), the court said, ina
similar case: ‘In adjusting equitable

rights, courts of equity will never allow
the statute of limitations to have a mani-
festly inequitable and unjust operation.”
In Scovill v. Thayer, 105 U. S., 148, 155
(1881), a case in equity; the court say:
‘Before there is any obligation upon the
stockholder to pay without an assess-
ment and call by the company, there
must be some order of a court of com-
petent jurisdiction, or, at the very least,
some authorized demand upon him for
payment. And it is clear the'statute of
limitations does not begin to run in his
favor until such order or demand,” cit- .
ing cases. A decree of a court of equity
that the subscription be paid is equiva-
lent to a call, and the statute com-
mences to run. Glenn v. Saxton, 68
Cal., 353 (1886). An assignment by the
corporation for the benefit of creditors
starts the statute within. a reasonable
time thereafter. Glenn v. Dorsheimer,
24 Fed. Rep., 536 (1885); Glenn v. Priest,
28 Fed. Rep., 907 (1886). For an explana-
tion of the origin of the Glenn cases, see
Baltimore, etc.,.R. R. Co. v. Glenn, 28:
Md., 287 (1867).

8 Johnson v. Albany & Susquehanna
R. R. Co., 54 N. Y., 416, 426 (1878),
where the court say: ‘‘ The claim of the
plaintiff is not.supported by any princi-
ple that should give it any consideration
in either a court of law or equity. The
statuté of limitations never paid a debt,
although it barred a remedy.”

203
&§ 197, 198.] MISCELLANEOUS DEFENSES. [cH x.
ignorant of the actual condition of the corporation.’ Nor is it a
defense that he was ignorant of the legal effect of the subscription
contract which he signed.? |

§ 197. Miscellaneous defenses.— A subscriber. cannot defeat an
action for the collection of his subscription by alleging that the
charter was obtained in bad faith;® or that, where a corporate
creditor is enforcing payment, such creditor is also a director of
the corporation;* or that other subscribers have paid their sub-
scriptions in Confederate money ;° or that he has paid the subscrip-
tion by note instead of by cash, as required by the charter;® or
that the promoters sold to the corporation a patent-right at an
overvaluation ;7 or that the officers were illegally elected ;* or that
an illegal by-law prevents his voting until calls are paid; ;2 or that,
by the charter, the whole capital stock should have been paid in
before the commencement of business, which was not done;” or
that the corporation has been ousted from its franchises."! A mate-
rial alteration, however, in a subscription contract is a good de-
fense, unless the corporation proves it to have been made without
its knowledge or procurement.” The defense that the corporate
charter has ‘been amended by the legislature without the consent
of the defendant subscriber is considered elsewhere; as also the
right of an assignee of the corporation to collect subscriptions;"
and the defense that the stockholder did not know the legal effect
of his subscription.”

§ 198. Waiver of defenses.— A subscriber to stock in a corpora-
‘tion may waive any defense he may have to the subscription. The
waiver may be express, or it may arise by implication from the
acts and declarations of the subscriber. Thus a payment of a call,

*

1Payson v, Withers, 5 Biss., 269 23 (1826). See, also; § 110, supra. No

(1878).

2New Albany & S. R. R. Co. v. Fields,
10 Ind., 187 (1858); Clear v. Newcastle &
D. R. BR. Co., 9 Ind., 488 (1857). See,
also, cases in § 146.

3Peychaud v. Love, 24 La. Ann., 404
(1872); Garrett v. Dillsburg & M. R. RB.
Co., 78 Pa. St., 465 (1875); Smith v.
Heindecker, 39 Mo., 157 (1866).

4Chouteau Ins. Co. v. Floyd, 74 Mo.,
286 (1881).

5 Mason & Augusta R. R. Co. v. Vason,
57 Ga., 314 (1876).

8 Little v. O’Brien, 9 Mass., 423 (1812).

TDorris v, French, 4 Hun, 292 (1875).
See, also, § 56 and notes.

‘8 Trustees of Vernon v. Hills, 6 Cowen,

defense that the directors were not
stockholders, as required by statute.
Ross v. Bank, etc., 19 Pac. Rep., 248
(Nev., 1888).

®Chandler v. Northern Cross R. RB.
Co., 18 TIL, 190 (1856. ,

10McDermott v. Dongan, 44 Mo., 85
(1869).

ll Gaff v. Flesher, 38 O. St., 107; Row-
land v. Meader Furniture Co., 38 O. St.,
269 (1882).

12Bery v. Marietta, etc., R..R. Co., 26
O. St., 673 (1875). Cf Ellison v, Mobile
&O.R. RB Co., 36 Miss., 572 (1858).

13 See chapter XXVIII

1 See $$ 111, 670.

15 See § 146, infra.

204
CH. x.} MISCELLANEOUS DEFENSES. [§ 198.

with full knowledge of the defense, is held to be a waiver;! and
any act indicating a clear intent to abide by or accept or pass over

an objection which the subscriber might make will be held to be a
waiver.’

1 Miss. & Tenn. R. R. Co. v. Harris, 2See May v. Memphis Branch R. R
36 Miss., 17 (1858); Inter. Mountain P. Co., 48 Ga., 109 (1873); Middlesex Turn-
Co. v. Jack, 6 Pac. Rep., 20 (Montana, pike Co. v. Seman, 10 Mass., 385 (1818);
1885); Hamilton v, Grangers’ Life & H. McCully v. Pittsburgh & C. R. R. Co., 32
Ins, Co., 67 Ga., 145 (1881). Pa. St., 25 (1858). See, also, §§ 160, 161,

and chapter XLIV.

205
CHAPTER XI.

STOCKHOLDERS’ LIABILITY TO CORPORATE CREDITORS UPON

THE
UNPAID SUBSCRIPTIONS.
§ 199. Unpaid subscriptions a_ trust /§ 208. Receivers and assigneesin bank-
fund for the benefit of cred- ruptcy or for the benefit of
, itors. creditors — Their duties, pow-
200. Can be reached only after judg- ers and liabilities as to shares
ment against the corporation, not paid up. ;
and execution returned unsat-| 209. The judgment against the cor-
isfied. poration impeachable only for
201. The remedy by garnishment or fraud or want of jurisdiction.
attachment. 210. Defenses available against cor-
202. The remedy by mandamus, - porate, creditors in actions to
208. The remedy by action at law. compel payment of balances
204. The remedy by bill in equity. of subscriptions,
205-206. Parties to the bill in equity.| 211. Contribution,’

207. A court of equity may make a
call.

§ 199. Unpaid subscriptions a trust fund for the benefit of ored-
itors.— The capital or capital stock of a corporation is the aggre-
gate of the par value of all the shares into which the capital is
divided upon the incorporation; it is the fund or resource with
which the corporation is enabled to act and transact its business,
and upon the faith of which persons give credit to the corporation
and become corporate creditors. The public, in dealing with a cor-
poration, has the right to assume that its actual capital, in money
or money’s worth, is equal to the capital stock which it purports to
have, unless it has been impaired by business losses. The public
has a right also to assume that the capital stock has been or will
be fully paid up, if it be necessary, in order to meet corporate lia-
bilities. Accordingly, the American courts go very far to protect
corporate creditors; and in this country it is a well-settled doctrine
that capital stock, and especially unpaid subscriptions tothe capital
stock, constitute a trust fund for the benefit of the creditors of
‘the corporation.1 There are three methods by which stockholders

1“ Though it be a docttine of modern

date,” says Mr. Justice Miller in Sawyer |

v. Hoag, 17 Wall., 610, 620 (1878), ‘* we
think it now well established that the
capital stock of a corporation, especially
its unpaid subscriptions, is a trust fund
for the benefit of the general creditors of
the corporation. And when we consider

the rapid development of corporations
as instrumentalities of the commercial
and business world in the last few years,
with the corresponding necessity of
adapting legal principles to the new and
varying exigencies of this business, it is
no solid objection to such a principle that
it is modern, for the occasion for it could

206
OH. XI.]

6

SUBSCRIPTIONS AND CORPORATE CREDITORS.

[§ 199.

seek to avoid their liability to corporate creditors: first, by a can-
cellation or withdrawal from the contract;! second, by a release
from their obligation to pay the full par value of the stock ;? third,
by a transfer of the stock.? In each of these cases, however, a
court of equity does its utmost to protect the corporate. creditors,
and a rigid scrutiny will be made in the interest of creditors into

every transaction of such a nature.‘

not sooner have arisen.” This seems to
be a distinctively American doctrine. It
is not known to the English law, and
was first clearly announced by Mr. Jus-
tice Story in Wood v. Dummer, '3 Ma-
son, 808 (1824). See, also, the cases of
Hightower v. Thornton, 8 Ga., 486 (by
Lumpkin, J.), (1850); Germantown, etc.,
Ry Co. v. Fitler, 60 Penn. St., 124 (1869);
Crawford v. Rohrer, 59 Md., 599 (1882);
Lewis v. Robertson, 21 Miss., 558 (1850);
Bunn’s Appeal, 105 Penn. St., 49 (1884);
Curran v. Arkansas, 15 How., 304 (1858);
Mumma v. Potomac Co,, 8 Peters, 281
(1834); Sanger v. Upton, 91 U. S., 56
(1875); County of Morgan v, Allen, 103
id., 498 (1880); Osgood v. Laytin, 8
Keyes (N. Y.), 521; S. C., 5 Abb. Pr., N.
S., 1 (1867). Cf. Vose v. Grant, 15 Mass.,
505 (1819) ; Spear v. Grant, 16 id., 9 (1819);
Baker v. Atlas Bank, 9 Metc., 182 (1845);
Osgood v. King, 42 Iowa, 478 (1876);
Chisholm v, Forny, 65 id., 333; Jackson
v. Traer, 64,id., 469 (1884). In New York
many decisions to this point have been
rendered, especially in actions under
the General Manufacturing Act (§ 10,
ch. 40, laws of 1848). They are fully
cited and considered in the chapter,
‘infra, on Statutory Liability, g. v. See
Gillet v. Moody, 5 Barb., 184, 189 (1849);
Mills v. Stewart, 41 N. Y., 384, 389
(1869); Morgan v. New York, etc., R. R.
Co.,; 10 Paige, Chan., 290 (1843). To the
same effect, see Salmon v. The Ham-
borough Company, 1 Cases in Chan.,
204 (1671); Nevitt v. Bank of Port Gib-
son, 6 Smed. & M., 513 (1846).

1See §§ 167-170.

21d. ; also 8§ 30, 31.

8 See chapter XV.

4Sawyer v. Hoag, 17 Wall., 610 (1878);
County of Morgan v. Allen, 103 U. &.,

'

498 (1880); Chouteau v. Dean, 7 Mo.
App., 211 (1879); Gill v. Balis, 72 Mo.,
424 (1880); Putnam v. City of New Al-
bany, 4 Biss., 865 (Ind., 1869); Re South
Mountain, etc., Mining Co., 7 Sawyer,
30 (Cal., 1881); Union Ins. Co. v. Frear:
Stone Manuf’g Co., 97 Ill, 587 (1881);
Singer v. Given, 61 Iowa, 98 (1883);
Jackson v. Traer, 64 Iowa, 469 (1884),
In one case it is said that it is not within
the ingenuity of man to devise a
scheme to prevent courts of equity
from enforcing the payment of unpaid
subscriptions to capital stock for the
benefit of corporate creditors, Upton v.
Hansbrough, 8 Biss., 417, 425 (1878). Cf.
Chisholm v. Forny, 65 Iowa, 333 (1884),
Unfortunately this cannot be said to be
always the result of corporate creditors’
suits to enforce, such liability. Gener-
ally, however, the courts are able to
give relief. Thus an arrangement en-
tered into between the corporation and
its stockholders, for the purpose of de-
feating the claims of creditors, in pur-
suance of which the stockholders are
allowed, after it is ascertained that the
corporation is insolvent, to buy.in de-
preciated and repudiated claims against.
the company, and thus to extinguish
their indebtedness for stock suibscribed,
is held fraudulent and void. Goodwin
v. McGehee, 15 Ala., 232 (1849); Thomp-
son v. Meisser, 108 IIl.; 359 (1884). And
a payment in full for stock, followed:
by an immediate loan of part or all of
the purchase price by the corporation
back to the subscriber, is a fraud as to
creditors and the public, and will be set
aside. Sawyer v. Hoag, 17 Wall., 610
(1873). A fraudulent device by which
astockholder pays his subscription by
a note, and subsequently obtains the

207 \
§ 200.] SUBSCRIPTIONS AND CORPORATE CREDITORS. [CH. XI.

§ 200. Can be reached only after judgment against the corporation
and execution returned insatisfied.— Although it may be considered
settled law, at least in the United States, that unpaid subscriptions
to the capital stock of corporations constitute a trust fund for the
benefit of corporate creditors, yet such unpaid balances of ‘subscrip-
tion are not the primary or regular, fund for the payment of 'cor-
porate debts. Persons transacting business with the corporation
look to the corporation itself for the payment of their debts.
Credit is given to the corporation, not to the stockholders; and it
is the natural order of business that the creditors of tke corpora-
tion are to be paid by the corporation from funds in the corporate
treasury. Ordinarily, corporate creditors have no knowledge or
concern about the subscription list, and unpaid or partially paid
subscriptions are a matter entirely between the corporation and
the subscribers. So long as the corporation meets its obligations
in the ordinary course of business, corporate creditors have no need
to concern themselves about unpaid subscriptions to the stock.
But when the corporation is in default and embarrassed, or for any
reason fails to pay its debts, then its creditors have rights with ref-
erence to such unpaid subscriptions. They then have the right to
know whether all the subscriptions for stock have been fully paid
in, and, if not, they have the right to compel such payment.

Tt accordingly becomes important to know at what point, in their
efforts to collect what is due them, corporate creditors may cease
to pursue the corporation and proceed directly against its delin-
quent members. ‘The well-established rule upon this point is that
a corporate creditor’s suit to enforce payment of unpaid subscrip-
tions can be properly brought only after a judgment at law has
been obtained against the corporation, and an execution returned
unsatisfied." This rule is of such importance that, by statute, in

note at a large discount, may be valid
as against the company, but will be set
aside as regards corporate creditors.
Bouton v. Dement, 14 N..W. Rep., 62
(Ill., 1887). A subscriber cannot pay
for his stock by purchasing full-paid
stock and having this substituted for
his subscription. Marshall, etc., Co. v.
Killian, 6 8. E. Rep., 680 (N. C., 1888).
The stockholders’ liability in this re-
spect is not confined in general to the
original capital stock, but it attaches,
upon an authorized increase of the cap-
ital, to such increase. Chubbv, Upton,
95 U. S., 665 (1877). See, also, Veeder
v. Mudgett, 95 N. Y., 295 (1884); Pacific

National Bank Cases, 118 U. S., 635. The
filing of the statutory certificate declar-.
ing that the whole amount of the capital
stock has been paid in is not conclusive
of the fact, and will not prevent proof
to the contrary. Barre National Bank
v. Hingham Manuf’g Co., 127 Mass., 563
(1879); Wheeler v, Millar, 90 N, Y., 353
(1882); Veeder v. Mudgett, 95 id., 295
(1884) ; Thompson v. Reno Sav. B’k (Nev.,
1885). The question whether a stock-
holder may limit or entirely do away
with his liability, by an express con-
tract to that effect with corporate cred-
itors, is considered elsewhere, See § 216.

1 Bank of the United States v. Dallam,

208
OH. X1.]

SUBSCRIPTIONS AND CORPORATE CREDITORS.

[$ 200.

many of the states, a creditor’s right to proceed against a stock-
holder on his unpaid subscription is allowed only after the remedy
against the corporation itself has been exhausted.! By this is meant
that judgment shall have been duly recovered against the corpora-
tion, and execution issued and regularly returned unsatisfied. Noth-
ing short of that exhausts the remedy against the corporation.?
This rule is founded in reason and a wise public policy relative
to the transaction of business, since the corporate funds are the cor-
porate creditors’ primary resource, even where the liability of the
individual shareholder is declared to be primary, like that of an

4 Dana, 574 (1836); Walser v. Galtinags,
21 Bilatch., 130 (1882); Wetherbee v.
Baker, 35 N. J. Eq., 501 (1882); Cutright
v. Stanford, 81 Ill., 240 (1876); Baxter v.
Moses, 77 Me., 465 (1885); Terry v. An-
derson, 95 U. 5., 628, 636 (1877); Cleve-
land v. Burnham, 55 Wis., 598 (1882);
Freeland v. McCullough, 1 Denio, 414
(1845). The suit is to be brought for this
purpose in the courts of the state where
the corporation exists. Barclay v. Tall-
man, 4 Edw. Chan., 123 (1842); Murray
v. Vanderbilt, 39 Barb., 140, 147 (1868);
Bank of Virginia v. Adams, 1 Pars. Eq.,
534 (1850); Patterson v.Lynde, 112 IIL,
196 (1884); Harris v. Pullman, 84 id., 20,
25 (1876); Bayliss v. Swift, 40 Iowa, 648
1875). See, also, § 219, infrg. Cf.
Claflin v. McDermott, 12 Fed. Rep., 375
(1882).

1Thornton v:; Lane, 11 Ga., 459 (1852); .

Lane v. Harris, 16 id., 217 (1854); Mc-
Claren v. Franciscus, 43 Mo., 452 (1869);
New England, etc., Bank v.. Newport
Steam Factory, 6 R. I., 154 (1859); Priest
v. Essex Manuf’g Co., 115 Mass., 380
(1874); Cambridge Water-works v. Som-
erville Dyeing, étc., Co, 4 Allen, 239
(1862); Lindsley v. Simonds, 2 Abb.
Prac. (N. S.), 69 (1866); Blake v. Hinkle,
10 Yerg., 218 (1836); Shellington v,
Howland, 53 N. Y., 371 (1878); Wehr-
man v. Reakirt, 1 Cin. Super. Ct., 230
(1871); Dauchy v. Brown, 24 Vt., 197
(1852); Drinkwater. v. Portland Marine
R’y, 18 Me., 35 (1841); Handy v. Draper,
89 N. Y., 334 (1882); Richards v. Coe,
N. Y. Daily Reg., August 2, 1887; and
Richards v. Beach, id.; ‘December 12,

(14)

1887. Cf. Perkins v. Church, 31 Barb.,
84 (1859).

2Rocky Mountain National Bank v.
Bliss, 89 N. Y., 388 (1882). In this case
it is held that a proceeding in rem, af-
fecting only the property of the corpo-

ration attached, and execution against

that property, is not what the rule re-
quires; and again, that the recovery of
a judgment and issue of execution in
another state is not a compliance with
the rule, but that a judgment in and
execution issued out of a court of the
state where the statute is in force is nec-
essary. To the same effect see Brice v..

‘Munro, 5 Canadian Law Times, 180,

Ontario high court of justice, queen’s
bench division (1885), in which case it
is held that an execution issued: and re-
turned in Quebec is not sufficient as
against a company incorporated and ex-
isting in Ontario. Contra, Shickle v.
Watts, 7S. W. Rep., 274 (Mo., 1888). In
England a scire facias is a necessary
preliminary, unless there is some statu-
tory enactment to the contrary. 2
Lindley on Partnership, 520; Bartlett v.
Pentland, 1 Barn. & <Ad., 704 (1831);
Clowes v. Brettell, 10 Mees. & W., 506 ©
(1842); Winfield v. Barton, 2 Dowl. (N.
8.), 855 (1872); Wingfield v Peel, 12 L.
J. N. 8., Q, B.), 102 (1842), In the suit
by a corporate creditor against a corpo-
ration to obtain judgment before suing
stockholders on their liability, the stock-
holders are not allowed to come in as
parties. Hambleton -v, Glenn, 9 S. E,’
Rep., 129 (Va., 1889).

209
§ 201.] SUBSCRIPTIONS AND CORPORATE CREDITORS. [CH. x1,

original contractor or partner.! Where, however, the corporation
has been adjudged a bankrupt, and a dissolution has in this way
been brought about, the remedy against the corporation need not
first be exhausted.2 Such, also, has been held to be the rule where
the corporation is notoriously insolvent,’ or is formally dissolved.

§ 201. The remedy by garnishment or attachment.— There are
various remedies which corporate creditors may employ to enforce
the payment of partially paid up subscriptions. Among these is

that of garnishment.

1Stone v. Wiggin, 5 Metc., 316 (1842);
Stedman v. Eveleth, 6 id., 114 (1848).

2 State Savings Association v. Kellogg,
52 Mo., 583 (1873); Dryden uv. Kellogg,
2 Mo. App., 87 (1876); Shellington v.
Howland, 53 N. Y., 371 (1878). Cf. An-
sonia Brass & Copper Co. v. New Lamp
Chimney Co., 53 N. Y., 123 (1873); 8. C.,
91 U.S., 656; Walser v. Seligman, 21
Blatch., 180 (1882) See § 219. And
see, contra, Birmingham National Bank
v. Moser, 14 Hun, 605 (1878); Fourth
Nat'l] B’k v. Francklyn, 120 U. 8., 747
(1887). .

3 Hodges v. Silver Hill Mining Co., 9
Oregon, 200 (1881); Terry v. Tubman,
92 U.S., 156 (1875); Camden v. Doremis,
3 How., 515, 533 (1845). It has been held
that the right of action accrues to the
creditor whenever it is clear that the
corporation has no property from which
the claim can be paid. A judgment is
not necessary for the beginning of an
action against the stockholder, though
it may be necessary as evidence in such
action to determine the measure of dam-
ages. First Nat. Bank of Garrettsville
v. Greene, 64 Iowa, 445 (1884), Cf.
Cleveland v. Marine Bank, 17 Wis., 545
(1863). A creditor of an insolvent cor-
poration may bring a creditor’s bill
against the assignee for the benefit of
creditors of a subscriber, even though
no judgment against the corporation
had been obtained, and no other stock-
holders are made co-defendants. Sa-
mainego v. Stiles, 20 Pac. Rep., 607
(Ariz., 1889).

4Kincaid v. Dwinelle, 59 N. Y:, 548
(1875). Cf. Hollingshead v. Woodward;

Thus, where asubscription has been called

35 Hun, 410 (1885), As to what is suffi-
cient to dissolve a corporation for this
purpose, see Kincaid v. Dwinelle, supra.
Under a statute requiring dissolution of
the corporation before corporate cred-
itors can reach unpaid subscriptions, the
corporation is deemed to be dissolved
when it has’ ceased to exercise its proper
functions, is without funds and is in-
debted. Penniman v. Briggs, 1 Hopk.
Chan. (N. Y.), 300 (1824); Slee v. Bloom,

19 Johns., 456 (1822); Bank of Pough-

keepsie v. Ibbotson, 24 Wend., 473, 479
(1840). Of. Terry v. Anderson, 95 U.S.,
628 (1877). Remington v. Samana Bay’
Co., 140 Mass., 494 (1886), holds that the
judgment herein against the corporation
ig void if the corporation has been dis-
solved, It has been said that corpo-
rate creditors need not await the collec-
tion by the corporation of doubtful
claims, but may compel the ‘payment
of their claims by the shareholders, an
let the latter take the risk and delay.
“Creditors,” say the supreme court of
Tennessee, ‘will not be required to
await the collection of doubtful claims
or claims in litigation. The stockholders
must pay promptly, and take upon them-
selves the onus of delay and risk as to
all such cases.” Moses v. Ocoee Bank,
1 Lea, 898, 418 (1878). See, also, Stark
v. Burke, 9 La. Ann., 841, 348 (1854). -
General creditors may also reach unpaid
subscriptions, although another corpo-
rate creditor has a mortgage lien on the
corporate property, rights, privileges
and franchises, -Dean v. Biggs, 25 Hun,
122 (1881).

210
CH. X1.]

SUBSCRIPTIONS AND .CORPORATE CREDITORS.

“

[§ 201.

in, in part, or wholly, and has not been paid by the subscriber, it is,
at least to the extent of such calls, an asset of the corporation, and,
like other assets, is subject to garnishment at the instance of a cor-

porate creditor.!

When, therefore, a stockholder is in default for instalments of
stock for which calls have been made, he stands in the attitude of
any other debtor to the corporation, and may be garnished in the
usual way, upon the theory of the authorities just cited, for the pur-

pose of collecting the debt due from the corporation.

But this

remedy is not available to reach that part of the unpaid subscrip-
tion for which calls have not been made.?

1Meints v. East St. Louis, etc., Co., 89
Tll., 48 (1878); Hannah v. The Moberly
Bank, 67 Mo., 678 (1878); Simpson v.
Reynolds, 71 id., 594 (1880); Faull v.
Alaska, etc, Mining Co., 8 Sawyer, 420
(1882); Curry v. Woodward, 53 Ala., 371
(1875); Bingham v. Rushing, 5 Ala., 403
(1848); Hays v. Lycoming, etc., Co., 99
Penn. St., 621 (1882). Cf. Rand v. White
Mountains R. R. Co., 40 N. H., 79 (1860);
Brown v. Union Insurance Cox, 3 La.
Ann., 177 (1848); Angell and Ames on
Corp., § 517. See Dean-v. Biggs, 25
Hun, 122 (1881). An attachment of un-
paid subscriptions due to a foreign cor-
poration will be stayed where seques-
tration proceedings are commenced,
but the priority of the attachment cred-
itor will be preserved. Re Queensland,
etc., Co., 58 L. T. Rep., 878 (1888).

2Bingham v. Rushing, 5 Ala., 403
(1848); Brown v. Union Insurance Co.,
8 La. Ann., 177 (1848); Bunn’s Appeal,
105 Penn. St., 49 (1884). See, also, Coal-
field Coal Co. v. Peck, 98 IIl., 189 (1881).
In Nevada the right of garnishment in
a case where calls had not been made
was expressly denied. McKelvey v.
Crockett, 18 Nev., 238 (1884). Oj. Meints
v. East St. Louis, etc., Co., 89 Ill, 48
(1878); Hughes v. Oregonian R’y Co.; 11
Oreg., 158 (1888); Peterson v. Sinclair,
83 Penn. St., 250 (1877); Langford v. Ot-
tumwa Water-power Co., 59 Ia., 283
(1882); Chandler v. Siddle, 10 N. B. R.,
236 (1874). In New York there is no
process of garnishment, but instead
thereof an attachment is allowed.

Under an attachment against a foreign
corporation not chartered by the United
States, the sheriff may levy upon the
sums remaining unpaid upon a subscrip-
tion to the capital stock of the corpora-
tion, the subscriber being within the
‘county and having property therein;
‘for upon one or more shares of stock
therein held by such a person, or trans-

ferred by him for the purpose of avoid-

ing payment thereof.” New York Code
of Civil Procedure, § 646. It has also
been held that a corporate creditor, by
an execution against the corporation,
may reach an unpaid subscription,
though no call has been made. In re
Glen Iron Works, 17 Fed. Rep., 324
(1883); S. C., 20 id., 674 (1884); Cucullu
v. Union Insurance Co., 2 Rob. (La.),
571 (1842). Cf. Bunn’s Appeal, 14 Week.
Notes Cases, 198; and see Hannah »,
The Moberly Bank, 67 Mo., 678 (1878),
But this is a somewhat questionable
rule, and the remedy proposed by it ‘is
probably very seldom invoked. For the
remedy in Pennsylvania, where by stat-
ute, after execution returned unsatis-
fied against the corporation, on order
of the court, execution arises against
the stockholders, see Lander v. Tillia,
11 Atl. Rep., 86 (Pa., 1887). Bank of
Va. v. Adams, 1 Par. Sel. Eq. Cas., 534
(1850), holding that.a court of equity in
Pennsylvania has no jurisdiction to
compel stockholders of a foreign corpu-
ration residing there to pay a subscrip-
tion to its stock on the application of its
creditors. “A judgment against a non-

ail
$$ 202, 203.] sUBSCRIPTIONS AND CORPORATE CREDITORS. [cH. xx,

$202. The remedy by mandamus.— It is doubtful whether cor.
porate creditors can, in this country, have recourse to the writ of
mandamus to compel the officers of the corporation to make a call
for the purpose of raising money to meet corporate obligations.!

In the English courts a mandamus is sometimes awarded in these
cases.2. But in this country the question of calls is not usually of
much importance in such cases. The corporation is generally in-
solvent; a bill is filed in a court of equity to collect and distribute
all the assets, and calls on the subscriptions are made by the court
itself.

§ 208. The remedy by action at law.— Another remedy is by an
action at law. It has been held that unpaid subscriptions, after
call, may be enforced by an action at law brought directly by the
creditor against the delinquent subscriber, and that in such an ac
tion each subscriber is liable, not for his proportionate share, but

to the full extent of his unpaid subscription.‘

resident stockholder served outside of
the jurisdiction is not enforceable. Wil-
son v. Seligman, 36 Fed. Rep., 154 (1888).

In Missouri it is held that a ‘ proceed-
ing by motion for execution against a
stockholder of an insolvent corporation
is in no sense the institution of an inde-
pendent suit, but a mere supplementary
proceeding in aid of the execution
against the corporation.” Kohn v.
Lucas, 17 Mo. App., 29 (1885); Paxon v.
Talmage, 2 West. Rep., 105 (Mo., 1885).
In the case of Ogilvie v. Knox Ins. Co.,
22 How., 380 (1859), the court said:
‘* The creditors of the corporation are
seeking satisfaction out of the assets of
the company to which the defendants
are debtors. If the debts attached are
sufficient to pay their demands the
creditors need look no further. They
are not bound to settle up all the affairs
of this corporation, and the equity be-
tween its various stockholders. or part-
ners, corporators or debtors.”

1 Dalton, etc., R. R. Co. v. McDaniel,
56 Ga., 191 (1876); Hatch v, Dana, 101
U. 8., 205, 215 (1879). Of. Cucullu v,
Union Insurance Co.,, 2 Rob. (La.), 571,
573 (1842); Allen v. Montgomery, etc.,
R. R. Co., 11 Ala., 487 (1847),

2 Queen v. Victoria Park Co., 1 Ad, &
Bl. (N. S:), 288 (1841): Queen v. Led-

gard, id., 616; The King v. Katherine
Dock Co., 4 Barn. & Ad., 360 (1882),

3See § 108, supra.

4Bank of the United States v. Dal-
lam, 4 Dana, 574 (1836); Allen v. Mont-
gomery, etc, R. R. Co., 11 Ala., 437
(1847); Persch v. Simmons, 3 N. Y.
Supp., 783 (1889). An action to re
cover unpaid subscriptions may be at
law. Faull v. Alaska, etc., Mining Co.,
8 Sawyer, 420 (1883); Wilbur v. Stock-
holders, 18 Bank, Reg., 178 (1879);
White v. Blum, 4 Neb., 555 (1876);
McCarthy v, Lavasche, 89 Ik, 370 (1878) ;
Freeman v. Winchester, 18 Miss., 577
(1848). Contra, Griffith ». Mangam, 73
N. Y., 611 (1878). Cf. Glenn v. Lancas-
ter, 109 N. Y., 641 (1888). The legis-
lature may modify a summary rem-
edy to collect subscriptions. Ha parte
Northeast, ete., R. R. Co., 87 Ala., 679
(1861); Howard v. K’y, etc., Ins. Co., 18
B. Mon. (Ky.), 282 (1852). See, also, cases
in § 208. A statutory remedy of one
state is not available in another state.
Christensen v, Eno, 106 N. Y., 97 (1887).

See, also, § 228, n., infra. A cor-
porate creditor may bring a common-
law action to collect a subscription to a
foreign corporation. Savings Assoc. v.
O’Brien, 51 Hun, 45 (1889),

212

'
OH. XI. | SUBSCRIPTIONS AND CORPORATE CREDITORS.

[$ 204.
The tendency of the law, however, is to do away with this rem-
edy, and to compel the creditor in all cases to seek his remedy ina
court of equity. This tendency is in accord with the best interests
of corporate creditors and stockholders and the prevention of a,
multiplicity of suits, and is to be emphatically commended!

§ 204. The remedy by bill in equity. The remedy most usually
adopted by corporate creditors to obtain the payment of their
claims against the. corporation from the unpaid balances of sub-
scriptions due the corporation by the subscribers to the capital stock
is by a bill in equity. This is in the nature of a creditor’s bill,
reaching the equitable assets of the principal debtor. It is the
most effectual, simple and just remedy, and is not only the favorite
remedy of the courts, but is generally resorted to by the corporate
creditors themselves.?, Some of the courts have even gone to the

extent of holding a bill in equity to be the exclusive remedy for the

1See § 204.

2Pfohl v. Simpson, 74 N. Y., 187
(1878); Mathez v. Neidig, 72 id., 100
(1878); Dayton v. Borst, 31 id., 485 (1865);
Mann v. Pentz, 8 id., 415 (1850); Ste-
phens v. Fox, 88 id., 313 (1881); 8. C.,
17 Hun, 485; Griffith v. Mangam, 73
N. Y., 611 (1878); Christensen v. Eno,
106 id., 97, 100 (1887); Ward v. Gris-
woldville Manuf’g Co., 16 Conn., 593
(1844); Bank of the United States v.
Dallam, 4 Dana, 574 (1886); Shickle ,v.
Watts, 7 8. W. Rep., 274 (Mo., 1888);
Crawford v. Rohrer, 59 Md., 599 (1882) ;
Hightower v. Thornton, 8 Ga., 486
(1850); Hightower v. Mustian, 8 id., 506
(1850); Dalton, etc., R. R. Co. v. McDan-
iel, 56 id,, 191 (1876); Germantown, etc.,
R’y Co. v. Fitler, 60 Penn. St., 124 (1869);
Adler v. Milwaukee, etc., Co., 13 Wis.,
57 (1860); Curry v. Woodward, 53 Ala.,
871 (1875); Allen v. Montgomery, etc.,
R. R. Co., 11 id., 487.1847); Wincock v.
Turpin, 96 Ill., 185 (1880); Hickling v.
“Wilson, 104 Il, 54 (1882); Henry w.
Vermillion, etc., Turnpike Co., 17 Ohio,
187 (1848); Miers v. Zanesville and Mays-
ville Turnpike Co., 11 id., 273 (1842);
Judson v. Rossie Galena Co., 9 Paige,
698 (1842); Van Pelt v. U. S., etc., Co.,
13 Abb. Prac. (N. 8.), 331 (1872), (Com-
pare with this case Sherwood v. Buffalo,
etc., R. R. Co., 12 How. ‘Prac. , 187 (1855),

and Hammond v. Hudson River, etc.,
Co., 11 id., 383 — 1854.) Marsh v. Bur-
roughs, 1 Woods, 463 (1871); Louisiana,
Paper Co. v. Waples, 8 id., 34 (1877);
Faull v. Alaska Mining, etc., Co., 8
Sawyer, 420 (1883); Holmes v. Sher-
wood, 8 McCrary, 405 (1881); S. C., 16
Fed. Rep., 725; Chandler v. Siddle, 10
Bank. Reg., 236; Myers v. Seeley, 10 id.,
411.1874); Wilbur, v. Stockholders, 18
id., 178 (1878); Harmon v. Page, 62 Cal.,
448 (1882); Ogilvie v. Knox Insutance
Co., 22 How., 380 (1859); Sanger vw.
Upton, 91 U. S., 56, 60 (1875); Hatch v.
Dana, 101 id., 205 (1879); Salmon wv.
Hamborough Co., 1 Cas. in Chan,
(Eng.), 204 (1671); Patterson v. ae
106 U. S., 519 (1882), saying that “‘n

one eieditor can assume that he ane
is entitled to what any stockholder
owes, and sue at law so as to appropri-
ate it exclusively to himself.” It seems
to be well settled that, in the United
States courts, unpaid subscriptions can
be reached by a corporate creditor in a
court of equity only. Brown v. Fisk,
23 Fed. Rep., 228 (1885). In Ohio it
was held that an action for unpaid as-
sessments on subscription for stock.
might be joined in an action on the
statutory liability of stockholders. War-
ner v. Callender, 20 O. St., 190 (1870).

218
§ 205.] SUBSCRIPTIONS AND CORPORATE CREDITORS. ‘Tee XI.

corporate creditor in these cases.’ Occasionally, also, siavates are
enacted prescribing that a creditor who seeks to apply such assets
to the payment of his claim can do so only by a suit in equity?

The right to proceed by a suit in equity herein has been held to
exist, even where the general equitable remedy by creditor’s bill
has been abolished by statute.®.

§ 205. Parties to the bill in equity — Parties plaintiff.— A cor-
porate creditor who seeks in this way to obtain payment of his
claim from the unpaid subscriptions to the capital stock of the
corporation should file his bill on behalf of himself and such other
creditors as may wish to come in.* The general rule is that such
a suit is and should be for the benefit of any or all creditors who
elect to come in as parties complainant, and establish their debts
according to the course and practice of a, court of chancery.’

1 Jones v. Jarman, 34 Ark., 323 (1879);
Harris v. First Parish in Dorchester, 23
Pick., 112 (1889); Knowlton v, Ackley,
8 Cush., 93 (1851); Erickson v. Nesmith,
15 Gray, 221 (1860); Smith v. Huckabee,
53 Ala., 191 (1875); Umsted v. Buskirk,
17 O. St., 118; Pollard v. Bailey, 20
Wall., 520 (1874); Terry v. Little, 101
U.S,, 216 (1879). Cf. Spear v. Grant,
.16 Mass., 9 (1819); Hodges v. Silver
Hill Mining Co., 9 Oreg., 200 (4881).
In Bunn’s Appeal and Lane’s Ap-
peal, 14 Weekly Notes, 192 (Pa., 1884),
the supreme court of Pennsylvania
clearly held that upon corporate in-
solvency no creditor can sue at law for
the application of unpaid subscriptions
to his debt. His remedy isin equity
alone. As to discovering the names of
stockholders, see Hipple v. Fire, etc.,
Co., 8 Central Rep., 462 (N. J., 1886);
also, §§ 519, 520, infra.

2?Hadley v. Russell,
(1860).

3 Adler v, Milwaukee, etc., Manuf’g
Co., 13 Wis., 57 (1860). The equitable
jurisdiction herein seems to have been
based on various grounds. See Wilbur
v. The Stockholders, 18 Bank. Reg., 178.
In one case the bill in equity has been
held to be in the nature of an equitable
attachment in which the subscribers
are in effect called on to answer as gar-
nishee of the principal debtor. Ogilvie

40 N. B., 109

\

v. Knox Insurance Co., 22 How., 380
(1859). In practice a receiver is usually
appointed, the amount of the corporate
debts and of the amount necessary to
be contributed by the holders of shares
not paid up is ascertained by proof, or
through a referee and master’s report,
and then there is a final decree afford-
ing, so far as the assets admit, adequate
relief, and, in any event, proportional
relief to all parties. Dalton, etc., R. R.
Co. v. McDaniel, 56 Ga., 191 (1876);
Wilbur v. The Stockholders, 18 Bank,
Reg., 178; Ogilvie v. Knox Insurance
Co., 22 How., 880 (1859).

4Crease v. Babcock, 51 Mass., 525
(1846); Holmes v. Sherwood, 8 McCrary,
405 (1881); Sawyer v. Hoag, 17 Wall.,
610 (1878); Mills v. Scott, 99 U. S., 25
(1878); Patterson v. Lynde, 106 id., 519
(1882).

5 Wetherbee v, Baker, 85 N. J. Eq.,
"501 (1882); Coleman v, White, 14 Wis.,
700 (1862); Carpenter v. Marine Bank,
14 id., 705, n. (1862); Morgan v. New
York, etc., R. R. Co., 10 Paige, 290
(1843); Masters v. Rossie Lead Mining
Co., 2 Sandf. Chan., 301 (1845); Mann v.
Pentz, 3 N. Y., 415 (1850); Umsted wv
Buskirk, 17 Ohio St., 118 (1866); Crease
v. Babcock, 51 Mass., 525 (1846); Pollard
v. Bailey, 20 Wall., 520 (1874); Terry v.
Little, 101 U. S., 216 (1879).. Any cred-
itor has a slot to come in, establish

214

 
CH. xI.]

SUBSCRIPTIONS AND CORPORATE CREDITORS.

[$ 205.

While the bill must be so framed as to permit other creditors, if
they elect, to come in and be made parties to the suit, it is in no
way necessary to join them as parties. The other creditors are
proper but not necessary parties.' Several creditors, however,

cannot bring separate suits of this nature.

They must all join

in one proceeding.? The stockholders need not wait to be made

his claim and share pro rata in the dis-
tribution of the assets, even though the
bill was not filed for the benefit of such
as should choose to come in and share
the expense. Turnbull v. Prentiss Lum-
ber Co., 55 Mich. , 387 (1884). See, also,
Tallmadge v. Fishkill Iron Co., 4
Barb., 393 (1848); Walker v. Crain, 17
id., 131 (1853). In consequence thereof
no one creditor can, by superior dili-

gence in filing a bill, obtain a prefer-

ence over other creditors in respect of
the unpaid balances of subscriptions.
Vide the cases in preceding note. There
is, however, an earlier case in the Ohio
reports, which seems to recognize such
a preference. Miers v. Zanesville and
Maysville Turnpike Co., 18 Ohio, 197
(1844). See Adler v. Milwaukee, etc.,
Co., 13 Wis., 57 (1868); Wright v. McCor-
“mack, 17 Ohio St., 86 (1866). There
moust be an account taken of the-amount
of debts, assets and unpaid capital, and
a decree for an assessment of the
amount due by each stockholder.”
Bell’s Appeal, 8 Atl. Rep., 177 (Penn.,
1887). Otherwise it is for the jury to
say whether the whole of the unpaid
subscriptions are needed to pay cor-
porate debts. Citizens’, etc., Co. v.
Gillespie, 9 Atl. Rep., 73 (Pa., 1887).
The pleadings may be of such a nature
that the trial must be atlaw. Glenn
v. Lancaster, 109 N. Y., 641 (1888).

1Marsh v. Burroughs,. 1 Woods, 4638
(1871); Crease v. Babcock, 51 Mass., 525
(1846); Hatch v. Dana, 101 U. 8., 205
(1879). Cf. Adler v. Milwaukee, etc.,
Co., 18 Wis., 57 (1860). Corporate cred-
itor suing need not join all the corpo-
rate creditors as co-complainants nor all
the stockholdei:s liable as defendants.
Appeal of Cornell, 6 Atl. Rep., 258 (Pa.,
1886).

2Crease v. Babcock, 51 Mass., 525
(1846). But see Perry v. Turner, 55 Mo.,
418 (1874). And an action to compel
the payment of an unpaid subscription
may be joined by.a creditor with an
action to enforce a statutory liability.
Warner v. Callender, 20 O. St., 190
(1870). Accordingly, where a bill is
filed, on behalf of all the creditors who
chose to come in, against all the stock-
holders in default, the courts will en-
join a separate creditor’s suit. Pierce v.
Milwaukee Construction Co., 38 Wis.,
2583 (1875). Cf. Coleman v. White, 14
id., 700 (1862); Carpenter v. Marine
Bank, id., 705,'n. (1862); Ballston Spa
Bank v. Marine Bank, 18 id., 490 (1864).
A stockholder himself, although he is
in default, provided he is solvent, may,
if he is also a creditor of the corpora-
tion, be a party to the bill to collect the
unpaid subscriptions, but pursuant to
the final decree he must contribute rata-
bly with the rest. ‘Bissit v. Kentucky
River Navigation Co., 15 Fed. Rep., 353
(1882), and the valuable note; Thomp-
son v. Reno Savings Bank (Nev., 1885).
Cf. Hogg’s Appeal, 88 Penn. St., 195
(1878); Calhoun v. The Steam Ferry,
Boat, etc., 27 Int. Rev. Rec., 273 (1881),
in which ‘case it is held he cannot sue
the corporation, But see Milvain v.
Mather, 5 Exch., 55 (1850), in which it
is held that a corporation sued by a
stockholder may set off any amount
due by him on calls, Of. Ex parte
Winsor, 8 Story’s C. C., 411 (1844).
Weber v. Fickey, 47 Md., 196 (187%),
holding that a stockholder who is also
a creditor and who has not fully paid
his subscription cannot recover from
another stockholder the full amount of
his claim. Emmert v. Smith, 40 id.,
128, to same effect. In distributing the

215
§ 206.]

SUBSCRIPTIONS AND CORPORATE CREDITORS.

(cH. x1,

parties defendant to a creditors’ bill before moving for contribu-
tion, but may, in a proper case, before a suit in the nature of a
creditors’ bill is filed against them by creditors of the corporation,
file a bill in equity upon their own account, making the corpora-
tion a party, to enforce the payment of unpaid balances of sub-
scription, for the payment of corporate indebtedness, and for

contribution.!

§ 206. Parties defendant.— The defendants to such a suit should
be the corporation itself, and all from whom an unpaid subscrip-
tion is due, except such as are unknown or insolvent, or beyond the

jurisdiction.’

proceeds of sale of the property of a
corporation the claims of such creditors
as are stockholders should be reduced
by the amount unpaid upon their stock.

1 Fiery v. Emmert, 36 Md., 464 (1872).

2The corporation is ordinarily a nec-
essary party. Mann v. Pentz, 3N. Y..
415 (1850); Walsh v. Memphis, etc., R.
R. Co., 2 McCrary, 156 (1881); S. C., 19
Fed. Rep., 152; Wilbur v. The Stock-
holders, 18 Bank. Reg., 178 (1846);
Wetherbee v. Baker, 35 N. J. Eq., 501
(1882); First Nat. B’k v. Smith, 6 Fed.
Rep., 215 (1879); Brinkerhoff v. Brown,
% Johns. Chan., 217 (1828). But see,
contra, Walser v. Seligman, 21 Blatch.,
130 (1882), a well-considered case, and
Wellman v. Howland Coal & Iron
Works, 19 Fed. Rep., 51 (1884). In the
former of these cases the court say: ‘‘Suf-
ficient reason for not making it (the

corporation) a party is found in the’

fact that it is beyond the jurisdiction
of this court, and also in the fact that
it is practically defunct.” In the case
last cited it was held that, where a cor-
poration is without property or officers

or place of business, it Beet not be made '

a party of record.

3'Vick v. Lane, 56 Miss., 681 (1879)5
Walsh v. Memphis, etc., R. BR. Co., 2
McCrary, 156 (1881); Hadley v. Russell,
40 N. H., 109 (1860); Erickson v. Ne-

smith, 46 id., 371 (1860); Pierce v, Mil-

waukee, etc., Co., 88-Wis., 253 (1875);
Coleman v. White, 14 id., 700 (1862);
Carpenter v. Marine Bank, 14 id., 705,
n, (1862); Umsted v. Buskirk, 17 O.

216

St., 118 (1866); Mann v. Pentz, 3N. Y.,
415 (1850). Cf. Young v. New York &
Liverpool Steamship Co., 10 Abb. Prac.,
229 (1860), holding that judgment cred-
itors are not proper parties defend-
ant without showing why they were
not made parties plaintiff. The bill
should contain an appropriate allega-
tion as to the shareholders unknown,
insolvent, or out of the jurisdiction, and
a prayer that, upon discovery, they be
made parties when possible. Bogardus
v. Rosendale Manufacturing Co., 7 N.
Y., 147 (1852). “ Where the attempt is
to reach the liability of the shareholders
on their subscription to capital stock, all
the solvent stockholders within the ju-
risdiction must be joinéd, except where
this will be excused upon an allegation
that the number is too great.” Chal-
mers, J., in Vick v. Lane, 56 Miss., 681,
684 (1879). Cf. Bonewitz v. Van Wert
Co. Bank, 41 O. St., 78 (1884). But on
the other hand, with respect to the
matter of joining all the solvent share-
holders who are in arrears as parties de-
fendant to the bill, provided they are
within the jurisdiction, we find a line:
of authorities in support of the -proposi-
tion that all such stockholders are not
always necessary parties to the bill,
that such a suit may properly be brought
against one, or any, of the delinquent
stockholders as well as against all, and
that a bill will not be held defective
merely because it fails to include all the
delinquent stockholders as parties de-
fendant. Ogilvie v, Knox Insurance
CH. XI.]

SUBSCRIPTIONS AND CORPORATE CREDITORS.

¢

[§ 206,

The stockholders against whom the bill is filed may, however, it
seems, when all are not made parties, file'a cross-bill, obtain a dis-
covery of the remaining delinquent stockholders, bring them in as

parties, and thus enforce contribution.

Co., 22 How., 380 (1859); Hatch v. Dana,
101 U. &., '205 (1879); Marsh v. Bur-
roughs, 1 Woods, 4638 (1871); Holmes v.
Sherwood, 3 McCrary, 405 (1881); Glenn
v, Williams, 60 Md., 93 (1882); Bartlett
v. Drew, 57 N. Y., 587 (1874); Griffith
v. Mangam, 73 id., 611 (1878); Brundage
v. Monumental, etc., Mining Co., 12
Oregon, 322 (1885). Cf. Von Schmidt
v. Huntington, 1 Cal., 55 (1855); Lamar
Insurance Co. v. Gulick, 102 II1.,
(1882). Any other rule would place
upon the creditor a burden which
would be unjust and perhaps destruc-
tive of the remedy itself. In Hatch
v. Dana, supra, there. was a bill to
compel payment of a debt out of the
unpaid subscription of a single ‘stock-
holder. It was not sought to wind
up the company. It being urged that
a creditor of an insolvent corporation is
not at liberty to proceed against one or
more delinquent subscribers to recover
the amount of his debt, without an ac-
count being taken of other indebted-
ness, and without bringing in all the
stockholders for contribution, the court,
by Mr. Justice Strong, said: ‘‘The lia-
bility of a subscriber for the capital
stock of a company is several and not
joint. By his subscription each be-

comes a several debtor to the company,’

as much s0 as if he had given his prom-
issory note for the amount of his sub-
scription. At law, certainly, his sub-
scription may be enforced against him
without joinder’ of other subscribers,
and in equity his liability does not cease
to be several. A creditor’s bill merely
subrogates the creditor to the place of
the debtor, and garnishes the debt due
to the indebted corporation. It does
not change the character of the debt at-
tached or garnished. It may be that, if
the object of the bill is to wind up the
affairs of this company, all the share-

41-

Tf all the parties who are

holders, at least so far as they can be
ascertained, should be made parties,
that complete justice may be done by
equalizing the burdens, and in order to
prevent a multiplicity of suits. But
this is no such case. The most that,can
be said is that the presence of all the
stockholders might be convenient, not
that it is necessary. When the only
object of a bill is to obtain payment of
a judgment against a corporation out
of its credits or intangible property,
that is, out of its unpaid stock, there is
not the same reason for requiring all the
stockholders to be made defendants.”
See, also, Bonewitz v. Van Wert Co.
Bank, 41 O. St., 78 (1884), where it
was held error to give judgmentagainst .
the defendants properly before the
court, when the return of the summons
was entirely silent as to two of the de-
fendants. As to when bills brought by
creditors in these cases are and are not
multifarious, see Allen v. Montgomery
R. R. Co., 11 Ala., 487 (1847); Cam-
bridge, etc., Co. v. Somerville, etc., Co.,
14 Gray, 193 (1860), where the liability
of some of the defendants was as di-
rectors and of others as stockholders,
and the bill was held to be multifarious.
Barre National Bank v. Hingham Mfg.
Co., 127 Mass., 563 (1879); Pope v.
Leonard, 115 id., 286 (1874); Déeaderick
v. Wilson, 8 Baxter, 108 cay Holmes
v. Sherwood, infra.

1 Hatch v. Dana, 101 U. S., 205 (1879).
In the orginal bill itself there may prop-
erly be a prayer, when some of the de-
linquent shareholders are unknown, for
a discovery, in order that such un-
known stockholders may be made ‘par-
ties by amendment. Hipple v. Five,
etc., Imp. Co., 3 Atl. Rep., 682 (N. J.,
1886) ;. Bogardus v. Roséndale Mfg. Co.,
7 Ni. Y., 147 (1852); Morgan wv. N. Y.,
etc., R. R. Co., 10 Paige, 290.

* 217
88 207, 208.] SUBSCRIPTIONS AND CORPORATE CREDITORS. [OH. x1,

liable have not been brought before the court, it has been held that
those who are defendants of record cannot be charged with liabil-
ity which should fall upon those who are absent, unless it be shown
that the absentees are insolvent or beyond the jurisdiction of the
court... There is some doubt, however, as to the soundness of this
rule.

§ 207. A court of equity may make a call.— It is well settled?
that, when stock is subscribed to be paid in upon call by the cor-
porate authorities, and the company neglects or refuses to make
such calls as are necessary to raise funds to meet the just corpo-
rate obligations, a court of equity will itself make the necessary
calls, if the interests of the creditors require it. The court will; in
behalf of the creditors, do what it is the duty of the corporation to
do in respect of calls. And the court may make the call al-
though the statute says calls shall be made by the trustees, direct-
ors or managers.! .

§ 208. Receivers and assignees in bankruptcy for the benefit of
creditors — Their duties, powers and liabilities as to unpaid sub-
scriptions.—_ When a corporation becomes insolvent, with corporate
creditors on the one hand pressing their claims, and subscriptions
to the capital stock wholly or partially uncollected on thé other
hand, it is usual to place the assets of the company, including the
claims against delinquent share-owners, in the hands of a third per-
son for the benefit of all concerned. Such a person may be an

1Wood v. Dummer, 3 Mason, 308
(1824), But see Marsh v. Burroughs, 1
Woods, 463 (1871). Cf. Erickson v,
Nesmith, 46 N. H., 371 (1866). Contra,
Appeal of Cornell, 6 Atl. Rep., 258 (Pa.,

18 Ga., 65 (1855); Ward v. Griswolds-
ville Mfg. Co., 16 Conn., 593 (1844);
Sanger v. Upton, 91 U. S., 56 (1875);
Chubb v. Upton, 95 id., 665 (1877);
Glenn v. Williams, 60 Md., 93 (1882),

1886), citing Strong’s Appeal, 10 W. N,
Cases, 409. When there are delinquent
stockholders beyond the jurisdiction,
the stockholders who have been sued
and compelled to pay more than their
due proportion must look to them for
contribution. Holmes v, Sherwood, 3
McCrary, 405 (1881).

2 Vide § 108, supra.

3Scovill v. Thayer, 105 U. 8., 148, 155
(1881); Hatch v. Dana, 101 id., 205, 214
(1879); Curry v. Woodward, 58 Ala.,
371 (1875); Wilbur v. Stockholders, 18
Bank. Reg., 178 (1878); Marsh v. Bur-
roughs, 1 Woods, 463 (1871); Myers v.
Seeley, 10 Bank, Reg., 411 (1874); Henry
v. Vermillion, etc., R. R. Co., 17 Ohio,
187 (1848); Robinson v: Bank of Darien,

Cf. Germantown, etc,, R’y Co, v. Fit-
ler, 60 Penn. St., 124 (1869); Chandler
v. Keith, 42 Iowa, 99 (1875); Mann wv,
Pentz, 3 N. Y., 415 (1850); Ogilvie v.
Knox Insurance Co., 22 How., 380
(1859); Adler v. Milwaukee Mfg, Co.,
13 Wis., 57 (1860). And see Seymour v.
Sturgess, 26 N. Y., 184 (1862); Wheeler
v. Millar, 90 id., 358 (1882).

4Crawford v. Rohrer, 59 Md., 599
(1882). Cf. Glenn v. Saxton, 68 Cal.,
358 (1886). Where, however, it was pro-
vided by the charter of the corporation
that all calls are to be made only upon
a three-fourths vote of the stockholders,
it was held that a call by the court was
irregular. Trustees of the Louisiana
Paper Co. v. Waples, 3 Woods, 84 (1877).

218
cH. x1.]

SUBSCRIPTIONS AND CORPORATE CREDITORS.

[$ 208.

assignee under state insolvent laws, a receiver, or an assignee in
bankruptcy. A receiver in such a case may be defined to be a
third person appointed by a court of equity to act as the repre-
sentative alike of creditors and stockholders for the purpose of col-
lecting the corporate assets and paying the corporate debts! It
is the right and duty of such a receiver to collect the unpaid sub-
scriptions, so far as it may be necessary, for the purpose of paying

the corporate debts in full?

1 Johnson v. Laflin, 5 Dill., 65 (1878);
High on Receivers (2d ed.), 1.

2Dayton v. Borst, 31 N. Y., 485 (1865); ”

Nathan v, Whitlock, 9 Paige, 152 (1841);
Mean’s Appeal, 85 Penn. St., ‘75 (1877);
Dorris v. French, 4 Hun, 292 (1875); Van
Wagenen v. Clark, 22 id., 497 (1880);
Frank v. Morrison, 58 Md., 423 (1882);
Chandler v. Brown, 77 IIL, 3888 (1875);
Calkins v. Atkinson, 2 Lans., 12 (1870).
Cf. Tucker v. Gilman, 45 Hun, 193
(1887). Assignee for benefit of cred-
itors of an insolvent corporation may
enforce unpaid subscriptions. Cham-
berlain v. Bromberg, 3 S. Rep., 434
_ (Ala., 1888); Tobey v. Russell, 9 R. L.,
58 (1868); Stewart v. Lay, 45 Iowa, 604
(1877); Clarke v. Thomas, 34 O. St., 46
(1877); Phoenix, etc., Co. v. Badger, 67
N. Y., 294 (1876), As incidental to the
receiver’s power to collect unpaid bal-
ances of subscription, it is held that he
may, as an officer of the court, make
calls for the amount due. Hall v.
United States Ins, Co., 5 Gill (Md.), 484
(1847); Rankine v. Elliott, 16 N. Y., 377
(1857). Lionberger v. Broadway, etc.,
10 Mo. App., 499 (1881), holds that an as-
signee for benefit of creditors may, by a
billin equity, compel the directors of the
insolvent corporation to make an assess-
ment upon the capital stock, payable to
him; such a suit is not affected by the
fact that certain creditors are proceed-
ing against the stockholders by motion
under the statute, since the proceeding
by motion is cumulative merely and
not exclusive. Chandler v. Keith, 42
Iowa, 99 (1875), holds -that a stock-
holder who had paid all regular assess-

ments could not be called upon by the
receiver, in an action at law, to pay
the remainder of his subscription until
a general call is made upon the stock-
holders for the amount assessed upon
their shares, and this call should be
preceded by the fact that losses have
been sustained by the corporation,

showing a necessity for an assessment
and call upon the stockholders. Under
the English Railway Companies Act of
1867, a receiver has no such power. In
re Birmingham, etc., R’y Co., L. R., 18
Chan. Div., 155 (1881). In New York,-
by statute, the receiver may sue. See
Dayton v. Borst, 81 N. Y., 484 (1865);
and see, previous to the statute, Mann
v. Pentz, 3 N. Y., 415 (1850), reversing
2 Sandf. Ch., 257. The receiver cannot
enforce the subscription where the de-
fendant had transferred his ‘stock and
been discharged by the . corporation.

Cutting v..Damerel, 88 N. Y., 410 (1882).

It may be remarked here that the re-

ceiver has no power to enforce statutory,
liability, this liability not being an asset
of the corporation. See Farnsworth v.

Wood, 91 N. Y., 308 (1883), and the
chapter on Statutory Liability, infra.

The receiver of a foreign corporation,

duly empowered to sue at home, may
sue resident stockholders for the bal-

ances due the company, provided the
corporation itself could have done so if
it had remained solvent. Dayton v.

Borst, 31 N. Y., 485 (1865), a case where
a receiver appointed by the court of
chancery in New Jersey was held com-

petent to maintain a suit of this nature

in New York against a citizen thereof.

219
§ 208.]

SUBSCRIPTIONS AND CORPORATE CREDITORS.

[cH. Xr,

As long as the authority of the receiver exists, a creditor can-
not directly bring suit against delinquent share-owners, but the re-
ceiver may be compelled to act in the matter at the instance of

creditors.!

An assignee for the benefit of the creditors of a corporation, like
a receiver, represents both the corporation and the creditors, and
should collect unpaid subscriptions;? and, in like manner, an as-
signee in bankruptcy may sue to recover the amounts due by stock-
holders on account of their subscriptions, and his proper remedy is

Mann wv. Cook, 20 Conn., 178 (1850);
McDonough v. Phelps, 15 How, Prac.,
372 (1856); Seymour v. Sturgess, 26 N.
Y., 134 (1862). It has been held that a
receiver may collect unpaid balances
due on subscriptions, although the
other corporate assets have not been
collected and the amount of the lia-
bilities is undetermined. Starke v.
Burke, 9 La. Ann., 841 (1854). And that
if, on the final settlement, there is a
surplus, it is to be returned pro rata to
the shareholders. Pentz v. Hawley, 1
Barb. Chan. (N. Y.), 122 (1845). But
the more modern and better rule is that
a receiver has no authority to call upon
a subscriber for his unpaid balance
until the court have determined the
amount of the corporate indebtedness
and fixed definitely the liability of each
share of the stock. Chandler v. Keith,
42 Iowa, 99 (1875). See, also, Mills v.
Scott, 99 U. 8., 25 (1878). After a trans-
fer, the transferrer is not liable to the
receiver any more than he would have
been to the corporation. Billings vD
Robinson, 94 N. Y., 415 (1884) ; affirm-
ing 28 Hun, 122. The court cannot
give a receiver power to compromise
claims upon unpaid subscriptions.
Chandler v. Brown, 77 Ill., 883 (1875).
See §§ 167-171, 210. It has been held that
the assignee cannot sue to set aside a
fraudulent device by which a stock-
holder has escaped payment of his sub-
scription. Bouton v. Dement, 14 N. E.
Rep., 62 (Ill, 1887). Receiver cannot
enforce subscriptions which the corpo-
ration could not enforce. Winters v.

Armstrong, 87 Fed. Rep., 508 (1889).
The receiver may sell the subscription
at auction and the subscriber may buy
it. Dean v. Biggs, 25 Hun, 122 (1881).
1It is the receiver's duty to act
promptly and vigilantly in the collection
of the assets, and to compel payment of
balances due by subscribers on unpaid
stock, if such a course is necessary to
meet the demands of creditors. If the
receiver fails to do’ his duty in this re-
spect the creditors‘may compel him to
act, inasmuch as they cannot act di-
rectly themselves. Gas Light Co. v
Haynes, 7 La. Ann., 114 (1852); New
Orleans Gas Light Co. v. Bennett, 6 id.,
457 (1851); Starke v. Burke, 9 id., 341
(1854); Atwood v. Rhode Island Agric,
Bank, 1 R. I., 376 (1850); Rankine v. El-
liott, 16 N. Y., 877, holding that when a
receiver of an insolvent railroad is ap-
pointed in an action in behalf of all its
creditors, the right to proceed for the
collection of unpaid subscriptions vests
in him, and a judgment creditor will be
enjoined from proceeding against a
stockholder in an action begun after the |
order was made but before the appoint-
ment is perfected.

2 Shockley v. Fisher, 75 Mo., 498 (1882);
Vanderwerker v. Glenn, 6 5. E. Rep.,
806 (Va., 1888). Cf. Germantown, etc.,
R’y Co. v. Fitler, 60 Penn. St., 124 (1869);
Eppright v. Nickerson, 78 Mo., 482 (1888),
holding that an insolvent corporation
may include in an assignment for the
benefit of its creditors, the liability of
its stockholders for unpaid stock for
which no call has been made.

220

 
i

SUBSCRIPTIONS AND CORPORATE CREDITORS.

CH. XI.| [§ 209.

by bill in equity, making all the delinquent share-owners parties to
the bill.

§ 209. The judgment against the corporation impeachable only
for fraud or want of jurisdiction.— That a judgment conclusively
settles all matters of controversy involved in the suit, so far as par-

ties or their privies are concerned, excepting where it may be im-

peached for fraud or want of jurisdiction, is well-established law.
When, therefore, a corporate creditor has obtained judgment against
_the corporation, and execution is returned unsatisfied, and he then
proceeds to enforce his remedy against the holders of stock not
paid up, the question arises whether the stockholder may set up in
~ defense matters which the corporation might have set up or did set
up to defeat the creditor’s claim against the corporation.

It has been strenuously insisted that he might. This was Chan-
cellor Kent’s famous contention in the case of Slee v. Bloom;? but
the authorities have firmly established the rule that, in the absence
of fraud and collusion, judgments against the corporation, if the
court had jurisdiction, are conclusive against the stockholders as to
the validity and amount of the creditor’s claim.’ Thus, it is held

that the stockholder cannot take advantage, in the suit against

lSawyer v. Hoag, 17 Wall., 610, 621

(1878); Upton v. Tribilcock, 91 U. 8., 45
(1875); Sanger v. Upton, id., 56; Web-

ster v. Upton, id., 65; Chubb v. Upton,
95 id., 665 (1877); Payson v. Stoever, 2
Dill., 427 (1873); Upton v. Hansbrough,
8 Biss., 417 (1873). Cf. County of Mor-
gan v. Allen, 103 U. S., 498 (1880). The
principles of equity applicable in cases
of this nature to actions by a receiver
will, in general, unless some statute has
changed the law, be found applicable to
these actions when brought by assignees
at common law or in bankruptcy.

25 Johns. Chan., 866 (1820); reversed
by 19 Johns., 456, 4783 (1822), by Spen-
cer, C.J. 181 U.S. 319.

3 Slee v. Bloom, 20 Johns., 669 (1822);
Henry v. Vermillion, etc., R. R. Co.,
17 Ohio, 187 (1848); Hampson v. Weare,
4 Iowa, 13 (1856); Milliken v. White-
house, 49 Me., 527 (1860); Wilson v.
Pittsburgh, etc., Coal Co., 48 Penn. St.,
424 (1862); Bank of Wooster v. Stevens,
1 Ohio St., 233 (1853); Stephens v. Fox,
88 N. Y., 313 (1881); Marsh v. Bur-
roughs, 1 Woods, 463 (1871); Grund v.

Tucker, 5 Kan., 70 (1869); Bissit v. Ken-
tucky River Navigation Co., 15 Fed.
Rep., 353, and the note, p. 360 (1882);
Hawes v. Petroleum Co., 101 Mass., 385
(1869).
statutory liability of stockholders, a
judgment against the corporation is
equally conclusive. Donworth v. Cool-
baugh, 5 Iowa, 300 (1857); Came wv.
Brigham, 39 Me., 35 (1854); Hawes v.
Anglo-Saxon Petroleum Co.,.101 Mass.,
885 (1869), holding that a judgment by
default
Stephens v, Fox, 83 N. Y., 313 (1881);
Holyoke Bank v. Goodman Paper Mfg.
Co., 63 Mass., 576 (1852), holding that a
judgment by default is conclusive;
Bigelow on Estoppel, 129, 4th ed. ; Free-
man on Judgments, § 177, 8d ed. The
stockholder may, of course, set up that
he is not a stockholder, and other sim-
ilar defenses, such as are specified in
chapter X. See infra, §$ 210, 224. See,
also, Merrill v. Suffolk Bank, 31 Ma,
57 (1849); Johnson v. Sommerville, etc.,
Co., 81 Mass., 216 (1860); Glenn wv.
Springs, 26 Fed. Rep., 494; 38 id,, 187.

221

i

So, also, in actions to enforce |

is prima facie conclusive; .
§ 209.) :

SUBSCRIPTIONS AND CORPORATE CREDITORS.

[CH. Xz.

him, of a defect in the service of process upon the corporation in

the original suit.

His remedy in such a case is by a direct pro-

ceeding! In New York the conclusiveness of the judgment in
these cases has been much questioned. 2

Where the stockholders are liable only on a particular class of
corporate debts, or to certain classes of creditors only, the court

1Came v. Brigham, 89 Me., 35 (1854);
Wheeler v. Millar, 24 Hun, 541 (1881).

Nor can he set up that the creditors”

rights are based on purchases made
ultra vires by the corporate officers.
Suniner v. Marcy, 38 Woodb. & M., 105
(1847). In Chesnut v. Pennell, 92 Il.,
55 (1879), it was held that a decree
against the corporation is not admissi-
ble in evidence against a stockholder
who was not a party to the bill or de-
cree, actually or constructively, and
” that in such a case proof of the liability
of the corporation to the creditor should
be given.

2New York is practically the only
state' where this question presents any
difficulty, and the confusion which
there reigns is largely due to the failure
to distinguish between cases of liability
for unpaid subscriptions and liabilities
created by statute. In some of the
cases the meaning of the court is not
clear, and often the question did not
come up directly for decision. The
general rule was originally stated essen-
tially as in the text, by Spencer, C. J.,
in Slee v. Bloom, 20 Johns., 669 (1822),
reversing S. C., 5 Johns. Ch., 366 (1821),
This was followed by Moss v. Oakley, 2
Hill, 265 (1842). Moss v. McCullough, 5
Hill, 181 (1843), started a new theory
that the case was the ordinary one of
principal and surety, and hence a judg-
ment against the corporation was not
even prima facie evidence against the
stockholder. Although this ruling was
overturned on the final determination,
8. C.,7 Barb., 279 (1849), it was fol-
lowed in Strong v. Wheaton, 88 Barb.,
616 (1861). In Belmont v. Coleman, 21
N. Y., 96 (1860), on appeal from 1
Bosw., 188, three justices affirmed the

ruling below that the judgment was
prima facie evidence, while the other
four refused to commit themselves
to that doctrine. Conklin v. Furman,
8 Abb. Pr. (N. 8.), 161 (1865), accepts
the original rule as stated by C. J.
Spencer. Then follow two later cases,
Miller v. White, 50 N. Y., 187 (1872),
and McMahon v. Macy, 51 id., 155,
which reject that rule in strong terms,
But both these cases are easily distin-
guishable on the principle stated supra.
They were suits to enforce a statutory
penalty against trustees for failure to
file a certain report. It may be said,
then, that after all, the New York rule,
in the cases really covered by the lan-
guage of the text, differs comparatively
little from the general law. The courts,
under the influence of some of the
earlier decisions, hesitate to accept the
rule of conclusiveness; but the latest
case in the court of appeals, Rapallo, J.,
uses this language: ‘* The creditor thus
claims through the corporation, and to
entitle him to this statutory subroga-
tion or transfer he need only show that
he is a creditor. If he shows this fact
by evidence which is binding and con-
clusive against the corporation, such
evidence should be competent against
the stockholder to establish the title of
the creditor to succeed to the rights
of the corporation, A judgment against
the corporation, being the highest evi-
dence against it, should be as effectual
to pass its title to the fund in question
as a deed or any other form of transfer.”
Stephens v. Fox, 88 N. Y., 318, 817
(1881). Cf. Wheeler v. Millar, supra.
See, also, Grund v. Tucker, 5 Kan., 70
(1869); Merchants’ Bank v. Chandler, 19
Wis., 484 (1865).

222
‘

CH. XI. ] SUBSCRIPTIONS AND CORPORATE CREDITORS.

[$$ 210, 211.
will not, of course, reject evidence tending to show either that the
debt recovered belongs or does not belong to the class on which
the shareholder is iiable.!

§ 210. Defenses available against corporate creditors in actions
to compel payment of balances of subscriptions.— There are, of
course, certain defenses which subscribers may set up when actions
are brought against them on behalf of corporate creditors. These
defenses are the same as those which may be set up to defeat an
action by the corporation to enforce the subscription.2 But both
in England and in this country the courts do not favor such de-
fenses, especially after the corporation has become insolvent.
Moreover, there are many defenses which might defeat an action
by the corporation, but which do not prevent the corporate creditor
from enforcing the subscription.

 § 211. Contribution — Corporate creditors compelling stockhold-
ers to pay their subscriptions are under no obligation to see that
the payments made by the subscribers are proportionally equal.

1 Wilson v, The Stockholders, 43 Penn.
St., 424 (1862); Conant v. Van Schaick, 24
Barb., 87 (1857); Larrabee v. Baldwin, 35
Cal., 155 (1868). Cf. Hudson v. Carman,
41 Me., 84 (1856), holding that the judg-
ment obtained’ may not be conclusive
evidence of the organization and exist-
ence of the corporation, and if denied
they must be proved.

2 See chapter X.

8Such as fraud on the part of the

corporation, inducing a subscription.
See §§ 163, 164, supra. So, also, fraud
and mismanagement on the part of the
directors and corporate officers is not a
valid defense herein. In re Republic
Insurance Co., 8 Biss., 452 (1873). The
stockholder may set up that the corpo-
ration had no stock to offer him. Lath-
rop v. Kneeland, 46 Barb., 482 (1866).
Cf. Mackley’s Case, L. R., 1 Chan. Div.,
247 (1875). Acts that estop the sub-
scriber as against the corporation estop
him as to corporate creditors. Gris-
wold v. Seligman, 72 Mo., 110 (1880).
But mere entries in corporate books
are not admissible in evidence to prove
the creditor’s claim. Neilson v. Craw-
ford, 52 Cal., 248 (1877).

Where a firm or partnership becomes
a subscriber in the copartnership name,

corporate creditors may have execution
against any one of the partners, The
partnership subscription is not a de-
fense of which any single partner can
avail himself to escape liability. Bray’s
Adm’r v, Seligman’s Adm’r, 75 Mo., 31 ,
(1881), It is no defense that judgment
against the defendant stockholder for
the full amount of his liability has been
recovered by other creditors, and that
he settled the same at adiscount. Kun-
kelman v. Rentchler, 15 Brad. (IIl.), 271
(1884). Prominent among these de-
fenses is the defense that the corpora-
tion contracted with the defendant
that his stock should be deemed fully
paid-up stock, although in fact the full
par value had never been paid. Vide
chapter ITI.

The unpaid subscription may be col-
lected in payment of damages for a tort
the same as for a contract debt. Powell
v. Oregonian R’y, 36 Fed. Rep., 726
(1888); 88 id.; 187. In Maine this rule
is declared by statute. Grindle v. Stone,
4 East. Rep., 623 (1886). For many
other defenses, see ch. XII, where de-
fenses were set up to defeat the stat-
utory liability.

4Pentz v. Hawley, 1 Barb, Chan., 122
(1845),

223
§ 211.]

SUBSCRIPTIONS AND CORPORATE CREDITORS.

[oH. x1.

A court of chancery will compel subscribers to pay in full the
amount of their unpaid subscriptions if the corporate indebtedness
make it necessary, leaving them to seek contribution from the

other shareholders.

The rule, moreover, is well settled that a

shareholder who has been compelled to pay more than his propor.
tion of the debts of the company may maintain an action against
his co-stockholders for contribution.’

Contribution may properly be enforced in the corporate cred-
itor’s suit. It is largely for this purpose that all the delinquent
shareholders may_be and should be made parties defendant.’

1Pentz v. Hawley, supra, 1845; Evans
v. Coventry, 25 L. J. Chan., 489 (1856);
Marsh v. Burroughs, 1 Woods, 463 (1871).
As to whether solvent stockholders are
required to make up, for the benefit of
creditors, the deficiency of defaulting
or insolvent subscribers to the full
amount of the former’s own unpaid
subscriptions, see South C. Mfg. Co.
v, Bank of S. C., 6 Rich. (Eq.), 227
(1854). But actual subscribers are not
liable for that part of the capital stock
which was never subscribed. Evans v.
Coventry, 25 L. J. Chan,, 489 (1856). It
is no defense to show that notes were
given in payment of subscriptions, or
that the notes by insolvent persons were
procured to be given, when it appears
that nothing was ever realized from the
notes. Nathan v. Whitlock, 9 Paige
Chan., 152 (1841). When it is made to
appear by proof that some of the stock-
holders.are insolvent, the solvent must
pay the proportion of the insolvent, to
be apportioned among them according
to and up to the amount of their stock
subscribed and unpaid. Hodges v. Sil-
ver, etc., Co., 9 Oregon, 200 (1881).

2 Wincock v. Turpin, 96 Ill., 185 (1880);
Millaudon v. New Orleans, etc., R. R.
Co., 3 Rob. (La.), 488 (1848); Marsh v.
Burroughs, 1 Woods, 463 (1871); Holmes
v. Sherwood, 8 McCrary, 405 (1881);
Umsted v. Buskirk, 17 O. St, 113
(1866); Matthews v. Albert, 24 Md., 527

224

(1866); Stewart v. Lay, 45 Iowa, 604
(1877); Hadley v. Russell, 40 N. H., 109
(1860); Erickson v. Nesmith, 46 id., 371
(1866); Masters v. Rossie Lead Mining
Co., 2 Sandf. Chan., 801 °(1845); Aspin-
wall v. Torrence, 1 Lans., 381 (1870);
Stover v. Flack, 30.N. Y., 64 (1864); Far-
row v. Bivings, 13 Rich. (Eq.), 25 (1866);
Brinham v. Wellersburg Coal Co., 47
Penn. St., 48 (1864). CfA Andrews v.
Collender, 30 Mass., 484 (1833); Gray v.
Coffin, 63 Mass., 192 (1852); Sutton’s
Case, 3 De G. & Sm., 262 (1850). In
Pennsylvania the right to contribution
is said to be purely statutory. Brinham
v. Wellersburg Coal Co., supra.

3N. Y. Code of- Civil Procedure,
§§ 1791-1794; Masters v. Rossie Lead
Mining Co., 2 Sandf. Chan., 301 (1845);
Holmes v, Sherwood, 3 McCrary, 405
(1881); Hadley v. Russell, 40'N. H., 109
(1860); Umsted v. Buskirk, 17 O. St.,
118 (1866); Hodges v. Silver Hill Mining
Co., 9 Oregon, 200 (1881). Where the
articles of incorporation provide that
the indebtedness shall not exceed a cer-
tain sum, but debts are contracted in
excess of the limit, and, the corporation
being insolvent, the officer who con-
tracted the debt pays it off out of his
own individual funds, he cannot claim
contribution unless the debt in excess
of the limit was contracted by the
unanimous assent of the stockholders.
Haldeman v. Ainslie, 82 Ky., 895 (1884).
CHAPTER XII.

STATUTORY LIABILITY OF STOCKHOLDERS TO CORPORATE CRED-
ITORS.

A. EXTENT OF THE LIABILITY. § 220. Difficulty in determining
whether the creditor’s rem-
edy is at law or in equity.

The remedy at law. :

The remedy in equity.

Enforcement of the statutory:
liability by means of courts
in other states,

How far the judgment against
the corporation is conclusive
of the creditor's claim.

Stockholder’s miscellaneous de-
fenses against his statutory
liability — Defense of re-
lease — Defense of liability

§ 212. Statutory liability in general.
214, The liability is strictly construed 224
and limited. 999.

215. Particular statutes construed as | 203.
to the extent of the liability. ag

216. Waiver by corporate creditors of
their statutory rights against 204
stockholders. :

217.. Statutory Hability not enforce-
able to pay damagesrecovered | 905

against the corporation in tort. .

B. ENFORCEMENT OF THE STATUTORY

EE already paid — Defense of
218. The statutory liability can be set-off — Defense of inter-
enforced by corporate cred- est— Defense of costs— De-
itors only. fense of statute of limita-
219. Judgment, execution, etc., tions — Other defenses.

against the corporation, a 226. Priority among creditors,
condition precedent to the 227. Contribution among stockhold-
right to enforce the statutory ers.

liability,

 

‘A. EXTENT OF THE LIABILITY.

§ 212, Statutory liability in general.— Probably the most clar-
acteristic feature of a corporate existence is the fact that, by being
a corporation, its stockholders are liable only for the par value of
the stock held by them. This exemption from liability need not
be declared in the charter, but.flows from the very fact of incor-
poration., For this reason legislatures are very careful, in giving
joint-stock companies certain. special powers, to distinctly declare
that the company shall not thereby become a corporation. The
very fact of incorporation by itself releases subscribers for stock
from all liability for corporate debts, except to the extent of their
unpaid subscriptions. It has been deemed wise, however, by the
state legislatures, in many instances, to increase the liability of
stockholders to corporate creditors. Accordingly, statutes are
passed expressly declaring that the’ stockholders shall be so liable
fer a specified sum, in addition to their unpaid subscriptions. This
is called the statutory liability of stockholders. It rarely exists

a oS =e

\
of

§§$ 214, 215.] sTraTuToRY LIABILITY OF STOCKHOLDERS. (CH. x1r.

as regards stockholders in railroad corporations, but frequently
exists in the case of manufacturing and various other corpora-
tions.

This additional liability may be imposed by the state constitu-
tion, or by the charter, or by a general statute. Where this liabil-
ity is imposed by a provision existing at the time of the creation
of the corporation, there is no doubt of its constitutionality. But
where the liability is created by a statute or constitutional provis-
ion enacted after the corporation was incorporated, then there
arise difficult questions of constitutional validity. A full discus-
sion, however, of the constitutionality of such a statute is consid-
ered elsewhere.’

§ 214. This liability is strictly construed and limited. Inasmuch
as all statutes creating an additional liability on the part of stock-
‘holders are in derogation of the common law, they are to be strictly
construed. They are a wide departure from established rules, and,
though founded on considerations of public policy and general con-
venience, are not to be extended beyond the plain intent of the
words of the statute.*

§ 215. Particular statutes construed.— Tie character, nature and
extent of the liability imposed by constitutional provisions or by
statute upon stockholders, in addition to their common-law liabil-

ity, vary, of course, widely, and the extent of the liability created

1A complete statement of the liabil-
ity of stockholders in various corpora-
‘tions in all the states and territories is
given in another book published by the
author,
2See § 497, infra. A constitutional
liability may not be enforceable where
no statute has been passed to enforce
it; as, for example, the provision that
“dues from corporations shall be se-
cured by individual liability of the stock-
holders to an additional amount equal
to the stock owned by each stockholder,
-and snch other means as shall be pro-
vided by law.” Morley v. Thayer, 8 Fed.
Rep., 787 (1880). ‘
3Gray v. Coffin, 9 Cush., 192 (1852);
’ O'Reilly v., Bard, 105 Penn. St., 569
(1884); Chase » Lord, 77 N. Y., 1 (1879);
Mean’s Appeal, 85 Penn. St., 75 (1877);
Dane v. Dane Mfg. Co., 14 Gray, 489
41859); Chamberlin v. Huguenot Mfg.
Co., 118 Mass., 582 (1875); Grose v. Hilt,
36 Me., 22 (1853); Coffin vu. Rich., 45 id.,

511; Windham. Provident Institution,
ete, v. Sprague, 43 Vt., 502 (187%);
Dauchy v. Brown, 24 id., 197; Moyer v.
Pennsylvania Slate Co., 71 Penn St.,
293 (1872); Youghiogheny Shaft Co. v.
Evans, 72 id., 831 (1872); Diven v. Lee,
36 N. Y., 802 (1867); Lowry v. Inman, 46
id., 119 (:871); Salt Lake City National
Bank v. Uendrickson, 40 N. J. Law, 62.
Cf. Priest v. Essex Hat Mfg. Co,, 115
Mass., 880 (1874); Ripley v. Sampson, 10
Pick., 871 (1830): Knowlton vu. Ackley,
8 Cush.. 93 (1851); Bassett v. St. Albans
Hotel Co., 47 Vt., 818 (1875); David-
son v, Rankin, 34 Cal., 503 (1868); Moke-
lumne Hill, ete, Co, v. Woodbury, 14
id., 265 (1859); Dewey v, St, Albans
Trust C.»., 57 Vt., 882 (1885). A con-
trary rule seems to have been adopted
in Carver v. Braintree Mfg. Co., 2Story,
482 (1845), where liability for debts con-
tracted during membership was held
to include *‘dues owing.” Freeland »
McCullough, 1 Denio, 414 (1845).

226
1
'

CH. XII.] STATUTORY LIABILITY OF STOCKHOLDERS. [§ 215.
by each statute will depend entirely upon the particular words of
the enactment.’ Occasionally, however, a provision imposing addi-
tional liability is found to be substantially repeated i in the statutes
of many states. Such is the case with the provision that stock-
holders shall be liable “to an amount equal to their stock.” This
is construed to impose a double liability.2 When it has been en-
forced, each subscriber will have paid double for his stock—once
on the subscription and once on the statutory liability.
Stockholders in national banks are subject to this double liabil-
ity. Not only that, but if at any time the capital stock of the bank
becomes diminished by losses, the comptroller of the currency may
compel the stockholders to discontinue business or to assess them-

selves to replace the loss.?

A very common statutory liability is that which makes stock-

holders liable for debts due from

1 Root v. Sinnock, 11 N. E. Rep., 339
(I.,.1887), citing many cases; Wheeler
v. Millar, 90 N. Y., 353, 859 (1882); Mat-
ter of the Empire City B’k, 18 N. Y.,
199, 218 (1858); Ohio Life Ins. Co. vw,
Merchants’ Ins. Co., 11 Humph. (Tenn.),
1, 23 (1850); Lewis v. St. Charles Co., 5
Mo. App., 225 (1878). Cf. Briggs wv.
Penniman, 8 Cow., 887 (1826); B’k of
Poughkeepsie v. Ibbotson, 24 Wend.,
473 (1840). The constitution of Missouri
formerly contained a provision, now re-
pealed, imposing a double liability. See
Perry v. Turner, 55 Mo., 418 (1877). By
the constitution of 1575, a provision
taken from amendment of 1870 provides,
**in no case shall any stockholder be in-
dividually liable in any amount over
and above the amount of stock owned
by him or her.” Construed in Schricker
v. Ridings, 65 Mo., 208, to limit liability
to unpaid subscriptions. Prov. Sav.
Inst. v. Jackson, etc., 52 Mo., 552 (1878);
Miller v. Marion, 50 id., 55 (1872); Perry
v. Turner, 55 id., 418 (1874). See, also,
Ochiltree v. Ruilroad Co., 21 Wall., 249
(1874), A statute imposing a liability to
the amount of the stock has been held in
Texas to be merely declaratory of the
subscription liability. Walker v. Lewis,
49 Tex., 128. In Massachusetts, by stat-
ute, stockholders in manufacturing cor-
porations are liable as tenants in com-

the corporation to its servants or

mon to credifors, to the extent of the cap-
ital stock, until it has been divided into
shares. Hawes v. Anglo-Saxon Petro-
leum Co., 101 Mass., 885 (1869); Same v.
Same, 111 id., 200 (1872). Cf. Burnape
v. Haskins Steam-engine Co., 127 Mass.,
586 (1879), Cf. Hager v. Cleveland,
supra; Morris v. Johnson, supra. But
where some of the stock is held by the
corporation itself, this will not compel
the other shareholders to bear the stat-
utory liability as to the stock so held by
the corporation. Crease v. Babcock, 10
Metc., 525, 556 (1846). A liability imposed
until a specified certificate is filed is
not revived by an increase of the capital '
stock. Veeder v. Mudgett, 95 N. Y.,
295 (1881), See, also, Ochiltree v. Rail-
toad Co., 21 Wall., 249 (1874), as to lia-
bility on increase of capital stock. As
to the liability on a reduction of the.
capital stock, and the constitutionality
thereof, see Dane v. Young, 61 Me., 160
(1872); also § 497, infra.

' 2A liability “to an amount equal to
the amount of stock held by them re-
spectively ” has been construed to create
the double liability. Booth v. Camp-
bell, 37 Md., 522 (1872); Matthews v.
Albert, 24 id., 527 (1866); Morris v.
Johnson, 34 id., 485 (1871); Hager wv.
Cleveland, 86 id., 476, 491 (1872).

' 88ee R. 8S, of U. S., § 5205,

\ 227
§ 215.]

laborers.

STATUTORY LIABILITY oF STOCKHOLDERS.

[cu. | ‘ert,

There has been difficulty in determining’ what persons

are to be classed as servants, but the courts are not, inclined to
give a broad application to the word.

1It may be stated as the rule, that
only those who perform menial or man-
ual services are within the class contem-
plated in the statute; ‘that he who
performs them must be of a class whose
members usually look to the reward of
a day’s labor or service for immediate
or present support, from whom the
company does not expect credit, and to
whom its futuro ability to pay is of no
consequence.” Wakefield v. Fargo, 90
N. Y., 218, 217 (1882). Cf. Adams v.
Goodrich, 55 Ga., 238 (1875). This over-
rules some of the earlier New York
cases, ¢. g., Vincent v. Bramford, 1
Jones & Sp., 506; S. C., 12 Abb. Prac,
(N. S.), 252, which held an engineer and
foreman, who sometimes also acted as
superintendent, to be a servant within
the meaning of the rule; Harris v. Nor-
vell, 1 Abb. N. C., 127 (1876), which
held a reporter employed by a news-
paper company, and a city or assistant
editor, if not an officer of the company,
to be a servant; Hovey v. Ten Broeck,
8 Robertson, 316 (1865), holding an over-
seer and book-keeper within the protec-
tion of the act. A master mechanic and
superintendent of works is a servant or
laborer. Sleeper v. Goodwin, 31 N. W.
Rep., 835 (Wis., 1887). The following
employees have been held not servants
or laborers within the protection of the
rule: The secretary of a manufacturing
company. Coffin v. Reynolds, 87 N. Y.,
610 (1868), overruling Richardson v.
-Abendroth, 43 Barb., 163, and perhaps
Williamson v. Wadsworth, 49 id., 294
(1867), which is the case of a civil en-
gineer and traveling agent at a fixed
salary. A civilengineer. Pennsylvania,
etc., R. R. Co. v. Leuffer, 84 Penn. St.,
168 (1877). Contra, Conant v. Van
Schaick, 24 Barb., 87. Cf. Williamson
v, Wadsworth, 49 Barb., 294 (1861), A
consu'ting engineer. Ericsson v. Brown,
88 Barb., 390 (1862). -An assistant chief

engineer. Brockway v. Innes, 39 Mich.,
47 (1878). Cf. Peck v. Miller, 39 Mich.,
594 (1878). An overseer on a plantation,
Whitaker v. Smith, 81 N. C., 340 (1879),
Contra, Hovey v. Ten Broeck, 3 Robert-
son (N. Y. Super. Ct.), 316 (1875). A con-
tractor. Boutwell v.Townsend, 87 Barb.,
205 (1860); Aikin v, Wasson, 24 .N. Y,,
482 (1862) ; Balch v. New York, etc., R.
R. Co., 46 id., 521 (1871); Atcherson v,
Troy, etc, R. R. Co., 6 Abb, Prac,
(N. 8.), 829. Cf. Kent v. New York,
etc, R. R. Co., 12 N. Y., 628 (1855);
McCluskey v. Cromwell, 11 id., 593. An
agent of a mining corporation employed
to take charge of its mines in a foreign
country. Hill v. Spencer, 61 N. Y., 274
(1874); Dean v. De Wolf, 16 Hun, 186
(1878); Krauser v. Ruckel, 17 id., 463
(1879). A book-keeper and general man-
ager, Wakefield v. Fargo, 90 N. Y., 218
(1882), A superintendent. Kincaid v,
Dwinelle, 59 N. Y., 543 (1875). Cf. Gor-
don v. Jennings, L. R., 9 Q. B. Div., 45
(1882), And compare, also, Gurney v.
Atlantic, etc., R’y Co., 58 N. Y., 3858
(1874), Butin general only manual or
menial laborers are protected by the
statute. Adams v. Goodrich, 55 Ga,
835; People v. Remington, 43 Hun,
829 (1887). Cf. Heebner v, Chave, 5
Penn. St., 115 (1847); Harrod v. Hamer,
82 Wis., 162(1873), Under the mechan-
ics’ lien laws of the several states, a
wider meaning has been given to the
word ‘‘laborers.” ‘hese cases are fre-
quently confused with the statutes con-
sidered herein. Stryker v. Cassidy, 76
N. Y., 60 (1879); Mutual Benefit Ins. Co.
», Rowood, 26 N. J. Eq., 889 (1875);
Bank of Pennsylvania v. Gries, 35 Penn.
St., 4238 (1860); Arnoldi v. Gonin, 22
Grant’s Chan, (Upp. Can.), 814 (1875);
Mulligan v, Mulligan, 18 La, Ann,, 21
(1866); Knight v. Norris, 18 Minn., 475
(1868); Raeder v. Bensberg, 6 Mo, App,
445 (1878); Foushee v. Grigsby, 12 Bush,

228
CH. X11. ]

‘stockholder debts which the corporation fails to pay.!

STATUTORY LIABILITY OF STOCKHOLDERS. [§ 216.

,

§ 216. Waiver by corporate creditors of their statutory rights |
against shareholders.— A corporate creditor may, by express con-
tract, when the debt is incurred, waive his right to collect from the
And the
corporation in its contracts with third persons may, it is held in

_ England, lawfully stipulate for the exemption of its members from

the. liability imposed upon them by statute in ae event of the in-
solvency of the corporation?

It has beén held to be competent for any one dealing with the
company to contract to hold the shareholders responsible to only a
limited extent, to no extent at all, or to any specified extent mutu-

ally agreed upon.

%5 (1876); Smallhouse v. Kentucky, etc.,
Co., 2 Montana, 448 (1876); Capron v.
Stout, 11 Nev., 204 (1881). The mere
fact that one does some manual labor
incidental to his position as manager
or foreman or superintendent, will not
constitute him a laborer within the in-
tent of these statutes. Krauser v.
Ruckel, 17 Hun, 463 (1879); Ericsson v.
Brown, 38 Barb., 390 (1862). Cf. Wake-
field v. Fargo, 90 N. Y., 218 (1882.) But
where a foreman did so much manual
labor that it was not a mere incident of
his foremanship, it was held that he
might recover as a laborer. Short v.
Medberry, 29 Hun, 39 (1883). See, also,
Poor on N. Y. Mfg. Act, p. 70. In con-
struction of the Pennsylvania liability
for labor and supplies, see Weiss v.
Mauch Chunk Iron Co., 58 Penn. St.,
295 (1868); Reading Industrial Manuf’¢g
Co. v. Graeff, 64 id., 395 (1870); Moyer
v. Pennsylvania, ete., 71 Pa. St., 293
(1872), where a statute imposing liabil-
ity for debts due workmen, etc., and
materials furnished was construed not
to include debts for hauling, repairing

-wagons, lumber for erecting machinery,

powder for blasting, ete. ; Weigley v.
Coal Gil Co., 5 Phila., 67 (1862).

1Robinson v. Bidwell, 22 Cal., 379
(1863); French v. Teschemaker, 24 id.,
518 (1864); Basshor v. Forbes, 36 Md.,
154 (1872); Brown v. Eastern Slate Co.,
184 Mass., 590 (1883), where the waiver
was oral,

Dowdall, 18 Q. B. D. (1852).

2 Re Athenzeum, etc., Society, 3 De G.
& J., 660 (1859); Halket v. Merchant
Traders’, etc., Association, 13 Q. B., 960
(1849); Durham’s Case, 4 Kay & J., 517
(1858) Cf. Shelford on Joint-stock
Companies (2d London edition), 4

317 re State Fire Insurance Co., 1
Hem. & M., 457 (1863); S. C., 1 De G.,
J. & J., 684; 85 L. J. Chan., 834; 84 id.,
436; Hassell v. Merchant Traders’ Asso-
ciation, 4 Exch., 525; Lord ‘Talbot’s
Case, 5 De G. & Sm., 386 (1852); 8. C.,
21 L. J. Chan., 816. See, also, Reid v.
Allan, 4 Exch., 326 (1849); 8. C., 19 L.
J. Exch., 39. And compare In re In-
dependent Assurance Co., Eu parte
Cope, 1 Sim. (N. 8.), 54; Sunderland

‘Marine Insurance Co. v. Kearney, 16
-Q. B., 925 (1851); 8. C., 20 L. J. Q. B.),

417; Pedell v. Gwynn, 1 Hurl. & N,,
590 (1857); S.C., 26 L. J. Exch., 199;
Gordon v. Sea, Fire and Life Assurance
Society, 1 Hurl. & N., 599 (1857); 8. C.,

29 L. J. Exch., 202. ee see Hess v.
Werts, 4 Serg. & R., 361 (1818); King wv.
Accumulation, etc., Assurance Co., 3
Cc. B., N.S., 151.(1857). Cf. Mallett v.
The mere
fact that the articles of association of
an unincorpprated company provide
against personal liability is no defense,
even though the contracts say that they
are subject to the provisions in such arti-
cles. Sullivan v. Campbell, 2 Hall
(N. Y.), 271 (1829); Hess v, Wirts, 4 Serg.
& R. (Pa.), 356 (1818); Green wood’s Case,

229
8§ 217, 218.]

STATUTORY LIABILITY OF STOCKHOLDERS.

[CH. Xu1,

§ 217. Statutory liability not enforceable to pay damages recov.
ered against the corporation in tort.— The statutory liability im-
posed upon the shareholders in corporations is a liability exclusively
for debts and demands accruing against the corporation by reason

of its contracts.

It cannot, therefore, be enforced to pay damages

recovered against the corporation in an action in tort.

B. THE ENFORCEMENT OF THE LIABILITY.

§ 218. The statutory liability can be enforced by corporate cred-
itors only.— The statutory liability of the stockholder is created

3 De G., M. & G., 459 (1854). The same
rule prevails in an ordinary copartner-
ship. Bromley v. Elliot, 38 N. H., 287
(1859). Directors are bound to know
of the restriction and have no recourse
to the stockholders; nor does a firm in
-which a director is amember. In re
Worcester, etc., Co., 83 De G., M. &
G., 180 (1853). Contract that promot-
ers shall not be liable binds an en-
gineer. Lardman v. Entwistle, 7 Ex.,
632 (1252). Where promoters stipu-
late that they shall not be liable the
party who tacitly assents to that condi-
tion is bound. Giles v. Smith, 11 Jur.,
334 (1847), See, also, ch. XLIII, infra;
Kent’s Com., vol. III, p. 27; Story on
Partn., §164. A contrary doctrine seems
to have prevailed in Davis v. Beverly, 2
Cranch, C. C. (U. 8.), 35 (1811); Riggs v.
Swann, 8 id., 188 (1827); reversed on
another point by Mandeville v. Riggs, 2
Pet., 482. The exemption from liability
must .be clearly proved. Skinner v.
Dayton, 19 John., 518, 587 (1822) A
stipulation against holding stockholders
liable has been held to refer to statu-
_tory liability and not the subscription
liability. Preston v. Cincinnati, etc.,
_R.R., 36 Fed. Rep., 54 (1888). ‘

1Heacock v. Sherman, 14 Wend., 59
(1835). In this case the stockholders in
a company which owned a bridge, and
against which a judgment had been re-
covered for damages, because the bridge
was out of repair, were held not to be
.liable upon such a demand, since the
act imposing a personal liability upon

them contemplated a liability only for
demands arising ex contractu. In gen-
eral, the word ‘“‘ debt,” as used in stat.
utes imposing a personal liability upon
stockholders, is construed to include
only liabilities arising ex contractu, and
not to include liability for damages re-
covered against the corporation in ac-
tions sounding in tort. Child v. Boston,
etc., Iron Works, 137 Mass., 516 (1884);
8. C., 50 Am. Rep., 328, where a judg-
ment for infringement of patent was
not enforced; Mill Dam Foundry Co.
v. Hovey, 21 Pick,, 417, 455 (1839), sus-
taining an unliquidated claim for dam-
ages; Dryden v. Kellogg, 2 Mo. App.,
87 (1876), enforcing a judgment for
breach of warranty of title; Doolittle
v. Marsh, 11 Neb., 248; Esmond v. Bul-
lard, 16 Hun, 65 (1878); 8S. C. affirmed,
sub nom. Losse v. Bullard, 79 N. ¥.,
404 (1880); Archer v. Rose, 3 Brewster
(Penn.), 264 (1871); Cable v. McCune, 26
Mo.,'871 (1858), defeating a judgment
for, damages for loss .of a steamboat;
Bohn v. Brown, 383 Mich., 257, _2638
(1876). Cf. Stanton v. Wilkeson, 8
Ben., 357, refusing to enforce herein a
judgment against a common carrier for
negligence; Chase v. Curtis, 113 U. 8,
452 (1884). Cf. Carver v. Braintree
Mfg. Co., 2 Story, 432, 448; Wyman v.
American Powder Co., 8 Cush., 168, 182;
Zimmer v. Schleehauf, 115 Mass., 52.
But the stockholders’ subscription lia-
bility may be enforced to pay damages
arising from torts. Powell v. Oregonian
R’y, 36 Fed, Rep., 726 (1888); 38 id., 187.

230
CH. xu] STATUTORY . LIABILITY OF STOCKHOLDERS.

[§ 219.
exclusively for the benefit of corporate creditors. It is not to be
numbered among the assets of the corporation, and the corporation
has no right or interest in it. It cannot enforce it by an assess-
ment upon the sharcholders.1_ Nor can the corporation upon the
insolvency assign it to a trustee for the benefit of creditors.’ It is
a liability running directly and immediately from the shareholders
to the corporate creditors.’ - Accordingly, a receiver of an insolvent
corporation, invested with “all.the estate, property and equitable
interests” of the concern, has no power to enforce such a liability
as this The action to enforce can be maintained only by the
creditors themselves, in their own rigbt and for their own benefit.®

§ 219. Judgment, exccution, etc., against the corporation a con-
dition precedent to the right to enforce the statutory liability.—
Even when not expressly provided by statute, it is the rule, accord-
ing to the weight of authority, that corporate creditors, before they
can proceed against the shareholders upon their statutory liability,
must first exhaust their remedy against the corporation and its as-
sets.§ This rule arises from the fact that the liability of the stock-

1Umstead v. Buskirk, 17 O. St., 113
(1866); Liberty Female College Asso-
ciation v. Watkins, 70 Mo., 18 (1879).

2Wright v. McCormick, 17 O. St.,
86, 95 (1866); Dutcher v. Marine Na-
tional Bank, 12 Blatch., 485 (1875).
See, also, Cuykendall v. Corning, 88
N. Y., 129 (1882).

3Bristol v. Sanford, 12 Blatch., 341
_(1874); Lane v. Morris, 8 Ga., 468 (1850);
Arenz v. Weir, 89 Ill., 25. This was.an
action by a judgment creditor against
a stockholder after a distribution of
corporate assets by a receiver, The
creditor was held to stand ‘‘on an inde-
pendent platform, above that of a re-
ceiver, having no concern with the
corporation, and the stockholder is
bound under the law to answer to him.”
Breese, J.

4 Billmgs v. Robinson, 94 N. Y., 415
(1884); Farnsworth v. Wood, 91 N. Y.,
308 (1883); Jaccbson v. Allen, 12 Fed.
Rep., 454 (1882); Cuykendall v. Corning,
88 N. Y., 129 (1882); Arenz v. Weir, 89
Il., 25; Jacobson’ v, Allen, 20 Blatch.,
525 (1882); Cutting v. Damerel, 88 N. Y.,
410 (1882). Cf. Davis v. Gray, 16 Wall.,
203 (1872); Attorney-General v, Guard-

ian Mutual, etc., Ins. Co., 77 N. ¥., 272
(1879).

5 Farnsworth v. Wocd, 91 N. Y., 308
(1883). See, also, Mason v. New York
Silk, ete., Co., 27 Hun, 307 (1882); Bill-
ings v. Trask, 30 id., 314(1883). See, also,
Walker v. Crain, 17 Barb., 128 (1858):
Story v. Furman, 25 N. Y., 215 (1862):
Cuykendall v. Corning, 88 N. Y., 129
(1882); Herkimer Co. Bank v. Furman,
17 Barb., 116 (1858); Hurd v. Tallman,
60 id., 272 (1871).

. 6Means’ Appzal, 85 Pa. St., 75 (1877);
Fourth Nat’] B’k v. Francklyn, 120
U. S., 747 (1887); Bayliss v. Swift, 40
Iowa, 648 (1875); McClaren v. Francis-
cus, 43 Mo., 452 (1869); Wright v. Mc-
Cormack, 17 O. St., 86 (1866); Wehr-
man v. Reakirt, 1 Cinn. Super. Ct., 230
(1871); Lane v. Harris, 16 Ga., 217 (1854) ;
Drinkwater v. Portland, etc,’ Ry, 18 .
Me., 35 (1841); Dauchy v. Brown, 24
Vt., 197 (1852); Cambridge Water-
works v. Somerville Dyeing Co., 4 Al-
len, 239 (1862); Toucey v.. Bowen, 1
Biss., 81 (1855). Cf. Patterson v. Wyo-
missing Mfg, Co., 40 Pa. St., 117 (1861);
Harper v. Union Mfg. Co., 100 Hil., 225
(1881); Hatch v. Burroughs, 1 Woods,

231
STATUTORY LIABILITY OF STOCKHOLDERS. {cH. xur.

§ 219.]
holders is not the usual fund for the payment of corporate debts,
but that the corporate treasury is the. primary ‘resource. Accord-
ingly, the statutory liability of the stockholders is not to be resorted
to, if the assets of the corporation, including the unpaid subscrip-
tions for stock, will suffice to pay the debts.

Frequently the statutes which impose this extraordinary or extra
common-law liability upon shareholders provide that a creditor
shall obtain judgment against the corporation, and that an exesu-
tion duly levied thereunder shall have been returned wholly or
partially unsatisfied, before the creditor has a right to proceed
against the stockholders individually.? But, in general, proceed-

439 (1870). In Colorado stockholders
liable by statute may be joined as party
‘defendants in the original suit against
the corporation. Tabor v. Goss, etc.,
Co., 18 Pac. Rep., 537 (Colo., 1888).

1 Stewart v. Lay, 45 Iowa, 604 (1877);
Wright v. McCormack, 17 O. St., 86
(1866). There is, however, a line of au-
thorities in support of the proposition
that a judgment against the corpora-
tion is not a prerequisite to the enforce-
ment of the shareholders’ statutory
liability. Perkins v. Church, 31 Barb.,
84 (1859); Southmayd v. Russ, 3 Conn.,
52 (1819); Culver v. Third National
Bank, 64 IIL, 528 (1871); Davidson v.
Rankin, 84 Cal., 508 (1868); Young v.
Rosenbaum, 39 id., 646 (1870); Morrow
v. Superior Court, 64 Cal., 383 (1883);
Bird v. Calvert, 22 8S. C., 292 (1884),
Cf. § 200, supra. In these cases it is
held in general that the shareholder’s
liability under the statute is uncondi-
tional, original ard immediate, not de-
pendent on the insufficiency of the cor-
porate assets, and not collateral to that
of the corporation upon the event of its
insolvency. Thus, in the caso of Man-
ufacturing Company v. Bradley, 105
U.S., 175 (1881), it was held that, upon
a bill being filed against the corpora-

‘tion for the collection of a debt, the

shareholders might properly be made
parties, in order to avoid a multiplic-
ity of suits, and upon the ground that
the shareholders were immediately lia-
ble under that provision of their char-

ter which made ‘‘ members of the com-
pany jointly and severally liable
for all debts and contracts made by the
company until the whole amount of the
capital stock fixed and limited by the
corporation” is paidin. Under the New
York act of 1875, a stockholder may be
sued before judgment against the cor-
poration, but cannot be held liable until
after such judgement. Walton v. Coe,
110 N. Y¥., 109 (1888). ,
2See laws of 1843, New York, ch. 40,
§ 24, commonly known as ‘‘ The Gen-
eral Manufacturing Act.” Handy v.
Draper, 89 N. Y., 834 (1882), But a con-
trary rule prevails under the Business
Corporation Act of 1875. See Walton
v. Coe, 110 N. Y¥., 109 (1889). See,
also, Rocky Mountain National Bank
v. Bliss, 89 N. Y., 388 (1882); Dean v,
Mace, 19 Hun, 391 (1879). Sometimes
the statute provides that a specific de-
mand shall have been made. Haynes v.
Brown, 36 N. H., 545 (1838). In Wis-
consin, by statute, there need be no pre-
cedent judgment against the corpora-
tion. Sleeper v. Goodwin, 31 N. W.
Rep., 335 (Wis., 1887). An action in New
York, to enforce the statutory liability
of a stockholder in a New York corpora-
tion, does not lie, where the only execu-
tion issued was in Colorado. Rocky
Mountain Bk ». Bliss, 89 N. Y., 338
(1882). Dean v. Mace, 19 Hun, 391
(1879); Summer vw. Marcy, 3 Woodb. &
M., 105. The case of Patterson v. Lynde,
112 Ill, 196 (1884), holds tat the judg-

232
OH. XII]

‘STATUTORY LIABILITY OF STOCKHOLDERS.

[§ 219.

ings against the corporation are not to be required when they

would be nugatory or impossible.

Where the statutes provide for an enforcement of tie sharehold-
er’s statutory liability only upon the dissolution of the corporation,
it is held that a dissolution, in the sense in which that term is here
used, takes place when the corporation comes into the condition of
having debts and no assets, or has ceased to act and exercise its
corporate functions, or has suffered acts to be done which end the

object for which it was created.?

ment must be obtained in the state
where enforcement is sought, and that
not even a judgment in the federal cir-
cuit court for that district will suffice.
Cf. $200, supra. *,

1Cf. Shellington v. Howland, 53 N. Y.,
871 (1873), where proceedings required
as conditions precedent toliability were
rendered impossible by the operation of
United States bankruptcy law. See, a'so,
State Sav. Ass, v. Kellogg, 52 Mo., 583
(1878); Dryden v. Kellogg, 2 Mo. App.,
87. Cf. Ansonia Brass & Copper Co. v.
New Lamp Chimney Co., 53 N. Y., 123
(1873); 5. C. aff'd, 91 U. S., 656 (1875);
Fourth Nat’! B’k v. Francklyn, 120 U.
S., 747 (1887) ; Paine v. Stewart, 33 Conn.,
516 (1866), where, under a statute pro-
viding that the property of stockholders
could not be levied upon while corpo-
rate property could be found to satisfy
the debt, it was held that evidence that
the corporate property was in the hands
of a receiver was sufficient to prove the
condition. Chamberlain v. Huguenot,
etc., 118 Mass., 532 (1875), holding that
proceedings in bankruptcy do not, in
Massachusetts, prevent recovering judg-
ment against the bankrupt corporation
for the purpose of perfecting the liabil-
ity of stockholders. It has been held
in New Hampshire, that, before suit is
brought against the stockholders, he
should be given notice of the default of
the corporation, and a demand should
be made. Hecks v. Burns, 38 N. H., 141
(1839). Even where the statute requires
it, a suit to enforce astatutory liability
need not be delayed until the corporate
property has all been applied to the pay-

ment of debts, if it be clear that such
property will be insufficient to pay every-
thing. Munger v. Jacobson, 99 TIl., 349
(1881). Or where'the corporation ig
clearly insolvent, and it would be idle to
wait the return of the execution. Flash
v. Conn., 109 U. S., 871 (1883); Kincaid
v. Dwinelle, 59 N. Y., 548 (1875). Cf.
Toucey v. Bowen, 1 Biss., 81 (1855); Mun-
ger v. Jacobson, supra. Or the corpora-
tion is dissolved. Patterson v. Lynde,
112 Il., 196 (1884), The creditor may
proceed to judgment though a receiver
has been appointed. Mason v. N. Y.,
etc., Mfg. Co., 27 Hun, 207 (188°), A
judgment against the corporation is not
necessary to enforce the stockholler’s
liability when the corporation is in-
solvent, has ceased to do business, and
has made an assignment for the benefit
of creditors. Morgan v. Lewis, 17 N. E.
Rep., 558 (O., 1888), The liability of stock-
holders in national banks is enforced by
an order of the comptroller of the cur-
rency. It is for him to determine
whether and to what extent the stat-
utory liability of the stockholders shall
be enforced. Casey . Galli, 94 U. S.,
673 (1876); Kennedy v. Gibson, 8 Wall.,
498 (1869); Strong v. Southworth, 8 Ben. .
231; National B’k v. Case, 99 U. S.,
628 (1878). A voluntary assessment of
the stockholders by themselves does not
affect or decrease this statutory liability,
118 U. S., 634 (1888).

2 Bank of Poughkeepsie v. Ibbotson,
24: Wend., 478 (1810); Slee v. Bloom, 19
Johns,, 456 (1822); Penniman v. Briggs,
Hopkins’ Chan., 300 (1825); S. C., sub
nom. Briggs v. Penniman, 8 Cowen, 887

283
STATUTORY LIABILITY OF STOCKHOLDERS. [cH. XII,

§§ 220, 221.]

§ 220. Difficultics in determining whether the creditor's remedy is
at law or in equity.— Perhaps the most difficult, unsettled and un-
satisfactory question concerning the statutory liability of stock-
holders is the question whether that liability nrust be enforced at
law, or must be in equity, or may be in either a court of law or of
equity. After determining this point, there arises the further diffi-
culty of ascertaining who shall be parties plaintiff and parties de-
fendant — whether one corporate creditor may sue, or all must
join; whether one stockholder may be pursued as a single de-
fendant, or all the stockholders must be brought in. The law on
these points is in a transition stage. ‘The question is largely one of
practice, and from experience the courts will doubtless evolve that
rule which is most just and convenient. At present, however, not
only must the decisions of the state in which the action is brought
be examined, but it is necessary also to note carefully the wording
of the statute creating the liability. Where the statute prescribes
éxpressly the form of the remedy, it is the well-established rule that
that remedy was intended by the legislature to exclude every other,
and it must be strictly pursued.

§ 221. The remedy at law.— In New York the shareholder’s lia-
bility, impbsed by the statute known as the General Manufactur-
ing Act, is held to be such that any creditor who has recovered a
judgment against the company, and sued out an execution thereon,
which has becn returned unsatisfied, may sue any stockholder and
recover to the extent provided by the statute in an action at law?

(1826); State Savings Association v. Kel-
logg, 52 Mo., 588 (1873); Dryden v. Kel-
logg, 2 Mo. App., 87 (1876); Perry Vv.
Turner, 55 Mo., 418 (1874); Central
Agric., etc., Association v. Alabama,
etc., Ins. Co., 70 Ala., 120 (1881). Cf.
Morley v. Thayer, 3 Fed. Rep., 787 (1880),
holding that bankruptcy of the corpo-
‘ration is not a dissolution of a corpora-
tion within the meaning of the statute
of Massachusctts imposing liability upon
stockholders.

lLowry v. Inman, 46 N. Y., 119, 127
(1871); Morley v. Thayer, 8 Fed. Rep.,
787, 741 (1880); Haskins v. Harding, 2
Dillon, 99 (1873); Allen v, Walsh, 25
Minn., 543 (1879); Windham  Provi-
dent Savings Institution v. Sprague, 43
Vt., 502 (1871); Dauchy v. Brown, 24
Vt., 197; Bassett v. St. Albans Hotel
Co., 47 id., 813 (1875); Pollard v. Bailey,
20 Wall., 520 (1874); Knowlton v, Ack-

ley, 8 Cush., 93, 98 (1851); Erickson v.
Nesmith, 15 Gray, 221 (1860); Brinham
v. Wellersburg Coal Co., 47 Penn. St.,
43 (1864); Hoard v. Wilcox, 47, id., 51;
Youghiogheny Shaft Co. v. Evans, 72
id., 331 (1872). Cf. Andrews v. Cal-
lender, 13 Pick., 484 (1833); Potter v.
Stevens ‘Machine Co., 127 Mass., 592
(1879); Grose v. Hilt, 86 Me., 22 (1853);
Diven v. Lee, 36 N. Y., 802 (1867); Wehr-
man v. Reakirt, 1 Cinn. Super. Ct., 280.

2 Abbott v. Aspinwall, 26 Barb., 202
(1857); Wiles v. Suydam, 64 N. Y., 178
(1876); Shellington v. Howland, 53 id.,
371.(1873); Handy v. Draper, 89 id., 334
(1882); Rocky Mountain National Bank
v. Bliss, id., 388 (1882); Mathez v. Neidig,
%2 id., 100 (1878); Flash v. Conn, 109
U.S., 871, 380 (1883); Weeks v. Love,
50 N. Y., 568 (1872). And this was the —
rule, also, under the earlier statute of
March 22, 1811, R. S., 7th ed., p, 1726,

2384
OH. xI.]

STATUTORY LIABILITY OF STOCKHOLDERS.

[§ 291.

So, also, when it is provided by statute that the shareholders “shall,
to the amount of the stock by them held, be jointly and severally
liable for all the debts and responsibilities of such company,” it is
held that an action at law may be maintained on the individual
liability by any corporate creditor against. any individual share-

holder.!

Where an action at law can be maintained, and the shareholder’s
liability is limited and several, each shareholder being made liable
for a sum certain, a separate action will lie against each one2 And
unless the: remedy at law has been enlarged by statute, so as to.
allow judgment separately against each one of several defendants
before the court in the same proceeding, cach creditor must sue

Bank of Poughkeepsie v. Ibbotson, 24
Wend., 478 (1840). Cf. Van Hook v.
Whitlock, 3 Paige, 409 (1882); Simonson
v. Spencer, 15 Wend., 548 (1836); Rich-‘
ards v. Coe, N. Y. Daily Reg., Ang. 2,
1887. But when the action is to enforce
the statutory liability to employees,
“laborers, servants and apprentices,”
in New York, it has been held that all
the shareholdets should be, made par-
ties. Strong v. Wheaton, 38 Barb., 616
(1861). The creditor must sue one or
all. Dean v. Whiton, 16 Hun, 203 (1878).
In Illinois, under the charter provision
that “ each stockholder shall be liable
_ to double the amount of stock ” owned,
it was held that the stockholders were
severally and individually liable; that
is, that an action at law against one
or all of them would lie. ' McCarthy v.
Lavasche, 89 Ill., 270 (1878); Hull v.
Burtis, 90 id., 213 (1878); Fuller v. Led-.
den, 87 id., 310 (1877). In Pennsylvania,
- under the statute relating to the incor-
poration of manufacturing companies,
the corporate creditor proceeds against
the shareholders in an action at law
upon the original contract, making the
corporation and all the shareholders
parties defendant. Brinham v. Wellers-
burg Coal Co., 47 Penn. St., 48 (1864);
Mansfield Iron Works v. Willcox, 52 id.,
377 (1866); Hoard v. Wilcox, 47 id., 51
(1864); McHose v, Wheeler, 45 id., 82
(1863). See Patterson v, Wyomissing
Manuf’g Co., 40 Penn. St., 117 (1861).
And tosame effect, Thompson v. Jewell,

(1850); Branch v. Baker, 53 id.,

43 Mich., 240 (1880); Pope v. Leonard,
115 Mass., 286 (1874). Under a Georgia
statute, by the provisions of which each
shareholder in banking corporations in
that state is made liable to redeem his
proportionate share of the outstanding —
circulation, a single creditor may have
his action at law against any individual
shareholder. Lane v. Harris, 16, Ga.,
217 (1854); Lane v. Morris, 8 Ga., 468
502
(1874); Hatch v, Burroughs, 1 Woods,
439 (1870). Cf. Bank of Poughkeepsie
v. Ibbotson, 24 Wend., 478 (1840).

1Grunad v.. Tucker, 5 Kan., 70 (1869);
Norris v. Johnson, 34 Md., 485 (1871).
See Bullard v. Bell, 1 Mason, 248 (1817,
by Story, J.). Cf. Matthews v. Albert,
24 Md., 527 (1866); Culver v. Third Na-
tional Bank, 64 TIL, 528 (1871); Bond v,
Appleton, ‘8 Mass., 472 (1812). The Mis-
souri statute may be enforced at law.
Savings Assoc. v. O’Brien, 51 Hun, 45
(1889). By statute in California the
remedy may be at law. Borland v.
Haven, 37 Fed. Rep., 394 (1888),

?Bank of Poughkeepsie v. Ibbotson,
24 Wend., 473 (1840); Perry v. Turner,
55 Mo., 418 (1874); Boyd v. Hall, 56 Ga.,
563 (1876), where the liability was pro -
rata; Paine v. Stewart, 33 Conn., 516
(1866); Culver v. Third National Bank,’
64 Ill, 528.(1871); Abbott v. Aspinwall,
26 Barh., 202 (1857); Garrison v. Howe,
17 N. Y., 458 (1858); Terry v. Little, 101
U. S., 216 (1879).

235
§ 991.]

STATUTORY LIABILITY OF STOCKHOLDERS.

(oH. xm.

_ each shareholder, or each creditor must sue some one or more

shareholders separately.

Under a statute providing that “ each shareholder shall be indi-
vidually and personally liable for his proportion of all the debts

and liabilities of the company contracted or incurred,

for

the recovery of which joint or several actions may be prosecuted,”
it has been held me the liability of the-shareholders is substantially

that of partners.

So, also, a ‘general joint and several liability

for all thé corporate debts makes the stockholders liable as partners

as though there had been no incorporation.

1Abbott v. Aspinwall, 26 Barb., 202
(1857); Paine v. Stewart, 83 Conn., 516
(1866); Matter of the Hollister Bank, 27
N. Y., 393 (1863); Perry v. Turner, 55
Mo., 418 (1874); Bank of Poughkeepsie
v. Ibbotson, 24 Wend., 473. Cf. Milroy
v. Spurr Mountain Iron Mining Co., 43
Mich., 231 (1880). Where the share-
holder’s liability is held to be like that
of a partner, then all must be joined as
defendants, and the omission of any
one is ground for a plea in abatement.
Allen v. Sewall, 2 Wend., 827 (1829),
but holding that it cannot be taken
advantage of on the trial; Strong v.
Wheaton, 38 Barb., 616 (1861), holding
that, under the New York code, defect
of parties herein must be objected to by
demurrer or answer; Reynolds v. Fe-
‘liciana Steamboat Co., 17 La. Rep., 397
(1841); Dean v. Whitory, 16 Hun, 205
(1878); Bonewitz v. Bank, 41 O. St., 78,
holding that the sheriff’s return show-
ing clearly that other stockholders are
out of the jurisdiction must be in proof,
Cf. Dodge v. Minnésota, etc., Slate
Roofing Co., 16 Minn., 868 (1871); Cul-
ver v. Third National Bank, 64 IIL, 528
(1871); Branson v, Oregonian R’y Co.,
10 Oregon, 278 (1882); Hoag v. La-
mont, 60 N. Y., 96 (1875); Abbott’ v,
Aspinwall, 26 Barb., 202, 207. As to
the joinder of parties in Pennsylvania,
see Mansfield Iron Works v, Willcox, 52
Penn. St., 877 (1866); McHose v.
Wheeler, 45 id., 32 (1868); Hoard v,
Wilcox, 47 id., 51 (1864). In Pennsyl-
vania the corporation also should be
made a party defendant. Hoard v..

Under the provisions

Wilcox, 47 Pa. St., 51; Mansfield Iron
Works v. Willcox, 52 Penn. St., 877
(1866). Cf. Deming v. Bull, 10 Conn.,
409 (1835); Middletown Bank v. Magill,
Sid., 28 (1828). In Vermont a provis-
ion that shareholders ‘‘ shall be person-
ally holden” is held to create only
a joint liability. Windham Provident
Savings Institution v. Sprague, 48 Vt.,
502 (1871).

2Davidson v. Rankin, 84 Cal., 503
(1868). Cf. Young v. Rosenbaum, 89 id.,
646 (1870); Larrabee v. Baldwin, 35 id.,
155 (1868); McAuley v. Yorke Mining Co.,
6 id., 80 (1856); Adkins v. Thornton, 19
Ga., 825 (1856) [this case is frequently
miscited, owing to a misprint in the
original report, as Dozier v. Thornton];
Branch v. Baker, 58 Ga., 502 (1874);
Dane v. Young, 61 Me., 160 (1872); Cas-
tleman v. Holmes, 4J. J. Marsh. ,.1 (1830),
Cf. Fuller v. Ledden, 87 Ill., 312; Brown
v. Hitchcock, 86 O. St., 678.

3 Planters’ Bank, etc., v. Bivingsville,
ete., Manuf’g Co., 10 Rich. Law, 95
(1856); Southmayd v. Russ, 8 Conn., 52
(1819); Middletown Bank v. Magill, 5
id., 28, 45 (1823); Deming v. Bull, 10id.,
409 (1835); Conant v. Van Schaick, 24
Barb., 87 (1857); Allen v. Sewall, 2
Wend., 827 (1829); Moss v. Oakley, 2
Hill, 265 (1842); Harger v. McCullough,
2 Denio, 119 (1846); McCullough v. Moss,
5 id., 567 (1846); Corning v. McCullough,
1 N. Y., 47 (1847); Moss v. Averell, 10
id., 449 (1853); Wiles ». Suydam, 64id.,
178, 176 (1876); Conklin v, Furman, 8
Abb. Pr. (N. §.), 164; 8. C., 57 Barb.,.
487; Abbott v. Aspinwall, 238 Barb., 207;

236
CH. x11]

STATUTORY LIABILITY OF STOCKHOLDERS.

[§ 221.

of the constitution and statutes of Ohio, and of other states, it is
held that while the undertaking of the shareholder is not primary,
and ‘is to be resorted to only in case of the insolvency of the corpo-
ration, still the liability, when it does properly arise, is essentially

that of partners.'

And, in general, unless the statute prescribes

otherwise, the common- law rules as to the liability of partners, and
the remedies for enforcing that liability, apply to the statutory lia-
bility of share-owners in incorporated companies.

Erickson v, Nesmith, 46 N. H., 3871
(1866); White v Blum, 4 Neb., 555
(1876); New England Commercial Bank
v. Newport Steam Factory, 6 R.1., 154
(1859); Moies v. Sprague, 9 id., 541 (1870);
Witherhead v, Allen, 28 Barb., 667;
Chase v. Lord, 77 N. Y., 33.

1 And that although the stated extent
of the shareholder's liability, as pro-
vided by the statute,-cannot be ex-
ceeded, still, up to the full measure of
his liability, he may be charged, al-
though it be shown that, if other solv-

ent-shareholders had contributed their.

‘full proportion, it would not be neces-
sary for hint to pay. Wehrman
Reakirt, 1 Cinn. Super. Ct., 230 (1871);
Brown v. Hitchcock, 36 0. St, 678.
Cf. Stewart v. Lay, 45, Iowa, 604 (1877);
Crease v. Babcock, 10 Mete., 525 (Mass.,
1846). In Wisconsin stockholders in
banking corporations are liable, by stat-
ute, as original and principal debtors,
substantially as though they were part-
ners, except, as in Ohio, that the re-
sponsibility of each is limited to a sum
equal to his shares of stock. “Coleman
v. White, 14 Wis., 700 (1862). ’

2Story v, Furman, 25 N, Y., 214, 221,
222 (1862); New England Commercial
Bank v. Newport Steam Factory, 6 R.

I., 154, 189 (1859); Moies v. Sprague, 9
id., 541 (1870). It is sometimes held that
a general statutory liability means a lia-
bility on ‘the part of the stockholder
only inthe proportion which his inter-
est bears to the total indebtedness of the
corporation, Boyd v. Hall, 56 Ga., 563
(1876); Reynolds v. Feliciana Steatabaat
Co., 17 La. Rep., 897 (1841), In such a
case, where the shareholders are jointly

and severally personally liable for debts
contracted by the corporation, which it
cannot or does not pay, in proportion to
the number of shares they own, it seems
to be settled that they are to be held
principal debtors, and not mere sureties
for the corporation. Harger v. McCul-.
lough, 2 Denio, 119 (1846); Corning v.
McCullough, 1 N. Y., A7 (1847, the
court saying that the stockholders stand
towards the creditors ‘“‘on the same
ground and under the same responsibil- .
ity . . . as they would, if unincor-
porated, have stood;” Moss v. Averell,
10 id., 450 (1858); Simonson v. Spencer,
15 Wend., 548 (1836), sustaining the
action fox debt; Bailey v. Bancker, 3
Hill, 188 (1842), ‘holding, also, that a
creditor must sue a stockholder upon
the original demand and not upon the
judgment against.the company; South-
mayd v. Russ, 8 Conn., 52 (1819), Hold-
ing that, since the liability is original,
scire facias will not lie against a stock-
holder, but he must be sued as if there
were no incorporation; Marcy v. Clark,
17 Mass., 830 (1821), In Michigan it is
held that they are sureties. Hanson v,
Donkersley, 87 Mich., 184 (1877). Cf.
7 and Rapids Savings Bank v. Warren, :
2 id., 557 (1884), It has been held, also,
oat they are not sureties for each other.
Lane v, Harris, 16 Ga., 217, 284 (1854);
Crease v. Babcock, 10 Metc., 525 (1846).
Cf. Larrabee v. Baldwin, 85 Cal., 155
(1868). This seems to be the rule, in
general, as to all’ statutory liability,
Young v. Rosenbaum, 39 Cal., 646 (1870);
Taylor on Corporations, §§ 714,. 715;
Erickson v. Nesmith, 46 N. H., 871
1866); Thompson v. Meisser, 108 IIL,”

237
~~

STATUTORY LIABILITY OF STOCKHOLDERS. [ou. XII.

§ 222.)

It is uncertain whether a stockholder, who is also a creditor of
the corporation, can bring an action at law against his co-stock-
holders to enforce astatutory liability. In Massachusetts,' Illinois?
and New York? the rule is settled that such an action cannot be
maintained. In those jurisdictions the only remedy for such a
creditor in such acase is by a bill in equity for contribution* But

"in Pennsylvania* and in Maine® the rule is otherwise, and it is no

objection to the creditor’s action that he be himself also a share-
holder.’ 4

§ 292. The remedy in a court of equity.— The remedy in equity is
the favorite remedy of the courts. It is just, certain, impartial
and clear. It enforces once forall the liability of the stockholders,
and at the same time provides for contribution. It distributes the
assets equally and equitably among all the corporate creditors.
It prevents a multiplicity of suits, and avoids the difficult question
as to whether a suit at law will lie. The only and great objection
to the remedy in equity is that it is protracted, vexatious and ex-

pensive.’

859 (1884). Itis obvious that the ques-
tion whether the creditor, in pursuing
his remedy against the shareholder,
may sue one or any of the shareholders
at his option, or must sue all, in a joint
action, is of the highest importance. It
goes to the very form and essence and
content of his action; but it is a point
upon which, as has been already in-
timated, a text-writer cannot deduce
from the reported cases any clearly-
settled rule of general application. -It
is, in every case where the statute does
not contain an explicit provision, a ques-
tion of construction to be determined
by the courts in expounding the words
of the statute, 1

1Thayer v. Union Tool Co., 4 Gray,
75 (1855).

2Meisser v. Thompson, 9 Brad. (Ill),
868; 108 IIL, 359.

3 Mathez v. Neidig, 72 N. Y., 100 (1878);
Clark v. Myers, 11 Hun. 608 (1877);
Bailey v. Bancker, 8 Hill, 188 (1842)
(overruling upon this point Simonson v,
Spencer, 15 Wend., 548 — 1836); Beers v,
Waterbury, 8 Bosw., 396 (1861); Richard-
son v. Abendroth, 43 Barb., 162 (1864) ;
Deming v. Puleston, 83 Super. Ct., 231.

Cf. Sanborn v. Lefferts, 58 N. ¥., 179
(1874); Garrison v. Howe, 17 N. Y., 458
(1858). To same effect, Perkins v. San- *
ders, 56 Miss., 733 (1879). Cf. Slee v.
Bloom, 5 Johns. Ch., 366, 382 (1821).

4But see Potter v. Stevens Machine
Co., 127 Mass., 592 (1879), and Sav. Ass’n
v. O’Brien, 51 Hun, 46 (1889).

'Brinham v. Wellersburg Coal Co.,
47 Penn. St., 43 (1864).

6 Fowler v. Robinson, 81 Me.,189 (1850).

7In New York it seems that the as-
signee of a judgment may bring the
suit to enforce statutory liability, though
the assignee be a stockholder. Wood-
ruff & Beach Iron Works v, Chittenden,
4 Bosw., 406 (1859), See Garrett v.
Sayles, 1 Fed. Rep., 371 (1880); Potter v.
Stevens Machine Oo,, 127 Mass., 592
(1879).

8 Thus, with reason, the court said, in
Mason v. Alexander, 44 O, St., 318: “By
reason of the great number of stock-
holders, the frequent transfers of stock,
the decease of parties, and of other
causes, delays, vexatious, expensive and
almost interminable, seem to be inevi-
table in allsuch proceedings; so much
so, indeed, that such liability has grown

238
CH. XII. ]

STATUTORY LIABILITY OF STOCKHOLDERS.

[§ 222.

Frequently the courts have held that an action at law to enforce

a statutory liability is not a proper proceeding, -but that the rights
of all parties can be properly adjusted only in a court of equity,
and that the latter remedy is exclusive of all others.!

In many jurisdictions-the rule prevails that creditors in these

cases have a concurrent remedy, either at law or in equity.

The

action at law will lie upon the debt, while,.on the other hand, the
equitable jurisdiction arises from the power of a court of chancery
to compel contribution among the shareholders and to effect an
equitable distribution among the creditors.

In the courts of the United States it is the rule that, where a

to be looked upon as furnishing next
to no security at all for the debts of
corporations.”

1 Thus, under a charter provision that
stockholders shall ‘be bound respect-
ively for all debts of the bank in pro-
portion to their stock holden therein,”
it was held that an action at law by a
single creditor against a single stock-
holder would not lie. Pollard v. Bailey,
20 Wali., 520 (1874); Hatch v Dana, 101
U. S., 205 (1879); Terry v. Little, id.,
216; Smith v. Huckabee, 53 Ala., 191
(1875); Jones v. Jarman, 34 Ark., 323
(1879). Cf. Wright v. McCormack, 17
O. St., 86 (1866); Sands v. Kimbark,
87 Barb., 108, 120 (1868); Cushnian v-
Shepard, 4 id., 113 (1848). Nor under
a statute making the stockholders of a
banking company ‘‘individually re-
sponsible to the amount of their respect-
“ ive share or shares of stock for all its
indebtedness and liabilities of every
kind.” Coleman v. White, 14 Wis., 700
(1862); Carpenter v. Marine Bank, id.,
705, n. (1862).

Also upon the ground that at law tho
indebtedness’ ‘of the corporation aud the
several liabilities of the members could
not be equitably adjusted. Low v.
Buchanan, 94 Ill., 76 (1879), where the
directors were held liable for an excess
of indebtedness; Queenan v. Palmer,
84 Alb. L, J., 117 (IIL, 1886); Stewart
v. Lay, 45 Iowa, 604 (1877); Norris v.
Johnson, 384 Md., 485 (1871); Garrison
v, Howe, 17 N. Y., 458 (1858); Story v.

Furman, 25 id., 214 (1862). .Cf. Flash v.
Conn, 109 U. 8., 371 (1883).

Where, in South Carolina, the charter
of a bank provided that upon the failure
of the bank ‘each stockholder shall
be liable and held bound . . . for
any sum not exceeding twice the °
amountof .. . his .. . shares,”
it was held by the supreme court of the
United States that a suitin equity by
or on behalf of all the creditors is the
only appropriate mode of enforcing the
liability’ incurred by such a failure.
Terry v. Little, 101 U. S., 216 (1879).

2 Bank of the United States v. Dallam,
4 Dana, 574 (1836); Van Hook v. Whit-

‘lock, 3 Paige, 409 (1832); Bank of Pough-

keépsie ‘v. Ibbotson, 24 Wend. 473
(1840); Masters v. Rossie Lead Mining
Co., 2 Sandf. Chan., 801 (1845); Pfohl
v, Simpson, 74 N. Y., 187 (1878); Hames
v. Doris, 102 Ill., 850 (1882); Culver: v.
Third National Bank, 64 id.,.528 (1871);

‘Perry v. Turner, 55 Mo., 418 (1874);

Norris v. Johnson, 84 Md., 485, 489
(1871); Matthews v. Albert, 24 id., 527
(1866). Cif. Weeks v, Love, 50 N. Y.,"
568 (1872); Garrison v. Howe, 17 id.,
458 (1858). And see the following New
York cases, wherein it is held that a
remedy in equity is preferable: Morgan
v. New York, etc., R. R. Co., 10 Paige,
290 (1848); Sherwood v, Buffalo, ete.,
R. R. Co., 12 How, Prac., 186 (1855);
Hinds v. Canandaigua, etc., R. R. Co.,
10 id., 487 (1855); Courtois v. Harrison,
12 id., 859 (1856) — the last three’ cases
relating to supplementary proceedings.

239
_. Lynde, 106 U. S., 519 (1832).

§ 999.

STATUTORY LIABILITY OF STOCKHOLDERS.

[cH. xm.

stockholder’s statutory liability is by the terms of the statute a
joint and several or several liability, the creditor may, after the
remedy against the corporation has been exhausted, enforce his
rights in an action at law; bat, in all other cases of statutory liabil-
ity, the remedy must be in equity, as in cases of unpaid subscrip-

tions.}

In several of the state courts it is held that a creditor’s

remedy against a shareholder upon the statutory liability -is in

equity alone.”

In New York and Illinois a stockholder sued at

law for the enforcement of this liability may institute an equitable
proceeding to bring in all the parties.*

1 Pollard v. Bailey, 20 Wall., 520 (1874);
Terry v. Little, 101 U. S., 216 (1879).
Cf. Terry v. Tubman, 92 U.8., 156 (1875);
Andrews v. Bacon, 38 Fed. Rep., 777
(1889); Cuykendall v. Miles, 10 Fed. Rep.,
842 (1882), where the court said: ‘‘ The
supreme court hold that the mode in
which a liability of this kind is to be
enforced depends entirely upon the par-
ticular law governing the corporation.
If that law merely provides for a pro-
portionate liability of all stockholders
for all debts, there should be a bill in
equity for the benefit of all the cred-
itors and against all the stockholders.
(Citing cases.) But if the law of the
state authorizes an action by one cred-
itor against one stockholder, that rem-
edy may be pursued.” Patterson v.
As to
joinder of parties, see R. S. of U.S.,
§ 737, An action at law lies in the fed-
eral courts, herein, when that remedy
is appropriate. Bullard v. Bell, 1 Mason,
243 (1817), Or where the courts of the
state creating the liability hold that an
action at law will lie. Mills v. Scott, 99
“U. 5., 25 (1878). As regards the remedy
under the National Bank Act, see Ken-
nedy v. Gibson, 8 Wall., 498 (186%);
Casey v. Galli, 94 U. 8., 673 (1876), and
act of June 80, 1876, ch. 44; Witters v,
Sowles, 32 Fed. Rep., 767 (1887); Rich-
mond +, Irons, 121 U. 8., 27 (1887), as
to joinder of causes of action. In the
federal courts a suit to enforce a direct-
or’s statutory liability is in equity.
Stone v, Chisolm, 118 U. 8., 302 (1884),
® Harris v, First Parish, 40 Mass,, 112

(1839); Coleman v7. White, 14 Wis., 700
(1862); Ladd-v. Cartwright, 7 Oreg., 329;
Smith v. Huckabee, 63 Ala., 191 (1878).
See Patterson v. Lynde, 106 U. S., 519
(1882). In Illinois there was some doubt
as to whether the bill in equity would
lie; but the late case of Tunesma v.
Schuttler, 114 Ill., 156 (1885), holds that,
in case the corporation is insolvent and
the corporate creditors numerous, a bill
in equity is the proper remedy, Under
the Manufacturing Company’s Act of
Illinois, the creditor’s remedy is held
to be clearly in equity. Rounds »v.
McCormick, 114 IIL, 252 (1885); Harper
v. Union Mfg. Co., 100 IIl., 225 (1881);
Low v. Buchanan, 94 IIl., 76 (1879). See
Pierce v. Milwaukee, etc., Co., 83 Wis. -
253 (1875), for the rule in that state.
3Pfohl v.’ Simpson, 74 N. Y., 187
(1878); Cochran v. American Opera Co,
N. Y. Daily Reg., Jan. 5, 1888.° In
‘Wisconsin a long line of decisions hold
that the creditor’s remedy against stock-
holders can be in equity only. Sleeper
v. Goodwin, 31 N. W. Rep., 335 (Wis.,
1887), citing many cases; Garrison v.
Howe, 17 N. Y., 458 (1858), Semble,
Thebus v. Smiley, 110 Ill, 816 (1884);
Eames v. Doris, 102 Ill., 850 (1882).
When the equitable remedy is pursued, .
the corporation and all the solvent
shareholders within the jurisdiction
who are known must be made defend-
ants. Contribution among the share-
holders is of the essence of the proceed-
ing, and that is best effected when ail
are made parties. Walsh v. Memphis.
etc., R. R. Co., 2 McCrary, 156 (1881):

240
\

CH. XIL. | STATUTORY LIABILITY OF STOCKHOLDERS. [§ 998.
A still different remedy from all these exists where the judgment
creditor of the corporation, after execution returned unsatisfied, '

may issue execution against any stockholder without being obliged

to institute a new action.!

Another remedy still is to allow the plaintiff creditor to join
stockholders as defendants in his original suit against the corpo-

ration.’

§ 223. Enforcement of the statutory liability in the courts of

another state.—

The stockholders of a corporation are generally
widely scattered, and reside in many states.

Accordingly, when

some or all of them are non-residents of the state in witch he cor-

$. C., 6 Fed. Rep., 797; Umsted v. Bus-
kirk, 17 O. St., 118 (1866), holding, also,
that defendant stockholders may insist
-on joinder of co-stockholders. Erickson
». Nesmith, 46 N. H., 371 (1866); Hadley
v. Russell, 40 N. H., 109 (1860), The
joinder of all. the shareholders may be
-dispénsed with in a case where it is
shown to be impracticable. Umated v.
Buskirk, 17 O, St., 113 (1866); Pettibone
Uv. McGraw, 6 Mich., 441 (1859); Pierce v.
Milwaukee Construction Co., 38 Wis.,
258 (1875) ; Coleman v. White, 14 Wis.,
700 (1862); Crease v. Babcock, 10,Metc.,
525 (1846); Brundage v. Monumental,
etc., Mining Co., 12 Oregon, 322 (1888),
holding, also, that a defendant stock-
holder desiring to bring in other stock-
‘holders must do that by an appropriate
cross-proceeding, And an action to en-

force statutory liability may be joined

with an action to collect unpaid subscrip-
tions, Warner v, Callender, 20 O. St., ‘190
(1870). Buta claim against stockhold-
ers upon a liability’ imposed by statute
cannot be joined in one bill in equity
with a penal claim against the directors
of the company. Cambridge Water-
works v. Somerville Dyeing, etc., Co.,
414 Gray, 193 (1859); Pope v. Leonard,
115 Mass., 286 (1874); Nappier v. Morti-
‘mer, 11 Abb. Pr. (N. S.), 455. Of. Wiles
y. Suydam, 64 N. Y., 178 (1876). The~

late case of Mason v. Alexander, 18 Am,

and Eng. Corp. Cas., 54(O., 1886), holds

that the corporation is a necessary party

to the creditor's suit in equity; that

judgment against the stockholders is
16

to be against them severally; and that
interest isto be allowed from the com-
mencement of the suit, ‘‘ although the
amount of recovery may thereby exceed
the stockholder’s original: liability.”
See, also, § 226, infra, to the effect:
that any creditor may enjoin the pro-
ceeding at law and bring all parties into
a suit in equity. In a corporate cred-
itor’s action against a few stockholders,
to enforce their liability and to obtain
discovery of other stockholders, the,
discovery may be:compelled. ° Hipple
wv. Fire, etc., @o., 3 Central Rep., 462
(N. J., 1886). See, also, §§ 519, 520,

infra, A married woman in Arkansas
may own stock and be liable thereon.

* Her liability may be enforced in equity.

Bundy v. Cocke, 128 U. 8., 185 (1888).
tLowry v. Inman, 46 N. Y., 119,
where a charter permitting the prop-
erty of stockholders to be taken upon
execution on a judgment against the
corporation, . and providing that such
stockholders may use the same powers
against others to enforce contribution,
was held not to create such a general
individual liability as would sustain a
personal action.
- 2Milroy v. The Spurr, etc.; 48 Mich.,
231, holding that, if the statute quiher.
izes a suit against the corporation alone
or jointly with one or more stockhold-
ers, a creditor who elects to sue it alone
cannot afterwards proceed upon the
same debt against the corporation and.
stockholders jointly.

‘ Rat
STATUTORY LIABILITY OF STOCKHOLDERS. [cH. XII.

§ 298.]

poration exists, the important question arises whether the courts of
one state will enforce a stockholder’s statutory liability created by
the statutes.of another state. If not, then non-resident stockholders
practically escape the liability which they assumed when they be-
came members of the corporation.

The cases are uniform in holding that the extent of the stock-
holder’s statutory liability and the character of that liability de.
pend upon and are determined by the charter of the corporation
or the statute of the state which created it. :

In general, when the courts of.one state are asked to enforce
the statutory liability of stockholders in a corporation created by
another state, two things are to be considered: First, is the stat-
utory liability itself a contract liability or a mere penalty? Second,
are the remedies provided by the laws of the state where suit is
sought to be brought adequate to the just enforcement of the lia-
bility ?

The law is clear that the courts of one state will not enforce
penalties imposed by another state.? But the usual statutory liabil-
ity of stockholders is not a penalty. The courts are unanimous in

1Payson v. Withers, 5 Biss., 269° shareholders of the corporation to the

(1873); Seymour v. Sturgess, 26 N. Y.,
134 (1862); Merrick v. Van Santvoord,
34 id., 208 (1866); McDonough v. Phelps,
15 How. Prac., 372 (1856); Eu parte
Van Riper, 20 Wend., 614 (1839); Ault-
man’s Appeal, 98 Pa. St., 505. Cf. Hill
v. Beach, 12 N. J. Eq., 31 (1858); Nabob
of Carnatic v. East India Co., 1 Vesey,
Jr., 871 (1791); Dutch West India Co.
v. Henriquez, 1 Strange, 612. This
principle applies, of course, only to
corporations which were legally incor-
porated. For the liability where the
incorporation was not legal, see chap-
ter XIII. An administrator may en-
force the statutory liability even in a
foreign jurisdiction. The United States
courts take judicial notice of the stat-
utes of the various states. Newberry
v. Robinson, 36 Fed. Rep., 841 (1888).
In Bateman v. Service, L. R., 6 App.
Cas., 886 (1881), the ground is taken
that a liability created by statute re-
mains the same wherever the corpora-
tion may transact its business, or wher-
ever the shareholders may happen to
live, and that the fact of doing business
in a foreign state does not subject the

operation of laws which create statu-
tory liability in such foreign state, In
accordance with this view it was held
in Ohio, where a foreign corporation,
without statutory liability of its stock-
holders, did business in Ohio, where the
statutes prescribe a personal liability
for stockholders in domestic corpora-
tions of similar character, that the
shareholders of the foreign ‘corporation
are protected by the exemption they
enjoy at home. Second National Bank
v. Hall, 35 O. St., 158 (1878), - See, also,
Jessup v. Carnegie, 80 N. Y., 441 (1880),
and §§ 237-289, infra.

2 Story on the Conflict of Laws, §§ 620,
621; Wharton on the Conflict of Laws,
§ 858 et seg. ; Rorer on Interstate Laws,
148, 149. See, also, Lowry v. Inman,
46 N. Y., 119 (1871); Patterson v. Baker,
34 How. Prac.. 180 (1867); Howell v
Manglesdorf, 38 Kan., 194 (1885). ‘Penal
laws are strictly local, and cannot have
any operation beyond the jurisdiction
of the country where they were en-
acted.” Scoville v. Canfield, 14 Johns.,
338 (1817).

242
OH. XII.]

STATUTORY LIABILITY OF STOCKHOLDERS.

[§ 298.

holding that where by statute the stockholders in a corporation,
instead of being relieved entirely from liability to corporate credit-
ors, are only partially relieved therefrom, the additional. liability
is a contract liability, and will be enforced by the courts of any

state.

In other words, the ordinary statutory liability of stock- !

holders is a contract liability, and will be enforced as such by the

courts of all the states.!

A different rule prevails as to the statutory liability of corporate —
-officers for failure to file reports, or give certain notices, or make -
certain contracts. Such liability is generally construed to be penal, ,
and will not be enforced by the courts of other states.”

1Corning v. McCullough, 1 N. Y., 47
(1847); 8. C., 49 Am. Dec., 287; Free-
land v. McCullough, 1 Denio, 414 (1845);
8. C., 48 Am. Dec., 685; Hodgson v.
Cheever, 8 Mo. App., 321 (1880); Man-
ville v. Edgar, 8 id., 324 (1880); Queenan
v. Palmer, 117 Tll., 619 (1886); Aultman’s
Appeal, 98 Pa. St., 505 (1881); Sacketts
Harbor Bank v. Blake, 3 Rich. Eq., 225;
Woods v. Wicks, 7 Lea (Tenn. ), 40 (1881) ;
Ex parte Van Riper, 20 Wend., 614
(1839); McDonough v, Phelps, 15 How.
Prac., 872 (1856); Lowry v. Inman, 46
N. Y., 119 (1871). See, also, Paine v.
Stewart, 33 Conn., 516 (1866); Bond v.
Appleton, 8 Mass., 472 (1812); Hutchins
v. New England Coal Mining Co., 4 Al-
len, 580 (1862); Grand Rapids B’k v.
Waren, 52 Mich., 537. Cf. Bateman v.
Service, L. R., 6 App. Cas., 386 (1881) ;
‘Norris v. Wrenschall, 34 Md., 492 (1871);
Terry v. Calnan, 13 S. C., 220 (1879);
Tinker v. Van Dyke, 1 Flippin, 532
(1876). Cf. Lowry v. Inman, 46 N. Y.,
119, 127 (1871); Strong v, Wheaton, 38
Barb., 625 (1861); Brown v. Hitchcock,
36 O. St., 678 (1879); Hatch v. Bur-
roughs, 1 Woods, 443 (1870); Flash v.
Conn, 109 U. S., 871 (1883); Four.h
Nat'l B’k v. Francklyn, 120 U.S., 747
1887); Cuykendall 2%. Miles, 10 Fed.
Rep., 842; Nimick v. Mingo Iron Works,
25 West Va., 184 (1884). Cf. Woods v.
Wicks, 7 Lea (Tenn.), 40 (1881); Lawler
». Burt, 7 O. St., 840 (1857). A Mary-
land case holds that the statutory lia-
bility of a stockholder in a New York
manufacturing corporation is a penalty,

and cannot be enforced in that state..
Attrill v. Huntington, 16 Atl. Rep., 651
(Md., 1889). And, when the suit is

maintainable, the construction placed

upon the statute of the state in which

the corporation exists, by the courts of °

that state, is, as a general rule, con-
trolling, and will be followed by the

‘courts of the state where the suit to en-

force is brought. Jessup v. Carnegie,
80 N. Y., 441 (1880); Chase v. Curtis, 113
U.S., 452 (1884); Sav. Assoc. v. O’Brien,
51 Hun, 45 (1889). In the case of New
Haven, etc., Co. v. Linden Spring Co.,
6 East. Rep., 663 (Mass., 1886), the court,.
in refusing to enforce a subscription
made to a foreign corporation, without
an express promise to pay, said: ‘‘ That:
the statutes of a state do not operate ex~
traterritorially, proprio vigore, will be:
conceded. How far they should be en-
forced ‘beyond the limits of the state
which has enacted them must depend
on several considerations — as, whether
any wrong or injury will be done to the
citizens of the state in which. they are

sought to be enforced; whether the pol- |
icy of its own laws will be contravened |

or impaired ; and whether its courts are
capable of doing complete justice to
those liable to be affected by their de-
crees.” To same effect, Halsey v,
McLean, 94 Mass., 438 (1866),

? Derrickson v. Smith, 27 N. J. Law,
166 (1858); First National Bank v, Price,
83 Md., 487 (1870), where a statute of
Pennsylvania imposing liability upon

directors and officers contracting or as-
3

I
STATUTORY LIABILITY OF STCCKHOLDERS. [cx. XII.

§ 223.]

The second question is whether the courts of one state will en-
force a statutory liability created by another state, when the legal
procedure for enforcing that liability is prescribed by the latter
state and is not feasible in the former state. As already stated,
when the statute creating the liability prescribes the procedure for
enforcing it, that procedure is exclusive of all. other remedies,'
Hence, instances have occurred in which the enforcement of this
‘statutory liability in another state has failed, by reason of difficul-
, ties attending the legal procedure to be used i in enforcing that lia-
’ bility. 2 The liability will be enforced only when it may be-enforced
by the procedure of the state wherein the enforcement is sought.!

Generally, the statute creating the liability must. be pleaded
where the action is in another state.“ The United States courts,
however, take judicial notice of the statutes of all the states; and
in those courts this part of the pleading may be omitted.> The

senting to an indebtedness in excess of
the amount of capital was held to be
penal. (Butsee, contra, Field v. Haines,
28 Fed. Rep., 919 1886.) Halsey v.
McLean, 12 Allen, 488 (1866); Bird v.
Hayden, 1 Robertson (N. Y. Super. Ct.),
383 (1863); Union Iron Co. v. Pierce, 4
Biss., 327 (1869). The twelfth section of
the New York Manufacturing Compa-
nies Act, to the effect that the corpordte
officers shall be liable for the debts of the
corporation in case they fail to make
an annual public report of the business
of the corporation (Laws of 1848, ch. 40),
is universally held to be penal in its
character. Chase v. Curtis, 118 U.8.,
452 (1885); Stokes v. Stickney, 96 N. Y.,
328 (1884); Pier v. Hanmore, 86 id., 95
(1881); Pier v. George, 86 id., 613 (1881) ;
Veeder v. Baker, 83 id., 156 (1880); Knox
v. Baldwin, 80 id., 610 (1880); Easterly
v. Barber, 65 id., 252 (1875); Wiles v.
Suydam, 64 id., 173 (1876); Jones v. Bar-
low, 62 N. Y., 202 (1875); Merchants’
Bank of New Haven v. Bliss, 35 id., 412
(1866). Moreover, there can never be
‘such a thing as a vested right to enforce
a penalty. Yeaton v. United States,
Cranch, 281 (1809); Norris v. Crocker,
13 How., 429.(1851.) Until judgment is
ebiiitied the legislature may relieve the
parties from this penalty.
1See § 220, supra.

not possible.

2 Lowry v. Inman, 46 N. Y., 119 (1871),
where the remedy prescribed by the
Georgia corporation was an execution
levied on stockholders’ property, and
based on.the judgment against the -cor-
poration only; Nimick'v. Mingo Iron
Works, 25 W. Va., 184 (1884). See, ‘also,
Sav. Assoc. v. O’Brien, 51 Hun, 45 (1889),
Where the statute provides that the
creditor’s remedy shall be by bill in
equity, and that all stockholders shall
be joined, the liability cannot be en-
forced in a state where this remedy is
Erickson v. Nesmith, 4
Allen, 233 (1862); 8. C., 15 Gray, 221
(1860). Cf. 8. C., 46 N. H., 3871 (1866).

3 Lowry v. Inman, supra; Drinkwater
v. Portland, etc., R. R. Co., 18 Me., 35
(1841); Nimick v. Mingo, etce., Works,
supra; Christensen v. Eno, 106 N. Y,,
97 (1887); Erickson v. Nesmith, 15 Gray,
221. Cf. Taft v. Ward, 106 'Mass., 518
(1871).

4Salt Lake, etc., v. Hendrickson, 40
N. J. Law, 52, holding that the foreign
statute, when pleaded, must be set forth
in substance; and an averment “‘pursu-

5. ant to the statute” is insufficient.

5 Fourth Nat'l B’k v, Francklyn, 120
U. S., 747 (1887); Newberry 7 Robin-
son, supra. In New Hampshire it is
held to be necessary to set out in the
pleading the remedy provided by the

244
CH. X11. ] STATUTORY LIABILITY OF STOCKHOLDERS. [S$ 204
courts of one state will entertain a bill of discovery filed by cor-
porate creditors to obtain the namés of stockholders in a corpora-
tion in another state, with a view to enforcing their statutory lia-
bility in the latter state.!

§ 224. How far the judgment against the corporation is con-
clusive of the creditor’s claim.—In general, the judgment in these
cases against the corporation is conclusive as to the amount and
validity of the creditor’s claim. Consequently, in most of the
states, when suit is brought to enforce the stockholder’s statutory
liability, that judgment can be impeached by him only for fraud
and collusion, or for want of jnrisdiction.?

In some jurisdictions, however, this judgment against the corpo-
ration is only prima facie evidence of the validity and amount of
the creditor’s claim. And in New York, judgment against the
corporation and the execution returned wholly or partially unsat-
isfied are evidence only that the corporation cannot pay its debts.
They only serve to show that the creditor has taken the necessary
precedent steps to collect his claim from the corporate assets.
But he cannot rely upon the judgment obtained against the corpo-
ration to establish his right to recover against the shareholder. It
is not even prima facie evidence either of the amount or validity
of his claim. The stockholder may set up any defense that the
corporation might have set up.! This means that the corporate

laws of the state creating the corpora-
tion and the liahility, and to show that
this remedy can be employed in the
court where suit is brought. Rice v.
Merrimack Hosiery Co., 56 N. H., 114
(1875).

1Post v. Toledo, etc., R. R. Co., 11
N. E. Rep., 540 (Mass., 1887).

2Thayer vu. New England Litho-
graphic Co., 108 Mass., 528 (1871); Bor-
land v. Haven, 87 Fed. Rep., 394 (1888) ;
Came v. Brigham, 89 Me., 85 (1854);
Milliken v. Whitehouse, 49 id., 527
(1860); Wilson v. The Stockholders, etc.,
43 Pa. St., 424 (1862); Donworth v.
Coolbaugh, 5 Iowa, 300 (1857); Farnum
v. Ballard, etc., Machine Shop, 12
Cush., 507 (1853); Handrahan v. Chesh-
ire Iron Works, 4 Allen, 396 (1862);
Gaskill v. Dudley, 6 Metc., 546; Hamp-
son v. Weare, 4 Iowa, 18 (1856); Bullock
v. Kilgour, 39 O. St., 548 (1888). Cf.
Merrill v. Suffolk Bank, 31 Me., 57
(1849); Holyoke Bank v. Goodman, etc.,

Mfg. Co., 9 Cush., 576 (1852); Bank of
Australasia v. Nias, 16 Q. B., '711;8.C.,
20L. J. (C. B.), 284 (1851), and § 209,
supra. Stockholders sued on their lia-
bility may show that the judgment was
obtained by default, and that a valid
defense exists to the original claim.
Irons v. Mfrs. B’k, 36 Fed. Rep., 843
(1888).

3Grund v. Tucker, 5 Kan., 70 (1869);
Hawes v. Anglo-Saxon, etc., Co., 101
Mass., 885 (1869); Grand Rapids Savings
Bank 2 Warren, 52 Mich.. 557; Mer-
chants’ Bank v. Chandler, 19 Wis., 435
(1865), And see Neilson v. Crawford, 52
Cal., 248 (1871), passing also on the ad-
missibility of the books of the corpora-
tion to prove its indebtedness to a credi-
tor in an action against a stockholder.

4Moss v. McCullough, 5 Hill, 181
(1848). [This case was reversed upon
another point in McCullough v. Moss,
5 Denio, 567 (1846).] McMahon v. Macy,
51 N. Y., 155 (1872); Miller v, White, 50

245
STATUTORY LIABILITY OF STOCKHOLDERS. (oH. XIt. -

§ 925.)
creditor is obliged to prove his cause of action over again, and re-
peat what he has already proved in his action against the corpora-
tion. Such, also, seems to be the rule in Illinois.!

In any jurisdiction where the stockholders are, by statute, made
liable for only a certain class of the corporate indebtedness, it is
plain that they cannot be charged upon a judgment recovered
against the corporation, unless it be shown that the claim in con-
troversy comes within the class upon which they are liable?

§ 225. Stockholder’s miscellaneous defenses against his statutory
liability — There are two classes of defenses that may occur to
a stockholder to defeat his statutory liability. One class is of
defenses that the corporation itself might have set up, or did set

id., 1387 (1872); Chase v. Curtis, 113 U. S.,

452 (1884); Esmond v. Bullard, 16 Hun,
65 (1878); Conant v. Van Schaick, 24
Barb., 87 (1857). But see Slee v. Bloom,
20 Johns., 669 (1822); Belmont v. Cole-
man, 21 N. Y., 96 (1860); Hastings v.
Drew, 76 id., 9 1879); Lawler v. Rose-
brook, 48 Hun, 453 (1888); Moss v. Oak-
ley, 2 Hill, 265 (1842); Stephens v. Fox,
83 id., 313 (1881), in which the ground
is taken that the judgment in these
cases is prima facie evidence or more,
without, however, overruling the earlier
cases; Trippe v. Huncheon, 82 Ind.,
307 (1882), where a complaint founded
on the judgment was held bad on de-
murrer, because the liability of the
stockholder was looked upon as being
upon the original debt and not upon the
judgment; Southmayd v. Russ, 8 Conn.,
52 (1819), where, for the same reason,
a proceeding by scire facias was not
allowed to be maintained; Whitney
Arms Company v. Barlow, 63 N. Y.,
62 (1875). Practically the corporate
creditor must bring his action anew
against the shareholder upon his orig-
inal demand. Bailey, v.. Bancker, 8
Hill, 188 (1842); Kincaid v. Dwinelle,
59 N. Y., 548 (1875); Moss v. Averell,
10 id,, 449 (1853); Witherhead v. Allen,
4 Abb. App. Dec., 628 (1867). As to
the effect of recitals in a decree against
the corporation, see Chesnut v. Pen-
nell, 92 Ill, 55 (1879). This judgment
against the corporation is admissible
only as evidence that the condition pre-

eedent to his right to recover from the
shareholder has been complied with,
Wheeler v. Miller, 24 Hun, 541 (1881);
8S. C., sub nom. Wheeler v. Millar, 90
N. Y., 853 (1882); Strong v. Wheaton,
88 Barb., 616 (1861). But ef. Tyng v.
Clarke, 9 Hun, 269 (1876). See, also,
Bissit v. Kentucky, etc., Navigation
Co., 15 Fed. Rep., 353 (1882), and the
annotation; Union Bank v. Wando
Mining, etc., Co., 17 S. C., 339 (1881).

The judgment may avail, however, in

these cases to prevent the statute of
limitations from barring the’ action.
Van Cott v. Van Brunt, 2 Abb. N. C.,
283, 294 (1877); rev'd on other points, 82
N. Y., 585 (1880).

1Chesnut v. Pennell, 92 Ill, 55.
In Quick v. Lemon, 105 IL, 578 (1883),
where the corporation had not pleaded
a counter-claim against a creditor ina
suit at law, a stockholder was permit-
ted to file a cross-bill in a chancery
suit brought by judgment creditors
against the corporation and certain
stockholders. The stockholder may set
up that the plaintiff’s claim grew out
of business transacted by the corpora-
tion after it had been put into liquida-
tion by the court. Richmond v. Irons,
121 U. 8., 27 (1887).

2 Bohn v. Brown, 88 Mich., 257 (1876).
Wilson v. The Stockholders, etc., 43
Penn, St., 424 (1862); Conant v. Van
Schaick, 24 Barb., 87 (1857). Cf. Larrabee
v. Baldwin, 35 Cal., 155 (1868); Farns-
worth v. Wood, 91 N. Y., 308 (1883). ,

246
CH. X11. | STATUTORY LIABILITY OF STOCKHOLDERS.

[$ 225.
up, against the plaintiff when he sought to collect his debt from
the corporation. As already explained herein, in some jurisdic-
tions, particularly New York, the stockholder may set up these
defenses, although the corporation has failed to establish them. In
other and most jurisdictions he cannot.

A second class of defenses include those which are personal to
the particular stockholder, and not such as the corporation might
have set up. They are largely such defenses as the stockholder
might set up against the corporation to defeat his subscription.
They do not refer to the validity of the creditor’s debt, but they
deny that that particular defendant is one of those who are liable

for the corporate debts. There are, in addition to the defenses
specified in a previous chapter,’ several defenses which are pecul- |
iar to this statutory liability.

(a) Release or extension —A release by the corporate creditor of
one shareholder from his proportion of the corporate indebtedness
will not operate to release the other shareholders.? Thus, where the
shareholders are held to be severally and not jointly liable under
the statute, one may be released without releasing the others.’
But whether an extension given to the corporation by a creditor
will not discharge a shareholder as to his liability by statute seems

uncertain.

1Chapter X, supra.

2Herries v. Platt, 21 Hun, 182 (1880).
See, also, Prince v. Lynch, 38 Cal., 528
(1869), holding that the stockholder lia-
ble only proportionately is released only
proportionately. The assumption of the
corporate debt by a third party may be
rescinded. Borland v. Haven, 87 Fed.
Rep., 394 (1888).

3Bank of Poughkeepsie v. Ibbotson,
5 Hill, 461 (1848). Cf. Herries v, Platt,
21 Hun, 132 (1880).

4In the case of Harger v. McCullough,
2 Denio, 119 (1846), it was held that it
would not; while in the later case of
Parrott v. Colby, 6 Hun, 55 (1875); S. C.
affirmed, 71 N. Y., 597 (1877). Without
expressly overruling Harger v. McCul-

lough, it is plainly declared, in making’

an application of the short statute of
limitations provided by the General
Manufacturing Act of New York (N. Y.
Laws of 1848, ch. 40, § 24), that the
liability of shareholders in these cases
cannot be revived or extended by any

» renewal or extension of the indebted-

ness which the creditors may make with
the corporation. And in accordance
with that view, where the effect of the
extension granted by the creditor to the
corporation had been to postpone the '
aetion against the shareholder beyond
the time prescribed by the statute
within which such an action is main-
tainable—that is, one year from the time
the corporate debt. was first due — it was
held that the shareholder was thereby
discharged. Parrott v. Colby, supra;
Jagger Iron Co. v. Walker, 76 N. Y.,

521 (1879); Hardman v. Sage, 47 aun,
280 (1888); Stilphen v. Ware, 45 Cal., 110
(1872). See, also, Jones v. Barlow, 62 N.
Y., 202 (1875); Bolen v. Crosby, 49 N. Y.,
188 (1872). In Aultman’s Appeal, 98 Pa.
St., 505 (1881), it was held that, where the
extension was granted at the request
of the directors, the stockholders had
assented, and there was no release. A
release of the corporation under an in-
solvency statute is a release of the stock-

247 :
§ 225.] ‘STATUTORY LIABILITY OF STOCKHOLDERS. [CH. XII.

(b) Liability already paid.— It is a defense to the stockholder to
prove that his full statutory liability has already been paid by him.
‘A stockholder who has voluntarily paid corporate debts to the full
extent of his statutory liability is entitled to set up that fact. And
when such a payment was bona fide it is a bar to an action to col-
lect any further amount.’

(¢) Set-off— Closely related to the defense of payment already
made, there is the defense that the defendant stockholder has
claims against the corporation, and that he is to be credited to that

amount as a set-off.

holder’s statutory liability. Mohr v..
Minn., etc., Co., 41 N. W. Rep., 1074
(Minn., 1889). See, also, Hanson v. Donk-
ersley, 37 Mich., 184 (1877), ruling that
the Michigan statute does not make
stockholders primarily liable, and hold-
ing that the individual liability for cor-
porate debts is discharged by an exten-
sion of time and the acceptance of a cor-
: porate note. A laborer’s statutory right
to collect from the stockholders is not
waived by taking the corporate note.
Jackson v. Meek, 9 S. W. Rep., 225
(Tenn., 1888).

i Garrison v. Howe, 17 N. Y., 458
(1858); Mathez v. Neidig, 72 N. Y., 100
(1878); Lane v. Harris, 16 Ga., 217 (1854);
Belcher v. Willcox, 40 id., 391 (1869);
Robinson v, Bank of Darien, 18 id., 65,
109 (1855); Woodruff & Beach Iron
Works v. Chittenden, 4 Bosw., 406
(1859); Boyd v. Hall, 56 Ga., 563 (1876);
San Jose Savings Bank v. Pharis, 58
Cal., 380. Cf. Thebus v. Smiley, 110
Til, 816 (1884), where fraud’ was in-
volved; Delano v. Butler, 118 U. S.,
634 (1886). Contra, Fowler v. Robinson,
81 Me., 189 (1850); Grose v. Hilt, 36 Me.,
22. But when a creditor has actually
commenced a suit to enforce the statu-
tory liability of any individual share-
holder, it is then too late for that share-
holder to defeat the action by paying
some other corporate creditor’s claim.
Jones v. ‘Wiltberger, 42 Ga., 575 (1871).
See, also, Lane v. Harris, 16 Ga., 217;
Thebus v. Smiley, 110 Ill, 316 (1884).
A contrary conclusion was reached in
Richards v, Brice, 3 N. Y. Supp., 941

(Com. Pl., 1889); but the plain injustice
of allowing the stockholder to defeat an
action by such a device will not com-
mend this decision. Nor will a share-
holder who has employed an agent to
buy up claims at a discount, and then
confessed judgment in favor of that
agent, be permitted to plead such a
judgment in bar of an action by other
creditors. Manville v. Karst, 16 Fed,
Rep., 173 (1883). -Payment of the judg-
ments at a discount is no exhaustion of
the liability, though the judgments at
full value would have exhausted it.
Kunkelman v. Rentchler, 15 Brad. (IIL),
271 (1884). Neither may a shareholder
himself buy in claims at a discount, and
then set them off at their face value in
an action to enforce his statutory lia-
bility to creditors. Gauch v. Harrison,
12 Bradw. (IIl.), 457 (1883). See, also, -
Thompson v. Meisser, 108 Ill., 359 (1884);
Diven v. Phelps, 34 Barb., 224 (1861).
A stockholder can defeat his statutory
liability by offsetting judgments against
the corporation purchased by himself,
but only to the extent that he paid for
the judgments. Bulkley v, Whitcomb,
49 Hun, 290 (1888); Lingle v. Nat’l Ins.
Co., 45 Mo., 109 (1869); Holland v. Hey-
man, 60 Ga., 174 (1878). A mortgage
by an insolvent stockholder in an in-
solvent corporation td one of the cor-
porate creditors is a preference to the
extent of the stockholder’s liability for
corporate debts. Gatch v. Fitch, 34 Fed.
Rep., 566 (1888); Ingalls v, Cole, 47 Me.,
580, 541, holding that the mere pend-
ency of suits is not a defense for a stock-

248
CH. X11. | LIABILITY OF .STOCKHOLDERS.

STATUTORY [§ 225.

It has been held that, where the statute creates a fund, out of
which the creditors are to be paid ratably, then the stockholder
cannot set off an indebtedness of the corporation to him. He
must pay in what the statute requires, and then prove his claim
against the corporation like any other creditor.) But where the
shareholder’s liability by statute is immediate and personal and
several, and any creditor may sue any shareholder, then the share-
holder may set off a debt, owing to him from the corporation,
when he is sued by a corporate creditor?

(d) Interest.— In South Carolina,’ Maine and Illinois,‘ the share-
holder is not liable for interest on the amount for which the statute
makes him answerable, and when he pays the principal sum the

holder in a later action, unless the prior
claims have been legally established
and his liability exhausted.

1 Matter of the Empire City Bank, 18
N. Y., 199, 227 (1858); Matthews v. Al-
bert, 24 Md., 527 (1866); Briggs v. Corn-
well, 9 Daly, 486; Hobart v. Gould,
8 Fed. Rep., 57 (1881); Hillier v. Alle-
gheny Mutual Ins. Co., 3 Penn. St,
470; Lawrence v. Nelson, 21 N. Y., 158
(1860); Thebus v. Smiley, 110 Ill., 316
(1884); Witters v, Sowles, 32 Fed. ie: ‘5
130 (1887). See, also, Clapp v. Wright,
21 Hun, 240 (1880); Buchanan v. Meis-
ser, 105 Tll., 688 (1883). A stockholder
sued on his statutory liability cannot
offset judgments which he has pur-
chased against the corporation, except
to the extent that he paid for them.
Bulkley v. Whitcomb, 1 N. Y. Supp.,
748 (1888). For cases where the stock-
holder brings action as a corporate
creditor, see Terry v. B’k of Cape Fear,
20 Fed. Rep., "77; Weber v. Fickey,
47 Md., 196.. See, also, Emmert wv.
Smith, 40 id., 123; and §§ 198, 194,
supra; Hollister v. Hollister Bk, 2
Abb. App. Dec., 367 (1865). In this
case'stockholders of an insolvent bank,
after paying the judgments had against
them to enforce their individual liabil-
ities, turned around and asked to be
made, to the extent of those judgments,
creditors of the bank, and thus entitled
to participate pro rata with other cred-
itors. Held, nothing is to be repaid to

the stockholders until all the debts of
the bank are paid.

2Mathez v. Neidig, 72 N, Y., 100
(1878); Agate v. Sands, 73 id., 620 (1878);
Wheeler v, Millar, 90 id., 358, 362 (1882) ;
Richards v. Crocker, N. Y. Daily Reg.,
April 22, 1887, Christensen v. Colby, 43
Hun, 362 (1887); Tallmadge v. Fishkill, 4
Barb., 382 (1848); Boyd v. Hall, 56 Ga.,
568 (1876); Remington v. King, 11 Abb.
Prac., 278 (1858). This defense is al-
lowed by the courts of New York in
actions to enforce the liability imposed
by the statute of that state known as
the Manufacturing Companies Act of
1848. N. Y. Laws of 1848, ch. 40,
$$ 10, 24. See Wheeler v. Millar, 90
N. Y., 353 (1882), a case in which the
right to set-off under this statute is
fully considered. The shareholder’s
right to set off his claim against the
corporation in defense to an action
against him to enforce his statutory lia-
bility may sometimes be a matter of
bonu fides, Boyd v. Hall, 56 Ga., 563
(1876); Belcher v. Willcox, 40 id., 391
(1869) ; Thompson v. Meisser, 108 IIl., 359;
Buchanan v. Same., 105 id., 638 (1883);
Welles v. Stout, 38 Fed. Rep., 807 (1889).

3Sacketts Harbor Bank v. Blake, 3
Rich. Eq., 225 (1849); Cole v. Butler, 48
Me., 401 (1857). See Grand Rapids Sav-
ings Bank v, Warren, 52 Mich., 557
(1884); Cleveland v. Burnham, 64 Wis.,

' 347 (1888).

4Munger v. es 99 Ill, 349

(1881). ‘

249
§ 225.] STATUTORY LIABILITY OF STOCKHOLDERS. [CH. XII.
whole liability is discharged. In New York interest is collectible
from the time the suit to enforce is commenced, instead of begin-
ning from the time when judgment is entered.’

(6) Costs— Although it be a condition precedent to the action
against the shareholder that a judgment be recovered against the
corporation, it has been held no part of the shareholder’s ‘ statutory
liability to pay the costs of obtaining that judgment. Accordingly,
a judgment against the shareholder was held not to include any
part of the costs of the proceeding against the corporation; but
there has been strong dissent from this doctrine.’

(f) Statute of limitations Where the liability of the share-
holder is immediate and primary, and not contingent on the obtain-
ing of a judgment against the corporation, it is clear that the stat-

ute of limitations begins to run in favor of the shareholder when
the debt matures against the corporation.’

But when the creditor must first obtain a judgment against the
corporation and sue out an execution, which must be duly returned

l1Handy v. Draper, 89 N. Y., 334
(1882); Burr v. Wilcox, 22 id., 551 (1860).
Cf. Casey v. Galli, 94 U.8., 678 (1876);
Richmond v. Irons, 121 U. 8., 27 (1887).
Where a referee computed the interest
on the plaintiff’s claim from the date on

‘which it became due from the com-
pany instead of from the day the suit
_ against the shareholder was com-
menced, it appearing that the indebted-
ness was less than the amount of the
shareholder’s liability, and that the
allowance of interest did not swell it
beyond that limit, the court of appeals
held such a computation no error.
Wheeler v. Millar, 90 N. Y., 358, 862
(1882). Interest on the judgment is al-
lowed in suit to enforce a stockholder’s
liability. Shickle v. Watts, 7 S. W.
Rep., 274 (Mo., 1888).

2 Bailey v. Bancker, 3 Hill, 188 (1842);
Richmond v, Irons, 121 U. 8., 27 (1887);
Rorke'v. Thomas, 56 N. Y., 559, 565
(1874); Miller v. White, 50 N. Y., 187
(1872). Cf. Veeder v. Mudgett, 27 Hun,
519 (1882). It is possible that the rule
might be otherwise in a case where the
judgment is held to be conclusive as
against the shareholder. Soin Michigan.
Grand Rapids Savings Bank v. Warren,
52 Mich,, 557 (1884), A judgment for

250

costs against a corporation may be en-
forced against the director’s statutory
liability. Allen v. Clark, 108 N. Y., 269
(1888). Costs may be collected against
stockholders in suits to enforce this lia-
bility. Irons v. M’f’rs B’k, 36 Fed. Rep.,
843 (1888). A creditor enforcing the |
stockholder’s liability in behalf of him-
self and other creditors may have his
costs. Irons v. M’f’rs B’k, 36 Fed. Rep.,
843 (1888).

3Davidson v. Rankin, 84 Cal., 503
(1868); Lindsay v. Hyatt, 4 Edw. Chan.
(N. Y.), 97 (1842); Godfrey v. Terry, 97
U. S., 171 (1877); Conklin v. Furman, 8
Abb. Pr. (N. §.), 164 (1865); Schalucky
v. Field, 16 N. E. Rep., 904 (IIl., 1888).
Compare Carrol v. Green, 92 U. S., 509
(1875); Terry v. Tubman, 92 id., 156
(1875); Terry v. McLure, 103 id., 442
(1880); Corning v. McCullough, 1 N. ¥.,
47 (1847); Jagger Iron Co. v. Walker, 76
N. Y., 522 (1879). See, also, Terry v.
Calnan, 18 S. C., 220; Lawler v. Burt,
7 O. St., 840; King v. Duncan, 38 Hun,
461 (1886); Stilphen v. Ware, 45 Cal.,
110 (1872), holding that, under California
statute of limitations, the three years
begin to run from the time the debt
was due, and is not extended by a judg-
ment obtained against the corporation.
cH. x1r.]

STATUTORY LIABILITY OF STOCKHOLDERS.

[§ 225.

wholly or partially unsatisfied before the cause of action arises:
against the shareholder of his statutory liability, then the statute.
of limitations commences to run upon the return of the execution.!

It is a general rule of law that the statute of limitations appli-
cable to any ordinary action to enforce a contract is the one appli-
cable to the action to enforce the statutory ay of shareholders

in incorporated companies.?

Accordingly, the suit must usually be gawuitanead within six years

after the cause of action has accrued.®

\Handy v. Draper, 89 N.. Y., 884
(1882); Merritt v. Reid, 18 Week. Dig.
(N. Y.), 458 (1882); Longley v. Little, 26
Me.,'162 (1846). In Terry v. Tubman,
92 U. S., 156 (1875), where the charter of
a bank contained a provision making

\ the shareholders individually liable for
the ultimate redemption of its bills, the
liability of the shareholders was held to
arise, and hence the statute of limita-
tions to commence to run in their favor,
-upon the open and notorious insolvency
of the bank. So, likewise, where share-
holders were made individually liable
‘upon the failure of the bank,” it was
held that, the liability arising upon the
failure, the statute of limitations began
to run at that time. Carrol v. Green,
92 U. S., 509, 511 (1875). To the same
effect is Baker v. Atlas Bank, 9 Metc.,
182 (1845); Terry v. McLure, 103 U.5.,
442 (1880); Godfrey v. Terry, 97 id., 171
(1877), The case of Terry v. Anderson,
95 U. S., 628 (1877), sustains the consti-
tutionality of a statute shortening the
statute of limitations herein. The case
In re B’k of Sing Sing, 32 Hun, 462
(1884): aff’d, 96 N. Y., 672, held that
twenty years’ delay by receiver in mak-
ing report bars any assessment on stock-
holders. A statute of limitations run-
ning from thé time of dissolution of the
company is not set running by corporate
insolvency and cessation of business.
Sleeper v. Goodwin, 31 N. W. Rep., 335
(Wis., 1887).. Cf. § 195; 88 Fed. Rep., 187.

2Green v. Beckman, 59 Cal., 545
(1881); Corning v. McCullough, 1 N. Y.,
47 (1847); Wiles v. Suydam, 64 id., 178,
176 (1876); Mappier v. Mortimer, 11 Abb.

'

Prac. (N.'S.), ‘455 (1871); Baker v. The
Atlas Bank, 9 Metc., 182 (1845); The
Commonwealth v. The Cochituate Bank,
3 Allen, 42 (1861); N. Y. Code of Civil
Proc., § 382.
'3The citations in the preceding note.

‘See, also, Phillips v. Therasson, 11 Hun,
‘141 (1877), holding that where by stat-

ute the capital must be paid in within
two years upon pain of dissolution, and
imposes liability upon stockholders for
debts of the corporation until the cap-
ital is fully paid, the statute of limita-
tions beginé to run at the expiration of
the two years allowed for paying the
capital. Under the New York Manu-
facturing Act relative to the two-year
statute of limitations to a stockholder’s
statutory liability, it begins to run
upon the dissolution of the corporation.
The creditor must sue within that time,
Hollingshead v. Woodward, 107N. Y.,
96 (1887); King v. Duncan, 38 Hun, 461
(1886), holding that under that statute
the creditor is not required to delay his
suit until the two years has expired;
Knox v. Baldwin, 80 N. Y., 610 (1880);
Hawkins v. Furnace Co., 40 O. St., 507
(1884). In South Carolina, under the
statute of limitations of 1712 in that
state, this action must be begun within
four years, Carrol v. Green, 92 U.S,
509 (1875); Terry v. McLure, 103 id., 442
(1880). And, on the other extreme, in
some of the older cases, it is held that
an obligation, such as this, to pay
money, arising under a statute, is a
debt by specialty, and accordingly that
it is barred only by a lapse of twenty
years, Bullard v. Bell, 1 Mason, 243,

. 261
STATUTORY LIABILITY OF STOCKHOLDERS. [oH. uh

§ 295.)

If a statutory liability be held to be a penalty, then of course it
will be held to come within that provision of the statute of limita-
tions which provides for actions to enforce penalties.’

In general, whatever the statute be, it is the rule that a lapse of
time sufficient to constitute a bar at law will in equity be given the
same effect; in other words, in these cases there is the same statute
of limitations both at law and in equity.

Other defenses.—- The cause of action against a stockho!der, aris-

ing from his statutory liability, is not defeated by his death. The
action may proceed against his estate.* The liability of. solvent
stockholders is not extended beyond the limit fixed by statute, even
though other stockholders are insolvent.* A petition in bankruptcy

.

289 (1817, by Judge Story); Thornton v.
Lane, 11 Ga., 459 (1852); Lane v. Morris,
10 id., 162 (1851). Butsee this view con-
demned in Carrol v. Green, 92 U. S., 509,
515 (1875), in an opinion by Justice
Swayne, construing the South Carolina
statute of 1712. Cf. Greeny. Beckman,
59 Cal., 545 (1881), construing § 859, Cal-
ifornia Code of Civil Procedure; 38 Fed.
Rep., 777. Sometimes there is a provis-
ion that the action must have been com-
menced by the creditor against the cor-
poration within a given limited time
after the maturity of the debt, in order
to hold the share-owner on his statutory
liability. N.Y. Laws of 1848, ch. 40,
§ 24; Shellington v. Howland, 53 N. Y.,
371 (1873); Birmingham National Bank
v. Mosser, 14 Hun, 605 (1878); Lindsley v.
. Simonds, 2 Abb. Prac..(N. 8.), 69 (1866).
Cf. State Sav. Ass’n v. Kellogg, 52 Mo.,
5838 (1873). See, also, Freeland v. McCul-
lough, 1 Denio, 414, 422 (1845); Mer-
chants’, etc., Co. v, Bliss, 21 How. Pr.,
366; aff'd, 85 N. Y., 414 (1860); Lewis v.
Ryder, 13 Abb. Pr., 1; Kuykendall v,
Draper, 19 Hun, 577; Moore.v. Boyd, 15
Pac. Rep., 670 (Cal., 1887). Frequently,
also, there is a limitation applicable
particularly to transfers of stock. Paine
v. Stewart, 33 Conn., 516 (1882). In this
case a statute of Minnesota imposing
liability upon stockholders while they
were such, and for one year thereafter,
was held, in an action in Connecticut, not
to be operative against one who had not

been a stockholder for more than a year
before the action was brought. In New
York this limitation is two years. See
Handy v. Draper, 89 N. Y., 334, and ch.
XV, infra.

1Gridley v. Barnes, 103 IIL, 211; Di-
versey v. Smith, id., 378 (1882), See,
also, Cable v. McCune, 26 Mo., 380; Law-
lor v. Burt, 7 O. St., 341 (1857); Cady v.
Smith, 12 Neb., 628 (1882); Knox v. Bald-
win, 80 N. Y., 610 (1880). Cf. Duck-
worth v. Roach, 81 N. Y., 49 (1880);
Wiles v. Suydam, 69 N, Y., 178. The fed-
eral courts follow the state decisions.
Price v. Yates, 7 Weekly Notes, 51 (U.
8. C. C., Penn., 1879).

2 Bank of Pouphkeepste v. Ibbotson,
24 Wend., 473 (1840); Carrol v, Gréen,
92 U. S., 509 (1875); Baker v. The Atlas
Bank, 9 Metc., 182 (1845); Lindsay v.
Hyatt, 4 Edw. Chan. (N. Y.), 104 (1842);
Van Hook v. Whitlock, 8 Paige, 409
(1882); Commonwealth v, Cochituate, 3
Allen, 42 (1861); Terry v. McClure, 103,
U. S., 442 (1880). When the statute
prescribes the limitation, there is. of
course no controversy. Baker v. Bachus’
Adnv’r, 32 Ill, 99.

3Richmond v. Irons, 121 U. S&S, 27
(1887); Chase v. Lord, 77 N. Y., 1. But
see Dane v. Dane Mfg. Co., 80 Mass.,
489 (1860).

4Crease v. Babcock, 51 Mass., 525.
See, also, under the National Bank Act,
United States v. Knox, 102 U. &., 422
(1880).

252
CH. x11.] STATUTORY LIABILITY OF STOOKHOLDERS.

[$$ 226, 227,
by a stockholder is no bar to the enforcement of his Liahintty; unless
the corporate creditor was a party to the bankruptcy proceeding.!
The admissions of one stockholder cannot bind another stockholder
herein.?

§ 226. Priority among creditors When the creditor is entitled

‘to an action at law against an individual shareholder for an enforce-
ment of a statutory liability, in order to collect a claim against the
corporation, it has been held that the creditor first suing any share-
holder is entitled to priority in enforcing his claim as against that
particular shareholder. The diligent creditor is entitled to the
payment of his claim, although other creditors are thereby de-
prived of payment.’ The right to a priority, however, in these
cases, is in general one of questionable propriety, and the courts
are not inclined to favor it. And one creditor may, at the instance
of the rest, be restrained from the prosecution of his individual
suit where it is in prejudice of the equal rights of all the others.®

§ 227. Contribution among shareholders.— Upon general princi-
~ples of equity, where a shareholder has been held liable, under the
provisions of a statute, for a debt of the corporation of which he is
a member, he may maintain an action against his co-shareholders

for contribution.’

1 Birmingham B’k v. Mosser, 14 Hun,
605.

2Simmons v. Sisson, 26 N. Y., 264
(1863).
3Cole v. Butler, 48 Me., 401 (1857),
holding, also, that the rights of a cred-
itor who moves ‘first cannot be affected
by the fact that.another creditor, pursu-
ing a shorter remedy, obtains judgment
before him; Ingalls v. Cole, 47 id., 580,
541 (1860); Jones v. Wiltberger, 42 Ga.,
575 (1871); Robinson v. Bank of Darien,
18 id., 65, 108 (1855); Thebus v. Smiley,
110 Ill., 316 (1884). Cf. Weeks v. Love,
50 N. Y., 568 (1872); Miers v. Zanesville,
etc., Tuirnpike Co., 18 Ohio, 197 (1842),
§ 2256.

4 Wright v. McCormack, 17 O. St., 86,
holding that, if part of the creditors in-
stitute an action to enforce the liability
of all, no creditor can acquire priority
or institute a separate suit on his own
behalf; Smith v. Huckabee, 53 Ala., 191
(1875); Chicago v. Hall, 108 Ill, 342
(1882), holding that, if a suit at law by
a creditor against a stockholder be en-

Where the stockholders’ statutory liability is

joined by other creditors who seek to
enforce the liability for the benefit of
all the creditors, and the stockholders
discharge their liability, the creditor so
enjoined has no prior lien. upon the

‘fund.

5 Eames v. Doris, 102 Ill., 850 (1882);

-Pfohl v. Simpson, 74 N. Y., 187 (1878).

Cf. Garrison v. Howe, 17 N. Y., 458
(1858).

6 Aspinwall v. Sacchi, 57 N. Y., 331
(1874); Stewart v. Lay, 45 Iowa, 604
(1877); Umsted v. Buskirk, 17 O. St.,
113 (1866); Matthews v. Albert, 24 Md.,
527 (1866): Hadley v. Russell, 40 N. H.,
109, 112 (1860); Erickson v. Nesmith, 46
id., B71 (1866); Gray v. Coffin, 9 Cush.,
192 (1852); Middletown Bank v. Magill,
5 Conn., 61 (1828); Brinham v. Wellers-

‘burg Coal Co., 47 Penn. St., 43 (1864);

Masters v. Rossie Lead Mining Co., 2
Sandf. Chan., 301 (1845): Farrow v. Biv-
ings, 18 Rich. Eq., 25; Clark v. Myers, -
11 Hun, 608 (1877), holding that the
action cannot be against one only;
O'Reilly v. Bard, 105 Pa. St., 569’ (1884),

253
§ 297.)

STATUTORY LIABILITY OF STOCKHOLDERS.

a
Has

oH. xIr,

enforced by a suit in equity, contribution is of course enforced, in
that suit, so far as the parties can be found within the jurisdiction}

holding that a stockholder who pays a
judgment against the corporation is con-
fined to the remedy provided in the act,
and in this case could not maintain as-
sumpsit for contribution against other
stockholders who were not parties to
the judgment. As to the Pennsylvania
statutory method of obtaining contribu-
tion, see, also, Brinham v. Wellersburg,
etc., Co., 47 Pa. St., 48 (1864). Stock-
holders seeking to enforce contribution
from co-stockholder in foreign corpora-
tion must show that he, the plaintiff,
is legally liable. Eastman v. Crosby, 8
Allen, 206. See, also, Ladd v, Cart-
wright, 7 Oregon, 329; Patterson v.
Lynde, 106 U. S., 519 (1882). A share-
holder, it is said, being alsoa creditor
of the corporation, may make use of
whatever advantage his position as
shareholder gives him to secure the pay-
ment of his claim, even to the exclusion
of other creditors who are not share-

holders. Whitwell v. Warner, 20 Vt., :

425, 444; Reichwald v. Commercial
Hotel Co., 106 Ill., 439, holding that the
securing of a large debt to a stock-
holder for money advanced, by means
of a deed of real property, with agree-
ment that it should be considered se-
curity, was not fraudulent. See, also,

Bristol Milling, etc., Co. v. Probasco,
64 Ind., 406; Terry v. Bank of Cape
Fear, 20 Fed. Rep., 777. See, also,
§ 226, supra, to the effect that a stock-
holder sued at law may enjoin the suit
and bring all parties into a suit in
equity. Officer paying statutory liabil-
ity may have contribution. Nickerson
v, Wheeler, 118 Mass., 295. Cf. Ray
v. Powers, 134 Mass., 22; Hartman
v. Ins. Co. of Valley of Va., 32 Gratt.,
242 (1879); Chandler v. Brown, 77 IIL,
334 (1875); Bronson v. Wilmington, etc.,
Insurance Co., 85 N. C., 411 (1881);
Perry v. Turner, 55 Mo., 418 (1874);
Lindley on Partnership, pp. 1223-1474.

1Harpold v. Stobart, 21 N, E. Rep.,
637 (Ohio, 1889). This case holds also
that a stockholder in Ohio ‘‘is liable to
creditors of the corporation for such
portion only of the debts existing while
he held the stock and remaining due
(not in excess of the amount of stock
assigned) as will be equal to the propor-
tion which the capital stock assigned
by him bears to the entire capital stock
held by solvent stockholders, liable in
respect of the same debts, who are
within the jurisdiction, to be ascer-
tained at the time judgment is ren-
dered.” |

254
CHAPTER XIII.

LIABILITY OF STOCKHOLDERS WHERE THE SUPPOSED INCORPORA-
TION DOES NOT PROTECT THEM, AND FOR ASSESSMENTS BEYOND
THE PAR VALUE OF THE STOCK.

§ 280. Different liabilities of a stock- | § 237-39. Liability as partners by rea-

holder, son of the fact that the

231-33. Liability as partners by rea- corporation is incorporated

son of deficient incorpora- in one state, but does all its

tion. business in another state.

234. Instances. 241-42, ' Assessments in excess of par
235. Extent of the liability. value of stock.

236. Liability as partners by reason | 248. Miscellaneous cases of liability.
of unauthorized incorpora- .
tion.

§ 230. Different liabilities of a stockholder on his stock.— A
stockholder may be said to be liable on his stock in three different
ways. First, he is liable to the corporation and corporate creditors
until the full par value of his stock has been paid.! Second, he
may have an additional liability imposed upon him by statute?
Third, it may happen that by some accident, mistake or neglect
the supposed. corporation was never duly incorporated, or for some
other reason the members become liable as partners in a copartner-
ship; or it may be within the power of the corporation to assess
the stockholder for sums over and above and in addition to the par
value of the stock. This third kind of liability is unusual in its
character, and is the subject of this chapter. ,

§ 281. Liability as partners by reason of material defects in be-
coming incorporated.— The statutes under which incorporations
are generally made provide that a corporation may be formed by
taking certain steps, usually the making and filing with the state,
and also with the local authorities, a certificate signed by the cor-
porators, and containing a statement of the business, of the capital
stock, and other facts material to the organization of the corpora-
tion.

Occasionally, however, it happens that this certificate is not fully
made out, as required by the statute, or is not filed, or some other
step prescribed by law is not complied with. The corporation is
then not duly incorporated; and the state, by quo warranto, may
oust it from its user of corporate franchises. But it is a very dif-

1.See chapters XI and TI, 2 See chapter xi.
255

fr i
PARTNERSHIP LIABILITY OF STOCKHOLDERS. [ou. XIII.

§§ 232-234. |
ferent and a difficult question to determine whether a private indi-
vidual may take advantage of such facts, and claim that the sup-
posed corporation is not a corporation, but only a partnership.

§ 232. When the regularity of acts in becoming incorporated can-
not be questioned by a private individual. As already explained,!
a subscriber for stock in a corporation cannot, when sued for calls
on his stock, set up that the corporation was not duly incorporated.
He is estopped from so doing. Nor can a stockholder, who has
funds of the corporation in his hands, defeat an action by the cor-
poration therefor by setting up that the corporation was not duly
~ incorporated.” And, in general, a party contracting to pay money
to a corporation, or to transfer property to it as a corporation, can-
not avoid the obligation of that contract by alleging the fact that
the corporation was not duly incorporated, provided that such cor-
porations were allowed by law.’ Nor, on the other hand, can the
corporation itself avoid its contracts on such grounds.!

§ 2338. When the regularity of the incorporation may be questioned
by a private individual. A corporate creditor seeking to enforce
the payment of his debt may, however, ignore the existence of the
corporation, and may proceed against the supposed stockholders as
partners, by proving that the prescribed method of becoming in-
corporated was not complied with by the company in question. He
is not estopped from so doing, since he is not repudiating a contract,
but is enforcing it. The fact that he contracted with them under
a corporate name is immaterial, since, at common law, parties may
carry on business under any name they choose.®

§ 234. Instances.— Thus, it has been held that, where the arti-
cles of association are signed, but~not filed until some time sub-
sequently, debts contracted in the interim: may be collected from

4 Holbrook v. St. Paul Fire & M. Ins.

1 See §§ 183-186; Buffalo & A. R. R.
Co. v. Cary, 26 N. Y., 75.

2 Krutz v. Paola Town Co., 20 Kan.,
397 (1878).

3 See 19 Am. Dec., 67, notes; Lessee of
Frost v. Frostbury Coal Co., 24 How.,

278 (1860), where the grantor of land to.

a corporation claimed that no title
passed; Pope v. Capital B’k, 20 Kan.,
440 (1878), where the. plaintiff corpora-
tion sued the defendant on a promissory
note; Fay v. Noble, 7 Cush., 188, wherea
third person was not allowed to impeach
a transfer of property by a corporation
to another, person by setting up that the
transfer was invalid owing to informal-
ities in the incorporation. See ch. 88.

Co., 25 Minn., 229 (1878).

5 Lauferty v. Wheeler, 11 Abb. N. C.,
228; Lindley on Partn., 182 (Callaghan
& Co., 1881), The case of Chaffe v.
Ludeling, 27 La. Ann., 607 (1875), well
says: ‘‘ Obligors are bound, not by the
style which they give to themselves, but
by the consequences which they incur
by reason of their acts. It matters not
what they choose to call themselves.”
See, also, Nat’l B’k, etc., v. Landon, 45
N.Y., 410, 414 (1871) ; Ridenour v. Mayo,
40 O. St., 9 (1888); and cases infra. Cf.
Wentz v. Lowe, 3 Atl. Rep., 878 (Pa..
1886).

256
OH, XII]

PARTNERSHIP LIABILITY OF STOCKHOLDERS.

z

[§ 234.

the stockholders as partners.’ So, also, a total failure to file or
record the certificate or articles of incorporation renders the mem-
bers liable as partners;? as does an omission of the members to

1 Bigelow v. Gregory, 78 IIl., 197 (1874).
See, also, Bergen v. Porpoise F. Co., 18
Am. & Eng. Corp. Cas., 1 (N. J., 1886).
Contra, Whitney v. Hyman, 101 U. S.,
392 (1879). Cf. 17 Atl. Rep., 840(Vt., 89).

?Field v. Cooks, 16 La. Ann., 153
(1861); Abbott v. Omaha Smelting Co.,
4 Neb., 416 (1876); Garnett v. Richard-
son, 85 Ark., 144 (1879); Ferris v. Thaw,
72 Mo., 449 (1880); Coleman v. Coleman,
78 Ind., 344 (1881); Martin v. Fewell, 79
Mo., 401, 410 (1883). In the case of
Hurt v. Salisbury, 55 Mo., 310 (1874),
corporate officers were held personally
liable on a promissory note signed by
them as officers, where the certificate of
incorporation was not filed as required.
In Richardson v. Pitts, 71 Mo., 128
41879), the same officers were held to
be entitled to contribution from other
members of the supposed corporation.
In the case of De Witt v. Hastings, 69
N. Y., 518 (1877), where no certificate
was filed owing to an abandonment of
the enterprise, it was held that a subse-
quent filing of it could not render liable
one of the original promoters who took
no part in the filing of the articles of as-
sociation, although his name was at-
tached thereto. Cf. Blanchard v. Kaull,
44 Cal., 440 (1872); Western, etc., T.
Co. v. U. P. B’y, 8 Fed. Rep., 721, 729
(1880). Contra, Planters’, etc., B’k v.
Padgett, 69 Ga., 159 (1882); Humphreys
v. Mooney, 5 Col., 282 (1880); Gartside
«“ Coal Co. v. Maxwell, 22 Fed. Rep., 197
(1884); Merriman v. Magivennis, 12
Heisk. (Tenn.), 494 (1873); Merchants’,
etc., B’k v. Stone, 88 Mich., 779 (1878);
Jessup v. Carnegie, 80 N. Y., 441 (1880),
applying an Iowa decision to an Iowa
case, First Nat. B’k v. Davies, 48 Iowa,
424 (1876). Cf. Harrod v. Hamer, 382
Wis., 162 (1878), where the statute ef-
fected an ircorporation without a fil-
ing, but prohibited organization until
after the articles were filed. Where

(17)

the certificate or articles are to be filed
both with the state and the local author-
ities, a failure as to the former does not
render the stockholders liable as part-
ners, provided the articles or certificate
are filed with the local authorities.
Makelumne Hill Min. Co. v. Woodbury,
14 Cal., 424 (1859); Raisbeck v. Oester-
richer, 4 Abb. N. C., 444 (1878); Cross
v. Pinckneyville Mill Co., 17 IIL, 54
The creditor cannot sue the directors
for damages for a fraudulent conspiracy
herein, especially when he was informed
that the corporation had been irregu-
larly incorporated. Nelson v. Luling,
62. N. Y., 645 (1875),

In Iowa stockholders are liable as
partners, by statute, if the incorporation
is not regular. LEisfield v. Kenworth,
50 Iowa, 389 (1879). Stating place of
business suffices for principal place of
business. Jn re Spring, etc., Works, 17
Cal., 132 (1860). That a failure to file
the certificate with the secretary of state
does not invalidate the corporation, see
Tarbell v. Page, 24 Tll., 46(1860). The fil-
ing of the certificate in the county clerk’s
office, as required by statute, is essen-
tial to incorporation. Childs v. Hurd,
9 8. E. Rep., 862 (W. Va., 1889). In
Bigelow v. Gregory, 78 Ill, 197 (1874),
the court held that there was no corpo-
ration until the certificate was filed,
and that a creditor might recover from
a stockholder as a partner. In Indian-
apolis Min. Co. v. Herkimer, 46 Ind.,
142 (1874), the court held that there was
no corporation until the certificate was
filed, and that a subscriber to the arti-
cles who had agreed to pay the corpo-
ration his dues when it was organized
could successfully resist its suit until
the certificate was filed. In State v.
Cent. O. Mut. R, Ass’n, 29 O. St., 399,
the court ousted an association whose
notice of acceptance to the state was in-
definite and ambiguous. In Clegg wv.

257
3 Pas.
§ 234. ] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [oH. xm.

sign ee publish the articles of assoeiation;! or an indefinite state-
ment of where the principal place of business of the corporation
is to be.2 The mere assumption of corporate powers, without any
attempt at incorporation, cannot, of coarse, exempt the members
from full liability as partners.’ It is not, however, every omission
to comply with the statute that renders the members liable as
partners. Immaterial provisions, or requisites to be complied with
after incorporation, have not that effect.! Thus, a failure to com-
_ mence the principal business> does not invalidate the incorpora-
tion; nor does an wltra vires act or fraud of the conporation have

that ‘elteck: :

Hamilton Co., 61 Iowa, 121, the court
held that publishing the articles which
did not contain all the requirements of
the statutory notice was insufficient,
and stockholders were liable as part-
ners. In Henig v. Adams and W. Co.,
81 Ky., 300, the court held that there
was no corporation until the certifi-
cate was published. In Garnett v.
Richardson, 35 Ark., 144, the court held
stockholders liable as partners until
the certificate was filed with the secre-
tary of state. In First Nat, B’k v. Da-
vies, 43 Iowa, 424 (1876), the court held
that, where the state waived notice by
permitting the filing to be made with
its secretary within ninety days, vested
rights accrued which would not be
affected iby failure to file within that
time. See, also, Jessup v. Carnegie, 80
N. Y., 441 (1880). In Holmes v. Gilli-
land, 41 Barb., 568, the court held that
failure to give notice to the community
by publication does not make the stock-
holders partners. In People v. Self-
ridge, 52 Cal., 331, an action was brought
on the ground that the certificate filed
did not show, as required, that a major-
ity of the stockholders were present at
‘the meeting to organize, The defend-
ant offered to. prove that a majority
were in fact present, but the court re-
fused to receive the evidence and ren-
dered judgment of ouster. Such facts,
however, are no defense to subscrip-
tions. See §§ 183-186, supra, and § 637,
infra, Failure to file the articles of
association with the county clerk, as

required by statute, does not render the
stockholders liable as partners. Granby,
etc., Co. v. Richards, 8 S. W. Rep., 246
(Mo., 1888),

1Unity Ins. Co. v. Cram, 43 N. H.,
636 (1862); Kaiser v. Lawrence 8. Br,
56 Iowa, 104 (1881), where the articles
were not properly signed and acknowl-
edged. This case also disapproves the
decision in Humphrey v. Mooney, 1 Col.,
282 (1880). In enforcing this partner-
ship liability, the assumed corporation
is not to be made a party defendant
with the members thereof. Smith v.
Colorado Fire Ins. Co., 14 Fed. Rep., 399
(1882).

2 Harris v. McGregor, 29 Cal., 124 (1865).

3Pettis v. Atkins, 60 Ill., 454 (1871);
Fuller v. Rowe, 57 N. Y., 28 (1874).

4Thus, a failure to notify éach mem-
ber of the meeting to organize is im-
material. McClinch v. Sturgis, 72 Me.,
288 (1881). See, also, Judah v. America,
etc., Co., 4 Ind., 383 (1853); Russell v.
McLellan, 31 Mass., 68 (1833); Newcomb
v. Reed, 12 Allen, 362. The omission
of an immaterial part of the acknowl-
edgment by an incorporator, and the
owission of a certificate of notaryship,
do not render the incorporators liable
as partners. Stoutv. Zulick, 7 Atl. Rep.,
862 (N. J., 1886).

5 Trowbridge v. Scudder, 66 Mass., 83
(1853),

6 Langan v. Iowa & Minn, Con. Co.,
49 Iowa, 817 (1878); Second Nat'l B’k
of Cin. v. Hall, 35 O. St., 158 (1878).
Where, however, an incorporated s0-

258
cH. xut.]

PARTNERSHIP LIABILITY OF STOCKHOLDERS. [S§ 235, 236.

§ 235. Extent of the liability by reason of deficient incorpora-
tion. The mere fact that an attempted incorporation has failed
does not necessarily render all the participants therein liable ab-
solutely for the debts of the concern. At the most, each is liable
only in case he would be liable if the-original plan had been to
form a partnership. If he was not a member when the debt was
contracted he cannot be held liable on that particular debt.!. One
case goes still further, and holds that one who: ‘becomes a member
subsequently to the attempted incorporation, but takes no part in
the organization or management of the company, cannot be held
liable for its debts.?

§ 236. Liability as partners by reason of fact that corporations
cannot be organized for the business involved.— The general incor-
porating acts common to most of the states usually specify the
particular kinds of business for the prosecution of which corpora-
tions may be formed thereunder. It follows that no business can
be carried on by persons, as a corporation, under the incorporating
act, unless that particular business is specified therein.? Frequently

ciety used all its funds to contest a debt, -

the court compelled the members to re-
place the money so used. Adm’r of Big-
elow v. Cong. Society of M., 11 Vt., 283
(1839). In the case of Medill v. Collier,
16 O. St., 599, 618 (1866), the court said:
‘*When the entire business carried on
by persons in the name of a corporation
is such as the corporation is prohibited
by law from doing, they cannot inter-
pose the corporate privileges between
them and the liabilities which the law
‘imposes upon individuals in the trans-
action of similar business without the
use of the:corporate name.”

1 Fuller v. Rowe, 57 N. Y., 23 (1874).
See, also, § 508, infra. In a suit against
stockholders as partners, the defendants
may require the joinder of their asso-
‘ciates. DeWitt v. Hastings, 69 N. Y.,
518 (1877).

2Stafford B’k v. Palmer, 47 Conn.,.
448 (1880). Cf. Richardson v. Pitts, 71
Mo., 128 (1879).

3’ Thus, where a rifle club attempted
incorporation under the statute allow-
ing incorporation for “literary, scien-
tific and charitable purposes,” the mem-
‘pers were held individually liable for
damages to the widow of a man who

was killed by a bear which the club was
keeping. Vredenburg v. Behan, 38 La.
Ann., 627 (1881). See, also, Glen wv.
Brearc, 35 La. Ann, 875 (1883), There
may be a question as to the validity of
the law itself allowing the incorpora-
tion. Williams v. B’k of Michigan, 7
Wend., 540 (1831); State of Michigan v.
Howard, 1 Mich., 512 (1846); Chenango
Bridge Co. v. Paige, 88'N. ¥., 178, 190
(1880). As toa corporation incorporated
by astate, asa state, before it was ad-
mitted to the Union, see Myers v. Man-
hattan B’k, 20 O., 283 (1851). Contra,
Scott v. Detroit, etc., Society, 1 Doug.
Rep. (Mich.), 119 (1843). Persons incor-
porated for thé purpose of doing a grain-
gambling business have been held
jointly and severally liable for money
obtained from a customer. The corpo-
rate character does not protect them.
McGrew v. City Produce Exchange, 4
S. W. Rep., 38.(Tenn., 1887). See, also,
38 Fed. Rep., 191. Many business pur-
poses may be specified in one charter.
Bird v. Daggett, 97 Mass., 494 (1867). A
bank cannot incorporate under act for
“any species of trade or cgmmerce.”
B’k of California v. Collins, 7 Hun, 336
(1876). A purchaser of stock from one

259
§ 237.]

PARTNERSHIP LIABILITY OF STOCKHOLDERS.

[cH. XIII,

certain kinds of business are not mentioned in the att, for the rea-
son that it is not deemed wise public policy to allow a limited lia-

bility in that class of business.

This seems to have been the rule

as regards construction companies for the building of ‘railroads,!

and as regards a general mercantile business.

Accordingly, where

the business for ehioh incorporation is sought is not within the
classes of business mentioned in the act itself, “the attempted incor-
pores is void, and the participants are liable as copartners.
$237. Liability as partners by reason of the fact that the corpo-
ttn is incorporated in one state, but does all its business in another
state.— By the comity of states the rule has become well established

of the supposed stockholders cannot re-
cover back the purchase price from all
of such stockholders. His remedy is
other than this. Perry v. Hale, 10
Northeast. Rep., 174 (Mass., 1887).

1The New York Business Companies
Act of 1875 (ch. 611), expressly excludes
railroad construction companies from
incorporation under that act. In the
following statutes authorizing the in-
corporation of railroad corporations
the words used do not authorize corpo-
rations to ‘‘ construct,” but read ‘ for
the purpose of constructing, maintain-
ing and operating railroads:” N. Y.
Sess. L., 1850, ch. 140,.§ 1; Laws of
Michigan, § 3313; Brightley’s Purdon’s
Digest (Penn.), 1414; Stat. of IIL, ch.
114, § 1; Ind. RB. S., ch. 37 (1885). In
Ohio, on the other hand, there may be
an incorporation “for any purpose for
which individuals may lawfully associ-
ate themselves, except for dealing in
real estate or carrying on Professional
business.” R. S. (1886), § 3235. But
railroad construction companies must
file a statement of the termini, etc., of
the railroad itself (§ 3237). It has been
held, however, that, under the general
act for the incorporation of companies
for constructing and operating a rail-
road, a company for the construction
alone of the road may be incorporated.
* That there can be a railroad company
which does nothing but construct the
voad, and a railroad company which
does nothing but operate the constructed
road, cannot be doubted. It is not es-

sential to the idea of a railroad com-
pany that it should both construct and
operate a railway.” First Nat. B’k of
Davenport v. Davies, 48 Iowa, 424
(1876), followed in Jessup v. Carnegie,
80 N. Y., 441 (1880); Langan v. Iowa &
Minn. Construction Co., 49 Iowa, 317
(1878).

Medical college cannot be incorpo-
rated under act to incorporate benevo-
lent, charitable, scientific and mission-
ary societies. People v. Gunn, 96 N. Y.,
817 (1884). Mutual reliance society can-
not be incorporated under act for in«
corporating benevolent, charitable, sci-
entific and missionary societies. People
v. Nelson, 46 N. Y., 477 (1871). Bank
cannot incorporate under act for ‘‘any
species of trade or commerce.” B’k of .
Cal. v. Collins, 7 Hun, 336 (1876), Ex-
press business is an ‘industrial pur-
suit,” as used in federal statute allowing
incorporation in territories. Wells, etc.,
Co. v. Northern Pac. R’y Co., 23 Fed.
Rep., 469 (1881). A mercantile enter-
prise may be incorporated under an act
authorizing-incurporation for any ‘‘in-
dustrial or productive industry.” Car-
ver, etc., Co. v. Hulme, 19 Pac. Rep.
218 (Mont., 1888), An elevator com-
pany cannot incorporate under a manu-
facturing company act. Mohr v, Minn..
etc., Co., 41 N. W. Rep., 1074 (Minn.,
1889). Printing and publishing a news-
paper is not a manufacturing business.
Press, etc., Co, v. State Board, 16 Atl.
Rep., 173 (N. J., 1888).

260

.
a
s

AH xii. ] PARTNERSHIP LIABILITY OF STOCKHOLDERS.

[$ 237.

that a corporation organized under the laws of a state may trans-
act business beyond the borders of that state! But in order that
such contracts may be upheld and the corporate character be sus-
tained, it is necessary that both the state creating the corporation
and the corporation so created shall have acted in good faith in
conferring and taking the corporate privileges. Thus, where a cor-
poration was ‘incorporated by the legislature of Pennsylvania, and
authorized to do business anywhere but in that state, the court of
Kansas refused to recognize its corporate character? The comity
of states does not prevail’ to that extent. In New Jersey, at an
early day, it was held that a corporation could not become incor-
porated under the laws of New York for the purpose of partying
on all its corporate transactions in the state of New Jersey.’ The
stockholders were decided to be merely partners. Likewise it was
held that where a corporation was incorporated to do business in a
certain.city in the state, but actually does all its business in another
city of that state, the incorporation is a fraud upon the law, and

the company is the same as though unincorporated.!

1“ Tt is very true that a corporation
can have no legal existence out of the
boundaries of the sovereignty by which
it is created. . . . But although it
must live and have its being in that
state only, yet it does not by any means
follow that its existence there will not
be recognized in other places; and its
residence in one state creates no insu-
perable objection to its power of con-
tracting in another.” Ch. J. Marshall,

in Bank of Augusta v. Earle, 13 Pet., |

521 (1839).

2 Land Grant R’y & Trust Co. v. Coffey
County, 6 Kan., 245 (1870), the court
saying: ‘“ Norule of comity will allow
one state to spawn corporations, and
send them forth into other states to be
nurtured and do business there, when
said first-mentioned state will not allow

them to do business within its own,

boundaries.” And see opinion of At-
torney-General of Texas (1887), 2 R’y &
Corp. L. J., 4883, to the effect that a
Scotch corporation, authorized to pur-
chase land anywhere excepting at home,
cannot hold lands in Texas.

3The corporation ‘‘ cannot be recog-
nized by any court in New Jersey as a

legally constituted corporation, nor be
dealt with as such. If it can be, what
need is there of any general or special

law in our state? Individuals desirous

of carrying on any manufacturing busi-
ness may go into the city of New York,
organize under the general laws of that
state, erect all their manufacturing
establishments here, and under their
assumed name transact their business,
not only free from all personal respon-
sibility, but under cover of a corporation
not amenable to our laws.” Hill v.
Beach, 12 N, J. Eq. R., 81 (1858).

4The corporation was incorporated to
do business in Trenton, but actually
transacted all its business in Jersey
City. The court said: “The doctrine
that the organization cannot be inquired
into collaterally has no application as
the case stands, because the charter
does not fit this company, and was not
intended for it.” Booth v. Wonderly,
86 N. J. L., 250 (1873). This doctrine
was followed ina New York casein an ,
inferior court, the facts being that a
New Jersey corporation had no office
or place of business in New Jersey, and
did no business there, but transacted its

261

1
’

“business in New York.

PARTNERSHIP LIABILITY OF STOCKHOLDERS. [oH. XIII.

g 239, ]

In Massachusetts it has been held that where a citizen of Massa-
chusetts incorporates a company in New Hampshire, and states in
the certificate of incorporation that the chief place of business is in
a city in New Hampshire, and that he and his associates are jointly
interested, the corporation is fraudulent and void —it being proved,
in fact, that all the business was carried on in Massachusetts, and
that the associates were “dummies,” having one share of stock
each.!

§ 239. A much more broad and liberal: view of the comity of
states and the interests of business was taken by the New York
court of appeals in the case of Merrick v. Van Santvoord, where,
although a Connecticut corporation did all its corporate business
and performed all its corporate acts in New York excepting the
holding of elections, yet the court, in a well-considered and ably-
written opinion, held that the corporation did not thereby lose its
corporate character, and that its members were not liable as co-

partners.’

“It was not an
existing corporation within the mean-
ing of the statute of New Jersey, under
which it purports to have been incor-
porated. It was a fraud upon
the laws of New Jersey, and cannot
screen defendants and its organizers
from personal responsibility as partners
for contracts made in New York under
the assumed name.” Kruse v, Dusen-

‘bury, 19 Weekly Dig. (N. Y. Com. Pl.),

201 (1884).

1Montgomery v. Forbes, 19 N. E.
Rep., 842 (Mass., 1889). | In this case the
holder of a note signed in the corporate
name, and given for goods sold, sued a
stockholder for the price of the goods,
The court sustained the suit, and said:
‘“‘The apparent corporation was not a
corporation, The defendant’s
pretended associates were associates
only in name; he alone was interested
in the enterprise. The articles of agree-
ment were recorded in Nashua, N. H.,
and stated that the business was to be
carried on there; but it was not in
fact carried on there, and was not in-
tended to be. This is not a case where
a corporate charter has been granted,

but the organization of the corporation |

This view of the law has. been taken also by the su-

under the charter has been defect-
ive. The business was his per-
sonal business, which he. transacted
under that name.’

2 Merrick v. Van Santvoord, 34 N. Y.,
207 (1866), reversing Merrick v. Brainerd,
38 Barb., 574, the court saying: “‘We
think the recognition, in our state, of
the rights hitherto conceded in our
courts to foreign corporations is neither
injurious to our interests, repugnant to
our policy, nor opposed to the spirit of
our legislation, . . It would be
neither provident nor just to inaugurate
a rule which would unsettle the secu-
rity of corporate property and rights,
and exclude others from the enjoyment
here of privileges which. have always
been accorded to us abroad. aA
corporation is an artificial being, and
has no dwelling, either in its office, its
warehouses, its depots or its ships.

. The grant of franchises without
restriction is equivalent toa specific au-
thority to exercise them wherever the
company might find it convenient or
profitable, whether within or without
the limits of the state of Connecticut.”
See, also, Danforth v. Penny, 3 Metc..
564 (1842),

‘

262
CH. xu. ]

PARTNERSHIP LIABILITY OF STOCKHOLDERS.

[§ 239.

preme court of the state of Ohio, and is now established by the

great weight of authority.’

1Second Nat’! B’k of Cin. v. Hall, 35
O. St., 158 (1878), the court holding
it to be no fraud on the Ohio laws for a
corporation organized under the laws of
Kentucky to do all its business in Ohio,
even though thereby the stockholders
escape a personal liability. Bateman v,
Service, L. R., 6 App., 386 (1881); Ste-
vens v. Phoenix Ins. Co., 41 N. Y., 149
(1869), A party contracting with a for-
eign corporation to pay it in oil from

- land assigned by it to him cannot de-
feat the suit of the corporation by
alleging that it was incorporated in
another state to do all its business in
the state, and thereby was guilty of a
fraud. Newburg Petroleum Co.. v.
Weare, 27 O. St., 348 (1875). Although
parties incorporated in Kentucky, by.
reason of the greater liberality of the
Kentucky corporation statutes, and al-

though the corporation does all its busi-

ness in Ohio, nevertheless its corporate
charter is recognized, and the stockhold-
ers are not liable as partners on a cor-
porate note. Second Nat’! B’k v. Lovell,
2 Cin. Rep., 397 (1873). A corporation
of one state ‘lawfully may, as they
often actually do, remove their officers,
agents, offices and effects into another
sovereignty, and there exercise their
functions and. franchises,” Penn. Co.
v. Sloan, 1 Bradw. (Ill.), 364 (1878).

2In the case of Christian Union v.
Yount, 101 U. S., 352 (1879), involving
the question whether a foreign corpora-
tion could, by bequest, take land in II-
linois, the court said: ‘‘In common
with the general law of comity obtaining
among the states comprising the Union,
the presumption should be indulged
that a corporation of one state, not for-
bidden by the law of its being, may ex-
ercise within any other state the gen-
-eral powers conferred by its own charter,
unless it is prohibited from so doing,
either in the direct enactments of the
latter state, or by its public policy to be

deduced from the settled adjudications
of its highest courts.” See, also, Ore-
gonian Railway Company v. Oregon
Railway & Navigation Company, 23
Fed, Rep., 232 (1885), where the plaint-
iff, an English corporation, did all its
business in Oregon ; reversed on another
point, 130 U. 8., 1 (1889). A corporation
*‘may do business in all places where its
charter allows and the local laws do not
forbid.” Canada Southern R’y Go. v.
Gebhard, 109 U. S., 527(1888). See, also,
Cowell v. Springs Co., 100 U. 8, 55
(1879), holding that a Pennsylvania cor-
poration authorized to purchase land in
states and territories west of the Missis-
sippi may purchase land in Colorado, and
such purchase is valid, where no statute
of Colorado prohibits it, And see Stock-
ton v. Baltimore, etc., R. R. Co., 32
Fed. Rep., 9 (1887). In Halles v. Drew
Theo. Sem., 95 N. Y., 166 (1884), the court
said, as to foreign corporations, that the
courts could not exclude them from
doing business in the state. ‘‘ Unless the
legislature’ forbids, they can come here
as freely as natural persons, and exer-
cise here allthe powers conferred upon
them by their charters, subject to the
same limitations imposed upon natural
persons ; that is, they do no acts in vio-
lation of our laws or of our public policy.
But, unless prohibited by law, they can
do here, within the limits of their char-
tered powers, precisely what domestic
corporations could do.” See, also, Bard
v. Poole, 12 N. Y., 495 (1855); Mumford
v. American, etc, Ins. Co, 4 N. Y.,
468, 482 (1851); In reN. Y. & W. RR,
Co.,. 35 Hun, 220 (1885). In the case of
People v. Fire Association, 92 N. Y., 311
(1883), the court, in holding that the
state may prohibit a foreign insurance
company from doing business within its
borders unless a certain tax was paid,
said: ‘“‘ The right of a state to exclude
foreign corporations is perfectly settled
and not open to debate. Out of com-

263
§ 241.]

PARTNERSHIP LIABILITY OF STOCKHOLDERS.

[ow. xi.

§ 941. Assessments by the corporation in excess of the par value of
the stock.— It is a principle of law, coeval with the existence of
corporations having a capital stock, that, unless the corporate char-
ter or a constitutional statute provides otherwise, a stockholder, the
full par value of whose stock has been paid in, is not liable and can-
not be made to pay any sums in addition thereto.’ The mere legis-

ity between the states has grown a
right founded upon implied consent.
Where a state does not forbid, or its
public policy as evidenced by its stat-
utes is not infringed, a foreign corpo-
ration may transact business within its
boundaries, and be entitled to the pro-
tection of its laws.” As was well said
by Chancellor Kent in Silver Lake B’k
v. North, 4 John. Ch., 370 (1820), in ref-
erence to allowing foreign corporations
to sue in our courts, such a policy is de-
manded by comity, since otherwise they
might say: ‘‘ What race of men is this,
from whose arena we are excluded?”
It is. argued that corporations should
be compelled to incorporate in the state
where they do their business. The an-
swer is that the latter state should be
as liberal in its corporation statutes as

other states are, and that a change in.

the statutes will be induced by the fact
that incorporation is obtained in other
states. Stockholders are not liable as
partners for corporate dealings in ex-
change carried on outside of the state.
Ohio Life, etc., Co. v. Merchants’, etc.,
Trust Co., 11 Humph. (Tenn.), 1, 28
(1850). A corporation may do all its
business outside of the state incorporat-
ing it. Saltmarsh v. Spaulding, 17 N. E.
Rep., 316 (Mass., 1888). Members of a
Massachusetts corporation who are lia-
ble for its debts are liable for its debts
created in other states. The corpora-
tion may contract in other states. Hal-
thius v. New Eng., etc., Co., 86 Mass.,
580 (1882). See, also, § 694, infra.
1Great Falls & C. R. R. Co. v. Copp,
38 N. H., 124 (1859); State v. Morristown
Fire Ass’n, 3 Zab., 195 (1851); Morley v.
Thayer, 3 Fed. Rep., 737 (1880); Chase v.
Lord, 77 N. Y., 1 (1879); Slee v. Bloom,
19 Johns., 458, 478 (1822); Shaw v, Boy-

lan, 16 Ind., 384; Coffin v. Rich, 45 Me.,
511 (1858); Gray v. Coffin, 63 Mass., 192,
199 (1852); French v. Teschimaker, 24
Cal., 518, 540; Inhabitants of Norton v,
Hodges, 100 Mass., 241 (1868); Oliver v.
Liverpool & L. L. & F. Ins. Co., 100 Mass.,
531, 5389 (1868), holding that, in order to
prevent this limited liability, the Eng-

‘lish parliament expressly declared joint-

stock companies not to be incorpora-
tions; Myers v. Irwin, 2 Serg. & R., 371

(1816), the court saying: ‘‘ The personal

responsibility of the stockholder is in-
consistent with the nature of a body
corporate ;” Liverpool Ins. Co. v. Massa-
chusetts, 10 Wall., 566, 576 (1879); New
Eng. B’k v. Stockholders of N. 8. Fac-
tory, 6 R. I., 188 (1859); Walker v. Lewis,
49 Texas, 123 (1878); Green v. Beckman,
59 Cal., 545 (1881); Jones v. Jarman, 34
Ark., 323 (1879); Windham Prov. Inst.
v. Sprague, 43 Vt., 502 (1871); Woods v.
Hicks, 7 Lea (Tenn.), 40, on the ground
that the corporate creditor contracts
not with the stockholders, but with the
corporation. Terry v. Little, 101 U.&.,
216 (1879), the court saying: ‘The in-
dividual liability of stockholders in a
corporation is always a creature of stat-
ute. It does not exist at common law;”
Smith v, Huckabee, 53 Ala., 191 (1875),
where the court said: ‘‘ Immunity from
such liability is one of the inducements
which has led to the multiplication of
private corporations, and caused them
to supersede, to.a great extent, in haz-
ardous enterprises, or enterprises re-
quiring large capital, partnerships;”
Spense v. Iowa Valley Construction Co.,
36 Iowa, 407 (1878), the court saying:
“It is one of the distinguishing features:
of incorporation that the individual
property of its members may be ex-
empt from liability for corporate debts.

264
OH. XIII. | PARTNERSHIP LIABILITY OF STOCKHOLDERS.

[§ 241.
lative act of creating a corporation produces -by implication this
limited liability of its members. For this reason the statutes regu-
lating joint-stock companies are frequently careful to state that
nothing therein contained shall give such companies the character
of corporations, ' The older text-books and the earlier reports did
not emphasize or probably appreciate the vitality of this principle of
law. Of such importance is it that it would seem to be the great
and distinguishing characteristic of corporations, and not a subsid-
lary or unimportant one. It seems to have been assumed rather
than. established by direct adjudication. In the early turnpike
company cases of New England a contrary rule appears to have
been assumed, and the subscriber appears to have been open to as-
sessments indefinitely, except that he might forfeit his stock. Such
companies, however, had no fixed par “valae of their stock. At
present the rule of non-liability at common law, beyond the par
value of the stock, is established beyond question, and forms the
chief inducement in the formation of the many corporations of the

day. '

Therein consists the great superiority of
a corporation over a partnership or an
unincorporated joint-stock company ;”
Salt Lake City Nat. B’k v. Hendrickson,
40 N. J. L. Rep., 52 (1878); Van Sandan
v. Moore, 1 Russ. Ch., 392, 408 (1826);
Atwood v. Rhode I. Agri. Bk, 1 RT,
876 (1850), the court saying: ‘‘ At com-
mon law the stockholders in a corpora-
tion are not liable individually for the
corporate debts. The capital ‘stock is
the fund to which alone the creditors
‘must resort, unless in cases of, fraud.”
5 N. Y. Supp., 192 (1889). The case
of Atlantic De Laine Co. v. Mason,
5 R. L, 463 (1858), holds that the pay-
ment of one invalid assessment is no
waiver of the right to object to another.
Cf. Field v. Pierce, 102 Mass., 253 (1869).
If the stockholders voluntarily contrib-
ute to the corporate treasury in order to
‘make it a success, such gifts are not
corporate debts and cannot be recov-
ered back. Bidwell v. Pittsburgh, etc.,
Ry Co., 6 Atl. Rep., 729 (Pa., 1887);
Leavitt v. Oxford, etc., Go., 3 Utah, 265
(1883). In England ‘the liability of a
shareholder in a corporate body is de-
termined by the conditions of incor,
poration. Without express provision,

no member of a corporate body is indi-
vidually liable for the corporate debt.
A company may be registered under the
Companies Act, 1862, with limited or
unlimited liability. According to-the
nature of such registration a share-
holder will be liable to contribute, re-
spectively, the unpaid amount on his
shares, or to the extent of the com-
pany’s guaranty, or indefinitely.” Cav-
anagh’s Law of Money Securities (2d
ed.), 494, citing Lion, etc., Ins. Co. v.
Tucker, L. R., 12 Q. B. D., 176; In re
Norwich Ins. Society, L. R, 13 Ch. D.,
693; In re City, etc., Bank, L. R., 4
App. Cas., 337, 550, 567, 581, 583, 598,
607, 615, 624,'632; City, etc., Bank v.
Houldsworth, L. R., 5 App. Cas., 317.

1Oliver v. Liverpool, etc., Ins. Co.,
supra; Laws of N. Y., 1854, ch. 245,
§3. And see chapter XXIX.

2In the case of Carr v. Iglehart, 3 O.
St., 457 (1854), the court took counsel to
task for questioning this principle of
law. Foran opinion that at common
law the stockholders were liable for all
corporate debts, see Harvard Law Re-
view, Nov., 1888, p. 160.

3 Middlesex Turnpike Co. v. Swan, 10
Mass., 884.

265
PARTNERSHIP LIABILITY OF STOCKHOLDERS. [cx. XT.

§ 249.)

§ 249. Attempts have been made in various ways to authorize the
assessment of stockholders for amounts after the par value of their
stock has been paid in. Such efforts have generally failed. It can-
not be done by a majority vote of the stockholders, nor of the di-
rectors, nor by a by-law.! The liability is sometimes created by
statute.2 Where the state has reserved the power to alter, repeal
or amend the charter, it may authorize the corporation to levy as-
sessments on its stockholders, in addition to the subscription of their
stock. The reasoning of this rule is clear. The limited liability is
a part of the corporate privileges conferred. A right to repeal the
franchises includes the right to repeal in part or altogether the fran-
chise or privilege of limited liability. On such grounds, laws of
this character, however harsh in their operation, are upheld as con-

stitutional.’

1Flint v. Pierce, 54 Mass., 539 (1868) ;
Kennebec & Portland R. R. Co. v. Ken-
dall, 31 Me., 470 (1850); Trustees of Free
School v. Flint, 54 Mass., 589 (1847);
Reid v. Eatonton Mfg. Co., 40 Ala., 98
(1869). In the first-mentioned case the
defendant subscribed to such a by-law,
among other by-laws, when he sub-
scribed for stock. Placing the words
‘‘individual property of stockholders
liable” on the face of corporate liabil-
ities has no effect in itself. Stockhold-
ers are liable only as prescribed by law.
Lowry v. Inman, 46 N. Y., 119 (1871).
An agreement of a vendee of stock with
the vendor to pay the corporate debts is
not enforceable by corporate creditors.
Free Schools v. Flint, 54 Mass., 543
(1847). But the agreement is enforce-
able if made directly with creditors.
Maxwell’s Case, L. R., 20 Eq., 585 (1874).
By consent of the stockholders each
share may be subject to further assess-
ment; and, when this agreement is
printed on the certificates, the purchaser
is bound by it. Weeks v. Silver, etc.,
Co., 55 J. & 8. (N. Y.), 1 (1887). The
case, however, of Hume v. Winyah &
W. Canal Co., Carolina Law Journal,
217, held, at an early day, that where a
corporation, not professing to have any
fixed capital, made a by-law by which
each of the corporators were bound to

contribute equally or ratably to all ex-
penses incurred, the corporators were
liable personally.

2In California, under} sections 381,
333, of the Civil Code, a corporation
may assess its members to any extent
‘“‘for the purpose of paying expenses,
conducting business or paying debts.”
Santa Cruz R. R. Co. v: Spreckles, 65
Cal., 193 (1884). A better construction
of such a statute prevails in Vermont.
Under a charter provision that ‘‘if at
any time the stock paid into said corpo-
ration shall be impaired by loss or other-
wise, the directors shall forthwith re-
pair the same by assessment,” a receiver
was not allowed to assess, since the pro-
vision is only to prevent a continuance
of business with an impaired capital.
Dewey v. St. Albans Trust Co., 59 Vt.,
332 (1886), In Pennsylvania it is ‘held
that, though the corporation has power
to assess beyond the par value of the
stock, yet such power may be restricted
by by-law. Price’s Appeal, 106 Pa. St.,
421 (1884). In Texas it is possible to
form a corporation wherein assessments
may be made on members ratably to
any amount for corporate purposes.
Guadalupe, etc., Ass’n v. West, 78. W.
Rep., 817 (1888) — a stock-protecting cor-
poration.

3Gardner v. Hope Ins. Co, 9 BI,

266

f
e
[$ 248.

cu. x11. ] PARTNERSHIP LIABILITY OF STOCKHOLDERS.

§ 248. Miscellaneous cases of liability or non-liability.— It has
been held, on grounds of public policy, that although a corporation
is advertised as having a capital stock of a fixed amount, the share-
holders and directors are not liable personally, even though sub-
scriptions have not been taken to that amount. They are not liable
either for the untaken stock, or on the ground of false representa-
tions, since the capital stock is understood to represent what the
corporation hopes to obtain in subscriptions.!. An oral promise to
pay corporate debts is void by the statute of frauds.? Partners, by
becoming incorporated, do not thereby cease to be partners as to
all the debts of the former partnership.? A stockholder is not lia-
ble as a partner by reason of misrepresentations that the corpora-
tion is solvent, though probably he would be liable in damages for
false representations.‘ Upon the dissolution of the corporation the
liability of the stockholder ceases. If the business is carried on
thereafter by the agents, rio liability therefor attaches to the former
stockholders,> unless they expressly authorize it.6 Persons who
purchase a railroad at an execution sale thereof cannot continue to
run it in the name of the old railroad corporation, and thereby be

protected from liability as partners.’
ee character, although they purchase its property. In all
es, however, in which the members of an association might have

é
ca

194 (1869); Meadow Dam Co. v. Gray, 30
Me., 547 (1849). See, also, §§ 280, 497,
infra.

1 First Nat’l B’k v. Almy, 117 Mass.,
476 (1875); Wakeman v, Dalley, 51N. Y.,
27, 30; Evans v. Coventry, 25 L. J.
(Ch.), 489 (1856); Crease v. Babcock, 51
Mass., 525, 557 (1846).
wv. Wotherspoon, Strob. Eq. (S. C.), 209,
229 (1847). In Illinois there is a statu-
tory liability in a case like this. Stat.
of Ill, ch. 32, § 18. Where, upon incor-

_* poration, the capital stock is fixed at

$25,000, and is subscribed, but no part
thereof is paid in, and business‘is com-
menced, the ‘participators are liable as
partners under the Pennsylvania stat-
ute. It is a fraud on the law. Hill,
etc., Co. vw. Stetler, 138 Atl. Rep., 306
(Pa., 1888). A corporation may com-
mence business before any stock is sub-
scribed unless the charter forbids. John-
son v. Kessler, 41 N. W. Rep., 57 (Iowa,
1888), Where, by the charter, a certain

Contra, Haslett .

They do not succeed to its

amount of the capital stock must be
paid in before business is commenced,
it is sufficient that that amount was
paid in by a few stockholders paying
their subscriptions in full. Lander v.
Logan, 16 Atl. Rep., 44 (Pa., 1889).

2Trustees of Free School v. Flint, 54
Mass., 539 (1868).

3 Broyles v. McCoy, 5 Sneed (Tenn.),
602 (1858). The case of Martin v. Few-
ell, 79 Mo., 401, 412 (1883), holds also
that, ‘‘ for the debts incurred after they
become a corporation, their liability
will depend upon the fact of actual no-
tice of their incorporation to the plaint-
iffs at the time such debts were in-
curred.”

4Searight v. Payne, 2 Tenn. Ch.,, 1'%5.

5 Central City Sav. B’k v. Walker, 66
N. Y., 424 (1876), aff’g 5 Hun, 34.

§Nat’l Union B’k of Watertown v.
London, 45 N. Y., 410 (1871),

7 Chaffe v. Ludeling, 27 La,.Ann., 607
(1875).

267
§ 243.] PARTNERSHIP LIABILITY OF STOCKHOLDERS. [oH. XII,

been held liable as partners, the right of the creditor to enforce
that liability is barred by his bringing suit and obtaining judgment
against the supposed corporation.’ ‘

1Cresswell v. Oberly, 17 Brad. (Ill.), each other. Their remedy is in equity.
281 (1885); Pochelu v. Kemper, 14 La. .Crow v. Green, 17 W. N. C., 409 (Penn.,
Ann., 308 (1859). The partners herein 1886). See, also, chapter XXIX,. on

cannot bring an action at law against Joint-stock Companies.
268 ,

.
CHAPTER XIV.

LIABILITY OF PLEDGEES, TRUSTEES, EXECUTORS, AGENTS, ETC,

§ 244. The liability of trustees and | § 251. The liability of the corporation

‘ cestui que trust. itself as a stockholder.

247, The liability of a pledgee of 252, The liability of legatees, assign-

i shares. ees in insolvency,:and joint

248. The liability of an executor or owners of shares.
administrator. 258. The use of ‘‘dummies,” and

249. The liability of an agent as transfers to nominal and fic-
transferrer or transferee. titious persons,

250. The liability of infants and mar- :

ried women as transferrers or
transferees,

§ 244. The liability of trustees and cestui que trust.— Where the
apparent owner of shares is not the real owner, the registered title
to the stock being in one person, and the equitable or real owner-
ship being in another, various intricate questions have arisen involv-
ing the matter of liability for unpaid subscriptions and liability
under the statute. The cases, which are very numerous, present
every variety of ownership and every phase of liability, including
many instances of transfer for the purpose of avoiding liability.
Yet, although the principles and rules of law governing this branch
of the subject are somewhat numerous and complicated, they are,
nevertheless, comparatively well settled.

The rights, duties and liabilities of a trustee and cestui que trust
of stock in a corporation are fully discussed elsewhere in this work.'

§ 247. The liability of a pledgee of shares. A pledgee of stock,
that is, one to whom the stock has been transferred in pledge or as
collateral security, and who has had the stock transferred into his
,own name on the corporate books, is liable to the creditors of the
corporation as though he were the absolute owner of the stock.

1 See § 5038c, infra. ;

2Moore v. Jones, 3 Woods, 53 (1877);
Pullman v. Upton, 96 U. S., 328 (1877);
Aultman’s App., 98 Pa. St., 505 (1881);
Crease v. Babcock, 51 Mass., 525 (1846);
Holyoke Bank v. Burnham, 68 Mass.,
183 (1858); Sleeper v. Goodwin, 31 N. W.
Rep., 3885 (Wis., 1887); Rosevelt v.
Brown, 11 N. Y., 148 (1854); Matter of
The Empire Bank, 18 id., 199 (1858);
Grew v. Breed, 10 Metc., 569 (1846);

Royal Bank of India’s Case, L. R., 7
Eq., 91 (1868); 8. C., L. R., 4 Chan., 252
(1869); Weikersheim’s Case, L. R., 8
Chan., 831 (1873); Price & Brown’s
Case, 3 De G. & Sm., 146 (1850), in which
the holders of shares taken as security,
who had new shares issued in their own
names in exchange for the old shares
which had been called in, were declared
to be contributories, though the direct-
ors knew the nature of their holding;

269
es

§ 247.)

'

LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC.

[cH. xIv.

This rule has frequently been enforced in the case ofa pledge of -

shares of stock in a national bank.!

Tf, however, the stock has been

recorded on the corporate books, not in the name of the pledgee, .
but in the name of a “dummy,” the pledgee is not liable thereon. 2
A statute frequently relieves the pledgee#

Richardson v. Abendroth, 43 Barb., 162
(1864). And the pledgee is liable upon
the stock even after his debt has been
paid and the certificate handed back to
the .pledgor, if the retransfer is not
properly entered on tle corporate books.
Bowdell v. The Farmers’ & Merchants’
National Bank of Baltimore, 25 Nat.
Bank. Reg., 405 (1877); Johnson v. Som-
erville Dyeing, etc., Co., 15 Gray, 216
(1860); Adderly v. Storm, 6 Hill, 624
(1844).

1Magruder v, Colston, | 44 Md., 349
(1875); Wheelock v. Kost, 77 Tll., 296
(1875); Hale v. Walker, 31 Towa, 344
(1871); Barre National Bank v. Hing-

ham Manuf’g Co., 127 Mass., 563 (1879);

National Bank v. Case, 99. U. S., 628
(1878).

2 Henkle v. Salem Mfg. Co., 39 O. St.,
547 (1883); Welles v. Larrabee, 36 Fed.
Rep., 866 (1888). In the case of Ander-
son, Receiver, v. Philadelphia Ware-
house Co., 111 U. 8., 479 (1883), it is

held that a pledgee of shares of stock

ina national bank, who takes the secu-
rity for his benefit in the name of an
irresponsible person, as trustee, for the
avowed purpose of avoiding individual
liability as a share-owner, incurs no
liability which can be enforced by
creditors of the bank in case of its
failure. To same effect, Newry, etc.,
Ry Co. v. Moss, 14 Beav., 64 (1851),
§ 470, infra. A transfer of shares by
one who holds them as collateral secu-
rity, for the purpose of avoiding liabil-
ity thereon, is not a conversion. Hiatt
v.'Griswold, 5 Fed. Rep., 578 (1881).
Cf. § 253.

3New York Laws of 1850, ch. 140,
§ 1, applicable to railroads. See

McMahon v, Macy, 61 N. Y., 155 (1872).

A similar provision is found in the New

_

York Manufacturing Companies Act of
1848 (New York Laws of 1848, ch. 40,
§ 16). See Stover v. Flack, 30N.'Y., 64
(1864); S. C., 41 Barb., 162. Cf. Case
of the Reciprocity Bank, 22 N. Y., 9, 17
(1860). And a similar provision has
been enacted in Maryland. Matthews
v. Albert, 24 Md., 527 (1866). In Mis-.
souri it was held that the act does not
operate to discharge a person to whom
shares have been originally issued by
the corporation as collateral security
for money advanced to it. Griswold
v. Seligman, 72 Mo., 110 (1880); Addi-
son’s Case, L. -R., 5 Chan., 294 (1870).
In Burgess v. Seligman, 107 U.S., 20
(1882), the supreme court of the United
States declined to put that construction
upon the Missouri statute, and held that
the pledgees were not liable to corpo-
rate creditors upon the shares so held
by them; and such also is the rule now
in Missouri. Union Sav. Ass’n v. Selig-
man, 92 Mo., 635 (1884), overruling Gris-
wold v. Seligman, supra. See, also, Mel-
vin v. Lamar Ins. Co., 80 Ill., 446 (1875),
§§ 188, 465. In England, Chapman’s,
etc., Case, L. R., 3 Eq., 365; Re Anglesea
Colliery Co., L. R., 2 Eq., 379; Inds’ Case,
L. R., 7 Ch., 485, were under the Com-
panies Act. In the case Re City Termi-,
nus Hotel Co., L. R., 14 Eq., 10 (1872),
a hotel company borrowed £40,000 of a
railroad company and gave its unissued
shares as security, they being placed
in the hands of a trustee, with power to
sell, and thus reduce the debt. After-
wards 'the railway company bought the .
hotel, and the latter was wound up.
Held, that the railway company were
not stockholders, but creditors, and
were entitled to deduct the amount of
the loan from the purchase money.
See, also, Manchester, etc., Case, 22

270
CH. XIV.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETc. [8 248,

§ 248. The liability of an executor or administrator.— The estate
of a deceased person is liable upon the stock held and owned by
the decedent in the same way and to the same extent that the share-
holder was liable in his life-time. Accordingly, an executor or ad-
ministrator of the estate of a deceased shareholder is chargeable
upon the shares of the decedent to the extent of the property that
comes into his hands as the personal representative of the deceased.!
The executor or administrator becomes personally liable, however,
upon the stock, if he pay away the assets of the estate in legacies
without making provision to meet the liability on the stock? When
the executors accept a transfer in their own names they make

Week. Rep., 41 (1875); Nellis v. Cole- Taylor v. Taylor, L. R., 10 Eq., 477

man, 98 Pa. St., 465 (1881), where the
corporation received subscriptions as a
loan, to be repaid. It was held to be
valid. In a late Massachusetts case it
is said that the pledgee is liable on the
stock as owner only when the certifi-
cate fails to show that the shares are
held merely as collateral. Barre Na-
tional Bank v. Hingham Manuf’g Co.,
127 Mass., 563 (1879); S. P., Davis v.
Essex Baptist Society, 44 Conn., 582
(1877). An unrecorded pledgee is, of

course, not liable on statutory liability. -

Henkle 'v. Salem, etc., Co., 39 O. St.,
547 (1883). See, also, § 261, infra.

1 Thomas’ Case, 1 De G. & Sm., 579
(1849); Baird’s Case, L. R., 5 Chan., 725
(1870), holding that the presumption is
that executors of a deceased share-
holder succeed to his full liability;
Stewart’s Trustee v. Evans, 9 Scotch Ct.’
‘of Ses. Cas. (8d series), 810 (4871); Evans
v. Coventry, 25 L. J. Chan., 489 (1856),
holding the executor liable only to the
extent of the estate funds. To same
effect, Blakeley’s Case, 18 Beav., 133
(1850); Ex parte Gouthwaite, 3'Mac, &
G., 187 (1851); Hx parte Doyle, 2 Hall
‘& Twells (Eng. Chan.), 221 (1850); Ha
parte Hall, 1 Mac. & G., 307 (1849);
Hamer’s Devisees’ Case, 2 De G., M. &
G., 366 (1852); Robinson’s Executor’s
Case, 6 id., 572 (1856); Ness v. Arm-
strong, 3 De G. & Sm., 38, note (1849);
Straffars’ Case, 1 De G., M. & G., 576;
Bulmer’s Case, 33 Beav., 485; Gouth-
waite’s Case, 8 De G. & Sm., 258 (1850);

(1870); Alexander’s Case, 15 Sol. Jour.,
788 (1871); Hamer’s Case, 3 De G. &
Sm., 279 (1850); Grew v. Breed, 10 Metc.,
569 (1846); New England Commercial,
Bank v. Stockholders of the Newport
Steam Factory, 6 R. I., 154 (1859); Cran-
dall v. Lincoln, 52 Conn., 73 (1884);
Bailey v. Hollister, 26 N. Y., 112 (1862);
Chase v. Lord, 77 id., 1 (1879); Witters
v. Sowles, 25 Fed. Rep.,.168 (1885); 8. C.,
32 id., 180 (1887), relative to the liability
of an executor under the federal stat- ,
ute governing national banks; also
Davis v. Weed (U.S. D. C.), 44 Conn.,
569; Schouler on Executors, § 880; New
York Laws of 1850, ch. 140, § 11; 1848,
ch. 40, § 18. Some of the earlier Mas-
sachusetts cases are in apparent con-
flict with the rule declared in the text.
Child v. Coffin, 17 Mass., 64 (1820); Gray
v, Coffin, 9 Cush., 200; Ripley v. Samp-
son, 10 Pick., 371 (1830); Andrews v.
Callender, 18 id., 484 (1833); Dane ».
Dane Manuf’g Co., 14 Gray, 489 (1860);
Grew v. Breed, 10 Metc., 569 (1846),
See, also, Re Cheshire Banking Co., 54
L, T. Rep., 558 (1886).

2Taylor v. Taylor, L. R., 10 Eq., 477
(1870); Jefferys v. Jefferys, 24 L. T. Rep.
(N. 8.), 177 (1871); Thomas’ Case, supra,
In Stewart’s Trustees v. Evans, 9 Scoteh
Ct. Ses. Cas. (8d series), 810 (1871), it is
held that, where executors pay away
the estate bona fide, they are not, after
a lapse of-sixteen years, liable person-
ally for a deficit on shares. Cf. Witters
v. Sowles, 25 Fed. Rep., 168 (1885).

271
[eH. xtv.

§ 249.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC.

themselves personally liable on the stock.! An executor who takes
new shares for the estate is personally liable thereon.?

§ 249. The liability of an agent as transferrer or transferee.—
Sometimes a subscription for stock is made by one person as the
agent of another, and the stock is. entered on the corporate books
in the name of the agent. In such a case it is the rule that corpo-
rate creditors may hold either the principal or the agent respon-
sible on the stock.2 But an agent who is compelled to assume
and pay charges on the stock may recover from his principal the
amount so paid.* Where a transfer is made, not to the principal
himself, but to an agent, the latter is but a nominal holder, and is
subject to the rules applicable to such. The transferee of an agent,
when suit is brought by corporate creditors to enforce a demand
against the stock, cannot set up that the agent had no power to
transfer the stock to him. If he has received the certificates and
appears as a stockholder on the books of the corporation, he is, as
between himself and creditors of the corporation, a shareholder.é

It isa serious question whether so-called “dummies ”— that is, per-
sons holding in their own names stock which belongs to others, in

order to enable the latter to avoid liability thereon — are not to be

1 Alexander’s Case, 15 Sol. Jour., 788

_ (1871), In New York it is held that an
action to charge an executor on the
stock of the estate need not be joined
with an action to enforce an individual
subscription by the executor. Erie, etc.,
R’y Co. v. Patrick, 2 Keyes, 256 (1865).
A special statute of limitations appli-
cable to executors will apply to an ex-
ecutor’s liability on stock. Sales v.
Bates, 6 East. Rep., 708 (R. I., 1886).
In England an executor is liable person-

ally on stock, if he transfers it to him-.

self; otherwise not, the title to the stock
being left in the name of the testator.
Healey’s Company Law and Practice,
p. 30; Buchan’s Case, L. R., 4 App.
‘Cas., 549 (1879),

2Fearnside & Dean’s Case, L. R., 1
‘Chan., 231 (1866); Spence’s Case, 17
Beav., 208 (1853); Jackson v, Turquand,
L. BR, 4 H. L., 305 (1866); Mallorie’s
Case, L. R., 2 Chan., 181 (1867). Cf.
Russell’s Executor’s Case, 15 Sol. Jour.,
790 (1871),

3 Burr v. Wilcox, 22 N. ¥. 551 (1860).
See, also, §§ 67, 68; and § 258, infra, Cf.

Grangers’ Market Co. v. Vinson, 6 Ore,
gon, 172 (1876); Barrett’s Case, 4 De G.,
J. & S., 416 (1864), where one who al-
lowed another to use his name in reg-
istering stock as a favor, and under
agreement that he should incur no lia-

bility, was held to be a contributory.

A broker who has the stock transferred
into his own name is liable as though
he were the full owner. M’Kim v.
Glenn, 8 Atl. Rep., 180 (Md., 1887). An-
unregistered transfer to one as agent to
sell does not render him liable for the
unpaid subscription. Powell v. Willa-
mette, etc, R. R. Co., 15 Pac. Rep., 663
(Oreg., 1887); Mann v. Currie, 2 Barb.,
294 (1848), where one who held stock in

. his own name, but really as an agent

or broker for its sale,.was held to be a
stockholder at the suit of creditors.

4Orr v. Bigelow, 14 N. Y., 556 (1856);
affirming 8. C., 20 Barb., 21 (1854);
Stover v. Flack, 30 id., 64 (1864).

5 Wakefield v. Fargo, 90 N. Y., 218
(1882). Upon the liability of agents or
trustees in these cases, see Crandall v.
Lincoln, 52 Conn., 73 (1884),

272
CH. XIv.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC. [§ 250.

regarded as agents rather than trustees.
arises in a later section of this work.

§ 250. The liability of infants and married women as transferrers
or transferces.— It has already been shown that an infant cannot
be held liable upon a subscription to stock,? and any person subscrib-
ing for shares in the name of an infant renders himself personally,
able thereon. So, likewise, when shares are assigned or transferred
to infants as a contrivance to escape liability, the transferrer remains
liable? And this is the rule, as to an infant transferee, although
the transfer was bona fide, and even in ignorance of the infancy of
the.transferee.t The infant may, however, upon attaining his ma-
jority, ratify or acquiesce in a transfer of shares to him during his
infancy, and thereby render himself liable on the stock.’ The. plea
of infancy in these cases must, however, allege repudiation within

This question, however,

a reasonable time after attaining majority.‘

1 See § 258, ona

2 See 88 66, 318.

3Capper’s Case, L, R., 3 Chan., 458
(1868); Mann’s Case, id., 459, note (1867);
Weston’s Case, L. R., 5 Chan., 614 (1870);
Richardson’s Case, L. R., 19 Eq., 588
(1875); Roman vw. Fry, 5 J. J. Marsh., 634
(1831); Castleman v. Holmes, 4 id., 1
(18380). But see Parson’s Case, L. R.; 8
Eq., 656, where the action of the com-
pany in continuing an infant’s name, and
not notifying his vendor of his infancy,
was held to be such laches as to estop
the official liquidator from substituting
the vendor’s name for that of the in-
fant. Curtis’ Case, L. R., 6 Eq., 455
(1868); Reid’s Case, 24 Beav., 818 (1857);
and see cases in the succeeding notes
herein.

4 Weston’s Case, L. R., 5 Chan., 614
(1870). Thus, a broker purchasing shares
for the account of an infant was held

liable as holder of the stock, not even |

‘his broker’s agency availing to protect
him. Ruchisky v. De Haven, 97 Penn.
St., 202 (1881): Mann’s Case, supra. In
Nickalls v. Merry, L. R., 7 H. L., 580
(1875), a stock jobber was held liable,
where, in asuit to recover calls on stock
sold by him for the stock exchange, it
turned out that the ultimate transferee
of the shares was a minor, and his trans-
ferrer had, in consequence, been com-

(18)

pelled to pay the calls. Tf three per--
sons buy fifteen shares and take title in
an infant’s name, each is liable on five
shares and no more. Brown v. Black,
29 L. T. Rep., 363 (1878). ;

>+>Lumsden’s Case, L. R., 4 Chan., 31
(1868), where an infant held stock for
six months. Accordingly, where an in-
fant, after becoming of age, permits
his name to remain on the registry as a
shareholder, he is held to have ratified
the antecedent transfer to him during ,
his minority. Cork, etc., R’y Co. »..
Cazenove, 10 Q. B., 985°(1847).

6 Dublin, etc., R’y Co. v. Black, 8
Exch., 181 (1852). Cf. Birkenhead, etc.,
R’y Co. v, Pilcher, 5 Exch., 24 (1850).
Where an infant transferee became of
age ten months before the winding up,
he was held liable as a contributory by
acquiescence. Ebbett’s Case, L. R., 5
Chan., 302 (1870); 8. C., 18 W. R.,. 202
(1869), But in a case where the winding
up came just before an infant transferee
became of age, it was held that no af-
firmative repudiation was necessary,
but that some distinct act of affirmation
alone would avail to render him liable
after majority. Wilson’s Case, L. R., 8
Eq., 240 (1869). Where the winding up
occurs just before or just after the in-
fant transferee becomes of age, it is said
that he need not expressly repudiate in

278
§ 250.)

LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETO.

[CH. XIV.

What is a reasonable time within which the infant must repudi-
ate the contract in order to escape chargeability is, in general, a
question of law, and it will vary with the particular circumstances

of each individual case.

In general it is the rule that the trans-

feree, on coming of age, must disaffirm promptly. Laches will bar

his right to repudiate.’

order to escape liability, ‘‘ because he
cannot tell whether the company in-
tends to enforce their claim against him,
and, therefore, he is not bound till some
steps are taken to resist his being a
shareholder inthe company.” Mitchell’s
Case, L. R., 9 Eq., 863 (1870). Tt seems,
also, that a repudiation during infancy
may, under certain circumstances, avail
to discharge an infant shareholder from
liability to pay calls which are made
after he attained the age of twenty-one
years. Newry & Enniskillen R’y Co. v.
‘Coombe, 3 Exch., 565, 578 (1849). The
court, in speaking to this point, said:
“He became a shareholder by contract
during infancy, and during infancy he
-disaffirmed the contract; therefore, in
‘my opinion, he ceased to be a share-
holder liable to be sued for calls. Where
ithe infant transferee, coming of age
..after the winding up had been com-
menced, offered to affirm the contract,
.it was held that the liquidators might,
-in the interest of the creditors, refuse
‘to accept the offer, and might instead
hold the transferrer liable. Symon’s
Case, L. R., 5 Chan., 298 (1870); Cos-
‘( tello’s Case, L. R., 8 Eq., 504.
1In one English case we find ‘it held
that two years’ delay after coming of
age is a ratification of the contract.
Mitchell’s Case, L, R., 9 Eq., 863.(1870).
And in another case ten months is held
sufficient. Ebbett’s Case, L. R., 5 Chan.,
802 (1870). While in a third case a lapse
of three years was held not to amount
to an affirmance of the contract. Hart’s
Case, L. R., 6 Eq., 512 (1868), In thig
case the infant shareholder came of age
six months after the proceedings to
wind up the company had been com-
menced. He was served with notice of

these proceedings shortly before his ma-
jority. Two years after, a list of share-
holders liable as contributors, which in-
cluded his name, was filed, and a year
later a. notice of a call was served on
him. He resisted the collection of the
amount of that call; and, although his
resistance was made three years after
he came of age, the court held that he
was liable. But affer a repudiation of
the contract on at ining majority, itis
held that rendering aid in holding the
transferrer liable is “not a waiver by
the infant of his formal repudiation of
the transfer to him of which the cor-
porate creditors can take’ advantage,
when for any reason they fail to make
their claim against the vendor of the
infant. Baker’s Case, L. R., 7 Chan.,
115 (1871). If a father transfers. shares
of stock to his minor son, though in
good~ faith, ‘he is, upon the winding
up, liable upon the stock as though
no transfer had been attempted, if the ~
son repudiates the transaction, Litch-
field’s Casé, 3 De G..& Sm., 141 (1850);
Weston’s Case, L. R., 5 Chan., 614 (1870).
Cf. Roman tv. Fry, 5 J. J. Marsh., 684
(1831), And a director in an incorpo-
rated company, who. induces his minor
children to take stock in the company
in their own names, is liable upon the
winding up for a breach of trust, in
case the children are still minors. Ex
parte Wilson, L. R., 8 Chan., 45 (1872).
But if a father buy shares in the name
and for the benefit of his son, who is a
minor, and when the transfer is made
informs the broker of the vendor of the
minority of the transferee, the father,
upon the winding up, is not liable on the
stock, but, the transferee continuing a
minor when the right of action accrues,

274
ie
CH. XIv.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC.

'

No general rule can be laid down as regards the effect of a trans-
fer of stock to a married woman. By the law of most of the states
she may contract as a feme sole in respect to her separate estate, and
doubtless may become a transferee of stock. In such cases she
would also have power to transfer her stock without the consent of
her husband.

§ 251. The liability of the corporation itself as a stockholder.—
When the corporation becomes the purchaser of its own stock, and
the shares, as is generally the case, are transferred into the name
of a trustee for the corporation, itis the rule, both here and in Eng-
land, that the trustee is personally liable in respect of all the shares

[$ 251.

so standing i in his name.”

the corporate creditors may look to the
transferrer. Maitland’s Case,.38 L. J.
Chan., 554 (1869). So, also, where the
vendor of shares allows the certifi-
cate to be made to the minor son of
his vendee, and the son upon attaining
his majority répudiates the transaction,
the vendor and not the vendee is liable
upon the winding up. Hennessey’s Case,
3 De G. & Sm., 191 (1850). But where
a shareholder transferred to an infant,
and this infant to another infant, who
in his turn transferred to an adult capa-
ble of responding upon the stock, all
the transfers having -been duly reg-
istered, it was held that the last vendee
was a contributory, and that the im-
mediate transfers could not be avoided.
Gooch’s Case, L. R., § Chan., 266 (1872).
After a winding up is commenced, a
person in whose nanie, while an infant,
stock had been placed, but who had,
with knowledge, allowed the subscrip-
tion to continue after he came of age,
cannot repudiate. Re-Yoeland, etc., 58
L. T. Rep., 922 (1888). It seems, there-
fore, that the act of the infant in trans-
ferring shares is valid and\effectual to
pass the title and to discharge himself
from liability on the stock.

1See §§ 62, 819; also, Johnson v, Gal-
lagher, 3 De G., F. & J., 494 (1861);
Mrs. Matthewman’s Case, L. R.,.3 Eq.,
"81; Luard’s Case, 1 De G., F. & J., 533;
Queen v. Carnatic R. Co., L. R., 8 Q. B.,
299 (1873). In Angus’ Case, 1 De G. &
Sm., 560, the constitution of the corpo-

ration prevented such a transfer. See,
also, Matter of Reciprocity B’k, 22 N.
Y.,9. In England the husband is liable
on stock owned by his wife when he
married her. Burlinson’s Case, 3 De G.
& Sm., 18 (1849); Sadler’s Case, id., 36;

White's Case, id., 157. But he is liable

only for subsequent liabilities of the
company. Kluht’s Case, id., 210. See,
also, Butler v. Cumpston, L. R., 7 Eq.,
16, where the wife was a cestut que
trust. A husband has been held liable
on stock which was given to his wife
after their marriage by way of legacy,
and was accepted by her. Thomas v.
City of Glasgow B’k, 6 Scotch Ct. of
Sess. (4th series), 607 (1879). A married
woman is herself liable for the statutory
liability on stock, where she has power
to be a stockholder. Sdles v, Bates,
6 East. Rep., 703 (R. I., 1886); Bundy w.
Cocke, 128 U. 8., 185 (1888). So, also,
as to national banks. Witters v. Sowles,
32 Fed. Rep., 767 (1887); Ibid., 35 id.,
640 (1888); 38 id., 700;. Keyser v. Hitz, 2
Mackey, 473 (U. 8. D. C., 1883); Hobart
v. Johnson, 19 Blatch., 359 (1881); Ander-
son v. Line, 14 Fed. Rep., 405 (1880), The
case of Simmons v. Dent, 16 Mo. App.,
288 (1884), holds that, under a statute
whereby a married woman may become
a stockholder, a transfer of stock from
the husband to the wife is valid, and re-
lieves him from liability on the stock
the same as though he had transferred
to any other person.

2 Matter of the Empire City Bank, 18

275

‘
§ 252.]

LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC.

{cH. xIVv.

The transferrer, also, if he knew that the transferee took as

trustee for the corporation, is liable upon the stock."

But when

this knowledge is not imputable to the transferror, he is not liable.
Nor, of course, is he liable when the corporation has power, by

charter or otherwise, to deal in its own shares.’

Where the owner

of stock transfers it directly to the corporation itself, without the
intervention of a trustee, the transferrer is not released from his
liability on the stock, but remains as fully chargeable as though

_no transfer had been attempted.!

§ 252. The liability of legatees, assignees in insolvency and joint
owners.— A legatee of shares of stock may, of course, if he thinks

N. Y., 199, 226 (1858); Allibone v. Hager,
46 Penn. St., 48 (1862); Crandall v. Lin-
coln, 52 Conn., 78 (1884). Cf. Sanger v.
Upton, 91 U.S., 56, 60 (1875). To the
same effect are the English cases. In re
St. Marylebone Banking Co., 3 De G. &
Sm., 21 (1849); In re National Financial
Co., L. R., 3 Chan., 791 (1868), in which
one who held shares in one company as
trustee for another company was de-
clared to be a creditor of the company
for which he held the shares to the
amount of the calls made upon and
paid by him on account of the other
company. Chapman v. Barker’s Case,
L. R., 3 Eq., 361 (1866), holding, also,
that the trustee might have a right to
be indemnified by the company of
which he was merely a trustee. The
trustee for the corporation has recourse
against it for calls paid by him. Good-
son’s Claim, 28 W. R., 766 (1880); Ind’s
Case, L. R., 7 Chan., 485 (1872); Eyre’s
Case, 31 Beav., 177; Munt’s Case, 22 id.,
55; Richmond's Case, 8 De G. & Sm.,
96; Walter’s Case, id., 244. The last
four cases are instances of attempted
transfers to trustees for the benefit of
the corporation being declared void as
illegal and the original holders being
declared liable. See, also, §§ 282, 314.

1Lawe’s Case, 1 De G., M. & é, 421
(1852); Walter’s Second Case, 3 De G. &
Sm., 244 (1850); Daniell’s Case, 22 Beav.,
43 (1856). Cf. Johnson v. Laflin, 5 Dill.,
65 (1878); 8. C., Thompson Nat. Bank
Cases, 831; 8. C., 103 U. &., 800 (1880);

and particularly Crandall v. Lincoln, 52
Conn., 73 (1884). See, also, § 309.

2 Hollwey’s Case, 1 De G. & Sm., 777
(1849); Nicol’s Case, 3 De G. & J., 387
(1859); Johnson v. Laflin, 103 U. S., 800
(1880).

3Grady’s Case, 1 De G., J. & S., 488
(1863); Lane’s Case, id., 504 (1868),
Sometimes, by agreement between dis-.
contented stockholders and the direct-
ors of the corporation,’ transfers are
made by such shareholders as desire to
be released from their obligation as
shareholders to nominees of the direct-
ors, with the intent thereby to relieve
themselves from liability upon the
stock. In such cases it is held that the
action of the directors in permitting or
sanctioning such a transfer was ultra
vires, and that in consequence the trans-
ferrer is still liable. Morgan’s Case, 1
De G. & Sm., 750 (1849); Bennett’s Case,
5 De G., M. & G., 284 (1854); In re
Patent Paper Manufg Co, L. R., 5
Chan., 294 (1870); Nathan v. Whitlock,
9 Paige, 152 (1841). See, dlso, §§ 253,
809, 810, infra. .

4 Case of the Reciprocity Bank, 22 N.
Y., 9 (1860); Currier v. Lebanon Slate
Co., 56 N. H., 262° (1875); Johnson v.
Laflin, 5 Dill., 65 (1878); S. G., 6 Cen-
tral Law Jour., 124; 103 U. 8, 800
(1880); Walter’s Second Case, 8 De G. &
Sm., 244 (1850); Glenn v. Scott, 28 Fed.
Rep., 804 (1886). Compare Zulueta’s
Claim, L. R., 5 Chan., 444 (1870); In re
Patent ee Manuf’g Co, L, RB, 5
Chan., 294 (1870), =

276
' OH. XIV.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC.  [§ 253.

proper, decline to receive his testator’s gift. But if he accepts the
legacy, it is well settled that, as specific legatee, he is bound to
pay all calls made upon the stock after the death of the testator.!
He must also pay all calls voted before, but not due and payable
in the regular course of business until after, the testator’s death,?

It has been held that an assignee. of the estate of a bankrupt is
not liable, personally or as assignee, upon the bankrupt’s share of
stock. He is not bound, as assignee, to accept as part of the es-
tate property of this nature, when if is of an onerous or unprofit-
able character.

Upon the death of one who is joint owner with another or others
of shares of stock, the liability thereon attaches only to the sur-
viving owners, and the estate of the deceased owner cannot be.
_charged.4

§ 253. The use of ‘‘dummies” and transfers to nominal and fic-
titious persons.— Frequently it happens that persons purchasing or
subscribing for stock do not wish to take the stock in their own
names, inasmuch as they thereby incur liability, or make known to
the ‘public the fact that they are stockholders. Accordingly, it is
- the custom in such cases to have the stock taken or purchased in
the names of other persons. These latter are called “dummies.” ®
The law is well settled that such a “dummy ” is liable on the stock
-. to the corporation and corporate creditors to the same extent that

iDay v. Day, 6 Jur. (N. 8.), 365 (1860). Hotel Co., L. R., 4 Eq., 10 (1872). It

Cf. Witters v. Sowles, 25 Fed. Rep., 168
(1885).

‘2 Addams v. Ferick, 26. Beav., 884
(1859). For a more complete statement
of the law relative to legacies of stock,
see chapter XVIII.

3 American File Co. v. Garrett, 110

* U. S., 288 (1883); Amory v. Lawrence,
8 Cliff., 523 (1872); and see Rugely &
Harrison v. Robinson, 19 Ala., 404 (1851);
Streeter v. Sumner, 31 N. H., 542 (1855);
Ex parte Davis, L. R., 3 Chan. Div.,
463; Furdoonjee’s Case, id., 268, hold-
ing that the liability upon shares not
being a debt provable in insolvency
proceedings is not barred by the order
of discharge. And where a corporation
itself assigned shares of its own stock
to an assignee for the benefit of corpo-
rate creditors, it was held that the as-
signee was not liable, personally or as
assignee, thereon. In re City Terminus

has been held otherwise, however, in a

case where the assignment was absolute
and the assignee was also a creditor.
Protection Life Insurance Co. v. Os-
good, 93 Ill., 69. It has been held that
one who makes an assignment for the

‘benefit of creditors is thereby released

from liability on stock, even though.
the transfer has not been recorded in
the corporate books. Sales v. Bates, 6
East. Rep., 703 (R. I., 1886).

4Re Maria Anna, etc., Coal & Coke
Co., 44 L. J. Chan., 423 (1875); Hill’s
Case, L. R., 20 Eq., 585 (1874).

5 The cases in this section refer to the
use of ‘‘dummies” without the real
owner appearing at all on the corporate
books as a stockholder. These cases

‘differ from those where stock is trans-

ferred by a stockholder from himself to
a “dummy” or irresponsible person,
See §§ 263-266.

207
y

§ 253.] LIABILITY OF PLEDGEES, AGENTS, EXECUTORS, ETC.

he would be if he were the real owner of the stock.! And it is es.
tablished that the real owner of the stock is liable to repay to his
“dummy” any sum of money which the latter has paid to the cor-
poration or the corporate creditors.’

But a more difficult question arises when an attempt is made to
hold the real owner of the stock liable to the corporation or corpo-
rate creditors. Where the real owner was formerly the registered
stockholder, but has transferred his stock to an irresponsible per-
son, a class of cases are found which are considered elsewhere.

A different class of cases, however, are considered in this part of
the work. :

In America it has been held, where a person purchased, stock in
a national bank, but had it franstenred, not to himself, but to an-
other person, a “dummy,” that the real owner of the stock is liable
thereon, although he never appeared on the corporate books as a

t
[cH. xIv..

stockholder.

In England a directly contrary rule prevails.>
In America the relation of. the real owner to the “dummy” is held

1 Wakefield vw. Fargo, 90 N. Y., 218
(1882); Case of Reciprocity B’k, 22 id., 9
(1860); Barrett’s Case, 4 De G., J. & S.,
416 (1864); Bugg’s Case, 2 Dr. & Sm.,

, 952. Cf. Fox wv. Clifton, 6 Bing. (Eng.),
776 (18380). Atransfer of stock on the
books to a director renders him liable on
the statutory liability, even though the
transfer was to render him eligible for
office, and he was unaware of the trans-
fer, and had paid the dividends to the
transferrer. As director he was bound
toknow. Brown v, Finn, 34 Fed. Rep.,
124 (1888). When a director enters
stock in his wife’s name, but she knows
nothing of it and he receives all divi-
dends and votes it, she cannot be charged
as a stockholder. Longdale Iron Co.
v. Pomeroy Iron Co., 84 Fed. Rep., 448
(1888).

2 This is the rule whether the relation

of the real owner be considered that of.

a principal towards an agent (see § 249,
supra), or that of cestui que trust
towards a trustee (see § 503c, infra).

3 See §§ 263-266, infra.

4Case v. Small, 10 Fed. Rep., 722
(1881); Davis v. Stevens, 17 Blatch., 259
(1879). Cf. cases in note 2, p, 270.

_ real owner,

supra.‘ Anundisclosed owner of stock,
standing in the name of another as
trustee, is liable on the statutory liabil-
ity. Borland v. Haven, 37 Fed. Rep.,
394 (1888); Castleman v. Holmes, 4 J.
J. Marsh., 1 (1830), holding that one
who subscribed for stock in the name
of an infant for the purpose of avoid-
ing responsibility, and who enjoyed the
benefits of the stock, was individually
responsible as a stockholder for debts of
the corporation. Where the ‘‘dymmy”
dies, and his representatives claim the
stock, and they pay the real owner a

small sum in settlement, the compro-'

mise will be upheld. Antoine v. Smith,
4 South Rep., 321 (La., 1888), Where
the ‘‘dummy” dies and is insolvent,
the stock cannot be reclaimed by the
Hirsch v. Norton, 17 N. EB,
Rep., 612 (Ind., 1888). Stock held in
the name of a ‘‘dummy ” is subject to
his debts, even though he notified the
secretary of the company that he held
it in trust. Ex parte Ord, 2 Mont. &
A., 724 (1835); Ex parte Watkins, id.,
348 (1985); reversing 1 id., 698.

5 King’s Case, L. R., 6 Ch. App., 196
(1871), where the court says it does not

278

{
CH. XIV. ] LIABILITY OF PLEDGEES, AGENTS, cae | ETO.

x

[§ 253.

to be that of principal and agent, and the principal i is held liable,
on the ground that an undisclosed principal is liable on the con-

tracts of his agent.

In England the real owner of the stock is

looked upon as a cestui que trust, and hence is not liable.!
A transfer to a fictitious person is void, and leaves all parties as-

they were.

know upon what ground a court, set-
ting aside a transaction as fraudulent,
is able to make a new contract for per-
sons which they had never made them-
selves. Cox’s Case, 4 D. G., J. & §., 53
(1868), is distinguished on the ground
that Cox had*agreed to take certain
shares, and the decision was in the nat-
ure of specific performance. In Cox’s
Case, also, he had, by the use of ‘‘dum-
mies,” entrapped the public into believ-
ing that many persons were investing.
In Williams’ Case, L. R., 1 Ch. D., 571
(1875), where a purchaser of shares had
them transferred to one of his em-

ployees, the real owner was held not:

liable thereon. In the case Le parte
Bugg, 2 Drew & Sm., 452, a similar
conclusion was arrived at, the court
saying that the relation between the
real owner and the ‘*‘ dummy ” was that
of cestui que trust and trustee. Such,
also, is the rule laid down in Fenwick’s
Case, 1 De. G. & Sm., 557 (1849), where
the purchaser had the stock transferred
into the name of the ‘“‘dummy” as
“trustee.” A person who subscribes
for stock in a Canadian corporation in
the name of another, a ‘‘ dummy,” is

not liable for the unpaid subscription.
Molson’s B’k v. Boardman, 47 Hun (N.
Y.), 185 (1888). That a cestui que trust
is not liable on stock held by his trustee.
See § 503c, infra. See, also, cases in
note 2, p. 270, supra. ‘

1See supra.

? Arthur v. Midland R’y Co., 3 Kay &
J., 204 (1857). See Pugh and Sharman’s
Case, L. R., 18 Eq., 566 (1872), where the
transfer was to a married woman, but
the court treated it asa transfer to a
fictitious person. In Muskingum, etc.,
Co. v. Ward, 18 Ohio, 120 (1844), where
the transfer was made to a fictitious
person, the court held that the transac-
tion was a mere nullity, and that it
could not be regarded as an abandon-
ment of the stock. So where one pur-
chased, or assumed to purchase, shares
for an infant, and took the certificate
in the name of an imaginary person, it
was held that by such a transaction the
purchaser did not become liable upon
the shares, nor was the vendor released.
Maitland’s Case, 38 L. J. Chan., 554
(1869). See, also, Richardson’s Case,
L. R., 19 Eq., 588.

279
CHAPTER XV.

LIABILITY AS AFFECTED BY TRANSFERS.

§ 254. The subject herein. § 259. Does the statutory liability at-
255. Liability of the transferrer on tach when the corporate debt
unpaid subscriptions after -is contracted or is due or is
registry. sued upon?
256. Liability of the transferee on} 260. Transferrer’s statutory liability
unpaid subscriptions after after transfer but before reg-
z registry. istry.
257. Knowledge that the shares are 261. The transferee’s statutory’ lia-
not fully paid up, how far bility.
imputable to a transferee. 262. Liability of transferee to trans-
258. Liability on subscription after ferrer.
transfer but before registry — | 268-266. A transfer to a ‘‘dummy”
Irregular and attempted or to an insolvent person
transfers. : in order to escape liability.

4

§ 254. The subject herein When shares of stock are transferred
from one owner to another it-at once becomes animportant matter
to determine who is liable upon unpaid subscriptions, and who
must assume the liability imposed by statute. The difficulty is in-
creased by the rule of law that no transfer is complete until it is
duly entered or recorded in the transfer book of the corporation.
The complication is usually greatest in cases involving the question
of statutory liability, since generally each case turns more or less
upon the particular words of the statute by which the liability is
imposed. There are, however, many rules which are general in
their character and application, governing the liability of share-
holders as affected by transfer, and these are the subject of this’
chapter.

§ 255. Liability of the transferrer on unpaid subscriptions after
_ registry.— Transfers of shares may be made at any time after the
contract of su bscription i is made, and before any part or after a part
of the subscription price has been paid. The well-established and
general rule of law is, that where a stockholder makes an absolute
transfer of his stock in good faith, and the transfer is duly recorded .
in the corporate stock banks the tuangierrer is thereby wholly dis-
charged from all further liability upon the uncalled subscription
price of the stock.!

1 Huddersfield Canal Co. v. Buckley, lings v. Robinson, 94 N. Y., 415 (1884);
7 Term Rep., 36 (1796) (by Lord Ken- affirming 8. C., 28 Hun, 122 (1882);
yon); Executors of Gilmore v. Bank of Wakefield v, Fargo, 90 N. Y., 218 (1882);
Cincinnati, 8 Ohio, 62, 71 (1837); Bil- Cowles v. Cromwell, 25 Barb., 413 (185%);

280
~

cH, Xv.]

' ;
TRANSFERRER’S AND TRANSFEREE’S LIABILITY,

[§ 258.

This important rule is peculiar to corporation law. It is based
on public policy and an appreciation of the demands of trade. The

t
Cole v. Ryan, 52 id., 168 (1868); Isham
v. Buckingham, 49 N. Y., 216 (1872);
Stewart v. Walla, etc., Co., 20 Pac.
Rep., 605 (Wash. Ter., 1889); Chouteau
Spring Co. v. Harris, 20 Mo., 882 (1855),
holding that an assignment upon the

books of the company, without having

a@ new certificate issued, is a sufficient
transfer to exonerate the assignor from
liability for assessments; and that any
transfer in writing is valid against a
company which, having notice, refuses
to allow it to be made. Miller v. Great

Republic Ins. Co, 50 id., 55 (1872);.

Allen v. Montgomery R. R, Co., 11 Ala.,
437, 451 (1847); Haynes v. Palmer, 13
La. Ann., 240 (1858); Weston’s Case, L.
R., 4 Chan., 20 (1868): McKenzie v.
Kittridge, 24 Upp. Can., C. P., 1 (1874),
The mere fact that the transferrer, after
the registry, paid a call does not: estop
him from denying his liability for sub-
sequent calls. Provincial Ins. Co, v.
Shaw, 19 U. C. (Q. B.), 583 (1860). It
is not necessary to the validity of the
transfer that there should be a consid-
eration moving from transferee to
transferrer; and so, where one gives his
share away absolutely and in good faith,
the same rule as to liability prevails. In
re European Bank, Master’s Case, 44
L. J. Chan., 501 (1872). ' Neither does it
alter the rule that no certificates of

_ stock have been issued. In such a case

the transferee becomes liable on the
stock, and the transferrer’s liability is
atan end. Burke v. Smith, 16 Wall.,
890 (1872); Brigham v. Mead, 10 Allen,
245 (1865). See, also, First Nat)?] Bank
v. Gifford, 47 Iowa, 575, 583; Isham

- y, Buckingham, 49 N. Y., 216 (1872). As

regards the rule where the transfer is
made before the corporation is organ-
ized, see § 61. The statutes of the state
may, of course, change thisrule. Thus,
in Pennsylvania, see Brightley’s Pur-
don’s Digest, pp. 1420-1427; and in

281

Virginia, see Glenn v. Scott, 28 Fed.
Rep., 804 (1886); McKim v. Glenn, 8 Atl.
Rep., 180 (Md., 1887). In Pennsylvania
and Virginia, both the transferrer and
transferee are liable. Glenn v, Foote, 36
Fed. Rep., 824 (1888). In Pennsylvania,
after considerable doubt and conflict,
it has been clearly stated by the su-
preme court that the transferee of stock
is liable on the unpaid subscription,
Bell’s Appeal, 8 Atl. Rep., 177 (Penn.,
1887); Citizens’, etc., Co. v. Gillespie, 9
Atl. Rep., 78 (1887), where, however, the
transferee directly contracted to pay.
But compare West Philadephia Canal
Co. v. Innes, 3 Wharton, 198 (1838);
Aultman’s Appeal, 98 Penn. St., 505
(1881); Bunn’s Appeal, 105 id., 49 (1884);
Palmer v. Ridge Mining Co., 34 id.,
288; Pittsburgh Iron Co. v. Otterson, 4
Week. Notes Cas., 545 (1878); Delaware
Canal Co. v. Sansom, 1 Binn., 70 (1803);
_Merrimac Mining Co. v. Levy, 54 Penn.,
St., 227 (1867). And, in general, as re-
gards the Pennsylvania General Rail-
road Act of February 19, 1849, see Pitts-
burgh, etc., R. R. Co. v. Clarke, 29 Penn.
St., 146 (1857); Graff v. Pittsburgh, etc.,
R. R. Co., 81 id., 489 (1858). Cf
Frank’s Oil Co. v. McCleary, 63 id., 31%
(1869), holding that the transferee in
a mining company is not liable. Mes-
sersmith v. Sharon Savings Bank, 96
id., 440 (1880), to same effect; and see
Aultman’s Appeal, 98 id., 505 (1881),
involving an Ohio corporation; Pitts-
burgh, etc., Iron Co. v. Otterson, 4
Week. Notes Cas., 545 (1878). In Mary-
land, ‘also, the ordinary statutory provis-
ion holding stockholders liable until
the capital stock is fully paid in is held
to render the shareholder liable, even
though he has transferred his shares.
Hager v. Cleveland, 36 Md., 476 (1872),
In New York no stock in either rail-
road or manufacturing corporations,
created by the laws of thatstate, can be
TRANSFERRER’S AND TRANSFEREE’S LIABILITY. [cx. XV.

§ 256.]

‘transferrer is released, although the corporate officers enter the
transfer against the protest of ire transferee.! The transferee, how-
ever, is liable for calls payable before the transfer, is made,’ ana 4 in
some cases for calls made before but payable after the transfer!

§ 256. Liability of the transferee on unpaid subscriptions after
registry. — When a transfer of stock is made, and the transfer is
duly recorded i in the corporate stock book, the transferee thereupon
becomes liable for any balance of the subscription price remaining
unpaid at the time of the transfer. The transfer releases the trans.

ferrer, and charges the transferee.
In Pennsy ylyania® and some other states, the liability of the trans-

feree is regulated by statute.

lawfully transferred while there are
calls unpaid upon the shares. N. Y.
Session Laws, 1850, ch. 140, § 8; N.
Y. Session Laws, 1848, ch. 40, § 8
In California railroad stock cannot be
issued until it is fully paid up. Brew-
ster v. Hartley, 87 Cal., 1§ (1869). In
Tennessee it is held that, upon a valid
transfer, the transferrer is released, not
only upon his liability for unpaid sub-
scriptions, but also as to all the exist-
ing debts of the corporation; and this
is the general rule. Jackson v. Sligo
Manuf’g Co., 1 Lea, 210 (1878). So in
Alabama. Allen v. Montgomery R. R.,
11 Ala,, 487 (1847).

1 London, ete., R'y Co. v. Fairclough,
2 Man. & G., 674, 706 (1841); Upton v,
Burnham, 3 Biss., 520 (1873); Webster
v. Upton, 91 U. S., 65 (1875). In a pro-
ceeding in equity a transferee will be
compelled to pay calls made after trans-
fer of the certificate and before registry
of the same. Webster v. Upton, supra.

2 Vicksburg, etc., R. R. Co. v. Mc-
Kean, 14 La. Ann., 724(1859); and cases
in this section generally, and § 258, infra.

3 North American Colonial Associa-
tion v. Bentley, 19 L. J. (Q. B.), 427
(1850); Schenectady, etc., Plank-road
Co. v. Thatcher, 11 N. Y., 102, 118 (1854),
Contra, West Philadelphia Canal Co. v.
Innes, 3 Wharton, 198 (1838). But this
case was decided on the ground that the
transferee had not accepted the stock,

28

Where, by statute or a by-law of

and could not be held liable by the cor-
poration. Cf. Aylesbury Railway Co.
v. Mount, 4 Man. & G., 651, reversing §
Scott's New. Rep., 127 (1842); In re
Hoylake R’y Co., L. R., 9 Chan., 257
(1874). :

¢ Webster v. Upton, 91 U. §., 65 (1875);
Pullman v. Upton, 96 id., 328 (1877);
Upton v. Hansbrough, 3 Biss., 417 (1878);.
Hall v. United States Ins. Co., 5 Gill
(Md.), 484 (1847); Bend v. Susquehanna
Bridge Co., 6 Har. & J., 128 (1825); Mer-
rimac Mining Co. v. Bagley, 14 Mich.,
501 (1866); Brigham v. Mead, 10 Allen,
245 (1865); Hartford, etc., R. R. Co. v.
Boorman, 12 Conn., 530 (1838) ; Moore».
Jones, 3 Woods, 53 (1877); Merrimac
Mining Co. v. Levy, 54 Penn, St., 227
(1867); Huddersfield Canal Co. v. Buck-
ley, 7 Term Rep., 36 (1796). In Gray’s
Case, L. R., 1 Ch. Div., 664, where an
owner of iron-works sold them to an
incorporation for its stock, and hav-
ing guarantied that the net dividends
should be not less than ten per cent, on
the paid-up capital, for which purpose
the shares given as consideration were
vested in trustees, but. were not to be
registered in their names except by their
own direction, it was held that they
were not liable as stockholders because
they had not elected to be ee as
stockholders.

5 See notes to the preceding section.

2
/

OH. XV.] TRANSFERRER’S AND TRANSFERED’s LIABILITY. [S§ 257, 258.
the corporation, no valid transfer can be made while there are calls
due and unpaid, it is held that a transfer without such payment
will not render the transferee liable thereon.!

§ 257. Knowledge that the shares are not fully paid up, how far
imputable to a transferee.— The question whether the purchaser of
shares is bound to take notice that the stock he purchases is not
fully paid for is a serious and complicated one. The better opin-
ion, and the one most in accord with the usages and analogies and
demands of trade, is that, where one buys stock in open market, in
good faith, without. notice that the subscription price thereof has
not been paid up, such a purchaser cannot be held liable to pay the
unpaid balance of subscription.?

§ 258. Liability on subscription after transfer but before regis-
try — Irregular and attempted transfers.— Until a transfer is re-
corded in the transfer book of the corporation, the transferee, not
being duly recognized as a stockholder, is not chargeable either
with corporate debts or unpaid balances of the subscription. -He
is bound to protect and indemnify his transferrer, but he is not
liable to the corporation or corporate creditors or other stockhold-

ers.?

1 Watson v, Eales, 23 Beav., 294 (1856);
McCready v. Rumsey, 6 Duer, 574 (New
York Super. Ct., 1857), in a case under
a prohibition to transfer in articles of
association of a bank, organized under

the General Banking Act of 1838 of the

state of New York; In re Bachman, 12
Nat. Bank. Reg., 223 (1875), where the
corporation had a lien on the stock.
2Certificates of stock have become
such important factors in trade and
credit, and general investment by all
classes, that the law is steadily tending
towards the complete protection of a
bona fide purchaser of them in open
market, and without notice of facts
which will decrease the apparent value
of the stock. The constant tendency of
the courts to increase the negotiability
of certificates of stock will probably, at
some time hereafter, not allow any lia-
bility on unpaid subscriptions to be en-
forced against a transferrer unless such
liability is stated on the face of the cer-
tificate itself. At present, however, it
is a question whether a purchaser of the

‘stock or not.

The transferrer, however, is not released from liability until:
the transfer is duly registered in the corporate books.‘

This rule,

certificate is bound to inquire and know
whether the stock is issued as paid-up
See § 50.

3 Marlborough Manuf’g Co. v. Smith,
2 Conn., 579 (1818); Topeka, etc., Co. v.
Hale, 17 Pac. Rep., 601 (Kan., 1888);
Midland, etc., R’y Co. v. Gordon, . 16
Mee. & W., 804 (1847).
has been held that a statute will not
be construed so .as to make both trans-
ferrer and transferee liable directly for
the same indebtedness. Williams v.
Hanna, 40 Ind., 535 (1872).

$Shellington v. Howland, 53 N. Y.,
371 (1873); Worrall v. Judson, 5 Barb.,
210 (1849); Louisiana Insurance Co. v.
Gordon, 8 La. Rep., 174 (1835); Dane wv.
Young, 61 Me., 160 (1872); Fowler v
Ludwig, 34 Me., 455 (1852); Davis v.
Essex, etc., Society, 44 Conn., 582 (1877);
Kellogg v. Stockwell, 75 Ill, 68; Bow-
dell v. Farmers’, etc., Nat. B’k, U. 8.
Cc. C. (D. Md., 1877); Brown’s N. B.
Cas., 147; London, etc., R’y Co. v. Fair-
clough, 2 Man. & G., 674 (1841); to the

same effect, McEuen v. West London

283

\

In Indiana it |
§ 258.] TRANSFERRER'S AND TRANSFEREE’S LIABILITY. [on xv.
however, has not been rigidly adhered to; and it has been held that,
where the corporation accepts the transferee as a stockholder and
pays dividends to him, or where, through the negligence or fault
of the corporation, no transfer on the books is made, in such cases
the transferrer is released, and the transferee only is liable on the
stock.)

Wharves, etc., Co., L, R., 6 Chan., 655, of the shares, constituted him a stock-
in which it was held that the sale and holder for the purpose of requiring him
transfer by delivery of scrip-certificates, to respond to calls for assessments;
allotted and issued to a subscriber enti- Taylor v. Hughes, 2 Jones & Lat.
tling the bearer to exchange them for (Ir. Ch.), 24, in which the court refused
share certificates, would not exonerate to hold liable as a stockholder of a bank
the vendor from liability for calls, even one who had transferred his stock seven
though the vendee had paid some calls; years before, though not by a proper

Midland, etc., v. Gordon, 6 Mee. & W., method, and whose name had not ap-

604 (1847); Sayles v. Blane, 19 L. J. (Q. peared on the books during that time,
B.), 19; 8. C., 6 Eng. R’y Cases, 79. See, but had been re-entered by a committee
also, 181 U. S., 319. after the failure of the bank. Burnes v.

1Isham v. Buckingham, 49 N. Y., 216 Pennell, 2H. of L. Cas., 497, held that,
(1872); Cutting v. Damerel, 88 id., 410 -where certain forms were to be observed
(1882); Chambersburg Ins. Co. v. Smith, by a transferee of shares in a Scotch
11-Penn. St., 120 (1849); Murray v. Bush, joint-stock company, the required acts
L. R., 6 House of Lords, 37 (1873); were for the benefit of the company,
Upham v. Burnham, 3 Biss., 431 (1873);, and therefore the leaving of one of
S. C., id., 520. Where a person agrees such acts unexecuted by a purchaser
to accept a transfer of stock, and acts was not allowed to enable him to retire
as director, he is liable on the unpaid from his contract. Maguire’s Case, 3
subscription though no formal transfer De G. & Sm., 31. In this case a share-
is made. Weinman v, Wilkinsburg, etc., holder in a steam packet company
R’y Co., 12 Atl. Rep., 288 (Pa., 1888); transferred two shares to his son without
Bernard’s Case, 5 De G. & Sm., 283(1852). ‘his knowledge. The son did not receive
See, also, § 260, infra. Cf. Ex parte Hall, dividends nor do any act as proprietor;
1 McC. & G., 307 (1849), holding that but, for the purpose of obtaining free
an unregistered transferee is not liable passages upon the boats. of the com-
merely because he accepts dividends; pany, he obtained from the company
Shipman’s Case, L. R., 5 Eq., 219, in certificates that he was a proprietor. It
which a purchaser offered a name to was held that the son was a contribu-
which he wished the shares transferred tory in respect of the two shares. A
on the register, but which was rejected receiver cannot apply to have .a trans-
by the directors. The vendor, inwhose feree’s name put on the list of contribu-
name they stood, was held liable for tories on ground of unduedelay of the
calls, and the court refused to remove company in registering the transfer.
his name; Sheffield. etc., v. Woodcock, Only the transferrer can complain,
7 Mee. & W., 574, holding that where, by Sichell’s Case, L. R., 3 Ch., 119 (1867).
law, transfers of stock were to be made See Marlborough Mfg. Co. v. Smith, 2
by deed, a transfer in blank, and stating Conn., 579 (1818), holding that a mere

' the consideration untruly, made to a entry on the corporate books that a

purchaser who afterwards signed and transfer has been made is insufficient;

sent to the company a proxy, in which and see, also, Dane v. Young, 61 Me.,

he described himself as the proprietor 160, holding that the failure to have the
284
‘On. xv.]

TRANSFERRER’S AND TRANSFEREE’S LIABILITY.

‘Tg 258.

It is immaterial that no certificate of stock is issued to the trans-
feree. The registry is complete without it. There is also to be

‘registry properly witnessed invalidates
it. A person who buys stock at an exe-
cution sale, after it‘has already been
pledged for its full value to others and
a transfer to them made, is not liable
fér calls on the’stock, even though such
pledgees transferred it to him without
his knowledge. Simmons v. Hill, 108.

W. Rep., 61 (Mo., 1888). A vendee of

stock who is to be entitled to it only
upon payment is not liable for the sub-
scription price if he never pays for the
stock and his name never appears on
the books, Cormac v. Western, etc., Co.,
41 N. W. Rep., 480’ (Iowa, 1889). For
other cases holding the transferee lia-
ble, although all the formalities of reg-
istry were not complied with, see Hx
parte Dixon, 1 Dr. & Sm., 225 (1860);
Gordon’s Case, 8 De G. & Sm., 249 (1850);
Straffon’s Case, 1 De G., M. & G., 576
(1852); Walter’s Case, 3 De G. & Sm,
149 (1850); London, ete., R’y v. Fair-
clough, 2 Man. & G., 674 (1841); London,
etc., R’y v. Freeman, 2 Man. & G., 606
(1841); Birmingham, etc., R’y v. Locke,
1Q. B., 256 (1841). -For a case holding
that the transferrer is liable, see Keene’s
Case, 3 De G., M. & G., 272 (1858).
, Where the consent of the board of di-
rectors is necessary to a transfer, no
transfer is complete without it, and the
transferrer remains liable. Bosanquet v.
Shortridge, 4 Ex., 699 (1850). But this
case atlaw was enjoined by Bargate v.
Shortridge, 5 H. L. C., 297 (1855), in
equity, and it was held that the trans-
ferrer was not liable, To same effect,
see Taylor v. Hughes, 2 Jo, & La.
_ (Irish), 24 (1844), where the registry was
not regularly made, but the transferee
was treated as a stockholder. Cf.
Murray v. Bush, L. R., 6 H. of L., 3%
(1872); aff'g L. R., 6 Ch., 246, In this
case the deed of settlement, among
other things, required a transferee to
covenant by deed to abide by the rules
of the company. A director who failed

285

to comply with that requirement was
held to be a shareholder as to the shares,
because he had been recognized as a
shareholder by the directors at a meet-
ing of shareholders and had been at that
meeting elected a director, The trans-
ferrer was held not liable. Contra,
Keene’s Ex’rs Case, 3 De G., M. & G.,
272 (1853); Mayhew’s Case, 5 De G., M.
& G., 837 (1854), where the parties went
together to the proper officer of the
company and deposited a transfer, but
no notice in writing was given to the
officer as required by the company’s
rules. The transferee was held to be
properly placed on the list of contribu-
tories. See, also, the next two notes,

1 First Nat’l Bank, etc., v. Gifford, 47
Towa, 575, 583; Brigham v. Mead, 10
Allen, 245 (1865); Straffon’s Executor’s
Case, 1 De G., M. & G., 576 (1852). The
shareholder cannot set up for defense,
to an action by a corporate creditor,

. that some third person had contracted

to purchase his shares, or a portion of
them, but that with the consent of the
corporate authorities it had been agreed
that, until that third person had paid
the notes given for the purchase price
of the stock, the transfer should not be
made on the corporate stock-book.
Phoenix Warehousing Co, v. Badger, 67
N, Y., 294 (1876); affirming S. C.,-6
Hun, 293 (1875). Nor is it a defense for
the transferrer that he had attempted
in good faith to have the transfer re-
corded. He is, in general, discharged
only when the transfer is actually re-
corded, and duly recorded in the stock-
book, and when all the prescribed con-
ditions of a valid transfer havé been .
duly complied with. Cartmell’s Case,
L. R., 9 Chan., 691 (1874); Heritage’s
Case, L. R., 9 Eq., 5 (1869); Hennessy’s
Executor’s Case, 8 De G. & Sm,, 191
(1850); Ha parte Henderson, 19 Beav.,:
107 (1854). But see Bargate v. Short-
ridge, 5 H. L. Cas., 297, holding that,
§ 258.]

TRANSFERRER’S AND TRANSFEREE’S. LIABILITY.

"fom. xv.

found a line of cases holding that, when the transferrer has done
all in his power to complete the transfer and is guilty of no laches,
his liability to corporate creditors is thereby determined; and that,
accordingly, he is discharged, as though the registry had been made!

when the rules required the consent of
the board of directors to be signified by
a certificate signed by three of them,
and it was the custom of the company
to give such consent by three directors
as individuals, the company was not al-
lowed to set up their want of observ-
ance of the rules in order to fix the
liability of a vendor as a continuing
shareholder. That the failure to record
the transfer is the fault of the corpora-
tion itself, or of the officer thereof whose
duty it is to make the entries in the
stock-book, is not sufficient to relieve
the shareholder who, having transferred
his shares, fails to see to it that the
proper entry is actually and duly made.
In re Bachman, 12 Nat. Bank. Reg.,
223 (1875). Cf. Ex parte Henderson,
19 Beav., 107 (1854).

1 Whitney v. Butler, 118 U. &., 655
(1886). See, also, § 383. Ex parte
Henderson, 19 Beav., 107 (1854); Short-
ridge v. Bosanyuet, 16 Beav., 84 (1852),
overruling 8. C., sub. nom. Bosanquet
v. Shortridge, 4 Exch., 699 (1830), In
White’s Case, L. R., 3 Eq., 86 (1866), a
transferrer was held not discharged be-
cause of laches; Fyfe’s Case, L. R., 4
Ch., 768 (1869), where there was an im-
proper delay on the part of the com-
pany in registering a transfer; Lowe’s
Case, L, R., 9 Eq., 589 (1870), on similar
facts and to same effect: Nation’s Case,
L. R., 3 Eq., 77 (1866), in which the
directors did not confirm a transfer at
their next meeting after it was left for
that purpose, thereby causing an un-
necessary delay; Hill’s Case, L, B., 4
Ch., 769 (1869), note, to same effect as
Fyfe’s Case, supra; Ward v, Garfit’s
Case, L, R.,4 Ey., 189, in which the
court rectified the register by complet-
ing a transfer which was duly executed
and left for registry the day before the
corporation stopped business, but was

not registered on that account; Ward’s
Case, L. B., 2 Eq., 226 (1867), in which
the names of purchasers of shares had
not been placed on the register in place
of that of the vendor in consequence
of disputes among themselves; Ex
parte Hall, 5 R’y & Canal Cas., 624 (1849),
holding that where a transferee whose
name has not been actually entered on
the registry has so acted — as beinga
trustee for his wife —and his acts have
been so far adopted that a waiver of
the necessary forms may be inferred,
he will be held a contributory in wind-
ing up proceedings. De Pass’ Case, 4
De G. & J., 544 (1859), In this case the
certificates were transferable by de-
livery; and in winding-up proceedings
the holders were adjudged to be con-
tributories, though it appeared that, ag
to some shares, they were not delivered
until after the winding-up order was
made, and, as to others, that they were
delivered to a clerk-for a nominal con-
sideration in order to escape liability.
Marino’s Case, L. R., 2 Ch., 596 (1867),
in which the transferee, who lived in
Smyrna, and had not sufficient time to
execute and forward the deed required
of him by the rules and usage of the com-
pany to effect a valid transfer, was held
not to be a contributory; Skowhegan
Bank v. Cutler, 49 Me,, 315 (1872), hold-
ing that, in order to hold a transferee
liable, it must be shown that statutory
provisions relating to transfer have
been observed; Laing v. Burley, 101 IIL,
691 (1882), holding that, where there
was no transfer on the books of a na-
tional bank as required by law, but new
certificates had been issued to the trans-
feree, who was also recognized as a
shareholder on the bank’s ledger, the
transferee was liable; Midland, etc.,
v. Gordon, 16 Mee. & W., 804 (184%),

“holding that a holder of scrip certifi-

286
.

CH. Xv.] TRANSFERRER’S AND TRANSFERER’S LIABILITY. [§ 259.

§ 259. Does the statutory liability attach to him who is the
registered stockholder when the corporate debt is contracted, or is
due, or is sued upon? — When the question of statutory liability is
considered there is more difficulty, as between transferrer and trans-
feree, in determining who is to be charged. Frequently the statute
itself prescribes when the liability is to attach. The important
question which arises herein is whether the corporate debt raises a
liability against him who was the registered stockholder when the
corporation entered into the contract leading to the debt, or
against him who was the registered stockholder when the debt
itself, became due and payable | to the corporate creditor, or against
him who was the registered. stockholder when suit is brought by
the corporate creditor against the corporation to collect the debt,
or against him who was the registered stockholder when suit is

brought against the stockholder.

Under certain statutes to that effect, those stockholders are liable
who are such at the time when the execution against the corpora-

tion is returned nulla bona.)

Under the usual statute making the stockholders liable, to.a
greater or less extent, for the debts of the corporation, it is held
that a registered stockholder is liable, not for debts contracted be-

cates for shares to be allotted at a future
time, having sold them in the market,
was liable for calls until the name of
the vendee was registered as the holder
of them. See, also, 21 N, E. Rep., 637
(Ohio, 1889).

1 Nixon v. Green, 11 Excvh., 550; af-
firmed, 25 L. J. Exch., 209 (1856); Dodg-
son v. Scott, 2 Exch., 457 (1848); Long-
ley v. Little, 26 Me., 162 (1846); Bond v.
Appleton, 8 Mass., 472 (1812). In this
case, under a statute making the orig-
inal stockholders, their successors, as-
signs and the members of the corpora-
tion liable for the debts of the corpora-
tion, it was held that only such persons
as were members at the time payment
was refused was intended; McClaren
v. Franciscus, 43 Mo., 452 (1869);
Douchy v. Brown, 24 Vt., 197%. Cf.
Deming v. Bull, 10 Conn., 409 (1835).
Under the provision of a charter that
stockholders should “at all times be
liable for all debts due by said corpora-

» tion,” it was held that those who were
members when the debt was contracted,

but had transferred their stock absc-
lutely and in good faith before the
commencement of thé suit against the
corporation, are not to be held liable :
under the statute. Middletown Bank
v. Magill, 5 Conn., 28 (1828), following
Bond v, Appleton, supra; Child v; Cof-
fin, 17 Mass., 64 (1820), holding that,
where there is a statutory provision
‘that a creditor, in a certain case, may

levy his execution upon the body or

estate of any member of the corporation,
this must be understood of such as were
members at the time of the commence-
ment of the action, and of those only.”
It does not authorize an execution upon
the estate of a corporator who died be-
fore the commencement of the action.

Under the statute making all the
members of a company liable in certain
cases for its debts, the liability extends
to all who were members when it was
sought to be enforced, and is not con-
fined to such persons as were members
when the debt was contracted. Cur-
tis v. Harlow, 12 Metc,, 8 (1846).

287
§ 259.]

TRANSFERRER’S AND TRANSFEREE’S. LIABILITY.

’

[oH. xv.

fore he became such, but for those contracted while he was such,
although he subsequently transfers his stock.’

1Chesley v. Pierce, 82 N. H., 388
(1855), holding that, under a statute
making stockholders liable for the debts
of a corporation, the individual stock-
holders are not liable for debts con-
tracted before they became such; Cas-
tleman v. Holmes, 4 J. J. Marsh., 1
(1839), but here a statute made them
liable for debts, etc., contracted ‘‘ dur-
ing the time he or they held stock;”
Mill-dam, etc., v. Hovey. 21 Pick., 417,
453 (1834), where the question arose on
an objection to a witness in a suit
against a corporation on the ground
that he was liable for its debts; Bank
v. Burnham, 11 Cush., 183 (1853), a case
where, under statute making liable
‘all the members” of a corporation, a
shareholder was held for all debts con-
tracted while he was a member, al-
though he ceased to be a member before
they were payable, and not liable for
debts contracted before he became a
member if his membership expired be-
fore they became payable and action
brought; Southmayd v. Russ, 3 Conn.,
52 (1819), holding that the judgment
creditor cannot proceed against stock-
holders by sciré facias, but must sue

them upon their liability; Williams 2: .

Hanna, 40 Ind., 585 (1872), holding that
owners of steck at the time corporate

debts are contracted are intended in a.

statute making stockholders liable for
all debts of the company, etc.; Larra-
bee v. Baldwin, 35 Cal., 155 (1868); Moss
v. Oakley, 2 Hill, 265 (1842), holding
that a, charter declaring stockholders
jointly and severally liable for the debts
of the company makes liable only such
as were members when the debt was
contracted, and not those persons who
became members afterwards; Judson v.
Rossie, etc., 9 Paige, 598 (1842), to the
same effect; McCullough v. Moss, 5 Ne-
nio, 567, 572, 585 (1846), to same effect;
Adderly w, Stor, 6 Hill, 624, holding.

that they are considered liable whose
names appear on the books of the com-
pany as stockholders when the debt was
contracted. But see McMaster v, David-
son, 29 Hun, 542 (1888), varying this
rule as applicable to New York manu-
facturing corporations; and ef, Tracy v,
Yates, 18 Barb., 152 (1854); Phillips v,
Therasson, 11 Hun, 141 (187%); King ».
Duncan, 38 Hun, 461 (1886); Davidson
v. Rankin, 34 Cal., 508 '(1868), holding
that the cause of action against a stock-
holder of a mining corporation, under
the laws of California, accrues at the
same time as against the corporation;
Brown v. Hitchcock, 86 O. St., 667
(1881), holding, also, that the liability is
not discharged by asubsequent transfer
of the stock ; that in such cases there is an
implied undertaking by the assignee to
indemnify the assignor from the liabil-
ity for debts contracted while he was a
stockholder; Hager v. Cleveland, ete..
36 Md., 476, holding that, by virtue of
the statute of Maryland, the transfer of
stock does not exonerate the transferrer
from liability for a corporate debt con-
tracted while he was a stockholder and
before the capital stock was paid in.
His liability is in the nature of a con-
tract with the company, and is not
affected by a transfer of his stock, In
Illinois suit may be brought against
him who is a stockholder at the time
suit is brought. ‘The liability being
because of the ownership of stock, it
follows the stock, into whosesoever
hands it may go, and whoever pur-
chases it does so at the risk of this lia-
bility.” Root v, Sinnock, 11 Northeast.
Rep., 339 (ILL, 1887). Individual liability
continues, even’ after the death of the
stockholder, until a transfer is made.
Davis v. Weed (U.S. D. C.), 44 Conn.,
569. See, also, Witters v. Sowles, 32
Fed. Rep., 180 (1887); Phillips v. Theras-
son, 11 Hun, 141 (1877); Tracy v. Yates,

288
OH. XV.] TRANSFERRER'S AND TRANSFEREE’S LIABILITY. [$ 260,

§ 260. Transferrer’s statutory liability after transfer but before
registry.— The previous section treated of the statutory liability of
a transferrer, in cases where the transfer is recorded on the corporate
books at the same time the sale and transfer of the certificate
is made. But frequently there is some delay in registering the
transfer in the corporate books, and in such cases the further com-
plication arises as to who is liable for corporate debts and liabili-
ties incurred during that ¢nterim. The rule in such cases, however,
is clear. The law is well settled that the transferrer of stock is
liable to corporate creditors on his statutory liability, up to the time
of a registry of the transfer, to the same extent that he would be
if no sale and transfer of the certificate had been made until the

date of the registry. Until registry is made, corporate creditors

18 Barb., 152 (1854), holding that, un-
der the New York statute of 1848, a
stockholder is not liable for debts con-
tracted before he was such. But see
McMaster v. Davidson, 29 Hun, 542
(1883). Cf. Rosevelt v. Brown, 11N. Y.,
148 (1854); Cutting v. Damerel, 88 id.,
410 (1882). See, also, § 261, infra. A
stockholder does not, by transfer, avoid.a
statutory liability to creditors who were
such at the time of the transfer. Jack-
son v. Meek, 9 8, W. Rep., 225 (Tenn.,
1888). “It is not always clear precisely
when a given indebtedness may be held
to have been ‘‘contracted.” When a
corporate note has been renewed, it is

‘doubtful whether the renewal operates

to create a new indebtedness or to con-
tinue and perpetuate that indebtedness
for which the original note was given.
In Ohio it is held that a renewal which
is a payment or extinguishment of the

debt discharges the shareholders who.

were bound under the old note. Wheeler
v. Faurot, 87 O. St., 26 (1881), And
in Maine the date of the second or re-
newed note is taken as the time when
the indebtedness accrued. Milliken v.
Whitehouse, 49 Me., 527 (1860). While
in Massachusetts the debt is said to be
contracted when the corporation accepts
a bill of exchange. Byers v. Franklin
Coal Co., 106 Mass., 131 (1870). Cf. Free-

land v. McCullough, 1 Denio, 414, 426.

(1845), holding that, in a suit upon a
(19)

!

note given by the corporation for a debt
on a simple contract, the stockholders
at the time the debt was contracted are
the ones to be held liable. See, also, in
New York, Parrott v. Colby, 6 Hun, 55;
affirmed, 71 N. Y., 597 (1877); Jagger
Tron Co. v. Walker, 76 N. Y., 521 (1879),
overruling Fisher v. Marvin, 47 Barb.,
159; Moss v. Oakley, 2 Hill, 265 (1842),

-holding that, where stockholders at the

time the debt was contracted are liable,
a note given for a debt will be presumed
to have been made when the debt was
contracted. It has been held that the
debt does not accrue, as against the
shareholder, at the time judgment
thereon is recovered against the cor-
poration. Larrabee v. Baldwin, 35 Cal.,
155, 168 (1868). In this case Sawyer,
C. J., said: ‘‘ The claim of the respond-
ent, that the judgment. is itself a con-
tract creating a new debt, within the
meaning of the statute, for which all
who were stockholders at the date of
the rendition of the judgment are per-
sonally liable, is too absurd to require
argument to refute it.” In New York,
by statute, shareholders in manufactur-
ing corporations who have transferred
their shares are liable on debts existing
at the time of the transfer only when
suit is commenced against them within
two years from the date of the transfer. '
Laws of 1848, ch. 40, § 24.

289
§ 261.] TRANSFERRER'S AND TRANSFEREE’S LIABILITY. _— [CH. XV.

may hold the unregistered transferrer liable, as though he had not
sold his stock. As to them the transfer will be decreed to have
been made only at the date of the record thereof in the corporate
stock-book.! Such, also, is the rule of the English courts.’ The cor-
porate creditor, in determining who are stockholders, need only
show that the persons whom he sues appear as stockholders on the
corporate stock-books.’

A different question arises when an irregular registry of the
transfer has been made, or the transferrer has done all in his power
to effect a registry, or the corporation has accepted the unregistered
transferee as a stockholder. These questions, however, are treated

of elsewhere.!

§ 261. The transferee’s statutory liability— The transferee of
stock whose name has been duly entered on the stock-book: as a

1 Brown v. Hitchcock, 36 O. St., 667
(1881), holding, also, that after the lia-
bility attaches to a stockholder it is not
discharged by an assignment or transfer
of the stock, but the subsequent hold-
ers of it impliedly undertake to indem-
nify the assignor from his liability;
Wehrman v. Reakirt, 1 Cinn. Super.
Ct., 280 (1871). Cf. Jackson wv. Sligo
Manuf’g, etc., Co., 1 Lea (Tenn.), 210
(1878). In an action to charge a trans-
ferrer for corporate debts incurred be-
tween transfer and registry, the trans-
feree is, in Ohio, a necessary party.
Wheeler v. Faurot, 37 O. St., 26 (1881);
Richmond v. Irons, 121 U. S., 27
(1887); Shellington v. Howland, 53 N.
Y., 371 (1878); Johnson v. Underhill,
52 id., 203 (1873); Veiller v. Brown, 18
Hun, 571 (1879); Richardson v. Abend-
roth, 48 Barb., 162 (1864); Worrall v.
Judson, 5 id., 210 (1849); Borland v.
Haven, 37 Fed. Rep., 394 (1888); Dane
v. Young, 61 Maine, 100 (1872); Skowhe-
gan Bank v. Cutler, 49 id., 315 (1860);
Fowler v. Ludwig, 34 id., 455 (1852);
Stanley v. Stanley, 26 id., 191 (1846),
holding that parol evidence is not ad-
missible as against the books of a cor-
poration to prove who were its stock-
holders in suits by creditors. In sup-
port of the general rule see, also,
Trons v. Manufacturers’ Nat. B’k, 27
Fed. Rep., 591 (1886); Price v. Whitney,

28 Fed. Rep., 297 (1886), holding that
the executors of one whose name ap-
pears on the books as a stockholder are
liable for assessment, though deceased,

.in his life-time, had sold the stock,

Transferrer is liable on debts existing at
time of registry of transfer. Harfold v.
Stobart, 21 N. E. Rep., 637 (Ohio, 1889).

2 Musgrave & Hart’s Case, L. R., 5 Eq.,
193 (1867); Walker’s Case, L. R., 6 Eq.,
30 (1868); McEuen v. West London
Wharves, etc., Co., L. R., 6 Chan., 655
(1871); Gower’s Case, L. R., 6 Eq., 77
(1868), holding that, where shares had
been forfeited by a resolution of the
directors, but the names of their owners
had not been removed- from the reg-
ister, they were contributories in wind-
ing-up proceedings instituted a year
later; Humby’s Case, 5 Jur. (N. 8.), 215
(1859); Head’s Case, L. R., 3 Eg., 84
(1866); White’s Case, L. R., 3 Eq., 86
(1866); Shepherd’s Case, L. R., 2 Chan.,
16 (1866).

3Magruder v. Colston, 44 Md., 349,
856 (1875). Cf. Fisher v. Seligman, 75
Mo., 18 (1881); Adderly v. Storm, 6
Hill, 624 (1844); Crease v, Babcock, 10
Metc., 525 (1846); Matter of The Em-
pire City Bank, 18 N. Y., 200, 224 (1858);
Holyoke Bank v. Burnham, 11 Cush.,
183, 187 (1853),

4 See § 258, supra.

290 -
\

OH. Xv.] TRANSFERRER'S AND TRANSFEREE’S LIABILITY.

[§ 261.
shareholder becomes thereupon liable on the stock to corporate
creditors. The registry which operates to change the stockholder
at the same time operates to charge the transferee! It is immate-
rial that no certificate has been issued to the transferee, or that .
the corporation has not issued certificates to any of the sharehold-
ers.” Nor will the transferee be heard to allege, as defense against
an action to enforce the statutory liability, that he was induced by
fraudulent representations to purchase the shares.2 Whether the
statutory liability attaches to a shareholder, in respect’ of debts
contracted before he became a member of the corporation, is a
question turning upon the words of the statute.‘ Nevertheless,
although the transferee may not be liable to others, he clearly is
liable herein to his transferrer for liabilities herein which fall upon
the latter. It has been held that a purchaser of stock may be
held liable to creditors upon the liability imposed by statute, al-

though the transfer is not recorded.®

1 Webster v. Upton, 91 U. S., 65 (1875);
De Pass’ Case, 4 De G. & J., 544 (1859);
Cape’s Executor’s Case, 2 DeG., M. &
G., 562 (1852); Briggs v. Waldron, 83
N, Y., 582 (1881). Cf. Chesley v. Pierce,
82 N. H., 388 (1855); Thebus v. Smiley,
110 IIL, 816 (1884), to the effect that
there can be but one amount for which
there is liability on account of the same
stock, and the statutory double liability
having been once met -by an owner of
the stock, his transferee takes it free
from liability.

2 See § 258, supra.

3 Oakes v. Turquand, L. R., 2 House
of Lords, 325 (1867); Houldsworth v.
City of Glasgow Bank, L. R., 5 App.
Cas., 817 (1880); Tennent v. City of
Glasgow Bank, L. R., 4 App. Cas., 615
(1879); and see chapterTX. Cf. Slater’s
Case, 35 Beav., 391 (1866). :

4Tracy v. Yates, 18 Barb., 152 (1854),

holding that it does not; Cape’s Execu- .

tor’s Case, 2 De G., M. & G., 562, hold-
ing that the transferee is liable for
debts incurred before as well as after
the transfer; McMaster v. Davidson, 29
Hun, 542 (1888), holding thatthe trans-
feree is liable on debts contracted before
he became such, but falling due after
he became a stockholder. Cf. § 259,
supra. Under the Mass. Mfg. Act, as

“re-enacted in Rhode Island, ‘‘ the liabil-

ity extends to all persons who were
stockholders when the debt sought to
be enforced was contracted, and also to
all persons who are stockholders when.
the liability is sought to be enforced,
although they may have become such
since the debt was contracted; but it.
does not extend to persons who had be-
come stockholders after the debt was.
contracted, and had ceased to be such
before the debt became payable and ac-
tion was brought.” Sales v. Bates, 2
N. E. Rep., 633 (R. I, 1886). Under the
Ohio statute the transferees are liable
for precedent debts., See Brown wv.
Hitchcock, 86 O. St., 667 (1881). See,
also, Mason v. Alexander, 44 O. St., 318
(4886); Wheeler v. Faurot, 37 id., 26
(1881). By the law of copartnership a
new partner is not liable for old debts.
See Lindley on Partnership, 205, 435,
208 (Callaghan & Co., 1888),

5 See § 262.

6 For a full discussion of the release
of a transferrer, and hence the charg-
ing of a transferee, where no registry
has been made, but an effort to make
it has been made, or an informal regis-
try was made, or the transferee was
treated by the corporation as a stock-

holder, see § 258, supra, and notes.

291
TRANSFERRER’S AND TRANSFEREE’S LIABILITY.

§ 262.] [cH. xv.

§ 262. Liability of transferee to transferrer herein.— A transfer
of stock may be said to involve three distinct acts, all of which,
may take place at one and the same time, or each at a different
time. There is, first, the agreement of sale, by which the right to
the stock passes from the transferrer to the ‘transferee; second, the
formal transfer of the certificate of stock; third, a registry of the
transfer, by an entry on the corporate transfer-book. It frequently
happens that the registry is not made until some time after the
agreement of sale, and that during the inter¢m calls on the sub-
scription are made or corporate creditors’ rights attached. The
law then holds liable the transferrer whose transfer has not been
registered. But in reality his transferee ought to meet that liability.
Hence the rule that for liabilities arising after a sale of stock, but
before a registry of the same on the corporate books, the vendee
is liable to the vendor when such liabilities are paid by the latter.!
The transferrer in these cases may have recourse to the real and not
the nominal transferee.? In case of several successive transfers,
the transferrer who has paid an assessment or corporate debt may
look to his immediate transferee, although there be another one

in the series who will ultimately be charged.’

lLord v. Hutzler, 3 Atlantic Rep.,
891 (1886); Johnson v. Underhill, 52
N. Y., 203 (1878); Kellogg v. Stockwell,
"5 Ill, 68 (1874); Hutzler v. Lord, 64
Md., 534 (1885); Brigham v. Mead, 10
Allen, 245 (1865); Walker v. Bartlett, 18
C. B., 845, overruling Humble v. Lang-
ston, 7 Mee. & W., 517; Grissell v.
Bristowe, L. R., 3 C. P., 112 (1868);
Davis v. Haycock, L. R., 4 Exch., 873
(1871); Bowring v. Shepherd, L. R., 6
Q. B., 809 (1869); Kellock v. Enthoven,
L.-R., 9 Q. B., 241 (1874); 8 C., L. R.,
8 Q. B., 458. The statute of limita-
tions does not bégin to run against the
transferrer until the assessment is paid
by him. Hutzler v. Lord, supra. . So,
also, when shares are sold for future
delivery, but before the time for deliv-
ery the seller, in order to save the stock
from forfeiture, is compelled to pay as-
sessments duly levied upon it, the seller
may refuse to deliver until he is re-
paid the amount of such assessments.
Whitney v. Page (N. Y. Super. Ct.),
Daily Register, March 31, 1885. A trans-
ferrer who seeks recourse to his trans-
feree for calls paid by the former after

Generally the trans-

the transfer does not prove the trans-
fer by showing a registry of the same,
He must prove some act of purchase
or acceptance by the transferee. Tripp
v. Appleman, 35 Fed. Rep., 19 (1888).

2Castellan v. Hobson, L. R., 10 Eq.
Cas., 47 (1870). But not to an interven-
ing unregistered transferee. Shaw v.
Fisher, 2 De G. & Sm., 11 (1848); 8. C.,
5 De G., M. & G., 596 (1855). See,
also, § 258, supra. An unrecorded
transferee who has transferred the cer-
tificate to still another party is not lia-
ble to his transferrer for calls made
after the transferee had transferred
to the second transferee. Brinkly
Hambleton, 8 Atl. Rep., 904 (Md., 1887).
In Lessassier v. Kennedy, 36 La. An.,
589 (1884), an unregistered vendee es-
caped liability of indemnity to his
vendor, because the vendee sold to a
person to whom the transfer direct from
the first vendor was made on the cor-
porate books, but without the knowl-
edge of the vendor. The dissenting
opinions in this case are to be com-.
-mended.

3Nickalls v. Eaton, 23 L, T. (N. 8.)

292
|
CH. xv.]

TRANSFERRER’S AND TRANSFEREE’S LIABILITY.

“1g 963,

ferrer who has paid seeks his remedy by a suit in equity for in-
demnity, and also to compel a registry of the transfer.! :

_§ 263. A transfer to a “dummy” or to an insolvent to escape
liability” —In the United States a transfer of shares in a failing
concern, made by the transferrer with the intention and for the
purpose of escaping liability as a shareholder to a person who for
any cause is incapable of responding in respect of such liability, is
void both as to creditors of the company and as to other share-
holders; and that, too, although as between the transferrer and

689 (1871); Kellock v. Enthoven, supra.
Or he may look to the final transferee,
even though the call was made before
the latter purchased. Hawkins v. Malt-
by, L. R., 3 Ch., 188 (1867). See 8. C.,
L. R., 6 Eq., 505 (1868).

1 Wynne v. Price, 3 De G. & Sm., 310
(1849); Cheale v. Kenward, 3 De G. &
J., 27(1858); Morris v. Cannan, 4 De G.,
F. & J., 581 (1862); Hawkins v. Maltby,
L. R., 4 Chan., 200 (1868), holding,
however, that the vendor cannot re-
cover from the vendee interest which
he has had to pay to a liquidator by
way of penalty for not having paid
calls promptly; Butler v. Cumpston,
L. R., 7 Eq., 16; Evans v. Wood, L. R.,
5 Eq., 9 (1867); Paine v. Hutchinson, L.
R., 23 Eq., 257; Cruse v. Paine, L. R.,
6 id., 641; S. C., 4id., 441 (1868); Shaw
v. Fisher, 2 De G. & Sm., 11 (1848);
James v. May, L. R., 6 House of Lords,
328; Allen v. Graves, L. R., 5 Q. B., 479
(1870), holding that, where the pur-
chaser did not offer as transferee the
name of a person to whom no reason-
able objection could be made, he had
not fulfilled the contract of sale and
was liable for the amount of a call sub-
sequently made, and interest, as dam-
ages; Shaw v. Rowley, 16 Mee. & W.,
810 (1847), sustaining an action for price
of shares sold on which a previous call
had not been paid, it being held that
plaintiffs could recover because they
could have paid the call and transferred
the stock if defendants had furnished
the name of the transferee when re-
quested. In Ohio, under the act creat-
ing statutory liability on the part of

shareholders, transferees are liable, as
between themselves and their vendors,
for all indebtedness of the corporation,
whether incurred before or after the
transfer, ‘‘as if they had owned the
stock from the organization of the com-
pany.” Wheeler v. Faurot, 37 O. St.,
26 (1881); Brown v, Hitchcock, 36 id.,
667 (1881), a case wherein the question
of statutory liability is very fully and
satisfactorily discussed. To same effect
Cape’s Case, 2 De G., M. & G., 562
(1852), That a transferrer may compel
the transferee to register the transfer,
see § 884. The court will determine
the liability as between the transferrer
and transferee, in connection with the
corporate creditors’ suit, brought to en-
force the stockholder’s liability. Mason
v, Alexander, 44 O. St., 318 (1886);
Sayles v. Blane, 19 L. J. (Q. B.), 19
(1849), holding that a transferrer who
continues to be the owner on the reg-
istry, and who has been compelled to
pay calls made after the transfer, can-
not recover the money so paid from the
transferee upon’the common count for
money paid for his use.

2The cases in this section refer to
instances where a person transfers
stock from his own name to that of a
“dummy.” An entirely different class
of cases exists where the’ person really
interested buys stock or subscribes for
stock in the name of a ‘‘dummy,” and
the name of the real owner never ap-
pears on the corporate books. The latter

-class of cases are treated of in § 253,

supra. e

293-
TRANSFERRER’S AND TRANSFEREE’S LIABILITY. [cH. xv.

\

§ 263.]

transferee the transaction may have been absolute and no secret
trust involvéed.! But, on the other hand, it has been held that if the
transfer is bona fide, and the transferrer is ignorant of the insolv-
ency of the transferee, and the company is not insolvent, the trans-
fer is effectual, and the transferrer is released from liability.? The
creditor’s remedy to enforce the liability of a shareholder who has
in this way fraudulently assigned or transferred his stock is in a

court of chancery.’

1Nathan v. Whitlock, 3 Edw. Chan.
(N. Y.), 215 (1888); 8. C., 9 Paige, 152
(1841). Transferee held liable herein
though transfer of certificate was made
long previous but registered only shortly
before insolvency and though all parties
acted in good faith. Richmond v. Irons,
121 U. S., 27 (1887); Veiller v. Brown,
18 Hun, 571 (1879); McLaren v. Francis-
cus, 43 Mo., 452 (1869); Miller v. Great
Republic Ins. Co., 50 id., 55 (1872), hold-
ing, however, that, ifa sale and transfer
be made honestly and without intent to
defraud the creditors of the corporation,
the fact that the purchaser is insolvent
will not render the vendor liable. Prov-
ident Savings Institution v. Jackson
Place Skating and Bathing Rink, 52 id.,
657 (1878) ; Chouteau Spring Co. v. Har-
ris, 20 id., 382; Mandion v, Fireman’s
Ins. Co., 11 Rob. (La.), 177 (1845), where
the transfer was a gift; Inre Bachman,
12 Nat. Bank. Reg., 223 (1875); Marcy v.
Clark, 17 Mass., 830 (1821); Central Ag-
ricultural, etc., Association v. Alabama
Gold Life, etc., Co., 70 Ala., 120 (1881);
Gaff v. Flesher, 33 O, St., 107 (1877);
Douchy v, Brown, 24 Vt., 197 (1852);
Aultman’s Appeal, 98 Penn. St., 505
(1881). In the last case one who held
stock as collateral security and surren-
dered it after the company’s insolvency
tothe company, which issued a new cer-
tificate to the former owners, was held
responsible to the creditors of the com-
pany. Everhart v. West Chester, etc., R.
R. Co., 28 id., 339 (1857); Rider v. Morri-
son, 54 Md., 429 (1880); Paine v. Stewart,
83 Conn., 516 (1866); Bowden v, Santos,
1 Hughes (U. 8.), 158 (1877); Wehrman
v. Reakirt, 1 Cin. oe Ct., 230 (1871);

Bowden v. Johnson, 107 U. S., 251 (1882);
Davis v. Stevens, 17 Blatch., 259 (1879).
Cf. Allen v. Montgomery R. R. Co., 11
Ala., 457 (1847); Billings v. Robinson, 28:
Hun, 122 (1882); aff’d, 94 N. Y., 415
(1884). It is also held that the owner of
stock cannot escape liability by trans-
ferring it to his infant children, or by
taking it originally in their name. Ro-
man v. Fry, 6 J. J. Marsh, 684 (1831).
It has been held, also, that no transfer
made in anticipation of a judgment
against the corporation, and for the pur-
pose of escaping liability, is valid, and
shareholders who make such a transfer
will be held liable. McClaren v, Fran-
ciscus, 48 Mo., 452 (1869) ; Marcy v. Clark,
17 Mass., 380 (1821).

? Miller v. Great Republic Ins. Co., 50
Mo., 55 (1872). See, also, Cole v. Ryan,
52 Barb., 168 (1868). Cf. Billings v. Rob-
inson, 94 N.Y., 415 (1884); 8. C., 28 Hun,
122 (1882). A stockholder who promises
a corporate creditor, at a time when the
company’s affairs are involved, that he
will not transfer, thereby inducing him
not to sue to collect his debt, is liable to
such creditor in case he does transfer.
Paine v. Stewart, 33 Conn., 516 (1866).
But a transfer will be held valid, it
seems, when it is made pursuant to an
antecedent option agreement, although
the final transfer is really made in order
to avoid liability. Holyoke Bank v.
Burnham, 65 Mass., 183 (1853); Magru-
der v. Colston, 44 Md., 349 (1875). Cf.
Chapman v. Shepherd, L. R., 2 C. P.,
228 (1867), under the English statute.

3 Johnson v. Southwestern Railroad
Bank, 3 Strobh. Eq. (S. C.), 268, 295
(1848).

294
CH. XV. | TRANSFERRER’S AND TRANSFEREE’S LIABILITY. [§ 266.

§ 266. The rule in _England— The rule in England is that a
shareholder may transfer his shares, when the company is in a fail-
ing condition, to a man of straw for a nominal consideration, even
although the ‘sole purpose of such a transfer be to. escape liability.
If the transfer be out and out, and not merely colorable and col-
lusive- with a secret trust attached, it is valid, and the transferrer
is thereby released from liability, both as t6 corporate creditors
and the other shareholders.' But if the transfer is merely color-
able, and there exists a secret trust in favor of the transferrer, so
that as between the parties there has been no bona jide transfer,
- but the object is to secure the shares to the transferrer in the event
that the concern becomes prosperous, and to leave them to the
transferee if there is a winding up, the transferrer’s name will be
put in the list of contributories, and the pretended transfer be

wholly ignored.?

1De Pass’ Case, 4 De G. & J., 544
(1859) ; Weston’s Case, L. R., 4 Chan., 20
(1868); Harrison’s Case, L. R., 6 Chan.,
286 (1871); Master’s Case, L, R., 7 Chan.,
292 (1872); Hakim’s Case, L. R., ‘7 Chan.,
296, n. (1872); Bishop’s Case, id. (1872);
William’s Case, L. R., 1 Chan. Div., 576
(1875); King’s Case, L. R., 6 Chan., 196
(1871); Chynoweth’s Case, L. R., 15
Chan. Div., 13 (1880); Jessopp’s Case, 2
De G. & J., 638 (1858); In re Taurine
Co., L. R., 25 Chan. Div., 118 (1883);
Moore v. McLaren, 11 ‘Up. Can., C. P.,
584 (1862); Batties’ Case, 39 L. J., Chan.,
891 (1870). Cy. Bunn’s Case, 2 De G.,
F. & J., 275 (1860). Thus, in De Pass’
Case, 4 De G. & J., 544 (1859), the facts
were that De Pass, owning two hundred
and fifty shares of stock in the Mexican
& South American Company, for which
he had paid £1,750, upon learning that
the concern was involved, handed the
certificate to his clerk, without having
previously spoken to him of the matter,
saying that he might have the stock for
a sovereign, which the clerk instantly,
paid, and at the same time accepted the
shares. In about three weeks this clerk
sold the shares to another person in the
employ of De Pass. Upon the winding
up of the company, which was ordered
within a few days after the sale by De
Pass to his clerk, although it was shown

that the shares at the time of that sale
were worth considerably more than a
sovereign, still, inasmuch as the trans-
action appeared to have been absolute,
although confessedly made to escape
possible liability, it was held that the
transfer might stand, and that De Pass
was not liable in respect to the shares
after the date of the sale to the clerk.
But in Master’s Case, L. R., 7 Chan.,
292 (1872), a transfer of two hundred
and eighty shares of stock, on which
£15 per share had been paid for a nomi-
nal consideration to an irresponsible
son-in-law of the transferrer, the trans-
fer being made only for the purpose of
escaping liability upon the shares, was
held to discharge the transferrer, A
transfer by a director in a failing corpo-
ration to avoid liability is void. Re
South London, etc., Co., 59 L. T. Rep.,
210 (1888).

2 Budd’s Case, 3 De G., F. & J., 297
(1861); Payne’s Case, L. R., 9 Eq., 223
(1869); Kintrea’s Case, 39 L. J. Chan.,
193 (1869); 8. C., L. R., 5 Chan., 95;
Chinnock’s Case, Johns. (Eng. Chan.),
714 (1860); Costello’s Case, 2 De G., F.
& J., 302 (1860); Hyam’s Case, 1 id., 75
(1859) ; Lund’s Case, 27 Beav., 465 (1859);
Ex parte Bennett, 18 id., 389 (1853);
Daniell’s Case, 22 id., 43 (1856); Eyre’s
Case, 31 id., 177 (1862); Munt’s Case, 22

© 295
§ 266.) |

TRANSFERRER’S AND TRANSFEREE’S LIABILITY.

[CH. Xv.

The right to transfer shares in England seems to exist up to the
time the company is ordered to be wound up and business is sus-
pended.! But after that time the right is gone, and it is the duty
of the management to refuse to allow a transfer.?. Any collusion
between the stockholders and the directors to evade the rules gov-
erning transfers, for the purpose of evading liability, will invali-’

date the transfer.*

Persons to whom shares have been transferred

without. their knowledge or assent are not estopped, when the
knowledge is brought to them, from repudiating and denying the
stockholdership.* The present tendency in England is to give

id., 55 (1856); Slater’s Case, 35 id:, 391
(1866); Bank of Michigan v. Gray, 1 Up.
Can. Q. B., 422 (1884); Cox’s Case, 33
L. J., Chan., 145 (1864); William’s Case,
L. R., 9 Eq., 225, n. (1869); Capper’s
Case, L. R., 38 Chan., 458 (1868); Mann’s
Case, id., 459, n. (1868); Mitchell’s Case,
L. B., 9 Eq., 363 (1870); Ex parte Hat-
ton, 31 L. J. Chan., 340 (1862); Pugh &
Sharman’s Case, L. R., 13 Eq., 566 (1872) ;
Lankester’s Case, L. R., 6 Chan., 905, n.

(1871); Gilbert?s Case, L. R., 5 Chan.,.
Cf. Castellan v. Hobson, -

559 (1879).
L. R., 10 Eq., 47 (1870); Maynard v.
Eaton, L. R., 9 Chan., 414 (1874); Col-
quhoun v. Courtenay, 43 L. J. Chan.,
338 (1874); Richardson’s Case, L. R., 19
Eq., 588 (1875). :

1De Pass’ Case, supra, and the cases
generally in the preceding notes.

2 Mitchell’s Case, L. R., 4 App. Cas.,
548 (1879); Weston’s Case, Ix R., 4Chan.,
20, 30 (1868); Hae parte Parker, L. R., 2
Chan., 685 (1867); Chappell’s Case, L.
R., 6 Chan., 902 (1871). In this country
directors have in general no power to
refuse or prevent transfers, such as in-
heres in the boards of management in
English companies. «4

3 Hyre’s Case, 31 Beav., 177 (1862);
Bennett’s Case, 5 De G., M. & G., 284
(854), Nor may a director make use of
his position as director to transfer his
stock, and thus escape chargeability
upon it. Munt’s Case, 22 Beav., 55
(1856). Nor will a stockholder be al-

lowed to relieve himself when he learns .

of the probable insolvency of the con-
cern by inducing the directors to post-

_ sible person.

pone their application for an order to
wind up until he have time to transfer
his shares to a pauper or other irrespon-
Ex parte Parker, L. R.,
2 Chan., 685 (1867); Gilbert’s Case, L.
R., 5 Chan., 559 (1870); Allin’s Case, 16
Kq., 449 (1873). And a director who
transfers shares standing in his name
to a person already holding all the
shares any one person is allowed to
hold will not thereby escape liability.
Ex parte Brown, 19 Beav.. 97 (1854).
In general, moreover, a transferrer is
not exempt from liability by reason of
a transfer, unless the transferee has the
present capacity to assume the liability,
Nickalls v. Merry, L. R., 7 H. L., 530
(1875); Browne v. Black, L. R., 8 Chan.,

‘989 (1878); Mann’s Case, L. R., 8 Chan,

459, n. (1868). Cf. Johnson v. Laflin, 5
Dill., 65, 81 (1878); Case of the Reci-
procity Bank, 22 N. Y., 9 (1860). Ac-
cordingly, a transfer to an infant for
the purpose of escaping liability is fu-
tile. Symon’s Case, L. R., 5 Chan., 298
(1870); Weston’s Case, ‘id., 614 (1870);
Curtis’ Case, L. R., 6 Eq., 455 (1868);
Castello’s Case, L. R., 8 Eq., 504 (1869);
Walsh v. The Union Bank, 5 Quebec,
L. R., 289 (1879). |

4 Birch’s Case, 2 De G. & J., 10 (1857);
Fox’s Case, 3 De G., J. & S., 465 (1863);
Higg’s Case, 2 Hem. & M., 657 (1865);
Somerville’s Case, L. R., 6 Chan., 266
(1870). Cf. Bullock v, Chapman, 2 De G.
& Sm., 2i1 (1848). And see, also,
case of the Reciprocity Bank, 22 N. Y.,
9 (1860). A colorable transfer, as has
appeared, will not operate to discharge

296
CH. Xv.]_

TRANSFERER’S AND TRANSFERER’S LIABILITY.

\

[s 266.

greater security to corporate creditors; and it is probable that the
English rule in regard to transfers to insolvent persons will gradu-

ally be changed.

the transferrer where shares were col-
lusively assigned to a servant for the
purpose of evading liability. Hence
when the servant, upon the concern
becoming solvent, attempted to claim
the shares as though the transfer had
been out and out, the court, having pre-
viously decided against the bona fides

of the transaction, held the owner en-
titled to a declaration that the servant
held the shares in trust for him. Col-
quhoun v. Courtney, 43 L. J., Chan., 338
(1874). As toa transfer made in igno-
rance of the fact that a winding up has
been commenced, see Emmerson’ Case,
L. R., 1 Ch., 433 (1866).

297
CHAPTER XVI

ISSUE OF PREFERRED STOCK AND STOCK UPON WHICH INTEREST
IS GUARANTIED.

§ 272. Arrears of preferred dividends,

§ 267. What is preferred stock.

268, Power to issue preferred or guar- to what extent payable subse-
antied stock. quently,

269. General rights of preferred| 278. The option to exchange common
stockholders. for preferred shares.

270. Preferred shareholders are not| 274. Rights of the assignee or trans-
creditors, and are entitled to : feree of preferred shares in
dividends only from profits. arrears of dividends.

271. The discretion of directors with} 275. Special stock in Massachusetts,

_ respect to declaring dividends; 277%. Interest-bearing stock.
-on preferred stock, and rem-| 278. Rights of preferred stockholders

edies of the preferred stock- on dissolution.

holders in regard thereto.

§ 267. What is preferred stock— By preferred stock is to be
understood stock which entitles the holder to receive dividends
from the earnings of the company before the common stock can
receive a dividend from such earnings.’ In other words, it is stock
entitled to dividends from the income or earnings of the corpora-
tion before any other dividend can be paid.? The relation of debtor
and creditor does not exist between the preferred stockholders
and the corporation, and the right to a preferred or guarantied
dividend is not a debt until the dividend is declared. A dividend
is money paid out of profits by a corporation to its shareholders.
A preferred dividend is nothing more than that which is paid to
one class of shareholders in priority to that to be paid to another

class.

1 Totten v. Tison, 54 Ga., 139 (1875).

2 Chaffee v. Rutland R. R. Co., 55 Vt.,
110 (1882). ;

3 Belfast, etc., R. R. Co. v. Belfast, 77
Me., 445 (1885); Taft v. Hartford, etc.,
R. BR. Co., 8 R. 1, 310, 383 (1866); Chaffee
v. Rutland, etc., R. R. Co., 55 Vt., 110
(1882). In Burt v. Rattle, 31 O. St., 116
(1876), it was held that the holder of
preferred stock was a creditor; but that
was a case where there had been prac-
tically a loan on mortgage. The mort-
gagees were only nominally preferred
shareholders, and did not have any right

to vote at corporate meetings, and were
not liable for corporate debts. The pre-
vailing rule, it is believed, is correctly
stated in the text. A preferred divi-
dend has also been defined as ‘‘ substan-

tially interest chargeable exclusively on

profits.” Henry v. Great Northern R’y
Co.,1 De G. & J., 606, 687; Crawford
v. North Eastern, etc., R. R. Co., 3 dur.
(N. S.), 1093 (1856). The preferred stock-
holder is one who may say, ‘‘ Nobody
shall have any portion of the profits of
the company until I have been paid my
dividend.” Henry v. Great Northern

298
aN

CH. XvI.] PREFERRED STOCK. [§ 267.

In the United States the terms “preferred” and “ guarantied,”
as applied to stock, mean the same thing! In England, however,
guarantied stock is stock that is entitled to arrears of dividends,
and preference stock is stock not so entitled?

At common law a corporation has no power to issue preferred
stock. Unless the statutes or the charter expressly allow such an
issue, the issue-cannot be made. Where a charter amendment ex-
pressly provides for the issue of preferred stock, there is no question
as toits legality. But the law is clear that the corporation has no

implied power to issue preferred stock. That power exists only when

expressly conferred by the charter or by statute.‘
R’y Co., 4 Kay & J., 1, 32 (1857). A pre- :

ferred dividend is said to be “a pledge
of the funds legally applicable to the
purposes of a dividend. Taft v. Hart-
ford, etc., R. R. Co, 8 R. LL, 310, 335
(1866).

ivaft v. Hartford, ete., R. RB. Co., 8
R. L., 310, 333, 884, 335 (1866).

2Henry v. Great Northern R’y Co., 4
Kay & J., 1, 12, 21 (1857).

’Everhart v. West Chester, etc., R.
R. Co., 28 Penn. St., 339 (1857), holding
that a charter amendment authorizing
the issue was legal; Rutland, etc., R. R.
Co. v. Thrall, 35 Vt., 536, 545 (18638), to
same effect. Railroad company has no
implied power to guaranty a specified

dividend on its stock. Memphis, etc., .

Co. v. Memphis, etc., R. R. Co., 5 8. W.
Rep., 52 (Tenn., 1887). Cf. Davis v. Pro-

prietors, etc., 49 Mass., 821 (1844); Wil-

liston v. Michigan, etc., R. R. Co., 95 id.,
400 (1866); Curry v. Scott, 54 Penn. St.,
270 (1867). Under a power to increase
capital stock ‘‘in such manner, and
with and subject to such rules, regula-
lations, privileges and conditions,” as
the company may see fit, it has been
held that preferred stock may be issued.
Harrison v. Mexican, etc., R. R. Co., L.
R., 19 Eq. Cas., 358 (1875). But see
Moss v. Syres, 82 L. J. Ch., 711 (1868).
Sometimes a statute provides for the
exchange of common for preferred
stock. N. Y. Session Laws, 1880, ch.
225; Webb v. Earl, L. R., 20 Eq., 556
(1875), where the charter authorized
the transfer of preferred into common.

If, however, the

Under the powers conferred by the stat-
ute, 30 and 31 Vict., ch, 127, various
plans have been devised by English
companies on-the verge of insolvency
to raise funds; and a favorite device is
the issue of preferred shares of stock,
Thus, in one case, there were five kinds
of preference shares. Corry v. London-
derry, etc., R’y Co., 29 Beav., 263 (1860).
See, also, by way: of illustration as to
these various methods in England of
raising funds by the issue of preferred
shares, Matthews v. Great Northern,
etc., R’y Co., 28 L. J., Chan., 375 (1859);
Re Cambrion R’y Co.,L. R.,'3 Chan,
278 (1868); Re Potteries, etc., R’y Co.,

id., 67 (1867); Webb v. Earl, L. R., 20

Eq., 556 (1875); Stevens v. Midland, etc.,
R’y Co., L. R., 8 Chan., 1064 (1878); Re
Bristol, etc., R’y Co., L. R., 6 Eq., 448
(1868); Re Devon, etc., R’y Co., id., 610
(1868); Munas v. Isle of Wight R’y Co.,
L. R.,'8 Eq., 665 (1869); Re Hast &
West, etc., R’y Co., id., 87 (1869); Lon-
don, etc., Association v. Wrexham, ete.,

Ry Co., L. R., 18 Eq., 566 (1874); Re.

Anglo-Danubian, etc., Co., 'L. R.,'20
Eq., 839 (1875); Midland R’y Co. v. Gor-
don, 16 Mee. & W., 804 (1847).

4Hutton v. Scarborough, etc., Co., 4
De G., J. & S., 672 (1865); Sturge vw.
Eastern, etc., R. R, Co., 7 De G., M. &

G., 158 (1855); Guinness v. Land Corpo-

ration of Ireland, 22 L..'R., Ch. Div.,

349 (1882); Moss v. Syers, 11 Week. Rep.,

1046 (1863); S. C., 82L. J. Chan, 711;

Melhado v. Hamilton, 28 L. T. (N. 8.), .

578 (1878); S. C., 29 id., 364; Fielden v,

299

/
§ 267.]

PREFERRED STOCK.

[cH. Xvi.

stockholders at the time of organization agree to issue preferred
stock, there is no principle of law which forbids such an issue.!

If the power to issue preferred stock is given to the corporation
it cannot be exercised by the directors.? But where the directors
have, without authority, issued such stock, the corporation as a
corporation, having the power, may by a subsequent vote ratify
the unauthorized act of the directors and thus validate the issue.’

Lancashire, etc., R’y Co., 2 DeG. & Sun.,
531 (1848); The Railway Companies Act,
1867, 30 and 81 Vict., ch. 127, §§ 6-17.
It formerly was held that, where the
power to increase the capital stock ex-
ists, preferred stock may be issued by a
/ majority vote, the legality of such an
issue being based upon the. corporate
power to borrow money. Hazelhurst v.
Savannah, etc., R. R. Co., 43 Ga., 18
(1871); Harrison v. Mexican, etc., R. R.
Co., 19 L. R., Eq. Cas., 358 (1875); Rut-
land, etc., R. R. Co. ». Thrall, 35 Vt.,
536 (1863). But it is no longer consid-
ered good law that such stock may be
issued under a power to borrow money.
Kent v. Quicksilver Mining Co., 78 N.

Y., 159 (1879). Where a corporation is.

organized under an original charter
which is afterwards amended so as to
authorize the corporation to issue pre-
ferred stock “‘ and to pledge its revenues
for the payment of dividends on the
same,” no relief will be given to the
holders of’ common stock in an action to
recover their share of dividends which
are declared on the preferred stock,

their rights having been fully protected :

in the amendments by requiring the
consent of the non-preferred stock to

the provisions enacted, and in giving -

them the privilege of taking all the pre-
ferred stock. City of Covington v.
Bridge Co., 10 Bush (Ky.), 69 (1873);
Re The South Durham Brewery Co.,
Lid., 58 L. T. Rep. (N. S.), 928 (Ct. of
App., 1885). In this case the memoran-
dum of association of a company pro-
vided as follows: “The capital of the
company is £10,000, divided into one
thousand shares of £10'each, with power
to increase the capital.” The contem-

poraneous articles of association pro-
vided that the company might, by a
special resolution, from time to time in-
crease its capital by the creation of new
shares ‘‘ with or without special priv-
ileges and priorities over the original
shares,” Held, that the company had
power to increase its capital by the issue
of preference shares. But it has been
held that a loan may take the shape
of preferred shares where the pre-
ferred shares are secured by bond and
mortgage, the holders being expressly
declared not to be members of the cor-
poration. Burt v. Rattle, 31 O. St., 116
‘(1876); Totten v. Tison, 54 Ga., 189 (1875).
And in another case the legality of the
issue of preferred stock was put upon
the ground, not of the right to borrow
money, but upon the ground of a right
to raise funds by asale of stock. Chaffee
v, Rutland, etc., R. R. Co., 55 Vt., 110
(1882); State v. Cheraw, etc., R. R. Co.,
16 S. C., 524:(1881) — a muniéipal sub-
scription payable jn bonds. The issue
of preferred stock cannot be created by
a by-law passed long after incorpora-
tion. Hutton v. Scarborough, ete., Co.,
2 Dr. & Sm., 521 (1865); Ashbury v.
Wilson, T. R., 80 Ch. D., 376 (1885).
Unless the charter authorized such an
issue. In re South, etc., Co., L. R., 31
Ch. D., 261 (1885).

1 Harrison v. Mexican R’y Oo., 44 L.
J. (Ch.), 408 (1875), where the issue was
authorized by the original by-laws. See,
also, dictum in Kent v. Quicksilver Min.
Co., '78 N. Y., 159, 178 (1879).

2McLoughlin v. Detroit, etc, R. R.
Co., 8 Mich., 100 (1860).

3McLoughlin v. Detroit, etc, R. RB
Co,, supra (1860).

300
OH. XVI. ] PREFERRED STOCK.

[§ 269.

Where a corporation has no express charter power to issue pre-
ferred stock, it is well settled that one or more dissenting stock-
holders may enjoin the issue; or the issue may be set aside if the
dissenting stockholder brings suit within a reasonable time. But
an unreasonable delay will be a bar to his remedy.!

A power to issue preferred stock does'not include the power to
issue partly preferred and partly non-preferred shares.? Neither
can a power to issue a certain number of preferred shares be ex-
tended to validate the issue of a greater number.? The stock-
holder’s remedy to restrain the issue of the preferred stock is by a
bill in equity,‘ and he need not wait to commence his suit until
there are funds to make a dividend.

§ 269. General rights of preferred shareholders.— The rights and
the status of the holder of preferred shares depend upon the partic-
ular provisions to be found in the certificate of stock which he holds
as the evidence of his contract, upon the terms of the contract it-
self, and upon the statute under and by virtue of which the issue
was made.® The real intent and character of the contract is to be
sought for and ascertained by reference to the charter and its

1See, in general, on this subject,
chapter XLIV. Thus, a delay of four
years, Kent v. Quicksilver Mining Co.,
78 N. Y., 159 (1879); or ten years, Tay-
lor v. South, etc., R. R. Co., 4-Woods,
575 (1882); S. C., 18 Fed. Rep., 152. See,
also, Hazelhurst y. Savannah, etc., R. R.
Co., 43 Ga., 18 (1871); Lockhart v. Van
Alstyne, 31 Mich., 76 (1875). Delays in
raising the question of the validity of an
issue of preferred stock, advantages hav-
ing accrued in the meantime to the cor-
poration and the shareholders, have
been held such acquiescence as will bar
the right of a stockholder to object.
Acceptance, of the preferred stock and
dividends thereon also bars the right
to challenge the legality of the issue.
Branch v. Jesup, 106 U. S., 468 (1882).
So, also, where the matter was on the
whole more favorable to. the plaintiff
than to other shareholders, it was held
in Indiana, in a leading case, that the
issue could not be questioned. But the
soundness of this decision may well be
questioned. Evansville, etc., R. Ry Co.
v. City of Evansville, 15 Ind., 395.

2 Covington, etc., Co. v. Sargent, 1
Cin. Super. Ct., 854 (1871).

~8 Melhado v. Hamilton, 28 L. T. (N.S.),
578 (1878); S. C., 29 id., 364. /
4Guinness v. Land Corporation of
Ireland, L. R., 22 Ch. D., 349 (1882),
holding, also; that the by-laws cannot
authorize the issue of preferred stock.
5Sturge v. Eastern, ‘etc., R’y ©o., 7
De G., M. & G., 158 (1855). A subscriber
to the common stock, who has giyen an
express or implied consent to the issue
of preferred stock, is not released from
liability ‘on his subscription by such
issue, Rutland, etc,, R. R. Co. v. Thrall,
35 Vt., 536 (1863); Hazelhurst v. Savan-
nah, etc., R. R. Co., 43 Ga., 18 (1871);
Hoyt v. Quicksilver Mining Co., 17 Hun,
169; Kent v. Same, 78 N. Y., 159 (1879).
6 Baily v. Hannibal, etc., R. R. Co., 1

Dill, 174 (1871); & C., 17 Wall., 96; St.

John v. Erie R’y Co., 22 id., 186 (1874); °
West Chester, etc., R. R. Co. v. Jack-

son, 7% Penn. St., 321 (1875); Matthews

v. Great Northern, etc., R’y Co., 28 L.

J., Chan., 875 (1859), construing a stat-

ute affecting the rights of holders of
‘‘ puarantied” and ‘‘deferred” stock;

Belfast, etc., R. R. Co. v. Belfast, 77

Me., 445 (1885).

301
PREFERRED STOOK. [CH. Xvz.

§ 270.]

amendments, the by-laws and resolutions of the shareholders, books
of minutes of corporate meetings, annual reports and other records
of corporate action.'

Like other stockholders, the holders of preferred stock have the
right to vote at corporate meetings and exercise in full the various
rights of a shareholder.’ '

§ 270. Preferred shareholders are not creditors, and are entitled to
dividends only from profits.— In the earlier decisions there was a
tendency to hold that owners of preferred or guarantied stock
were creditors of the corporation. But it is now conclusively

settled that such a shareholder is not a creditor?

1 Boardman v. Lake Shore, etc., R. R.
Co., 84 N. Y., 157 (1881); Gordon v.
Richmond, etc., R. R. Co., 78 Va., 501,
510 (1884); Stevens v. South, etc., Ry
Co., 9 Hare, 318 (1851); Sturge v. East-
ern, etc., R’y Co., 7 De G., M. & G., 158
(1855); Corry v. Londonderry, etc., Ry
Co., 29 Beav., 263 (1860); Harrison v.
Mexican, etc., R’y Co., L. R., 19 Eq.

_Cas,, 358 (1875); Kent v. Quicksilver
Mining Co., 78 N. Y., 159 (1879); Craw-
ford v. Northeastern, etc., R’y Co., 3
Jur. (N. §.), 1093 (1856); Henry v. Great

_Northern, etc., R’y Co., 3 id., 1117;
Matthews v. Same, 5 id., 284; Belfast,
etc., R. R. Co. v. Belfast, 77 Me., 445
(1885). Asto what are net earnings, see
§ 540, infra, After the preferred stock
has been issued it is beyond the power
of the corporation to limit the prefer-
ence given to it. Ashbury v. Watson,
L. R., 30 Ch. D., 376 (1885). See, also,
Coats v. Nottingham, etc., 30 Beav., 86;
West Chester, etc., R. R. Co. v. Jackson,
77 Penn. St., 321 (1875), where there
was a special act providing for the issue
of preferred stock, and afterwards an-
other for the issue of consolidated stock.
A dividend having been declared, a
holder of the preferred stock, who had
declined to accept the consolidated, was
held ‘‘entitled to receive just what the
company agreed to pay when the money
was received,” that is, a stipulated por-
tion of the net earnings.

2S8t. John v. Erie R’y Co., 22 Wall.,
136 (1874).

3 Belfast, etc., R. R. Co. v. Belfast, 77

Me., 445 (1885); Taft v. Hartford, ete,
R. R. Co., 8 R. I., 310 (1866); King »,
Ohio, etc., 9 Rep., 431; Chaffee v. Rut-
land, etc., R. R. Co., 55 Vt., 110 (1882),
the court saying: “ The claim is that he
is also a creditor with all the rights per-
taining to that relation. Against this
claim are the terms of the charter, the
presumptions of law and the usual
course of business.” Vesey, J. In
this case certificates issued for “scrip
dividends” or “ guarantied preferred
stock” were convertible into mortgage
bonds. The company having refused
to convert them it was held that gen-
eral assumpsit for the amount of the
certificates would lie, and that the suit
could be brought in the name of the
holder for value. Warren v. King, 108
U.S., 389 (1882). In this case the certifi-
cates of preferred stock provided that it
should ‘‘be and remain a first claim
upon the property of the company after
its indebtedness,” etc. In foreclos-
ure proceedings the preferred stock-
holders asked to have their stock de-
clared a lien prior to a subsequent
mortgage; but the court refused the
application, declaring that they had
priority over the common stock only.
Totten v. Tison, 54 Ga., 189 (1875), In
this case the company was authorized
by legislature to make a mortgage loan
which it chose to effect by the issue of
stock indorsed “preferred,” guaranty-
ing fifteen per cent. for two years, when
they might be redeemed or converted
into common stock, At the expiration

802
OH. XVI. ]

PREFERRED STOCK.

[§ 270.

The preferred shareholder is but a shareholder with a right to
have his dividend paid before dividends on the common stock are

-of two years they were, by agree-
ment, exchanged for mortgage bonds.
The owners were never considered as
stockholders nor acted as such. In the
winding up of the company when it
became insolvent, the holders of these
mortgage bonds were held entitled to
claim as bona fide creditors. Burt v.
Raitle, 31 O. St., 116 (1876), turned upon
a general “Act to authorize manufact-
uring corporations to issue preferred
stock.” Where such stock was issued
certifying that the corporation guaran-
tied the holders certain dividends not
exceeding legal rates, and the final pay-
ment of the certificates at a specified
time, it being provided that such pre-
ferred stock might be converted into
common stock, and the corporation
executed its bond and mortgage to a
trustee to secure such certificates, it was
held that holders of the so-called pre-
ferred stock did not become stockhold-
ers and members, but creditors of the
corporation, so that, on the winding up
of the company’s affairs, they had a lien
upon the mortgage property superior to
that of general creditors and assignees.

‘“A mortgage creditor, although de--

nominated a ‘preferred stockholder,’
is a mortgage creditor nevertheless;
and interest is not changed into a ‘divi-
dend’ by calling it adividend.” It was
a self-evident misnomer in the act. See,
\also, Ragland v. Broadnax, 29 Gratt.,
401 (1877), where the court upheld the
charge of guarantied dividends on the
gross receipts. That was the case of a

debt converted into guarantied stock.

The debt would have borne, if it had
not been converted into stock, interest
at the rate of six per cent. per annum,
whether there were net earnings or not.
The court held that the guaranty of
three per cent. dividend on the whole

stock, which formerly belonged to the -

state, was simply the six per cent.
interest upon the debt which was

308 ;

converted into stock; and it also held
that it was chargeable, in accordance
with the plain provisions of the statute,
upon the gross receipts. St. John »v.
Erie R’y Co., 22 Wall., 186 (1874). In
this case an agreement that preferred
stock should be entitled to dividends
out of the annual net earnings “ after
payment of mortgage interest and de-
layed coupons in full” was construed
to mean that interest on a loan con-
tracted afier the agreement was en-
tered into had preference over the divi-
dend. West Chester, etc., v. Jackson,
77 Pa. St., 821 (1875). In this case pre-
ferred stock to be redeemed by pay-
ment of the par value and a sum which,
with dividends and interest already

_ paid, should amount to eight per cent.

per annum from the time of its pur-
chase from the company, was declared
to be, to all intents and purposes, a
mortgage. Phillips v. Eastern, etc.,
138 Mass., 122 (1884), was under a stat-
ute authorizing the conversion of cer-
tificates of indebtedness into preferred
stock. The holders of such preferred
stock as had been issued were regarded,
in an action by the trustees of the
mortgage securing the certificates
brought to restrain the railroad from

‘leaving its property, as stockholders

for some purposes and creditors for oth-
ers. Rutland, etc., v. Thrall, 35 Vt.,
586 (1863), where preferred stock was
regarded only as in the nature of a
mortgage.” Pittsburgh, etc., v. County
of Allegheny, 63 Pa. St., 126 (1875),
holding that where a railroad by legis-
lative authority sold its stock to a mu-
nicipal corporation for its bonds, and
agreed to pay interest in a sum equal
to that falling due on the bonds, the
agreement clearly was binding as be-
ing a part of the consideration, And
again, where a mortgage was executed

_upon the property of a corporation for.

the purpose of raising funds, subse-
PREFERRED STOCK. (ox. XVI.

§ 271.)

paid, and he is not entitled to any dividend until the corporation.
has funds which are properly applicable to the payment’ of divi-
dends.! A contract that dividends shall be paid on the preferred
stock whether any profits are made or not would be contrary to
public policy and void.2 An agreement to pay dividends abso-
lutely and at all events— from the profits when there are any, and
from the capital when there are not — is an undertaking which is
contrary to law, and is void.* Public. policy condemns with em-
phasis any such undertaking on the part of a corporation as to its
preferred or guarantied shares.* Dividends on preferred stock are
payable only out of the net earnings of the company.’ The ques-
tion of what constitutes net earnings has been treated of elsewhere.

§ 271. The discretion of directors with respect to declaring divi-
dends on preferred stock, and remedies of the preferred stockholders
in regard thereto.— In general it is within the discretion of the di-

quently to an issue of preferred stock

called ‘‘income bonds,” the mortgage.

was held to be not in derogation of the
rights of the preferred share-owners,
and an injunction to restrain the exe-
cution of the mortgage was refused.
Garrett v. May, 19 Md., 177 (1862). See,
also, Thompson v. Erie R’y Co., 45 N. Y.,
468 (1871); 5.C., 11 Abb. Prac., 188; 42
How. Prac., 68. See, also, Bailey v. Rail-
road Co., 1 Dill., 174 (1872), holding that
the common and preferred stock share
equally in profits over and above the
regular ,preferred dividend, and an
equal common stock dividend. S. C.,
17 Wall, 96; St. John uv, Erie R’y Co.,
10 Blatch., 271 (1874); 5. C., 22 Wall.,
137; Richardson v. Vt., etc., R. R. Co.,
44 Vt., 613 (1872).

lBates v. Androscoggin, etc., R. R.
Co., 49 Me., 491 (1860); Taft v. Hartford,
etc., R. R. Co., 8 R. 1, 310 (1866); Lock-
hart v. Van Alstyne, 31 Mich., 76 (1875);
Chaffee v. Rutland, etc., R. R. Co., 55
Vt., 110 (1882); Warren v. King, 108 U.
S., 889 (1882), See, also, Pittsburgh,
» ete., R. R. Co. v. County of Allegheny,
63 Penn. St., 126 (1869). Dividends may
be declared on preferred stock where
the net earnings since the issue of the
stock are sufficient, even though prior
to such issue the capital stock had been

impaired. Cotting v. N. Y., etc., BR. B.,
54 Conn., 156 (1886).

2 Lockhart v. Van Alstyne, 31 Mich.,
76 (1875). In Mills v. Northern R’y Co,,
etc., L. R., 5 Ch. App., 621 (1870), where
a corporation, being in arrears in the
payment of preferred stock dividends,
and being at the same time largely in-
debted, proposed to appropriate a por-
tion of its capital and to borrow further
sums upon debentures for the purpose
of paying such preferred dividends, it
was held, in a suit by the creditors to
prevent such action, that inasmuch as
the appropriation of the capital was
justified on the ground that an equiva-
lent portion of the revenue had been
used for capital purposes, and the pro-
posed loan was within the company’s
borrowing power, an injunction could
not be granted.

3Crawford v. Northeastern, etc., R’y
Co., 8 Jur. (N. 8.), 1098 (1856); Henry v.
Great Northern, etc., R’y Co., 3 id,
1117; State v. Cheraw, etc., R. R. Co.,
168. C., 524 (1881).

4 Lockhart v. Van Alstyne, by Cooley,
J., supra.

5 Elkins v. Camden, etc., R. R. Co., 36
N. J. Eq., 238 (1882); Belfast, etc., R. R.
Co. v. Belfast, 77 {Me., 445 (1885), and
the cases supra,

8 See § 546.

304
CH. XVI.]}

PREFERRED STOCK.

[$ 271.

rectors to declare or not to declare dividends on the common
stock. But with respect to dividends on the preferred stock the

rule is otherwise.

The question of the ability of the corporation

to pay a preferred dividénd is one that may be brought before a
court of equity, and the decision of the directors is not conclusive,
but will be reviewed by the court.!

1 Boardman v. Lake Shore, etc., R. R.
Co., 84.N. 'Y., 157, 180, 181 (1881); Henry
v. Great Northern, etc., R’y Co., 4 Kay
& J., 1 (1851), where an injunction
' was granted against declaring dividends

on ordinary stock without regard to
the priority of preference shares, and
against paying such dividends before
_ paying im full the dividends called for
by the preferred stock; Sturge v. East-
ern, etc, R’y Co, 7 De G, M. & G.,
158 (1855); Smith v, Cork, etc., R’y Co.,
tr. Rep., 3 Eq., 356 (1869); Bailey v.
Hannibal, etc., R. R, Co.,1 Dill., 174
(1871), all to the same effect; Prouty
v. Michigan, etc., R, R. Co., 1 Hun,
655 (1874), where an injunction was
granted to restrain the declaring of div-
idends or making other disposition of
the funds of the corporation until ar-
rears on preferred stock should be paid;
Thompson v.. Erie, etc., R. R. Co,, 45
N, Y., 468, involving an action to ‘‘en-
force the declaration and payment of a
dividend;” Barnard v. Vermont, etc.,
89 Mass., 572 (1863), holding that where
certificates for an intended dividend
had ‘been issued payable at a future
time when the company should be able
to pay them, the final decision as to
when the company is able to pay does
not rest with the directors but with the
court; Belfast, etc., R. R. Co. v. Bel-
fast, 77 Me., 445 (1885) — the court say-
ing, ‘‘it does not necessarily follow that
debts should be first wholly paid, before
a declaration of dividends, merely be-
cause they are of a floating character.
It may be that it would be reasonable
and proper to convert such liabilities
into a funded debt. . . When the
right to a dividend is clear, and there
are funds from which it can properly
(20)

be made, a court of equity will interfere
to compel the company to declare it.”
Williston v, Michigan, etc., R. R. Co.,
95 Mass,, 400 (1866). In this case the
decision was that, when a preferred
stockholder is entitled to share pro rata
with holders of common stock in divi-
dends over and above the preference,
his remedy is not by an action at law
against the corporation, but by suit in
equity; and that there is no remedy
against a foreign corporation in such
case. West Chester, etc., v. Jackson,
77 Pa. St., 321 (1875), in which assump-
sit was held to be the proper remedy

for dividends on preferred stock which ;
by the contract were to be paid ‘from |

the time of payment for the stock,” the-
issue of the stock being considered in:
the nature of a mortgage and the pro-.
ceeding not being an attempt to enforce.
the declaration of a dividend. Where-
the common stockholders in a re-organ--
ized company claim that the preferred
stockholders are defrauding them,. a:
preliminary injunction will not. be
ordered unless imminent danger: is.
shown. Mackintosh v. Flint, ete. RB.
R. Co., 82 Fed. Rep., 350 (1887). Where,.
by a@ re-organization plan, common
stockholders are allowed to vote, ete..,.
only after certain dividends are de-
clared on preferred stock, the court
will determine whether such dividends
should have, been declared. Id., 34
Fede Rep., 350 (1887); Thompson wv.
Erie R’y Co., 45 N. Y., 468 (1871), hold-
ing that, in an action brought by pre-
ferred stockholders against a corpora-
tion to compel payment of a dividend
alleged to be earned, it is not necessary
to make holders of common stock par-
ties defendant. Cf. Chase v. Vander-

805
§ 271.] PREFERRED STOCK. (cH. xvz.

The preferred stockholder, however, is not entitled as a matter
of right to his dividend, even though there are net profits’ which
might be used for that purpose. If the directors are reasonable in
the exercise of their discretion, and use the profits to improve the
road, it is held by the supreme court of the United States that-the
discretion of the directors will not be interfered with.! This rule
will work no injustice where the corporation is lable for arrears of
preferred dividends. But, if such arrears are not collectible, then
the rule laid down by the supreme court will result in numerous
frauds by the corporation on the preferred stockholder, since no
dividend would be given to the preferred stockholder unless the
net profits were sufficient fora dividend on the common stock also.’
But preferred shareholders are not entitled to a dividend which
‘would work an injustice to creditors and the other stockholders by
taking all the money from the treasury and thereby crippling or

wrecking the enterprise.’

Moreover, it has been held that earnings

ought to be appropriated to the payment of a floating debt in pref-
erence to the payment of dividends on the preferred stock.

The directors, under an authority to issue preferred stock, have
no right to issue it for the purpose of paying dividends therewith

upon the common stock.’

The par value of the issue must be per-

manently added to the capital stock, as is required’ in the case of
wn ordinary increase of the capital stock of a corporation.’ |
In England, under the statute, it is held that, upon a reduction of

bilt, 87 N. Y. Super. Ct., 884 (1874);
aff'd, 62 N. Y., 307; Rutland, etc., B. R.
Co. v. Thrall, 85 Vt., 586 (1863); Rich-
ardson v. Vermont, etc., R. R. Co., 44
Vt., 6138 (1872); Barnard v. Vermont,
etc., R. R. Co., 89 Mass., 512 (1863);
Bates v. Androscoggin, etc., R. R. Co.,
49 Me., 491 (1860),

IN. Y., etc., R. R. Co, uv. Nickalls, 119
U.S., 296 (1886), reversing 15 Fed. Rep.,
575.

2 Hence, in Dent v. London Tramways
Company, L, R.,16 Chan. Div. ,844 (1880),
it was held that the owners of preference
shares, the dividend on which was “dee
pendent upon the profits of the particu-
lar year only,” were entitled to a divi-
dend out of the profits of any year after
setting aside a proportionate amount
sufficient for the maintenance and repair
of the tr Pear for that year only; and

that they were not to be deprived of that
dividend in order to make good the sums
which in previous years should have
been set aside by the company'for main-
tenance, but which had been improperly
applied by them in paying dividends.

3 Culver v. Reno, etc., Co., 91 Penn.
St., 867 (1879).

4 Chaffee v. Rutland, etc., R, R. Co.,
55 Vt., 110 (1882). Cf. Belfast, etc., R, R.
Co. v. Belfast, supra, Jones on Railroad
Securities, 620. Fora full and very sat-
isfactory discussion of how far net earn-
ings are to be withheld in anticipation
of a corporate debt not yet due, see
Hazeltine v. Belfast, etc., R. R. Co., 10
Atl. Rep., 828 (Me., 1887).

5 Hoole v. Great Western R’y Co., L
R., 3 Chan., 262 (1867),

6 See eliaptee XVIL

806
CH. XVI. | PREFERRED STOOK.

[§ 272.

the capital stock, preferred stock is reduced the same as common
stock.}

Where a corporation, having issued preferred stock, is merged
., into anew corporation by consolidation, the preferred shareholders
of the old corporation may prosecute a suit for dividends against the
new corporation.? In an action to compel the corporate | manager
to declare a preferred dividend the common stockholders are poe
but not necessary parties. i

§ 272. Arrears of preferred dividends, to what extent ‘aagaie
subsequently.— Preferred stock is stock with a guaranty that the
dividends thereon will be paid.’ Accordingly, where there are no
net profits, and consequently no funds for a dividend, the contract
of guaranty is broken. As soon, however, as there are net profits
available for dividends, the corporation must pay the preferred div-

idends and all arrearages thereon before a dividend is declared
~ on the common stock. This is the well-settled rule in this country,!

and also at common law in England.’

1 Bannatyne v. Direct, etc., Co., 55
L. T. Rep., 716 (1886); 60 id., 482.

2 Boardman v. Lake Shore, etc., R. R.
Co., 84 N. Y., 157 (1881); Chase v. Van-
derbilt, 62 id., 807 (1875). Cf. Prouty
wv. Lake Shore, etc., R. R. Co., 52N. Y¥.,
563 (1873).

3 Thompson v, Erie R. Co., 45 N. Y.,
468 (1871). See, also, Chase v. Vanderbilt,
62 id., 807 (1875), holding that the cor-

porate officers are not necessary parties,

4 Boardman v, Lake Shore, etc., R. R.
Co., 84 N. Y., 157 (1881); Prouty v.
Michigan, etc, R. R. Co., 1 Hun, 655
(1878); Elkins v. Camden, etc, R. RB.
Co., 36 N. J. Eq., 238 (1882). Contra,
Belfast, etc., R. R. Co. v Belfast, 77
Me., 445, under the terms of a by-law.
See, also, to same effect, Hazeltine v.
Belfast, etc., R. R. Co., 10 Atl. Rep., 328
(Me., 1887). And see, also, contra, Gor-
don v. Richmond, etc., R. R. Co., 78 Va.,
501 (1884).

5Henry v. Great Northern, etc., R’y
Co., 1 De G. & J., 606 (1857); Crawford
vw Northeastern R’y Co., 3 Jur. (N. 8.),
1093; Sturge v. Eastern, etc., R’y Co., 7
De G., M. & G., 158 (1855); Stevens v.
South, etc., R’y Co., 9 Hare, 318.(1851);
Matthews v. Great Northern, etc., R’y
Co., 28 1 J., Chan., 875 (1859); Corry v.

Londonderry, etc., R’y Co., 29° Beav.,
263 (1860); Webb v. Earle, L. R., 20 Eq.,
556 (1875); Coates v. Nottingham, etc.,
R’y Co., 30 Beav., 86 (1861); Smith v.
Cork, etc., R’y Co., Ir. L. R., 38 Eq., 856
(1869); S. C., 5 id., 65; Coey v. Belfast,
etc., R’y Co., Ir. Rep., 2 C. L., 112
(1866), holding, also, that an action at
law will lie against a railway company
for not giving to the plaintiff preferred
stockholder the same dividend that it
has given to others. The Companies
Clauses Act of 1863, 26 and 27 Vict.,
ch. 16, § 14, provides that preference
shares or stock shall be entitled to the
preference dividend or interest assigned
thereto out of the profits of each year
in priority to the ordinary shares and
stock of the company, but that if'in any
year there are not profits available for
the payments of the full amount or the
preferential dividend or interest for that
year, no part of the deficiency shall be
made good out of the profits of any sub-
sequent year, or out of any other funds
of the company. In Henry v. Great
Northern R’y Co, 1 De G. & J., 606,
in which the matter of arrears in pre-
ferred dividends was elaborately con-
sidered, it was stated, that the rea-
son why such arrears ought to be

807
PREFERRED sTOCK. [cH. XVI.

§ 278.]

Where there was a provision for the payment of a dividend to
the holders of the common stock after the payment of the preferred
dividend, it was held that arrears of common dividends must be
paid next after the arrears of preferred dividends, and before any
further preferred dividends could be declared.’ ‘And where there
is a statutory provision that dividends on the preferred stock shall
not exceed a certain rate per cent., then there i is no carrying overa
deficiency of that per cent.

When arrears are recoverable, interest on such arrears may be
recovered.®

§ 273. The option to exchange common for preferred shares.—
When the power to issue preferred stock is conferred upon a cor-
poration, it is sometimes provided that under certain conditions the
common stock may be exchanged for the preferred stock.4 Con-
cerning this option it is to be noted that any time limited for its
exercise is of the essence of the offer.>

Where the time for payment of a series of convertible bonds was

held payable out of subsequent profits
is that otherwise there would be a
temptation to the corporation to set
aside profits for improvements when the
profits were too small for a dividend on
both the common and the preferred
shares, and not to set aside enough for
improvements when the company niace
a dividend for both. Where each share
in a company was converted into two
half shares, one preferred, the other
commen or deferred, and the holders of
the preferred half shares had, in a for-
mer year, acquiesced in the declaration
of a dividend on the deferred half shares,
while there was an arrearage of divi-
dends on the preferred half shares, it
was held that, although they had pre-
cluded “themselves from making any
claim to those specific arrears, they had
not waived their right to claim sub-
sequent arrears. Matthews v. Great
Northern, etc., R’y Co., 28 L. J., Chan.,
875 (1859). Nor their right to all arrears.
Smith v. Cork, ete, R’y Co., Ir. L. R.,
5 Eq., 65.

1 Allen v, Londonderry, etc., R’y Co.,
25 Week. Rep., 524 (1877). The pre-
ferred and common stock share equally
in net profits over and above arrears.

Bailey v. R. R., 1 Dill, 174 (1872); S.C.,
17 Wall., 96.

2 Elkins v. Camden, etc., R: R. Co., 36
N. J. Eq., 238 (1882),

3 Boardman v. Lake Shore, etc., R. R.
Co., 84 N. Y., 157 (1881); Prouty v.
Mich. §., etc., R. R., 1 Hun, 655 (1874).
See Adams v. Fort, etc., B’k, 86 N. Y.,
255 (1867). Contra, Corry v, London-
derry, etc., R’y Co., 29 Beav., 268 (1860).
Cf. § 546, infra.

4New York Session Laws, 1880, ch.
225; Webb v. Earle, L, R., 20 Eq., 556
(1875), providing that, the company
might turn the preferred into common.
See. also, § 283, infra.

5So where an option was given to
holders of the common stock to take a

‘certain number of new shares within a

given, time, it was held that a share-
holder who lived abroad and had no
notice of the option until the expiration
of the specified time could not, upon
learning of it afterwards, come in and
demand the right to purchase the pre-
ferred shares, Pearson v. London, etc.,
R’y Co., 14 Sim., 541 (1845), Such also
is the rule where there is an option
within a fixed time to convert loan
notes into shares, Campbell v. London,
etc,, R’ y. Co., 5 Hare, 519 (1846),

808
’

,

CH. Xv1.] PREFERRED STOCK. [8§ 274, 275.
extended, it was held that such extension did not extend the time
as fixed in the bond within which it might be converted into
stock.'

§ 274. Rights of the assignee or transferee of preferred stock in
arrears of diwidends.— The transferee or assignee of preferred
stock stands, in respect to arrears of dividends, in the shoes of his
assignor or transferrer. The undeclared arrears of dividends pass
to him in the transfer of the stock, unless by the terms of the trans-
fer the arrears are expressly separated from the stock itself and
reserved to the transferrer.2, An assignment of preferred stock
carries with it all arrears of dividends, and a subsequent assign-
ment of arrears by the transferrer conveys nothing.’

§ 275. “ Special stock” im Massachusetts.— In Massachusetts in-
corporated companies are permitted by statute‘ to issue a pecul-
iar kind of stock, known as “special stock.” It is something
essentially different from preferred stock.’ Its essential character-
istics are that it is limited in amount to two-fifths of the actual
capital; it is subject to redemption by the corporation at par after
a fixed time, to be expressed in the certificate; the corporation is
bound to pay a fixed half- yearly sum, or dividend, upon it as a
debt; the holders of it are in no event liable for the debts of the
corporation beyond their stock, and the issue of this special stock

“makes all the general stockholders liable for all debts and contracts

of the corporation until the special stock is fully redeemed.’ Spe-.
cial stock can be issued only by a vote of three-fourths of the gen-
eral stockholders of the company at a meeting duly called for that
purpose.’ The guaranty of dividends of special stock in Massa-

1Muhlenberg v. Phila. etc., R. R.
Co., 47 Pa. St., 16 (1864).
2Jermain v. Lake Shore, etc., R. R.

-Co., 91 N. Y., 483 (1883) ;. Boardman v.

Same, 84 id., 157 (1881); Hyatt v. Allen,
56 id., 553 (1874); Manning v. Quicksil-
ver, etc., Co., 24 Hun, 361 (1881). But
it is otherwise when’ the dividend has
been declared before the transfer., City
of Ohio v. Cleveland, etc., R. R. Co.,
6 O. St., 489 (1856).

3 Manning v. Quicksilver Mining Co.,
24 Hun, 361 (1881).

4Stats. 1855, ch. 290; 1870, “oh, 224,
8§ 25, 39, cl. 4; Pub. Stats., ch. 106,
§$ 42, 61, cl. 3.

“5 American Tube Works v. Boston,
etc., Co., 189 Mass., 5 (1885).

6 The statutes cited supra; American

Tube Works v. Boston, etc., Co., 139,
Mass., 5 (1885).
7Stats. 1870, ch. 224, § 25. And the

‘corporation must have a clerk, who is

sworn, and who acts as recorder at such
meeting. Stats. 1870, ch. 224, &§ 15, 18;
Pub. Stats., ch. 106, §§ 23, 26. See,
also, Reed v. Boston Machine Co., 141
Mass., 454 (1886). This special stock is
dedbared to be ‘‘a peculiar kind of stock,
distinctly provided for by statute;” and
it is important that the marked distinc-
tion between preferred stock, as usually
understood, and special stock, as au-
thorized by the statutes cited in the
notes, be kept plainly in view. Ameri-
can Tube Works v. Boston, etc., Co.,
189 Mass., 5,(1885).

It was held, in accordance with’ this.

"809
x i
PREFERRED STOOK. [cHu. xvz

§ 2773]:
chusetts is an absolute one, and not in any degree conditional upon -
the earning of sufficient profits by the corporation.’

§ 277. Interest-bearing stocks.— Occasionally, instead of issuing
preferred stock, a corporation issues ordinary common stock, to-
gether with a promise that the corporation will pay interest
thereon. Such a promise is generally lawful, and may be enforced
as a contract in the nature of an agreement to pay a dividend? It
is a lawful contract, however, only when it is to be interpreted as
requiring payment from profits alone.* Any contract on the part
of a corporation to pay interest or dividends to its shareholders,
without reference to the ability of the company to pay them out of
its earnings, is wholly illegal and void.‘ Moreover, the directors or
corporate ‘officers paying interest on stock out of the capital stock
are jointly and severally liable to refund the amounts so paid out.
A railway company may lawfully receive subscriptions to its cap-.
ital stock upon the condition to pay interest thereon as soon as the

view, in the case last cited, that a vote
of a corporation to issue special stock,
at a meeting called to consider whether
the corporation will issue preferred
stock, is invalid; that a vote to issue
special stock ‘is invalid if the record of
the meeting fails to show that three-
fourths of the general shareholders
voted for such issue: thatthe court will
not presume, because the record showed
that more than three-fourths of the
shareholders were present at the meet-
ing, that therefore three-fourths or
more voted for the issue of special
stock;. and that a holder of special
stock which is illegally issued cannot,
by estoppel or otherwise, become a
member of the corporation in respect of
such shares.

1 Williams v. Parker, 186 Mass., 204
(1884). See, also, Allen v, Herrick, 81
id., 274 (1860).

2 Barnard v. Vermont, etc., R. R. Co.,
89 Mass., 512 (1863).

3 Richardson v. Vermont, etc.. R. R.
Co., 44 Vt., 613 (1872); Miller v. Pitts-
burgh, etc., R. R. Co., 40 Penn. St., 237
(1861); Cunningham v. Same, 78 Mass.,
411 (1859); McLoughlin v. Detroit, ete.,
R. R. Co., 8 Mich., 100 (1860); City of
Ohio v. Cleveland, etc., R. R. Co., 6 O.
St., 489 (1856); Evansville, etc., R. R.

Co. v. City of Evansville, 15 Ind., 395
(1860); Rutland R. R. Co, v, Thrall, 35
Vt., 548 (1863); Wright v. Vermont,
etc.,'R. R. Co., 66 Mass., 68 (1853);
Waterman v. Troy, etc., R. R. Co., 74
id., 433 (1887); Barnard v, Vermont,
etc., R. R. Co., 89 id., 512 (1863), In
the case of Ohio College, etc., v. Rosen-
thal, 12 Northeast. Rep., 665 (Ohio, 1887),
where certificates of stock-bearing in-
terest were issued by a corporation
which merely owned real estate, which
was not organized for profit, never
made any profit, never expected to, and
had existed forty years, a suit by a
stockholder to collect interest failed.
4Painesville, etc., R. R. Co. v. King,
17 O. St., 534 (1867); Pittsburgh, etc.,
R. R. Co. v, County of Allegheny, 63
Penn. St., 126 (1869); Lockhart, Van
Alstyne, 31 Mich., 76 (1875); Troy, etc.,
R. R. Co. v. Tibbits, 18 Barb., 297 (1854);
McDougall v. Jersey, etc., Co., 2 Hem. &
M., 5281864). ' Cf. Salisbury v. Metropol-

itan, etc., R’y Co., 88 L. J. (N. S.), Ch.,

249 (1869); In re National, etc., Co., 10_
L. R., Chan. Div., 118 (1878); Bardwell
v. Sheffield, etc., Co., L. R., 14 Eq. Cas., -
517 (1872). ‘

5 Re National, etc,, Co, 10 L. RB,
Chan. Div., 118 (1878). ,

810
/

CH. xvi. | PREFERRED SsTOCK..,

[§ 278.
amount of the subscription shall have been paid in, and until the
completion of the road, or of some part thereof, or ‘until the road
shall have been put in operation. ! Tt has been held that stipulated
interest on stock cannot become a debt payable absolutely.2. The
right of a subscriber drawing interest on his stock to participate in
elections and general corporate meetings, and to exercise generally
the rights of a shareholder, is the same as that of other stock-
holders.’ .

§ 278. Rights of preferred shareholders on dissolution.— Upon
the dissolution of a corporation, and the distribution of its assets
among the shareholders after the payment of the corporate indebt-
edness, it is the settled rule of law that, in the absence of any
statutory provision, preferred shareholders have no priority over
common stockholders. Their stock was preferred in respect of -
dividends, and not in reference to the capital stock. The assets of
the corporation are to be distributed as though no preferred shares
had: been issued. The preferred shareholder in the distribution be-
comes a common shareholder.* Where, however, a preference as

to capital has been expressly contracted for, or is given by a stat-
ute,® the rule is, of course, otherwise.’

1 Milwaukee, etc., R. R. Co. v. Field,
‘12 Wis.; 340 (1860); Racine County Bank
.v. Ayers, 12 id.,,512 (1860); Miller v.
Pittsburgh, etc., R. R. Co., 40 Penn. 8t.,
237 (1861); Rutland, etc., R. R. Co. w
Thrall, 35 Vt., 536 (1863); Waterman
v. Troy, etc., R. R. Co.,
(1857). The only effect of an agreement
by the corporation to pay such interest
is to enable those stockholders with
whom the agreement is made to claim
a dividend and arrears of dividend be-
fore other stockholders receive any-
thing. This is nothing more nor less
than a preferred dividend.

2 Barnard v. Vermont, etc., R. R. Co.,
89 Mass., 512 (1863). Nevertheless, the
relation of debtor and creditor is cre-
ated to the extent of. the interest stip-
ulated for. McLoughlin v. Detroit,
etc., R. R. Co., 8 Mich., 100 (1864).

3 McLoughlin v. Detroit, etc., R, R.
Co., supra.

74 Mass., 433-

4McGregor v. Home Ins. Co., 88 N. J.
Eq., 181 (1880); In re London India
Rubber Co., L. R., 5 Eq., 519 (1864); Re
Bridgewater Nav. Co., 58 L. T. Rep., 476
(1888); id., 866, When the capital stock
is deareed by decreasing the par value
of the stock, the preferred stock may
be reduced equally with the rest. Re
Barrow, etc. ‘ Co., 59 L. T. Rep., 500
(1888). ,

5 Re Bangor, etc., Slate Co., L. R., 20
Eq., 59 (1875).

® McGregor v. Home Ins. Co., 33 N, J.
Eq., 181 (1880).

7Where a corporation was dissolved
by consolidation with another, it was
intimated that there might be a prefer-
ence in the distribution of the assets of
the old corporation. Griffith v. Paget,
L. R., 6 Ch. D., 511 (1877); 8. C., 25 W.
R., 523.

311
CHAPTER XVII.

INCREASE AND REDUCTION OF THE CAPITAL STOCK AND OVER-
ISSUED STOCK.

 

§ 279. Introductory. § 290. Changes in the number or par
" value of the shares.
A, LEGAL INCREASE OR REDUCTION OF
CAPITAL STOCK, B, ILLEGAL INCREASE OF STOCK, BEING
OVERISSUED STOCK.
§ 280. Power of the legislature to au-
thorize an increase or reduc-| § 291. Unauthorized increase of stock
tion. may aniount to overissued

281. Power of the corporation to in- stock,
crease or reduce the capital] 292. Overissued stock is absolutely
stock. void. |

282. Effect of purchase by a corpo-| 2938. Liability of the corporation on
ration of shares of its own overissued stock.
stock. 294. Defenses of the corporation to

283. The issue of bonds convertible such actions.
into stock. 295. Personal liability of the officers

284. Power of a court to direct an of the corporation on over-
increase or reduction. issued stock.

285. Shareholders, not directors, 296. Liability of the vendor of over-
should authorize the increase. _ issued stock. -

286. Prior right of the old stock- 29%. Equity will enjoin voting, trans-
holders to buy the new stock. ferring, and dividends on

287. Issue of an increase of stock by such stock, and will adjust
a stock dividend. the rights of all parties.

288. Liability of the shareholder 298.- Subscriber’s right to defeat a
upon an increase of the cap- subscription to overissued
ital stock. : stock and to recover back

289. Rights and liabilities of the money paid thereon,
shareholder upon a reduction :
of the capital stock. *

§ 279. Introductory.— The capital stock of all incorporated com-
panies is generally fixed by the charters which give them an exist-
ence. Frequently, however, in the progress of the corporate enter-
prise, it happens that the capital stock is found to be too small or
too large for the demands of the business, and there is a desire to
change it. This change can be made lawfully only under certain
conditions and limitations. These are the subject of this chapter.

A. LEGAL INCREASE OR REDUCTION OF CAPITAL STOCK.

§ 280. Power of the legislature to authorize an increase or redue-
tion.— It isclearly constitutional for the legislature, upon granting
a charter, to fix the capital stock and to authorize the corporation

to increase or decrease that capital stock. But where the legisla-
312
ia -

CH. XVII.], INCREASE, REDUCTION AND OVERISSUE OF STCOK. [§ 281,
ture did not authorize the corporation to vary its capital stock, it is
_ @ serious question whether, as against a dissenting stockholder, the
capital stock may be subsequently changed, even under the author-
ity of a legislative enactment. The better and prevailing opinion is
that it may be; that the statute authorizing the change is constitu-
tional, and that the increase or reduction is valid.!

A different conclusion may be reached, however, as regards the
rights of creditors of the corporation. It is clear that the legisla-
ture cannot constitutionally authorize a reduction of the capital
stock in prejudice of their rights as to an existing corporate in- ‘
debtedness.”

§ 281. Power of the corporation to increase or reduce the capital
stock.— In the absence of express authority from the state, a cor-
poration has no power whatsoever to increase or reduce the amount
of its stock,'and any attempt upon the part of the corporation,
ejther by the corporate officers or by the stockholders,:to do so is’
wholly illegal and void.? Accordingly it is not competent for a
corporation, having a fixed capital stock and being without legisla-
t.ve authority to change it, to reduce that capital to the amount
actually paid in.!

Where the attempted increase or reduction of the stock is unau-
thorized, not even the unanimous assent and agreerent of all the
parties concerned will legalize it. It is voids

A different rule prevails, however, where the increase of capital
stock is authorized by charter or statute, but is informally made. —
‘In such a case the increase is valid as against all parties excepting
the state which created the corporation. c

An authority to reduce the number of shares cannot be inferred
from the authority to increase, and a reduction with no other war-
rant of authority than a right. to increase will be held void.?

If the charter of the corporation provides that the capital stock
shall not be less than a specified sum, nor greater than another

1 See chapter XXVIII on this subject.
21d,
$Scovill v. Thayer, 105 U. &., 148, 148

Corporation v. Ropes, 6 Pick., 23 (1827),
“Tf,” says Parker, C. J.,in the case
last cited, ‘‘a corporation is created

(1881); Sutherland v. Olcott, 95 N. Y.,

98, 100 (1884); New York, etc., R. BR.
Co. v. Schuyler, 34 id., 20 (1865); Me-
chanics’ Bank v. New York, etc., R.-R.
Co., 13 id., 599 (1856); Grangers’ Life,
etc., Insurance Co. v. Kamper, 73 Ala.,
825 (1882); Moses v. Ocoee Bank, 1 Lea
(Tenn. ), 398 (1878); Ferris v. Ludlow, 7
Ind., 517 (1856); Lathrop v. Kneeland,
46 Barb., 482 (1866); Salem Mill Dam

with a fund limited by the act, it can-
not enlarge or diminish that fund but °
by a license from the legislature.”

4Droitwich Patent Salt Co. v. Cur-
zon, L. R., 3 Ex., 35, 42 (1867).

5 See § 292, infra.

6See § 288, infra.

7Sutherland v. Olcott, 95 N. Y., 93
(1884); Seignouret v. Home Ins, Co., 24
Fed. Rep., 332 (1885).

313
§ 282,] ‘INCREASE, REDUCTION AND OVERISSUE OF STOCK. [CH. XVI.
specified sum, the corporation may commence business with less
than the latter sum, and afterwards increase the capital until the
limit is reached.?

An injunction is the proper remedy to prevent an illegal increase
or reduction of the capital stock of a corporation. But an injunc-
tion against the issue of new stock by a foreign corporation will be
dissolved where the courts of the state where the corporation was
created decide such issue of stock to be legal.?

§ 282. Effect of purchase by a corporation of shares of its own
stock.— If a corporation has power to reduce its capital stock it has
been held that it may do so by purchasing and retiring a portion
of its shares. Whether such a purchase by a corporation will op-
erate to diminish the capital stock is a question of intention. Ifa
reduction is authorized by charter or by statute, and the formali-
ties of making the reduction have been complied with, and the
proper corporate authorities purchase for the corporation shares
of its own stock and consider the capital stock thereby reduced,
the law holds that a reduction of the capital stock is thereby made.
But if any of these elements are wanting, then.no reduction is ef-
fected, and the corporation may at any time sell and re-issue the
stock. Hence a mere transfer of shares to the corporation, whether
the corporation assumes to buy the stock or the shareholders sim-
ply to surrender it, will in no case constitate a reduction when the
corporation lacks authority from the legislature to reduce its capi-
tal. Even if the shareholder is held to be released by such a
transfer, still the stock survives and subsists. The corporation is
merely the holder of it, and may sell and re-issue it at any time!

1Gray v. Portland Bank, 3 Mass., 364
(1807); Somerset, etce., R. R. Co. wv
Cushing, 45 Me., 524 (1858). In the
case last cited it is held that where the
number of shares is not fixed by charter
the directors or shareholders must fix
it before an assessment can be levied,
and that then, if the number fixed is
greater than the number taken, it may
be reduced subsequently.

20’Brien v. Chicago, Rock Island &
Pacific R. R. Co., 58 Barb., 568 (1868).
An increase of the capital stock without
warrant of authority is denominated an
overissue of stock — asubject fully con-
sidered in the succeeding sections of this
chapter, q. v.

3State v. Smith, 48 Vt.,.266 (1876),
dictum. So, also, City Bank of Colum-

bus v. Bruce, 17 N. Y., 507 (1858). Con-
tra, Currier v. Lebanon Slate Co., 56
N. H., 262 (1875).

4The purchase by a corporation of
its own stock does not necessarily de-
crease the capital stock. “It might or
might not have that effect at the ope
tion of the company, and would require,
I think, some manifestation of such an
intent to produce that result.” Such
stock may be re-issued at any time.
City Bank of Columbus v. Bruce, 17
N. Y., 507 (1858). See, also, § 314, infra,
and Hartridge v. Rockwell; R. M. Charl-
ton (Ga.), 260 (1828). In an early case
atransfer to the corporation seems to
have been regarded as a reduction of
the capital stock pro tanto. Percy. v.
Millaudon, 8 La., 563, 587 (1832). It is

814
OH. XVII.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [§ 283.

§ 283. The issue of bonds convertible into stock.—W here the char-
ter of a railway corporation authorizes the issue of bonds, convert-
ible at the option of the holder into stock, the directors of the
company have power.to issue such bonds in ‘the name of the cor-
_ poration. It has been held that such an issue may be made, even
though, if the bonds were converted into stock, the capital stock
would thereby be increased beyond the amount fixed by the char-
ter. The statute or charter authorizing such an issue of bonds is
held to thereby authorize, by necessary implication, the right to
increase the capital stock to the extent.required in the fulfillment
of the contract to allow the-bonds to be converted into stock; but
it is doubtfnl whether this is a correct rule of law.!

The issue of a bond convertible into stock has precisely the same
effect. as issuing stock, and the sale of such a bond at a discount is
_unlawful2 The holder of the bonds may demand stock therefor

at any time; and even though the demand is made just before a
dividend is declared he is entitled to the stock and dividend.®

§ 284. The power of a court to direct an increase or reduction.—

' The courts have no power, by mandate or decree or in any other

manner, to effect an increase or reduction of the capital stock of

important to note in this connection
that the purchase of its own stock by a
corporation is an act not permitted at
all in England, and not permitted in
this country when corporate creditors’
rights would be prejudiced thereby.
See’ §§ 3809-812, infra. It has been held
in a recent case (New Eng., etc., Life
Ins, Co. v. Phillips, 6 N, E. Rep., 584,
Mass., 1886) that a purchase by a cor-
poration of certificates of indebtedness
effects a cancellation, even though the
certificates have a voting power.

1Belmont v. Erie R’y Co., 52 Barb.,
637, 669 (1869); Ramsey v. Erie R’y Co.,
88 How. Pr., 193, 216 (1869). When
bonds are convertible by their terms
into stock, but the company has no
stock, specific performance will not be
decreed, but damages given. Chaffee
v. Middlesex R. R., 16 N. E. Rep., 34
(Mass., 1888). Where the stock of a land
corporation is convertible into land, a
stockholder may enforce the change by
bill in equity. Franco, etc., Co. v. Bous-
selet; 78. W. Rep., 761 (Texas, 1888).

2 Where, however, a corporation has

‘Cleveland, etc., R. R., 28 O. St,

power to increase its capital stock, it
may issue bonds at fifty per cent. of
their par value, convertible into stock
upon payment of the other fifty per
cent. Van Allen v, Ill. Central R. R,
Co., 7 Bosw. (N. Y.), 515 (1861).

3 Jones v. Terre Haute, etc., R. R. Co.,
57 N. Y., 196 (1874). But where bonds
are convertible into stock, a bondholder
cannot, just before the making of the
stock dividend, convert his bonds into
stock and claim the stock dividend.
Sutliff v. Cleveland, etc., R, R., 240. St.,
147 (1878). Ina suit by holders of bonds
convertible into stock against the cor-
poration for refusal to allow such con-
version, the plaintiffs must allege that
they still hold the bonds. Denney v.
108
(1875). A corporation with authority to
increase its capital stock may lawfully
issue new shares and receive in payment
therefor the bonds of the corporation.
Lohman v. New York, etc., R. R. Co.,-2
Sandf. Super. Ct., 89 (1848); Reed w.
Hayt, 51 N. Y. Super. Ct., 121 (1884).
See, in general, § 273.

315 .
§ 285.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. '[CH. Xvn.

a corporation. Hence, where the whole capital stock has been is-
sued, and the corporation, by reason of its misconduct or mistakes,
is bound to issue new certificates to the owner of the stock or pay
him damages, the court can give judgment for damages only. It
cannot order the corporation to issue stock, since to do so would be
to direct an overissue.!

In Massachusetts a later and better rule prevails, to the effect that
the corporation in such a case may be compelled to issue the stock,
but in order to prevent an illegal overissue it must purchase an
equal amount of shares in the market.?

Where corporate officers enter into a contract to pay for serv-
ices or property wholly or partially in stock of the corporation, a
court will not, after the whole amount of the stock has been issued,
decree a specific performance of the contract, but the aggrieved
party is remitted to his action for damages.®

~§ 285. Shareholders, not directors, should authorize the increase.
An increase or reduction of the capital stock of a corporation is
such a fundamental change in its affairs that, although it has been
duly authorized by act of the legislature or by the charter of incor-
poration, it cannot lawfully be effected merely by the act or assent
of the board of directors,' but must be authorized by the sharehold-

1«* When a corporation has issued cer-
tificates of stock (which are valid and
not void) tothe full extent of all the
-shares which by law and the constitu-
tion of the company it may issue, no
court can order the issuance of other
shares, because in that respect'the pow-
ers of the corporation have been ex-
hausted.” Smith v. North American
Mining Co., 1 Nev., 423 (1865); Williams
v. Savage Manuf, Co., 3 Md. Chan., 418
(1851); Mechanics’ Bank v. New York,
etc., R. R. Co., 18 N. Y., 599 (1856). In
an action for the conversion of shares,
the question of an increase or reduction
not being involved, it was said that ‘To
require a new issue of stock might in
cases like this, where shares have gone
into the hands of innocent purchasers,
involve an overissue of stock, which
would be illegal.” Baker v. Wasson, 59
Texas, 140 (1883); S. C., 58 id., 150
(1880).

2 This rule, with an equitable adjust-
ment of the conflicting interests of all
the parties, where an owner of stock

was deprived of it by forgery, was es-
tablished by the supreme judicial court
of Massachusetts inthe case of Ma-
chinists’ National Bank v. Field, 126
Mass., 845 (1879). : See, also, Pratt v.
Machinists’ National Bank, 128 id., 110,
and Boston, etc., R. R. Co. v. Richard-
son, 135 id., 473, each of the three cases
growing out of the same transaction.

8Finley Shoe, etc., Co. v. Kurtz, 34
Mich., 89 (1876). In this case the court
say: Where the capital stock may be
increased by vote of the stockholders,
‘it certainly could not be within the
implied powers of .any corporate officer
to obligate the corporation to any such
increase, and thus indirectly do what
the law permits to be done only by the
body of corporators, specially convened
for the purpose.” In actions against
corporations for conversion of stock, the
relief demanded is usually in the alter-
native, being either for an issue of a cer-
tificate of stock, or damages in lieu
thereof.

4Percy v. Millaudon, 3 La., 568, 585

316

.
CH. XVII.] . INCREASE, REDUCTION AND OVERISSUE OF STOOK. [§ 286.
ers at a corporate meeting. Where, however, the directors have
made the change, and the stockholders have acquiesced therein,
they are as fully bound as though the increase or reduction had
been expressly authorized at a corporate meeting. The share-
holders’ assent to the change may be shown as conclusively by
their conduct and acquiescence as by a formal vote.! The power to
increase the capital stock may be vested in the directors.2 Although
the shareholders have regularly voted to increase the capital stock,
in pursuance of adequate legislative authority, still, inasmuch as
the increase is not accom plished until the shares are actually is-
sued, the vote may be reconsidered in a lawful manner at any time,
before the stock is finally issued.’

§ 286. Prior right of the old stockholders to buy the new sek
When the capital stock of a corporation is increased by the issue
of new shares, each holder of the original stock has a right to
offer to subscribe for and to demand ‘from the corporation such
a proportion of the new stock as the number of shares already
owned by him bears to the whole number of shares before the in-
crease. This pre-emptive right of the shareholder in respect of
new stock is well recognized.‘ But this applies only when'the cap-

(1832); Eidman v. Bowman, 68 IIl., 444
(1871); Finley Shoe, etc., Co. v. Kurtz,
34 Mich., 89 (1876); Crandall v. Lincoln,
52 Conn., 78, 99 (1884); People v. Parker
Vein Coal Co., 10 How. Pr., 548 (1854).
See, also, Railway Company v. Allerton,
18 Wall., 233 (1878). Cf. City of Chicago
v. Jones, 60 Ill, 383 (1871); Matter of
Wheeler, 2 Abb. Prac. (N. S.), 861 (1866);
People v. Twaddell, 18 Hun, 427, 432
(1879); State v. Merchant, 37 O. St., 251
(1881). See, also, § 708, etc.

1Sewell’s Case, L. R., 8 Chan., 131
(1868) ; Lane’s Case, 1 DeG, T&S,
504 (1868); Payson YX Shoevaly 2 Dill,
428 (1878). See, also, § 689, infra, rela
tive to mortgages; but see § 288, infra.
An allegation of ratification must not
be in general terms, but must set out
specifically the facts constituting the
ratification. Eidman v. Bowman, 58
Til, 444 (1871), An amendment of the
charter which allows the directors in-
stead of the shareholders to authorize
an increase of. the capital is not such a
fundamental change in the constitution
of the corporation as will operate to re-

lease non-assenting shareholders from
the obligation on their stock. Payson
v. Withers, 5 Biss., 269 (1873); Payson
v. Stoever, supra.

2Sutherland v. Olcott, 95 N. Y., 93
(1884), Their resolution that ‘‘ the capi-
tal stock of this company be and the

‘game is hereby increased to ——” is

sufficient to effect the increase.

-8 Terry v. Eagle Lock Co., 47 Conn.,
141 (1879). In this case the court say:
“Tt cannot be said that the capital is
actually increased until the new stock is
subscribed for at least. Until then there
isan element of uncertainty about it.
It may never be taken. It is very clear
that the vote to increase is not per se an
increase.”

‘Gray v. Portland Bank, 3 Mass., 364
(1807); Hidman v, Bowman, 58 Ill, 444
(1871); Reese v. Bank of Montgomery,
81 Penn. St., 78 (1855); Jones v. Morri-
son, 31 Minn., 140 (1883); Bank of Mont-
gomery v. Reese, 26 Penn. St., 143 (1856).
Cf. Curry v. Scott, 54 Penn. St., 270
(18867); Miller v, Tlinois, etc., R. R. Co.,
24 Barb., 812 (1857); Wilson v. Bank of

817
y i
§ 286.] INCREASE REDUCTION AND OVERISSUE OF sTocK, [oH. XVII.

ital is actually increased, and not toa re-issue of any portion of the
original stock.! The right must be exercised within a fixed or a
reasonable time; and if ‘the shareholder fails to avail himself of it
he is barred by laches or acquiescence of his right to contest a dis-
position of the stock to some one else? The corporation cannot
compel the old stockholders, upon their subscription for new stock,
to pay more than the par value therefor. They are entitled to it

“without extra burden or expense beyond the regular subscription

~

price.?

An attempt to deprive the stockholder of this right wil be

enjoined in the absence of laches or BOE MIESCE BOE: :

Montgomery County, 29 Pa. St., 587
(1857); Mason v. Davol Mills, 132 Mass., 76
(1882); Biddle’s Appeal, 99 Pa. St., 278,
in which the option to subscribe for new
stock was sold by an executor: Pratt
v. American Bell Tel. Co., 141 Mass.,
225 (1886), where one who held notes
convertible into stock at a future time,
sought to establish his right as a stock-

‘holder to dn equitable share of an in-

crease of capital stock to which share-
holders had a first right to subscribe
upon favorable terms. The court held
that the suit could not be maintained,
on the ground that until he had con-
verted the notes into stogk he had no
rights as a stockholder; Ohio Ing, Co.
v. Nunnemacher, 15 Ind., 294 (1860),
where the charter varied the rule; Re
Wheeler, 2 Abb, Pr. (N. 8.), 361, 363, in
which it was said that if new stock is
not apportioned among old stockholders
it should be sold at public sale to the
highest bidder, so that all may share in
the gains arising from its sale; Miller
v. Iinois, etc,, 24 Barb., 312 (1857), that
a stockholder who holds a receipt from
a corporation for money payable on de-
mand in cash, or, at his option, in new
stock when issued, has no interest in
such stock as a shareholder until he has
elected to take it instead of the cash.
In Massachusetts this right is preserved
in the statutes. Ch. 106, § 87; ch. 112,
§ 58. In Massachusetts increased capi-
tal, if worth more than par, must, by
statute, be sold at public auction. See
Att’y-Gen’l v. Boston, etc., R. R. Co.,
109 Mass,, 99 (1871). In New York, in

banking. corporations, it is secured to
the shareholder by statute. Session
Laws 1878, ch. 274, §.5. But the pledgee
of stock who holds it merely as collat-
eral security is not entitled to this
right to take up newshares, The right
belongs to the pledgor. Miller v, Illinois
Central R. R. Co., 24 Barb., 312 (1857).

1State v. Smith, 48 Vt., 266 (1876);
Hartridge v. Rockwell, R. M. Charlton
(Ga.), 260 (1828); Curry v. Scott, 54
Penn, St., 270 (1869), in which Reese v.
Bank was said to decide ‘‘ nothing more
than that untaken stock is held by the
corporation in trust for the corporators,
and must be disposed of for the benefit
of all;” and it was held that a stock-
holder has no greater right than a
stranger to subscribe to original stock
untaken. Cf. Eidman ». Bowman, 58
TIL, 444 (1871); Gray v. Portland R. R.
Co., 3 Mass., 364 (1807).

2Terry v. Eagle Lock Co., 4% Conn.,
141 (1879); Hart v. St. Charles St. R. R.
Co., 80 La. Ann., 758 (1878); Brown v.
Florida Southern R’y Co., 19 Fla., 472
(1882).

3 Cunningham’s Appeal, 108 Penn. St.,
546 (1885), Where the corporation in is-
suing new stock requires the old stock-
holders-to pay a bonus in order to sub-
scribe, a former stockholder may pay
the bonus, in order to get the stock and
may then recover back the bonus by a
suit. Dawson v. Ins. Co., 5 Ry & Corp.
L, J., 154 (1888, Com. Pl. Phil).

4A stockholder’s remedy, it is said, in
such a case is clearly against the cor-
poration, and he is not obliged to sue at

818

|
CH. XVII.] INCREASE, REDUCTION AND OVERISSUE OF S8TOOK. [§ 286.

When the newly-issued shares have all been distributed or sold
to others, in violation of a shareholder’s pre-emptive right, his only
remedy is an action at law against the corporation for damages.
And the measure of damages has been declared to be the excess of
the market value above the par value at the time of the issue of
the shares, with legal interest on such excess.)

A mere verbal notice by the stockholder to the corporation that —
he will take his proportion of the new issue under an increase is
held in Louisiana not to be sufficient to render the company liable
in damages for selling the shares to some one else.? The corpora-
tion may, however, and usually does, limit the time within which
the shareholders may signify their intention to take up the new
shares, and may require a part payment upon the shares within
that time.? The stockholder, therefore, who brings his action
against the corporation for damages for refusal to allow him to
subscribe for the new shares, or for selling the shares to some one
else, or for depriving him in any other way of them, must allege
and prove that he demanded the shares and offered to subscribe
and pay for them in the regular way, within the time fixed for such
subscriptions! Other shareholders similarly aggrieved are not to
be joined as parties complainant. ‘Each stockholder sues alone,
inasmuch as the liability of the corporation in these cases is several

and not joint.®

law for damages. ‘‘The effect of such
an action [%. e., the action for damages]
would be to convert part of his interest
as a shareholder into a judgment for
damages; in other words, to sell a por-
tion of his stock to the corporation.

. The judgment to be effectual
must be against the corporation itself,
not against the directors personally,
who may be changed from time to
time.” Dousman v. Wisconsin & Lake
Superior, etc., Co., 40 Wis., 418 (1876).
In this case it is also held that the share-
holder, where the stock is not.yet fully
issued, may have a decree in a court of
equity restraining the whole issue, or
else that there be an equitable distri-
bution; and, if the shares are already
partially distributed, that the proper
amount be issued to the party com-
plainant. Cf. Hidman v. Bowman, 58
Ill, 444, In Massachusetts, however,
this is not the rule, and in that state it
‘8 held that the courts have no power to

compel the corporation or the directors
to issue the shares to the party ag-
grieved. Sewall v. Eastern R. R. Co., 9
Cush., 5 (1851). But an action will lie
against the corporation for damages,
Gray v. Portland B’k, 3 Mass., 364 (1807).

1Hidman v. Bowman, 58 Ill, 444
(1871); Reese v. Bank of Montgomery,
81 Penn. St., 78 (1855); Gray v. Portland
Bank, 3 Mass., 364 (1807).

2Hart v. St. Charles St. R’y Co., 30
La, Ann., 758 (1878), holding, also, that |
a tender must be made,

3 Sewall v. Eastern R. R. Co., 68 Mass.,
5 (1851); Hart v. St. Charles St. R’y Co.,
30 La. Ann., 758 (1878).

4 Wilson v. Bank of Montgomery
County, 29 Penn. St., 587 (1857).

5Dousman v. Wisconsin & Lake Su-
perior Mining and Smelting Co., 40
Wis., 418 (1876), In an early Indiana

ecision it is said to be the law that
where, in the charter, directors are
given full power to effect an increase

819

°
8§ 287, 288.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. ou. xvi.

§ 987. Issue of new stock by a stock dividend.— A frequent method
of issuing an increase of the capital stock is by a stock dividend.
In England there is some doubt as to whether such dividends may
be imposed upon stockholders who object thereto, and demand the
money dividend in lieu of which the stock is issued. 1 Tn this coun-
try ‘such dividends are legal unless prohibited by constitutional or
statutory provisions.” But in all cases of a stock dividend, as a
method of issuing,an increase of the capital stock, there must be
in the possession of the corporation an amount of property over
and above its corporate debts equal to the whole capital stock, in-
cluding the increase; and this amount cannot afterwards be used.
for any kind of a dividend.

§ 288. Liability of the shareholder upon an increase of the capital
stock.— A person subscribing for shares of stock upon an increase
of the capital stock is liable thereon the same as a subscriber to
the original capital stock. In some respects he cannot set up de-
fenses that an original subscriber might have set up. Thus, a sub- ’
scriber for increased stock cannot defeat an action to enforce his
subscription by setting up the failure of the corporation to obtain
subscriptions for the whole of the authorized increase.’ In general,
a subscriber to an increase of stock cannot interpose defenses to his
subscription which subscribers to the original stock could not have
_ raised —such, for example, as technical objections to the validity
of his contract of subscription. Nor can the subscriber set up that
the increase was irregularly effected. It is for the state alone to
raise the question whether corporate capital stock has been lawfully

of the capital stock, ‘‘on such terms
and conditions and in such manner as
to them shall seem best,” they may au-
thorize the increase without the consent
of the shareholders; that as to each

21d. also § 51, supra; Howell v.
Chicago, ete, R. R. Co., 51 Barb., 378
(1868), An increase of the capital stock,
by the issue of new shares and the sale
of them for less than their par value, is ©

increase there is no pre-emptive right,
and that, accordingly, the newly-issued
shares may be disposed of as the direct-
ors determine. @hio Insurance Co. v.
Nunnemacher, 15 Ind., 294 (1860). So,
also, in New York it is said that the ex-
ecutory purchaser of shares of the orig-
inal stock is not entitled to the propor-
tionate amount of new stock on an
increase of the capital. Mfller v. Illi-
nois Central R. R. Co., 24 Barb., 312
(1857). An incorporator is not entitled
to the increased stock as a gratuity;
he must pay for it. Brown v. Florida
Southern R’y Co., 19 Fla., 472 (1882),
1See § 537, infra.

320

not such an ‘‘issue of fictitious stock”
as the California state constitution for-
bids (art. XII, $11). Stein v. Howard,
65 Cal., 616 (1884).

Clarke v. Thomas, 34 O. St., 46
(1877); Nutter v. Lexington, etc, R. R.
Co., 6 Gray, 85 (1856); Delano v. Butler,
118 U. S., 684 (1886). But see Eaton v.
Pacific, etc., B’k, 10 N. E. Rep.,' 844
(Mass., 1887).

4 Kansas City Hotel Co. v. Hunt, 57
Mo., 126 (1874). Stockholder participat-
ing in irregular increase of stock cannot
afterwards object to it. Poole v. West,
etc., Assoc., 2 R’y & Corp. L. J., 6
(U.S. C. C., 1887), 30 Fed. Rep., 518.
OH. XVII.] INCREASE, REDUCTION AND OVERISSUE OF STOOK.
and regularly increased.! Especially it is the rule that, as against
corporate creditors, stockholders who have subscribed for the in-
creased stock, accepted the certificate, and received dividends
thereon, are estopped from defeating an action on their subscrip-
tion by setting up that the stock was increased in an irregular or
anlawful manner.

But a contrary rule prevails as regards essential steps in the in-
crease. If there is no vote of the stockholders as required by stat-
ute, they are not liable on the stock.’ Stockholders of the original
capital stock are of course not liable for the defaults of subscribers
to the increased: capital stock.‘

§ 289. Rights and liabilities of the shareholders upon a reduction
of the Gapital stock.— Upon an authorized reduction of the capital |
stock of an incorporated company, regularly effected, the amount
of corporate assets over and above the amount of the capital stock
as reduced is equivalent to surplus profits; and may be treated as

[§ 289.

1 Pullman v. Upton, 96 U. S., 328
(1877.

2 Chubb v. Upton, 95 U. S., 665 (1877).
In re Miller’s Dale, etc., Co., L. R., 31
Ch. D., 211 (1886), in which a subscriber
to new shares was not permitted to
plead, as against creditors, that the issue
was irregular because only thirteen days
had elapsed between the passing of the
resolution to increase the capital and
the confirming of it, when the law re-
quired fourteen days, Kansas City Hotel
Co. v. Harris, 51 Mo., 464 (1878); and see
McCarthy v. Lavasche, 89 IIL, 270 (1878);
Veeder v. Mudgett, 95 N. Y., 295 (1884)—
the last case holding that a statute al-
lowing increase to be made by stock-
holders in meeting assembled ona spec-
ified notice is invalid if the notice did
not conform to the statute, but that the
stockholders are liable nevertheless to
corporate creditors on such stock. Sew-
ell’s Case, L. R., 3 Chan., 131 (1868);
Upton v. Jackson, 1 Flippin, 413 (1874);
Kansas City Hotel Co. v. Hunt, 57 Mo.,
126 (1874). In such a case the state alone
can properly raise the question whether
the corporate stock had been regularly
and lawfully increased. Pullman v,
Upton, 96 U. 8., 329 (1877). See Clarke
v. Thomas, 34 O, St., 46 (1874); Mat-
ter of the Reciprocity Bank, 22 N, Y., 9

(21)

(1860); Byers v. Rollins, 21 Pac. Rep.,
894 (Colo., 1889). See, also, Peckham v.
Smith, 9 How. Prac., 486 (1854). See,
also, the principles and cases in § 298,
infra, Irregularity of notice of a meet-
ing to increase the capital stock has been
held to be fatal. Matter of Wheeler, 2
Abb. Pr. Rep., N. S., 351.’ If the statute
requires a publication of notice of the in-
tended increase, such publication must
be made. It cannot be waived, even by
unanimous consent of the stockholders.
The public are entitled to knowledge of
the increase. State v. meres oe Mo.,
239 (1886).

3 The receiver of a national bank can-
not hold stockholders liable on increased
stock where such increase was not au-
thorized by a two-thirds vote of the
stockholders.
37 Fed. Rep., 508 (1889).

4 Veeder v. Mudgett, 95 N. Y., 295
(1884). See, also, § 215, supra. Stock-
holder not participating is not liable for
fraud in increase of stock where the di-
rectors received pay therefor in notes
which are worthless. So held under
Iowa statute. Miller v. Bradish, 28
Northwest. Rep., 594 (Iowa, 1886). See,
also, Delano v, Butler, 118 U. §., 634
(1886).

321

Winters v. Armstrong,

1
& ‘
INCREASE, REDUCTION AND OVERISSUE OF STOCK. [ou. XVII.

§ 289.]

such by the corporation. It may be set aside as surplus, or it may
be divided among the shareholders proportionally by a dividend,
unless the rights of previous corporate creditors would thereby be
injured.’ But it is not the rule that the reduction of the capital
stock of a corporation always authorizes the distribution among the
stockholders of a sum equal to the difference between the original
and the reduced amount of capital. Such a distribution is lawful
only when it appears that the original-capital stock is unimpaired.
The corporation can divide among its stockholders only such a sum
as will leave with the epEROTALION an amount equal to the reduced

18trong v. Brooklyn Crosstown R. R.
-Co., 93 N. Y., 426 (1888), where a corpo-
ration whose capital had been reduced
one-half issued certificates of indebt-
edness , bearing’ interest to sharehold-
ers for the excess. The application of
a dissenting holder to have them de-
clared illegal, and to restrain the corpo-
ration from paying them, was refused ;
Seeley v. New York National Exchange
Bank of New York, 8 Daly, 400 (1878);
8. C. aff'd, 78 N. Y., 608 (1879); McCann
v. First Nat. Bk, 14 N. E. Rep., 251
(Ind., 1887), approving of the text herein,
and holding that where by reason of
bad debts the capital stock is reduced, a
subsequent collection of such debts does
not sustain an action by a stockholder
for his proportion thereof. If increase
is afterwards canceled, a corporate cred
itor who was such previous to the in-
crease cannot complain. Coit v. Gold
Amal. Co., 119 U. S., 348 (1886). A sub-
scriber to the increased stock may re-
cover back the money paid thereon if
the corporation afterwards reduces the
proposed increase, so that it shall cor-
respond to the amount actually sub-
scribed for. The principle laid down
in $§ 176-181, supra, applies. Eaton v.
Pacific Nat. B’k, 10 N. E. Rep., 844 (Mass.,
1887). Cf. § 288. For the rules herein
relative to life estates and remainder
in stock, see § 559. A stockholder may
enjoin the corporation from reducing
its capital stock, as allowed by statute;
ealling in all certificates of stock; issu-
ing new certificates proportionately ; de-
claring a dividend of the surplus over

the reduced capital stock, and, on ac-
count of the corporate property being
invested, borrow money to pay that divi-
dend. Coquard v. St. Louis, etc., Co., 7
S. W. Rep., 176 (Mo., 1888). Under the
English statute a reduction of the capi-
tal stock reduces the preferred as well

as the common stock. Bannatyne v,

Direct, etc., Co., 55 L. T. Rep., 716 (1886).
And in’ general see, also, In re State
Ins. Co., 14 Fed. Rep., 28 (1882); Excel-.

sior Co. v. Lacey, 63 N. Y., 422 (1875),

By-law cannot compel a stockholder to
sell his stock to the corporation for the
purpose of retiring it, Bergman v. St.
Paul, etc., Assoc., 29 Minn., 275 (1882).
In England it is the rule that when the
assets are already reduced by losses the
corporation cannot effect a reduction of

the capital stock so as to cover up the

losses. In re Ebbw Vale Steel, Iron &
Coal Co., L. R., 4 Chan. Div., 827 (1876).
And yet it should seem that a greater in-
jury would be worked upon the public
by continuing business with an impaired
capital than td reduce it openly to what
it actually is. Of. In re Kirkstall
Brewery Co., L. R., 5 Chan. Div., 585
(1877). In England, by statute, a plan
for reducing the capital stock must be
presented to and approved by the courts.
Re Direct, etc, Co., 55 L. T. Rep., 804
(1886). And a distribution of part of
the capital stock among the sharehold-
ers proportionally is an unauthorized
reduction, and the stock will be ordered
to be returned. Holmes v. Newcastle-
upon-Tyne Abattoir Co., 45 L, J. (Chan.),
383 (1875).

822 ‘
OH. XVII.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [§ 290.
capital stock. Not only this, but corporate creditors who were
such before the reduction may disregard the reduction and enforce
payment of their debts from the original unpaid subscriptions as
though no. reduction had taken place. 2 But creditors whose debts
were contracted subsequently to the reduction can look only to the
capital stock, as reduced, for security. They will be held to have
given credit upon the faith of that amount of stock alone.’

A reduction of the capital stock is effected only when all statu-.
tory formalities have been complied with.‘

§ 290. Change in the number or par value of the shares.— It is a
principle of law closely related to those already set forth in this
chapter, and well settled, that the number of shares into which the
capital stock has been divided, and the par value of those shares,
can neither be increased nor diminished, in number or in value,
without express warrant of authority either from the legislature or
the charter of the company.> . When, however, the charter does not

fix the number or amount. of the shares, it devolves upon the share-

\
1 Strong v. Brooklyn Crosstown R. R.
Co., 93 N. Y., 426 (1883).
2In re State Insurance Co., 11 Biss.,
801 (1882); S. C., 14 Fed. Rep., 28; Bed-
ford R. R. Co. v. Bowser, 48 Penn. St.,
29 (1864). Shareholders have no power
to avoid liability on their stock by re-
ducing either the amount of it or the
“par value of the shares. Danev. Young,
61 Me., 160 (1872). Cf. Bedford R. R.
Co. v. Bowser, 48 Penn. St., 29 (1864).
3Hepburn v. Exchange, etc., Co., 4

La. Ann., 87 (1849); Palfrey v. Paulding,.

% id., 863 (1852); Cooper v. Frederick, 9
Ala., 742 (1846). Cf. In re State Ins.
Co.,; 14 Fed. Rep., 28 (1882); 8. ©, 11
Biss., 301.

4See Moses v. Ocoee Bank, 1 Lea
(Tenn.), 398, holding that, where a cor-
' poration has power under its charter to
reduce its capital stock, it must clearly
appear that it has ordered the reduction
to. be made; neither equivocal acts nor
inferences nor unauthorized acts ‘of a
president or director will be sufficient;
Ferris v. Ludlow, 7 Ind., 517 (1856),
holding that where the records of a
company showed that propositions to
reduce its stock had been made, but

failed to show any acceptance, there
was no reduction. See, also, Grangers’
Life, etc., v. Kamper, 73 Ala., 328
(1882). ;

5Salem Mill-dam Corporation wv
Ropes, 23 Mass., 28 (1827); Re Financial
Corporation (Holmes Case), L. R., 2 Ch.,
714, 733 (1867); Droitwich Salt Co. v.
Curzon, L. R., 3 Ex., 35, 42 (1867);
Smith v. Goldsworthy, 4 Q. B., 430
(1843). Cf. Sewell’s Case, L. R., 3 Ch., 181
(1868). ‘‘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. Thesupreme legislative power
of the state can alone confer that au-
thority.” It cannot be increased ‘‘by
the covert or fraudulent efforts of one
or more of the agents of the corpora-
tion.” N. Y. & New Haven R. R. Co.
v. Schuyler, 34 N. Y., 80, 48 (1865). Cf.
Scovill v. Thayer, 105 U. 8., 143 (1881).
In New York a statute allowing such a
change exists. New York Session Laws,
1866, ch. 7%.

323
§§ 291; 292.] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [CH. XVII.

holder or directors to fix them; and in such a case it seems that
the limit established might lawfully be changed without special
authority.

B. ILLEGAL INCREASE OF STOCK, BEING OVERISSUED STOCK.

§ 291. Unauthorized increase of stock may amount to overissued
stock.— Where the full capital stock of a corporation has been is-
sued, and there is no statute or charter provision authorizing an
increase of the stock, it is clear that any issue of stock in excess of
the capital stock is not a legitimate increase of the capital stock.
It is unauthorized and illegal, and is termed in law an overissue of
stock. There is a clear distinction between overissued stock and an
irregular increase of stock. ‘The former is where an increase of the
stock is made, although no increase is authorized by the charter or
by statute. The latter occurs when there is a statutory or charter
provision authorizing an increase of the stock,.but the formalities
prescribed for making that increase have not been strictly complied
with. Overissued stock is void, while an irregular increase of stock
is merely voidable.

§ 292. Overissued stock is absolutely void.— By overissued stock is
to be understood stock issued in excess of the amount limited and
prescribed by the act of incorporation. Certificates of stock issued
in excess of the certificates that represent the full authorized capital
stock of the corporation represent overissued stock. Such stock is
spurious and wholly void. This is the settled law, and it prevails
equally whether the overissue is the result of accident or mistake,
or want of knowledge of the law, or is due to fraud and intentional
wrong-doing. The animus or intent of the parties to the overissue
is not material. Overissued stock, no matter how overissued, rep-
resents nothing, and is wholly and entirely valueless and void.’ So,

\

1 Somerset, etc., R. R. Co. v. Cushing, subject is New York, etc., R. R. Co, wv

45 Me., 524 (1858); Ambergate, Notting- Schuyler, 34 N. Y., 30 (1865). Cf. Me-
ham & Boston & Eastern R’y Co. v. chanics’ Bank v. New York, etc., R. R.
Mitchell, 4 Exch., 540 (1849); 8. C., 6 Co., 18 id., 599 (1856). See, also, as to
Eng. R’y Cases, 284; In re European the point that overissued stock is void
Central R’y Co., L. R., 8 Eq., 488 (1859). even in the hands of bona fide holders,
It has been held allowable, however, People’s Bank v. Kurtz, 99 Penn. St.,
for the company to allow the holders of 844 (1882); Bruff v. Mali, 36 N. Y., 200
paid-up shares to return them and take (1867); People v. Parker, etc., Co., 10
in exchange shares of double the par How. Prac., 543 (1854); Sewell’s Case,
value as half paid up, and vice versa; L. R., 8 Chan. Ap., 181, 188 (1868);
. both kinds of stock being authorized. Wright's Appeal, 99 Penn. St., 425
Teasdale’s Case, L. R., 9 Chan., 54 (1882); Scovill v. Thayer, 105 U, 8., 148
(1878). . (1881).

2The great and leading case on this

824
‘OH. XVII] INCREASE, REDUCTION AND OVERISSUE OF STOCK. [§$ 293.

\

rigid and well established is this rule that not even a dona fide
holder of ‘such stock can give to it any validity or vitality. Over-
issued ori spurious stock’ may, however, it seems, be legalized by a
subsequent legal increase of the capital stock. 1

§ 293. Liability of the corporation as to overissued stock.— Al-
though it is settled law that overissued stock is void and valueless,
and that no action lies either to compel the corporation to recog-
nize the holder as a stockholder, or to issue in place thereof a valid
certificate, yet where overissued certificates of stock, signed or pur-

porting to be signed by the corporate officers. having the authority |

to issue stock, and actually issued by such officers, are purchased :

by any person, orare taken in any manner in good faith and for
value, such bona fide holder may sue the corporation in tort and
recover damages.”

The cases to this point proceed upon the theory that a corpora-

tion, like a natural person, is liable in damages for the torts and’

frauds of its agents when acting within the scope of their proper
employment; and that, when fraudulent certificates are issued by
its officers, and pass innocently, into the hands of bona fide holders
for value, the corporation is estopped to deny the authority of such
agents, and cannot escape liability for damages so resulting.

If an innocent holder of overissued stock’ brings an action in
equity to compel the corporation to record the feaustor. he will be
denied that relief, but may have, in lieu thereof, damages at law.3
The better remedy in such a ‘case, therefore, ig an action at law;
and the measure of damages is the market value of the stock at the
‘time the transfer was demanded.*

1Sewell’s Case, !L. RB 3 Chan. Ap., 809 (1842); In re Bahia,
131 (1868); New York, etc., R. R. Co. v.

Mee. & W.,

Schuyler, 34 N. ¥., 80, 56, 57 (1865).
2New York, etc., R. R. Co. v. Schuy-
ler, 34. N. Y., 80, 49, 60 (1865); Bruff v.
Mali, 36 id., 200 (1867); Titus v. Great,
etc., Road Co., 5 Lans., 250 (1872); 8. C.,
61 N. Y., 287 (1874); Bank of Kentucky
v. Schuylkill Bank, Parsons’ Select
Cas., 180, 216 (1846). This was a suit
in equity by a bank against another
bank which, acting as its transfer agent,
had made a large overissue of its stock.
Tome v. Parkersburg, etc., R. R. Co., 39
Md., 36 (1878); Willis v. Phila., etc., R.
R. Co., 6 Week. Notes Cas., 461 (1879);
Willis v. Fry, 18 Phila., 33 (1879); Peo-
ple’s Bank v. Kurtz, 99 Penn. St., 344
(1882). See, also, Daly v, Thompson, 10

(1868); Simm v. Anglo, ete., Co., L. R.,
5 Q. B. Div., 188 (1879); Waterhouse v.
London, etc., R. R. Co., 41 L. T. (N. S.),
553 (1879); Mandelbaum v. North, etc.,
R. R, Co., 4 Mich., 465 (1857); Wright’s
Appeal, 99 Penn. St., 425 (1882).
many of these cases the overissue was
due toa mistake of the corporation in
allowing a transfer of stock.

3 Willis v. Phila., etc., R. R. Co., 6
Week. Notes Cas., 461 (1879); People’s

Bank v. Kurtz, 99 Penn. St., 844 (1882). |

4 People’s Bank v. Kurtz, 99 Penn. St.,
844 (1882); Willis v. Phila. etc., R. R.
Co., 6 Week. Notes Cas., 461 (1879);
Tome v. Parkersburg, ‘ete., R. RB. Co.,
39 Md., 36 (1873). It is, however, a con-

825

In

etc.,.R. R. Co, L. R., 3 Q. B., 584, 595 °
/§§ 294, 295.] INCREASE, REDUCTION/AND OVERISSUE OF STOCK. [CH. XVII.

§ 294. Defenses of the corporation to such actions. —It frequently
happens that an overissue of stock is made without a strict com-
pliance with the formalities of an issue of genuinestock. Generally,
certificates of stock must, according to the by-laws of the corpora-
tion, be signed by certain specified corporate officers. Often, how-
ever, nothing in the charter or by-laws of the corporation regulates
the form or contents of a certificate of stock. Accordingly, when
action is brought against a corporation on overissued stock, the
defense is sometimes set up that the certificates were not signed by
the proper officers, or were not issued with the usual formalities,
and consequently that, the purchaser having had notice of the in-
firmity, the corporation is not liable. But such a defense is not
favored by the courts.!. Where, however, the charter provided that
certificates of stock should be signed by the president, directors
and treasurer, fraudulent overissues signed by the president and
treasurer alone were held not sufficient to charge the corporation?

§ 295. Personal liability of the officers of the corporation on over-
assued stock.— The officers of a corporation who are authorized to
issue certificates of stock to the stockholders are liable, ix tort, both
to the immediate purchasers from them of spurious stock, falsely
and fraudulently certified by them, and also to any subsequent pur-
chaser buying upon the faith of the false certificate, and sustaining

damage thereby.’ There may be

dition precedent to maintaining such an
action that the holder of the overissued
stock discharge any lien upon it which
would have properly attached to gen-
uine stock under the same conditions.
Mt. Holly Paper Co.’s Appeal, 99 Penn.
St., 513 (1882).

1 New York, etc., R. R. Co. v. Schuy-
ler, 34 N. Y., 30 (1865). Thus, where an
officer of a corporation fraudulently is-
sued stock for his own use, controlled

> all the bodks relating to the stock, and
countersigned all the certificates, the
corporation was held liable for the spuri-
ous stock. Tome v. Parkersburg, etc.,
R. R. Co., 89 Md., 86 (1878). So, also,
where overissued stock is issued under
the genuine seal of the corporation, the
corporation is liable. People’s Bank v.
Kurtz, 99 Penn. St., 344 (1882). See,
also, Manhattan Beach Co. v. Harned,
27 Fed. Rep., 484 (1886). The last case,
however, was where the corporate of-
ficers issued stock, not in excess of the

a joint action against the corpora-

capital stock, but a part of the unissued
original capital stock. They issued it
not for the corporation, but in fraud of
it'and for their own benefit. See, also,’
§ 363, infra.
2 Holbrook v. Fauquier, etc., Turnpike
Co., 3 Cranch, C. C., 425 (1829), And
overissued stock issued by the president
to his private debtor, in ‘payment of his
private debt, has been held not to con-
fer on such debtor a right to hold the
corporation responsible. Wright’s Ap-
peal, 99 Penn. St., 425 (1882). In this
case the court assumes that the debtor
- could not be heard to claim bona fides.
3 Bruff v. Mali, 86 N. Y., 200 (186%);
Seizer v. Mali, 41 id., 619 (1869), revers-
ing S.C., 32 Barb., '76 (1860); 11 Abb.
Prac., 129; Cazeaux v. Mali, 25 Barb.,
578 (1857). And the holder of genuine
stock has an action against them for the
depreciation of its value by reason of
the overissue. Shotwell v. Mali, 38 id.,
445 (1862). A person receiving stock

826

Ss
OH. XVII.] INCREASE, REDUCTION AND OVERISSUE OF stoox. [§§ 296, 297.

tion and the corporate agents issuing the stock, or a separate ac-

tion against either.

§ 296. Liability of the vendor of overissued stock—In the ab-
sence of fraud the purchaser of overissued and spurious stock can-

not hold his vendor liable thereon.

The bona jide vendor can be

held to warrant only his own title to the shares, not the right of

the corporation to issue them.

If he came by them honestly and

sells’ them in good faith there is no recourse to him, even though

they turn out to be spurious. 2

§ 297. Equity will enjoin voting, transferring or dividends on
such stock, and will adjust the rights of all parties.— A court of
equity will, upon a proper application, grant an injunction to pre-
vent the transfer of illegally-issued stock, or the payment of divi-
dends thereon, or the voting of the pretended owners of such stocks.’
The most effectual remedy in these cases is a suit in equity, insti-
tuted by the corporation, whereby, in one proceeding, the rights
and liabilities of all persons concerned with the overissue of the
stock are fully and finally determined and adjudicated, and the
overissued stock itself is retired and destroyed. Such a proceeding
is in the nature of a bill to quiet title, or to remove a cloud from

~the title of the genuine stock. Spurious or overissued stock, issued
by corporate officers having the apparent authority, and outstand-
ing in the hands of numerous holders, is a cloud upon the title to
‘the genuine stock. It is a cloud which a court of equity will re-
move; and a suit to that end may be commenced, either by the

from the directors of a corporation, in
pledge for a loan to it, they Knowing
that the stock was overissued, may sue
‘the directors for damages in an action
for deceit. Whitehaven, etc., Co. v.
Reed, 54 L. T. Rep., 360 (1886); Nat’!
Exchange B’k v. Sibley, 71 Ga., 726
(1883). See, also, Daly v. Thompson, 10
M. & W., 309 (1842).
1Bruff v. Mali, 36 N. Y., 200 (1867).
_ And when the action is against the offi-
’ cers responsible for the fraudulent over-
issue, if the evidence shows that the
entire capital stock of the company had
\been issued prior to the dates of the
certificates purchased or held by the
plaintiff, and if it appears that the de-
fendants prior thereto had, as officers of
the corporation, issued spurious certifi-
cates of stock, then there is a presump-

tion of law that the certificates in con-'

troversy are false and fraudulent, and
the burden is upon the defendants to

show that these particular certificates
were issued, either upon the surrender
of certificates of genuine stock, or upon
the transfer on the books of the com-
pany of such stock — facts peculiarly
within the knowledge of the corporate
officers. Shotwell v. Mali, 38 Barb., 445,
469 (1862), a well-considered case; Bruff
v. Mali, supra.

2State v. North Louisiana, etc., R. R.
Co., 84 La. Ann., 947 (1882); People’s
Bank v. Kurtz, 99 Penn. St., 344 (1882);
Seizer v. Mali, 41 N. Y., 619 (1869).

8 Kent v. Quicksilver Mining Co., 78
N, Y., 189; Thomas v. Railroad Co., 101
U.S., 71. And where a corporate offi-
cer issues illegal and unauthorized stock
he may be enjoined from allowing a

transfer of it, if proof is given of its

illegal character and of a proposed
transfer. Sherman v. Clark, 4 Nev.,
138 (1869).

827
§ 298.] . INCREASE, REDUCTION AND OVERISSUE OF STOCK. [CH. XVII.

corporation! or by the stockholders themselves in their own behalf,
where the corporation fails or refuses to institute it.?

§ 298. Subscriber's right to defeat a subscription to spenaded
stock, and to recover back money paid thereon.— In addition to the
remedy i in equity, the holder of overissued stock has the further
right at law to defeat an action on his subscription therefor; and
that; too, even though he knew it to be overissued at the time the
subscription was made. There can be no estoppel in such a case;
and not even creditors can enforce any liability on spurious or over-
issued stocks.? Where also a subscriber has paid an instalment on
-his subscription, although he knew when he made the subscription
and paid the money that it was an illegal and unauthorized issue,
he may rescind, and recover back what he has paid.t In Jowa it
has been held that payment of a note given for overissued stock
cannot be enforced where the consideration was expressed in the
note to be the stock of the corporation to which the note was given,
and the directors subsequently made an illegal and unauthorized

increase in the stock, the maker of the note having had notice that

a large amount of illegal stock had been issued, and. that the illegal
and valid stock could not be distinguished.® But it is held that one
who subscribes for overissued stock, bona side, upon discovering
that the stock is spurious cannot have a receiver appointed, pend-
ing an inquiry into the legality of the stock, to the end that, in case
the stock is judicially declared invalid, such subscriber may re-
cover back from the corporation the money so paid for the spurious
shares, where the money received by the company had not been
kept separate from its general funds, and could not be traced and

identified.’

1New York, etc., R. R. Co. v. Schuy-
ler, 17 N. Y., 592 (1858). Stock pur-
chased from the secretary, as secretary,
is not good if overissued, and if the sec-
retary sold it for his own benefit, even
though it was duly signed. A bill in
equity lics to cancel it. Cincinnati,
etc., R’y v. Citizens’ Nat'l B’k, 3 Ry &
Corp. L. J., 459 (Cin. Court, 1888).

2 Dewing v. Perdicaries, 96 U. S., 193
(1877); Wood v. Union, etc., Ass’n, 68
Wis., 9 (1885); Perdicaris v. Charleston
Gaslight Co., Chase’s Dec., 435 (1869).
Cf. Taylor v. South & North Ala. R.
R. Co., 4 Woods, 575 (1882), where the

subscriber acquiesced ten years. The
court denied any relief.
3Scovill vu. Thayer, 105 U. 8., 143

(1881); Page v. Austin, 10 Can. Sup. Ct.,
182; Clark v. Turner, 73 Ga., 1 (1884).

-4 Knowlton uv, Congress, etc., Co., 14
Blatch., 864 (1877); aff’d, 103 U. S., 49:
(1880); Reed v. Boston Machine Co.,
141 Mass., 454 (1886). And the dissent-
ing opinion of Dwight, Com’r, in
Knowlton v. Congress, etc., Co., 57 N.
Y., 518, 540 (1874). This case, however,
was not strictly a case of overissued
stock. A different class of cases exists
where an increase of capital stock is
authorized, but is irregularly made.
A subscriber is then liable. See § 289,
supra, ;

5 Merrill v. Gamble, 46 Iowa, 615:
(1877); Merrill v. Beaver, 46 id., 646
(1877); Merrill v. Reaver, 50 id., 404
(1879).

6 Whelpley v. Erie Railway Oo., 66
Blatch., 271 (1868).

828
PART IL.

TRANSFERS OF STOCK.

CHAPTER XVIII.

LEGACIES AND GIFIS OF STOCK.

Ԥ 299. Definitions of general, specific 8 804-805. Amount: of stock conveyed

and demonstrative legacies of by certain legacies.
stock. 306. Ademption or revocation of a
300-301. Importance of the difference legacy of stock, and abate-
between general and spe- ent.
cific legacies. 307. Duty of executor as regards spe-
802-303. Legacies of stock are con-| ' cific or general legacies.

strued to be general if| 308. Gifts of stock.
the language will permit.

§ 299. Definitions of general, specific and demonstrative legacies
of stock.— A general legacy of stock is a legacy whereby it be-
comes the duty of the executor or administrator to give to or pro-
cure for the legattée a certain amount of stock, as indicated by the
will, there being nothing in the will itself to indicate that the legacy
is to be satisfied from stock actually owned by the testator. A spe-
cific legacy of stock arises when the testator, in his will, directs or
clearly indicates that the legacy is to be satisfied from stock which
he owns. A demonstrative legacy of stock is the same as a gen-
eral legacy, except that it is to be purchaséd from a particular fund
of the estate. Demonstrative legacies of stock are of little impor-
tance as compared with the other two kinds.

§ 300. Importance of the difference between general and: specific
legacies.— It is frequently of the greatest importance whether a
legacy be a general or a specific one. A large number of decisions,
running back for nearly two hundred years, have been made in en-
deavoring to lay down rules on this subject. The complications,

1 That iogaeea of stock may be demon- the circumstances. It is never demon-
strative has been assumed by the cases. strative. A demonstrative legacy is
In the case, however, of Eckfeld’s Es- always pecuniary — differing, however,
tate, W. N. C. (Penn.), 19 (1879), the from an ordinary legacy in being re-
court says a legacy of stock ‘‘may be ferred to.a particular fund or source

either specific or general, according to of payment.”
829
LEGACIES AND GIFTS OF STOCK. (oH. XVIII.

§ 301.]

contradictions, inconsistent decisions and doubt that have arisen
from the inherent difficulties of the subject are frequently adverted
to and deplored by successive generations of judges.

The importance of determining whether a legacy of stock is gen-
eral or specific rests in the fact that if it is specific it is entitled to
certain advantages, and, on the other hand, is exposed to certain
perils; while, if it is general, it is without those advantages, but is
also free from the perils. The advantages of a specific legacy of
stock are that debts of the estate are to be paid from other funds;
the specific legacy passes, though other legacies fail partially or
wholly by reason of deficiencies in the estate; and the specific leg-
atee is entitled to all dividends declared after the testator’s death,

instead of losing the first year’s dividends, as in case of a general .

legacy of stock. General legacies of stock have none of these ad-
vantages. On the other hand, a specific legacy of stock is open to
the great danger of being revoked by the acts of the testator, and
frequently so when the testator has no intention of revoking the
legacy.! This revocation, arising by implication from the acts of
the testator — such as selling the stock bequeathed, ‘or using it in any
way inconsistent with the idea of its passing under the will —is a
danger that does not exist if the legacy is a general one, since gen-
eral legacies of stock may be carried out by the executor’s pur-
chasing the stock for the purpose of the legacy.

§ 301. If a specific legacy will apply equally fo paid-up stock
and to stock not paid up, the legatee may take the former? If

1 Kenkel v. Macgill, 56 Md., 120 (1880),
the court saying: ‘‘If the legacy is to
be considered specific, then, in the event
of the testator’s parting with the thing
or property bequeathed, or if from any
cause it should be lost or destroyed, the
legacy fails. Then, again, such lega-
cies are not liable to abatement with
general legacies; nor are they liable to
contribution towards the payment of
debts.” Where pvidently the intent
was to give specific bonds, it was so
decreed. Davies v. Fowler, L. R., 16
Eq., 308 (1878); Walton v. Walton, 7
Johns. Ch., 257 (1823): Jacques v. Cham-
bers, 2 Coll., 485 (1846), holding also
that the legatee may select his stock
from different classes, but that he must
pay calls on the stock due at the time
_ of the testator’s death but not paid. In
the case of Mullins v. Smith, 1Dr.&Sm.,
204 (1860), the difference between a spe-

cific and demonstrative legacy is thus
described :

“The points of difference between
specific and demonstrative legacies are
these:

‘*A specific legacy is not liable to
abatement for the payment of debts,
but a demonstrative legacy,is liable to
abate when it becomes a general legacy
by reason of tHe failure of the fund out
of which itis payable. A specific legacy
is liable to ademption, but a demonstra-
tive legacy is not. A specific legacy, if
of. stock, carries with it the dividends
which accrue from the death of the tes-
tator, while a demonstrative legacy
does not carry interest from the testa-
tor’s death.”

2Millard v, Bailey, L. R., 1 Eq., 378
(1866); Jacques v. Chambers (1846),

supra.
\

330
CH. Xvi. | LEGACIES AND GIFTS OF STOCK.

[$ 302.
the testator has made payments on the stock before calls have
been made, the legatee is entitled to the benefit! If there is both
a specific and a general legacy of the same stock, the specific is to
be first satisfied? The specific legatee takes all the income and
profits of the stock,’ whereas the general legatee has no interest in
the stock until twelve months after the testator’s death.‘
cific legatee takes the stock, although there will then be no prop-
erty left to pay pecuniary legacies. * However, he can have only
so much stock of that kind as the testator dies ‘possessed of;° and if
the latter dies possessed of none, the specific legatee takes none.’
The specific legatee does not take dividends declared and due be-
fore the testator’s death, although such dividends have not been
collected.®

§ 302. Legacies of stock are construed to be general if the lan-
guage will pernvit.— It is the policy of courts of justice to uphold
and carry out a legacy, and implied revocations are not looked
upon with favor., Accordingly, in order to avoid the danger of
ademption, to which specific legacies are subject, the rule has be-
come established that general | legacies are’ to be favored by the
courts; and, if there is doubt as to whether a legacy be specific or
general, it will be construed to be of the latter kind.®

Where, however, the intent of the testator clearly was to give
particular stock owned by him, the court will declare the legacy to
be a specific one. Thus, where the testator gives the legacy of
stock by describing it as “ my” stock, the legacy is a specific one.”
So also where the phrase “standing in. my name” " is used, or

1 Tanner v. Tanner, 11 Beav., 69 (1828); Loring v. Woodward, 41 N. H,
(1848). 891 (1860); Shuttleworth v. Greaves, 4

The spe- |

2 Barton v. Cooke, 5 Ves., 461 (1805).

3 Loring v. Woodward, 41 N. H., 391
(1860), holding also that parol evidence
cannot show a contrary intent of the
testator.

4 Webster v. Hale, 8 Ves., 410 (1803).

5 Drinkwater v. Falconer, 2 Ves. Sr.,
622 (1755).

6 Gordon v. Duff, 28 Beav., 519 (1860) ;
Ashton v. Ashton, 3 P. Wms., 384
(1'735).

TEvans v. Trip, 6 Mad., 91 (1821).

8 Perry v. Maxwell, 2 Dev. Eq. (N. C.),
487 (1834).

9 Davies v. Fowler, L. R., 16 Eq., 308
(1878); Tifft v. Porter, 8 N. Y., 516, 520;
Eckfeld’s Estate, 7 W. N. C. (Penn.), 19
(1879).

10 Walton v. Walton, 7 Johns, Ch., 257

Mylne & Cr., 35 (1838); Miller v. Little,
2 Beav., 259 (1840); Hayes v. Hayes, 1
Keen, 97 (1836); Brainerd v. Cowdrey,
16 Conn., 1 (1843). The omission of the
word ‘‘my” does not necessarily make
the legacy a general one. Avelyn v.
Ward, 1 Ves. Sr., 420 (1749). The word
“my” does not, however, have the same
significance in its application to a legacy
of an annuity as it has toa legacy of
stock. Kirby v. Potter, 4 Ves., 748 (1799).
In the case of Parrott v. Worsfold, 1 Jac.
& Walker, 574 (1820), a legacy of “all
my stock that I may be posséssed of at
my decease” was held to be general,

since there was no ‘individual thing

given.”
ll1Ludlam’s Estate, 18 Penn. St., 188

(1850); Gordon v. Duff, 28 Beav., 519

331
§ 302.] LEGACIES AND GIFTS OF STOCK. [o. Xvul,
“ which I hold;”? or a direction is given to make up the specified
amount from the general fund if the testator does not hold enough;?
or the testator describes the stock as “now lying in the three per
cents.;”* or uses the word “such;”* or makes a legacy of stock
out of a quantity of stock; * or in another part of the will speaks of
the stock as that of which the testatrix may die possessed;® or
where, after several legacies, all apparently general, the testator
bequeaths the remaining stock “standing in my name,” — the ef-
fect of all these is that the legacies are specific.’ A legacy of all

_the dividends, interest and proceeds from stock is a specific legacy,
even though the testator did not own such stock at the time he
made the will.® There has been some difference of opinion as to
whether the fact that the testator, at the time of making the will,
possessed an equal or greater amount of stock than that bequeathed,
and of the same kind, is to be taken as evidencing an intent to
make the legacy specific, The weight of authority holds that such
a fact is not to be taken into consideration, and that if the words
of the legacy make it general, it cannot be construed to be specific
simply because by an examination of the testator’s effects he is
found to have possessed stock similar to that described in the will.

(1860); Kampf v. Jones, 2 Keen, 756
(1837). Where, however, other parts of
the will indicate that the legacy was
general, it was held to be general. See
Auther v. Auther, 13 Sim., 422 (1848),
holding also that though, by the delay
of the executor beyond a year in pur-
chasing the stock, it rises, the legatee is
entitled to the same amount as if it had
been bought at the right time, Fidelity
Trust Company’s Appeal, 108 Pa. St.,
839 and 492 (1885).

1Blackstone v. Blackstone, 83 Watts,
335 (1839).

2Townsend v. Martin, " Hare, 471
(1849), holding that such a legacy is
specific and not demonstrative. The
case, however, of McGuire v. Evans, 5
Tred. Eq. (N. C.), 269 (1848), holds that
a legacy of stock, to take effect in case
other legacies do not absorb that stock,
is demonstrative; also that in case of
legacies of the same stock to two differ-
ent persons, each takes a moiety. The
case of Mulling v. Smith, 1 Dr. & Sm.,
204 (1860); Fountaine v. Tyler, 9 Price,
Ex., 94 (1821); and Queen’s College v.
Sutton, 12 Sim., 521 (1842), hold that

t
such a legacy is specific if the testator
leaves stock enough, but is general if he
does not leave enough.

3Morely v. Bird, 8 Ves., 628 (1800),
holding that if the executor has sold
the stock the legatees may hold him
liable for its value one year after the
testator’s death,

4 Davies v. Fowler, L. R., 16 Eq., 308
(1873), the court saying that a legacy is
specific when a meting out or dividing
is evidently intended.

5 Hasking v. Nicholls, 1 Y. & ©. Ch.,
478 (1842). Andif the administrator has
paid the dividends to another, he is per-
sonally liable.

§ Measure v. Carleton, 30 Beav., 538
(1862). This case also holds that, if an
exact partition of the stock is impossible,
enough will be sold to render it possible.

*Sleech v, Thorington, 2 Ves. Sr., 560
(1754), A legacy of all of several arti-
cles is specific. Tomlinson v. Bury, 14
N. E. Rep., 137 (Mass., 1887).

8 Stephenson v. Dawson, 8 Beav., 342
(1840). See, also, Fidelity Trust CGom-
pany’s Appeal, supra.

§ Robinson v. Addison, 2 Beav., 515

332

/
CH. xvutt. | LEGACIES AND GIFTS OF STOOK.

[$$ 308, 304,

§ 303. The most common form of a general bequest of stock is
where the testator merely bequeaths a specified number of shares
of a specified kind to the legatees, without any further words indi-
cating that he then held or expected to hold the stock bequeathed.'
A direction to the executors to invest a certain. sum in specified
stock for the benefit of the legatee, is a general legacy.? So, also,
where the executors are directed to transfer to the legatee certain
stock? A legacy of the residue of the testator’s stock has been
held to be a general legacy.* A legacy to be paid “ out of the four
per cents.” is general.’ A codicil which is general in form is held
to be such, although it 4s but an increase of a previous legacy

which is specific, and which is revoked by the codicil.
§ 304. Amount of stock conveyed by certain legacies.— A legacy
of “one hundred pounds, long annuities,” has been held to mean,

(1840), the court holding that the legacy
was general, and saying the testator
‘in effect gave such an indefinite sum
of money as would suffice to purchase
so many shares as he had given;” Davis
v. Cain’s Ex’r, 1 Ired. Eq. (N. C.), 304
(1840); Bransdan v. Winter, Ambl., 56
(1788); Simmons v. Vallance, 4 Brown’s
Ch., 346 (1793); Bishop of Petersborough
v. Mortlock, 1 Brown’s Ch., 565 (1784);
Boys v. Williams, 2 Russ. & Myl., 689
(1881); Partridge v. Partridge, Cases
temp. Talbot, 226 (1736); Tifft.v. Por-
ter, 8 N. Y., 516 (1853), where the court
say: ~ ‘‘ The mere possession by the tes-
‘ator! at the date of his will, of stock
of equal or larger amount than the leg-
acy, will not of itself make the be-
quest specific;” Osborne vw. McAlpine,
“4 Redf. (N. Y. Surr.), 1 (1878); Eck-
feld’s Estate, 7 W. N. C. (Penn.), 19
(1879); Sponsler’s Appeal, 107 Penn. St.,
95 (1884), where the court also held that
a codicil repeating a general legacy of

stock will entitle the legatee to both’

legacies, In Massachusetts a doctrine
contrary to that stated in the text pre-
vails. See White v. Winchester, 23
Mass., 48 (1827); Metcalf v. First Parish,
128 Mass., 370 (1880). To same effect,
Cuthbert 'v. Cuthbert, 3 Yeates (Penn.),
486 (1808); Jeffreys v. Jeffreys, 3. Atk.,
120 (1744).

1 Wilson v. Brownsmith, 9 Ves.. 180
(1808), holding also that, if there is not

enough of such stock among the tes-
tator’s assets, the deficiency must be
purchased for the legatee. -Pearce v.
Billings, 10 R. 1, 102 (1871), the court

Saying that the evident intent of the

testator was ‘‘to have the stock men-
tioned purchased for the legatees by
his executor, or to have the legatees
furnished with the means to purchase
the stock for themselves.” The value of
the stocks one year after the testator’s
death is thé amount to be paid to the
legatees. In the case of Purse v. Snap-
lin, 1 Atk., 413 (1737), where two, lega-

cies of stock of 5,0002. each were given, '

and the testator had but 5,0001. of stock,
the court held that the general estate
must purchase 5,000/. of the same stock.

2Raymond v. Brodbelt, 5 Ves., 199
(1800).

3Lambert v. Lambert, 11 Ves., 607
(1805) ; Sibley v. Perry, 7 Ves., 522 (1802),
the court saying a legacy is not spe-
cific ‘‘ without something marking the
specific thing — the very corpus; with-
out describing it as standing in his
name, or by the expression ‘ my stock,’
etc.”

4 Parrott v. Worsfold, 1 Jac. & W., 574
(1820). Contra, Bethune v. Kennedy,
1 Myl. & C., 114 (1835).

5 Deane v. Test, 9 Ves., 146 (1803).

6 Johnson v. Johnson, 14 Sim., 813

(1844),

333

*
§ 305.) . LEGACIES AND, GIFTS OF STOCK. [oH. XVIII.
not that the legatee is entitled to an annual income from the estate
of one hundred pounds, but that he was entitled to have that
amount invested for him.! A will reciting the amount of stock
held by the testatrix, and bequeathing it, or so much as should be
standing in her name at her death, does not give to the legatee .
stock acquired after the making of the will and before the death
of the testatrix.2? A bequest of “stock “that I possess” is held to
mean stock possessed by the testator at the time of making the
will?

§ 305. There has been some controversy and doubt as to whether
a legacy of the testator’s “money” would give to the legatee the
testator’s stock in a corporation. The decided weight of authority
holds that it does not. Nor'will shares of stock belong to a legatee
to whom the testator has given, by a last will and testament, his

1 Att’y-Gen. v. Grote, 2 Russ, & Myl.,
699 (1881); Fonnereau v. Payntz, 1 Bro.
Ch., 412 (1785). See Pearce v. Billings,
supra. Contra, Stafford v. Horton, 1
Bro. Ch., 421 (1785). See, also, § 560.

2 Hotham »v. Sutton, 15 Ves,, 319 (1808). :

So, also, of a legacy of ‘‘the whole of
my stock in the Housatonic Bank,
amounting to $6,000.” The legatee does
not take stock subsequently acquired.
Foote, Appellant, 39 Mass., 299 (1839);
Douglass v. Douglass, Kay, 404 (1854).
The case of Fidelity Trust Company’s
Appeal, supra, states that at common
law a specific legacy of stock spoke from
the death of the testator, and that the
English Wills Act of 1888, and the
Pennsylvania act of 1879, were but de-
claratory in that respect. If the tes-
tator, in making a specified bequest of
stock, speaks of the stock as “now
standing in my name,” the statute does
not apply, and the bequest speaks from
the date of the will. In Miller v. Miller,
2 Beav., 259 (1840), the testator gave

‘fone share to each child him surviv-.

ing.” He then had eight shares and
seven children. At his death he had
ten shares and eleven children, Only
the eight shares were held to pass.
3Cochran v. Cochran, 14 Sim., 248
(1844). This rule is sometimes changed
by statute. See, in England, § 24, Wills
Act, applied in Trinder v. Trinder, L. B.,
1 Eq., 695 (1866), and Goodlad v. Bur-

nett, 1K. & J., 841 (1855); Hepburn »,

Skerving, 4 Jur., N.S., 651 (1858); Wag-
staff v. Wagstaff, L. R., 8 Eq., 229 (1869);
Bothamley v. Shersan, L. R., 20 Eq., 304
(1875), and preceding note. Legacy of
bank stock conveys all stock deposited
in bank, there being no shares of bank
stock owned by the testator. Tomlin-
son v, Bury, 14 N. EB, Rep., 137 (Mass.
1887).

4Mullins v. Smith, 1 Dr. & Sm., 204
(1860); Hotham v. Sutton, 15 Ves., 319
(1808); Lowe v, Thomas, Kay, 369 (1854),
affirming 5 De G., M. & G., 315 (1854);
Goshen v. Dotterill, 1 Myl. & K., 56
(1832); Hundleston v. Gouldsbury, 10
Beav., 547 (1847); Douglas v. Congreve,
1 Keen, 410, 424 (1836); Willis v. Plas-
kett, 4 Beav,, 208 (1841); Ogle v. Knipe,
L. R., 8 Hq., 486 (1869); Ommaney v.
Butcher, 1 Tur. & R., 260, 272 (1828),
holding also that a bequest of stock for
an indefinite charity fails; Beck, Ex.,
v.' McGillis, 9 Barb., 35, 39 (1850).
Contra, Waite v. Coombes, 5 De G. &
S., 676 (1852); Chapman v. Reynolds, 28
Beav., 221 (1860), where the testator had
no property but stock; Bescoby v. Pack,
1 Sim. & Stu., 500 (1823), holding that
“money” will pass the “funds,” but
not stock in private corporations; New-
man v. Newman, 26 Beav., 218 (1858),
where the legacy was of “surplus
money;” Jenkins v. Fowler, 63 N. H.,
244 (1 884).

334 \
CH. XVIII] LEGACIES AND GIFTS OF STOOK.

[§ 305.

“securities for money,”' or “furniture,” and all claims and de-
mands of whatever nature,’ or “every other article,” * or “ready
money,” ‘or goods,’ or “money and effects;” ® but they will pass
under a bequest of the “ personal estate,” lor “residue of money,” §
or “chattels.” ® If the testator, in describing the stock bequeathed,
has very clearly made a mistake in the description, the legacy’ will
be held to apply to the stock intended to be bequeathed. Thus,
where the testator has “City Bank” stock, but bequeaths “ Me-
chanics’ Bank” stock, and the intent was to bequeath the former,
the court will render a decree to that effect. Where, subsequently
to the making of the will, and before the death of the testator, the
stock bequeathed is changed in its character by operation of law,
the legatee will nevertheless be entitled to the stock in its new
form.

In England, where “shares” corresponds to the American
“stock,” but “stock” is a term applicable to a paid-up interest,
which, ‘like a bank deposit, may be used in large or small quanti-
ties, a bequest of “shares” does not pass “stock” if there be any

“shares” to which the legacy may apply.”

“public funds”

The words “funds” or

will include long annuities; and “foreign funds”

means securities guarantied by foreign governments; but “funds”

1 Turner v. Turner, 21 L. J. (Ch.), 848
(1852),

2Delamater’s Estate, 1 Whart. (Pa.),
362 (1836),

3 Collier v. Squire, 3 Russ., 467 (1827).

4May v. Grave, 3 De G. & Sm., 462
(1849).

5Cowling v. Cowling, 26 Beav., 449
(1859). Contra, Kendall v. Kendall, 4
Russ. Ch., 360 (1828). Stock passes un-
der a legacy of ‘‘my property at K.’s
bank,” the certificates being there. Re
Prater’s Estate, 58 L. T. Rep., 784 (1888).

_ §Borton v. Dunbar, 80 L. J. (Ch.), 8
(1861).

7 Kermode v. Macdonald, L. R., 8 Ch.,
584 (1868).

8Dawson v. Gaskoin, 2 Keen, 14
(1837); Fulkeron v. Chitty, 4 Jones’ Eq.
(N. C.), 244 (1858).

9 Kendall v. Kendall, supra.

10 Roman Catholic Orphan Asylum v.,
Emmons, 4 Redf. (N. Y.), 144 (1855);
Door v. Geary, 1 Ves. Sr., 255 (1749),
holding that a bequest of ‘‘ Hast India
stock” will apply to bank stock, when
the testator had the latter but none of

the former. See, also, Trinder v. Trin-
der, L. R., 1 Eq., 695 (1866), where a
legacy of “Great Western Railway”
stock was held to apply to the stock of
a road absorbed by the Great Western
Railway ; ‘Oakes v. Oakes, 9 Hare, 666
(1852), where a bequest of “shares”
was held to apply to “‘stock;” Gallini
v. Noble, 8 Mer. Ch., 690 (1810); Penti-
cost v. Ley, J. & W., 207 (1820); Clark
uv. Atkins, 90 N. C., 629 (1884), where
“bank stock” was held to pass bonds.
A palpable mistake of the testator in
describing a legacy of bonds will be
corrected by the court. Holt v. Jex, 48
Hun, 528 (1888).

11 See § 3806, note 9.

12 Oakes v. Oakes, 9 Hare, 666 (1852).

13 Howard v, Kay, 27 L. J. (Ch.), 448
(1858).

4 Ellis v. Eden, 23 Beav., 543 :(1857);
Cadett v. Earle, L. R., 5 Ch. D., 710
(1877), properly holding that New York
and Ohio are foreign governments. Cf.
Longdale’s Settlement Trusts, L. R., 5
Ch. D., 710 (187%), relative to French
railway securities, ‘

335
§.306.] LEGACIES AND GIFTS OF STOOK. [OH. XVIII
will not include bank stock,' nor East India‘stock.2? An uncondi-
tional bequest of the dividends of stock is a bequest of the stock
itself.3 But a bequest of a specific sum to be paid from stock does
not bequeath the stock itself, although amounting to a charge
upon it. A bequest of stock to a legatee “to draw the income
arising therefrom during her life-time, and at her death to dispose
of the same as she shall see fit,” vests the title to the stock, when
it is set apart, in the legatee, even though the executors are directed
to collect and pay to her the dividends.’ A bequest of the “rest
and residue after deducting” certain specific legacies of stock in-
cludes those legacies, if they have lapsed by reason of the death of
the legatees.6 A general bequest of stock applies to full-paid as
well as partly- paid stock.’ Legacies may be made of stock over
which the testator has the power of appointment,’ and a will may

provide for an annuity to be derived from stock.?
§ 306. Ademption or revocation of a legacy of stock, and abate-
ment.— The ademption of a legacy is a revocation of that legacy

1Slingsby v. Granger, 7 H. L, Cases, °

278 (1859).

2Brown v. Brown, 4 K. & J., 704
(1858).

3 Collier v. Collier, 3 O. St., 369 (1854) ;
Haig v. Swiney, 1 Sim. & Stu., 487
(1823); Page v. Leapingwell, 18 Ves.,

4638 (1812); Fox v. Carr, 16 Hun, 566
(1879), involving a similar question. Cf. .

Blann v. Bell, 2 De G., M. & G., 775
(1852), holding that this rule applies
only to the “‘ funds,” but not to stock in
private corporations, A legacy of stock
to A., ‘‘ the dividends derived from the
same to be paid to her by B., whom I
name as trustee for said stock and
bonds, as said dividends may accrue
from time to time,”
title to the legatee. No trust exists.
Appeal of Arnold, 6 Atl. Rep., 751 (Pa. ny
1886).

4Wilson v. Maddison, 2 Y. & C. Ch,,
872 (1848).

5 Onondaga Trust & Deposit Co, v.
Price, 87 N. Y., 542 (1882). .

6 Carter v. Taggart, 16 Sim., 423 (1848);
Shuttleworth v. Greaves, 4 Myl. & Cr.,
35 (1888), holding that a legacy of stock
lapses as to those dying before the tes-
tator, though it is given to them, ‘‘ their
executors, administrators or assigns,”

passes complete

7Emery v. Wason, 107 Mass., 507
(1871). This case holds also,that, where
a call on the stock becomes due the day
after the testator died, it was the duty
of the executor to pay it from the gen-
eral fund.

8 See Re David’s Trusts, 1 Johns., 495
(1859); Innis v. Sayer, 3 Mac. & G., 606
(1851); Lawnds v. Lawnds, 1 You. &
Jer., 445 (1827); Nannock v. Horton, 7
Ves., 391 (1802); Re Gratwick’s Trusts,
L, R., 1 Eq., 177 (1865); Warren v. Pas-
tlewaite, 2 Coll: Ch., 116 (1845); Walker.
v. Mackie, 4 Russ., 16 (1827), disapproved
in Hughes v, Turner, 8 Myl. & K., 697
(1884).

9 As to the construction of different
provisions in wills, where an annuity
on stock is created, see Innes v. Mitch-
ell, 9 Ves., 212 (1803); Kerr v. Middlesex
Hospital, 2 De G., M. & G., 576 (1852);
Ross v. Borer, 2 Jo. & H., 469 (1862);
Yates v, Maddan, 8 Mac. & G., 532
(1857); Blewitt v. Roberts, Cr. & Ph.,
274 (1841); Potter v. Baker, 13 B., 273
(1851); Robinson v. Hunt, 4 B., 450
(1841); Hedges v. Harpur, 8 De G. & J.,
129 (1858); Evans v. Jones, 2 Collyer,
516 (1846); Manserge v, Campbell, 3
De G. & J, 232.

336
CH. XVIII. } LEGACIES AND GIFTS OF STOCK.

[§ 306.
in part or wholly, not by an express revocation in the will, but by
the acts of the testator. Consequently, an ademption applies only
to specific legacies. An ademption of a specific legacy of stock
generally arises by a sale of the stock by the testator. If the spe-
cific stock bequeathed is not owned by the testator at the time of
his death the legal conclusion is that the specific legacy is adeemed,
and the legatee taleas nothing.! A sale of the stock by the testator
after the will is made revokes or adeems the legacy, and it is as if
never made.’ A codicil giving all the“ personal estate” to another
is a revocation of a bequest of stock in the original will? Where
the testator specifies the amount of his stock, the specific legatees
of it abate proportionately with the residuary legatee, if upon his
death it is insufficient. The rule is otherwise if no mention is
made of what amount of stock he owns.’ If the general property
of the testator is exhausted in the payment of the debts of the es-
tate, specific legacies of stock abate proportionately with other
specific legacies. A specific legacy of stock’ is not adeemed by a
change in the stock produced by an act of the government. Thus,
where the government buys the stock, a specific legatee takes the
compensation if it has not yet been collected by the testator,’ but
not if it has been collected and used by the latter.® A change by
law of the funds into funds bearing a lower rate of interest does
not adeem a specific legacy of it,® even though the testator sells the

1¥Ford v. Ford, 23 N. H., 212 (1854),
although not a stock case, says in re-
gard to this branch of the law:
now established in England that the
only question is whether the specific
thing remains at the death of the testa-
tor, and that the intention to adeem
will not be considered beyond the ex-
pressions in the will. The weight
of American authority is in favor of the
English rule.”

2 Ashburner v. Macguire, 2 Brown’s
€h., 108 (1786); White v. Winchester,
23 Mass., 48 (1827); Humphreys v.
Humphreys, 2.Cox, 184 (1789); Hayes
v. Hayes, 1 Keen, 97 (1836); Blackstone
v. Blackstone, 3 Watts, 335 (1839),

3Kermode v. Macdonald, L. R., 1

Eq., 457 (1866) ; aff'd, L. R., 3 Ch., 584
(1868).
4Elwes v. Causton, 30 Beav., 554

(1862), following Page v. Leapingwell,

* 18 Ves., 463 (1812).

‘5Petre v. Petre, 14 Beav., 197 (1851);
(22)

“Tt is. 252 (1855).

De Lisle v. Hodges, L. R., 17 Eq., 440
(1874); Vivian v. Mortlock, 21 Beav.,
The debts of the estate may
be directed to be paid from the residue
of the stock. Choat v, Yeates, 1 Jac. &
Walk., 102 (1819).

6 Sparks v. Weedon, 21 Md., 156 (1868).
When general legacies of stock abate
proportionately with other general leg-
acies, the stock is estimated at its value
twelve months after the testator’s
death. Blackshaw v. Rogers, cited in
4 Brown’s Ch., 849,

7Walton v. Walton, 7 Johns, Ch.,
257 (1828).

8 Ludlam’s Estate, 18 Penn. St., 188
(1850).

9 Brown v. McGuire, 1 Beat. Ir- Ch.,
858 (1829). Buta legacy of stock in an
unincorporated company, which, after
the making Of the will, is incorporated
and the value of the ‘stock changed,
which change the testator accepts, fails
whether considered as a specific legacy

337

&
1

§§ 307, 308.] {OH.. XVII,

LEGACIES AND GIFTS OF STOOK.
former and buys the latter kind of funds! A specific legacy of
stock by a feme covert, who had the power to bequeath it, is not
adeemed by the fact that she had the stock transferred into her
own name after the death of her husband.?

8 807. Duty of executor or administrator as regards a specific or
general legacy of stock.—Where a legacy of stock is made, it is the
duty of the executor or administrator to carry into effect the wishes
of the testator by turning over to the legatee the stock bequeathed
if the legacy be specific; or, if the legacy be general; by either set-
ting aside for the legatee the required amount of stock from the
testator’s effects,- or purchasing the same for the legatee. The
specific legacy of stock vests in the legatee as soon as the executor
is satisfied that the general fund will pay the debts of the estate
and consents to such vesting. When once given the consent of the
executor is irrevocable, and only a court of chancery can-reach the
stock and subject it to the testator’s debts. The liability of the
legatee to pay calls on the stock is discussed elsewhere.

8 308. Gifts of stock.— Shares of stock in a corporation may be the
subject of a gift. No formal method of carrying out the gift is
necessary. A formal instrument of transfer, duly delivered to an
agent with directions to deliver to the donee, vests title in the
donee, though no certificates are transferred. A gift of stock,

adeemed, or a general legacy impossible
of fulfillment. In re Grey, 67 L. T.
Rep., 132 (1887).

1Partridge v. Partridge, Cases temp.
Talbot, 226 (1736). Roper on Legacies,
p. 331, 2d ed. (1848), is inclined to the
opinion that a specific legacy of stock is
not revived by a purchase of similar
stock after a sale of the stock be-
queathed.

2Dingwell v. Askew, 1 Cox’s Ch.,
427 (1788).

3Onondaga Trust & Deposit Co. v.
Price, 87 N. Y., 542 (1882); Hill v. Rock-
ingham Bank, 44 N. H., 567 (1868), hold-
ing that the legatee should sue the cor-
poration at law for refusing transfer
where the parties interested in the will
asseht; and in equity if both the corpo-
ration and such parties do not assent.
A decree of a probate court that the
legacy of stock shall be turned over to
the legatee cannot be required by the
corporation. Under the Vermont stat-
ute it is the duty of the executor to

transfer stock to the residuary legatee,:
Witters v. Sowles, 25 Fed. Rep., 168
(1885). As regards sales of stock by an
executor, see § 329, infra. If stock
specifically bequeathed is not given to
legatee, but is used for other purposes,
the other legatees must make good its
value. Tomlinson v. Bury, 14 N. E.
Rep., 187 (Mass., 1887). Executors in
New York are not entitled to commis-
sion on transfers of stock specifically
bequeathed. Schenck v. Dart, 22 N. ¥.,
420 (1860). A legacy may be paid by
the stock of the decedent at a valuation
thereby agreed upon. Chase v. Burritt,
14 Atl. Rep., 212 (Conn., 1888).

4See § 560, infra.

5 De Caumont v. Bogert, 36 Hun, 382
(1885), treating also a gift as an advance-
ment, See 8. C., Re Morgan, 104 N.
Y., 74. In England, under the statutes,
it is held that a gift of stock does not
vest in the donee until registry on the
corporate books.; Nauney v. Morgan,
57 L. T. Rep., 48 (1887).

888
 

CH. Xvi] LEGACIES AND GIFTL OF STOCK. [§ 308.
vested by a due transfer into the name of the donee, cannot be re-
voked by the donor.! In order to constitute a gift a perfectly clear
intent so to do must be proved? Where the gift is made in grati-
tude for care to be bestowed on another, the gift will fail upon the
death of the donee if it is proved that the stock had not been fully”
and finally delivered? A gift of the dividend of stock is a gift of
the stock itself. A gift of stock by one legatee to another, in the
belief that the testator so intended the stock to be disposed of, can-
not be revoked after an unsealed instrument of transfer is signed
and actual transfer made, even though it is afterwards found that
the testator had no such intent.’ A stockholder who has trans-
ferred his stock into the joint names of himself and-his wife cannot
dispose of his interest by a last will and testament. It passes to
the wife as the survivor.’ <A gift of stock, donatio causa mortis,
may be made by a mere delivery of the certificate to the donee.”

1 Standing v, Bowring, L. R., 27 Ch.
D., 341 (1884), where the donor trans-

ferred into the joint names of donor and

donee, and afterwards attempted to dis-
pose of the whole stock.

2 Where, however, the stock is pur-
chased by one in the name of another,
parol evidence may show as against the
__ creditors of the former that he intended
the stock as a gift tothe latter. Rider v.
Kidder, 10 Ves., 361 (1805). A gift of
stock to take effect only upon the death
of the donor is not absolute, and is sub-
ject to the payment of his debis exist-
ing at the time of his. death. Sterling
uv. Wilkinson, 3 8. E. Rep., 533 (Va.,
1887). A gift of stock whereby the
owner makes himself a trustee of it for
his donees is complete, and a recogni-
tion of the trust in his will does not
render the stock a part of his estate,
subject to the dower right of his wife,
Dickerson’s Appeal, 8 Atl. Rep., 64
(Penn., 1837); Stone v. Hackett, 12
Gray, 227.

3 Jackson v. Twenty-third St. R’y Co.,
88 N. Y., 520 (1882). When a gift of
stock is made in accordance with an
agreement to compensate the donee for
taking care of the donor, a delivery of
the certificate without any transfer suf-
fices. Reed v. Copeland, 50 Conn., 472
(1883), But the contract-to make the

gift must not be in opposition to public .
policy, nor in fraud of the rights of
other stockholders. Nickerson v. Eng-
lish, 142 Mass., 267 (1886),

4See § 305. /

5Delamater’s Estate, 1 Whart. (Pa.),
362 (1886).

6 Dummer ¥,. Pitcher, 5 Sim., 35 (1831); «
affirmed, 2M. & K., 262 (1833). A gift
of stock direct from the husband to the
wife is legal. She thereupon takes a
sole and separate estate therein. Dem-
ing v, Williams, 26 Conn., 226 (185%).
The case of Francis v. New York & B,
El. R. BR. Co., 17 Abb. N. C., 1 (N. Y.,
1885), holds that, when a gift of stock is
made to a minor, it is complete and
irrevocable, so far as the donor is con-
cerned; but the minor may, upon at-
taining majority, either accept or re-
fuse it.

7Grymes v. Hone, Ex’r, 49 N. Y., 17
(1872); Walsh v. Sexton, 55 Barb., 251
(1869); Allerton v. Lang, 10 Bosw., 362
(1863). The last two cases hold that the
certificates need not even be indorsed.
or transferred, but that a mere delivery
without any writing is sufficient. Cf.
§ 875. Adonatio causa mortis of stock
is revoked by the recovery of the donor,
even though it is registered. Stainland
v. Willott, 3 Mac. & G., 664 (1850). In
England railway stock is not the sub-

339
§ 308.]

LEGACIES AND GIFTS OF STOCK.

[cH. XVIII.

So, also, the delivery and acceptance of a gift of stock is held to be
effectual where the donor had the stock transferred into the name
of the donee and took out certificates in the donee’s name, even
though-the donor died before the donee knew of the gift.!.

ject of a donatio causa mortis by a de-
livery of the certificate, since the trans-
fer can be by deed only. Moore v.
Moore, 43 L. J. (Ch.), 617 (1874).

1 Robert’s Appeal, 85 Pa, St., 84 (1877).
In Maryland it is held that a mere
transfer of the certificates of stock,

without « registry on the corporate.

book, is incomplete as a gift, and cannot
be enforced against the personal repre-

sentatives of the deceased donor. Balti-
more Retort, etc., Co. v. Mali, 66 Md.,
53 (1886). Buta written memorandum
left by a decedent to the effect that he
thereby gives certain stock to a person,
but retains the same during life in or-
der that he, the donor, may have the
dividends, is not a valid gift. Re Shield,
53 L, T., N. S., 5 (1885).

340
CHAPTER XIX.

WHO MAY BUY AND SELL STOCK.

§ 309-310. Competency of a corpora-
tion to purchase shares of
its own capital stock.

311-313. Rule in the United States.

314. The stock is not merged.

815. Purchase by a corporation of
stock in another corpora-
tion — Purchase by ‘railroad.

316. Purchases of stock by banks and
pledges to banks. :

817. Purchases of stock by insurance,
manufacturing and other cor-
porations.

318. Infants as purchasers of stock.

319. Married women as purchasers or
vendors of stock. ;

820. Competency of miscellaneous
parties.

321. Sales, purchases and transfers
by agents.

 

§ 322. Purchases of stock by guardians,
executors and trustees.

323-324. Sale or pledge of stock by

trustee in breach of his

trust.
325-326. Transferee of stock from

trustee is protected,
when. i
327. Rights and liability of the cor-
poration allowing a transfer
by a trustee in breach of his
trust.
828. Sales of stock by a guardian.
829. Sales by executor or administra-
tor.
330. Duty and liability of the corpo-

ration in sales by an executor
or administrator.

.§ 309. Competency of a corporation to purchase shares of its own
capital stock.— In England a long line of decisions has established
the rule that, at common law, a corporation cannot purchase shares

of its own capital stock."

This rule is enounced clearly and de-

cisely, and is closely adhered to.? The corporation may be given
an express power for this purpose; but, unless so given, the pur-

1Trevor v. Whitworth, 57 L. T. Rep.,
457 (H. of L., 188%), reviewing many
cases; Re Marseilles Extension R’y Co.,
L. R., 7 Ch., 161 (1871); Evans v. Cov-
entry, 25 L. J. (Ch.), 489, 501 (1856);
Cross’ Case, 88 L. J. (Ch.), 583 (1869) ;
Morgan’s Case, 1 De G. & Sm., 750
(1849); Ha parte Morgan, 1 Mac. & G.,
225 (1849); Eyre’s Case, 31 Beav., 177
(1862); 8 Ry & Corp. L. J., 169. Cf.
Taylor v. Hughes, 2 J..& Lat. (Irish
Ch.), 24 (1844), holding that a bank-
ing company, at common law, may
buy its own stock the same as a Co-
partnership may buy out a partner.
Where a director buys merchandise of
his corporation, and pays for it in stock

of the corporation, and the transaction
is ratified in general meeting, the di-
rector, on a winding up, is not liable

for the value of the merchandise.

Weekes’ Case, 17 L. R., Ir., 239. A pur-
chase by a corporation of its own stock
and payment by debentures is void,

and aresale of the stock at a discount
is void. Re London, etc., Co., 59 Law
Times Rep., 109 (1888).

~ 2Zulueta’s Claim, L. R., 5 Ch., 444
(1879); Hope v. International Financial
Soc., L. R., 4 Ch: Div., 327 (1876), hold-
ing also that a stockholder may enjoin
the purchase; distinguishing Teasdale’s.
Case, L. R., 9 Ch., 54,

341

4
\

§ 309.]

WHO MAY BUY AND SELL. STOCK.

[cH.xI3

chase is held to be beyond the legal powers of the directors and of
the whole body of stockholders." The object of the rule is to pre-
serve the rights of the corporate creditors, and also to confine the
corporation within the express powers given it, and the implied
powers necessary to its transaction of business? If the sale is
completed, and the corporation afterwards become insolvent, the
stockholder who sold the stock to the corporation is liable, on the

winding up, as though he never had made such a sale.°

If, how-

ever, the stockholder sells to a person, not knowing that the latter
is purchasing as a trustee for the corporation, the vendor is not
liable on such stock.! The directors authorizing or directing a pur-
chase for the corporation of shares of its own capital stock are
liable personally to the same extent that the selling stockholder

would have been had the sale not taken place.’

1 Zulueta’s Claim, supra; Hope v. In-
ternational Financial Soc., supra. See,
also, Lindley on Partnership, p. 739
(Callaghan & Co., 1881), Under an ex-
press power to the directors to enter
into any contract and engagement that
seemed best for the company, such a
purchase was upheld. Singer’s Case,
W. N. (1869), 206; Cockburn’s Case, 4
De G. & Sm., 177 (1850), where power
was given by the deed of settlement.
See, however, Ward’s Case, 29 W. R.,
768 (1881), where an express power to
purchase its own stock was held not to
authorize a trafficking in that stock —
the buying and selling for purposes of
gain.

2JTd. Compare, however, Ward’s Case,
29 W. R., 768 (1881), where the court
says: ‘If the company could not
question it, neither can a creditor; for
he can obtain nothing but what the
company can get from the sharehold-
ers,”

3 Walter’s 2d Case, 8 DeG. & Sm.,
244 (1850); Richmond’s Ex’rs Case, 3
DeG. & Sm., 96 (1859); Munts’ Case, 22
Beav., 55 (1856), where the stockholders
disagreed and the corporation bought
out one faction; Daniell’s Case, 22
Beav., 48 (1856); Bennetit’s Case, 5 De

-G., M. & G., 284 (1854), where the stock-
holders disagreed concerning the va-
lidity of a lease, and the corporation

Generally the

bought out part. If, however, the cor-
poration, six years after the transfer, dis-
covers that the transfer was invalid, and
summarily retransfers to the vendor,
the latter may apply to a court of
equity to compel the corporation to keep
the stock. Gardiner v. Victoria Estates
Co., 12 Ct. of Ses. (Sc. 4th series), 1856
(1885). See, also, $251, supra.

4 Nicol’s Case, 3 De G. & J., 387 (1858);
Grady’s Case, 1 De G., J. & S., 488 (1863),
where the vendee was managing agent
of the corporation, and the sale of the
stock was to stop litigation. Rich-
mond’s Case, 3 De G. & Sm., 96 (1849),
holds, however, that if the vendor's
selling agent, his solicitor, knew that
the sale was for the benefit of the cor-
poration, the stockholder himself is
chargeable with knowledge. See Re
Orpen, 32 L. J. (Ch)., 638 (1863), hold-
ing that it is a question for the jury
whether the vendee purchased for the
corporation or for himself. Johnson wv.
Laflin, 5 Dill., 65; 103 U. 8., 800 (1878).
See, also, § 251.

5Evans v. Coventry, 25 L. J. (Ch.),
489, 501 (1856). To same effect, Land
Credit Co. of Ireland v, Fermoy, L. R.,.
8 Eq. Cas., 7 (1869); Marzette’s Case, 42
L, T., N. S., 206 (1880). The directors
may have contributions from each other
for sums paid out by their authority for
such purchases, and for which one or

342

é
OH. xix.] WHO MAY BUY AND SELL STOCK. [8$ 310, 811.

‘transfer is made, not to the corporation directly, but toa trustee on
behalf of or for the benefit of the corporation. This practice is
not at all necessary, and has no effect other than a transfer direct
to the corporation itself, unless it be that the vendor of the stock
may not know that his vendee purchases for the corporation, and
thereby escapes liability on the winding up. If the contract is ex-
ecutory, the corporation may repudiate it and refuse to pay the
purchase money for the stock.! If, however, the sale is completed,
the stock belongs to the corporation, and does not pass to the
vendor’ s assignee in bankruptcy.’

§ 310. Where the transfer of stock to the ‘corporation is made by
one of the original subscribers for stock, it frequently becomes a
difficult question to decide whether the transaction was a cancella-
tion of the subscription contract or was a sale of the stock to the

corporation. Each‘case turns largely on its own peculiar facts
and circumstances. If the transaction is a cancellation, it is, legal.
‘In England, if it is a sale, it is illegal. The courts seem to favor a
construction whereby the transaction is held to be a sale, and the ©
stockholder made liable on the winding up?

§ 311. Rule in the United States— In this country there has been
a difference of opinion as to whether a corporation may purchase
shares of its own stock. In Illinois, Massachusetts and some other
states it is held that such a purchase is legal and allowable! And,

more has been held liable to the corpo-
ration. Ashhurst v. Mason, L. R., 20
Eq., 225 (1875). The directors are not
liable to the vendor of the stock for the
failure of the corporation to complete
their purchase for it of its own stock.
Abeles v. Cochran, 22 Kan., 405 (1879).

1The corporation may even refuse to
pay the price to the brokers employed
by its directors to buy its stock. Zulu-

eta’s Claim, L. R., 5 Ch., 444 (1879). This,

of course, does not authorize the corpo-
ration to retain the stock so purchased.

2Great Eastern R’y Co. v. Turner, 42
L, J. (Ch.), 83 (1878),

3 Hall’s Case, L. R., 5 Ch., '707 (1870),
distinguishing Snell’s Case, L. R., 5 Ch.,
22, See, also, Thomas’ Case, L. R., 18
Eq., 487 (1872); Teasdale’s Case, L. R.,
'9Ch., 54 (1873); Duke’s Case, L. R., 1 Ch.
Div., 622 (1876). See, also, 8§ 167-170,
supra.

4In Illinois, in Chicago, P. & 8. R. R,
v. President, ete. , of Town of Mar-

‘seilles, 84 Ill, 145 (1876), the court said:

‘We entertain no doubt that a rail-
road company may, for legitimate pur-
poses, purchase shares of stock which
have been issued to individuals. Such
is believed to have been the general cus-
tom of such bodies; nor have we known
the power to have been questioned.”
A contract whereby the corporation
agreed to take back the stock unless
certain things were done within a cer-
tain time was sustained. §. C., id., 643,
where the court says, “‘ the power of the
directors of a company, when not pro-

' hibited by their charter, to purchase

shares of stock of their company,” is
well recognized; Clapp v. Peterson, 104
IIL, 25 (1882); Chetlain v. Republic Life
Ins. Co., 86 Ill, 220 (1877); Fraser v,
Ritchie, 8 Bradw., 554 (1881), where a
perfectly solvent concern sold certain
property and took its own stock in pay-
ment; Dupee v. Boston Water-power
Co,, 114 Mass., 37 (1873), holding that a

343
-§ 811.)

WHO MAY BUY AND SELL STOCK.

[eH. xix.

indeed, if there is no statutory liability on stock, and if stockhold-
ers do not object, there is no reason why the net profits of a cor-
poration should not be applied to purchasing its stock, instead of
being used for a dividend.'. The few cases which appear to uphold

stockholder could not enjoin the pur-
chase, the court saying: ‘‘In the ab-
sence of legislative provision to the
contrary, a corporation may hold and
sell its own stock, and may receive it in
pledge or in payment in the lawful ex-
ercise of its corporate powers;” Leland
v. Hayden, 102 Mass., 542 (1869); Crease
v. Babcock, 51 Mass., 525, 557 (1846),
holding that the stockholders are not
liable for the deficiency caused by part
of the stock being owned by the cor-
poration. In Pennsylvania, in Eby v.
Guest, 94 Penn. St., 160 (1880), and
Early & Lane’s Appeal, 89 id., 411
(1879), it was held that “ the assignment
of the stock of. a corporation to itself,
as collateral security for a loan, divests
' the title of the assignor so far as to pre-
vent a sale of it under a fi. fa. against
the assignor.” But in Coleman v. Co-
lumbia Oil Co., 51 Penn. St., 74 (1865),
where a stockholder had accepted the
benefit of the purchase and then ob-
jected to its legality, the court said:

“The employment of corporate funds to

speculate in the stock of the company
to which the funds belong is not a prac-
tice to be encouraged; but the present
plaintiff is not in position to censure the
practice.” He ‘‘ should have sought an
’ injunction against the company to re-
strain the purchase, or to cancel it if
done before he had knowledge of it; or
if he would bring an action at law he
should have declared for his share of
the funds which he complains were
misapplied in huying the shares.” In
Georgia, in the case of Hartridge v.
Rockwell, R, M. Charlton, 260 (1826),
the court held: “If from the course of
business or the state of things the capi-
tal of the bank cannot be usefully em-
ployed in loans, there can, I think, be
no objection against the purchase of its
own stock.” The legislature, however,

thought differently, and by the Penal
Code of 1833 made such purchases a
penal offense. See Robinson v, Beale,
26 Ga., 17 (1858), where the purchase
was held to be authorized under a power
to purchase goods, etc. See, also, as
supporting the doctrine, Farmers’ &
Mechanics’ Bank v. Champlain Trans-
portation Co., 18 Vt., 131, 139 (1846);
Iowa Lumber Co. v. Foster, 49 Iowa,
25 (1878), under a power to purchase
‘property that may be deemed desir-
able in the transaction of its business.”
A corporation which has agreed to pay
a person a certain sum for his stock in
the corporation, if he will transfer it to
a corporate creditor in payment of the
corporate debt, is liable for that sum to
the stockholder. Snyder v. Tunitas,
etc., Co., 13 Pac. Rep., 479 (Cal., 1887).

1In Ohio the\early case of Taylor v,
Miami Ex. Co., 6 Ohio Rep., 166 (1838),
held that a bank may receive from the
stockholders transfers of stock in pay-
ment of debts previously contracted by
them. ‘See, also, State of Ohio v. Frank-
lin Bank of Colambus, 10 Ohio Rep., 91,
97 (1840). Butin Cappin v. Greenlees,
38 O. St., 275 (1882), the court refused
to enforce an executory contract for the
sale to the corporation of its own stock,
and said: ‘‘The doctrine that corpora-
tions, when not prohibited by their
charters, may buy and sell their own
stock, is supported by a line of author-
ities. But, nevertheless, we
think the decided weight of authority,
both in England and in the United
States, is against the existence of the
power, unless conferred by express
grant or clear implication. The foun-
dation principle upon which these lat-
ter cases rest is that a corporation pos-
sesses no powers except such as are
conferred upon it by its charter, either
by express grant or necessary implica-

344
CH. XIx.]

WHO MAY BUY AND SELL STOCK. [$ 312.

a contrary rule are found, upon close examination, to come within
the exceptions given above.' All of the American courts coincide
in the view that a corporation may take shares of its own stock in
payment of or security for antecedent debts due to the corpora-
tion? A corporation may take its own stock by way of gift’ or
bequest.4

§ 312. The objection usually made to allowing a corporation to
purchase its own stock is that thereby the corporate funds are
expended and no property is received by the corporation, except
the right to. resell. In some cases, also, a statutory liability at-
tached to the stock-is thereby jeopardized. The latter objection is
answered by the principle of law that the transferrer of stock to
the corporation is liable on the subscription and statutory liability
to the same extent as though no transfer to the corporation had
been made.> The former objection is merely a limit to the power of
the corporation to purchase. In Illinois, the state where the rights
of the corporation to make such purchases i is most clearly and deci-
sively established, the collateral principle that such purchases are to
be declared illegal and voidable at the instance of corporate creditors
who are injured thereby is distinctly stated and rigidly applied.®

tion.” The proposed purchase was held
to be invalid under the constitutional
provision imposing a personal liability
on all stockholders. But see Morgan v.

Lewis, 17 N. E. Rep., 558 (O., 1888)._

Quo warranto does not lie against a cor-
poration for purchasing its own stock.
State v. Minn., etc., Co., 41 N. W. Rep.,
1020 (Minn., 1889). 39 Fed. Rep. 89.
1Thus, in German Sav. B’k v. Wulfe-
kuhler, 19 Kan., 60 (1877), the bank was
insolvent when the stock was purchased
by it. The purchase was declared ille-
gal, _In Bent v. Hart, 10 Mo. App., 143
(1881), the corporation did not purchase
its own stock. The stock was pur-
chased by another corporation, and was
sustained. In St. Louis, etc., Co. v.
Hilbert, 1 R’y & Corp. L. J., 160 (Mo.
Ct. of App., 1887), the stock purchased
by the corporation was not paid-up
stock. In State v. Building Assoc., 35
O. St., 258 (1880), the peculiar purposes
and articles of association of a building
association governed the decision. In
Barton v. Port Jackson, etc., Co., 17
Barb., 397 (1854), the company mort-

gaged its road in order to raise money
to buy the stock.

2The leading case is City Bank of
Columbus v. Bruce, 17 N. Y., 507 (1858),
where a corporation received $133,000
of its own stock in payment of debts
due the corporation, the court saying it
is “not aware of any common-law
principle which forbids it.” See, also,
Verplanck v. Mercantile Ins. Co., 1
Edw. Ch., 84 (1881). State Bank of Ohio
v. Fox, 3 Blatch., 481 (1856), where the
stock was taken in payment of a debt
due the corporation. In Williams v.
Savage Mfg. Co., 3 Md. Ch., 418, 451
(1851), the creditor who had given stock
to a corporation in payment of a debt
was allowed to deny the amount of the
debt and to take back the stock upon
payment'of the amount actually due.

3 Lake Superior Iron Co. v. Drexel, 90

N. Y., 87 (1882), ’ where its legality was.

assumed.

4Rivanna Nav. Co. v. Dawsons, 3
Gratt., 19 (1846).

5See § 251, supra.

6 Clapp v. Peterson, 104 IIl., 26 (1882);

> 345
’

§ 813.] WHO MAY BUY AND SELL STOCK. [OH. XIX.

If the corporation is- insolvent at the time of the purchase, it is
clearly an invalid transaction, and will be set aside.’ The rule
goes still further, and declares that.if a corporation, by a purchase
of shares of its own capital stock, thereby reduces its actual assets
below its capital stock, or if the actual assets at that time are less
than the capital stock, such purchase may be impeached and set
aside, and the vendor of the stock rendered liable thereon at the
instance of a corporate creditor.? In Massachusetts not even a
dissenting stockholder can complain.*

§ 313. Frequently statutes are passed. expressly prohibiting a
corporation from purchasing shares of its own stock. The national
banks in this country are prohibited from so doing by the statutes

Peterson v. Ill. Land & Loan Co., 6
Bradw., 257 (1880). In Crandall v. Lin-

benefit. Each case must, therefore, de-
pend upon and be determined by its

coln, 52 Conn., 73 (1884), where stock -

was bought for the corporation by a cor-
porate agent, the latter was held liable
to the receiver of the corporation for
the money so expended. The court
said: ‘‘ The statute forbidding the com-
pany to make dividends payable from
the stock, and to loan money upon a
pledge of its stock, by necessary impli-
cation forbids the company from pur-
chasing its. stock. As a rule,
, to which there are few, if any, excep-
tions, when a stockholder conveys his
stock to the company and receives in
return a portion of the capital, he holds
the money so received subject to the
superior equities of creditors.” But the
selling stockholder, not knowing that
his vendee buys for the corporation, is
not liable. Johnson v, Laflin, 5 Dill,
65; 103 U. S., 800. |
1Currier v. Lebanon Slate Co., 56 N.
“HL, 262 (1875); Alexander v. Relfe, 74
Mo., 495 (1881).
. 2 Fraser v. Ritchie, 8 Bradw. (Ill), 554
(1881), holding that the right of the cor-
poration to purchase its own. stock .is
subject to certain restrictions, “one of
which is that it shall not be done at
such time and in such manner as to
take away the security upon which the
creditors of the corporation have the
right to rely for the payment of their
claims; or, in other words, so as not to
diminish the fund created for their

own facts and circumstances.” Gillett
v. Moody, 3 N. Y., 479 (1850): ’ Where,
directors and stockholders desire to sell
the enterprise, and do so by paying for
their stock out of the corporate funds,
and then re-insuring all risks in an-
other company, and turning over every-
thing to the latter, a receiver of the
company so sold out may hold a di-
rector liable for moneys so paid out.
Guild v. Parker, 43 N. J. L., 430 (1881).
A receiver of a corporation seeking to
set aside a purchase of stock by itself
must tender back the stock before su-
ing to recover the money. Pierson v.
McCurdy, 38 Hun, 520 (1884). In the
case In re Republic Ins. Co,,*3 Biss., 452 .
(1878), where the insolvent corporation
had, some three years previously, when
the corporation was solvent, purchased
stock of various stockholders and still
held ‘it, the court held that these old
stockholders were not liable for the
unpaid subscription price thereof, In
Farnsworth v. Robbins, 86 Minn., 369
(1887), the receiver of an insolvent com-
pany recovered from a_ stockholder
whose stock the company had pur-
chased. ae

3 Dupee v. Boston, etc., Co., 114 Mass.,
37 (1878), See § 282 as to the power of a
corporation to purchase stock in order.
to reduce its capital stock.

4See another book published by the
author. yA

346
 

ou. XIx.]

of the federal government.!

WHO MAY BUY AND SELL STOCK.

[$ 314.

In New York, by statute, both mon-

eyed’? and railroad’ corporations are prohibited from purchasing

shares of their own capital stock.

§ 314. The stock is not merged.—

Whena corporation buys shares

of its own capital stock, the capital stock is not reduced by that
amount, nor is the stock ‘merged. 4 So long, however, as the corpo-

IR, 8. of U. S., § 5201. See Johnson
v. Laflin, 5 Dill., 65; 103 U. S., 800,
holding that, if a stockholder in good
faith and without notice sells his stock
to one who purchases for the bank, the
sale is valid so far as he is ‘concerned,
and he is not liable thereon. See, also,
Bank v. Lanier, 11 Wall., 369 (1870),
holding that the bank cannot take its
own stock in pledge.

When the president of a bank buys
its stock for the bank itself, taking title
in his own name, he is liable as a stock-
holder. The purchase for the bank, how-
ever, is void. Bundy: v. Jackson, 24
Fed. Rep., 628 (1885). Although a na-
tional bank must sell its stock taken in
payment of a debt within six months,
it may sell on credit, taking a note in
payment and the stock as collateral.
Union Nat. Bank v, Hunt, 76 Mo., 439
(1882). Where a national bank receives

_its own stock in pledge at the time of

1

making the loan, and sells the stock as
collateral, on failure of the debtor to
pay, the latter cannot complain that the
statute has been violated. Nat. Bank
of Xenia v. Stewart, 107 U.'S., 676
(1882). See, also, Gold Mining Co. v.
National Bank, 96 U. S., 640 (1877);
Shoemaker v. Nat. Mechanics’ Bank, 31
Md., 396; O’Hare v. Second Nat. B’k,

‘* 77 Penn. St., 96; Stewart v. Nat. Union

Bank, 2 Abb. (N. 8.), 424 (1869). A na-
tional bank president and directors are
not liable criminally for purchasing the
stock of the bank for the bank itself.
United States v. Britton, 107 U. S., 192
(1882); id., 108 U. S., 655 (1882).

21 BR.8., ch. 18, title 2, art. 1, § 1 (5)
(p. 1367, 7th ed.). ‘* The evident inten-
tion was to prohibit a division of the
capital, or any portion of it, among the
stockholders, by whatever irstrumen-

tality the powers of the corporation in
doing the act might be exerted.” Gillett
v. Moody, 3 N. Y., 479, 487. See, also,
U.S. Trust Co. v. U.S. Fire Ins. Co.,
18 N. Y., 199, 226 (1858); Tracy v. Tal-
mage, 14 N. Y., 162 (1856). But pur-
chasers of the stock from a banking
corporation that had purchased it in
violation of the statute cannot com-
plain. They cannot impeach their own
title. Case of the Reciprocity Bank, 22
N. Y., 9, 17 (1860). Nor can the vendor
of the stock to the bank claim that the
sale wasinvalid. Heis estopped. United
States Trust Co. v. Harris, 2 Bosw., 75,
91 (1857).

3N. Y. Session Laws, 1850, ch. 140,
§ 8 (p. 1547, 7th ed. of R.S.), the statute
reading, ‘It shall not be lawful for
such company to use any of its funds in
the purchase of any stock in its own or
in any other corporation.” Id., Laws
1881, ch. 468, § 12, with the addition,
“‘except so far as the same may be
agreed upon in its articles of associa-
tion,” in cases of certain railroad corpo-
rations. See, also, Barton v. Port, etc.,
P. R, Co., 17 Barb., 397 (1854).

4State v. Smith, 48 Vt., 266 (1876);
Williams v. Savage Mfg. Co., 3 Md.
Ch., 418, 451 (1851); City. B’k of Colum-
bus v. Bruce, 17 N. Y., 507 (1858); State
Bank: of Ohio v. Fox, 3 Blatch., 431
(1856), the court saying: ‘‘The stock
was not extinguished or destroyed by
the purchase thereof by the corpora-
tion;” Vail v. Hamilton, 85 N. Y., 453
(1881); American R’y Frog Co. v. Haven,
101 Mass., 398 (1869); Commonwealth v.
Boston, etc., R. R. Co., 2, New Eng.
Rep., 647 (Mass., 1886) ; Ha parte Holmes,
5 Cow., 426 (1826), See, also, §§ 282,
261.

347

/
§ 315.] WHO MAY BUY AND SELL STOCK. [CH, xrx,
ration retains the ownership, the stock is lifeless, without rights or
powers. It cannot be voted nor can it-draw dividends, even though
it is held in the name of a trustee for the benefit of the corpora-
tion. But at any time the corporation may resuscitate it by sell-
ing it, and transferring it to the purchaser. Such sale may be
made upon the authority of the corporate directors. It may be
sold at its market value, and need not be held for its par value, as
is necessary in an original issue of stock.

§ 315. Purchase by a corporation of stock in another corpora-
tion — Purchase by railroad. It may be stated as a general rule,
with but few exceptions,.that a corporation has no implied power
to purchase shares of the capital stock of another corporation.
Especially is this the rule as regards railroad corporations. It has
been firmly settled by well-considered cases that one railroad com-
pany cannot purchase shares of stock in another railroad company,
especially where the purchase is for the purpose of controlling or

absorbing the latter.‘ In a few instances, particular corporations, by

1See § 613, infra.

2 State Bank of Ohio v, Fox, 3 Blatch.,
481 (1856); State v. Smith, 48 Vt., 266
(1876). See, also, § 282.

3 See § 22, supra.

4See §§ 68, 22,n. The most important
case is Central R. R. Co. v. Collins, 40
Ga., 582 (1869), where a stockholder in
one railroad obtained an injunction
against its purchase, for purposes of con-
solidation, of stock in a rival and com-
peting railroad. The court declared the
purchase to be beyond the corporate
powers and contrary to public policy,
and says, ‘‘it'is a general principle that
a railroad company, without express
authority given by the legislature to
make the purchase, cannot purchase
stock in another railroad company.”
Angell & Ames, § 892, To same effect,
Hazelhurst v. Savannah, G. & N. A. R.
R. Co., 48 Ga., 18, 57 (1871), the court
saying: ‘‘If one railroad may, at its op-
tion, buy the stock of another, it prac-
tically undertakes a new enterprise not
contemplated by its charter. This it
cannot do by any implication. The power
so to do must be clear.” In the case of
Elkins v, Camden & ‘Atlantic R. R. Co. ey
86 New Jersey Eq. R., 5 (1882), a similar
injunction was eranied, Such purchase

is not authorized by a power to lease
other lines, nor to build them. ‘The
purchase of a rival railroad is (not to
speak of public policy) foreign to the
objects for which the defendant was in-
corporated. As a purchase with
a view to extinguishing competition, the
transaction is clearly ultra vires.” It is
immaterial that the complainant pur-
chased stock for the purpose of obtain-
ing the injunction. Salomons v. Laing,
12 Beav., 389, 353 (1850); Great Northern
R’y Co. v. Eastern Counties R’y Co., 21
L. J. (Ch.), 887 (1851), where the object
was to control the corporation. | The
court said it was an ‘‘ attempt to carry
into effect, without the intervention of
parliament, what cannot lawfully be
done except by parliament, in the exer-
cise of its discretion with reference to
the interest of the public.” Maunsell uv.
Midland, Great Western R’y Co., 1 Hem.
& M., 180 (1863), relative to the power of
a railroad company to subscribe for the
stock of another railroad. Central R. R.
Co. of N, J. v. Pennsylvania R. BR. Co.,
81 N. J. Eq. Rep., 475, 494 (1879), where
the defendant was enjoined from build-
ing another railroad by means of an inde-
pendent corporation operated by “‘dum-
mies.” The court said: ‘‘ A corporation

348

 
!

CH. XIX]

WHO MAY BUY AND SELL STOCK.

[$ B15.

their charters, are given the power to invest in other railroad stocks,

and in other instances general statutes to that effect prevail.!

Oc-

casionally prohibitions against such purchases-are placed in ‘the con-

stitution of a state.”

cannot in its ‘own name subscribe for
stock or be a corporation under the gen-
eral railroad law, nor can it do so by a
simulated compliance with the provis-
ions of the law through its agents as
pretended corporators or subscribers for
stock.” Pearson v. Concord R. R. Co., 18
Am. & Eng. R. R. Cases, 102 (N. H.,

1883), where a railroad had pur chased the
controlling interest in the stock of a con-
necting railroad and was managing it in
the interest of the former road. A suit by
a stockholder of the defrauded road to
enjoin such act was sustained. Stock-
holders in a Michigan railroad may en-
join it from purchasing the stock,, prop-
erty and franchises of another railroad.
Mackintosh v. Flint, etc., R. R., 34 Fed.
Rep., 582 (1888). See, also, Green’s
Brice’s Ultra Vires, 91 (2d ed.). Where
a@ railroad corporation has power to
consolidate with another, it may pur-
chase the stock of that other, Hill v,
Nisbit, 100 Ind., 341 (1884). One rail-
road corporation cannot buy the stock
of another railroad corporation. If it
does so, it may be ‘enjoined from vot-
ing that stock. Woods v. Memphis, etc.,
R. R. Co, 5 Ry & Corp. L. J, 872
(Ala., 1889); Millbank v. N. Y., ete., 64
How. Pr., 20 (1882). Cf. Great, Western
R’y Co. v. Metropolitan R’y Co., 32 L. J.
(Ch.), 382 (1863). Where a railroad com-
pany, in the name of one of its leased
‘lines, contracted to purchase a majority
of the stock of still another line, the
vendor representing that the last line
was unincumbered, the first-mentioned
company may avoid the contract by
proving that an incumbrance rested on
the road to be sold. Southwestern R’y
Co. v. Papot, 67 Ga,, 675 (1881). A. con-
trolling stockholder in one railroad cor-
poration may become the controlling
stockholder in another railroad corpora-
tion. Havemeyer v. Havemeyer, 43

Super. Ct. (N. Y.), 506 (1878); 45 id., 464;
aff'd, 86 N. Y., 618; O’Brien v. Breiton-
bach, 1 Hilt., 804, A bondholder cannot
object. Matthews v. Murchison, 15 Fed.
Rep., 691 (1883). Where a railroad presi-
dent uses its funds to purchase the stock
of a construction company that has the
‘stocks and bonds of a contemplated com-
peting line which the construction com”
pany has agreed to build, the sale of the
stock to such president may be attacked
by parties who were defrauded by the
party who sold the stock of the con-
struction company. Langdon v. Branch,
37 Fed. Rep., 449 (1888). A railroad cor-
poration which is advancing money to
another corporation may take the bonds
and stock of the latter as security. The
West Virginia statutes do not prevent
such.act. County Court v. Baltimore,
etc, R. R., 85 Fed Rep., 161 (1888).
Mayor v. Baltimore & O. R. R. Co.,
21 Md., 50 (1863); Zabriskie y. Cleveland,
etc., R. R. Co., 28 How., 881 (1859), as to
the Ohio statute. The of case White v.
Syracuse & Utica R: R. Co., 14 Barb.,
559 (1853), held to be constitutional and
valid, a general law allowing any New
York railroad to subscribe to the stock
of the Great Western Railroad, Canada
West. Matthews v, Murchison, 17 Fed.
Rep., 760 (1888), on the North Carolina
act. Asto the Kansas act allowing such
purchases, see Atchison, etc., R. R. Co.
v. Fletcher, 10 Pac. Rep., 596 (1886);
Ryan v, Leavenworth, etc., R’y Co., 21
Kan., 365 (1879). 2
2 By the constitution of Pennsylvania
any railroad corporation is forbidden to.
control any other railroad corporation
owning or having under its controla
parallel or competing line. Under this
provision the Pennsylvania Railroad
Company was enjoined from purchasing
a majority of the stock of the South
Pennsylvania Railroad Company. In

349

t
oH. XIx,
§ 316. Purchases of stock by banks and pledges to banks. A
banking corporation has at common law no power to purchase or
invest in the stock of another corporation, whether that other cor-
poration be itself a bank or of a different business.'' The bank is .
organized for the purpose of receiving deposits and loaning money, |
not for the purpose of dealing in stocks. Any attempt to engage
in such transaction is a violation of its charter rights and of its
duty towards the stockholders and the public. There is a difference
of opinion as to whether a pledge of stock, as collateral security
for a loan made by the bank at the time of pledging the stock, is
legal. The weight of authority holds that such a pledge of stock
is valid and may be enforced.? This rule is in accordance with a
widespread custom of banks, and seems to have been denied in but

§ 316.] WHO MAY BUY AND SELL STOCK.

one case.®

this noted case (Penn. R. R. Co. v. Com-
monwealth, 7 Atl. Rep., 368 — 1886), the
court said that the ownership of a ma-
jority of the stock gave ‘‘ control” in the
sense of that word as used in the con-
stitution. Cf. Pullman Pal, Car Co. v.
Missouri Pac. R. R. Co., 11 Fed. Rep.,
632 (1882) ; aff'd, 115 U.S, , 587 (1885), con-
struing the word “control” differently
in a contract whereby the defendant
was to use the plaintiff’s cars over roads
under the defendant's control.
The supreme court of Pennsylvania,
‘in Penn. R. R. Co. v. Commonwealth,
7 Atl. Rep., 374 (Penn., 1886), also sus-
tained an injunction enjoining a corpo-
ration, a majority of whose stock was
owned by the Pennsylvania Railroad
Company, from purchasing a majority
of the stock of aroad competing with
the Pennsylvania Railroad Company.
Although one railroad company owns
a majority of the stock of another rail-
road company, yet the identity of the
two are separate as regards being par-
ties to suits. Jessup v. Ill, etc., R. R.,
36 Fed. Rep., 735 (1888). A corporation
which owns a majority of the stock of
another corporation, and buys goods of
it, is not bound to-see that the latter
turns the funds over to a party who

owned the goods and consigned them -

for sale. Wheeler v, New Haven, etc.,
Co,, 16 Atl. Rep., 893 (Conn., 1889).
1Talmage v. Pell, 7 N. ¥., 828, 347

(1852); Nassau Bank v. Jones, 95 N. Y.,
115, 120 (1884); First Nat. Bank uv. Nat.
Exchange Bank, 92 U. S., 122, 128 (1875),
where, in reference to national banks,
the court said: ‘‘ Dealing in stocks is
not expressly prohibited, but such a pro-
hibition is implied from the failure to
grant the power.” Tracy v. Talmage,
14 N. Y., 162 (1856); Royal Bank of
India’s Case, L. R., 4 Ch., 252 (1869);
Franklin Co. v. Lewiston Institution for
Savings, 68 Me., 43 (1877). The bank is
not liable to the corporate creditors on
the stock.

2Royal Bank of India’s Case, supra.
‘Making advances upon shares in pub-
lic companies is within the ordinary
course of the dealing of bankers.” The
stock pledged was stock in another
bank. To same effect, Re Barned’s
Banking Co., L. R., 3 Ch., 105 (186%);
Shoemaker v. Nat. Mechanics’ Bank, 1
Hughes (Ct. Ct. Md.), 101 (1869), as ap-
plicable to national banks; also National
Bank v. Case, 99 U. S., 628 (1878). Such
a pledge to a national bank is not pro-
hibited by the statute that the bank
shall not take a real-estate mortgage as
security. So held where the property
of the corporation whose stock was
pledged consisted of real estate. Bald-
win v, Canfield, 1 N. W. Rep., 261 (foot-
paging), (1879). See, also, Sistare v. Best,
88 N. Y., 527 (1882).

§ Franklin Bank v. Commercial Bank, |

350

}
OH. XIX. ] WHO MAY BUY AND SELL STOCK.

[$ 317.

As regards a pledge of stock to a bank to secure a debt previ-
ously contracted, its legality is unquestioned, and is free from.the
_ objections made to a pledge contemporaneous with the loan.!

§ 317. Purchases of stock by inswrance, manufacturing and other
companies.— An insurance company has no power or legal right to
subscribe for stock in a savings bank and building association,? nor
to purchase stock in another insurance company.’ It is difficult to
state any rule as regards the right of a manufacturing or trading
corporation to purchase shares of the capital stock of another cor-
poration. It has been held that neither a note-selling company ‘
nor a lumber company® has power to invest in the shares of a
bank, nor a steamship company to subscribe for stock in a dry-dock
company.’ On the other hand, it has been held that a steamboat

company may purchase stock in another rival line, even though the
evident purpose be to injure it.’ It is clearly legal for a manufact-
uring corporation to take the stock of another in payment of a
debts In-New York manufacturing corporations are prohibited
by statute from purchasing stock in any other corporation,® unless

86 O. St., 350 (1881), where the legality
of the pledge was denied, and the right
of the pledgee to have the stock regis-
tered in its name not granted.

1¥irst National Bank v. National Ex-
change Bank, 92 U. 8., 122, 128.

2Mutual Sav. Bank & Bldg. Ass’n v.
Meriden Agency Co., 24 Conn., 159
(1855), holding the insurance company
not liable on the stock. An insurance
company cannot invest in the stock of a
bank. State v. Butler, 8 S. W. Rep.,
586 (Tenn., 1888).

3 Re Liquidators of the British Nation
Life Assurance Association, L. R., 8 Ch.
Div., 679 (1878), the court refusing to
hold the former liable,on a winding up;
‘Berry v. Yates, 24 Barb., 199 (1857);
Pierson v. McCurdy, 33 Hun, 580 (1884).

4 Joint-stock Discount Co. v. Brown,

_L. B., 8 Eq., 381 (1869).

6Sumner v. Marcy, 3 W. & M., 105

(1847).
' 6New Orleans, F. & H. 8. Co. v. Ocean
Dry-dock Co., 28 La. Ann., 173 (1876).
Although a corporation purchases stock
in another corporation contrary to stat-
ute, yet a bona fide holder of a note

‘given in payment therefor may collect -

the note. Wright v. Pipe Line Co., 101
Pa. St., 204 (1882).

7 Booth v. Robinson, 55 Md., 419 (1880).
This decision goes to the extreme length’

-in allowing one corporation to invest in

the stock of another. A manufactur-
ing corporation is not presumed to be
incapable of purchasing stock in an-
other corporation. Parker v, Bernal, 66
Cal., 112 (1884).

8 Howe v. Boston Carpet Co., 82 Mass.,
493 (1860). Where an iron company
sells iron to a railway company to be
paid for in stock of the latter, the con-
tract is void, and the iron company can-
not, it seems, even recover the value of
the goods delivered. Valley R’y Co. v.
Lake Erie Iron Co., 18 N. E. Rep., 486
(O., 1888). "Where one telegraph corpo-
ration holds the bonds of another and
exchanges the bonds for the stock of
the latter corporation, a subsequent
mortgagee of the first corporation can-
not attack the validity of the bonds and
mortgage on the property of the second
corporation. Boston, etc., Co. v. Bank-
ers’, etc., Co., 36 Fed. Rep., 288 (1888),

9 As regards New York manufactur-
ing corporations, see Laws 1848, ch, 40, .

351
§ 318.] WHO MAY BUY AND SELL STOCK.’ [cH. XIX,

such other corporation either produces or consumes the articles in’
which the former corporation is interested.! Religious and chari-
table and other corporations, not for profit, have, it seems, implied
power to invest their funds in stock of other corporations.’ There’
has been some controversy whether one corporation could sell all
its property to another corporation, taking pay in stock of the lat-
ter, and dividing such stock among the shareholders of the selling
corporation. The weight of authority holds that such a transac-
tion is ultra vires, and may be prevented by any stockholder of the
former corporation.® Where a corporation owns stock in the name
of a trustee for the corporation, it is obliged to indemnify such
trustee for calls paid by him. The stock owned by a corporation
may be sold by its general business agent and financial manager
and representative, he having apparent power to sell, and the gov-
erning body not objecting.®

§ 318. Infants as purchasers of stock.— An infant is incompe-
tent to purchase shares of stock. Most cases of this class arise
upon a winding up of the corporation, when the infant is piped
upon the list of contributories, and, in defense, infancy is set up.
An infant’s purchase of stock is voidable and not void.’ This
seems to be the rule finally arrived at by the English courts, after
some hesitation and difference of opinion. The transfer is similar
to a deed, and passes an interest to the infant even when coupled _
with a liability, if it be for his benefit to accept it.2 Consequently
an infant, upon coming of age, is bound to elect whether he will
affirm or disaffirm a purchase of stock made by him while yet an
infant. He may disaffirm while still an infant, and is then not

§ 8, as changed by Laws 1866, ch. 838,
§ 8, as amended by Laws 1876, ch. 358,
allowing the corporation to purchase
stock in other corporations furnishing
it with material or taking its finished
products.

1N. Y. Session Laws, 1848, ch. 40, § 8
(p. 1732, R. S., 7th ed.); 1868, ch. 838
(p. 1748, R. 8., 7th ed.), as am’d by Laws
1876, ch. 358,

? Pearson v, Concord R. R. Co., 13 Am.
& Eng. R. R. Cages, 102 (N. H., 1883),
‘Certain classes of corporations may
rightfully invest their moneys in the
stock of other corporations, such as re-
ligious and charitable corporations, and
corporations for literary purposes. The
power is not expressly mentioned in
their charters, but is necessarily implied:

for the preservation of the funds with
which such institutions are endowed,
and to render their funds productive.”
To same effect, Hodges v. New Eng.
Screw Oo., 1 R. I., 312 (1850).

3 See § 668, infra.

4 Goodson’s Claim, 28 W. R., 760 (1880).

5 Walker v. Detroit Transit R’y Co.,
4% Mich., 388 (1882). See, also, Sistare

'v. Best, 88 N. Y., 527. That the corpo-

rate treasurer may sell the stock, see
Holden v, Metropolitan Nat’l B’k, 138
Mass., 48.

6 See §§ 250, 66.

7 Lumsden’s Case, L. R., 4 Ch, 31
(1868),

$Id.

5 Where, however, the corporation
becomes insolvent just. before or just

352
p

CH. XIx.] WHO MAY BUY AND SELL STOCK. [$ 319.
liable on calls.! The plea of infancy is a good defense,’ but the
plea must allege a disaffirmation within a reasonable time'after be-
coming of age.’ - Where a stockholder sells his stock through a
stock-exchange jobber, and the sale is made to an infant, the jobber
is liable to the vendor for calls paid by him in consequence of such
infancy.‘ An infant’s sale of stock, even by a transfer of the cer-
tificate, is not binding on him.®

-§ 319. Married women as purchasers or vendors of stock.— At
common law a married woman’s rights as regards shares of stock
were the same as prevailed with reference to other personal prop-
erty purchased or owned by. her. She had no material rights.
Modern statutes have, however, completely changed her rights of
property and of contract. These statutes are so different in form
and effect that, for the purpose of ascertaining the status of a mar-
‘ried woman as a stockholder, it is necessary to consult the statute
law of the state of her domicile, and also of the state of the corpo-

ration itself.®

after the infant comes of age, he need

not affirm or disaffirm, but may await

the action of the corporation. Mitchell’s

Case, L. R., 3 Eqg., 363 (1870). Where

he is silent for two years after coming

of age, and corporate insolvency then
occurs, he is bound. Id. For other

_ cases of ratification, see references in
88 66, 250.

_ Newry & Enniskillen R’y Co. v,
Coombe, 3 Ex., 565, 578 (1849). ‘‘He
became a shareholder by contract dur-
ing infancy, and during infancy he dis-
affirmed the contract; therefore, in my
opinion, he ceased to be a shareholder
liable to be sued for calls.” :

2 Birkenhead, L. & C. J. R’y Co. v.
Pilcher, 5 Ex., 24 (1850).

3 Dublin & Wicklow R’y Co. v. Black,
8 Ex., 181 (1852).

4Nickalls v. Merry, L. R., 7 HL,
530 (1875).

5 Smith v. Baker, 42 Hun, 505 (1886).

6 The wife’s capacity to transfer is de-
termined by the law of her domicile,

‘Hill v, Pine River B’k, 45 N.'H., 300
(1864). Dow v. Gould & C. 8. M. Co., 31
Cal., 629 (1867), holds that in California
a gift of stock from husband to wife is
valid, and that, after such gift, he could
not sell and transfer it as his own,

(23)

In England the severity of the common law has

Leitch v. Wells, 48 N. Y., 585 (1872).
The case of Stanwood v. Stanwood, 17
Mass., 57 (1820), holds that where the
husband does not have the stock trans-
ferred to himself on the corporate books,
but declares it to be his wife’s stock,
there is no reduction of it to his posses-
sion. See; also, Wall v. Tomlinson, 16
Ves., 413 (1809), to the effect that a
transfer of the wife’s stock to the hus--
band as trustee is not a reduction to
possession; also, Arnold v. Ruggles, 1
R. L, 165 (1837); Wildman v. Wildman,
9 Ves., 174 (1803), and Slaymaker v..
Bank of Gettysburg, 10 Penn. St., 378
(1849), to the effect that only a registry
will reduce the wife’s stock to the pos-
session of the husband. See, also, §.540,
infra. The wife’s stock, standing in
her name at the time of and after mar-
riage, is not subject to her husband’s
debts. Cochrane v. Chambers, Amb].,.
79, n. (1825). Contra, Stamford B’k v,
Ferris, 17 Conn., 259 (1845). In Con-
necticut itis held that the wife is not
liable in assumpsit to her husband's
creditors, to whom she has pledged
her stock; although ‘she subsequently
pledges it toanother. An express prom-
ise to pay on her part is necessary,
Platt v. Hawkins, 43 Conn., 189 (1879).

353 ‘
§ 320.]. WHO MAY BUY AND SELJ, STOCK. ~ (OH, max:
been but partially modified by statute,! but the time is not far dis-
tant when the English law will correspond to the American.

§ 320. Competency of miscellaneous parties. A sale of stock by
a person non compos mentis is void. The corporation is bound ab-
solutely to know of the lunacy of a transferrer, even though it
allows a registry on his ordinary signature and transfer? An as-
signee in bankruptcy or for the benefit of creditors takes only the
interest and equitable rights of his assignor. A previous unre-
corded transfer of the insolvent’s stock is protected.? A partner
may accept stock as collateral security for a loan from the firm,‘
and may sell and transfer partnership stock.’ A director of the
corporation itself may buy and sell its stock like any other indi-

vidual.

Curtis v. Steever, 86 N. J. Law, 304
(1878), clearly and properly holds that
. the wife’s stock, held by her as her sep-
arate estate, is not subject to her hus-
band’s debts. See, also, Cornell’s Case,
18 W. N. Cases, 289 (Penn., Nov., 1886),

and && 65, 250, 808; Vandenheyden v.>

Mallory, 1 N. Y., 452 (1848); Voorhees
v. Bonesteel, 16 Wall., 16 (1872). A cer-
tificate issued to husband as trustee of
wife constitutes her separate estate,
-where he pays dividends to her. In
-Kentucky a resident married woman’s
power of attorney to convey stock is
.void. B’k of Louisville v. Gray, 2S. W.
Rep., 168 (Ky., 1886). Taking out a
certificate in his own name by the hus-
‘band ‘reduces his wife’s stock to his
;possession, and it passes by his will,
-even though he made a memorandum
.to the effect that he held it in trust for
her. Cummings v. Cummings, 9 North-
east. Rep., 780 (Mass., 1887), Whete a
husband uses his wife’s money to pur-
chase stock and takes title in his own
name, but considers himself trustee for
her, a creditor of the husband, who at
. the time of incurring the debt knew
that the latter held the stock for his
wife, cannot subject it to the payment
of the debt. Porter v. B’k of Rutland,
19 Vt., 410 (1847),
1 By 33 and 84 Vict., ch. 93, § 4, mar-
ried women may purchase or take paid-
ep stock, or stock upon which there can

The information which he has of the affairs of the corpo-

be no liability, but if taken without the
consent of her husband, he may apply
to the court and have it turned over to
himself. Previous to this act the cor-

poration might refuse to register her as

a stockholder, but now the corporation

must accept her the same as any other

applicant for registry. Regina v. Car-

natic R’y Co., 42 L. J. (Q. B.), 169 (1873).

Under this act she may transfer her’
stock only after it has been formally

set aside by statutory authority as her

separate property. Howard v, B’k of

Eng., L. R., 19 Eq., 295 (1875). Where

the corporation Has allowed a transfer

by a married woman, it cannot cancel

the registry. Ward v, Southeastern

R’y Co., 2 El, & El., 812 (1860),

2Chew v, Bank of Baltimore, 14 Md.,
299 (1859).

3Dickiuson v. Central Nat. Bk, 129
Mass., 279.(1880); Purchase v. New York
Exchange Bank, '3 Rob. (N. Y.), 164
(1865). Contra, Shipman v, Aitna Ins.
Co., 29 Conn., 245 (1860), where the pre-
vious transferee delayed unreasonably
in claiming ownership of the stock.

4 Weikershcim’s Case, L, R., 8 Ch.,
831 (1873), In Comstock v, Buchanan,
57 Barb., 127 (1864), however, where the
stock was registered in both partners’
names, a contrary rule was upheld.

5 Quiver v. Marblehead Social Ins, Co.,
10 Mass, 476 (1818), Cf. Sargent v.
Franklin Ins. Co., 8 Pick., 90 (1829).

354
OH. XIx.] WHO MAY BUY AND SELL STOOK. [§ 820.

‘

ration, whereby he is enabled to buy or sell at an advantage over
the person with whom he deals, does not affect the validity of the
.transaction. He is entitled to the benefit of his facilities for in-
formation. There is no confidential relation between him and a
stockholder, so far as a sale of the stock between them is concerned ;
and, so long as he remains:silent and does not actively mislead the
person with whom he deals, the transaction cannot be set aside for
fraud.’ A joint owner of stock cannot transfer the interest of the
other joint owner where the stock is registered in the name of
both.? On the death of one, the survivor takes title to the whole
stock.$ \
A drunken person’s nai of stock may be set aside if an undue
advantage was taken. A stockholder may of course purchase
bonds upon their original issue by the corporation.» Where stock is
purchased by one person in his own name by due authority for
himself and another, the latter is a part owner, and has rights and
liabilities as such. The statute of frauds does not apply to such an

arrangement.’

1Board of Com’rs of T. County v.
Reynolds, 44 Ind., 509 (1878); Carpenter
v. Danforth, 52 Barb., 581 (1868), This
case was disapproved by the commenta-
tor to Story’s Eq. Juris., 12th ed., 229,
n., but the disapproval is omitted in
the 13th ed. So, also, Grant v. Attrill,
11 Fed. Rep., 469 (1882), where the sale
was induced by threat of assessments,
See, also, Johnson v. Laflin, 5 Dill, 65,
83 (1878); Deaderick v. Wilson, 8 Bax-
ter (Tenn.), 1038 (1874); Gilbert’s Case,
L. R., 5 Ch., 559 (1870), § 351, infra. See,
, also, Heman v. Britton, 14 Mo. (App.),
109; aff'd, 84 Mo., 657 (1883). In New
York, by statute, a ‘director is prohibited
from selling stock ‘‘short.” Laws 1884,
ch. 223. Where the president of a com-
pany advises a stockholder to sell his
stock at a certain price to a certain per-
son, and the sale is made, the president
is liable for the difference between that
price and the market price, where the
person purchased as the secret agent of
president. Fish v. Budlong, 10 R. L,
525 (1873).

2Standing v. Bowring, L. R., 27 Ch.
D., 3841 (1884); Comstock v. Buchanan,
57 Barb., 127 (1864). But if the other

joint owner dies first, the previous.
855

transfer of the survivor is effective and
conveysthe whole. Slaymaker v. Bank
of Gettysburg, 10 Penn. St., 373 (1849).

3 Garrick v. Taylor, 3 L. T. (N.S.), 460
(1860) ; Hill’s Case, L. R., 20 Eq., 585
(1874).

4 A sale of stock by a drunken person
for an insufficient consideration will be
set aside; and if, without his fault, he is
unable to restore the amount received,
it will be provided for in the final decree, ,
Thackrah v, Haas, 119 U. 8., 499 (1886).

5 Bergen v. Porpoise, etc., Co., 8 Atl.
Rep., 523 (N. J., 1887). ,

6 Staver v. Flack, 41 Barb., 162 (1862).
Where several parties buy and sell a
certain stock in the name of one of them-
selves and close the deal, a subsequent
purchase of the same stock by that one
does not inure to. their common benefit.
Kennedy v. Porter, 109 N. Y., 526 (1888).
Where several parties agree to purchase
land in the name of a corporation in ex-
change for stock to be taken in the name
of one of them, the others may compel
the latter to account for the stock. King
v. Barnes, 109 N. Y., 267 (1888). See,
also, § 252, supra,

7 See § 339, infra. -
§§ 841, 322.) WHO MAY BUY AND SELL STOOK. [ou. xix.
§ 321. Sales, purchases and transfers by agents.— Stock may he
purchased by an agent; and in making such a purchase the agent
is not permitted to make a secret profit, even though he acts with-
out compensation.! The real owner of stock may compel the nomi-
nal owner to transfer the stock to him.? The corporation may
disregard the nominal holder and allow the real owner to sell and
transfer the stock. The relation of an agent towards his princi-
pal in the purchase, sale or holding of stock exists where a “dummy ”
is used to shield the real owner from ‘liability on the stock. A
stockholder may of course sell stock through an agent.?

The principal and most difficult questions connected with an
agency herein arise where the owner of stock indorses it in
blank, and places it in the hands of an agent, and the agent in vio-
lation of his orders then sells the stock to a bona fide purchaser.
The law is clear that the dona fide purchaser is protected in his
ownership of the stock.’

§ 8322. Purchases of stock by guardians, executors and trustees —
In England, at an early day, the common-law rule was declared to
be that guardians, executors and trustees had no right to invest
the trustee fund in the stocks of private corporations, and that if.
they did so they themselves were personally liable for the moneys
so invested.’ The rigor of this rule has been relaxed somewhat in
England, by statute ‘and by orders in chancery, so that such in-
vestments may be made in the stock of the banks of England and
of Ireland and the East India Company.’ In this country, aside
from a few dicta and a few decisions to the contrary, the English
rule, in its: original integrity, is upheld and followed. The weight
of authority clearly holds that the investment of trust funds in the

*

1 Kimber v. Barber, L. R., 8 Ch., 56
(1872), holding that, where a person of-
fers to buy for another stock at a cer-
tain price, but buys it at a less'price and
keeps the difference, he is liable to tie
vendee for his gains. Keyes v. Bradley,
85 N. W. Rep., 656 (Lowa, 1887).

2 Colquhoun v. Courtenay, 43 Ty de
(Ch.), 838 (1874).

3 Sabin v, Bank of Woodstock. 21 Vt.,
858 (1849), holding also that the nominal
holder is not protected, although he sub-
sequently becomes the real owner of the
stock,

4 See § 253, supra, and § 508c.

5 See chapter XXV, on stock-brokers.
A person may assign stock to another
with discretionary power to sell at any

time the latter thinks best, and pay the
former’s creditors therefrom. Appeal
of Neilson, 13 Atl. Rep., 943 (Pa., 1888).

6 See § 851, infra.
1 Trafford v. Boehm, 3 Atk., 440 (1'746),
where the investment was in bank
and South Sea stock. Lewin on Trusts,
281 (7th ed., 1879), says that, ‘ unless
specially given power, it is settled in
England that a trustee may not invest
the trust fund in the stock of any pri-
vate company, as South Sea stock,
bank stock, etc. ; for the capital depends
upon the management of governors and
directors, and is subject to loss,”

8Lord St. Vincent’s Act, 22 and 28
Vict., ch. 85, § 82; 28 and 24 Vict.,
ch, 88.

856
CH. XIx. ]

WHO MAY BUY AND SELL STOCK.

s 399,

stock of railroad, insurance, bank, manufacturing or other corpora-

tions is made at the peril of the trustees.!

The cestui que trust

may hold the trustee liable for the amounts so invested, together

l1In New York the case of King wv,
Talbot, 40 N. Y., 76 (1869); affg 50
Barb., 453, clearly enounces and sustains
this rule. Adair v. Brimmer, 74 .N. Y.,
539, 551 (1878), where the trustees were
held liable for selling coal lands, taking
in pay coal stocks, they being authorized
by the will to invest in such securities
as they deemed safe, Mills v. Hoffman,
26 Hun, 594 (1882); reversed in 92
N. Y., 181, but not on this point. Ack-
erman v. Emott, 4 Barb., 626 (1848),
See, also, Berry v. Yates, 24 Barb., 210
(1857); Brown v. Campbell, Hopkins’
Ch. (2d ed.), 265 (1824). In Pennsylvania
the rule is the same. Nyce’s Appeal, 5
Watts & Serg., 254 (1848), holding the
trustee liable for investment in United
States bank stock, although the guard-
ian approved of the trustee’s invest-
ment. Norris v. Wallace, 3 Penn. St.,
319 (1846), where the investment was in
the stock of a suspended bank. Wor-
rell’s Appeal, 9 Penn. St., 508 (1848),
navigation stock not good, although
dividends had been accepted by the
cestui que trust; sustained on second ap-
peal, 23 Penn. St., (1854). Rush’s Estate,
12 Penn, St., 375 (1849), stock in Lehigh
Coal and Nav. Co., not good. Hemp-
hill’s Appeal, 18 Penn. St., 303 (1852),
United States bank stock not good.
Pray’s Appeal, 34 Penn. St., 100 (1859),
manufacturing corporation stock not
good, the works being unfinished. Bar-
ton’s Estate, 1 Pars., 24, doubted.. Ihm-
sen’s Appeal, 43 Penn. St., 431 (1862),
railroad stock not good. In Néw Jersey
the rule is the same. Gray v. Fox, 1

N. J. Eq. Rep., 259 (1831); Halsted v.'

Meeker’s, Ex’rs, 18 N. J. Eq. Rep., 136
(1866); Ward v. Kitchen, 30 N. J. Eq.
Rep., 31 (1878). Also in New Hampshire.
Kimball v. Reding, 31 N. H., 352 (1855),
stock in contemplated railroad not
good; French v. Currier, 47 N. H., 88
99.(1866), unproductive stock not good.

In Massachusetts the tendency is ta
favor a contrary rule, although no case
seems to have clearly decided that such
investments are legal. In the case of
Harvard College v, Amory, 26 Mass.,
446 (1830), express power was given. In
Lovell v. Minot, 87 Mass., 116 (1838), the
stock was taken as security. Kinmouth
v. Brigham, 87 Mass., 270 (1862), and ,
Brown v. French, 125 Mass., 410 (1878),
were not cases of investments in stocks,
Hunt v. Appellant, 6 N. E. Rep., 554
(Mass., 1886), is a dictum. Several of
the southern states clearly uphold the
rule that trustees, etc., may invest the
trust funds in stocks. Boggs v. Adger,
4 Rich. Eq. (S. C.), 408 (1852), United
States bank stock good; Washington
v. Emory, 4 Jones’ Eq. (N. C.), 32 (1858),
railroad stock good; Gray v. Lynch, 8
Gill (Md.), 408 (1849), bank stock good;
Smyth v. Burns, 25 Miss., 422 (1853),
bank stock good: Lamar v. Micou, 112
U. S, 452 (1884), and‘114 U. S. 218
(speaking for Georgia and Alabama),
bank and railroad stoek good, but not
Confederate bonds. See, also, on this
subject. generally, 40 Am. Dec., 515,
notes. An executor who is interested in
a corporation, and gets a commission
for selling its stock, is liable to replace
funds which he induces the cestui que
trust, a woman, to invest in such stock. -
Appeal of Potter, 12 Atl, Rep., 518
(Conn., 1888). Where all the'stockhold-
ers assign stock to the president to sell
to pay corporate debts, he may assign
part of it to himself to pay a debt due to
himself from the corporation. Appeal
of Patterson, 12 Atl. Rep., 679 (Pa.,
1888). Where the trustee is expressly
authorized to invest in bank stock he is
not liable to the estate for losses, though.
the investment is ‘made in his indi-
vidual name. Appeal of Pensyl, 15
Atl. Rep., 719 (Pa., 1888),

357
§§ 323, 324.] WHO MAY BUY AND SELL STOCK. * [ox. XIX.
with interest upon the same. Where the trustee is authorized to .
purchase stock he is not liable for the embezzlements of an agent
whom with due care he employs to make the purchase.!

§ 393. Sale or pledge of stock by trustee in breach of his trust.—
It is the function and duty of a trustee to keep and preserve the
trust property, and to apply the income according to the terms of
the instrument creating the trust. As a general rule it is not his
duty or his right to.sell or change the investment. Unless the in- |
strument creating the trust authorizes the sale of the trust prop-
erty, it is a breach of trust for the trustee to make a sale.’ In this
respect the powers of a trustee differ widely from those of an exec-
utor or administrator, and the rule applies to a trustee holding in
trust shares of stock. Moreover, under ordinary circumstances, a
trustee cannot sell stock held in trust, although such sale be for the
purpose of investing the proceeds in other stock or other property.’

§ 324. Where a trustee improperly sells shares of stock belonging
to the trust estate, the cestuz gue trust has a right to elect to have
the stock restored or the amount received for it paid over, together
with interest from the time of the sale.’ Were the rule otherwise
the trustee would profit by his own breach of trust in case there
was a decline in the value of the stock. The trust attaches to any
stock standing in the name of the trustee, and although the same
certificates are, not retained, an equal amount of other similar stock
owned by the trustee may be applied to the trust. And in all cases

_ Speight v. Gaunt, L. BR, 9 App.
Cases, 1 (1883).

2Bohlen’s Estate, 75 Penn. St., 312
. (1874); Bayard ‘v. Farmers’ & M. Bank,
52 Penn. St,, 232 (1866); Jaudon v. Na-
tional City Bank, 8 Blatch., 430 (1871);
aff’d, 15 Wall., 165 (1874). On the re-
lations and duties of trustees generally
in regard to stock, see, also, Perry on
Trusts (3d ed.), 589, 556,

3 Trustee selling stock for purpose of
investing in real estate may be com-
pelled to replace it. Earl Powlet v.
Herbert, 1 Ves., 297 (1791). Cf. Bohlen’s
Estate, 75 Penn. St., 312 (1874); Peck-
ham v, Newton, 4 Atl. Rep., 758 (R. L,
1886). The cestui que trust may waive
the objection. Duncan v. Jaudan, 15
-Wall., 171. The case of Washington v.
Emory, 4 Jones’ Eq., 32 (1858), holds
that a change in the investment is al-
lowable if there is good reason to be-
lieve that the estate will be benefited.

Trustees should sell the stock if depre-
ciation is probable. Ward v. Kitchen,
80 N. J. Eq., 31 (1878). But not liable
for failure to sell if in good faith and.
sound discretion. Bowker ,v. Pierce,
180 Mass., 262 (1881); Parker v. Glover,
9 Atl. Rep., 217 (N. J., 1887); Appeal of
Stewart, 6 Atl. Rep., 321 (Pa., 1885)—the
last case holding, also, that the trustee
cannot sell the stock to himself, even at
the market price. Cannot change stock
bequeathed. Murray v. Feinour, 2 Md.
Ch., 418 (1851). Nor a good investment
toastock investment. In re Warde, 2
Johns. & H., 191 (1861); Waite v. Whor-
wood, 2 Atkyns, 159 (1741).

4 Harrison v. Harrison, 2 Atkyns, 121
(1740); Bostock v. Blakeney, 2 Brown’s
Ch. R., 658 (1789); Pocock v, Redding-
ton, 5 Vesey, 800 (1801); Long v. Stew-.
art, 5 Vesey, 809, n. (1801); Hart v. Ten
Eyck, 2 Johns. Ch., 62, 117 (1816).

5Pinkett v, Wright, 2 Hare, 120

358
a)

OH. XIx.| “WHO MAY BUY AND SELL sTOOx. [§ 825.
where the trustee has sold stock belonging to the trust estate in
breach of his duties as trustee, he may beheld liable in damages by.
the cestué que trust or his representative’ for the value of the stock.!
A specific performance in regard to a trust estate of stock may be —
decreed?

§ 325. Transferee of stock from trustee protected, when.—
vendee or pledgee of stock, directly from a trustee, is or is not pro-
tected in his interest in the stock, according as he is or is not charge-
able with notice of the fact that the stock belongs to a trust estate,
and that the trustee is using it in breach of the trust. Anything
that is sufficient to put a party on inquiry is considered equivalent
to actual _notice, if inquiry be not made and reasonably satisfied.
The law imputes.to a purchaser the knowledge of a fact of which
the exercise of common prudence and ordinary diligence would
have apprised him. This is called constructive notice, rand has the
same effect as an actual notice of the trusteeship. The most com-
mon instance of a constructive notice that stock being sold belongs
to a trust estate is where the words “trustee” or “ in trust,” either
with or without the name of the cestui que trust, are written on the
face of the certificate of stock after the name of the person in whose
name it stands on the corporate books. It is well established that
such words, indicating a trustee ownership, are notice to the pur-
chaser that his vendor is selling trust property, and that he must
ascertain whether the trustee has any power to sell the stock.

(1842). A trustee is liable for breach of commencing suit against him, and in-

trust of _co-trustee in regard to stock

where the former is negligent in keep-
ing himself informed as to the transac-
‘tions of the latter in the trust property.
Bullock v. Bullock, 55 L. T. Rep., 703
(1886). Trust stock was pledged by a
trustee to secure his own debts in 1864,
the pledgee knowing that the stock was
trust stock; the stock was sold by
pledgee in 1867; the cestui que trust
learned thereof in 1877 and commenced
suit against the executors of the surety
for the trustee; judgment was rendered
in 1882, and executors commenced this
suit against the pledgee within three
years after 1882. Held, that no laches
or statute of limitations barred the suit.
Blake v. Traders’ Nat’l B’k, 12, North-
east. Rep., 414 (Mass., 1887).

1A trustee authorized to sell stock,
but selling in breach of trust, is liable
for the value of the stock at the time of

terest; also for dividends declared after
the breach of trust; or the cestui que
trust may demand the value of the
stock at the time of the breach of trust,
and interest; or a replacing of similar
stock and dividends. McKim v. Hib-
bard, 8 Northeast. Rep., 152 (Mass.,-
1886). A trustee to use stock: to pay
debts may assign a part of the-stock to
pay a debt due to himself, if in good:
faith and at a full valuation. Appeal
of Patterson, 12 Atl. Rep., 679 (Pa.,.
1888).

2See § 338, n., infra. ,

3Shaw v. Spencer, 100 Mass., 382
(1868), the court saying that the word
“‘trustee ” means trustee for some one
whose name is not disclosed, and that a

_eustom of trade disregarding such words

on certificates of stock is illegal and
ineffectual to protect the purchaser. To
same effect, Jaudon v, National City’

B59
326. | WHO MAY BUY AND SELL STOCK. [CH. XIx.

There are many other facts which will prevent the véndee from
claiming that he is a bona fide holder of the stock. Thus, if the
stock is pledged to a bank by the trustee, who is a director ofa
bank, and the bank is prohibited from loaning to its directors, the
bank is not a bona fide holder, though without 1 notice or knowledge
of the trusteeship.!

In England, the house of lords have decided that certificates of
stock in “railway companies are not negotiable in any respect, and
that a bona fide transferee of the certificate i is not protected until
he has obtained registry in the corporate books.? In this country a
different rule prevails, and it is accepted and assumed as elementary
that a bonw jide purchaser for value of stock belonging to a trust
estate and sold in breach of trust is nevertheless protected in his
purchase, although he has not registered the transfer on the cor-
porate books. A bona jide purchaser through several mesne con-
veyances, starting from a trustee who sells the stock in breach of

trust, is protected.*

Bank, 8 Blatch., 480 (1871); aff’d, 15
Wall., 165, 176, where the court says the
purchasers ‘are chargeable with con-
structive notice of everything which,
upon inquiry, they could have ascer-
tained from the cestwi que trust.” Gaston
v. American Ex. Natl. B’k, 29N. J. Eq.
Rep., 98 (1878}; Walsh v. Stille,2 Par-
sons’ Sel. Cases in Eq. (Penn.), 17 (1842);
Simons v. Southwestern R. R. Bank, 5
Rich. Eq., 270 (1853), where a master
in chancery held the stock in his own
name officially; Loring v. Brodie, 184
Mass., 453 (1883); Loring v. Salisbury
Mills, 125 id., 188 (1878); Sweeney v.
B’k of Montreal, 5 Canadian Law Times,
508 (1885): Budd v. Monroe, 18 Hun,
316 (1879); Bank of Montreal v. Sweeny,
36 L. T. Rep., 897 (1887). In California,
however, it is held that, although the
word ‘‘ trustee” on the face of the cer-
tificate, followed by the name of the
cestui que trust, may give notice that it
is tiust property, yet that where the
word “trustee” is but a cloak for an
agency. for the purpose of shielding the
real owner from liability on his stock,
and to conceal the fact that he is deal-
ing in stocks, the court will disregard
it, and will not protect the real owner
‘against his agent's unauthorized sale of

the stock. Brewster v. Sime, 42 Cal.,
139 (1871); Thompson v. Toland, 48 Cal.,
99 (1874).

1 Albert v. Savings B’k of Baliiniora,
2 Md., 159, 171 (1852), A bank which
receives trust stock as security for a
loan, and afterwards, on payment of the
loan, transfers: the stock to parties des-
ignated by the pledgor, is liable to the
cestui que trust for aiding in the latter
transfer. Hatten v. Russell, 58 L. T.
Rep., 252 (1888), :

2Shropshire Union Rys. & Canal Co.
v. Queen, L. R., 7 H. L., 496 (1875). Cf.
Dodds v. Hills, 2 H. & M., 424 (1866).
Cf. $$ 878, 380, 416. <A cestut que trust
of stock in England may defeat a bona
fide purchaser’s title to the stock by
suing for the stock before a transfer is
made on the corporate books. Roots v.
Williamson, 58 L. T. Rep., 802 (1888).

3Salisbury Mills v. -Townsend, 109
Mass., 115 (1871); Stinson v. Thornton,
56 Ga., 877 (1876); Cohen v. Grayun, 4
Md. Ch., 857 (1848) Where, however,
the trustee has been removed by a
court and another trustee appointed in
the state of the corporation, a pur-
chaser of the certificates held by the old
trustee is not protected, his purchase
being after the removal. Sprague v.

' 360
CH. xix, | WHO MAY BUY AND SELL STOCK.

[§ 327.

~ § 326. The mere fact that a purchaser of stock knows he is
buying from a trustee, and that the stock belongs to the trust
estate, puts the purchaser to no inquiry except that of ascertaining
whether the trustee has power to sell the stock or vary the invest-
ment. If he has such power the purchaser will be protected, al-
though the trustee uses the money for his own private purposes,
provided the purchaser has no notice of such-an intent on the part
of the trustee! The purchaser has.a right to assume that the ob-
ject of the sale is to invest the funds in a permanent investment or
to discharge liabilities? Where, however, the purchaser knows
that his vendor sells or pledges the stock as trustee, and also knows
that the sale or pledge is for the private debts or purposes of the
- trustee, the purchaser is chargeable with knowledge of the breach
of trust, and is not protected.* Nor is a pledgee of stock from a
trustee, acting as trustee, protected where the trustee is authorized
merely to sell the stock. Power to sell does not confer power to
pledge.®

§ 327. Rights and liability of the corporation allowing a trans-

fer by a trustee in breach of his trust— Where a corporation has |

notice that'a stockholder holds his stock as trustee for another, and:
the means of ascertaining the character of that trust are within the
power of the corporation, it is bound to refuse to allow a registry
of the trustee’s transfer until it is satisfied that the trustee has
.. power,to make the transfer. If the corporation allows the trans-

‘Cachigo Mfg. Co., 10 Blatch., 173
(1872). But in Holbrook v. New Jersey

Blatch., 450 (1871); affirmed, 15 Wall.,
165, sub nom. Duncan v, Jaudon; Walsh

Zine Co., 57 N. Y., 616 (1874), it was
held that a successful suit in a state not
the state of the corporation, to remove
a trustee, does not affect a bona fide
purchaser of the certificate from the
trustee, the purchase being made pend-
ing the suit; and that the corporation
allowing registry of the new trustee as
holder of the stock, and issuing new
certificates to him, is liable in damages
to the purchaser from the old trustee,
1 Perry on Trusts, § 225, 3d ed. (1882);
Lewin on Trusts, 417. 7th ed. (1879);
Godefroi on Trusts, 125, 127 (1879).
2 Ashton v. Atlantic Bank, 85 Mass.,
217 (1861), where the trustee sold land,
took notes in payment and stock as col-
lateral, and sold the notes with the col-
_ lateral.
3 Jaudon v. National City Bank, 8

v. Stille, 2 Parson’s Sel. Cases in Eq.
(Penn.), 17 (1842); White v. Price, 29
Hun, 394 (1886); Simmons v. South-
western R. R. Bank, 5 Rich. Eq., 279
(1853); Shaw v. Spencer, 100 Mass., 382
(1868), holding also that silence while
the ‘vendee pays an assessment is no
waiver.

4Loring v. Brodie, 184 Mass., 453
(1883).

5 Merchants’ B’k of Canada v. Living-
ston, 74 N. Y., 223 (1878); 180 U. S., 267,

6Chapman v. City Council, 6 S. BE.
Rep., 158 (8. C., 1888); Bayard ».
Farmers’ & Mechanics’ B’k, 52 Pa, St.,
232 (1866), where a refusal of the cor-
poration'to transfer until the terms of
the trust were examined by its attorney
and found to allow the trustee was sus-
tained. The corporation cannot, how-

361
a
WHO MAY BUY AND SELL STOCK. [cH. XIX,

§ 327.]
fer and the trustee had no power to make it, the corporation is
liable to the cestwi gue trust. The fact that the certificate runs to
the holder as “trustee” is sufficient notice to the corporation!
Notice to a board of directors is notice to all subsequent boards.
The corporation is bound to see that the sale by the trustee is made
in accordance with the terms of the trust. Thus, it is liable if it
permits a sale and transfer,by one trustee when there are two
trustees; and a general power of attorney by the other trustee au-
thorizing sales will not protect the corporation in its registry of “a
transfer signed by one only.? It is liable for allowing a registry of
a trustee’s transfer when tho trust is for an unmarried woman, to
take effect when she shall marry.t If there are several cestui que
trust, the corporation is liable for allowing one of them to transfer
the whole interest in the stock, where by mistake of the corpora-
tion the stock had been registered in the name of that one, and not
in the name of the trustee.’ If, however, the cestui gue trust is
guilty of laches in taking steps to obtain his rights, the corporation
is discharged.’ The remedy of the cestuc que trust is in equity, not,
‘at law.’ A waiver of former breaches of trust is no waiver of the
one complained of; and a judgment against the trustee himself is
no bar to the suit against the corporation, except to the extent that
satisfaction has been obtained.’ The corporation may be compelled
by the court to purchase an equal amount of stock and register it
for the benefit of the cestus que trust.?

ever, retain the copies of the probate
records used in investigating. Bird v.
Chicago, I. & N. R. R. Co., 187 Mass.,
428 (1884). In transfer of trust stock
the corporation may very properly re-
fuse to allow a registry where the sale
is made by the trustee at a price far be-
low its market value. Succession of
Boullemet, 35. Rep., 401 (La., 1887).

1 Loring v. Salisbury Mills, 125 Mass.,
188 (1878). See, also, § 330.

In the case of Stockdale v. South Sea
Co., Barnardiston’s Ch. (folio) 368 (1740),
the court said, however: ‘‘ These great
companies are only to consider the per-
son in whose name the stock is stand-
ing, unless the trust of that stock is
declared in their hooks.”

2Mechanics’ Bank of Alex. v. Seton,
1 Pet., 299 (1828).

’Bohlen’s Estate, 75 Penn. St., 312
(1874). Nor where the signatures of the
other trustees are forged by one. Cot-

tam v. Eastern Counties R’y Co., 1J. &
H., 248 (1860), In England one exec-
utor or trustee cannot assign railway
stock. All must join. Barton v. North.,
etce., R’y Co., 58 L. T. Rep., 549 (1884).

4Magwood v. R. R. B’k, 5 S, C., 379
(1874). f

5 Farmers’ & M. B’k v. Wayman, 5
Gill (Md.), 336 (184'7).

6 Albert v.,Sav. B’k of Baltimore, 1
Md. Ch., 407 (1849); aff’d, 2 Md., 159 (1852).

TLoring v. Salisbury Mills, 125 Mass.,
188 (1878). In a suit by a stockholder
to hold a corporation liable for his stock
and dividends, by reason of its allowing
a transfer by an unauthorized agent of
the stockholder, the subsequent owners
of the stock are not necessary parties.
The defense of prescription prevails
when, St. Romes v, Cotton Press Co.,
127 U. S., 614 (1888).

8Id.

§Bohlen’s Estate, supra.

‘ 362
’

CH. XIx.] [S§ 828, 329.

WO MAY BUY AND SELL STOOK.

§ 328. Sales of stock by a guardian.— At common law a guard-
ian may sell the personal property belonging to him as guardian,
without obtaining any special license or authority; and a bona fide
purchaser from him of such property is protected and is entitled to
the property, even though the guardian misappropriates the pro-
ceeds of the sale.! This rule applies to shares of stock.?) In most
of the states, however, statutes have been passed requiring guard-
ians to obtain the consent of a court before selling the personal
‘property of his ward.* If such a statutory permission to sell is re-
quired, and the vendee of stock has notice that his vendor sells as.
guardian, the vendee is bound to see that the requisite permission to
sell has been given.! An order of the court allowing the guardian
to sell is not authority to him to pledge the stock, and the pledgee
is bound to take notice of that fact.’ Where stock is sold by a
foreign guardian according to the laws of the state of the guard-
ianship, title passes and the purchaser is protected.®

§ 329. Sales of stock by an executor or administrator— It is the
duty of an executor or administrator of an estate to collect the
assets, pay the debts, and distribute the remainder according to
the provision of the will or of the statute of distribution.’ In order
to pay the debts the executor may sell the personal property of
the estate. Accordingly, the rule has become established that the
purchaser of personal property from an executor or administrator
is not bound to ascertain whether the sale is necessary in order to
pay the debts of the estate, nor to see. that the proceeds of the
sale are applied to the debts. If he buys in good faith and for

1Field v, Schieffelin, 7 Johns. Ch.,
150 (1823); “Ellis v. Prop. of E. M.
Bridge, 2 Pick., 248 (1824), holding that
a bona fide purchaser from the guard-
ian of a person non compos mentis is
protected.
' 2Lamar v. Micou, 112 U. 8., 452, 475
(1884), the court saying: ‘‘ He had the
authority, as guardian, without any
order of court, to.sell personal property
of his ward in his own possession, and
to reinvest the proceeds.” ‘See, also,
Bank of Va. v. Craig, 6 Leigh, 399,
482 (1835), to the same effect, and hold-
ing that the corporation is not liable for
a breach of trust by the guardian in
selling the stock. The courtsaid: ‘If
the guardian defrauds his ward, his
sureties are responsible; if the pur-
chaser combines in the fraud, he too is

chargeable; but the bank cannot inter-'

fere and arrest the transfer of its stock
by the legal holder of the scrip upon
such pretenses. It would trammel and
embarrass such transactions so as to
impede materially that transferable
character, which is one of the most
valuable attributes of stock.”

3Mass. R. S., ch. 79, § 21.

4Atkinson v, Atkinson, 90 Mass., 15
(1864), '

5 Webb v. Graniteville Mfg. Co., 11
S. C., 896 (1878); 180 U. S., 267.

6Ross v. Southwestern R. R. Co., 58
Ga., 514 (1874).

‘TKeylinge’s Case, 1 Eq. Cases, Abr.,
239 (1702), holding that, where the exec-
utor holds the stock for several years
and it declines in value, he is charge-
able with its value one year after the
death of the testator.

363
§ 329.] WHO MAY BUY AND SELL STOOK. _. [OH XIx,

‘value, he is protected. Such also are the rules applicable to an ex-
ecutor’s or administrator’s sales of stock.

The executors in the state of the decedent may transfer the stock
of the estate, and convey a title which the corporation is bound
to recognize, although the corporation itself is domiciled in another
state? The rule is “otherwise, however, as regards executors ap-
pointed in jurisdictions out of the United States.” An executor
may pledge estate stock at his bank-on a representation that the
money is to be used for the estate; and the bank will be protected
although the note given by the executor is renewed several times,
and the proceeds of the transaction were passed to the executor’s pri-
vate account.' So, also, a dona fide purchaser of stock from a life
tenant, to whom the administrator improperly transferred it, is pro-
tected. The remainder-man’s remedy is on the administrator's
bond.’ Where, however, the transferee of the executor knows
that the transaction is not for the benefit of the estate, but is a

1 Leitch v. Wells, 48 N. Y., 585 (1872),
holding that the bona fide transferee is
protected, although the executors had
previously set aside the same stock to
apply to the payment of a certain
amount chargeable by the will to the
estate annually. Woods’ Appeal, 92
Penn. St., 879 (1880), holding that a bona
fide transferee of the’ executor’s trans-
feree is protected, although the latter
would not have been, even though the
former was aware that his title came
from an executor. The court held that
letters of administration are always evi-
dence of power to sell, and that an
executorship differed widely from a
trusteeship as regards the right to sell.
Prall v. Tilt, 27 N. J. Eq., 398 (1876);
affirming 28 N. J. Eq., 479 (1877), where
the will authorized advances to ‘the
sons, and they represented to the trans-
feree that the stock was so advanced
to 'them by the executor. Lowry v.
Commercial & F, B’k of Baltimore,
Taney (U. §. C. Ct.), 810 (1848), In this
case the purchaser had no knowledge
or notice that the transferrer sold the
stock as an executor. Clark v. South
Metropolitan Gas Co., 54 L, J. (Ch.), 259

(1885), sustaining a sale of stock by an.

administratrix of an administrator. Re
London, etc., Tel. Co., L, B., 9 Eq,, 633

(1870), sustaining the title of a bona fide
purchaser from the executrix as against
an assignee in bankruptcy of the de-
ceased, the assignee having delayed his
application for five years.

2Middlebrook v. Merchants’ Bank, 3
Keyes (N. Y.), 185 (1866); Luce v. Man-
chester, etc., Ri R. Co, 2 New Eng.
Rep., 263 (N. H., 1886); Hobbs v. West-
ern Nat'l B’k, 8 Weekly Notes, 181
(U. 8. CG. C., 1880), An executor or ad-
ministrator may transfer stock in a
foreign corporation without taking ‘out
letters in-the state incoxporating the
company. In re Cape, etc., Co., 16
Atl. Rep., 191 (N. J., 1889).

3 Alfonso’s Appeal, 70 Penn. St., 347
(1872), "holding that, in Pennsylvania,
executors of a decedent, whose domi-
cile was in Cuba, have no authority,
under letters testamentary in Cuba, to
transfer stock in a Pennsylvania corpo-
ration. ‘“ Domestic creditors, legatees
or next of kin should not be sent abroad
in quest of property to answer their
claims when the decedent left property
within the jurisdiction of the state that
can be applied to meet their demands.”

4Goodwin v. American National B’k,
48 Conn., 550 (1881).

5 Keeney v. Globe Mill Co., 39 Conn.,
145 (1872).

364
»

CH. xIx.]

WHO MAY BUY AND SELL STOCK. [§ 880.
breach of trust, he: is not protected.’ Frequently statutes are
found requiring executors, when selling personal property of the
estate, to sell the same at public auction, When such a statute
exists a purchaser at private sale is not a bona fide purchaser, and
is not protected, and is liable for the stocks and dividends paid
thereon after his purchase.2 The bona fide transferee of such a
purchaser, however, is protected. An executor may have the du-
ties of a trustee’to perform, and then become subject to the rules
governing trustees in their transfers of stock.4

§ 330. Duty and liability of the corporation in sales by executors
or administrators.— There has been great difficulty in ascertaining
the rights and duties of the corporation in allowing and refusing
to allow a registry on the corporate transfer-book of a sale of stock
by an executor or administrator. The Bank of England, at an
early day, assumed the power to refuse to allow a registry of an
executor’s transfer of stock that had been specifically bequeathed,
unless the executor satisfied the bank that the sale was necessary
to pay the debts of the estate. The courts, however, compelled it
to allow registry without investigating specific legacies or the ap-

plication of the proceeds of the sale.°

1Prall v, Hamil, 28'N. J. Eq., 66 (1877).
The facts in this case differed from
those in Prall v, Tilt, supra, in that the
transferee knew that the stock was still
owned by the executrix. White v.
Price, 39 Hun, 394 (1886), the court
saying: ‘“‘A person who takes title
from an executor in payment of the
executor’s personal debts is not a pur-
chaser in good faith, and acquires no
rights over the prior title or rights of
other persons,” Also, that a purchaser,
buying with knowledge that the right
of the executor to sell is denied and is
being contested, is not a bona fide
holder. Cf. Keane v. Robarts, 4 Madd,
Ch., 832 (1819), where it was held that
where the executor did business
through an agent, the application of
the proceeds from sale of the stock,
to the running account between the
executor and jhis agent was legal, A
suit in equity lies to set aside an illegal
sale of stock by an executor. White v.
Price, 108 N. Y., 661 (1888). A pledgee
with notice of stock held by an exec-

vutor in breach of his duty may be

compelled to give up the stock, Odd,
865

‘In this country the question

ete, Bank’s Appeal, 16 Atl. Rep., 606
(Pa., 1889).

2Nutting v. Thompson, 57 Ga., 418
(1876), the court saying also that factors
or brokers acting for third persons are
also liable; Nutting v. Boardman, 48
Ga., 598 (1871), holding that the admin-
istrator’s bondsmen are not proper par-
ties to the suit; Weyer v. Second Nat'l
Bank of Franklin, 57 Ind., 198 (1877),
holding the purchaser liable. If the
executor uses the proceeds of sales
of stock for his own personal pur-
poses he is liable for the dividends de-
clared after such sales up to'time of
accounting, and for market value of
stock at time of accounting. Person
taking stock from him with knowledge
of the breach of trust is also liable.
McGeary’s Appeal, 6 Atl, Rep., 763 (Pa.,
1886),

§Nutting v, Thomason, 46 Ga., 34
(1872).

4 White v. Price, 89 Hun, 394 (1886);
Prall v, Tilt, supra.

5 Pearson v. B’k of Eng., 2 Brown’s
Ch. Rep., 529 (1789); B’k of Eng, v. Mof-
fat, 3 id., 260 (1791); Hartga v. B’k of
§ 330.] WHO MAY BUY AND SELL STOCK. [cH. xIx.
‘of the liability of the corporation has arisen on a different state of
facts. The cases of Lowry v. Commercial & Farmers’ Bank of
Baltimore,! and Stewart v. Firemen’s Ins. Co.,? clearly establish the
rule that, where the corporation has reasonable notice of the fact
that the executor is committing a breach of trust, the notice arising
from the fact that the transfer is made several years after the estate
should have been wound up, the corporation is under obligation to
refuse to allow a registry of the transfer; and, having allowed it,
the corporation is liable to the parties injured thereby.

‘In Indiana it is held that where, by statute, executors’ sales are
to be at public auction, the corporation is bound -to ascertain
whether the statute was complied with, and to be liable for allow-
ing a regisiry when the sale was a private one.’ And, in general,
a corporation has a right to assume that the executor is transfer-
ring the stock for the purposes of the estate. It is not obliged to
inquire into the purposes of the parties, nor to investigate whether

the transaction is in good faith or is fraudulent.*

Eng., 3 Ves., 55 (1796); B’k of Eng. v.
Parsons, 5 Ves., 665 (1800); B’k of Eng.
v, Lunn, 15 Ves., 568 (1809); Austin v.
B’k of Eng., 8 Ves., 522 (1808); Mar-
ryatt v. Same, id., 524, n. (1793); Ayns-
worth v. Same, id.; Franklin v. Same, 1
Russ. Ch., 575 (1826); Churchill v. Same,
11 M. & W., 8283 (1843); Humberstone
uv. Chase, 2 Y. & C, Ex. Rep., 209 (1836),
where the executor represented that the
specific legatee had died.

1Taney, U. S. C. Ct., 810 (1848). The
court said the corporation “not only
enabled the executor to perpetrate the
wrong by permitting the transfer, but
co-operated in it by certifying that the
title of transferee was good. Justice,
therefore, requires that it should bear
the loss.”

263 Md., 564 (1880), holding also that
the corporation was bound to take no-

tice of the contents of the will —a posi-
tion that is denied by the case of Hutch-
ins’ Adm’r v. State Bank, 58 Mass., 421
(1847). Where, however, the executrix
has power given by the will to apply
the stock to her own use in case of need,
the corporation is not bound to ascer-
tain whether such a state of need ex-
ists,» Hutchins’ Adm’r v. State Bank,
supra,

3 Weyer v. Second Nat’! B’k of Frank-
lin, 57 Ind., 198 (1877), A contrary
view seems to be held in ‘Southwestern
R. R. Co. v, Thomason, 40 Ga, Rep.,
408 (1869).

4Crocker v, Old Colony R. R. Co., 187
Mass., 417 (1884). See, also, Carter
Manufacturers’ Nat’l B’k, 71, Me., 448;
Goodwin v, American Nat'l Bk, 48
Conn,, 550.

366
CHAPTER XX.

SALES OF STOCK—THE FORMATION AND PERFORMANCE OF THE
CONTRACT — GAMBLING SALES — FRAUDULENT SALES.

A. FORMATION AND PERFORMANCE OF
CONTRACTS TO PURCHASE STOCK.
§ 331.
able. |
832. Restrictions on right to sell
stock,
832a. ‘* Pools,” {corners and combi-
nations in stock,

333. Contract for sale of stock may
be valid without delivery or
specific time for delivery.

334, Method of performance or offer
of performance by vendor.

337-88, Specific performance as a
' remedy for breach of a con-

tract to sell stock.

339-40. Statute of frauds as affect-

ing’sales of stock.

Shares of stock are transfer-

B. GAMBLING SALES OF STOCK.

341. What are gambling sales of
stock.

842, Statutes prohibiting wager con-
tracts, and also certain stock

contracts.
843. Test of legality of stock trans-

 

§ 844, When intent to deliver is ques-
von for the jury and when

345-46, Teeabrin stock contracts as
affecting the relations be-
tween the principal and
his broker.

347. Gambling stock transactions as
affecting notes, bonds, mort-
gages, etc, growing out
thereof.

©: FRAUD AS AFFECTING A SALE OF
STOCK. i

349, Extent of subject treated herein.

350. What has been held to consti-
tute a fraud herein.

351. Fraudulent sale by agent, etc.,

in breach of trust.
852-53. Fraud may be by corporate
reports or prospectus,

854, Remedies for the fraud.

355. Action for deceit.

356. Remedy in equity.

357. Fraud in selling stock may
amount to a conspiracy.

‘

action.
\

A. FORMATION AND PERFORMANCE OF CONTRACTS TO SELL STOCK.

§ 331. Shares of stock are transferable.— That shares of stock in
a corporation are transferable the same as other personal property
is a principle of law coeval with the existence of stock itself. The
few decisions holding that shares of stock were real estate were
exceptional rulings, and are no longer considered to be good law.!
Courts of law and of equity have guarded jealously the facilities
for the transfer of title to stock, and all unreasonable attempts to
restrain the right or readiness of passing title have been declared
void as against public policy. The right to transfer stock is of
‘vital importance, since the two chief causes of the phenomenal
growth of corporations in recent times are the limited liability of
the members and the readiness of withdrawing from the corpora-

1 See chapter I, . ‘3
867

\
CONTRACTS TO SELL— GAMBLING SALES — FRAUD.

tion by a transfer of the interest a member has therein. The
common law regards shares of stock as personal property, capable
of alienation or succession in any of the modes by which personal
property may be transferred.!

§ 332. Restrictions on right to sell stock.— The right of a stock-
holder to sell and transfer his stock cannot be restrained by a
by-law of the corporation.? An agreement or contract, however,
between the members, or a part of them, not to sell except on cer-
tain conditions, is valid, unless it amounts to an unreasonable re-
straint of trade.’ The right of transfer is sometimes limited by
statute, as in New York, where stock in railroad or manufacturing
corporations cannot be transferred until all calls thereon shall have
been fully paid# Where the charter or a statute forbids transfers
before the full capital stock is paid in, any transfer before such.

- -§ 332.) (cu. XX

payment has been held to be void.?
In England sometimes express authority is given to the direct-
ors, by the articles of association, to refuse to permit a transfer

1Mobile Mutual Ins. Co. v. Cullum,
49 Ala., 558 (1878): Cole'v, Ryan, 52
Barb., 168 (1868); Heart v. State B’k, 2
Dev. Eq., 111 (1831); Allen v. Mont-
gomery R. R. Co., 11 Ala., 487, 451
(1847); Boston Music Hall v. Cory, 129
Mass., 435 (1880); Sargent v. Franklin
Ins. Co., 8 Pick., 90 (1829); Chouteau
Spring Co. vu. Harris, 20 Mo., 882 (1855);
Poole v. Middleton, 29 Beav., 646 (1861);
Brightwell v. Mallory, 10 Yerg. (Tenn.),
196 (1836).

2Fechheimer v. Nat’?l Ex. B’k (Va,
May, 1884); Bank of Attica v. Manufact-
urers’ & T. B’k, 20 N. Y., 501 (1859);
Orr v. Bigelow, 14 N. Y., 556 (1856);
Sargent v. Franklin Ins, Co., 8 Pick.,
90 (1829); Moore v. B’k of Goin., 52 Mo.,
877 (1873). A by-law to the effect thata
transfer of stock shall be allowed only
upon consent of all the other stock-
holders is void as in restraint of trade.
In re Klaus, 29 N. W. Rep., 582 (Wis.,
1886). As regards corporate liens herein,
see § 522, infra. See, also, as to the gen-
eral policy of the law to discountenance
restrictions on right to sell, Moffatt v.
Farquhar, L. R., 7 Ch. D., 591 (1878). In
this case the directors were compelled
to allow a transfer although the pur-
pose of the transfer was to multiply

votes. As already stated, a by-law that
no stockholder shall transfer his stock
except by the consent of all stockholders
is void. A secretary cannot refuse to
register a transfer on account of the mo-
tive of the transferrer. Jn re Klaus,
supra.

3 Griffith v. “Jewett 15 Week. L. Bul.,
419, and §$ 618, 610, and chapter XXIX.
The foreclosure and sale of a pledze of
stock in the Western Associated Press
has been refused where it was shown
that the stock merely entitled the holder
to receive news; that no transfer was
allowed except 'by consent of the asso-
ciation, and such consent had never
been given, and the association was not
made a party tothe suit. Metropolitan,
etc., B’k v. St. Louis, etc., Co., 86 Fed.
Rep., 722 (1888). In this case it is to be
noticed that no profits or dividends
could arise from the stock, -

4N, Y. Sess, Laws, 1850, ch. 140, § 8
1848, ch, 40, § 8.

5Merrill v. Call, 15 Me., 428 (1839).
The case of Quiner v. Marblehead Ins.
Co., 10 Mass., 476 (1813), holds that,
nevertheless, such a transfer vests in
the transferee all the transferrer’s inter-
est in the stock. Cy. Cohn v, B’k of St,
Joseph, 70 Mo., 262 (1879),

868
\
“y '

'

CH. XX.]

CONTRACTS TO SELL-— GAMBLING SALES — FRAUD. [§ 332a.

unless the same is satisfactory to them.) They have this power,
however, only by express authority, and it is not extended by
implication.2 The power must be reasonably exercised, and its
exercise must be free from fraud, caprice and arbitrary power.$
The corporation cannot refuse to allow a registry on the ground
that there was no consideration for the transfer; nor because a
claimant of the stock notifies it not to make the registry.

§ 332a, “ Pools,’ “corners” and combinations in stock—The
courts will not aid either party in carrying out an agreement for °
advancing the price of stock by means of fictitious dealings designed
to deceive others concerning the real value of such stock.6 Where
both the vendor and vendee of stock know that the purpose of the
vendee is to control the corporation and illegally issue corporate
paper, the sale is illegal and void.?’ An agreement to make a “cor-

1Shortridge v. Bosanquet, 16 Beav.,
84 (1852); Bargate v. Shortridge, 5 H. L.
Cases, 297 (1855); In re Joint-stock Dis-
count Company, Shepherd’s Case, L. R.,
2 Kq. Cas., 564 (1864). j

2 Weston’s Case, L. R., 4 Ch. App., 20°

(1868); Gilbert’s-Case, L. R., 5 Ch. App.
559 (1870); Chappell’s Case, L. R., 6 Ch:
App., 902 (1871); Re Stranton Iron &
Steel Co., L. R., 16 Eq., 559 (1878); Mof-
fatt v. Farquhar, infra; Slee v. Inter-
national B’k, 17 L. T. Rep., 425. Judge
Dillon, in Johnson v. Lafiin, 5 Dill., 65,
78; aff'd, 108 U. S., 800 (1878), says:
**Such a power is so capable of abuse
and so foreign to all received notions

and the universal practice and mode of.
dealing in these stocks, that it cannot,:

in the absence of legislative expression,
be held to exist.” See, also, Farmers’ &
M. B’k v. Wasson, 48 Iowa, 336 (1878),
the court holding that a by-law that
transfers of stock shall not be valid un-
less approved by the board of directors
cannot restrain transfers. ‘Its enforce-
ment would operate as an infringement
upon the property rights of others,
which the law will not permit. It
would, besides; operate as a restraint
upon the disposition of property in the
stock of the corporation, in the nature
of restraint of trade, which the courts
will not tolerate.” 131 U. S., 246, 252.
3They cannot refuse to allow any:
transfers. Robinson v. Chartered Bank,
(24)

L. R., 1 Eq., 32 (1865), And an objection, :
not to the transferee, but to the purpose
of the transferrer in respect to voting,
is not sufficient. Moffatt v. Farquhar, L.
R., 7 Ch. D., 591 (1878), But the board
may refuse to give its reasons for re-
fusing to allow the transfer, and in-that
case it will be presumed to have had
sufficient reason for’ the refusal: Ex
parte Penny, L. R., 8 Ch., 446 (1872).
If misrepresentations are made in in-
ducing the directors to allow transfer,
they, having discretion, may avoid the
same. Payne’s Case, L. R., 9 Eq., 228;
Master’s Case, L. R., 7 Ch., 292; Bishop’s
Case, L. R., 7 Ch., 296. Although a
transfer is: rejected by the directors the
transferee is nevertheless entitled to
dividends and the title to the stock.
Poole v. Middleton, 29 Beav., 646 (1861).
Where the company may accept or'
rejecta transferee, and rejects him, the
transferee cannot recover back from the
transferrer the consideration of the
transfer. London, etc., Ass’n v, Clarke,
59 L. T. Rep., 93 (1888), ;

4 Helm v. Swiggett, 12 Ind., 194 (1859).

5 Ex parte Sargent, L. R., 17 Eq., 278
(1873) Cf. § 387, infra.

6Livermore v. Bushnell, 5 Hun, 285
(1875). See, also, in general, §§ 610,618, ~
infra.

1Town Council, ete, v. Elliott, 5 O.
S&., 113 (1855).:

369
§ 832a.] coNTRACTS TO SELL — GAMBLING SALES— FRAUD. [OH. Xx.

ner” in stock, by buying it up so as to control the market and then
purchasing for future deliveries, is ‘legal. It is not necessarily
unlawful to form a “ pool” for the purpose of dealing in a particu-
lar stock.2, An agreement to hold stock and sell together i is valid.’
A contract by which a shareholder ina corporation agrees to secure
to the purchaser of his stock a corporate office at a ‘stated salary,
and in case of his removal to repurchase the stock, is void as against
public policy and as a fraud on other stockholders, unless it is proved
that the transaction is not for the private benefit of the vendor, or
that it was consented to by the other stockholders. But a contract
to convey a majority of the stock of a corporation, and to procure
the resignation of the corporate directors, thereby enabling the
vendee to elect directors satisfactory to himself, is a valid and legal
agreement. 5 One railroad company: cannot purchase a controlling
interest in another railroad company for the purpose of managing
or absorbing the latter; but this rule grows out of the fact that such
purchases are: beyond the powers of the corporation.’ It is imma.
terial that the vendee already controls one railroad company, and
that the stock contracted to be sold will give him the control of
another. He is entitled to the stock.?’ An agreement to contribute

stock towards a common undertaking is enforceable, the considera-

Fr 1 Sampson v. Shaw, 101 Mass., 145

(1869); Raymond v, Leavitt, 18 Cent. L.
J., 110 (1881); Morris Run Coal Co. v.
Barclay Coal Co., 68 Penn. St., 173 (1871);
Arnot v. Pittston, etc., Coal Co., 68 N.
Y., 558 (1877); Keine v. Kent (N. Y.
Sup. Ct., Gen. T.), Daily Reg., March 15,
1887. Cf. Petrie y. Hannay, 3 Term R.,
418 (1789). A person making a “ corner”
in stocks is not subject to a criminal
prosecution therefor. Raymond v, Leav-
itt, 46 Mich., 447 (1881); Barry v. Cros-
key, 2 J. & H., 1 (1861), holding that the
victim of the ‘‘corner” may file a bill
in equity to recover back the money lost,

2Quincey v. White, 63 N. Y., 370, 388
(1875), modifying Quincey v. Young, 5
Daly, 32 (1878).

3’ Havemeyer v. Havemeyer, 11 J. & 8,
(N. Y.), 507 (1878); 8. C., 13 id., 464; aff'd,
86 N. Y., 618; Griffith v. Jewett, 15
Week. Law Bull., 419—an important
case. But an agreement not to sell ex-
cept by concurrent consent of all signers
to the agreement is void asin restraint of
trade and against public policy. Fisher

v. Bush, 85 Hun, 651 (1885). See, also,

§ 820, supra. For a full discussion of this

subject, see chapter XXIX, infra. Foran
interesting statement of the modus oper-
andi of a “corner,” see ‘An Investor's
Notes on American Railroads,” by
Swann, ch. XII (1886). See § 618, rela-
tive to purchases for the purpose of af-
fecting corporate elections.

4Guernsey v. Cook, 120 Mass., 501
(1876); Noyes v. Marsh, 123 Mass., 286
(187%). :

5 Barnes v. Brown, 80 N, Y., 527 (1880). *
Contra, Jacobs v. Miller, 15 Alb. L. J.,
188 (1877); Fremont v. Stone, 42 Barb.,
169 (1864). Where the agreement was
to keep the vendor in a professorship
the court will not aid the parties. The
agreement is against public policy.
Jones v, Scudder, 2 Cin. Sup. Ct., 178
(1872).

6 See § 315.

7Havemeyer v. Havemeyer,, supra;
O’Brien v. Breitenbach, 1 Hilt., 804
(1857). Cf. § 315, n,

870
x

CH. XX.] CONTRACTS TO SELL— GAMBLING SALES— FRAUD. [8 333.
tion being the mutual obligation But the common undertaking
must be a legal one.?

§ 333. Contract for sale of stock may be valid without delivery or
specific time for delivery.— Generally a sale of stock is attended
with an immediate delivery of the ‘certificates therefor, or it is
agreed that the certificates shall be delivered at some specified
time in the future. If, however, the vendor offers to sell his stock
and the vendee accepts the offer, the contract is complete and binds
both parties, although nothing has been said as to the time when
the certificates of stock shall be delivered. The law implies that
the contract will be performed by a delivery of the certificates im-
mediately or within a reasonable time, and either party may insist
upon carrying out the contract.? Where the vendor says, in his
contract, “I have sold” certain stock, deliverable at seller’s option,
within a specified timie, a sale in prasenti is made, and the vendor
assumes to have the stock and to hold it for the benefit of the pur-

1Conrad v. La Rue, 52 Mich., 88
(1883).
2I£€ the purpose is to rob a. railroad
and bribe a judge, the court will aid no
one. Tobey v. Robinson, 99 Ill., 202
(1881).
3 «<The performance of a contract, or
' the tender of performance, is no part of
the contract. The making of a contract
is one thing, but the performance
thereof, or the tender of performance, is
another and quite different thing. The
contract set up in the paragraph in
question is an executory one, by which
the plaintiff agreed to sell to the de-
fendant the shares of the stock, and the
defendant agreed to pay him therefor
the sum of $2,500. No time was fixed
for the performance; the law will im-
ply, therefore, that it was to be per-
formed immediately, or perhaps within
a reasonable time. Had a future day
been agreed upon for the performance
of the contract on each side, there could
have been no doubt as to its validity, or
the right of either party to enforce it,
he having done all he was required to
do on his part. The fact that no time
was agreed upon for performance does
not change the character of the con-
tract. The contract did not pass any

title to the stock, but it was, neverthe-
less, a valid contract, and one which
either party can enforce, he having
been in no default himself.” Bruce v.
Smith, 44 Ind., 1 (1878); Kerchuer v.
Gettys, 18 S. C., 521 (1882); Cheale v.
Kenward, 8 De G. & J., 27 (1858). An
agreement of the vendor of railroad
bonds to take back the bonds whenever
the vendee desires him to do so is a
valid and enforceable contract. Fitz-
patrick v. Woodruff, 96 N. Y., 561 (1884);
Meyer v. Blair, 109 N. Y., 600 (1888); 181
U. S., 247 (1889). Cf. § 339. Usage may
determine what is a reasonable time for
delivery. Seven days held reasonable,
Stewart v. Cauty, 8 M. & W., 160
(1841). Specific performance of a con-
tract to sell stock will not be enforced,
where the time of performance and of
payment is not fixed, and where five
years have elapsed, and where the
vendee, the corporate secretary, mis-
represented the value of the stock to
the vendor. Diamond, etc., Co. v.
Todd, 14 Atl. Rep., 27 (Del., 1888). An
agreement to transfer stock at any time
to a trustee, for creditors, is not en-
forceable against the insolvent estate
of the deceased stockholder. Chafee v,
Sprague, 18 Atl. Rep., 121 (R. I, 1888).

371
§ 334.] CONTRACTS TO SELL — GAMBLING SALES— FRAUD. [CH. Xx.

Co

chaser until delivery.!| An agreement to purchase stock when the
corporation is created is enforceable only after a complete and
legal incorporation is effected? A sale of stock with an agree-
ment to take it back whenever the vendee desires is an enforce-
able contract.’

An agreement to sell stock to be delivered at a future time, or
an agreement to sell stock at some future time, is valid.*

§ 834. Method of performance or offer of performance by vendor.
A person who is under contract to sell and deliver shares of stock
may fulfill the obligation on his part by tendering to the vendee
certificates of stock duly indorsed by himself, and containing a
power of attorney authorizing the vendee to obtain a registry of

1 Currie v. White, 45 N. Y., 822 (1871).
When the option is exercised the time
of delivery as fixed is as though that
time had been specified in the original
contract. Kelley v. Upton, 5 Duer, 336
(1866), holds otherwise where the con-
tract has also the words ‘‘ at buyer’s op-
tion in ninety days.” Such a contract
is executory as to time of passing title,
and tender is necessary. oe

2Childs v. Smith, 55 Barb., 45 (1869).
If stock is sold conditionally, and the
condition does not happen, the sale is
void. Mitchell v. Wedderburn, 11 Atl.
Rep., 760 (Md., 1887).

3 See § 339,

4 As to the remedies for a breach, see
Benjamin on Sales, §§ 428-498. For
the measure of damages, see chapter
XXXV, infra. As regards the plead-
ings in an action by a vendor of stock
to recover damages against the vendee
for refusal to accept and pay for stock
which the latter had agreed to accept
at a stated price, one year from date, if
the former desired to sell, see Strothers
v. Drexel, 122 U.S8., 487 (1887). For a
breach of an agreement to give a cer-
tain quantity of stock in payment for
services to be performed the person en-
titled to the stock may sue for damages.
Alford v. Wilson, 20 Fed. Rep., 96 (1884).
For a sale of stock where the vendee
was to divide with the vendor the
amount for which the stock should be

resold by the vendee, see Jones v.
Kent, 80 N. Y., 585 (1880). An agree-
ment of a party to sell bonds for an-
other party at a certain price may be
enforced by the party who is to give
the bonds to the other party to sell.
Plumb v, Campbell, 18 N. E. Rep., 790
(Ill., 1888). A person entitled by con-
tract to purchase stock of another may
collect damages against the latter for
failure to comply. Rand v. Wiley, 29
N. W. Rep., 814 (Ia., 1886). An option
to purchase stock within three years is
enforceable, since one party has an op-
tion which the other has not. Seddon
vy. Rosenbaum, 9 S. E. Rep., 326 (Va.,
1889). An agreement of a stockholder
that another stockholder shall be made
‘whole ” for any loss due to not selling
stock is without consideration and void.
Martin’s Estate, 4 R’y & Corp. L. J., 449
(Orphans’ Ct, Phil., 1888), An offer to
sell stock, open to acceptance after Jan-
uary 1st, must be accepted before July
9th. Park v. Whitney, 19 N. E. Rep.,
161 (Mass., 1889). A person induced
to subscribe by an agreement of a third
person to purchase. the stock at par at
any time may collect from the latter the
difference between the price at which
the former sells and the par value. the
latter having declined to perform.’
Lewis v. Coates, 5 S. W. Rep., 897 (Mo.,
1888). See, also, § 334,

872
OH. XX.] CONTRACTS TO SELL — GAMBLING SALUS — FRAUD. [$ 8384.
the transfer on the corporate books.! It has been held, however,
and evidently with good reason, that if the vendee objects to the
tender, on the ground that he wishes a registry of the transfer to
be made on the corporate books, the vendor must cause such regis-
try to.be made in order. to render his tender complete.’ A tender
of a certificate indorsed in blank, not by the vendor but by some
previous owner, is insufficient. The vendee is not obliged to trace -
his vendor’s title from the name appearing on the seu ihonies 3 In
England, where a transfer of shares is to be made by a deed, it is
the | duty sometimes of the vendor,' and sometimes of the rendes: .
to furnish the necessary deed, according to the custom of the mar-
ket in which the sale is made. If, after the vendee accepts a ten-
der of the certificates, the corporation refuses to allow a registry
and transfer on the corporate books, the vendor is liable to him,
since the registry is held to have been guarantied.6 The vendee
may decline to- accept the certificates if the stock has been at-
tached.” But the vendee cannot decline the tender on the ground
that the corporation has issued stock at a discount, nor because it
has mortgaged its property. A contract whereby stock is sold to
be paid for in the future is not forfeited by mere failure to pay as

agreed’ upon.®

1“ When certificates of shares are
given to a purchaser they are analogous |
to the sale of chattels, and the assign-
ment and delivering of the certificate
is a symbolical delivery of the shares
themselves.” Noyes v. Spaulding, 27
Vt., 420 (1855); Merchants’ Nat’l B’k v.
Richards, 6 Mo. App., 454 (1879); East-
man v. Fiske, 9 N. H., 182 (1838); Munn
v. Barnum, 24 Barb., 283 (1857); Bruce
v. Smith, 44 Ind.,-1 (1878).
v. Hudson River R. R. Co., 12 Barb.,
156; 21 N. E. Rep., 242 (Mass., 1889); 5
N. Y. Supp., 987, 940.

2White, Executor, v. Salisbury, 33
Mo., 150 (1862).

3Hare v. Waring, 3 M. & W., 362
(1838), per B. Parke: ‘‘ The party is to
convey and deliver certificates showing
either on the face of them or from the
indorsements that the title is in the per-
son conveying.”

4Stephens v. De Medina, 4 Q. B., 422
(1848).

5Shaw v. Rowley, 16 M. & W., ‘810

(1847).

Cf. Moore!

6 Wilkinson v. Lloyd, 7 Q. B.,
(1845),

7 Kastman v. Fiske, 9 N. H., 182 (1838).

8Noyes v. Spaulding, 27 Vt., 420
(1855). See, also, $ 349, etc., infra.

9Chater v. San Francisco Sugar Re-
fining Co., 19 Cal., 219 (1861), where
payment was made in notes and labor,
and the notes were not paid. Subse-:
quent dividends on the stock are to be
applied to the payment of such notes,
when the dividends have been received
by the vendor. A sale of stock to take
effect when a note given in payment is
paid does not enable the vendee to.
claim the stock long subsequently, the
note not having been paid. Davison v.
Davis, 125 U. S., 90 (1888). Where,
however, two parties, one owning
stock, the other bonds, contract to ex-
change the same, delivery being in
escrow at once, and absolutely after the
performance of certain things, a failure
of one party to perform on his part
enables the other to have the contract
canceled by a court of equity. Wilson
v. Roots, 10 N. E. Rep., 204 (IIL, 1887).

av

378

i
§ 334.) CONTRACTS TO SELL— GAMBLING SALES— FRAUD. [(H. XX.

In general the courts construe and enforce contracts for the sale
of stock according to the intent of the parties as manifested by
the written terms and conditions of their contract.'| An action at
law for damages is the usual remedy for a breach of a contract to
sell stock.2 The statute of limitations is a bar to the action.’

A person who is under contract to purchase stock cannot defeat
that contract by the fact that the corporation was insolvent, even
at the time the contract was entered into. An agreement to de-
liver stock free and clear of all incumbrances does not refer to in-
cumbrances against the corporation.’ The legality of the sale of
stock is governed by the law of the state within which it is made!
It is no defense to a contract to buy stock for the vendee to allege

1 When a subscriber to stock agrees
-to sell $5,000 worth of the same at its
‘* original cost,” such cost is the cost to
the subscriber and not the par value,
nor the cost including loans by the sub-
scriber to the corporation. Eagan v.
Clasbey, 18 Pac. Rep., 430 (Utah, 1887).
The vendor may guaranty that the
stock will be at par within a certain
time. Suit lies if it isnot at par within
that time. Hill v. Smith, 21 How.,
283 (1858). The fact that the corpora-
tion loses a large amount of money
after a partner agrees to take stock
as a part of his share of the partnership
assets does not allow him to decrease
the price which it was estimated to be
worth. Donahue v. M’Cosh, 80 N, W.
Rep., 14 (lowa, 1886). Only a de facto

corporation need be proved. Reynolds”

v. Myers, 51 Vt., 444 (1879). A contract
guarantying a certain dividend over
and above certain corporate expenses
does not include payment of salaries,
etc. Central, etc., Assoc. v. James, 7
S. E. Rep., 862 (Ga., 1888). A guaranty
upon the sale of stock that certain divi-
dends will be declared is enforceable
against the guarantying firm, even
though they acted as agents for an un-
disclosed principal. Their obligation is
primary, and not that of guarantors for
the company. Kernochan v. Murray,
111 N. Y., 306 (1888).

2 As to the character of the action at
law for failure of the vendee to accept

and pay for the stock, see Mobley v.
Morgan, 6 Atl. Rep., 694 (Pa., 1886).
The memoranda of the contract, to-
gether with the certificates of stock, are
sufficient presumptive evidence of the
existence of the corporation and the
legal issue of the stock. Mann v. Will-
iams, 9 Northeast. Rep., 807 (Mass.,
1887). See, also, Lindley on Partner-
ship, pp. 719, ete, 4th edition (Cal-
laghan & Co., 1881), Where stock is
issued to a person for construction work
and he sublets the contract and agrees
to divide the stock with others who are
to share the expense of construction,
they all are liable to the subcontractor.
M’Fall v. M’Keesport, etc., Co., 16 Atl.
Rep., 478 (Pa., 1889). 7

3Willfams v. Meyer, 41 Hun, 545
(1886),

4Rudge v. Bowman, L. B.,3 Q.B.,
689 (1868); Gordon v. Parker, 10 La.
Rep., 56 (1836), where the question of
whether fraud was involved was sub-
mitted to the jury. See § 849 ef seg.
Crubb v. Miller, 19 W. R., 519 (1891),
where by reason of a winding up a
transfer on the corporate books was no
longer possible; Kerchuir v. Gettys, 18
8. C., 521 (1882), holding that a loss by
the corporation of its property is no de-
fense.

5 Williams vw. Hanna, 40 Ind., 535
(1872).

®&Dow v. Gould & S. C. M. Co.,, 31
Cal., 629 (1867).

374
CH. XX.] CONTRACTS TO SELL—-GAMBLING SALES—FRAUD. [§§ 337, 338.

that the directors have committed an ultra vires act in issuing’ more
stock at a discount.

 § 837. Specific performance as a remedy for breach of a contract
to sell stock.— It frequently happens that the person who has con-
tracted to purchase stock is particularly anxious to procure that
stock, and that, under the circumstances of the case, the stock is
worth to him'a value not to be compensated for by mere money
damages. This cannot happen in the case of a contract to sell
securities issued by the government, since they may be easily pur-
chased in the market. Accordingly it is well established, both in
England and America, that a contract for the sale of government
securities will not be specifically enforced by a court’ of equity, but
the vendee may sue the vendor in an action at law for damages for
breach of contract. .

§ 338. An entirely different rule prevails as regards contracts for
the sale of stock of private corporations. If the stock contracted to
be sold is easily obtained in the market, and there are no particular
reasons why the vendee should have the particular stock contracted
for, he is left to his action for damages. But where the value of
the stock is not easily ascertainable, or the stock is not to be ob-
tained readily elsewhere, or there is some particular and reasonable
cause for the vendee’s requiring the stock contracted to be deliv-
ered, a court of equity will decree a specific performance and com-
pel the vendor to deliver the stock.

This rule, as applicable to contracts for the sale of railway stock,
was clearly established in England in 1841, in the case of Duncuft
v. Albrecht.’ Contracts for the sale of stock in mining and other

\

1Faulkner v. Hebard, 26 Vt., 452
(1854). Fraud is a defense, see §§ 349-857.

2Ross v. Union Pacific R’y Co., 1
Woolw., 26, 32 (1863); Cud or Cuddeev.
Rutter, 1 P. Wms. Rep., 570 (1719); 5
Viner’s Abr., 588 (1715); Dorison v.
Westbrook, 5 Viner’s Abr., 540 (1722);
Cappur v. Harris, Bunbury’s Rep., 185
(1728); Colt v. Netterville, 2 P. Wms.,
804 (1725); Buxton v. Lister, 3 Atk., 383
(1746). Of. Daloret v. Rothschild, 1 Sim.
& S., 590 (1824).

3Duncuft v. Albrecht, 12 Sim., 189
(1841); Parish v. Parish, 32 Beav., 207
(1868), granting also an accounting of
dividends; Poole v. Middleton, 29 Beav.,
646 (1861); Turner v. May, 32 L. T., N.
S., 56 (1875); Beckitt v. Billsbrough, 8
Hare, 188 (1850), dictum. Contra, dic-

tum in Ross v. Union Pacific R’y Co., 1
Woolw., 26, 82 (1863), per Miller, J. In
Cheale v. Kenward, 3 De G. & J., 27
(1858), the court said: ‘‘There is no
doubt that a bill will lie for a specific
performance of an agreement to trans-
fer railway shares. This was set at rest
by Duncuft v. Albrecht.” In the case
of Leach v, Fobes, 77 Mass., 506 (1858),
specific performance of a contract to
convey land and stock was granted
chiefly because of the land part of the
contract. Todd v. Taft, 89 Mass., 371
(1868), decreed specific performance of
contract to convey railway shares; also
‘Baldwin v. Commonwealth, 11 Bush,
417 (1875); Ashe v. Johnson’s Adminis-
trator, 2 Jones’ Kq. (N. C.), 149 (1855).

875
§ 338.]

CONTRACTS TO SELL — GAMBLING SALES — FRAUD.

'ToH. Xx,

private corporations will also be specifically enforced under like cir-

cumstances.!

Where the owner of a patent agrees to convey it toa corpora-
tion for stock, and then to divide the stock with others, he may be
compelled to perform his agreement.’

1 Treasurer v. Commercial Coal Min.
Co., 23 Cal., 390 (1868). See, also, Frue
v. Houghton, 6 Col., 318 (1882). As ap-
plicable to manufacturing corporations,
see Chater v. San Francisco 8. R. Co.,
19 Cal., 200 (1861). Granted in tow-
boat association in White v. Schuyler,
1 Abb. Pr., N. S., 300 (1865)... Refused
in the case of stock in a land associa-
tion. Jones v. Newhall, 115 Mass., 244
(1874), And in a paper company. Noyes
v. Marsh, 123 Mass., 286 (1877). See
Cushman v. Thayer Mfg. Co., 76 N. Y.,
865 (1879). ‘While the general rule is
for courts of equity not to entertain ju-
risdiction for a specific performance on
the sale of stock, this rule is limited to
cases where a compensation in damages
would furnish a complete and satisfac-
tory remedy.” This case, however, is
not a case of specific performance of a
sale of stock, but of compelling the cor-
poration to register a transfer. See,
also, in general, Austin v. Gillaspie, 1
Jones’ Eq., 261 (1854); Nutbrown ‘D
Thornton, 10 Vesey, 160 (1804); Shaw v.
Fisher, 5 De G., M. & G., 596 (1855);
Wynne v. Price, 3 De G. & Sm., 310
(1849); Wilson v. Keating, 7 W. R., 484
(1859) ; Oriental Co. v. Briggs, 2 J. & H.,
625 (1861); Paine v. Hutchinson, L. R.,
8 Hq., 257 (1866); Shepherd wv. Gillespie,
L. R., 5 Eq., 293 (1867); Birmingham v,
Sheridan, 33 Beav., 660 (1864); Stras-
burg v. Echternacht, 21 Penn. St., 220
(1853); Fallon v. R. R. Co., 1 Dill, 121
(1871). In regard to a specific perform-
ance of a trust of stock, see Ferguson v.
Paschall, 11 Mo., 267 (1848); Cowles v,
Whitman, 10 Conn., 121 (1884); Clark v.
Flint, 22 Pick., 231 (1839); Mechanics’
B’k v, Seton, 2 Peters, 299 (1828), Spe-
cific performance of a contract to sell
stock will be decreed where the stock

‘tered on the corporate books.

has no recognized market value, and
cannot be bought in the market. Ap-
peal of Goodwin, etc., Co., 12 Atl. Rep.,
736 (Pa., 1888). Specific performance

‘was refused in Eckstein v. Downing, 9

Atl. Rep., 626 (N. H., 1887), there being
no evidence that the vendee had any
wish or reason for wishing to; own that
particular stock ‘or stock in that par-
ticular corporation. See,-also, Cruse v.
Paine, L. R., 6 Eq., 641. Where a stock-
holder, who is also a director, contracts
to give a person a certain amount of
stock if he will do certain work for the
corporation, and the board of directors,
including this director, discharge such
person without cause, and thus prevent
completion, a court of equity will com-
pel a delivery of the stock. Price v.
Minot, 107 Mass., 49 (1871). In suits in

equity to compel a transfer of stock, _

parties interested by a purchase from
the defendant should be brought’ in.
O’Connor v. Irvine, 16 Pac. Rep., 236
(Cal., 1887).

2 But where the patentee does not con-
vey the patent to the corporation, but
conveys to another corporation, the lat-
ter is protected in its title, though some
of its incorporators and directors knew
all the facts. Davis, etc., Co. v. Davis,
etc., Co., 20 Fed. Rep., 699 (1884). Where
a patentee agrees with a promoter to
sell the patent to the corporation for
stock, and divide the stock with the
promoter, but the patentee after obtain-
ing the stock sells the certificates toa
bona fide purchaser, the latter is pro-
tected though.the transfer is not regis-
The pur-
chaser may come into a suit instituted
by the promoter against the corporation
tocompel atransfer, Thurber v, Crunip,
68S. W. Rep., 145 (Ky., 1887). Where a

376

’
CH. XX.] CONTRACTS TO SELL— GAMBLING SALES — FRAUD. [§ 339.
‘Specific performance will not be granted, however, where the
purpose of the purchaser of stock is to obtain control of a national
‘bank, when the change in management would probably be to the
detriment of the bank.!. Where the vendor’s contract is to deliver
stock and construct a railway, the court will not decree specific,
performance, since part of the contract is never the subject of such
compulsory performance.? If the vendor is not in possession of the
desired stock, specific performance will not be granted,’ except to
the amount of stock which he has. Although a court of equity
refuses to grant specific performance, yet it will not send the party
to a court of law, but will grant him damages. Laches may con-
stitute a bar to the bill in equity to enforce specific performance.
§ 839. Seventeenth section of statute of frauds as affecting sales

of stock.— In England the rule is firmly established that the sever-

* teenth section of ‘the statute of frauds, relating to contracts for the
sale of “ goods, wares and merchandise,” does not apply to sales, of
stock. No delivery, payment of earnest money or memorandum
in writing is necessary in order to render the contract of sale valid.
This principle of law was doubted in the early cases,’ but was de-

termined by the case of Humble v. Mitchell, in 1839.8

person holds property in trust or as’

agent for others, and conveys that prop-
erty to a corporation for its shares of
stock, the persons who had an equitable
interest in the property may compel this
agent or trustee to transfer to them-
selves such stock. But all of the prin-

cipals or cestuis que trust must be made

parties to the suit. O’Conner v. Irvine,
16 Pac. Rep., 236 (Cal., 1887).

1Foll’s Appeal, 91 Penn. St., 434 (1879),
the court saying: ‘I know of no in-
stance in this state in which a court of
equity has decreed specific performance
of a sale of stock.”

2Ross v. Union Pacific R’y Co., 1
Woolw., 26 (1863), per Miller, J. Court
will not decree specific performance of
a contract of a company to deliver its
stock to a constructer of its road, even
though the latter, the complainant, is
willing to perform. The court cannot
compel the latter to perform, and hence
will not tie up the stock of the former.

Peto v. Brighton, etc., Ry Co., 1H. &°

M., 468 (1868).
3 Columbine v. Chichester, 2 Phil. Ch.,
27 (1846).

In 1838 this

4Turner v. May, 32 L. T., N. S., 56
(1875).

5 Wonson v. Fenno, 129 Mass., 405
(1880); Austin v. Gillespie, 1 Jones’ Eq.,
(N..C.), 261 (1854).

6Seven years’ delay in bringing suit
for specific performance isa bar. York
v. Passaic, ‘etc., Co., 30 Fed. Rep., 471
(1887). Five years’ delay held fatal
where ‘‘ the relations of the parties have
changed and the stock has greatly ap-
preciated in value.” Mundy v. Davis,
20 Fed. Rep., 353 (1884).

7Mussell v. Cooke, Finch’s Prec. in
Ch., 533 (1720), holding that the statute
applied but was not properly pleaded;
Pickering v. Appleby, 1 Comyn’s Rep.,

' 858 (1721); not decided, the judges being *

divided six and six; ‘Colt v. Netterville,
2P. Wms., 306 (1725), not decided, the
lord chancellor saying it was too diffi-
cult to decide on a demurrer; Crull v.
Dodson, Sel. Cas. in Ch. Temp. King,
(fol. 41, 1724), statute held to apply.
811 A. & E., 205, followed in Duncuft
v. Albrecht, 12 Sim., 189 (1841), the
court saying that the statute applies
only to goods capable of part delivery ;

317
N

§ 839,] CONTRACTS TO SELL—-GAMBLING SALES— FRAUD. [OH. XX,

question arose in this country, apparently for the first time, and it
was decided in Tisdale v. Harris,! chiefly on the authority of the
early English cases, that a contract for the sale of stock was within
the seventeenth section of the statute of frauds. This decision has
been uniformly followed in America.?

A broker, however, a8 a common agent, may make the mem-
orandum for both parties.’ A subsequent part payment of the con-
sideration makes the contract valid,‘ and a payment in property‘
or services ® suffices. The statute does not apply as between part-
ners for the purpose of buying stock.’ A contract for the sale of
stock in a corporation not yet incorporated has been held not to be
within the statute.® The statute must be pleaded in order to be

Hibblewhite v. McMorine, 6 M. & W.,
201, 214 (1840); Tempest v. Kilner, 3 C.
B., 249 (1846); Heseltine v. Siggers, 1
Ex., 856 (1848).

137 Mass. (20 Pick.), 9

2Baltzen v. Nicolay, 52 N. Y., 467
(1873), rigidly applying the rule; North
v. Forrest, 15 Conn., 400 (1843), where
the court say: ‘‘Such contracts fall
clearly within the mischiefs which the
legislature, by the statute, intended to
remedy. There is as much danger of
fraud and perjury in the parol proof of
such contracts asin any other.” Pray
v. Mitchell, 60 Me., 480 (1872); Fine v.
Hornaby, 2 Mo. App., 61 (1876); Colvin
v. Williams, 3 Har. & Johns. (Md.), 38
(1810); Sherwood v. Tradesman’s Nat’l
Bank, 16 N. Y. W. Dig., 522 (1883, Su-
premeCt.). Cf. Brownson v. Chapman,
63 N. Y., 625. Contra, dictum, Vaw-
ter v. Griffin, 40 Ind., 598, 602 (1872).
See Reed on Statute of Frauds, § 234;
Hagar v. King, 38 Barb., 200 (1862),
holding that the sale .of railroad bonds
is within the statute. In Florida ‘the
statute applies, the word personal prop-
erty being used. Southern Life Ins. Co.
v. Cole, 4 Fla., 359, 378. Sec, also, Mason
v. Decker, 72 N. Y., 595; aff’'g 103. &
§., 115; Johnson v. Mulry, 4 Rob, (N.
Y.), 401 (1867), holding that the New
York Stock Jobbing Act (Laws N. Y.
1858, ch. 134) did not affect the appli-
cation of the statute of frauds, The stat-
ute is not sufficiently pleaded by.alleg-

ing that the contract of sale of stock.
‘« was void in Jaw and not binding upon
him.” Vaupell v. Woodward, 2 Sand.
Ch,, 148, The question of whether there
was a delivery sufficient to take'a case
of sale of stock out of the statute of
frauds was submitted to the jury in
Hinchman ‘v. Lincoln, 124 U. S., 38
(1887), discussed in N.Y. Daily Reg., Jan-
uary 28, 1888. Contract to sell stock at
the vendee’s option within three years
is not void by statute of frauds, since
the option may be exercised within a
year. Seddon v. Rosenbaum, 9 §, E.
Rep., 826 (Va., 1889).

3Calvin v, Williams, 3 Hare & J., 88
(1810)..

4Thompson v, Alger, 53 Mass. (12
Metc.), 428 (1847).

5 Eastern R. R. Co. v. Benedict, 76
Mass. (10 Gray), 212 (1857).

6 White v. Drew, 56 How. Pr., 58
(1878), holding that the furnishing of re-
liable information is sufficient.

TTomlinson v. Miller, 7 Abb. Pr., N.
S., 364 (1869). Nor as between persons,
one of whom buys stock“in his own
name for the joint benefit of both.
Stover v, Flack, 41 Barb., 162 (1862).

8 Gadsden v.-Lance, 1 McMull. Eq. (8.
C.), 87 (1841); Green v. Brookins, .28
Mich., 48, 54 (1871), where a person was
induced to subscribe on parol contract
that a purchaser for the stock would
afterwards befound, In Massachusetts,
on similar facts, except that a certain

378
CH. XX.] CONTRACTS TO SELL — GAMBLING sALES— FRAUD. [§§ 340, 341.

effectual as a defense.! The assignee of a contract for the sale of
stock, void by the statute of frauds, takes nothing by the assign-
ment.? An agreement by the vendor of ‘stock to take it back at
any time is not affected by the statute, and such an agreement is
a part of the executed sale.’
§ 340. Other sections of statute of frauds as affecting sales of
stock.— The provision of the statiie of frauds relative to answer-
ing for the debts, defaults or miscarriages of another does not ap-
ply to a guaranty that there will be a certain dividend on stock
urchased,‘ nor to a broker’s relation towards his client.’ The pro-
vision of the statute relative to transfers of land does not apply to
stock,’ since shares of stock are personal property.’’ A transfer of
stock for the purpose of defrauding the transferrer’s creditors is
void, and a court of equity will set it aside,’ or the stock may be
attached or sold under execution the same as though no attempt
at transfer had been made.° \

B. GAMBLING SALES OF STOCK.

§ 341. What are wager stock sales. Executory contracts for the
sale of stock may be made with an intent to actually deliver the
stock, or they may be made with an intent not to deliver it, but to

person agreed to purchase, a contrary
decision was rendered. Boardman v.
Cutter, 128 Mass.,. 388 (1880).

1 Porter v. Wormser, 94 N. Y., 481,
450 (1884).

2 Mayer v. Child, 47 Cal., 142 (1878).

3Fitzpatrick v. Woodruff, 96 N. Y.,
661 (1884); Thorndike v. Locke, 98 Mass.,
340 (1867); Fay v. Wheeler, 44 Vt., 292
(1872); B’k of Lyons v. Demmon, Hill
& Denio, Supp., 398 (1844). An agree-
ment by promoters with a subscriber
for stock that they would take the stock
from him within a certain time, if he
‘desired, is valid and enforceable. Meyer
v. Blair, 109 N. Y., 600 (1888); Morgan

_v, Struthers, 181 U. §., 246 (1889).

4Moorehouse v. Crangle, 36 O. St., 130
(1880).

5 Genin v. Isaacsen, 6 N. Y. Leg. Obs.,
218 (1845); Rogers .v. Gould, 6 Hun, 229
(1875).

6 Watson v. Spratley, 10 Ex., 222;
Powell v. Jessopp, 18 C. B., 336 (1856);
Walker v. Bartlett, 18 C. B., 845 (1856);

Ashworth v. Munn, L. R., 14 Ch. D.,
363, 368 (1880).

7 See chapter I.

8Skowhegan Bank v. Cutter, 49 Me.,
815 (1860); State v. Warren F. & M. Co.,
82 N. J. Law Rep., 489 (1868); Bayard
v. Hoffman, 4 Johns. Ch., 450 (1820);
Hadden v. Spader, 20 Johns. Rep., 554
(1822); Scott v. Indianapolis. Wagon
Works, 48 Ind., '75 (1874); Moore v. Met-
ropolitan Nat’l B’k, 55 N. Y., 41 (1878).
The fraudulent transferee must be made
a party defendant. Hyatt v. Swivel,
52 N. ‘Y. Super. Ct., 1 (1885). See, also,
chapter XXVII. But the fraudulent
transferee is not liable unless he has ac-
cepted the stock. Skowhegan Bank v.
Cutler, 49 Me., 315 (1860); Cartwell’s
Case, L. R., 9 Ch., 691 (1874). Accept-
ance is a question of fact. Pim’s Case,
3.De G. & S., 11 (1849), But he cannot
plead the statute of frauds himself.
Smith v. 49 and 56 Quartz M. Co., 14
Cal., 242 (1859).

9Beckwith v. Burrough, R. I., Feb,
9, 1884, See §§ 482, 484, infra.

379

4
8 341.]

CONTRACTS TO SELL— GAMBLING SALES — FRAUD.

[CH. Xx,

pay in cash the amount lost or won by phe rise or fall of the market

price of the stock.
law, legal and valid.’

or wager contract, and is not enforceable.

lIrwin v. Williar, 110 U. S., 499, 508
(1883). ‘‘ The generally accepted doc-
trine in this country is that a
contract for the sale of goods to be de-
livered at a future day is valid, even
though the seller has not the goods nor
any other means of getting them than

to go into the market and buy them;

but such a contract is only valid when
the parties really intend and agree that
the goods are to be delivered by the
seller and the price to be paid by the
buyer ; and if under guise of such con-
tract the real intent be merely to specu-
late in the rise or fall of prices, and the
goods are not to be delivered, but one
party is to pay to the other the differ-
ence between the contract price and the
market’ price of the goods at the date
fixed for execnting the contract, then
the whole transaction constitutes noth-
ing more than a wager, and is null and
void. And this is now the Jaw in Eng-
land by force of the statute of 8 and 9
Vict., ch. 109, § 18, altering the common
law in that respect.” It may be specu-
lation; nevertheless it is valid. Clark
v. Foss, 7 Biss., 540 (1878); Smith v.
Bouvier, 70 Penn. St., 325 (1872); Kirk-
patrick v. Bonsall, 72 Penn. St., 155
(1872), where the court say: ‘‘ We must
not confound gambling, whether it be
in corporation stocks or merchandise,
with what is commonly termed .specu-
lation. Merchants speculate upon the
future prices of that in which they deal,
and buy and sell accordingly.” Hatch
v. Douglas, 48 Conn., 116 (1860); Flagg
v. Baldwin, 88 N. J. Eq. Rep., 219 (1884);
Kent v. Miltenberger, 18 Mo. SPP 503
(1883).

2 Wagers at common law are valid
and enforceable in the courts;” and,
with certain exceptions growing out of
the peculiar subject of the wager, they
have been held to be valid contracts.

A sale with the former intent is,.at common
A sale with the latter intent is a gambling

The essential difference

Dewey on Contracts for Future Deliv-
ery and Commercial Wagers (1886), 10.
To same effect, Good v. Elliott, 3 Term
R., 693 (1790); Gilbert v. Sykes, 16 East,
150 (1812); Atherford v. Beard, 2 Term
R., 610 (1788); Morgan v. Pebrer, 4 8co.,
230 (1887); Hussey v. Crickitt, 8 Camp.,
693; Grant v. Hamilton, 8 McLean, 100
(1842); Campbell v. Richardson, 10
Johns., 406 (1813); Bunn v. Riker, 4
Johns., 436 (1809); Johnson v, Fall, 6
Cal., 359 (1856); Johnson v. Russel, 37
Cal., 670 (1869); Déwees v. Miller, 5
How., 347 (1848); Porter v. Sawyer, 1
How., 519 (1832); Griffith v. Pearce, 4
Houston, 209 (1869); Richardson v. Kel-
ley, 85 Ill., 491 (1877); Pettillon v. Hip-
ple, 90 Ill, 420 (1878); Trenton Ins. Co.
v. Johnson, 2 Zabr., 526 (1854) ; Dunman
v. Strother, 1 Texas, 89 (1846); McElroy
v. Carmichael, 6 Texas, 454 (1851);.
Wheeler'v. Friend, 22 Texas, 688 (1859);
Monroe v. Smeiley, 25 Texas, 486 (1860).
Contra—in Pennsylvania —Edgell ».
McLoughlin, 6 Whar., 176 (1841); Phil-
lips v. Ives, 1 Rawle, 36 (1828); Bruas’
Appeal, 55 Penn. St., Rod (1867); in
Vermont — Collamer v. Day, 2Vt., 144
(1829); Tarlton v. Baker, 18 Vt., 9 (1843);
New Hampshire — Clark v. Gibson, 12
N. H., 886 (1841); Winchester v. Metter,
52 N. H., 507 (1872); in Maine— McDon- .
ough v. Webster, 68 -Me., 530 (1878);
Gilmore v. Woodcock, 69 Me., 118 (1879);
Missouri — Waterman v. Buckland, 1
Mo. App., 45 (1876) ; and Massachusetts-—
Ball v. Gilbert, 12 Met., 399 (1847); Bab-
cock v. Thompson, 8 Pick., 446 (1826);
Sampson v. Shaw, 101 Mass., 150 (1869).
The supreme court of the United States
say, in Irwin v. Williar, supra: “In
England it is held that the contracts,
although wagers, were not void at com-
mon law, while generally, in
this country, all wagering contracts are
held to be illegal and void as against

380

‘

’
‘ ‘

CH. XX.] CONTRACTS TO SELL— GAMBLING SALES— FRAUD.  [§ 342.
between a wager contract and a contract not a wager is whether
there is an intent to deliver the property sold.!

Ԥ 342. Statutes prohibiting wager contracts, and also certain stock
contracts.— There are two classes of statutes affecting stock sales as
regards their speculative character. One class does not specify sales
of “stock, but declares in general terms that all gaming and wager-’
ing contracts shall be void , thereby rendering actions for the recov-
ery of money won on such wagers unsustainable. Such statutes
exist in England? and New York.’ The second class of statutes
is more explicit, and prohibits specified transactions in stock, irre-

‘Spective of whether such transactions be wager contracts or not.
Statutes affecting speculative sales of stock exist in. many of the

states.

public policy,” citing Dickson’s Execu-
tor v. Thomas, 97 Penn. St., 278 (1881);
Gregory v. Wendell, 40 Mich., 482 (1879);
Lyon v. Culbertson, 88 IIl., 33 (1876);
Melchert v. American U. Tel. Co., 3 Mc-
Crary, 521 (1882); 11 Fed. Rep., 193; Bar-
nard v. Backhaus, 52 Wis., 593 (1881);
Love v. Harvey, 114 Mass., 80 (1878);
Embrey v. Jemison, 181 U. S.,886 (1889).

1 Roundtree v. Smith, 108 U. §., 269
(1882); In re Hunt, 26 Fed. Rep., 789
(1886). Dewey, in his recent work on
Contracts for Future Delivery and
Commercial Wagers, states the rule ac-
curately as follows: ‘‘ Where the.parties
to a contract in the form of a sale agree
expressly or by implication at the time
it is made that the contract is not to be
enforced, that no delivery is to be made,
but the contract is to be settled by the
payment of the difference between the
contract price and the market price at
a given time in the future, sucha trans-
action is a wager,” citing many cases.
If there is an intent to deliver, then the
transaction is legal, though the parties
“exercise the option of settling the dif-
ference in price, rather than make de-
livery of the property.” Ward v. Vos-
burgh, 31 Fed. Rep., 12 (1887). As
regards sales and margins, see § 457,
infra. A note given in New York to
settle a gambling cotton debt is gov-
erned by New York laws as to its legal-
ity. Sondheim v. Gilbert, 18 N. E. Rep.,
687 (Ind., 1888). 1

In Massachusetts short sales are prohibited;‘ in Pennsyl-

28 and 9 Vict., ch. 109, § 18; Grizewood
v. Blane, 11 C. B., 526 (1851). Agree-
ments between buyers and sellers of
stock to pay or receive the differences
between their prices on one day and
their prices on another day are gaming
and wagering transactions within the
meaning of the statute. Thacker v,
Hardy, L. R., 4 Q. B. D., 687 (1878).
The statute does not necessarily affect
“corners” in stocks. Barry v. Croskey,
2J. & H.,1 (1861). As to the application
of this statute, see, also, Heinman v.
Hardie, 12 Ct. of Ses., 406. (Sc., 4th
series, 1885).

31 R. 8. of N. Y., 662, § 8 (vol. ITI,
p. 1962, 7th ed.). As applied to stock
cases, see Kingsbury v. Kirwan, 77 N.
Y., 612 (1879); Story v. Saloman, 71 N.
Y., 420 (1877); Harris v. Tumbridge, 83
N. Y., 92 (1880); Yerkes v. Saloman, 11
Hun, “1 (1877).

4Gen. Stat. Mass., ch. 105, ‘g 6. For
cases arising under this statute, see
Howe v. Starkweather, 17 Mass,, 243
(1821); Sargent v. Franklin Ins. Co., 25
id., 98 (1829); Barrett v. Mead, 92 id.,
337 (1865); Brigham v. Mead, 92 id., 245
(1865); Barrett v. Hyde, 73 id., 160
(1856); Durant v. Burt, 98 id., 161 (1867);
Brown v. Phelps, 103 id,,. 313 (1869);
Price v. Minot, 107 id., 49 (1871); Colt
wv. Clapp, 127 id., 476 (1879); Rock vu.
Nicholls, 85 id., 342 (1862); United States

vy, Vaughan, 8 Binn., 394 (1811); Wyman

v. Fiske, 85 Mass., 288 (1861); Pratt v..

381
§ 342.] CONTRACTS TO SELL—-GAMBLING SALES——FRAUD.. [OH, xx.

vania, sales for future delivery ;! in Ohio, sales of stock for future
delivery, where the vendor has not on hand or the vendee the
means to pay ;? in Illinois, all options are made gambling contracts,
and are void;* in Georgia, short sales cannot be enforced ;‘ in New
York, the statute of 1812,° re-enacted in the Revised Statutes of
1828,6 prohibiting short sales, was repealed by implication by the
statute of 1868, declaring the sale to be valid though there be no
consideration or payment ; of consideration, or no ownership: by the
vendor of such stock at the time of the sale. In England the stat-
ute of 1734,’ prohibiting gambling in the public funds, was repealed
in 1860.2 It is evident from the history of these statutes against
stock gambling that it is a difficult and delicate task to frame a
statute that will cure the evil. The great danger is that any stat-
ute will interfere with the legitimate transactions which for many
years have been building the railways and developing the material

resources of the country.®

American Bell Tel. Co., 5 N. E. Rep.,
807 (1886), following the decisions under
the New York statute from which the
statute in question was copied. :

1Laws of Penn., 1841, p. 398, § 6.
This statute has beenrepealed. Forde-
cisions, see Krause v. Setley, 2 Phil.
Rep., 32 (1856); Chillas v. Snyder, 1 id.,
289 (1850).

2Ohio Laws, May, 1885. ,

3 Revised Stat. of Ill., § 178. For de-
cisions, see Wolcot v. Heath, 78 Ill., 483
(1875); Pickering v. Cease, 79 III., 328
(1875); Pixley v. Boynton, 79 Ill, 351
(1875); Sanborn v. Benedict, 79 TIL, 309;
Cole v. Milmine, 88 Ill., 349 (1878). This
statute is restricted by the decisions to
cases where the transaction is to be
‘‘adjusted only by differences.” But
see Ward v. Vosburgh, 31 Fed. Rep., 12
(1887). In Illinois by statute jan option
to buy coal at a future time is void.
Osgood v., Bauder, 39 N. W. Rep., 887
(Iowa, 1888).

4 Georgia Code, § 2638.

52R. L., 187, § 18.

61R.8., p. 710,§ 6. For cases com-
ing under this statute, see Dykers v.
Townsend, 24.N. Y., 57 (1861), disapprov-
ing Stebbins v. Leowolf, 8 Cush., 148
(1849). See, also, Thompson v. Alger,
53 Mass., 428 (1847), on the New York

statute; Staples v. Gould, 9 N. Y., 520
(1854) (criticising Gram v. Stebbins, 6
Paige, 124— 1836); Frost v. Clarkson, 7
Cowen, 24 (1827); Cassard v. Heinmann,
14 How. Pr., 84 (1856); aff'd, 1 Bosw.,
207. In New York a director is pro-
hibited from selling “short.” LL, 1884,
ch. 228. In Arkansas a broker and
others are liable criminally for doing
business in futures. Fortenbury v. State,
18. W. Rep., 58 (1886).

77 Geo. II, ch, 8, and 10 Geo. II, ch. 8.
For cases under this statute, see Hewett
v. Price, 4 Man. & Gr., 355:(1842); Fisher
v. Price, 11 Beav., 194 (1848); Mortimer
v. McCullon, 6 M. & W., 69 (1840); Ells-
worth v. Cole, 7 M. & W., 30; Byles on
Bills, 194; 2 Kent’s Com., 468, n. (6).
The statute did not apply to stock in
private corporations. Hibblewhite v.
McMorine, 5 M. & W., 462 (1839), over-
ruling Bryan v., Lewis, R. & M., 386
(1826).

823 and 24 Vict., ch. 28.

9Dos Passos on Stock Brokers and
Stock Exchanges (1882), p. 405, says:
“The history of these stock-jobbing
acts seems to prove conclusively that
they have never been effective in pre-
venting speculations in stocks. In al-
most every instance in which they have
been adopted, after lingering for years

382
\

CH. xx. ] CONTRAOTS TO SELL — GAMBLING SALES — FRAUD. [§§ 3438, 344.

§ 848. Test of legality of stook transactions.— Although, as .al-
ready stated, stock sales, where no delivery but merely a settle-
ment of gain or loss is intended, are wagers, and although such
wagers are void by the statutes of some states and by the rules
of public policy in others,! yet difficulty is experienced in deter-
mining whether the parties really intended to deliver the stock or
to pay differences. The question of intent is always difficult of
ascertainment and of positive proof. It is pre-eminently a ques-
tion for the jury. It is accordingly found in most of the cases
involving the question whether the transaction was stock gam-
bling, that the court submitted to the jury whether an actual de-
livery of the stock was intended or not. If not, then, as a matter
of law, the transaction was a wager. If a wager, it is, by statute
in some states, by public policy in others, a void transaction, and
the parties haveonly the rights given them on void contracts.”

§ 344. When intent to deliver is question for the jury and when
not.— The question whether the parties to an executory sale of
stock intended to actually deliver the sock or merely to pay and
receive the gain or loss, is for the jury.’ In the application of this.
rule, however, great care is to be exercised in submitting the question
and charging the jury. Thus, an “option,” “put,” “ “call, » “strad-
dle,” or other similar stock exchange contract, may be made with
an intent to actually deliver the stock, and, if.s0, are unobjectionable
and are enforceable.t The parties may be asked directly whether

on the books, scorned: and violated by
the ‘unbridled and defiant spirit of

speculation,’ despite the earnest efforts.

of the courts to enforce them, they have
finally been repealed. It is, perhaps,
better to allow the evil to correct itself,
as it surely does, than to bring the ad-
ministration of justice into contempt
by filling the books with useless laws,
which are at all times openly violated
and laughed at, and which seem hardly
more effective to prevent the practice
at which they are aimed than legislation
against the laws of nature.”

1 Particularly in Pennsylvania are
such stock wagers void by public policy.
Worth v. Phillips, 89 Penn. St., 250
(1879); Fareira v. Gabell, 89 Pa. St., 89
(1879); Ruchizky v. De Haven, 97 Penn.
St., 202 (1881); Dickson’s Executor v.
Thomas, 97 Penn. St., 278 (1881); Bruas’
Appeal, 55 Penn. St., 294 (1867).

383

2See 8§ 345, 346. See, also, Green-
hood on Public Policy, pp. 280-287.

8Whitesides v. Hunt, 97 Ind., 191
(1884); Gregory v. Wendell, 39 Mich.,
337 (1878). And all the circumstances
are to be taken into consideration.
Beveridge v. Hewitt, 8 Bradw., 467
(1881); Hawley v. Bibb, 14 Reporter,
172 (1881); Brand v. Henderson, 107 TIL,
141 (1888); Barnard v, Backhaus, 52
Wis., 593 (1881); Kirkpatrick v. Bonsall,
72 Penn. St., 155 (1872)°

4For definitions of these terms, see
§ 445,n. A “put” is not per se con-
clusive evidence of an intent not to
deliver. Bigelow v. Benedict, 70 N. Y.,
202 (1877). A “straddle” follows the
same rule, The parties may have in- '
tended to deliver the stock. Harris v.
Tumbridge, 88 N. Y., 92 (1880); Story
v, Salomon, 71 N. Y., 420 (187%). Cf.
Ex parte Young, 6 Biss., 53 (1874);
-

§ 344.]

CONTRACTS TO SELL — GAMBLING SALES — FRAUD. [ow. XX:

they intended that a delivery should be made.’ If one party in-
tended to have a delivery the transaction is valid, even though the
other party intended otherwise.’ As between a party. and his
broker, however, greater difficulty arises, and in some jurisdictions
the intent between them governs their relations, irrespective of the
intent of the party dealing with them.’ The fact that stock trans.
actions were carried on by “margins” is no evidence that they
were gambling contracts, excepting in Pennsylvania and New

Webster v. Sturges, 7 Bradw., 56.(1880);
Tenney v. Foote, 4 Bradw., 594 (1879);
Lyon v. Culbertson, 83 IIL, 33 (1876);
Gilbert v. Gouger, 8 Biss., 214 (1878). A
short sale is not per se a wager, nor is
it presumed to be. Maxton v. Gheen,

75 Penn. St., 166 (1874); Huss v. Rau, 95°

N. Y., 359 (1884); Knowlton v. Fitch, 52
N. Y., 288 (1878); White » Smith, 54
N. Y., 522 (1874); Cameron'v. Durkheim,
‘55 N. Y., 425 (1874); Third Nat’l B’k v.
Harrison, 10 Fed. Rep., 248 (1882). These
decisions rest upon the principle of law
laid down in Stanton v, Small, 3 Sandf.
(N. Y.), 230, that ‘‘a contract for the
sale of goods, to be delivered at a future
time, is not invalidated by the circum-
stances that, at the time of the contract,
the vendor neither had the goods in his
possession, nor has entered into any
contract to buy them, nor has any rea-
sonable expectation of becoming pos-
sessed of them at the time appointed for
delivery otherwise than by purchasing
them after making the contract.” There
are many cases to the same effect. See
Noyes v. Spaulding, 27 Vt., 420 (1855);
Shales v. Seigmoret, 1 Ld. Raymond,
440 (1691); Frost v. Clarkson, 7 Cow., 25
(1827); Dewey on Contracts for Future
Delivery, 97; Thacker v. Hardy, L. R.,
4Q. B. D., 685 (1878), holding that, if
the intent at the time of buying was
to deliver, it is not a wager, even
though that intent be afterwards
changed. As to the legality of a ‘‘ cor-
ner,” see § 3320. Where there is evi-
dence of some intent to deliver, the
transaction is not gambling. Mitchell
v. Hartley, 16 N. E, Rep., 645 (Ind., 1888).

1Yerkes v. Saloman, 11 Hun, 471
(1877); Cassard v. Hinman, 6 Bosw., 14
(1860); First Nat. B’k v. Oskaloosa, 28
N. W. R., 255 (1885); Ha parte Young,
6 Biss., 58 (1874). In the case of Porter
v. Viets, 1 Biss., 177 (1857), the court re-
fused to admit parol evidence that the
contract was gambling, for the reason
that it varied a written contract.

2Wall v. Schneider, 17 Reporter, 700
(1884); Irwin v. Williar, 110 U. 8, 499
(1884); Whitesides vy. Hunt, 97 Ind., 191
(1884); Pixley v. Boynton, 79 Ill, 351
(1875); Ward v. Vosburgh, 31 Fed. Rep.,
12 (1887); Powell v. M’Cord, 12 N. EB,
Rep., 262 (Ill., 1887); Lehman v. Strass-
berger, 2 Woods (C. C.), 554 (1873); Cone
ner v. Robertson, Louisiana Sup. Ct.
(1886). Contra, Fareira v. Gabell, 89
Penn. St., 89 (1879); Beveridge.v. Hew-
itt, 8 Bradw., 467 (1881). In Tennessee,
by statute, dealing in futures is gam-
bling, if either party does not intend to
deliver. See McGrew v. City Produce
Exchange, 4 8. W. Rep., 38 (Tenn.,
1887).

3 See $$ 845, 346,

4Sawyer v. Taggart, 14 Bush, 727
(1879); Wall v. Schneider, 17 Rep., 700
(1884); Bartlett v. Smith, 18 Fed. Rep.,
268 (1882); Whitesides v. Hunt, 97 Ind.,
191 (1884); Union Nat. B’k uv. Carr, 15
Fed. Rep., 288 (1888); Hatch v. Doug-
las, 48 Conn., 116 (1880). Many other
cases do not directly pass on this ques-
tion, but assume that the deposit of a
margin, as a security to the broker,
does not prove an intent not to have a
delivery of the stock.

884
CH. Xx.] CONTRACTS TO SELL— GAMBLING SALES—FRAUD.  [§ 344:
Jersey. In these states this fact alone seems to be sufficient evi-
dence of a wager.'’ A wager contract is not proved by the fact
that the party selling stock to be delivered at a future time intends
to purchase that amount of stock in time for the delivery, or vice
versa" “An executory contract for the sale of goods for future,
delivery is not infected with the quality of a wager by reason of
the fact that at the date of the contract the vendor had not the
goods; had not entered into any arrangement to provide them,
and had no expectation of purchasing them, unless by a subsequent
purchase in the market.”* The financial responsibility of the par-

ties,‘ and their other transactions in the same line,’ are admissible

t

1Ruchizky v. De Haven, 97 Penn. St.,
202 (1881); Dickson v. Thomas, 97 Penn.
St., 278 (1881); Fareira v. Gabell, 89
Penn. St., 89 (1879); Maxton v. Green,
75 Penn. St., 166 (1874); North v. Phil-
lips, 89 Penn. St., 250 (1879); Flagg v.
Baldwin, 88 N, J. Eq. Rep., 219 (1884);
Justh v. Holliday, 11 Wash. L. Rep.,

418 (1883).
2In the case of Ashton v. Dakin, 7 W.
R., 884 (1859), the court held it not to
be a wager contract to order a broker to
buy stock, ‘and let the bargain be so as
to day of payment that you may have
an opportunity of reselling it for me by
such a day, when I expect the market
will have risen, and then you will pay
the seller for me with the money you
_ receive from the purchaser, and I shall
receive the gain from you, if any, or
pay you the loss.” So, also, Smith v.
Bouvier, 70 Penn. St., 825 (1872), holds
that stocks bought and sold upon spec-
ulation are not necessarily wager con-
tracts. A person may sell without
owning the stock, and at time of deliv-
ery buy to deliver, and yet the transac-
tion be not a wager, where the jury
finds that there was an intent to deliver
in both the selling and buying. See,
also, Thacker v. Hardy, L. R., 4 Q. B.
Div., 685 (1879); Sawyer v. Taggart, 14
Bush, 727 (1879). A purchase of corn
may be legal although made to fill cer-
tain sales which the party had made
previously. A mortgage given to a
(25)

broker for advancements made in the
transaction is valid. Douglas v. Smith,
88 N. W. Rep., 163 (Iowa, 1888).

3Conner v. Robertson, 37 La. Ann.,
815 (1885), the court saying also that-
Larymer v. Smith (1 B. & C., 1) has.
been repeatedly overruled. See, also,.
supra, page 383, note 4.

4 Kirkpatrick v. Bonsall, 72 Penn. St.,.
155 (1872); First Nat’l Bank v. Oskaloosa :
P. Co., 66 Iowa, 41 (1885); In re Green,,
7 Biss. , 388 (1877); Beveridge v. Hewitt,
8 Bradw., 467 (1881); Justh wv. Holliday,.
Ii Wash. Rep., 418 (1883); North w.
Phillips, 89 Penn. St., 250 (1879); Pat--
terson’s Appeal, 16 Rep.. 59 (Pa., 1883) ;.
Flagg v. Baldwin, 38 N. J. Eq., 2193.
Colderwood v. McCrea, 11 Bradw., 543.
(1882). The fact that one of the parties
is already under obligation to other
parties to purchase cotton several times
greater in value than his fortune is
evidence of an intent to gamble.
Beadles v. McElrath, 3 S. W. Rep., 152
(Ky., 1887). The fact that a party is
financially unable to pay for property
is evidence that the contract is gam-
bling. Myers v. Tobias, 16 Atl. Rep.,
641 (Pa., 1889).

5 Kirkpatrick v. Bonsall, 72 Penn. St.,
155 (1872); Beveridge v. Hewitt, 8
Bradw., 467 (1831); Irwin v. Williar,
110 U. S., 499 (1884). Contra, Tomblin
v. Callen, 28 N. W. Rep., 573 (Iowa,
1886). As to the competency of evi-

‘dence herein, and that evidence of cus-
885
f
§§ 815, 346.] CoNTRACTS TO SELL — GAMBLING SALES— FRAUD. [CH. Xx.

as evidence as to whether there was an intent to deliver the stock
or merely to pay the gain or loss. The burden of proving that a
stock transaction is a gambling contract is upon him who affirms it!

§ 845. Gambling stock contracts as affecting the relations between
the principal and his; broker— A broker is but an agent of his
principal. As such he may hold the principal liable for commis-
sions and for losses paid on stock transactions where those stock
transactions are legitimate and legal. Where, however, the stock
contracts are of a wager or gambling nature, a more difficult ques-
tion arises, and the decisions are irreconcilable. In England, in
1878, Judge Lindley, in Thacker v. Hardy,? a carefully-considered
case, held that, where the principal has been carrying on gambling
transactions, he cannot escape or repudiate his liabilities to his
broker in those transactions, even though the latter knew of the
gambling character of the business. The principal is liable to his
broker as though the transactions were free from such objections.
This is the well-established rule in England.*

§ 346. In this country an opposite rule prevails for the most part.
The great weight of authority holds that, where the broker has
knowledge of the purpose to gamble in stocks and aids in carrying
out that purpose, he cannot recover for services rendered or losses
incurred and paid by himself.t A few cases hold to the same effect

tom of settling by differences is incom-
petent, see Scofield v. Blackmarr, 4 Atl.
Rep., 208 (Pa., 1886).

1Dewey on Contracts, etc., p. 207,
says: ‘‘ All the cases except Barnard v.
Backhaus, 52 Wis., 503 (1881); Cobb wv.
Prell, 15 Fed. Rep., 774 (1883); Bever-
idge v. Hewitt, 8 Bradw., 467 (1881);
‘Stebbins v. Leowolf, 3 Cush., 187 (1849),
and possibly Chandler’s Case, Ex parte
Young, 6 Biss., 58, hold that these con-
tracts are presumed to be bona fide; and
in order to show them to have been
used as covers for wagers, an agree-

ment to that effect must appear to have .

bee:. made. According to these ex-
cepted cases option contracts are pre-
sunied to be invalid, and proof must be
made that they are bona fide.” See,
also, Dewey, p. 46.

2L.R.,4Q. B. D., 685. In Mlinois
the burden of proof is on the defend-
ant to prove a gambling intent on the
part of both parties. In Wisconsin a

contrary rule seems to prevail. - See
Ward uv. Vosburgh, 81 Fed. Rep., 12
(1887).

3Re Hart, Weekly Notes, 85 (1870);
Cooper v. Neil, 13 Weekly Notes, 128
(1878); He parte Rogers, L. R., 15 Ch.
D., 207 (1879); Faikney v., Reynons, 4 .
Burr., 2069 (1767); Jessopp v. Lutwyche,,
10 Ex., 614 (1854); Knight v. Cambers,
15 C. B., 562 (1855); Knight v. Fitch, 15
C. B., 566 (1855); Lyne v. Siesfield, 1 H.
& N., 278 (1856); Rosewarne v. Billing,
15 C. B., N.S., 816 (1868); Ridgeon v.
Burslem, 3 Ex., 465, (1849). Contra,
Byers v. Beattie, 16 Weekly Rep., 279
(1868, Ex., Irish). ,

{Irwin v, Williar, 110 U. §., 499, 510
(1883); McClean v, Stuve, 15 Mo. App.,
817 (1884), per Thompson, J.; Ream v.
Haniilton, 15 Mo. App., 877 (1884). Cf.
Kent v. Miltenberger, 13 Mo, App., 508,
511, (1883). See, also, as supporting
above rule, Everingham v. Meighan,.
5 Wis. Leg. News, 26 (1882): In re

886
OH. XX.] CONTRAOTS TO SELL— GAMBLING SALES— FRAUD.  [§$ 346.
as the English rule.! Many cases which seem to favor the English
rule do so only by dic¢a, inasmuch as the transactions involved in
such cases are held not to be wager contracts? In Pennsylvania
and New Jersey the American rule is rigidly enforced. The broker
is held to be dealing as a principal, not as an agent, in all stock
gambling transactions.* He cannot recover commissions nor losses.’
If his principal is an infant the broker is liable to such infant for
all sums received by way of margins.’ If, however, the parties do
not raise the question of the legality of the transaction, the court
cannot.6 In Ohio it is held that the broker may be made to ac-
count for profits, even though the transaction was a gambling
one.’ A note and mortgage given to the broker in settlement of
a gambling transaction will not be interfered with. The broker
is not liable for a sale of the stock on failure of margin, without

notice to the principal, where the business is gambling.®
L

Green, 7 Biss., 888 (1877); Bartlett v.
Smith, 18 Fed. Rep., 263 (1882); Ten-
ney v. Foote, 4 Bradw., 594 (1879); aff'd,
95 Ill., 99 (1880), defeating a note given
to the broker; Calderwood v. MtRae,
11 Bradw., 543 (1882); Webster v.
Sturges, 7 Bradw., 56; Barnard v. Back-
haus. 52Wis., 593 (1881), defeating notes ;
Beveridge v. Hewitt, 8 Brad., 467 (1881);
Whitesides v. Hunt, 97 Ind., 191, 208
(1884) ; Melchert v. American U. Tel.
Co. 11 Fed. Rep., 193 (1882); First Nat’l
B’k of Lyons v. Oskaloosa Packing Co,
(Iowa), 23 N. W. Rep., 255 (1885), hold-
ing a note void; Stewart v. Garrett, 4
‘Atl. Rep., 899 (Penn., 1886); Stewart v.
Schall, 34 Alb. L. J., 98 (Md., 1886),
Brokers are bound to know that banks
have no power to purchase cotton futures
-on margins, Cannot recover commis-
sions and losses. “Che ultra vires con-
tract-was not executed, inasmuch as
the corporation received no property.
Jennison v. Citizens’ Sav. B’k, 44 Hun,
412 (1887). A broker may recover com-
missions, etc., from his principal when
the former knew nothing of the latter's
intention to gamble. Lehman v. Feld,
37 Fed. Rep., 852 (1889); 38 id., 635.
1Brown v. Speyers, 20 Gratt. (Va.),
296 (1871); Wyman v. Fiske, 85 Mass.,
238 (1861), onthe ground that the note
sued on was a voluntary payment to

the broker; Warren v. Hewitt, 45 Ga.,
501 (1872); Marshall v. Thurston, 3 Lea
(Tenn.), 741 (1879), where also a note
had been given; Jackson v. Foote, 12
Fed. Rep., 37, also a note case, the court
saying that, as between the broker and
his ‘principal, the decision probably
would be different. Cf. Tinsley’s Case,
10 Fed. Rep., 249.

2Lehmann v, Strassberger, 2 Woods,
554 (C. C., 1873); Rumsey v. Berry, 65
Me.,, 570 (1876); Sawyer v. Taggart, 14
Bush, 727 (1879); Durant v. Burt, 98
Mass., 161 (1867); Williams v. Carr, 80
N. C., 294 (1879).

3Ruchizky v. De Haven, 97 Penn. St.,
202 (1881),

4North v. Phillips, 89 Penn. St., 250
(1879) ; Flagg v. Baldwin, 38 N. J. Eq.
Rep., 219 (1884); Fareira v. Gabell, 89
Penn. St., 89 (1879), holding that notes
given to the broker are void.

5Ruchizky v. De Haven, supra.

6Gheen v. Johnson, 90 Penn. St., 38
(1879); Williams wv. Carr, 80 N. C., 294
(1879).

TNorton v. Blinn, 39 O. St., 145 (1883),

8Clark v. Foss, 10 Chicago Legal
News (U. S. D. Ct., 1878.) Cf. Tantum
v. West (N. J.), Central Rep., March 25,
1886.

9North v. Phillips, 89 Penn. St., 250
(1879).

887
§ 347.]

CONTRACTS TO SELL — GAMBLING SALES — FRAUD.

§ 847. Gambling stock transactions as affecting notes, bonds,
mortgages, etc. growing out thereof,— The penalty of engaging in
a stock gambling operation is that, in case the transaction. is de-
clared by a court of justice to be illegal as a wager contract, the
court declines to aid either party. As a general “ine all liability
on the part of either party is unenforceable. Money paid by the
principal cannot be recovered back.? Neither principal can collect
the gains of the transaction, and neither is liable for a loss.’ Notes
given in settlement are void and not collectible,* even in the hands
of dona fide purchasers.’ Bonds and mortgages given in payment

[CH. Xx.

1 Reese v. Fermie, 13 W. R., 6 (1864),
holding that the court will not aid one
who has been tricked in gambling in
stocks, ;

2Gregory v. Wendall, 89 Mich., 837
(1878); Id., 40 Mich., 432 (1879); Wyman
v. Fiske, 85 Mass., 238 (1861), Cf. Nor-
ton v. Blinn, 30 O. St., 145 (1888). In

Tennessee, by statute, a contrary rule.

prevails. McGrew v. City Produce Ex-
change, 4 S. W. Rep., 38 (Tenn., 1887);
Dunn v. Bell, id., 41 (Id.), holding, also,
that where there are several partners
or co-conspirators who take the prin-
cipal’s money they are liable therefor
jointly and severally. Where a gam-
bling contract is illegal by statute, a cus-
tomer who gave money to the broker to
gamble with, according to orders, can-
not recover it back. Sale deliverable in
a certain month, on a day to be fixed
by seller, is not a gambling contract.
White v. Barber, 123 U. S., 392 (1887);
17 Atl. Rep., 791. Certificate of deposit
given to broker in gambling transac-,
tions may be recovered back. Denpsey
v. Harm, 12 Atl. Rep., 27 (Pa., 1887).
3Grizewood v. Blane, 11° C. B., 526
(1851); Webster'z. Sturges, 7 Bradw.,
(Il.), 560 (1880); Ea parte Young, 6
Biss., 53 (1874); Thompson v. Cum-
mings, 68 Ga., 124-(1881); Yerkes v.
Solomon, 11 Hun, 471 (1877). A part-
ner, however, may have contribution
for losses paid at the express request of
the other member of the firm. Petrie
v. Hannay, 8 Term Rep., 418 (1789).
‘Barnard v. Backhaus, 52 Wis., 598
(1881); Fareira v. Gabell, 89 Penn. St.,

89 (1879); Lowry v. Dillman, 18 N. W.
Rep. (Wis.), 4 (1884); Justh v. Holliday,
17 Central L. J., 56 (1883); 11 Wash. L.
Rep., 418; Cunningham », Third, etc.,
B’k of Augusta, 71 Ga., 400 (1888); Ten-
ney v. Foote, 4 Bradw., 595 (1879);
aff'd, 95 Ill, 99. Cf. Wyman v. Fiske,
85 Mass,, 238 (1861). Person loaning
money and taking notes therefor can-
not be defeated in suit on notes by evi-
dence that he knew the loan was to be
used in gambling operations. Defend-
ant must prove, also, that plaintiff in-
tended that the money should be s0
used. ‘Waugh v. Beck, 6 Atl. Rep., 923
(Pa., 1886), Checks, notes, etc, in

‘gambling contracts are void. Kahn v.

Walton, 20 N. E. Rop., 208 (O., 1889);
Embrey v. Jemison, 131 U. 8., 336 (1889).

5 Barnard v. Backhaus, 52 Wis., 593
(1881); Steers 7. Lashley, 6 Term Rep.,
61 (1794); Tenney wv. Foote, 4 Bradw.
(Ill), 594 (1879); Cunningham v. Nat'l
Bank of Augusta, 71 Ga., 400 (1883);
Lowry v. Dillman, 18 N. W. Rep., 4
(1884). Contra, Crawford v. Spencer, 4
S. W. Rep., 7138 (Mo., 1887), citing
Third Natl B’k v. Harrison, 10 Fed.
Rep., 243; also, contra, Lilley v. Rankin,
55 L. T. Rep., 814 (1886). An accom-
modation indorser to the note may set
itup. Justh v. Holliday, 17 Central L,
J., 56 (1883); 11 Wash. Law Rep., 418.
Note to bank is valid, though the pro-
ceeds were to pay a stock gambling
debt and the bank knew that fact.
Marshall v. Thurston, 8 Lea (Tenn.),
%41 (1879).
& A,, 179 (1819).

888

‘ |

Cf. Cannon v. Bryce, 8 Bo
}
CH. XX.] CONTRACTS TO SELL— GAMBLING SALES— FRAUD. [$§ 349, 350.

are void.'! Due-bills,? acceptances * and guaranties‘ of notes are
not valid or enforceable. If a part of the consideration is void
the whole contract and all securities given thereunder are void.

C. FRAUD AS AFFECTING A SALE OF STOCK.

§ 349. Extent of subject treated herein.—In a previous chapter
of this treatise the effect of fraud and fraudulent representations
on a subscription for stock was fully treated.. There is little dif-
ference in the principles of law governing fraud as affecting sales
of stock from fraud as affecting subscriptions for stock. Most of
the cases assume that the same principles apply to both kinds of
transactions. Consequently the questions of what constitutes fraud
herein; what remedies the defrauded person has; and the general
principles governing this branch of the law, will be fully under-
stood only by a comparison of these two parts of this work.®

§ 350. What has been held to constitute a fraud herein.— It is
difficult to lay down rules as to what does and what does not
amount to fraudulent misrepresentations. The courts, consequently,

let each case stand upon its own facts.

Certain states of fact

shave, however, been passed upon as constituting fraud, and as

1 Amory v. Merry weather, 2 B. & C.,
578 (1824); Flagg v. Baldwin, 38 N. J.
Eq. Rep., 219 (1884); Griffiths v. Sears,
112 Penn. St., 523 (1886); Barnard v.
Backhaus, 52 Wis., 593 (1881). A judg-
ment entered by confession on a bond
given for a gambling debt may be set
aside. Everitt v. Knapp, 9 Johns., 331
(1810); Beveridge v. Hewitt, 8 Bradw.,
467 (1881). A court of equity will en-
join the transfer of a note and will
decree the cancellation of a mortgage
given by a married woman in payment
of her husband’s stock gambling debts.
Tantum v. West, 6 Atl. Rep., 316 (N. J.,
1886). But will not where given by the
party himself to his brokers. Clark v.
Foss, 10 Chicago Legal News (1878).
A mortgage to a broker to pay losses on
gambling speculations is void and not
enforceable. Walters v. Comer, 5S. E.
Rep., 292 (Ga., 1888). But see Craw-
ford v. Spencer, 48. W. Rep., 713 (Mo.,
1887).

2 Rudolf v. Winters, 7 Neb., 125 (1878).

3Steers v. Lashley, 6 Term Rep., 61
(1794), Rawlings v. Hall, 1 Carr. & P.,

389

11 (1823), holds that the broker on the

witness stand need not-admit that the
consideration was a gambling debt,
since it would subject him to a common-
law criminal prosecution.

4Tenney v. Foote, 95 Ill., 99 (1880).

5.Tenney v. Foote, supra. See, also,
Fareira v. Gabell, 89 Penn. St., 89 (1879).
But where, upon the close of a success-
ful ‘‘ corner,” which is illegal by stat-
ute, one of the parties leaves his share
of the profits with the other party to
invest, the latter must account-for it
when called upon so to do. Where,
upon the close of an unsuccessful ‘ cor-
ner,” the parties Idsing settle among
themselves, but one of them fraudu-
lently overstates the losses, he is liable
to account for the amount fraudulently
allowed him. Wells v. McGeoch, 34.’
W. Rep., 769 (Wis., 1888).

6See chapter IX. In the important
case of Western Bank v. Addie, L. R., 1
H.'L. (Sc.), 145 (1867), part of the shares
had been subscribed for and part pur-
chased. The court applied the same
principle to both.

/
\
y
CONTRACTS TO SELL— GAMBLING SALES — FRAUD. [cH. XX,

§ 350.]
such they aid in coming to a conclusion on facts in somewhat »
similar cases. Thus, it has been held to be a fraudulent misrep-
resentation to make false statements as to the location, explora-
tions and developed state of a mine;! or that a patent owned by
the company was of great value, and that certain other persons
were owners of stock;? that the company was prosperous, when in
fact large overissues of stock had been made;? or that the corpo-
rate property was free from incumbrance;‘ or ‘that the corporation
would guaranty certain dividends;* or any false statement or
general fraudulent act, or fraudulent concealment of a material
fact whereby the purchaser is induced to complete the sale of

stock.§

It is not, however, a fraudulent representation to state

that the stock is worth its par value.’

1Morgan v. Skiddy, 62 N. Y., 319
(1875).

2 Miller v. Barber, 66 N. Y., 558 (1876).

3 Cazeaux v, Mali, 25 Barb,, 578 (1857).

4Southwestern R. R. Co. v. Papot, 67
Ga., 675, 692 (1881), the court saying:
“Tt is, we think, sufficient to show that
the misrepresentation or suppression of
fact was of such a nature as to prove
that the property purchased was of no
value to the purchaser for the purposes
for which it was bought, or that it
would be reasonable to suppose that the
purchaser would not have contracted
for it had he had knowledge of the ex-
’ istence of this defect.”

5 Gerhard v. Bates, 20 Eng. L. & Eq.,
129 (1853). °

6 See further illustrations in chapter
IX. Declaring a dividend in good faith
and sound discretion is not fraud by rea-
son of its turning out to have been ill-
advised. Burnes v. Pennell, 2 H. of L.
Cases, 497 (1849). A representation that
the stock ‘‘is good property or invest-
ment and is about to make a dividend ”
is a false representation when untrue,
and where the person taking the stock
as executor from:a preceding executor
objected to receiving it on account of
his doubt or, ignorance as to its charac-
ter. Lawton v. Kittredge, 80 N. H.,
£00 (1855). Representations that a cor-
porate property is valuable and one of
the best properties in Colorado, when in
fact the company was a bubble com-

pany, raises a question of fraud for the
jury to pass upon. Bradley v. Poole,
98 Mass., 169 (1867), The payment of an
excessive and speculative price for stock
is not fraud ‘and is no ground for setting
the sale aside. Moffat v. Winslow, 7
Paige, Ch., 124 (1888). The vendor war-
rants the title to the stock, but not its
quality or value. Allen v. Pegram, 16
Towa, 163 (1864). A sale of stock in a
company formed to purchase a railroad
cannot be set aside merely because its
title to the railroad fails. State v. North.
La. & T. R. R. Co., 34 La. Ann., 947
(1882). In the case of Wright's Appeal, 99
Penn. St., 425 (1882), it was held that
the corporation was not liable for the
conversion of stock by its president,
who obtained the certificates indorsed in
blank from the owner on false repre-
sentations that the corporation wished
to use them, Newlands v. National,

etc., Association, 58 L. T., N. &, 242

(1885); March v. Eastern R. R. Co., 48
N. H., 515 (1862), holding that the fact
that the earnings were not distributed
by dividends until after a sale of stock
does not constitute fraud. A confiden-
tial agent who uses his position to ob-
tain stock of which the principal has
been deprived wrongfully must turn it
over to the principal. Hardenburgh v.
Bacon, 338 Cal., 356 (1867).

7 Union Nat'l B’k &. Hunt, 76 Mo., 439
(1882). A false representation that the
stock sold is worth eighty cents on the

390 '
1

CH. xx.] CONTRACTS TO SELL — GAMBLING SALES — FRAUD.

[$ 350.

It is a fraud on the vendee of stock to sell him as paid-up stock
that which is not paid up, although issued as paid up, the vendor
having participated in the issue.1 It is fraud in the vendor to rep-
resent that property is to be turned in by him to the corporation
at a certain price and then to‘refuse to carry out the latter con-
tract.? Where the vendor agrees to sell at a value to be ascertained
_by an examination of the corporate books and affairs, it is fraud in
the vendee to cause false memoranda to ‘be made by the employees
of the corporation.’ Jt is not fraud, however, for a director or
other corporate officer to buy or sell stock at a profit due to his .
official knowledge of the condition of the corporation;* nor to ob-
tain the stock by a threat of a call.’ The fact that a check givenin
payment for stock is not honored, although the money is in bank,
is not fraud where payment was refused because of other frauds of
the vendor; nor is it fraud to issue certificates before anything has
been paid thereon, there being no participation by the vendor.’ It
is fraud, however, to represent the company as having a full-paid
capital stock when in fact the stock was wholly issued in payment
of a worthless mine. The person making such representation is
liable to the vendee.®

There are various facts which will constitute fraud herein, and
various principles of law applicable to the remedy to be pursued.
Many cases are occurring constantly, and the decisions on this sub-
ject are becoming of great importance.®

dollar — it being worth but forty cents—
will not sustain an action for deceit.
Ellis v. Andrews, 56 N. Y., 83 (1874).

1 Sturges v. Stetson, 1 Biss., 246 (1858),
holding that the vendee is not liable on
a note given in payment thereof. Fos-
dick v. Sturges, 1 Biss., 255 (1858), hold-
ing that the vendee may recover back
money paid. Reeve v. Dennett, 11
Northeast. Rep., 938 (Mass., 1887),
where the capital of $1,000,000 was is-
sued for a worthless patent; holding
also that the misrepresentations may
invalidate also a second and subsequent
purchase of stock, even though in the
meantime the vendee has become a
director in the corporation.

2Seaman v. Low, 4 Bosw., 337 (1859).

3’ Hager v, Thompson, 1 Black, 80
(1861).

4 Board of Com’rs of T. Co. v. Rey-
nolds, 44 Ind., 509 (1873); and see § 320,

5Grant v. Attrill, 11 Fed, Ree; 469

(1882). As to other cases of fraud by the
vendee, see Jolinson v. Kirby, 65 Cal.,
482 (1884); Hemppling v. Burr, 26
Northw. Rep., 496 (Mich., 1886).

§ Comins v. Coe, 117 Mass., 45 (1874).

7 Woodruff v. McDonald, 33 Ark., 97
(1878).

8 Cross v. Sackett, 2 Bosw. (N. Y.), 617
(1858). See, also, §§ 40, 48, supra. But
an assertion that the capital stock is a
certain amount is not an assertion that
it has all been paid in. Colt v. Woollas-
ton, 2 P. Wms., 154 (1723). When a
promoter misrepresents to a subscriber
the price paid by the promoter for prop-
erty conveyed by him to the company,
the subscriber may sue him for dam-
ages. Teachout v. Van Hoesen, 40 N.
W. Rep., 96 (Iowa, 1888).

9 Where a debtor turned over to his
creditor, as trustee, the controlling stock
of a corporation, for the latter to man-
age, and the latter afterwards, by

3891
§ 351.]

CONTRACTS TO SELL— GAMBLING SALES — FRAUD.

§ 351. Fraudulent sale by agent, etc., in breach of trust.— A bona
fide purchaser for value and without notice of stock from a vendor

threats of abandoning the enterprise,
forced the debtor to sell him the stock
outright, a court of equity will set aside
such sale and hold the creditor liable
asatrustee. Ryle v. Ryle, 7 Atl. Rep.,
44 (N. J., 1886). Where, for the pur-
pose of forwarding a corporate enter-
prise, one of its chief promoters con-
tracts to give and sell to a third person
certain bonds, etc., if the latter will do
certain acts, the former cannot, after
part performance by the latter, rescind
and recover back the bonds, etc., unless
he recompenses the latter for his part
performance; nor can he rescind at all
unless he can recompense the latter.
His remedy is for damages. So though
defendant is charged with fraud in re-
fusing complete performance. Snow v.
Alley, 11 Northeast. Rep., 764 (Mass.,
1887). Failure of vendor to state that
the company is a joint-stock association
and not a corporation is not fraud
avoiding the sale ofthe stock. Curtiss
v. Hurd, 30 Fed. Rep., 729 (1887). Di-
rector selling stock cannot be defeated
in his action for the price by reason
of fraudulent representations of the
corporate treasurer inducing defendant
to purchase. Doane v. King, 30 Fed.
Rep., 106 (1887). Question for jury
whether it was fraud ‘in representing

that stock was paid up, when in fact’

first payment only had been made, and
balance had been paid by dividends.
Kryger v. Andrews, 35 N. W. Rep., 257
(Mich., 1887). Fraud may be by direct-
ors in fraudulently making dividends,
See § 550, infra. Where, after an agree-
ment to sell land for stock, the owner
of the stock attends a corporate meeting
and votes to sell all corporate property
at sixty cents on the dollar, which is
done, the purchaser of the stock may
have the land returned. Harris v. Piatt,
31 N. W. Rep., 185 (Mich., 1887). Cases
of fraud on the part of the vendee
sometimes occur, where the vendee is

ns

given a majority of the stock, and then

uses his control of the corporation to
defraud the vendor in the execution of
his contract to pay for the stock. Har-
denburgh v. Bacon, 33 Cal., 356 (1867).
Jury decided it to be fraud on part of
corporate officers representing that the
company was without debt. They are
liable in damages for false representa-

-tions, -Faville v. Shehan, 26 N. W. Rep.,

131 (Iowa, 1885). Fraud may be by
agent’s representations as to cost of
mining the coal, of transportation and
of market price. Booth v. Smith, 7N,
E. Rep., 610 (IIl., 1886). Ona question of
testimony by the defendant, see Reeve
v. Dennett, 6 Northeast. Rep., 3878
(Mass., 1886). Defendant entitled to bill

of particulars as to when and by whom

the misrepresentations were made.
Blanco v. Navarro. N. Y. Daily Reg.,
April 2, 1887, p. 640. It has been held
that one who was induced. by fraud to
purchase stock in ah insolvent corpora-
tion may bring suit to have his part of
the corporate assets ascertained, to the
exclusion of a debt due from the corpo-
ration to the person inducing him to
purchase. Poole v. West, etc., Co., 80
Fed. Rep., 513 (1887). The person making
sales of stock by false representations
may be indicted for obtaining money
by false representations. Common-
wealth v. Wood, 8 Northeast. Rep., 482
(Mass., 1886); The statute of frauds as
to the answering to the debt, defaults,
etc., of another person has no applica.
tion to a sale of stock herein. The fact
that the cor porate property sold several
years later fora small amount is imma-
terial and not admissible. French v.
Fitch, 83 N. W. Rep., 258 (Mich., 1887).
Where a stockholder sells a controlling
interest to a person who is to pay there-
for by improving the corporate prop-
erty, but who elects a board of direct-
ors and defrauds the vendor, the latter’s
remedy isa difficult one. Cates v. Spark-

392

fou. xx.:
CH. xx.]

CONTRACTS TO SELL —-GAMBLING SALES — FRAUD.

[§ 851.

who delivers the certificates therefor indorsed in blank by another,
or indorsed by the vendor himself, is protected and entitled to the
stock, although it afterwards transpires that the agent was selling
as agent of ‘another and had been guilty of a breach of trust.!

man, 11 8. W. Rep., 846 (Texas, 1889),
The fraud or mistake must have been
such that the agreement would not have
been made in its absence, where a re-

scission of the contract is sought by de- -

cree. Means v. Rees, 26 Fed. Rep., 210,
216 (1886). Where an agent to sell a
mine induces his principals to place in
his name all their stock, and he sells the
property and accounts to them for part
only of the price, and refuses to return
the stock, they may sue him for an ac-
counting without previously tendering
back the amount they received or de-
manding the stock. Wooster v. Nevills,
14 Pac. Rep., 390 (Cal., 1887).
representations as to corporate property,
business and prospects, and use of cor-
porate prospectus which the vendor
knows contains false statements, sus-
tains rescission of transfer of land for
stock, Person purchasing land with
full knowledge of fraud is not protected.
Certificates may be filed with clerk of
court awaiting retransfer | of land.
Ormsby v. Budd, 33 N. Ww. Rep., 457
(lowa, 1887). Vendee of stock cannot
rescind or collect damages on ground
that the corporation was not legally in-
corporated. If it is ade facto corpora-
tion the vendor is not liable. Harter
v. Eltzroth, 111 Ind., 159 (1887). It is
fraud for a person to sell as stock of an-
other that which belongs to himself.
Maturin v. Tredinnick, 2 New Rep., 514
(1863). Vendee of stock for which he
gave real estate may have a reconvey-
ance of the real estate decreed, where
the sale of stock was induced by fraudu-
lent representations. Gray v. Robbins,
11 Atl. Rep., 860 (N. J., 1887). For a
case of misrepresentations, see, also,
N. Y. Daily Reg., March 21, 1888. A
managing director who buys stock on
credit, and then aids in levying an at-
tachment on the stock against the

‘

False .

vendor and conceals the same from the
vendor, and buys in the stock at a-low
price, and then repudiates his debt to
the vendor, is guilty of fraud. Young
v. Fox, 37 Fed. Rep., 385 (1888). Where
the president in selling stock makes
false representations the vendee is not
bound to investigate them. He may
defeat a note given in payment. Wan-
nell v. Kern, 57 Mo., 478 (1874). Arep-
resentation that a bond is an ‘‘ A No.1”
bond is not a material representation.
Deming v. Darling, 20 N. E. Rep., 107
(Mass., 1889), A broker who buys and.
sells stock for a cashier of a bank and
takes checks made out by him as cash-
ier is liable to the bank for sums of
money eribezzled by the cashier and
lost in this manner. Anderson v. Kis-
sam, 35 Fed. Rep., 699 (1888). See, also,
instances in § 334, supra. The vendee
fails in his suit‘for damages if he does
not contradict the defendant’s testi-
mony that the plaintiff vendee knew
all the facts at the time of the sale.
Nelson v. Luling, 62 N. Y, 645 (1875);
affg 43. &S., 544,

1 The case of McNeil v. Tenth National
Bank, 46 N. Y., 325 (1871), is not only
the leading case on the estoppel of the
principal from repudiating the sale or
pledge of his stock by his agent, whom
he intrusted with the certificates in-
dorsed in blank, but it is one of the
leading cases on the law of the quasi
negotiability of stock. Honold wv.
Meyer, 36 La. Ann., 585 (1884); Strange
v. Houston & T. CO, R. R. Co., 53 Tex.,
162 (1880); Dovey’s Appeal, 97 Penn. St.,
158 (1881); and see many cases in chap-
ter on Stock Brokers, where this princi-
ple of law is often involved. The case
of Taylor v. Great, etc., R. R. Co, 4
De G. & J., 559 (1859), to the contrary,
turns on the English doctrine that
transfers in blank are not valid. The

, 303
[CH. xx.

§ 851.] CONTRACTS TO SELL— GAMBLING SALES— FRAUD.

But the transferee is not protected where he is not a bona fide pur-
chaser! Where the same person acts as agent for both the trans-
ferrer and the transferee, and absconds with the purchase price after
the certificates have been delivered, but before registry on the cor-
porate books, the transferae is protected.’ Where the corporation.
knows that the vendor. is selling as the agent of the stockholder,
who has given to the agent the certificates indorsed in blank, it
must see to it that the agent has full power to sell the stock, and is
liable for allowing a registry where the agent has not such power.’
If the principal authorized the sale or ratified it, he of course can-

not afterwards complain.*

In England the courts do not protect a purchaser of certificates

ease of Donaldson v. Gillet, L. B., 8
Eq., 274 (1866), where the pledgee of
one who held the certificate indorsed to
thimself was not protected, since the
pledgor had purchased as agent and had
‘fraudulently taken title in his own
name, would not be good law in this
‘country, where the failure to have the
transfer registered has no effect on the
pledgee’s rights under such circum-
‘stances. Rumball v. Metropolitan Bank,
L. R., 2 Q. B. D., 194 (1877), where a
broker committed a breach of trust.
The court said the stockholder ‘‘is in
the position of a person who has made
a representation, on the face of his
scrip, that it would pass with a good
title to any one on his taking it in good
faith and for value, and who has put it
in the power of his agent to hand over
the scrip with this representation to
‘those who are induced to alter their
position on the faith of the representa-
tion so made.” Moodie v. Seventh Nat.
B’k, 3 Weekly N. C., 118 (1876), holding
that if the purchaser takes partly for
an antecedent debt he is not a bona fide

holder to that extent. Dovey’s Appeal,

97 Penn. St., 153 (1881). An assignee in
-insolvency of the agent does not take
‘the stock. See § 820. An agent to col-
-Iect dividends who loans the stock at a
profit is liable for its loss, even though
he informed the owner of the loan and
she did not object. Persch v. Quiggle,
57 Penn. St., 247 (1868), A bona fide
purchaser from the agent is protected.

State B’k v. Cox, 11 Rich. Eq., 344
(1860); West, etc., Co.’s Appeal, 81 Penn.
St., 19 (1870); Otis v. Gardner, 105 IL,
436 (1883); Gulick v.. Markham, 6 Daly,
129 (1875); Martin v. Sedgwick, 9 Beav.,

838 (1846); Appeal of Linnard, 6 East.

Rep., 877 (Penn., 1886).

1Talmage v. Third Nat. Bk, 91 N. Y.,
531 (1883); Crocker v. Orocker, 31 N. Y.,
507 (1865); Weaver v. Borden, 49 N. Y.,
286 (1872), where the agent fraudulently
bought in his own name and then
fraudulently sold; Williamson v. Ma-
son, 12 Hun, 97 (1877). Purchaser from
agent with notice of fact that he held
as agent, and that he had sold to him-
self, is not protected. B’k of Louisville
v. Gray, 25. W. Rep., 168 (Ky., 1886).

2Ke parte Shaw, L. R., 2 Q. B. D.,
463 (1877).

3 Woodhouse v. Crescent Mutual Ins.
Co., 85 La. Ann., 238 (1882), holding
also that the transferee who is charged
with receiving with notice may be
joined as a party defendant; St. Romes
v. Cotton Press Co,, 127 U. S., 614 (1888).

4As to the admissibility in evidence
of receipt showing that agent was au-
thorized to sell by order of the princi-
pal’s brother, see Dwyer v. Fuller, 11
Northeast. Rep., 686 (Mass. 1887).
Pledge of stock by agent is not a con-
version, where the principal receives
without objection and retains a receipt
from the agent setting forth such pledge.
Metcalf v. Williams, 11 Northeast. Rep.,
700 (Mass., 1887).

394
CH. XX.] CONTRACTS TO SELL—-GAMBLING SALES—-FRAUD.  [§ 852.
of stock, unless the latter has not only purchased but has obtained
a registry on the corporate books.'' An agent’s power to sell stock
does not authorize him to pledge it.2. A person who knows, or has
the means of knowing, that another person holds stock as an agent
only, cannot take such stock in pledge from the agent, aithough
the latter represents that the money is to be used for his principal.
The principal may recover the stock if he has not authorized the
pledge? A bcna fide purchaser of certificates of stock from a
pledgee is similarly protected.‘ ,

§ 352. Fraud may be by corporate reports or prospectus.— A re-
port of corporate officers to the stockholders, setting forth the condi-
tion of the affairs of the corporation; is deemed to bea statement to
the public also, and it may be relied upon by any one in purchasing
shares. This principle of law was first clearly established in Eng-
land in 1860, in the case of Davidson v. Tulloch.’ It was there held
that there need be no privity between the officers issuing the report
and the person purchasing shares of stock from third persons. If
such purchaser made his purchase relying upon material statements
in corporate reports which were false, he has his remedy against
all persons who knowingly made or issued the report. The lead-

1In England it is held, even in regard
to American certificates of stock, that a
bona fide purchaser of certificates of
stock, duly indorsed, from an agent
selling in breach of faith, is not pro-
tected until registry is obtained. Colo-
nial B’k v. Hepworth, 57 L. T. Rep., 148
(1887). But see Williams v. Colonial
Bk, 57 L. T. Rep., 188 (1887); and see
Easton v. London, etc., B’k, 55 L. T.
Rep., 678 (1886). See, also, §§ 378, 379.

2 Merchants’ B’k of Canada v. Living-
‘ston, 74 N. Y., 223 (1878). See $$. 321, 326.

3Fisher v. Brown, 104 Mass., 259
(1870).

4A bank taking a pledge of nego-
tiable bonds in good faith may hold
them though it turn out that the
_pledger was not the owner of them, but
held them as security that a mortgage
would be canceled. Saloy v. Hibernia,
etc., B’k, 1 South. Rep., 657 (La., 1887).
As to sales by trustees, etc., see chapter
XIX, supra.

56 Jur. (N. S.), 548; 8&.C., 3 Macg.
(H. of L.), 783.

“6 Scott v. Dixon, 29 L. J. (Ex.), 62, n.

(1859), explained in Peek v. Gurney, L.

R., 6 H. L., 398 (1878), as follows: ‘‘ The
report, though originally made to the
shareholders, was intended for the in-
formation of all persons who were dis-
posed to deal in shares; and the repre-

sentation must be regarded as having”

been made not indirectly, but: directly
to each person who obtained the report
from the bank where it was publicly
announced it was to be bought, in the
same manner as if it had been person-
ally delivered to him by the director.”
Gerhard v. Bates, 20 Eng. L. & Eq., 129
(1853); Cullen v. Thompson, 6 L. T. (N.
8.), 870. (1862), holding that, where di-
rectors of a joint-stock company issue
false and fraudulent reports to the
public, and the manager, secretary.and
other officers of the bank supply the de-
tailed statements for such report, know-

ing them to be false and that they are |

to be used for purposes of deceit, and a
third. party, acting on such reports, pur-
chases shares in the company and suf-
fers loss thereby, each of the officers of
the company who knowingly assisted in

395
§ 353.)

CONTRACTS TO SELL — GAMBLING SALES — FRAUD.

[cH. xx,

ing case in this country on the liability of corporate directors for
fraudulent representation as to the condition of the company, not
made to a purchaser of stock personally, but to the public gener-
ally, is Cross v. Sackett,! decided in 1858, where fraudulent dividends
and representations based thereon were made.
§ 353. A somewhat different rule prevails in England as to false
statements contained in a prospectus of a corporation. A prospectus
is issued for the purpose of inducing persons to subscribe for stock.
Its object is not to promote the sale of that stock. Accordingly it

was decided in Peek v. Gurney,’

the fraud is personally liable to such
third party for the loss caused by such
misrepresentation in the report, though
the report was signed only by the direct-
ors and not by the subordinate officers.

12 Bosw., 617; 6 Abb. Pr., 247; 16
How. Pr., 62, the court saying: ‘* When
an instrument is made to deceive the
public generally, and is adapted as well
as intended to deceive some portidn of
the public, and as well one person as

another, and is used as it was designed’

it should be, and fraudulently induces
some one to act to his prejudice by act-
ing in the mode it was intended to influ-
ence them to act who might be deceived
by it, the person who made the instru-
ment and caused it to be thus fraudu-
lently used is liable to the person who
has been defrauded by it. In such a
case the person injured has been sub-
jected to damages by his fraudulent
acts, and the fraudulent wrong-doer is
liable for the consequences.” Cazeaux
v. Mali, 25 Barb., 578 (1857). ‘‘ It is not
essential that the reference should be
addressed directly to the plaintiff; if it
were made with the intent of its influ-
encing every one to whom it might be
communicated, or who might read or
hear of it, the latter class of persons
would be in the same position as those
to whom it was directly communicated,
but they must have come to a knowl-
edge of it before their purchase.” Morse
v. Swits, 19 How. Pr., 275 (1859), hold-
ing a bank officer liable for false state-
ments in a report published in accord-
ance with the requirements of a statute.

in 1873, that “the purchaser of

The court said: ‘‘ Being published, the
public or any individual of the public
has a right to believe it. And if, believ-
ing it, any one of the public acts on that
belief, the makers and publishers of this
falsehood are to be held liable for the
consequences they have caused” (citing
cases). See, also, Salmon v. Richardson,
80 Conn., 360 (1862); Fenn v, Curtis, 23
Hun, 884 (1881), holding corporate sec-
retary liable to purchaser of shares
from an individual, the secretary hav-
ing signed the certificate of stock and
also a circular stating that the corpora-
tion was a corporation when in fact it
was not. And see §$ 40, 48, supra.
A person buying stock in what was
supposed to be a corporation, but is a
partnership, cannot recover back his
money from all of the participants.
Perry v. Hale, 10 Northeast. Rep., 174
(Mass., 1887). A corporation is not liable
for misrepresentations of the president
in selling stock belonging to himself.
Prosser v. First Nat’l B'k, 106 N. Y., 677
(1887).

2L.R.,6 H.L., 377, overruling Sey-
mour v. Bagshaw, 18 C. B., 903 (1856),
and Bedford v. Bagshaw, zi H.& N.,
538 (1859); explaining Scott v. Dixon, 29
L, J. (Ex.), 62, 0. (1859), and Gerhard v.
Bates, 2 El. & BL, 476 (1853), and itself
explained in Cargill v. Bower, L. R., 10
Ch. D., 502 (1878). In Bellairs v. Tucker,
L. R., 18 Q. B. D., 563 (1884), the court
seems to have assumed a different posi-
tion, and to have treated the prospectus
the same as any other method of mis-
representation.

396
1

OH. Xx.] CONTRACTS TO SELL — GAMBLING SALES— FRAUD. [8§ 354,355.

shares in the market, upon the faith of a _ prospectus which he has

not received from those who are answerable for it, cannot, by action.

upon it, so connect himself with them as to render them liable to
him for the misrepresentation contained in it as if it had been ad-
dressed personally to himself.” In New York a directly opposite
rule prevails. In the case of Morgan v. Skiddy,! in 1875, the court
of appeals held that, “if the plaintiff purchased his stock relying
upon the truth of the prospectus, he has a right of action for deceit
against the persons who, with knowledge of the fraud and with in-
tent to deceive, putit in circulation. The representation was made
to each person comprehended within the class of persons who were
designed to be influenced by the prospectus; and when a prospectus
of this character has been issued, no other relation or privity be-
tween the parties need be shown except that created by the wrong-
ful and fraudulent act of the defendants in issuing or circulating
the prospectus, and the resulting injury to the plaintiff.”

§ 354. Remedies for the fraud.— There are two methods by
_which a person who has been fraudulently induced to buy or sell
stock may remedy the wrong? He may bring an action at law for
damages for the deceit, or he may file a bill in equity to have the
transaction set aside. The first-named remedy is the most difficult
and the last thé most easy to maintain.

§ 355. Action for deceit.—In order to sustain an action for dam-
ages for deceit, whereby plaintiff was induced to buy or sell shares
of stock, it is necessary for the plaintiff to prove that statements
were made or acts done which were fraudulent, that the person
guilty of them knew that they were fraudulent, and that the plaint-
if acted on such statements or acts in buying « or selling the stock.

162 N. Y., 319.
2Tn the case of Smith v. Tracy, 36 N.
Y., 78 (1867), the vendee sued the vendor
‘for a breach of warranty, alleging that
the vendor’s agent made certain repre-
sentations as to the condition of the
corporation. The action failed on the
ground that the vendor did not au-
thorize the agent to make a warranty.
In the case of Ayers v. French, 41 Conn.,
142 (1874), the court held that fraud, in-
ducing the owner of stock to part with
it, may be remedied by the action of
trover with a count in case for a fraud-
ulent procurement and conversion of
the stock. In the case of National Ex-
change Co, v. Drew, 2 Macq, (H. of L.),
108 (1855), it was held that where a per-

son is induced by the fraudulent re-
ports and representations of corporate
officers to purchase stock, and the cor-
poration loans him money ‘to do so, it
cannot recover back the money loaned.
See Lightfoot v. Creed, 8 Taunt., 267
(1818), holding that the vendee should
declare not for money paid, but spe-
cially on the contract.

8 Arkwright v. Newbold, L. R., 17 ;

Ch. D., 801 (1881); Arthur v, Griswold,
55 N. Y., 400, 410 (1874); the court say-
ing: “The rules of law require a rea-
sonable degree of certainty as to each
requisite necessary to constitute the
cause of action, viz., representations,
falsity, scienter, deception and injury.”

897
~

§ 355.] (cH. xx.

CONTRACTS TO SELL——~ GAMBLING SALES — FRAUD.

In England a statement made recklessly, or without regard as to
whether it is true or untrue, may constitute a fraudulent intent.!
In New York the rule is more stringent. The case of Wakeman
v. Dalley * applies to this class of cases the rule that “an action
founded upon the deceit and fraud of the defendant cannot be.

_ maintained in the absence of proof that he believed, or had reason

to believe at the time he made them, that the representations made
by him were false, and that they were for that reason fraudulently
made, or that he assumed or intended to convey the impression that
he bad actual knowledge of their truth, ‘though conscious that he
had no such knowledge.”

This case held that a director is not liable for false representa-
tions on the company’s printed business cards, of which he was
ignorant, even though his name was attached thereto. In Cali-
fornia it is held that the purchaser of stock who has given a note
in payment cannot defeat an action on the note by setting up that
the purchase was induced by fraud. He must first disaffirm the
contract and return the certificate, and such return must be made
before the trial.2 But where the purchaser brings an action for
deceit he need not return the consideration nor rescind the con-
tract.* His injury is to be duly measured, and credit may be given
for the real value of the stock.’ A director is not liable for the,

misrepresentations and frauds of his co-directors, unless he has ex-

1Peek v. Gurney, L. R., 6 H. L., 377
(1878), the court saying: “‘ It is said that
the pr ospectus is true as far as it goes,
but half a truth will sometimes amount
to a real falsehood.” See, also, chapter
IX, § 14%. In Bellaires v. Tucker, L,
R., 13 Q. B. D., 563 (1884), however, the
court say: ‘‘The action is one for de-
ceit. It is necessary not only to prove
that the statements in a prospectus or
any other document are ndt true, but it
must be proved that they are fraudu-
lently put forward with intent to de-
ceive.”

261 N. Y., 27 (1872); Nelson v, Luling,
4N. Y. Sup. Ct., 544 (1878); aff'd, 62
N. Y., 645; Schwenck v, Naylor, 102
N. Y., 683 (1886), See, also, Clark v.
Haead, 80 Mo., 106 (1884); Gee v. Moss,
(lowa, 1886), The action for deceit does
not lie against the corporation, at least
where no fraudulent intent is proved.
Pinedo v. Germania, etc., Co, N. Y,
Daily Reg., July 29, 1885. See, also,

§ 167%. In an action of tort for deceit:
against a director for inducing a person
to purchase stock, ‘the plaintiff must
prove representations of material facts
which are false, and which induce him
to act; and either that the defendant
knew them to be false, or that the facts
being facts susceptible of knowledge,
he represented as of his own knowledge
that they were true, when in fact he
had no such knowledge.” Cole v. Cas-
sidy, 188 Mass., 487. (1885).”

3 Gifford v. Carhill, 29 Cal., 589 (1868).

4Miller v. Barber, 66 N. Y., 558, 564
(1876); Newbery v. Garland, 81 Barb.,
121 (1860).

5See chapter XXXV. In an action
for false representations, inducing the
purchase of stock, the defendant may
show that the stock was worth as much
as it would have been had the represen-
tations been true. Doran v. Eaton, 41
N. W. Rep., 244 (Minn., 1889),

898
L ’

CH. XX.] CONTRACTS TO SELL— GAMBLING SALES— FRAUD.  [§ 356.
pressly authorized or tacitly permitted commission thereof! The
mere fact of being a director “is not per se sufficient to hold a
party liable for the frauds and misrepresentations of the active
managers of a corporation. Some knowledge of and participation
in the act claimed to be fraudulent must be brought home to the
person charged.”* Where, however, proof is given tending to
show that the defendants were jointly engaged ina common scheme
to defraud the plaintiff, the acts and declarations of one are admis-
sible in proof against all,’ and frauds of a similar nature, at or near
the same time as the one complained of, may be shown.t The
fraud practiced need not have been the sole inducement to the pur-
chase. <A party may be liable herein although he was neither a
corporate officer nor the vendor of the stock. If, with intent to
cheat and defraud the vendee, he induces him, by fraudulent means,
to purchase stock for value which he knows to be worthless, he is
liable for the damages sustained, although the purchase is actually
made from another.’

§ 356. Remedy in equity.— A court of equity has concurrent juris-
diction with a court of law in enabling a purchaser of stock to re-
cover back money paid, where the purchaser was induced by fraud
chargeable to the vendor.’ In England this remedy is held to be
* precisely analogous to the common-law action for deceit,” in that
damages may be awarded. The remedy in equity, for a sale or
purchase of stock induced by fraud, is by a bill to set aside the

1 Weir v. Barnett, L. R., 3 Ex. D., 32.

2 Arthur v. Griswold, 55 N. Y., 400,
406 (1874); Morgan v. Skiddy, 62 N. Y.,
319,

2 Miller v, Barber, 66 N. Y., 558, 667
(1876),

4Id.

5 Morgan v, Skiddy, 62 N. Y., 819, 328
(1875); Ex parte Carling,. 56 L. T. Hep: is
115 (1887).

6 Hubbell v. Meigs, 50 N. Y., 480, 490
(1872), Upon the effect of false and
fraudulent representations, on an action
for damages, see Tockerson v, Chapin,
52. N. Y. Super. Ct., 16 (1885). Itis no
defense to such an action that the orig-
inal conversion was by some one else.
Kuhn v. McAllister, 1 Utah, 275 (1875);
8S, C. sub nom., McAllister v. Kuhn, 95
U. S., 87 (1877).

7 Hill v. Lane, L. R., 11 Eq., 215, where
the court say: “It is so well settled

that this court will entertain jurisdic-
tion in such cases that it would be a mis-
fortune, indeed, ‘to the public if there
were any sufficient ground for consid-
ering that the jurisdiction is doubtful.

Although courts of common law
may have jurisdiction in some.such
cases, there is clearly concurrent juris-
diction in this court,” doubting Ogilvie
v. Currie, 37 L, J. (Ch.), 541 (1868) ; Camp-
bell v. Fleming, 1 Ad. & El, 40 (1834).
A billin equity is a proper remedy for
fraud inducing a sale of stock. An- '
driessen’s Appeal, 16 Atl, Rep., 840(Pa., |
1889).

8 Peek v. Gurney, L. R., 5 H. L., 377,
390 (1873), the court saying, also: ‘‘ There
can be no doubt that equity exercises a
concurrent jurisdiction in cases of this
description, and the same principles ap-
plicable to them must prevail both at
law and in equity.”

899
4

§.856.] CONTRACTS TO SELL— GAMBLING SALES— FRAUD. [CH. XX,

whole transaction! This remedy follows.the rules usually pre-
scribed in such suits. It is not necessary for the complainant to
prove a fraudulent intent. Innocent acts or misrepresentations
suffice for this purpose, although they would be insufficient to sus-
tain an action for deceit.’

Where, however, the fraud is chargeable to the corporate officers
or third persons, and the vendor of the stock is innocent, the
vendee cannot rescind the sale, unless such corporate officers or third
persons acted as agents for the vendor.’

_ Equity will sometimes compel the vendor to make good his repre-
sentations. Thus, where the vendor represented that the corporate
property was unincumbered, equity will at the instance of the pur-
chaser of stock enjoin the vendor from enforcing a lien which he
has on such property.* The right to rescind the contract for fraud
is waived by taking a bond of indemnity against liability on the
stock, such bond being taken upon discovery of the fraud.? The
purchaser repudiating the transaction must tender back the stock

received by him.®.

1Stainbank v. Fernley, 9 Sim., 556 |

(1889), where a sale by a director who
has issued false reports and declared
illegal dividends was set aside. The cor-
poration is a proper party to such ac-
tions, if a registry has been obtained by

the person who has obtained the stock,

by fraud, since a retransfer on the cor-
porate books is asked for. See, also,
Bradley wv. Luce, 99 Ill, 284 (1881), A
‘judgment creditor of a foreign corpora-
tion cannot enjoin it from transferring
stock and bonds owned by it. The
remedy sought must be something in
addition to the injunction. Rogers v.
Michigan, etc., R. R., 28 Barb., 539
(1858).

2 Arkwright v. Newbold, L. R., 17
Ch. D., 801 (1881).

3Moffat v1. Winslow, 7 Paige, 124
(1838). Benjamin on Sales, 4th Am.
Ed., § 467a, says ‘‘the only remedy of
a shareholder in a joint-stock company,
who has been induced .to purchase
shares by the fraud of.the agent of the
company, is rescission of his contract
and restitutio in integrum.”

‘4 Jones v, Bolles, 9 Wall., 364 (1869),

5 Bridge v» Penniman, 51 Superior
Ct. (N. Y.), 183 (1885).

6 Francis v. New York & B. El. R. R.
Co., 108 N. Y., 93 (1888); 17 Abb. N.C., 1,
holding, also, that where the vendee
has transferred said stock to another
his action fails. Defrauded vendee
must tender back the stock uncondi-
tionally. If he has used the stock in an-
other transaction, even with the vendor,
his right to rescind for fraudulent mis-
representations is barred. Bridge vw.
Penniman, 105 N. Y., 642 (1887). But
where the vendee has sold part of the
stock he cannot maintain a suit in
equity to collect money damages for
loss occasioned by misrepresentations
inducing him to purchase. His rem-
edy is at law. No cancellation of the
contract is involved. White v. Boyce,
21 Fed. Rep., 228 (1884). Selling some
of stock before repudiating purchase
for fraud is no bar to repudiation, 1 R’y
& Corp. L. J., 484. Rescission is not
barred although the vendee has lost ‘the
stock by forfeiture, the vendor having
knowledge thereof. Maturin v. Tredin-
nick, 4 New..Rep., 15 (1864). Delay .of

400
, CH. XX.] CONTRACTS TO SELL—-GAMBLING SALES—FRAUD.  [§ 357.

§ 357. Fraud in selling stock may amount to a conspiracy— A
combination of persons to fraudulently raise the price of a stock
by misrepresentations and fraudulent practices may amount to a
criminal conspiracy. In England, in 1858, the directors of a joint-
stock bank were found guilty of a conspiracy to defraud, where,
knowing the bank to be insolvent, they issued a balance sheet
showing a profit, and declared a dividend, and issued advertise-
ments inviting the public to invest on such representations.!

six years after knowledge of fraud in- rectors and Officers, 115; Queen v.
ducing a purchase of stock is fatal. Stewart, id., 119; Queen v. Murch, id.,
Andriessen’s Appeal, 16 Atl. Rep., 840 118; Burnes v. Pennel, 2H. L. C., 479.
(Pa., 1889), / There cannot be such an offense against

1Regina v. Brown ef al., 7 Cox’s the United States by the directors of a
Criminal Cases, 442 (1858); Regina v, national bank, since the offense is not
Esdaile, 1 F. & F., 218 (1858); Queen v. recognized by statute. United States
Gurney. See Durrell & Hyde on Di- v. Britton, 108 U. S., 199 (1883).

(26) 401
CHAPTER XXI. .

SALES OF STOCK—SALES WHILE SUITS ARE PENDING AFFECTING
THAT STOCK; FORGERY; LOST AND STOLEN CERTIFICATES OF
STOCK; CONFISCATION OF STOCK.

A. PURCHASES WITHOUT A CERTIFICATE | § 364. Rights and liability of transfer-
OF THE STOCK. ees of forged certificate of

§ 858. Rights of a purchaser of certifi- stock, there being no inter-
cate of stock where the cor- vening registry on corporate

ion hi istered trans- books. — -
Se ee 365-66. Liability of corporation to

render of certificate. . real owner of stock for allow-
859. Liability of the corporation ing registry of forged trans-
herein. fer,
860. Rights of purchaser of stock 367. Rights of transferees who pur-
without certificates. chase after a registry has

been obtained.
B, SALES OF STOCK WHILE SUITS ARE
PENDING AFFECTING THAT STOCK. D. STOLEN OR LOST CERTIFICATE.

§ 361. Legal proceedings as affecting | | r
a sale of an outstanding cer- | § 368-69. Stolen or lost certificates of

 

tificate of stock. stock indorsed in blank, .
362. Lis pendens as affecting a pur-| 370. Owner of a lost certificate of
chase of stock. stock may obtain new certifi-
; cates.
C. FORGERY.
§ 363. Hongey as affecting a sale of} 371. E. CONFISCATION OF STOOK.
stock.

A. PURCHASES WITHOUT A CERTIFIOATE OF THE STOCK.

§ 358. Rights of a purchaser of certificate of stock where the cor-
poration has registered transfer to another without surrender of
certificate—It has often happened that an owner of, stock, after
selling his stock and delivering to the vendee the certificate there-
for indorsed in blank, has gone to the corporation before such
transfer is registered, and by misrepresentation or other fraudulent
means induced the corporation to issue to another purchaser a new
certificate of stock without a surrender of the old one. It is the
duty of the corporation to refuse to register a transfer unless the
old certificate is delivered up. The outstanding certificate is a con-
tinuing affirmation by the corporation that no registry of a trans-
fer of the stock represented by that certificate will be allowed until
the certificate itself. is presented and surrendered. This affirma-
tion is sometimes declared in a by-law,! and sometimes it is printed

1 Bridgeport Bk v. N. Y.,ete., R. R.' (1880); New York, etc, R. R. Co. v
Co., 80 Conn., 231 (1861); Strange v. Schuyler, 84 N. Y., 80 (1865).
Houston, etc., R. R, Co., 53 Tex., 162

402
X

CH. XXI.] FORGERY — STOLEN 8TOOK, ETC. [§ 359.
on the face of the certificate itself. The obligations of the cor-
poration, however, to require a surrender of- the old certificate upon
obtaining a registry is the same whether there is a by-law, or a
statement on the certificate, or neither of these. It exists without
any express declaration.”

§ 359. Liability of the corporation herein.— It is the duty and
right of a corporation to refuse to allow a registry of a transfer of
stock unless the outstanding certificate representing the stock is de-
livered up and canceled.’ And it is a duty which the corporation
is bound to fulfill. If it allows a transfer to be registered without
the old certificate being produced and surrendered, it is liable to
any person who, without notice, purchases or has purchased the
outstanding certificate.? This rule is well established, and is based

1Cushman v, Thayer Mfg. Co., 76
N. Y., 365 (1879).

2¥Factors’ & T. Ins. Co. v. Marine D. D.
&S. Co., 31 La, Ann., 149 (1887). As re-
gards the English rule herein, see 2
Ry & Corp. L. J., 577 and 625.

3Id., where a pledgee recovered dam-
ages against the corporation for issuing
new certificates without a surrender of
the one which the plaintiff held; Smith
v. American Coal Co., 7 Lans., 317 (1878),
where an unrecorded transferee recov-
ered damages against corporation for
issuing certificate to purchaser at exe-
cution sale on attacliment against the
transferrer. See, also, § 486 et seq.
Cushman v. Thayer Mfg. Co., 76 N. Y.,
365 (1879); Bank v. Lanier, 11 Wall., 369
. (1870), the court saying: ‘‘It is equally
clear that the bank, in allowing this
stock to be transferred to other parties
while the certificates were outstanding
in the hands of bona fide holders, was
guilty of a breach of corporate duty,”
and is liable. New York & N. H.R. R.
Co. v. Schuyler, 34 N. Y., 30, 81 (1865);
Holbrook v. New Jersey Zinc Co., 57
N. Y., 616 (1874), the court saying: ‘‘It
cannot be denied that, if a corporation
having power to issue stock certificates
does in fact issue such a certificate, in
which it affirms that a designated per-
son is entitled to a certain number of
shares of stock, it,thereby holds out to
persons who may dealin good faith with
the person named in the certificate that

he is an owner and has capacity to trans-
fer the shares. This proposition does
not rest on any view of the negotiability
of stock, but on the general principles
appertaining to the law of estoppel.”
Moores v. Citizens’ Nat’] B’k, 111 U. S.,
156 (1883), where the court seem to hold
that the person receiving new certifi-
cates without requiring a surrender of
the old ones is not such a bona fide
transferee of stock,as may hold the cor-
poration liable. Brisbane v. Delaware,
L. & W. R. R. Co., 94 N. Y., 204 (1888);.
aff’g 25 Hun, 488, and holding that,
until the purchaser of the outstanding
certificates presents them, the corpora-
tion is protected in paying dividends to
the transferee without the dld .certifi-
cates. If no ‘certificate has been issued
the rule does not apply. First Nat’] B’k v,
Gifford, 47 Iowa, 575 (1877), The unregis-
tered holder of the certificates is pro-
tected, since, if he were obliged to notify
the corporation at the time he purchases
the stock, ‘‘ the value of these certificates
as a basis of credit would be greatly im-
paired, particularly where the pledge is
made at a distance from the domicile
of the corporation.” Smith v. Crescent
City, etc., Co., 30 La. Ann., 1978 (1878).
See, also, Bridgeport B’k v. New York &
N. H. RB. R. Co,, 80 Conn., 231 (1861), the
court saying: ‘‘ The bona jide holders of
such certificates had a right to rely on
the certificate, under the circumstances,
as securing to them the stock which they

403
§ 359.] FORGERY — STOLEN STOCK, ETc. [cH. xx1

on the usages and requirements of trade, and on a wise public pol-
icy which favors the protection of those who invest their money in
certificates of stock, relying upon the corporation to protect the
holder of such certificates.! Thus the corporation has been held
liable where seventeen years have elapsed since a new certificate
was obtained, the latter having been obtained onthe ground that
the outstanding certificate has been lost.? The corporation need
not assume any risk, but may refuse to permit a registry on its
books of the transfer unless the old certificate is produced and sur-
rendered.’ Where, however, the corporation is compelled to make

represented against all other parties.”
Strange v. Houston & T. C. R. R. Co.,
53 Texas, 162 (1880), to the same effect,
on the ground that the non-production
of the original certificate ‘‘is notice to
the company that a superior title may
be in a third party.” Lee v. Citizens’
Nat’l B’k, 2 Cin. Sup. Ct., 298 (1872),
holding that the holder of the old cer-
tificates is entitled to have the illegal
registry canceled. In England there
seems to be no decision directly in point.
A dictum, however, in Shropshire U.
R’y & Canal Co. v. Queen, L. R., 7H. L.,
496, 509 (1875), does not support the rule
which prevails in this country. The
court said: Whether a transfer of shares
in a company can or cannot be made
without the production of the certifi-
cates of ‘the shares is ‘‘ entirely within
the discretion of the directors. They
were not bound to permit a transfer
without the production of the certificate;
but though not bound to permit a trans-
fer, apprehend they would not be in any
way answerable if the transfer should be
in any case made without the production
of the certificates of the shares.” The
case of Hart v. Frantino, etc., Gold Min.
Co,, L. R., 5 Ex., 111 (1870), holds, how-
ever, that where the corporation cancels
the stockholdership of one who pur-
chased after registry without a surren-
der of the old certificates having been
obtained, he may hold it liable in dam-
ages. As between two unrecorded trans-
fers, one having the certificate, and the
other — a subsequent ‘purchaser — not
having it, the former prevails, Societe

Gen. v, Tramways Union Co., L, R., 14
Q. B. D., 424 (1884). See, also, cases in
§ 351.
' 1Factors’ & T. Ins, Co. v. Marine D.
D. & 8. Co., 31 La. Ann., 149 (1879), the
court saying: ‘‘ We think that, by thus
making stocks transferable by mere de-
livery of the certificate, the law has in-
tended to interdict corporations from
transferring stocks on their books, ex-
cept upon surrender of the certificate
or upon proof of its loss or destruction.
These certificates of stock have become
such important factors in trade and
credit that thé law has intended to sur-
round those who take them with the
safeguards it accords to the holders
of the other great agencies of com-
merce — bills, notes, bills of lading, etc.”

2Cleveland & M. R. R. Co, v. Robbins,
35 O. St., 483 (1880). But is not liable
for dividends paid in the meantime, It
was held, further, that a by-law. allow-
ing such issue of new certificates.in case
of loss had no effect as regards the
plaintiff, and that the statute of limita-
tions ran against the plaintiff only from
the time he had notice of the new cer-
tificate. By statute, in New York, the
person claiming to have lost his: certif-
icate may be compelled to give a bond
of indemnity. to the corporation before
obtaining new certificates, and a holder
of the old certificates may have the ben-
efit of this bond. ‘N. Y. Session Laws,
1873, ch. 151. See-§ 870. Such ‘a sub-
rogation was refused in Greenleaf v.
Ludington, 15 Wis., 558 (1862).

3The corporation may refuse to issue

404
CH. XxI.|

FORGERY —- STOLEN sTOOK, ETC. [§ 360.

the registry by legal proceedings, as in case of execution sales, it
cannot be held liable to the holder of the outstanding certificate.!
The corporation, when sued by the holder of the old certificate, is
required either to replace the stock which has wrongfully been
taken from the plaintiff, or it is obliged to compensate him in
damages.

§ 360. Rights of purchaser of stock without certificates. A pur-
chaser of stock who does not receive the certificates of the stock he
has purchased, but who nevertheless obtains a registry on the’ cor-
porate books, and receives new certificates without a surrender of
the old, and who sells the new certificates, is not liable in damages
tothe holder of the old certificates.? The remedy of the latter is
against the corporation, or he may sue the corporate officer who
allowed the transfer.? The purchaser of the stock may insist on
the old certificate being produced and surrendered at the time of
registration, but if he waives this right, and a registry is made, he
cannot afterwards refuse to accept the stock on that account.4 The
corporation is not liable to the person who is registered as a stock-
holder without a surrender of the old certificate, at least not where
the registry is by the secretary, without special authority from the
board of directors.’ Where, however, the purchaser of stock with-

stock to the heirs of a stockholder un--

less they surrender the old certificates.
State v. New Orleans & C. R. R. Co.,
30 La. Ann., 308 (1878); National B’k of
* New London v. Lake S. & M.S, R. R.
Co., 21 O. St., 221 (1871), where the cor-
poration refused to allow registry by a
purchaser at an execution sale, although
it was quite plain that the judgment
debtor's sale of the certificates.had been
in fraud of creditors. As between two
unregistered transferees, the one with
the certificate is entitled to. the stock,
especially where he purchased first.
Maybin v. Kirby, 4 Rich. Eq. (8. C.),
105 (1851); Societe Generale de Paris v.
Walker, L. R., 11 App., 20 (1885); aff’g
L. R., 14Q. B. D., 424. So, also, as be-
tween a bona, fide purchaser, to whom
the certificates are transferred, and a
third party, to whom the vendor had
given the stock previous to the sale, the
vendee with the certificates is protected.
Crawford v. Dox, 5 Hun, 507 (1875), In
Wilson %, Atlantic, etc., R. R. Co., 2
Fed. Rep., 459 (1880), where an assignee
in bankruptcy applied for registry, the

bankrupt having fled with the certif-
icates, it was held that the corporation
was bound to allow transfer and to issue
new certificates upon a bond of in-
demnity being given. It has been held,
however, that a sale of a certificate of
stock to a bona, fide purchaser is to be
upheld, even as-against a receiver who
has been appointed and been given legal
ownership of the registered stock. Dud-
ley v. Gould, 6 Hun, 97 (1875).

1 Friedlander v. Slaughter-house Co.,
31 La. Ann., 523 (1879). See, also, chapter
XXII, § 388.

2Baker v. Wasson, 53 Texas, 150
(1880). Unless he obtained registry with
knowledge that his vendor had already
sold the old certificates to another.
Scripture v. Francestown Soapstone Co.,
50 N. Hi, 571 (1871).

3 Baker v. Wasson,
(1883).

4Boatmen’s Ins. & Trust Co. v. Able,
48 Mo., 136 (1871).

5 Hall v. Rose Hill & E. Road Co., 70
Il, 673 (1878); Houston & T. C. R’y Co. ,
v. Van Alstyne, 56 Texas, 439 (1882),

59 Texas, 140

405.
[cH. XxI.

§ 361.] FORGERY — STOLEN STOCK, ETC.

out the certificates obtained registry on the corporate book, the
corporation cannot afterwards remove his name in favor of the pur-
chaser of the old certificate. The former may compel the corpora-
tion to replace his name.!

B. SALES OF STOCK WHILE SUITS ARE PENDING AFFECTING THAT STOOK.

§ 861. Legal proceedings as. affecting sales of outstanding cer-
tificates of stock.—It is a well-established principle of law that
shares of stock may, for certain purposes, have a situs at two sep-
arate places at the same time. For the purposes of suits concern-
ing rights to its title, for taxation, and for a few other purposes,
shares of stock follow the domicile of the stockholder.? On the
other hand, it has at the same time a sz¢ws where the corporation
exists, and this s¢tws may be for the purposes, of suits concerning the
title to the stock, for attachment and execution, and for various
other similar purposes. Great difficulty arises in many instances of
legal proceedings affecting the title to stock by reason of the. fact
that, where the defendant has in his possession the certificates of
stock and is not enjoined from transferring them, he may transfer
them, either before or after suit’ has been commenced against
him to obtain possession of the stock represented by such certifi-
cates or to subject it to his debts. The question then arises
whether the dona fide transferee of such certificate is to be allowed
to retain the stock, or whether the successful plaintiff in the suit
against the defendant who has transferred the stock may follow
such stock and take it from the transferee. This conflict of right

holding that the corporation is not bound
to recognize as a stockholder one who
obtains registry without a surrender of
the old certificates, a regular registry
with a surrender of such certificates
having previously been obtained by
another. Cf. Hart v. Frantino, etc.,
Co., 22 L. T. (N. S.), 80. ;

1 Cady v. Potter, 55 Barb., 463 (1869).
In Platt v. Birmingham Axle Co., 41
Conn., 255 (1874), the corporation was
protected by its lien, and the fact that
it bought the stock without the certifi-
cates was not the essential point of the
ease. The corporation cannot inter-
plead after it has allowed the transfer.
Cady v. Potter, supra; Mt, Holly L. &
M. T. Co. v, Ferrie, 17 N. J. Eq., 117

* (1864), But it may interplead if it has re-
fused to transfer toany one. Merchants’

Nat'l B’k v. Richards, 6 Mo. App., 454
(1879). See, also, § 387.

2It is important here to distinguish
shares of stock from the certificates for
those shares. Certificates of stock have.
no situs or domicile. They cannot be
attached or subjected to execution. The

, Stock itself does not follow the cer-

tificate representing it. Winslow v.
Fletcher, 4 Atl. Rep., 250 (Conn., 1886).
Though prevented by injunction from
transferring, the corporation must pre-
serve the rights of a party who notifies
it of his rights. Purchase v, N. Y. Ex-
change B’k, 3 Rob., 164 (1865), As re-
gards the rights and duties of the cor-
poration herein when stock is sold
under. an execution or is attached, see
§ 488.

406
cH. XxI.] FORGERY — STOLEN STOCK, ETO. [§ 3862.

between the panshiaeey of the outstanding certificates and the pur-
chaser whose title is based on judicial proceedings arises most often
in cases of attachment or execution issued against shares of stock
at the domicile of the corporation. In such + cases the better rule
seems to be that transferees of the certificate held by the defend-
ant are protected and entitled to protection at the hands of the cor-
poration, if their purchase is ‘made before the attachment or execu-
tion is levied; but that transfers made after the levy are utterly
void so far as the corporation and the plaintiffs to the suit are con-
cerned, provided the suit itself is successful! The same difficulty
and conflict of rights arise in suits to reclaim stock which has been
taken from the plaintiff by fraud, or by the torts of an agent or
pledgee, or by the breach of trust of an executor, administrator,
guardian or trustee.? The plaintiff seeking to recover his stock,
certificates for which are in the hands of the defendant, seems to
have but two modes of procedure whereby he may prevent the de-
fendant from transferring the certificates. The suit should be
brought in the state of the domicile of the corporation and attach-
ment against the stock issued,’ or, when the defendant is sued in
another state, an injunction restraining the defendant from trans-
ferring the stock should be obtained. It is true that, after judg-
ment has been obtained and the decree of the court executed, any
subsequent transfer of the certificates by the defendant is null and
may be disregarded by the plaintiff and by the corporation.’ But
while the suit is pending the defendant may transfer the certificates
and the bona fide transferee takes a good title to the stock. The
latter is not affected by or bound to take notice of a lis pendens in
that: suit.

§ 862. Lis pendens as affecting a purchase of stock.— A purchaser
of certificates of stock is not chargeable with constructive notice
that a suit is pending in which his vendor is defendant, and the
plaintiff is endeavoring to obtain possession and title to the stock
which the purchaser is buying. The doctrine of ds pendens has no
application to sales of shares of stock. The purchaser is bound to
know that a judgment or decree has been rendered and executed
affecting the certificates he is buying, if such a judgment or decree
exists; but he is not bound to know that a suit is pending in which
judgment has not yet been rendered. That adis pendens in a suit
involving shares of stock does not affect a purchaser of the certifi-

\ Smith v. American Coal Co.,7 Lans., 57 N. Y., 616 (1874); Leitch v. Wells, 48
817 (1873); Smith v. Crescent City, etc., N. Y., 585 (1872).
Co., 80 La, Ann., 1878 (1878); and chap- 3 Quarl v. Abbett, 13 Am. & Eng. Corp.
ter XXVII. Cases, 27 (Ind., 1886).
2Holbrook v. New Jersey Zinc Co., 4Sprague v. Cacheco Mfg. Co., 10
‘ Blatch., 173 (1872),
407
§ 363.

FORGERY — STOLEN STOCK, ETO. OH. Xx1,

cate representing those shares, the purchase being made while the
suit is pending, was clearly established by the court of appeals of
New York in the case of Holbrook v. New Jersey Zinc Company.!

O. FORGERY.

§ 863. Forgery as affecting a sale of stock.— An owner of shares
of stock cannot be deprived of his property by a forgery through
which his certificates of stock pass into the hands of innocent pur-
chasers. He may be deprived of his stock, but has in lieu thereof
the right to collect the value of that stock, either from the corpora-
tion or from parties who have held the stock. The rights and rem-
edies of the stockholder who has lost possession of certificates of
stock by forgery vary according to the extent to which his certifi-
cate has been transferred. This remedy may be against the trans-
ferees of the certiticate before a registry has been obtained, or it
may be against the corporation for allowing a registry, or it may
be against the person obtaining the registry. The forgery itself
may consist of any writing on the certificate of stock, whereby,
with intent to defraud, it is falsely and materially so made or
altered as to have an apparent legality.2 Generally the forgerv
is of the name of the stockholder to the transfer on the back of
the certificate? The forgery may, however, be committed by
changing the number of shares of stock which the transferrer has
written out in the certificate, or by inserting the numbers of
shares of stock of one corporation in a blank transfer duly signed
by the stockholder, but ‘signed ‘for the purpose of transferring
shares of stock in another and different corporation.» The forgery

157 N. Y., 616 (1874), following Leitch’

v. Wells, 48 N. Y., 586 (1872). See
Dovey’s Appeal, 97 Penn. St., 153 (1881),
where the court refused to pass upon
this question; also, Bank of Va. v,
Craig, 6 Leigh (Va.), 399, 4385 (1885),
holding that a lis pendens in a suit by
sureties to restrain guardian frum sell-
ing stock is not notice to the corpora-
tion to refuse to allow him to register a
transfer..

2See Bouvier’s Dictionary, vol. I,
p. 679; 2 Bishop’s Criminal Law, § 528.

3 Nearly all of the cases in the several
following sections are cases of a forgery
of the stockholder’s name to a transfer.
It is forgery for one trustee to write in
the names of the other trustees without
authority. Cottam v. Eastern Counties

R’y Co., 1 J. & H., 248 (1860); Sloman
v. Bk of Eng., 14 Sim., 475 (1845), Or
for one partner to write in the name
of the other partner without authority,
where the stock stood in. their joint
names. Midland R’y Co. v. Taylor, § H.
L. Cases, 751 (1862); aff’'g Taylor v. Mid-
land R’y Co., 29 L. J. (Ch.), 781 (1860).

4Matthews v. Mass. Nat. Bk, 1
Holmes, 896 (1874); Sewall v. Boston
Water-power Co., 86 Mass., 277 (1862),
where the alteration was treated as a
forgery so far as legal rights were con-
cerned, although the alteration was due
to an innocent mipundersiandlig of a
clerk.

5S8wan v. North British Co., 7H. &
N., 608 (1862), practically overruling Ev
parte Swan, 7 C. B., N. §., 400.

408
OH, Xx1.]

FORGERY — STOLEN STOCK, ETO. [§ 3864.

may also be by an officer of the corporation who forges the neces-
sary names of the corporate officers to the certificate and puts it in
circulation.

§ 364. Rights and liabilities of transferees of forged certificates
of stock, there being no intervening registry on corporate books.—
The position of a transferee of a certificate of stock which is in-
valid by reason of forgery depends largely on whether there has
been an intervening registry of transfer on the corporate books
after the former owner was deprived of his stock by the forgery.
The forger himself is of course liable, not only to the real stock-
holder, but also to any other person who has been injured by the
forgery. Ifthe purchaser of stock from one who has forged a
transfer of the same sells the same after being notified by the real
owner that the latter claims the stock and has been deprived of it
by forgery, the real owner may recover damages in trover for the
value of the stock from the person who so sells, although he pur-
chased in good faith and without notice of the forgery.” If the
forgery is committed by a member of a firm, the real owner may
sue the firm for money had and received, and may recover the
value of the stock and dividends.? Where the forger has sold the
stock to a purchaser without notice, and the latter has sold to an-
other purchaser without notice, and the latter is deprived of his
apparent ownership on account of the forgery, the second trans-
feree may hold the first transferee liable! This principle grows
out of the well-established rule of law that, in a sale of chattels,
there is an implied warranty of title, unless the circumstances are
such as to give rise to a contrary presumption. The broker or
auctioneer of stock which passes through their hands cannot, it

1Shaw v. Port Philip & C. Gold. Min.
Co., L. R., 18 Q. B. D., 103 (1885), where
the corporation was held liable on a
certificate signed and issued by the sec-
retary of the corporation, but who had
forged thereto the names of the other
corporate officers. whose signatures were
necessary to the issue of a certificate of
stock. Cf. Duncan v. Luntley, 2 MeN.
& G., 30 (1849). By statute in many of
the states such forgeries are made a
special criminal offense. Regina v.
Nash, 2 Denison’s Crim. C., 493 (1852);
New York Penal Code, § 591. See, also,
Manhattan Beach Co. v. Harned, 27
Fed. Rep., 484 (1886), where, however,
_the issue was by fraud rather than for-
‘gery; Moores v. Citizens’ Nat. B’k, 111

U. §., 157 (1888); Brooklyn, etc., R. R.
v. Strong, 75 N. Y., 591 (1878). See,
also, §§ 293, 294, N. ¥. L. J. Aug. 5,
1889; 21 Pac. Rep., 894 (Colo., 1889).
' 2Monk v. Graham, 8 Mod., 9 (1721).

3Marsh v. Keating, 1 Bing. New
Cases, 198 (1834); Marsh v. Stone, 6 B.
& C., 551 (1827).

4Matthews v. Mass. Nat. Bank, 1
Holmes, 396 (1874). This was an ex-
tremely harsh case, involving a rigid
application of the principle, since the
defendant’s name appeared on the back
of the certificate of stock as a trans-
ferrer, when in fact it had only been a
pledgee, and on payment of the pledge
had retransferred the stock.

409
(on. XXI,

§ 365.] FORGERY — STOLEN. STOCK, ETC.

seems, be held liable, though it turns out that on account of a for-
gery there was no title to the stock in the party whom they rep-
resented.! The transferee whose title is based on a forgery has:
no rights as against the corporation, where there has been no reg-
istry on the corporate books after the forgery. He cannot compel
the corporation to allow him to register his transfer. If the cor.
poration has already registered him as transferee, it may repudiate
its registry so far as he is concerned, and refuse to recognize him
as a stockholder or as having the right to transfer the stock.? Such
a registered transferee has no right of action against the corpora-
tion by reason of its rescission of his registry, although the rule
may be different if he purchased by reason of the fact that he was
allowed such registry on the corporate books. On the other hand,
it is the transferee obtaining registry who warrants the validity of
his title and right to transfer; and if the corporation is compelled
to pay damages tothe real owner on account of allowing such reg-
istry, it may have recourse to and collect the same damages from
the transferee who obtained the registry, however innocent the
latter may have been.’ The person who first obtains a registry after
a forgery has deprived the real owner of his stock cannot retain
the new certificates as against the real owner of the old ones.

§ 865. Liability of corporation to real owner of stock for allow-
ing registry of forged transfer.— It is the duty of a corporation to
prevent and refuse a registry of transfer of stock where that trans-
fer has been forged. If the corporation fails to detect the forgery
it is liable to the real owner of the stock who has been deprived of
it by the forgery.’ It has been held that the owner of the stock

1 Machinists’ Nat. Bk v. Field, 126 of Baltimore, 68 Md., 6 (1884). In this

Mass., 345 (1879).

2Simon v. Anglo-Am. Tel: Co., L. R.,
5 Q. B. D., 188 (1879); Whitewright v.
American Tel. & Cable Co., N. Y. Daily
Reg., Aug. 6, 1686 (Superior Ct.);
Waterhouse v. London & §. W. R’y Co.,
41 L. T.,N. S., 553 (1880); Hambleton v.
Central O. R. R. Co., 44 Md., 551 (1876) ;
Brown v. Howard Ins, Co., 42 Md., 384
(1875); Hildyard v. South Sea Co., 2 P.
Wms., 76 (1722). Cf. Ashby v. Black-
well, 2 Eden, 299 (1765), holding the
corporation liable not only to the real
owner, but also to the transferee ob-
taining registry. See following section
for rights of transferee of the first reg-
istered holder, __

31d.

4 Metropolitan Sav. B’k v, Mayor, etc.,

case the plaintiff took the forged ¢ertifi-
cates in pledge from the forger. After-
wards, upon the forger’s applying for a
further loan on the same pledge of
stock, the corporation refused unless
the stock was registered in its name,
which was accordingly done, Held
that the bank lost the first loan, but had
recourse to the corporation for the sec-
ond loan.

5 Boston & Albany R. R. Co. v, Rich-
ardson, 185 Mass., 423 (1883), the court
saying also, in a dictum, that the de-
fendant has a remedy over against the
parties that sold to him.

6 Johnston v. Renton, L. R., 9 Eq.
Cas., 181 (1870).

TPratt v. Taunton Copper Mfg. Co.,
123 Mass., 110 (1887); Sewall v, Boston

410
CH. XX1.] FORGERY — STOLEN STOCK, ETO. ‘
may compel the corporation to cancel the illegal registry,and re-
store the name of the plaintiff! The better rule, however, is that,
inasmuch as a bona jide transferee of the illegally registered trans-
ferrer is entitled to retain the stock, the former owner of the stock
in suing the corporation should demand relief in the alternative, °
that the stock be restored to him or that he be given damages
in lieu thereof? Or he may demand that the corporation replace
the stock by going into the market, if necessary, and purchasing sim-

ilar stock? If the stockholder sues the corporation for a dividend
on stock which by a forged assignment has been registered in the
name of another person, the corporation cannot interplead. fou
court of equity has concurrent jurisdiction with law in remedying

a forged transfer of stock.5

Water-power Co., 86 Mass., 277 (1862);
Pratt v. Boston & Albany R. R. Co., 126
Mass., 443 (1879); Johnston v. Renton,
L. B., 9 Eq., 181 (1870); Cottam v. East-
ern Counties R’y Co.,1 J. & H., 248
(1860); Midland R’y Co. v. Taylor, 8 H.
L. Cases, 751 (1862); aff’g Taylor v. Mid-
land R’y Co., 29 L. J. (Ch.), 731 (1860);
Davis v. B’k of Eng., Bing., 393 (1824);
Swan v. North British Aus. Co., 7 H. &
N., 603 (1862), substantially overruling
same case in court of law; Hx parte
Swan, 7C. B., N. 8., 400 (1859) ; Pollock
v. National Bank, 7 N. Y., 274 (1852);
Day v. American Tel. & Cable Co., 52
N. Y. Sup. Ct., 128 (1885); Dalton v,
Midland R’y Co., 12 C. B., 458 (1852);
Mayor, etc., of Baltimore v. Ketchum,
57 Md., 23 (1881); Coates v. London &
S. W. R’y Co., 41 L. T., N. 8., 553 (1880);

Blaisdell v. Bohr, 68 Ga., 56 (1881);

Sloman v. B’k of Eng., 14 Sim., 475
(1845); Telegraph Co. v. Davenport, 97
_U.8., 369 (1878), where the court say:
“Upon the facts stated there _ought to
be no question as to the right of the
plaintiffs to have their shares replaced
on the books of the company and proper
certificates issued to them, and to cover
the dividends accrued on the shares
after the unauthorized transfer; or to
have alternative judgments for the
value of the shares and the dividends.
Forgery can confer no power nor trans-

The corporation, the co-conspirators

fer any rights. The officers of the com-
pany are the custodians of its stock-
books, and it is their duty to see that all -
transfers of shares are properly made,
either by the stockholders themselves
or persons having authority from them.
If upon the presentation of a certificate
for transfer they are at all doubtful of ©
the identity of the party offering it
with its.owner, or if not satisfied of the
genuineness of a power of attorney pro-
duced, they can require the identity of
the party in the one case, and the gen-
uineness of the document in the other,
to be satisfactorily established before
allowing the transfer to be made. In
either case they must act upon their
own. responsibility. Neither the
absence of blame on the part of the offi-
cers-or the company in allowing an un-
authorized transfer of stock, nor the
good faith of the purchaser of stolen
property, will avail as an answer to the
demand of the true owner.”

1 Johnston v. Renton, supra; Cottam
v. Eastern ‘Counties R’y. Co., supra;
Sloman v. B’k of Eng., supra.

* This is the usual prayer for relief in
this country.

2 Pratt v. Boston & ‘Mbany R. R, Co.,
126 Mass., 443 (1879).

4Dalton v. Midland R. R. Co., 12 C
B.. 458 (1852).

5 Blaisdell v. Bohr, 68 Ga., 56 (1881),

411
§ 366.] FORGERY — STOLEN STOOK, ETO. [CH. Xx1.
and the transferees of the forged certificate are all proper parties
to the suit;! but the only necessary party is the corporation itself.
Where the corporation is sued by the real owner of the stock for
allowing the registry of a transfer based on forgery, it cannot in-
stitute an independent action bringing in all the parties interested
and enjoining the action of the owner of the stock.’ The latter is
entitled to his action at law without delay and without involving
or settling the respective rights of others.

§ 866. The right of the rightful owner of the stock to complain
of the forgery whereby his certificate has passed into the possession
of another may be barred by estoppel or ratification. Formerly it
was held that the negligence of the owner of the stock would be a
bar to his remedy.‘ Later decisions, however, have firmly estab-
lished the rule that “there must be either something that amounts
to an estoppel or something that amounts to a ratification i in order
to make the negligence a good answer.”*® Accordingly, the right- -
ful owner of the stock is held not to be barred of his remedy by
the fact that the stockholder, a corporation, allowed its corporate
seal to be in the possession of its secretary, whereby he sold the
stock owned by the corporation;® or by the fact that the owner
delayed several months, during which time the forger escaped;7 or
that he transferred on the back of the certificate only part of the
shares specified in the certificate;° or that he gave his address
wrong , and thereby a letter of inquiry did not reach him; ® or that
he allowed his clerk, the forger, to have access to his papers, and

11d, As to a statutory criminal lia-
bility of an officer forging and issuing

3 American Tel. & Cable Co. v. Day;
52 N. Y. Superior Ct., 128 (1885),

stock, see State v. Haven, 9 Atl. Rep.,
841 (Vt., 1887).

2 Mayor, etc., of Baltimore v, Ketchum,
67 Md., 23 (1881); Pratt v Boston &
Albany R. R. Co., 126 Mass., 443 (18'79).
The statute of limitations in behalf
of the corporation begins to run in
a cause of action for forged transfer
only from the time when the corpora-
tion denies its liability therefor. Bar-
ton v. North, etc., Ry Co., 58 L. T.
Rep., 549 (1888). In a stockholders’ ac-
tion to compel the corporation to re-
transfer stock to them which has been
transferred on the corporate books by

forgery, the holders of the new certifi-

cates are not allowed to come in and de-
fend. Barton v. London, etc., R’y, 59
L. T. Rep., 122.(1888),

4Coles v. B’k of Eng., 10 Ad. & E., 487
(1889), where the continuous receipt of
dividends on a less quantity of stock
than she was entitled to was held a bar;
though the stockholder was old and in- :
firm. oe

5 Bank of Ireland v. Trustees of Evans
Charities, 5 H. L. Cases, 389 (1855).

8Td., and Merchants’, etc., v. Bank of
England, 56 L. T. Rep., 665 (1887), where
the preceding case was reluctantly fol-
lowed. :

7 Davis v. Bank of Eng., 2 Bing., 398
(1824).

8Sewall v. Boston Water-power Co.,
86 Mass., 277 (1862).

§ Johnston v, Renton, L. R., 9 Eq., 181
(1870).

412
a7

OH. XXI.] :

FORGERY — STOLEN STOCK, ETC. [S$ 367, 368.

gave him blank transfers duly signed to use in transferring other
stock; or that the guardian of the plaintiff was negligent?

§ 367. Rights of transferees who purchase after a registry has
been obtained.— It has already been shown that the transferees of a
certificate of stock which has been put in circulation by forgery
are not allowed to retain such stock where there has not been, at
some time subsequent to the forgery, a transfer registered on the
corporate books. It has also been shown that he who applies to
the corporation for a registry of transfer, such registry being the
first one since the forgery was committed, is not allowed to retain
the stock. An entirely different rule prevails as regards all subse-
quent Lona fide holders of the new certificate obtained by the first
registry. The person who obtains the first registry has no rights
except as against his’transferrer. But all subsequent purchasers
without notice are fully protected. They cannot be compelled to
give up the stock, either to the corporation or to the person who
lost it by forgery.’ This rule arises, not from the law of negli-
gence, but from the law of estoppel operating against the corpora-
tion. It is ih accord with the demands of trade and the constant
tendency of the law to protect bona fide purchasers of certificates
of stock.

D. STOLEN OR LOST CERTIFICATES.

§ 368. Stolen or lost certificates of stock indorsed in blank.— One
of the most important elements of the negotiability of promissory
notes is that, if the holder of such note loses it or it is stolen from
him when it is indorsed in blank, a subsequent bona fide purchaser
of such note is protected as against the person who lost it. <A dif-
ferent rule seems to prevail as regards certificates of stock indorsed
in blank and then lost or stolen. In this respect certificates of stock
dre not negotiable. It has been clearly held that a purchaser from
a thief of certificates of stock indorsed in blank is not protected,
nor is any subsequent purchaser of that identical certificate allowed
to claim the:stock. The real owner of the certificate may compel

1§wan v. North British Aus. Co., 7
H. & 'N., 608 (1862), substantially over-
ruling Ew parte ‘Swan, 7 C. B. (N.'S.),
400 (1859).

2 Telegraph Co. v. Davenport, 97U. S.,
369 (1878).

3Machinists’ Nat'l Bank v. Field, 126
Mass., 845 (1879); Re Bahia & San Fran-

‘cisco R’y Co., L. R., 8 Q. B., 584 (1868),
where, however, the corporation, hav-
ing canceled all‘the registries made sub-
sequent to the forgery, was held liable

in damages to a purchaser subsequent
to‘the first registry. The court said the

giving of.a certificate ‘is a declaration

by the company to all the world that

‘the person in whose‘name the certificate

is made out and to whom it is given is
a shareholder in the company, and. it is
given by the company with the inten-
tion that it shall be so used by the'per-
son to whom it is given, and acted upon
in the sale and transfers of shares.”

418

\
[cH. Xx.

§§ 369, 370.]

FORGERY — STOLEN STOCK, ETO.

the corporation which has refused to recognize the thief’s trans-
‘feree’s title to register the stock as his, or he may Have damages
against a bona fide transferee of the thief where such transferee
sold with notice! In Nevada it is held that the purchaser and
vendor of the stolen certificate is liable in damages to its real owner,
although the former acted as a broker and without notice.’ The
bona fide purchaser of stolen certificate of stock indorsed in blank
cannot compel the corporation to register him as a stockholder’
The person stealing certificates of stock is guilty of larceny, and
may be convicted for the same.! The corporation cannot obtain
an injunction against a possible action by the purchaser of stolen
certificates who has applied for registry and been refused it.’

§ 369. Where, however, certificates of stock indorsed ‘in blank
-have been stolen, and the thief or his transferee has obtained a reg-
istry on the corporate books and obtained new certificates of stock,
and these new certificates have been sold, the purchaser is protected.
in his possession of the stock. In Michigan this is held to be the
rale, even though such purchaser took the stock with full knowl-
edge of all the facts.’7 It is to be hoped that this rule will be gen-
erally sustained, since it is in accordance with the general rule that
the rights and equities of all holders of stock back of, the registry
and issue of the certificates in existence are not allowed to affect
the stockholdership or rights of purchasers of these new certifi-
cates.

§ 370. Owner of a lost certificate of stock may obtain new certifi-
 cate.— An owner of a certificate of stock who has lost it or had it
‘stolen from him may, by taking proper proceedings or by giving

proper security to the corporation, have new certificates issued to
him. In Louisiana it is held that, upon satisfactory. proof of the

1 Barstow v. Savage Min. Co., 64Cal., (Penn., 1888). The bona fide purchaser

388 (1883), substantially overruling Win-
ter v. Belmont Min. Co., 53 Cal., 428
(1879); Anderson v. Nicholas, 28 N. Y.,
600 (1864), where the purchaser of the
stolen certificate was not a bona fide
purchaser. The court said that even if
he had been a bona fide purchaser he
would not be protected. Cf. Aull v.
Colket, 33 Leg. Intel., 44 (1876, Penn.),
‘where the question of negligence was
submitted to the jury. The mere fact
of losing it is no proof of negligence.
Biddle v. Bayard, 18 Penn. 8t., 150
(1850). The purchaser of -a certificate
indorsed in blank and stolen is not pro-
tected, Given’s Appeal, 16 Atl. Rep., 75

of a certificate of stock indorsed in
blank, but which was stolen from the
owner, is not protected. East, etc., Co.
v. Dennis, 5 R’y & Corp. L. J., 296

(Tenn., 1889).

2 Bercich v. Marye, 9 Nev., 312 (1874).

3 Sherwood v. Meadow Valley M. Co.,
50 Cal., 412 (1875).

4 People v. ae 38 How. Pr.,
(1869).

5 Buffalo Grape Suse Co, v. Alberger,

475

. 22 Hun, 349 (1880).

6 Mandlebaum v, North Am, Min, Co.,

A Mich,, 465 a

TId.

414
'

CH. XXxI.] FORGERY — STOLEN STOCK, ETC.

[§ 871.
loss of certificates of stock, a writ of mandamus will issue to com-
pel the corporation to issue new certificates, and that no bond of in-
demnity need be given.' - But the better rule seems to be that,
except in cases of the clearest proof of loss, the corporation shall
not be required to issue new certificates unless a bond of indemnity
against its liability to possible legal holders of the lost certificate
shall be given.? In New York, by statute, security may be required
in all such cases.? It would seem reasonable that a bond of in-
demnity should be given to the corporation, since, in case the old
certificate has not been lost, but has been sold by its owner, the
corporation is liable in damages or to replace the stock to the pur-
chaser for issuing new certificates without a surrender of the old.

E. CONFISCATION OF STOCK.

§ 871. During the late Rebellion, acts of confiscation were passed,
both by the United States government and by the Confederate
government, and shares of stock owned by parties jn one section
of the country in corporations domiciled in the other section were
confiscated. The result of the war having established that the
Confederate government was an illegal one, all its acts of confisca-
tion became null and void, and all transfers and registers of stock
thereunder were held to be void utterly. The whole line of trans-
actions based on the confiscation fell with the confiscation itself.®
The corporation was held not liable to purchasers whose title was.
based on the confiscation, since it acted under compulsion of a power
temporarily greater than the law itself.* If the corporation neglects
to remedy the confusion and claims growing out of the illegal con-
fiscation of stock, any stockholder may institute an action in its be-
half for that purpose.’ The stock is to be restored to the owner

!

1 State v. New Orleans Gas Light:Co.,
25 La. Ann., 413 (1878).

2Galveston City Co. v. Sibley, 56
Texas, 269 (1882), where one who be-
came a stockholder in 1841 died in
1865, and his heirs applied for a new
certificate in 1878; Societe Generale de
Paris v. Walker, L. R., 11 App. Cas.
(H. of L.), 20; aff’g L. R., 14 Q. B. D.,
424; Butler v. Glen Cove Starch Co., 25
Hun, 47 (1879).

3N. Y. Session Laws, 1878, ch. 151.
This statute does not give a remedy to
a purchaser of stock at a receiver's sale.
If he is unable to obtain the outstand-
ing certificates his remedy is otherwise.

» 415

In re Biglin v. Friendship Ass’n, N. Y.
Daily Reg., Dec. 5, 1887. \

4See §§ 358-360. Persons receiving:
duplicate certificate on ground of loss
of original may be compelled by the.
company to return it where the orig-
inal turns up in another person’s hands,
the certificate having been sold to the:
latter by the former owner. New York
C., etc, R. R. v. Stokes, N. Y. Law
Journal, Nov. 16, 1888.

5Dewing v. Perdicaris, 96 U. S., 193
(1877).

6Id.; also Central R. R. & Banking
Co, v. Ward, 37 Ga., 515 (1868).
TPerdicaris v. Charleston Gas-light.
§ 371.) FORGERY — STOLEN STOCK, ETO. — [oH. xx1.

against whom the confiscation proceedings were had; and if the
corporation, during the Rebellion, voluntarily paid dividends to the
‘illegal holders of the stock, it must pay.the same to the plaintiff,
even though it would have been compelled to pay such dividends
to the southern holder if it had not done so voluntarily.!. On the
other hand, proceedings for the confiscation of stock under the
confiscation acts of the United States government, passed by reason
of the late Rebellion, are held to have been effective if in accord-
ance with established rules of procedure. Where, however, no
notice of the proceedings was given to the defendant, and her name
and the stock were not accurately described, the proceedings were
void; and the corporation, having obeyed the illegal judgment of
confiscation, was held liable in damages to thé southern owner of
the stock.?

Co., Chase’s Dec., 435 (1869); aff'd, sub 2Chapman v. Phoenix National Bank,

nom. Dewing v. Perdicaris, supra. 85 N. Y., 437 (1881); reversing 8. C., 12
1Keppel’s Adm. v. Petersburg R. R. J. &S., 340; Avil wv. Alexander Water
Co., Chase’s Dec., 167 (1868), Co., 1 Hughes, 408 (1877).

416
CHAPTER XXII.

SALES OF STOCK— FORMAL METHOD OF TRANSFERRING CERTIFI-
CATES AND REGISTRY THEREOF.

$372. Subject treated herein.

‘373. The two usual steps in perfect-:

ing a transfer of stock.
374, Omission of either or both steps.

A. METHOD OF TRANSFERRING THE CER-
TIFICATE,

Usual forms of assignment and
powers of attorney whereby
the transferrer assigns the cer-
tificate of stock to his trans-
feree.

Questions which arise herein.

A seal is not necessary to a
transfer of stock. 1

The assignment of the certifi-
cate of stock estops the trans-
ferrer from claiming any fur-
ther title in the stock as

§ 875,

376.
377,

378.

against, subsequent bona fide.

transferees, although such as-
‘signment be not registered.
Etfect of charter provision re-
quiring registry.
Certificate of stock may be as-
signed with the name of the
transferee left blank.

379,
380.

B, METHOD OF REGISTERING A TRANS-
FER OF STOCK.
Ls
§ 381. Registry an important part of a
transfer of stock. ‘

 

§ 382. Formalities of making registry.
383. Formalities of registry may be
waived by the corporation.
384. Either the transferrer or the
transferee may apply to the
corporation for a registry of
transfer. :

C. RIGHTS AND DUTIES OF THE CORPO-
RATION IN ALLOWING OR RE-
FUSING REGISTRY.

§ 885. Corporation may require proof
' of identity; also of genuine-
ness of signature, etc.

386. Corporation cannot refuse reg-
istry on account of the motive
of the transferrer or trans-
feree in the transaction.

387. Corporation may interplead be-
tween two claimants to stock.

888, Corporation must obey mandate

. of court ordering registry and
issue of new certificates.

889. Remedies of a transferee of stock
against the corporation for re-
fusal to allow registry.

390. Remedy by mandamus.

391. Remedy by suit in equity.

892. Remedy by an action for dam-

ages.

§ 372. Subject treated herein.— Having considered the compe-

tency of parties to enter into a contract of sale of stock;? also of
the legality, enforceability and character of that contract;” also
the rights of third parties as affecting the contract between the
transferrer and transferee,?—it is now necessary to discuss certain
formalities whereby the title to stock is transferred: These for-
malities are peculiar to sales of stock. The only analogy to them
is, perbaps, that arising from the making of a deed of real estate,
and a registry of the same at a recorder’s office. In many respects,

however, this analogy does not apply. Thus, the corporation itself

1Chapter XTX. 3 Chapter XXI.

2Chapter XX.
1)

’

417
§§ 873-375.] ¥ORMALITIES OF TRANSFER AND REGISTRY. (CH. XXII,

has many rights and duties herein which a register of deeds has
not. The principles of law governing the formalities of transfer
of stock have occasioned great difficulties and much litigation.
‘The rules given herein have arisen for the most part out of the ne-.
cessities and demands of business as sanctioned by the courts.
They have been gradually formed, and still bear the imprints of the
transition stage of a newly- created law.

§ 873. The two usual steps in perfecting a transfer of stock.—
‘To transfer a share of stock, there are generally two distinct steps
to be taken: First, the certificate is assigned by the transferrer to
the transferee; and second, that assignment and transfer is per-
fected and completed by delivering the assigned certificate to the
corporation, obtaining an entry on the corporate transfer book to
the effect that the transferee has purchased the stock of the trans-
ferrer, and taking from the corporation new certificates of stock
certifying that the newly-recorded stockholder owns a specified
amount of stock.

§ 374. Omission of either or both steps.— Either and probably
both of these two steps in the complete transfer of stock may be
omitted; and yet, where the facts estop the various parties from
denying that a transfer has been made, it will be held to be com-
plete. Thus, it has been held that an owner of stock may transfer
his stock to another without assigning a certificate to him! This
happens when a registry of transfer is made without any surrender
_ of the old certificate.? So far as the transferrer is concerned such
a method of transfer is effectual. Such cases also arise where the
corporation has never issued certificates of stock. The stockholder
may then transfer his stock without assigning a certificate.’

*
\

A. METHOD OF TRANSFERRING THE CERTIFICATE.

§ 375. Usual forms of assignment and powers of attorney
whereby the transferrer assigns the certificate of stock to his trans-
feree.— A certificate of stock is a paper issued by the corporation
to a stockholder, stating that the person specified ‘therein is the
owner of a certain number of shares of its capital stock. The as-
signment of this certificate is made, it seems, in three different
ways: First, it has been held that it may be made by a simple de-
livery of the certificate without any writing.* Again, it may be

1 See § 308. - tificate of stock causa mortis was held

See § 860. good, without any writing assigning

3 First Nat. Bank v. Gifford, 47 Iowa, the certificate; and § 465, note. See,

575 (1877); Brigham v. Mead, 92 Mass., also, Fraser v. Charleston, 11 8. C., 486

245 (1865). See, also, § 382. (1878). Cf. Sitgreaves v. Farmers’, etc.,

4 See § 308, where a delivery of acer- B’k, 49 Penn. St., 359 (1870); Davis v.
418
CH. XXII. ] FORMALITIES OF TRANSFER AND REGISTRY. [§§ 376, 377.
made by a formal instrument of transfer duly signed by the trans-
‘ferrer. This instrament may be separate from the certificate of
stock, but generally is printed in blank on the back of it. In
either case, in order to make the transfer complete by a registry of
‘it on the corporate books, it is necessary for the transferrer to go
to the office of the corporation and sign the stub of its transfer
_ book, whereby the transfer is recorded. The third and most usual
method of assigning a certificate of stock is by a formal instrument
of transfer, similar to the one explained above, united with a power
of attorney authorizing a person, whose name is generally left
blank, to be subsequently filled in, to sign the corporate registry
book, whereby the transfer is recorded. This instrument of trans-
fer and the power of attorney are generally printed in blank on the
back'of the certificate of stock. It enables the transferee to ob-
tain a registry without the presence of the transferrer, provided
the corporate registry agent is satisfied with the signature and in-
tent of the transferrer to assign the stock. This power of attor-
ney is not revoked by the death of the transferrer before it is used."
§ 876. Questions which arise herein.— The assignment of a cer-
tificate of stock by the transferrer to the transferee, considered
apart from the actual registry of such assignment on the corporate
books, involves the question whether such an assignment should be
under seal; whether, after the assignment, the transferrer can claim
any rights of ownership as against the transferee, even though
there be no registry of the transfer; and whether a transfer and
power of attorney duly signed by the transferrer, but left in blank
as.to the names of the transferee and attorney, are legal and may,
pass from hand to hand until some holder cares to fill up the
blanks. These and incidental questions are discussed in the follow-
ing sections.

§ 377. A seal is not necessary to a transfer of stock.— In Amer-
ica an assignment or transfer of a certificate of stock need not be
under seal.2, Formerly it was the custom to have all such transfers
made by deed, duly sealed. As the nature of stock and certificates
of stock, however, came to be understood more clearly, it became
a rule of law that a transfer of the certificate, like the transfer of
choses in action, did not require a seal. Not even the presence of

Bank of Eng., 2 Bing., 898 (1824); Bur-
‘yall v. Bushwick R. R. Co., 75 N. Y.,
211 (1878); Dunn v. Com. B’k of Buf-
falo, 11 Barb., 580 (1852). A deed of
release of shares of stock is a sufficient
transfer. Hastings v. Blue Hill, etc.,
Corp’n, 26 Mass., 80 (1829).

1Fraser v. Charleston, 11 8. C., 486

(1878); Leavitt v. Fisher, 4 Duer (N. Y.),
1 (1854); United States v. Cutts, 1 Sum-
ner, 188 (1882). |

2 Quiner v. Marblehead Social Ins. Co.,
10 Mass., 476 (1818); Atkinson v. Atkin-
son, 8 Allen, 15 (1864). If, however,
the by-laws require it, the transfer must
be under seal. Bishop v. Globe Co., 185

419
[ou. xx.

§ 378.]

FORMALITIES OF TRANSFER AND REGISTRY.

the seal gives the transfer the character of a sealed instrument.
The seal is a superfluity and is disregarded.

In England, on the other hand, transfers of railway stocks. are
generally required by charter to ‘be under seal. This is held to
give the instrument the character of a deed; and hence, in accord-
ance with the ancient technical rule of law that a deed must be
filled out as to the grantee and other essential particulars before it
is sealed in order to be valid, it has been held in England that a
transfer of a certificate of stock, duly signed and sealed, but with
the name of the transferee in blank, is void absolutely.? In those
English companies, however, whose charters do not require trans-
fers to be sealed, the transfer may be by an ordinary instrument in
writing, and the presence of a seal will be disregarded.?

§ 378. The assignment of the certificate of stock estops the trans-
ferrer from claiming any further title in the stock as against sub-
sequent bona fide transferees, although such assignment be not
registered.'— There is no case which denies this principle of law.
On close examination of the cases which seem to militate against

Mass., 182 (1883), holding, also, that the
word ‘‘ seal” is insufficient.

1German Union B. Ass’n v. Send-
meyer, 50 Penn. St., 67 (1865); Com-
mercial B’k v. Kortright, 22 Wend.,
348 (1839); McNiel v. Tenth Nat’l B’k,
46 .N. Y., 825 (1871); Bridgeport B’k v.
N. Y. & N. H. BR. R. Co., 80 Conn., 231,
274 (1861); Easton v. London, etc., B’k,
“55 L. T. Rep., 678 (1886).

2 Hibblewhite v. McMorine, 6 M. &
W., 200 (1840), per Parke, B.; Taylor v.
Great Indian P. R’y Co., 4 De G. & J.,
559 (1859); Societe Gen. v. Tramways
Union Co, L. R, 14 Q. B. D., 424
(1884), where transfer was to be by
deed; aff'd, L. R., t App., 20. Cf.
S$ 325, 380, 416.

3 Re Tees Bottle Co., 33 Law Times,
N. 8., 834 (1876); Walker v. Bartlett, 36
Eng. L. & Eq., 369 (1856); Re Barned’s
Banking Co., L. R., 3 Ch., 105 (1867);
Ex parte Sargent, L. R., 17 Eq., 327
(1873); Ortigesa v. Brown, 47 L. J.
(Ch.), 168 (1878). Transfer of certificates
in England must be under seal. Re
Balkis, etc., Co, 58 L. T. Rep., 300
(1888). The American cases incline to
the opinion that, even though a seal
were required, the sealed transfer

would not be void because of the blanks
left in it. Bridgeport B’k v. N. Y., ete.,
R. R. Co., supra; Com. B’k v, Kort-
right, supra; Matthews v. Mass. Nat’l
B’k, 1 Holmes, 396, 407 (1874); MeNiel
v. Tenth Nat'l B’k, supra.

4Scott v. Pequonnock B’k (U, 8. C.
Ct.), 15 Rep., 137 (1888); Brown wv.
Smith, 122 Mass., 589 (1877); Fitchburg
Sav. B’k v. Torrey, 134 Mass., 239 (1883);
Duke v. Cahawba Nav. Co, 10 Ala., 82
(1846); Chouteau Spring Co. v. Harris,
20 Mo., 382 (1855); St. Louis P. Ins. Co.
v. Goodfellow, 9 Mo., 149 (1845); Gil-
bert v. Manchester Iron Mfg. Co., 11
Wend., 627 (1834); Sargent v. Essex
Mfg. Co., 26 Mass., 202 (1829); Nesmith
v. Wash, B’k, 23 Mass., 824 (1829); Sar-
gent v. Franklin Ins. Co., 8 Pick., 90
(1829); Conant v. Reed, 10. St., 298
(1853); Baltimore City P. R’y Co. v
Sewall, 35 Md., 2388 (1871); B’k of
America v. McNiel, 10 Bush, 54 (1873):
United States v. Vaughan, 3 Binn.
(Penn.), 394 (1811); Beckwith v. Bur-
roughs, 18 R. I., 294 (1882); Farmers’ &
M. B’k v. Wasson, 48 Iowa, 336 (1878);
Carroll v. Mullanphy Sav. B’k, 8 Mo.
App., 249 (1880); B’way B’k v, McEl-
rath, 13 N. J. Eq., 24 (1860) ; Smith v.

420
CH. Xx11. | FORMALITIES OF TRANSFER AND REGISTRY.

[§ 379.

..it, it will be found that the issue involved was whether the unreg-
istered transferee was protected against third persons who claimed
title back of the transferrer. The transferrer himself is not al-
lowed to impeach his unregistered transferee’s title. Even in Con-
necticut, where, at an early day, the court held that the registry
was the originating act of the title of the transferee, the court was

‘considering the rights of third persons, and not the rights of the
transferrer himself. That the transferrer cannot question the com-
pleteness of his transfer of title is a rule binding not only on him-
self, but also upon his assignees in bankruptcy or insolvency.? The
transferrer is estopped also from attacking the assignment of the
certificate on the ground of informalities in the transfer.’

§ 379. Effect of charter provision requiring registry.— This rule
prevails even though the certificate or by-laws, or charter itself,
declares that a transfer shall not be legal or complete or effectual

until it is registered on the corporate books.

Crescent City, etc., Co., 30 La. Ann.,
1878 (1878); People’s B’k v. Gridley, 91
Ill, 457 (1879). Nor can the transferrer
avoid the assignment before registry on
the ground that no consideration passed.
Hall v. U. S. Ins. Co., 5 Gill (Md.), 484
(1847); Cushman v. Thayer Mfg. Co., 76
N. Y., 365 (1879), Such an assignment
satisfies a contract to sell stock. White
v. Saulsbury, 33 Mo., 150 (1862); Mer-
chants’ Nat’l B’k v. Richards, 6 Mo.
App., 454 (1879). ~The fact that the cor-
poration subsequently refuses to register
the transfer does not prevent title pass-
ing, as between transferrer and trans-
feree. Crawford v. Provincial,Ins..Co.,
8 Upper Can., C. P., 263 (1859).

1Northrop v. Newtown & B. T. Co.,
8 Conn., 552 (1821); Fisher v. Essex B’k,
5 Gray, 378 (1855), the rights of attach-
ing creditors being involved.

2 Ea parte Dobson, 2 Mont. D: & D.,
685 (1842); Dickinson v. Central Nat’l
Bk, 129 Mass., 279 (1880); Morris v.
Cannon, 8 Jur., N. S., 653 (1862); Sibley
v. Quinsigamond Nat’l B’k, 183 Mass.,
615 (1882),

3 Holyoke B’k v. Goodman Paper Mfg.
Co., 9 Cush., 576 (1852); Maguire’s Case,

8 De G. & S., 31 (1849); Sheffield A. &

M. R’y Co, v. Woodcock, 7 M..& W.,
574 (1841); Cheltenham & G. W. N. R’y

As between the

Co. v. Daniel, 2 Q. B., 281 (1841); Home
Stock Ins. Co. v. Sherwood, 72 Mo., 461
(1880). The legal sufficiency of the in-
strument of transfer cannot be ques-
tioned by the transferrer. Chew v. B’k
of Baltimore, 14 Md., 299 (1859).
4Johnson v. Laflin, 103 U. S., 800,
804 (1880), affirming.5 Dill., 63 (1878);

Noyes v. Spaulding, 27 Vt., 420 (1855),

where the court say: “ That provision
is similar to the statute in this state in
relation to the transfer of real estate,
under which it has uniformly been held
that the title passes to the grantee as
between the parties to the conveyance,
though the deed is unrecorded. . ere
The object of having the ‘transfer re-
corded on the books of the corporation
is notice, and that is the only object.
For that reason the transfer, though
unrecorded, is good against the party
and all those who have notice in fact
of the transfer.” United States wv,
Cutts, 1 Sumner, 188 (1882); First Natl
B’k v. Gifford, 47 Iowa, 575 (1877). The
same provision was involved in nearly
all the cases cited in preceding sections,
See, also, Johnson v. Underhill, 52 N.
Y., 203 (1873); B’k of Utica v. Smalley,
2 Cowen, 770 (1824); Baldwin v. Can-
field, 26 Minn.; 43 (1879), where the
court say that charter ‘“‘provisions of

421
4

§ 380.]

FORMALITIES OF TRANSFER AND REGISTRY.

ie
[CH. XXII.

transferrer and transferee, the unregistered assignment is complete ,

and effectual in contradiction of such declarations.

The courts con-

strue these provisions of the certificate or by-laws or charter to
be intended, not to affect the rights of the transferee as against
the transferrer, but to affect the rights of the transferee as against
attaching creditors of his transferrer and other third parties claim-
ing an interest in the stock, and also to affect his right to claim
dividends, the privilege of voting, and other rights of a stockholder.!

§ 880. Certificate of stock may be assigned with the name of the
transferee left blank.— By a commercial usage, which has been
repeatedly recognized as valid by the courts, certificates of stock
may be assigned by a transfer duly signed by the transferrer, but

with the name of the transferee left blank.”

Generally the com-

bined instrument of transfer and power of attorney on the back of
the certificate is signed by the stockholder and delivered to the
purchaser, with the names of the transferee and of the attorney
left blank. Such a certificate of stock, transferred in blank, may
be sold and passed from hand to hand; and each purchaser of it is
entitled to the same rights against his transferrer or previous

transferrers as he would have

holders appeared on the certificate itself.

if the names of the successive
Any purchaser of the

certificate, duly signed but transferred in blank, may fill up the

blanks and insert his own name.’

his kind are intended solely for the
protection and benefit of the corpora-
tion; they do not incapacitate a share-
holder from transferring his stock with-
out any entry upon the corporation
books.”

1 Continental Nat’l B’k v. Eliot Nat’l
‘B’k, 7 Fed. Rep., 369 (1881); Merchants’,
etc., B’k v. Richards, 6 Mo. App., 654
(1879); and cases cited supra, and § 465,
infra.

? Walker v. Detroit Transit R’y Co.,
47 Mich., 338 (1882); Pennsylvania R. R.
Co.’s' Appeal, 86 Penn. St., 80 (1878);
Cutting v. Damerel, 88 N. Y., 410 (1882);
German Union B. Ass’n v. Sendmeyer,
50 Penn. St., 67 (1865); Ex parte Sargent,
L. R., 17 Eq., 273 (1878); Ortigosa v.
Brown, 47 L. J. (Ch.), 168 (1878); Re
Barned’s Banking Co., L. R., 8 Ch. 105
(1867).
infra, ‘Even in the absence of such
usage, a blank transfer on the back of
‘the certificate, to which the holder has

Cf. §§ 825, 377, supra; § 416, _

He may fill in his own name as

affixed his name, is a good assignment;
and a party to whom it is delivered is
authorized to fill it up by writing a
transfer and power of attorney over the
signature.” McNiel v. Tenth Nat’l B’k,
45 N. Y., 825, 381 (1871). “There is no
force in the suggestion that the power
of attorney in the present case was in-
complete, because there were blanks for
the number of shares and for the name
of the attorney. Any holder might fill
up the blanks and constitute himself the
attorney. These points are too well set-
tled to need discussion.” Holbrook v.
New Jersey Zinc Co., 57 N. Y., 616, 623
(1874), As to the English rule, where
the charter requires transfers to be
under seal, see § 377. See, also, Colo-
nial B’k v. Hepworth, 57 L. T. Rep.,
148 (1887); Williams v. Colonial B’k, id.,
188 (1887); Nanney v. Morgan, 57 id.,
48 (1887).

3 Broadway B’k v. McElrath, 18N. J.
Eq., 24 (1860); Matthews v. Mass. Nat'l

422
OH. Xx. ] FORMALITIES OF TRANSFER AND REGISTRY.

[$ 381.
transferee, and the name of an agent as the attorney to make the
registry, or he may leave the latter blank and allow the registry
élerk to fill in his own name, as is frequently done.

B. METHOD OF REGISTERING A TRANSFER OF STOOK.

§ 381. Registry an important part of a transfer of stock.—The
effect of obtaining a registry or of neglecting to obtain a registry
of the transfer on the corporate books, immediately after purchas-
ing the same from the vendor, has given rise to much litigation
and much apparent confusion. A registry of the transfer is impor-
tant in two respects: First, as regards the rights of the purchaser in
reference to the corporation; second, in regard to the rights of the
purchaser as regards third persons who-are either creditors:of the
old registered stockholders or have claims upon the stock in ques-
tion. So far as the corporation is concerned, it is bound to recog-
nize only the registered stockholder.!. To him is accorded the right
to vote, draw dividends, and exercise the general rights of stock-
holdership. The unregistered purchaser of stock cannot claim such
rights. All the cases agree in this result of a neglect to register a
transfer. As regards the rights of third persons, however, the courts
of the different states vary widely in their opinions. Generally the
question arises by reason of an attachment or execution levied by a
‘creditor of the transferrer against the stock standing on the corpo-
rate books in the name of the transferrer, who has already sold and
assigned the certificate of stock to another. As a general rule, it
may be said that a purchaser of a certificate of stock is usually pro-
tected as fully without a registry_on the corporation books as he
would be by a registry, so far as subsequent attachments and most
other possible equities against the stock-are concerned.’ This is the

rule in New York and most of the states.

B’k, 1 Holmes, 396 (1874); Bridgeport
Bk ve N.Y. & N. H. R. RB. Co., 30
Conn., 231 (1861); Kortrizht v. Buffalo
Com. B’k, 20 Wend., 91 (1838); aff’d, 22
Wend., 348 (1839); Otis, Adm’r, v. Gard-
ner, 105 Ill, 486 (1883); Mount Holly
‘L, & M. T. Co, wv Ferrie, 17 N. J. Eq.,
117 (1864); Prall v. Tilt, 28 N. J. Eq.,
479 (1877); Leavitt v. Fisher, 4 Duer,
1, 20 (1854) Although in England
an unregistered transferee of stock is
not protected against, another trans-
fer which is registered, yet he is pro-
.tected where he lodged his transfer with
the corporate secretary, and the latter
accepted it for transfer before the sec-

In Connecticut, New

ond transfer was made. Nanney wv,
Morgan, 85 L. T. Rep., 288 (1887) In
Engiand an American certificate of
stock indorsed in blank gives no more
rights to a bona fide purchaser than to
a mala fide purchaser. Until a registry
is made, the registered owner may claim
his property and set up all equities to
regain possession, ‘Williams v. London, ~
etc., B’k, 59 L. T. Rep., 648 (1888).

1 Registry herein means not only an

.actual registry, but also a request to the

corporation to allow registry where im-
properly refused by it. See § 382.

2 These various questions are consid-
ered in chapters XXI and XXVIL

428
§ 382.] FORMALITIES OF TRANSFER AND REGISTRY. [CH. XXII,
Hampshire, Illinois and a few other states a contrary rule prevails.
In Massachusetts a late statute has changed the old rule so that it
now accords with that of New York. .

§ 382. Formalities of making registry.— The customary method
of registering a transfer of stock on the corporate books is simple,
Theregistered stockholder, or his attorney in fact, whose name is
written in the blank power of attorney, applies to the corporate
officer having charge of the transfer books, and requests a registry
of the transfer to a person designated by a name written in the
blank transfer. Books of transfer are kept for purposes of regis-
tering, and upon such an application and a surrender of the old cer-
tificate the old stockholder or his attorney makes the registry, and
a new certificate is issued.? ,

Any suitable registry or stock-list, or formal entry on the corpo-
rate books, suffices. No special book need be kept for that pur-
pose. The demand for registry should be made upon the principal
officer or clerk at the office of the corporation. When so made, it
is sufficient. The method of registry may be regulated by the by-
laws of the corporation.’ Thus, a by-law that the stock shall be
transferable by indorsement in writing, made in the presence of

the cashier or two other witnesses, has been sustained as valid, and

1 This statute is given in full in § 490.

2Burrall v. Bushwick R. R. Co., 75

N. Y., 211 (1878); Green, etc., Co. v.
Bulla, 45 Ind., 1 (1878).

3“ All that is necessary, when the
transfer is required by law to be made
upon the books of the corporation, is
that the fact: should be appropriately
recorded in some suitable registry or
tock-list, or otherwise formally entered
upon its books. For this purpose the
account in a stock ledger, showing the
names of the stockholders, the number
and amount of the shares belonging to
each, and the sources of their title,
whether by original. subscription and

payment or by derivation from others,

is quite suitable, and fully meets the re-
quirements of the law.” National Bank
v. Watsontown Bank, 105 U. S&, 217
(1881).

4“Tt is sufficient for him to apply at
the bank during the usual hours of
business, and make his demand upon
the officers and clerks who may be in
attendance there; and, in case they are

.

not authorized to transact that particu-
lar business, they must either refer him
to the proper officer in the bank or pro-
cure the attendance of such officer, or
of the board of directors, if necessary,
without any unreasonable delay. .. .
In the absence of any proof to the con-
trary, it may be fairly presumed that
the principal officer or clerk in attend-
ance at the bank, during the usual
hours of business, is authorized to per-
mit such a transfer when proper.”
Com. Bank of Buffalo v, Kortright, 22
Wend.,, 348, 351 (1839); Case v. Bank,
100 U. S., 446 (1879), where application
to the cashier was held to be proper;
McMurrich v. Bond H. H. Co., 9 U. C.
(Q. B.), 833 (1852), where the application
was to the secretary; Re Goodwin v.
Ottawa & P. R’y Co., 18 U. C. (C. P.),
254 (1868), where an application to sec-
retary and treasurer was sustained;
Green Mount. & 8. L. T. Co. v. Bulla
(1873), supra, where the application was
to the president.

424
CH. XXII. | [§ 382,

FORMALITIES OF TRANSFER AND REGISTRY.
is complied with only by the presence and signature of the cashier
or of the witnesses.', So also of a by-law requiring registry in the
presence of the president and secretary of the company.’ But a
by-law requiring the assent of the president of the corporation to
the registry of a transfer would be in restraint of trade and void.?
A delivery of certificates to the corporation, and a mere request to
the corporate officers to make the transfer, is not a registry until
the entry is actually made.‘

The fact that the registry clerk marks on the instrument of trans-
fer the words “ received for record ” does not constitute a registry.>
It has been held that, where the corporation has a branch registry
office in another state, a registry in the branch office is not an
effectual registry until it has been reported and entered in the
books of the main office of the corporation.’ If the corporation
does not keep books for the registry of transfers of stock, a mere
notice to the corporation that a transfer has been made constitutes
aregistry.’ But if the statute or charter requires a transfer to be
made on the corporate books, no registry is possible until such
‘books are obtained and opened.’ If the corporation never issues
certificates of stock, the stockholder cannot demand them.’ If the.
corporation cannot ‘allow the registry on account of an injunction,
it is nevertheless bound to respect the rights of a transferee who
gives notice to it of the transfer." The issue of a new certificate
of stock is not essential to the completeness of a registry of the.

{Dane v. Young, 61 Me., 160 (1872).

2 Planters’ & M. M. Ins. Co. v. Selma
Sav. B’k, 63 Ala., 585 (1879).

3 Sargent v. Franklin Ins. Co., 8 Pick.,
90 (1829). \

4 Brown v. Adams, ‘5 Biss., 181 (1870).
Nor will a mere entry of credit to the
transferee, on the treasurer’s books,
suffice. Marlborough Mfg. Co. v. Smith,
2 Conn., 579 (1818). Cf. § 262. .

5 Northrop v. Curtis, 5 Conn. , 246 (1824).
But a memorandum entered on the stub
in the stock-book opposite to the certifi-
cate issued, that that certificate has
been transferred, is a sufficient registry
as against attaching creditors of the
transferrer. Fisher v. Jones, 3 South.
Rep., 13 (Ala., 1887). A mere letter
from the transferee to the corporation
that he has purchased the certificate is
insufficient, even though such letter is
pinned to the transfer book. Newell v.
Williston, 188 Mass., 240 (1885).

6 Pinkerton v. Manchester & L. R. R.
Co., 42 N. H., 424 (1861).

‘Crawford v. Prov. Ins. Co., 8 U. C.
(C. P.), 263 (1859); Agricultural, etc.,
v. Wilson, 24 Me., 273 (1844), holding
that'a transfer on the books of a corpo-
ration of stock for which certificates
had not.been issued is sufficient to pass
the property:in the stock, and a valid
consideration for a note given in pay-
ment.

8 McCurry v. Suydam, 10 N. J. Law,
245 (1828). Where the corporation keeps
no stock ledger, a transfer is sufficiently
registered when the old certificate is
surrendered, a new one issued, and the
new name entered on the subscription
list. Stewart v. Walla, etc., Co., 20
Pac. Rep., 605 (Wash. Ter., 1889).

9Thorp v. Woodhull, 1 Sandf. Ch,,
411 (1844). See §§ 60, 192.

10Purchase v. New York Exchange
B’k, 3 Rob., 164 (1865).-

425
§ 383.] FORMALITIES OF TRANSFER AND REGISTRY. [cH. xxI,

transfer. If the corporation delays unreasonably in allowing a
registry it is liable in damages to the applicant for registry.’

The instrument of transfer must be in proper form.’ Unless the
old stockholder or his duly authorized, attorney offers to make
the registry, the corporation may refuse to allow it. The power
of attorney must run from the previous registered stockholder, and
not from an intermediate unregistered transferee of the certificate.®
Transfers under bankruptcy or insolvent laws are to be registered
like voluntary transfers.6 In England a written acceptance of the
stock by the transferee is required.’

A mere notice to the corporation that an assignment has been
made need not be considered by the corporation.? Where, how-
ever, the transferee giving such notice does not obtain registry
because the corporation refuses, for any reason, to make the regis-
try, the mere notice must be borne in mind by the corporation,
and the rights of the applicant preserved by it, as regards future
registries.’

§ 383. Formalities of registry may be waived by the corporation.—
The corporation may waive the formalities connected with a regis-
try of transfer, and when it does so the transferee becomes a stock-
holder as completely as though registry had been regularly made.”
Frequently the waiver arises by placing the transferee’s name on

1First Nat’l B’k v. Gifford, 47 Iowa,
575 (1877); Chouteau Spring Co. v. Har-
ris, 20 Mo., 382 (1855).

2Sutton v. Bank of Eng., 1 C. & P.,
193 (1824), where the bank delayed
longer than one day, the customary
time, and refused to give any reason
therefor; Catchpole v. Ambergate, N.,
etc., R’y Co., 1 El. & B., 111 (1852),
where, by reason of the delay, the
‘stock was forfeited, notice of forfeiture
going to the old stockholder. See, also,
Healey on Law and Pr. of Companies,
p. 81.

§ Queen v. General Cemeiery Co., 6 E.
& B., 415 (1856), holding that the deed
of transfer, where a deed is necessary,
must be properly drawn. See, also,
Societe Generale, etc,, v. Walker, L. B.,
11 App., 20 (1885).

4 Mechanics’ Banking Ass’n v. Mari-
posa Co., 3 Rob. (N. Y.), 895 (1865).

5Dunn v. Com. B’k, 11 Barb., 580
(1852).

6 Dutton v. Connecticut Bank, 13

Conn., 493 (1840); State v. Ferris, 42
Conn., 560 (1875.)

TOrtigosa v. Brown, 47 L. J. (Ch.),
168 (1878). The Joint-stock Company’s
Act of 1856 required such an accept- |
ance. The act of 1862, repealing the
act of 1856, prescribed that transfers
should be made as was customary, un-
less the by-laws prescribed otherwise.
Hence, in the absence of by-laws, the
written acceptance is held to be cus-
tomary and necessary.

8 Stockwell v. St. Louis-M. Co., 9 Mo.
App., 183 (1880).

§ Supra, note 10, See, also, § 582.

10 Richmondville Mfg. Co. v. Prall, 9
Conn., 487 (1838); Clowes v. Brettell, 11
M. & W., 461 (1848); Sadler’s Case, 3
De G. &. S., 36 (1849); Chambersburg
Ins. Co. v. Smith, 11 Penn. St., 120
(1849); Walter’s Case, 3 De G. & S., 149

. (1850); Baine v. Whitehaven, etc., R’y

Co., 3 H. L. C., 1 (1850); Wills v. Mur-
ray, 4 Ex., 843 (1850); Yelland’s Case, 5
De G. & Sm., 395 (1852); Powers

ane
/

A
FORMALITIES OF TRANSFER AND REGISTRY.

1

CH. XXIL | [§ 384.
the list of stockholders, although no formal registry has been had.!
Even a charter requirement that the consent of the directors to a
registry of transfer shall be obtained may be waived by the corpo-
ration.’ The corporation, by paying dividends to an unregistered
transferee of stock, thereby waives the formalities of registry.*
‘When the corporation refuses to allow a registry for reasons other
than those connected with the mere formalities of registry, or for
reasons not given to the applicant, it waives its right to insist on
them, and cannot afterwards claim that the appellant did not con-
form to such technicalities. A failure, however, on the’ part of the
corporation to notify the transferee of a refusal to allow registry is

.no waiver of such registry.°

§ 384. Hither the transferrer or the transferee may apply to the
corporation for a registry of transfer.— A person who appears on
the corporation books.as the holder of stock, but who-.in fact has
sold the stock, has a right to have his transfer recorded on the cor-
porate books, thereby releasing him from Hability on the stock.®
The vendor may request the corporation to register the transfer,
and the corporation may make it at his request. If he refuses so.
to do, the vendor may bring suit ina court of equity to compel the

‘ Harding, 1 C. B. (N. 8.), 533 (1857);
Henderson v. Royal British B’k, 26 L.
J. (Q. B.), 112 (1857); Daniell v. Same, 1
H. & N., 685 (1857); East G. R’y Co. v.
Bartholomew, L. R., 3 Ex., 15 (1867);
Ind’s Case, L. R., 7 Ch., 485 (1872);
‘Weber v. Fickey, 52 Md., 500, 516 (1879);
Home Stock Ins, Co. v. Sherman, 72
Mo,, 461 (1880); Isham v. Buckingham,
49 N. Y., 216 (1872). See, also, §§ 258,
260, 262.

1Upham v. Burnham, 3 Biss., 431,
520 (1878).

2Kx parte Walton, 26 L. J. (Ch.), 545
(1857). Likewise where the by-laws
‘contain such a provision. Chambers-
burg Ins. Co. v. Smith, 11 Penn. St.,
120 (1849), holding also that an over-
sight whereby the attorney who makes
the registry omits to sign the registry
is immaterial.

8Cutting v. Damerel, 88 N. Y., 410
(1882). ;

4Townsend v. McIver, 2 S. C., 25
(1870); Bond v. Mt. Hope Iron Co., 99
Maas., 505 (1868), holding that the cor-
poration must put the refusal on the

ground of non-conformity with formali-
ties at the time of the application, and
cannot afterwards raise such. Chou-
teau, etc., Co. v. Harris, 20 Mo., 382
(1855); Robinson v. Nat’l B’k of New
Berne, 95 N, Y., 637 (1884), where the
court say: ‘‘The requirement of a reg-
istry, existing only for its own protec-
tion and convenience, must be deemed
waived and non-essential when it
wrongfully refuses to obey its own
rule.”

5Gustard’s Case, L. R., 8 Eq., 488
(1869). '

6 *« The purchase was in itself author-
ity to the vendor to make the trans-
fer. . . Acourt of equity will com-
pel a transferee of stock to record the
transfer, and to pay all calls after the
transfer. If so, it: is.clear that the
vendor may himself request the trans-
fer to be made.” ‘Webster v. Upton, 91
Uz. S., 65, 71 (1875). “If a subsequent
transfer of the certificate be refused by
the bank, it can be compelled at the in-
stance of either of them.” Johnston
v, Laflin, 103 U. S., 800, 804 (1880),

427
§§ 385, 386.] FORMALITIES OF TRANSFER AND REGISTRY. [OH. XXII.

corporation to register the transfer.' It has been held, also, that
an intermediate vendor of the stock, whose name has never ap-
peared on the corporate books, may likewise compel a registry to
be made After an ultimate vendee has been registered, the orig
inal vendor cannot have an intermediate vendee and vendor regis-
tered as the stockholder.? The corporation may register the transfer,
even against the wishes of the transferee.‘ The transferee also has
a right to apply for and compel a registry of the transfer of stock
to himself.

C. RIGHTS AND DUTIES OF THE CORPORATION
FUSING REGISTRY.

IN ALLOWING OR RE-

§ 885. Corporation may require proof of identity, also of genuine-
ness of signature, etc— When a transfer of stock is. presented to
the corporation for registry, if the corporation is in doubt as to the
identity of the person presenting it, whether he be the stockholder
already registered on the books or the attorney of such, the corpo-
ration may require proof of such identity.* If it is in doubt as to
the competency of the transferrer to sell the stock,’ legal proof of
such competency must.be given.’ If the applicant for registry ap-
plies as the attorney of the registered stockholder, the corporation
may require satisfactory evidence of the genuineness of the latter’s
transfer, or may require the presence of the stockholder himself.

§ 386. Corporation cannot refuse registry on account of the mo-
tive of the transferrer or transferee in the transaction. The cor-
poration has nothing to do with the motive or purpose of the
vendor or vendee of the stock." It can refuse a registry only when

‘Wynne v. Price, 3 D, & S., 310 (1849);
Birmingham v. Sheridan, 33 Beav., 660;
Eustace v. Dublin, T. C. R’y Co., L. R.,
6 Kq., 182 (1868).

2 Paine v. Hutchinson, L. R, 3 Ch.,

388 (1868).

3Shaw v. Fisher, 5 De G.,.M. & G.,
596 (1855).

4Upton v. Burnham, 8 Biss., 520, 525
(1873).

5 Norris w Irish Land Co., 8 E. & B.,
512 (1857); Daly v. Thompson, 10 M. &
W., 309 (1842); Johnston. v. Laflin, 5
Dill, 65 (1878); 103 U. S., 800; Hill v.
Pine River Bank, 45 N. H., 300 (1864);
Presbyterian Con. v. Carlisle B’k, 5
Penn. St., 345 (1847); Mechanics’ B’k v,
Seton, 1 Peters, 299 (1828); Arnold v,
Suffolk B’k, 27 Barb., 424 (1857); Sar-

gent v. Franklin Ins, Co., 8 Pick., 90 (1870).

(1829); Cushman v. Thayer Mfg. Co.,
76 N. Y., 865 (1879). But‘the complaint
must be full and accurate in its aver-
ments. ‘Edwards v. Sonoma Bank, 59
Cal., 186 (1881).
Telegraph Co. v. Davenport, 97 U.
S., 869 (1878): Davis v. Bank of Eng., 2
Bing., 393 (1824), where the court say
the corporation ‘may take reasonable
time to make inquiries, and require
proof that the signature to a power of
attorney is the writing of the person
whose signature it purports to be.”
Bayard v. Farmers’ & M. B’k, 52 Penn.
St., 282 (1866).

7See S$ 318, 319.

8Id.

» Supra, note 6; and see §§ 368-867.

10Townsend v. McIver, 2 8. C., 25
But a transfer, merely nominal,

428
CH, Xxul.] FORMALITIES OF TRANSFER AND REGISTRY. [§ 387.
there is doubtas to the legal right of the applicant to have such
registry. It cannot refuse on the ground that the transfer would
injure the corporation, nor on the theory that the object of the
transfer is to increase the votes of the transferee.’ In England,
often the directors are by charter given a discretionary power to
refuse a transfer.”

§ 387. Corporation may interplead between two claimants to stock.
The task imposed upon a corporation in determining whether to
refuse or to allow a registry of stock is a difficult and dangerous
one. It is easy to avoid the risk of forgery or of failure of the ap:
plication to identify himself. But circumstances frequently are
such that the corporation dare not allow registry to either of two
parties, each of whom claims to be the sole and absolute owner of
the stock, and each of whom claims the right of registry or notifies
the corporation not to register the other claimant as a stockholder.
These cases arise on various occasions, but most often where the
stock has been attached or sold on: execution by the transferrer’s
creditors before the transferee has obtained registry ; or where, by
the fraud of the old stockholder’s agent, the certificate has passed

into the hands of.a bona fide purchaser; or where, by a breach of.
trust, an executor or administrator, or trustee or guardian, has sold.

the trust stock and appropriated the proceeds; or under other states
of fact wherein there are two claimants of the stock, each having
rights which can be clearly ascertained only by litigation. It is
not incumbent on the corporation to decide between these con-
flicting parties and rights.’ Such a requirement would expose
it to unreasonable risks and compel it to assume the functions of a
court. Where there is a reasonable. doubt as to the facts involved
or as to the respective rights of the claimants of the stock, and the
corporation is sued by one of the claimants for refusing to allow a
registry by him, the corporation may interplead, and thus compel
the claimants to ascertain their rights through the medium ofa
court of justice. A similar interpleader may be made where the

to obtain for the transferee certain
special privileges, such as free admis-
sion to a place of amusement, may be a
fraud on other stockholders and will be
set aside. Appeal of Academy of Music,
108 Pa. St., 510 (1885). In an action to
compel the unincorporated Standard Oil
“trust” to transfer on its books trust
certificates which the plaintiff has pur-
chased, the defendants who allege that
the plaintiff is a competitor of the trust
and purchased the certificates in order
to break up the trust and compel it to

buy the plaintiff out, may be compelled
to give a bill of particulars, Rice v.
Rockefeller, N. Y. Daily Reg., May 29,
1888.

1 Moffatt v. Farquhar, L. R., 7 Ch.
D., 591 (1878).

2 See Healey on Law and Practice of
Companies, 79.

3The discussion of the duty of the
corporation in various circumstances is
given under chapters devoted to them.

4Mechanics’ B’k v. Richards, 6 Mo.
App., 454 (1881); aff'd, 74 Mo., 77; State

429

i
FORMALITIES OF TRANSFER AND REGISTRY. [ox. XXII

§ 387.]

corporation is sued for dividends which are claimed by two oppos- °°
ing parties An interpleader is proper, however, only when suit is
actually commenced against the corporation.

There is some doubt and considerable difficulty in laying down
rules as to when a corporation may safely claim a right to refuse
to act, and to compel the claimants to litigate between themselves
before it allows a registry to either. The policy of the law doubt-
less is to go very far in allowing the corporation to refuse to incur
responsibility by taking action. Where, however, the rights of one
claimant are reasonably clear, the corporation should suspend action
for a reasonable time within which the contesting party may ap-
ply to the courts; and if no such action is brought, it should allow
a registry by the first-named claimant.’ Any other rule would en-
able any person to practically deprive a stockholder of the possession
of his stock temporarily, by simply notifying the corporation that
he claims the stock.!’ Where, however, the corporation has allowed

one claimant to register his transfer, the right of the corporation to

interplead is gone.*

Ins. Co. v. Gennett, 2 Tenn. Ch., 100;
Leavitt v. Fisher, 4 Duer (N. Y.), 1
(1854). If the court decides that the in-
terpleader is properly filed by the corpo-
ration herein, it generally on a motion
dismisses the proceeding with costs to
the corporation, and the court also de-
cides between the defendants if the case
is ready as between them. :If not ready,
it directs an action or an issue, or a ref-
erence to a master, to ascertain con-
tested facts, as may be best suited to
the nature of the case; “ or the court
may leave it to the defendants to pre-
pare the case between them as they may
be advised, which would be the effect
of a general order to interplead.” State
Ins. Co. v. Gennett, 2 Tenn, Ch., 100
(1874), citing, as cases on above rules of
practice, East. & West., etc., Co. uv. Lit-
, tledale, 7 Hare, 62 (1848); Martinius v.
Helmuth, 2V. & B., 412 (1814), note;
Horton v. Baptist Church, 84 Vt., 317
(1861); Rowe v. Hoagland, 7 N. J. Eq.,
131 (1848); Crawford v, Fisher, 1 Hare,
441 (1842); Condit v. King, 2 Beas. Ch.,
883 (1861); Hendrickson v. Decow, Sax.,
595 (1802); City B’k v. Bangs, 2 Paige, 570
(1831); Angell v, Hadden, 16 Ves., 202

It cannot afterwards remove the name of the

(1809). The case of State Ins. Co. v. Gen-
nett, 2 Tenn. Ch., 82 (1874), says: ‘ The.
law is that-the mere pretext of a con-
flicting claim is not sufficient. The
court must be able to see from the facts
stated that there is a ques:ion to be
tried.” See, also, Norton v. Union Trust
Co., N.Y. Daily Reg., April 18, 1887,
p. 744. In England, by section 85 of
the Companies Act, 1862, a corporation
may interplead between two claimants
of stock, and need not pay costs. Re
Edie, etc., 58 L. T. Rep., 305 (1888),

1Salisbury Mils v. Townsend, 109
Mass,, 115 (1871); Diamond, etc., Co. v.
Todd, 14 Atl. Rep., 27 (Del., 1888). Quere,
as to whether an action for dividends
can be ‘maintained before the right of
the claimant to the stock is established.
Hughes v. Vermont Copper Min. Co.,
72N. Y., 207 (1878). See chapter XXXII.

? Buffalo Grape Sugar Co. v. Alberger,
22 Hun, 349 (1880),

3 Townsend v. McIver, 2 8. C, N.S,
25 (1870).

4 Re Tahiti Cotton Co., L. R., 17 Eq.,
278 (1874); Ex parte Sargent, L. R., 17
Eq., 278 (1878).

5 Dalton v. Midland R’y Co., 12 C. B.,

430
\

cu. Xx1I.] FORMALITIES OF TRANSFER AND ‘REGISTRY. [§§ 388, 389.

registered stockholder, capectaty where such stockholder has acted
in reliance upon such registry.

§ 388. Corporation must obey mandate of court ordering registry
and issue of new certificates The authorities on this proposition
of law are few in number, but they are decisive in protecting the
corporation from liability where it proceeds under mandate of a
court. Thus, where a decree is obtained commanding the corpora-
tion to register a transfer, the corporation is protected in obeying
the decree, even though it is reversed on appeal, there having been
no stay of proceedings.? Cases herein may arise also where the
registered stockholder alleges that he has lost his certificate, and
the court compels the corporation to issue to him a new one;° also
where an attachment or execution has been levied, the old certif-
icate of stock being outstanding.t There is a limit, however, to
the power of courts in these matters. If the whole capital stock
has been issued and the certificates therefor are outstanding, a court
cannot order the issue of other certificates, unless the decree at the
same time practically nullifies a corresponding outstanding certif-

icate.® .

_ § 3889. Remedies of a transferee of stock against the corporation
for refusal to allow registry.— Where, for any reason, the corpora-
tion refuses to allow the registry of a transfer of stock, when it is
the duty and obligation of the corporation to allow it, the trans-
ferrer or the transferee who applies for registry may, in general,
pursue one of three remedies. He may apply to a court of law for
a mandamus to the corporation to compel it to open its books and
allow the registry; or he may bring a suit in equity, praying that
the corporation be decreed to allow the registry, or to pay him

.damages if registry is impossible; or he may sue the corporation

458 (1852); Cady v. Potter, 55 Barb., 463
(1869); Mt. Holly, L. & M. -T, Co. w.
Ferrie, 17 N. J. Hq., 117 (1864).

1 Ward v. Southeastern R’y Co., 6 Jur.,
N. 8., 890 (1860); Hart v. Frontino, etc.,
Co., 22 L. T., N. S., 80 (1870); Cohen v.
Gwynn, 4 Md. Ch., 357 (1848). Unless
there clearly is a clerical mistake and
the issue is to the wrong party. Smith
x. North Am. Min. Co., 1 Nev., 4238
(1865), The corporation is liable for such
mistakes. Harrison v. Pryse, Barnar-
diston (Fol.), Ch., 824 (1740).

2Chapman v. New Orleans G. L. &
Banking Co., 4 La. gnn., 153 (1849).
See, also, Purchase v. N. Y. Exchange
Bank, 3 Rob., 164 (1865). But when the

court directs the corporation to issue a
certificate to the life tenant of stock,
the corporation is still bound to notify
a purchaser of that certificate that it
represents a life interest only ; otherwise
the corporation is liable to the re-
mainder-man. Caulkins v. Memphis,
etc., Co., 4S. W. Rep., 287 (Tenn.,
1887). A: corporate officer is guilty of
contempt if he refuses to obey an order

-of court requiring him to make certain

transfers of stock upon the surrender
of the old certificates. King v. Barnes,
113 N. Y., 476, 655, 656 (1889).

3 See §§ 368-370.

4See § 488,

5 See § 284,

431
8 390.]

\ '
FORMALITI“"S OF TRANSFER AND REGISTRY,

[ou. xxI,

at law for damages, on the ground that by its refusal it has been
guilty of a conversion of his stock.

§ 390. Remedy by mandamus.—

The authorities are in irreconcil-

able conflict on the question whether a mandamus lies to compel a
corporation to allow a registry on its books of a transfer of stock.

The weight of authority holds very clearly that the mandamus will
not lie under such circumstances.! This rule is based largely on the

1The leading case in this country is
Shipley v. Mechanics’ Bank, 10 Johns.,
484 (1818), where the court say: ‘‘ The
applicants have an adequate remedy, by
a special action on the case, to recover
the value of stock if the bank have un-
duly refused to transfer it. There is no
need of the extraordinary remedy by
mandamus in so ordinary a case. It
might as well be required in every case
where trover would lie. It is not a
matter of public concern, as in the case
of public records and documents; and
there cannot be any necessity or evena
desire of possessing the identical shares
in question.” Ex parte Firemen’s Ins.
Co., 6 Hill, 248 (1848); People v. Parker
Vein Coal Co., 10 How. Pr., 548 (1854);
State v. Rombauer, 46 Mo., 155 (1870);
State v. St. Louis, etc., Co., 21 Mo, App.,
526 (1886); King v. London Assurance
Co., 1 Dowl. & R., 510 (1822); Stackpole
v, Seymour, 127 Mass., 104 (1879); King
v, Bank of Eng., 2 Doug., 524 (1780);
Curry v. Scott, 54 Pa. St., 270, 276;
Gray v. Portland Bank, 3 Mass., 364,
881; State v. Guerrero, 12 Nev., 105
(1877); People v. Miller, 39 Hun, 557
(1886); Baker v, Marshall, 15 Minn., 177
(1870), where the stock had already been
issued to another; Wilkinson v. Prov.
B’k, 3 BR. 1, 22 (1853); Kimball v. Union
Water Co., 44 Cal., 173 (1872); Birming-
ham Fire Ins. Co. v. Com., 92 Penn. St.,
72 (1879), where the court says that,
even if the ‘‘courts were inclined to
enlarge the remedy, it could not be
done in a case where the right is dis-
puted, where no public interest is in-
volved, where no reason is shown for a
transfer of a specific and favorite thing,
and where the remedy by action is fully
adequate;” Townes v. Nichols, 73 Me.,

515 (1882), where the court vigorously
says: ‘‘ All the authorities declare that
the remedy by mandamus cannot be re-
sorted to in a case like this, unless the
legal right of the petitioner to the pos-
session of the thing sought for is clear
and unquestionable. If there be doubt
as to what his legal right may be, in-
volving the necessity of litigation to
settle it, mandamus must be withheld.
Mandamus is the right arm of the law.
Its principal office is not to inquire and
investigate, but to.command and exe
cute. It is not designed to assume a
part in ordinary lawsuits or equitable -
proceedings. It is properly called into
requisition in cases where the law has
been settled, or in cases where questions
of law or equity cannot properly and
reasonably arise. Its very nature im-
plies that the law, although plain and
clear, fails to be enforced and needs as-
sistance.” See, also, Rex v. Worcester
Nav. Co., 1 Mon. & R., 529 (1828); Queen
v. Liverpool & M., etc., R’y Co., 21 L.
J. (Q. B.), 284 (1852); Murray vw. Stevens,
110 Mass., 95 (1872), where the court
say, in refusing a mandamus to compel
a registry of stock: ‘‘ Without under-
taking to lay down an invariable rule
on the subject, we think it must besaid
that this process was not intended and
is not well adapted for the trial of mere
questions of property ;” State v. Warren
Foundry & M. Co., 82 N. J. L., 489
(1868), where a previous transfer had
been registered, although possibly in
fraud of creditors; Freon v. Carriage
Co., 42 O. St., 80 (1884), refusing a man-
damus, although it is said ‘that this
stock has no mayket value, that the cor-
poration is doing a growing and profit-
able business, that its good-will en-

432 !
CH, XXI1.]

FORMALITIES OF TRANSFER AND REGISTRY. {§ 391.

historical origin of the writ of mandamus, and on the theory that
the stock of a private corporation has no peculiar value and may
be readily obtained in open market or fully compensated for in
damages. It is doubted, however, whether these reasons will be
sufficient to restrain the manifest tendency to enlarge the scope of
this writ, particularly with reference to stock transactions. There
is a strong line of decisions which holds that a mandamus lies to
compel a corporation to allow a registry of a transfer of stock,
particularly where the corporation has no good and sufficient rea-
son for refusing the registry.) Perhaps the strongest argument
against granting a mandamus for this purpose lies in the fact that
by-.a bill in equity not only can a registry be specifically decreed
and ordered by the court, but the rights of the corporation and
any other claimant can be fully and finally heard and disposed of.

§ 391. Remedy by suit in equity— This is, it seems, the surest,
most complete and most just remedy for compelling a corporation
to register a transfer of stock, and for adjusting the various con-
flicting rights or claims of other parties. It i is a remedy ae

hances the value of the stock, and that
by reason of these things damages will
not be an adequate remedy. These facts
do not change therule. They are ele-
ments in assessing damages which may
be fully ascertained in an action at
law.” See, also, Pomeroy on Eq. Juris.,
§ 1412; State v. People’s Bld’g, etc., As-
sociation, 43 N. J. L., 389 (1881); State
v. Timken, 2 Atl. Rep., 782 "(N. J.,

1886); Tobey v. Hakes, 7 Atl. Rep., 551
(Conn., 1886), refusing a mandamus_on
the corporate secretary; Bank v. Har-
rison, 66 Ga., 696. See, also, Lindley on

-Partnership, pp. 148, 520, 1086. Man-

damus does not issue to compel a cor-
poration to transfer stock. when there
is no written transfer of ‘the certificate,
and another party claimsit. Burnsville,
etc., Co. v. State, 20 N. E. Rep., 421

(Ind., 1889). See, also, § 574.
1People v. Goss Mfg. Co., 99 Ill. 355
(1881); State v. First Nat’l Bank, 89 Ind.,
802 (1883); Green Mount., etc., Co. v.
Bulla, 45 Ind., 1 (1878); People wv.
Crockett, 9 Cal., 112 (1858); Townsend
v. McIver, 2 8. C., 25 (1870); State v.
Cheraw, etc., R. R. Co., 16 8. C., 524
(1881); Cooper v. Swamp, etc., Co., 2
Murph. (S. C.), 195 (1812); Norris v.
(28)

Irish Land Co., 8 El. & BI., 512 (1957); i
Regina v. Carnatic R’y Co, L. R., 8
Q. B., 299 (1878); Crawford v. Prov.
Ins. Co., 8 U. C. (C. P.), 268 (1859);
Goodwin v. Ottawa & P. R’y Co., 13-
U. ©. (C. P.), 254 (1863), holding also
that the mandamus may run to the:
corporation. itself without specifying
any officers, and that an evasive an--
swer by them is equivalent to a refusal
to register. It has been held that man-
‘damus will issue to aid the sheriff. in
transferring stock sold on an execution.
sale. This rule, however, would.work
harshly in states where the purchaser
of the outstanding certificate may have
some rights.. Where such a possibility
exists the mandamus should be denied.
State v. First Nat’] Bank, supra ;. Bailey
v. Strohecker, 38 Ga., 259 (1868); Dur-
ham v, Man., etc., Co., 9 Oreg., 41 (1880).
2Cushman v. Thayer Mfg..Go.,.76 N.
Y., 865 (1879); Walker v. Detroit Tran-
sit R’y Co., 4% Mich., 888; Iasigi v.--
Chicago, B. & Q. R. BR. Co.,.129 Mass.,
46 (1880); Mechanics’ Bk. v. Seton, 1
Peters, 299 (1828); Wilson v. Atlantic
etc., R. R. Co., 2 Fed. Rep., 459 (1880):
Middlebrook v. Merchants’ B’k, 8 Abb.
Ct. of App., 295 (1866); Buckmaster v.

433
§ 392.] FORMALITIES OF TRANSFER AND REGISTRY. [Ou. XXII.
to almost all cases arising under a refusal of the corporation to al-
low a registry of transfer. The case will be decided on equitable
principles, however, and a transfer will not be decreed if it involves
bad faith. The relief usually demanded is in the alternative, being
either for a registry of the transfer or damages in lieu thereof, It
all the stock has already been issued, equity has no power to com-
pel a further issue.’

§ 392. Remedy by an action for damages.— An action at law for
damages is an old and well-established remedy of a stockholder
who has applied to the corporation, for a registry of a transfer and
has been refused. The form of the action is not definitely fixed,
and in different states different. forms seem to have been passed
upon without any question being raised as to their technical nat-.

ure.*

other cases of conversion of stock.’

The measure of damages is substantially the same as in

The statute of limitations runs

only from the time when a demand for registry was made.®

Consumers’ Ice Co., 5 Daly, 513 (1874);
Iron R. R. Co.. v. Fink, 41 O. St., 821
(1884), the court saying that the power
of equity to decree a registry is well
settled. As regards the pleadings, see
Burrall v. Bushwick R. R, Co., 75 N. Y.,
211 (1878). See, also, §579. Suits herein
frequently arise wherein a complainant
claims stock which is registered in the
name of another. The chief defendant
is that other party. But it is necessary
also that the corporation be made a
party defendant, in order that transfer
may be decreed on corporate books,
For equitable action to compel a cor-
poration to issue stock to a purchaser of
the same from one of the parties defend-
ant, see Tanner v. Gregory, 37 N. W.
Rep., 830 (Wis., 1888); Kendig v. Dean,
97 U. §., 423 (1878); Budd v. Munroe,
18 Hun, 316 (1879), the latter case hold-
ing also, that the corporation may re-
cover costs against a co-defendant who
is aefeated in the suit; Johnson »v,
Kirby, 65 Cal., 482 (1884). In such
cases the corporation is but nominally
concerned in the result of the suit. It
cannot appeal from the judgment when
both of the real parties in interest are
satisfied and do not appeal. Board of

L. v. New Orleans Water-works Oo., 1
Southern Rep., 445 (La., 1887). If the
complainant is a citizen of the same
state as the corporation, one of the par-
ties defendant, another defendant can-
not remove the case into a United States
court. Crump v. Thurber, 115 U. S.,
56 (1883).

1 Regina v. Liverpool, etc., R’y, 21 L.
J. (Q: B.), 284.

2Smith v. North Am. Min. Co., 1Nev.,
428 (1865); and see § 284,

3 Hussey v, Monweaccarcna & M. Bk,
27 Mass., 414 (1880); Helm v. Swiggett,
12 Ind., 194 (1859), Cases’ supporting
this rule abound inall the states. They
will be found together with others in
chapter XXXV. Ifthe corporation ille-
gally refuses to allow a registry, but
afterwards does allow it, the corpora-
tion is not liable in damages for the de-
cline of the market value of the stock.
in the meantime. Skinner v, City of
London M. Ins. Co., L. R., 14 Q, B. D.,
882 (1885).

4See chapter XXXV.

5Id.

Cleveland R, R. Co. v. Robbins, 35
O. St., 483; Iron R. R, Co, v, Fink, 41.
O. St., 824 (1884).

434
CHAPTER XXIII.

RULES FOR CORPORATIONS IN REGARD TO REFUSING OR ALLOW-
ING REGISTRIES OF TRANSFERS OF STOCK.

§ 393. Purpose of the chapter. § 402. Corporation must require a sur-
394. Right to refuse until the trans- render of the outstanding cer-
ferrer pays the unpaid sub- tificate.
scription price. 403. Alleged loss of the old certifi-
395. Whether the corporation may | cate.
refuse to register a transfer to} 404. Attachment or execution.
an irresponsible transferee, 405. Decree of a court that certifi-
396. Corporation may refuse to reg- cates be issued. :
ister as transferees persons} 406. Theft of certificates indorsed in
who are incompetent to con- blank,
tract. » 407. Interpleader by the corporation.
397. ‘Trustees, executors, guardians,| 408. Restrictions by corporation on
agents and pledgees, stockholder’s right to sell or
898. Sales of stock by executors or - transfer,
administrators. 409. Lien of the corporation.
399. Sales by trustees. 410. Formalities of registry which
400. Sales by guardians. the corporation may insist
401. Forgery of transfer. upon,

 

§ 893. Purpose of the chapter.— It is proposed in this chapter,
as a continuation of the last, and as a recapitulation of the various
rights, liabilities and duties of the corporation in refusing or allow-
ing a registry of a transfer of stock, to state briefly the rules which
prevail herein. The stand-point taken is that of the corporation.
The minute and particular application of the general rules govern-
ing this subject are not stated here at length; but an effort has been
made to give, in systematic order, certain directions which will
enable a corporation, when in doubt as to whether to allow or refuse
a registry, to decide the question intelligently and safely.

§ 894. Right to refuse until the transferrer pays the unpaid sub-
scription price. — A corporation cannot refuse to register a trans-
fer of stock merely because the subscription price has not been
fully. paid in, unless the charter or the statutes of the state ex-
pressly give that right. Nor can it refuse registry, even though
a call for part of the subscription price has been made, is due, and
remains unpaid. It must allow a registry, but may continue to
hold the transferrer liable for the call. The corporation has no .
lien on the stock for the subscription price, nor has it a right to re-
strict transfers until calls or parts of the subscription price not yet
called are paid. The policy of the Jaw is to favor the right: of
transfer, and no impediments by the corporation are allowed to re-

1See chapter XV,
435
§§ 895-397. ] RULES REGULATING REGISTRY. . (CH. XXIII.

strict that right. As regards parts of the subscription not yet called
in, the transferrer is released from liability and the transferee as-
sumes the liability. As regards calls made before the application
for registry but not yet due, the transferrer is liable, but, it seems,
not the transferee. As regards calls made before the application
and due before such, the transferrer and not the transferee is liable.
As regards calls made after the application the transferee alone is
liable. In Pennsylvania, however, a different rule prevails, and by
statute the transferrer, if he is the original subscriber, is liable until
the whole subscription is paid. In New York, by statute, both
railroad and manufacturing corporations may refuse to allow reg-
istry of transfers until unpaid calls have been paid. .

§ 395. Whether the corporation may refuse to register a transfer
to an irresponsible transferee.\— Greater difficulty is experienced in
finding a working rule on this subject. On one point, however, all
the authorities agree. If the corporation is insolvent, or in such a
state of decline that insolvency seems inevitable, the corporation
may refuse to allow a registry of transfer from a responsible to an
irresponsible insolvent transferee. The policy of the law is to protect
corporate creditors, even at the expense of restricting the right of
transfer. The above rule applies not only where the subscription is
unpaid, but also where it has been paid and only a statutory liability
exists. Where, however, the corporation is solvent and a stock-
holder applies for a registry of transfer. from himself to an irre-
sponsible transferee, it seems that the corporation cannot refuse to
make the registry. o

§ 396. Corporation may refuse to register as transferees persons
who are incompetent to contract2— If the transferee of a certificate
of stock is an infant or person of unsound mind, the corporation
may refuse to register such transferee as a stockholder. The reason
of the rule is that such persons would not be obliged at law to re-
spond to the obligations of a stockholder, and consequently are not
entitled to its privileges. With married women at the present day
the law is different. At common law they were incompetent to be-
come a stockholder, the same as an infant is at the present time.
But the statutes of all the states have substantially removed these
disabilities, and enabled a married woman to transact business as a
Jeme sole, so far as her separate estate is concerned. She may be-
come a stockholder in a corporation, but cannot bind her husband’s
estate for the liabilities of such stockholdership.

. § 397, Trustees, executors, guardians, agents, pledgees.’— In regis-
tering transfer to a trustee, executor or guardian, the corporation

1See chapter XV. 3See chapter XIV,
2See chapter XIV,
4386
OH. XXIII. ] RULES REGULATING REGISTRY. [§ 398.

may be required to register the transferee as holder in his official
capacity. A trustee who purchases or receives stock to hold in

trust for the benefit of another may, it seems, require the corpora-

tion to register the transfer and issue new certificates to himself
in his own name as “trustee.” In England the rule appears to be

different. The reason of this rule is that the liability of a trustee
on stock is in many of the states different from that of a complete
owner of the stock, and also because where stock is held by a trustee

as trustee, it is the duty of the corporation to refuse to allow the

trustee to sell and register a sale of the stock unless the instrument

creating the trust authorizes such sale. So also an executor or ad-

ministrator or guardian may compel the corporation to place his

official title after his name in the stock registry. Pledgees, how-

ever, and agents, have not this right. The corporation need not

write the word “pledgee” after the transferee’s name either in the

stock registry or on the certificate. Such is the rule, for the reason
that the corporation is not obliged to protect the rights of the

pledgor, nor to recognize the pledgeeship of the transferee. The
same rule applies to transferees who take as agents of the trans-

ferrer.

§ 398. Sales of stock by executors or administrators.'— A corpo-
ration may with safety, and in fact is obliged to, allow an execu-
tor or administrator to register a transfer of the sale of stock
belonging to the estate upon presentation by the executor or ad-
‘ ministrator of the letters téstamentary or letters of administration.
The executor or administrator may then register a transfer of the
stock to himself, or directly from the name of the deceased to a
purchaser from the executor; or from the deceased to the execu-
tor, and then from the executor to the purchaser. One executor
may sell and register a transfer of the stock. The corporation is’
not bound to inquire whether it is necessary that the sale be made
in order to pay the debts of the estate, nor to see to it that the
executor actually applies the proceeds of the sale to that purpose. _
Where, however, the corporation has actual knowledge through
its officers that a breach of trust is contemplated by the executor,
it is bound to refuse registry, and will be liable to the estate for
neglecting so todo. So'also, where such a long time has elapsed
between the taking out of the letters and the sale by the executor
that the latter has become practically a trustee, the corporation
must use the same precaution as in sales by a trustee. In the case
of specific legacies of stock, the corporation need take no notice of
them, but must allow the executor to transfer the stock into his

1See chapter XIX,
437
§§ 399-401. ] RULES REGULATING REGISTRY. [cH. Xxttt.

own name, since he may need it to pay debts, and the corporation
is not bound to investigate such questions.

§ 399. Sales by trustees.'— A trustee who holds stock belonging
to the trust estate has no right to sell and transfer such stock un-
less he is expressly authorized so to do by the instrument creating
the trust. Consequently the law imposes upon the corporation the
duty of refusing to allow a trustee to transfer the stock unless he
clearly has a right so to do. If the corporation neglects this duty
it is liable to the trust estate, and, in case of a breach of trust by
the trustee, may be compelled to replace the stock or pay damages.
If the trustee has an express power given to him to sell, the corpo-
ration may allow him to make the transfer. If no such power is
given, the corporation must refuse. The trustee is bound to rea-
sonably satisfy the corporation of his right, but the corporation
cannot permanently retain the papers submitted to it for that
purpose. :

§ 400. Sales by guardians?— A guardian has a right to change
the investment of the funds in his charge, and consequently has a
right to sell stock held by him in his official capacity. Accordingly,
the corporation may allow him to register a transfer of stock held
by him as guardian, and cannot require the guardian to obtain an
order or decree from a court authorizing such transfer. An order
or decree i is often obtained by the euardian, however, for his own
protection, and is to be commended. In New York the rights and
duties of guardians are regulated by statute, and other states have
similar statutes.

§ 401. Forgery of transfer.— A corporation is bound and required
to detect a forgery whereby the name of the owner of a certificate
of stock is signed to it and a transfer made which the corporation

‘is requested to register. The stockholder in whose name the old
certificate was made out, and whose name was forged to the trans-
fer, may hold the corporation liable if it fails to detect the forgery
and allows a registry of the forged transfer. He may compel it to
replace the stock or pay damages. This rule is due to the fact that
the corporation is a custodian of the books whereby a stockholder
obtains his rights of stockholdership, and it cannot deprive him of
these rights by allowing others to take them from him by the aid
of the corporation and without his consent. It is in the power of
the corporation to require the presence of the transferrer at the
time of registry, or at least clear proof that the signature is genu-
ine. The corporation, however, has recourse over against the per-
son who applied for registry on the forged transfer, however inno-

1See chapter XIX. 2See chapter KIX,
438
CH. XXIII. ] RULES REGULATING REGISTRY. {S$ 402-404.

cent the latter may be. He is held to have impliedly represented
that the transfer was genuine.

§ 402. Corporation must require a surrender of the outstanding
certificate.'— If a corporation permits a registry of a transfer of
stock, and issues new certificates to the transferrer without reguir-
ing a surrender of the old certificate, it assumes a dangerous: posi-
tion, and one which it is not obliged to assume. If the certificate
which is not delivered up is in the liands of a bona fide purchaser
for value and without notice, he may hold the corporation liable
for allowing a registry of transfer to another without requiring a
delivery of the certificates. It is negligence and a breach of duty
on the part of the corporation to allow a registry without a surren-
der of the old certificate. It generally refuses to do so, as is its duty,
and is sustained by the law in its refusal. There are occasions, how-
ever, where the law compels the corporation to: register the trans-
fer without a surrender of the old certificate. When so compelled
to do, thé corporation cannot be held liable by the purchaser of
the outstanding certificate, but he must seek his remedy against
others. Such “compulsory registry, excusing the corporation, may
exist in cases of alleged loss of the old certificate, a decree of a
court compelling the registry, and, under the latter, an attachment
or execution against the stock.’

§ 408. Alleged loss of the old certificate— According to the ruié
of nearly all the states a corporation is not obliged to issue a new
certificate of stock to the owner of an old one, which he alleges
he has lost, unless such person gives to the corporation a suffi-
cient bond of indemnity to protect it against liability in case it
turns out that the old certificate was not lost, but was sold and
passed into dona fide hands. In New York this rule is fixed by
statute. The corporation is liable to the holder of the outstanding
certificate, if it is outstanding, and -consequently should be pro-
tected against that liability by a bond from the applicant for regis-
try. In Louisiana a statutory advertisement is made and a bond
of indemnity dispensed with. But in the other states the court
compels the loser to give a bond, varying in amount according to
the amount of the stock and the clearness of the proof of loss.

§ 404. Attachment or execution.'— Nearly all the states have laws
whereby shares of stock are rendered subject to levy of attach-
ment and to sale on levy of execution. Such attachment or execu-
tion can be levied only at the domicile of the corporation, since the
certificates are mere evidences of title, and the res itself of the
stock exists only where the corporation is created. When, there-

1 See chapter XXI, 3 See chapter XXI.
2 But see § 488, 4See chapter XXVII.
* 439
§ 405.] RULES REGULATING REGISTRY. [CH. XXII.

fore, an execution sale, or an attachment followed by an execution
sale, takes place where the corporation exists, the purchaser at
such sale generally has not the outstanding certificate, but never-
theless demands registry of himself as stockholder in accordance
with the law authorizing the attachment and execution. In the
meantime the judgment debtor whose stock is thus attached or
sold under an execution generally has sold or will sell his certiti-
cate of stock to a buna fide purchaser for value. If it happens that
both parties claim the stock, the duty and privilege of the corpora-
tion is plain. It may refuse to decide between them, and when
sued by either may interplead and compel the claimants to settle
the right between them in the courts. But frequently it happens
that the corporation does not know whether the judgment debtor
has sold the outstanding certificate or not. By the law of most of
the states, if such certificate was sold before the attachment or exe-
cution was levied the purchaser would be protected, and the cor-
poration would be liable to him for registering as a stockholder
the purchaser at the execution sale. Accordingly, in that case, it is
the duty of the corporation to refuse to register the purchaser at
the execution'sale. It cannot afford to take the risk, and is not
obliged to take it. If the court then compels it to make the regis-
try of transfer to the execution purchaser, the court will also, prob-
ably, compel such purchaser to givea bond of indemnity to protect.
the corporation. If such a bond is not required by the court the
corporation must nevertheless obey'the decree. What rights the
purchaser of the outstanding certificate would then have, has not
as yet been passed upon by the courts.

§ 405. Decree of a court that certificates be issued.1— A corpora-
tion must of course obey the decree of a court that it issue a cer-
tificate of stock to a specified person. Buta court will rarely resort
to such an extreme remedy where it is probable or possible that
there may be an outstanding certificate in the hands of an inno-
cent holder representing the same shares. As a principle of law
the court has no power to decree such an issue ordinarily, since the
whole capital stock has been issued, and its decree amounts prac-
tically to an order to make an overissue of stock. Generaily the
court decrees damages to be paid, or directs the corporation to pur-
chase stock for the purpose of re-issuing it to the specified party.
This occurs frequently where the corporation has unjustly deprived
a person of his stock. A different class of cases arises where the
corporation has refused to allow a registry because the outstanding
certificate is not surrendered. Such cases include those of alleged
loss of certificate, an execution sale of the stock, and, possibly, a

1 See chapter XXII,
440
CH. XXIII] RULES REGULATING REGISTRY. [§§ 406, 407.

suit in equity at the domicile of the corporation to recover from
another stock which the complainant claims. A decree in such a
suit in most states would be ineffectual to deprive of his rights one
who purchased from the defendant his certificate of stock before
the decree was rendered. It would accordingly be a harsh decree
that compelled the corporation to register the successful complain-
ant as a stockholder. - The corporation should not be compelled to
assume the risk of being sued by the purchaser of the outstanding
certificate. The complainant ‘should be compelled to give a bond
of indemnity, or else be contented with a personal judgment against
the defendant. - The demands of trade and of an investing public
require that the safety of a purchaser of a certificate of stock should
be assured, except against attachments, execution sales or decrees

. duly obtained and notified to the corporation before the bona fide
purchaser received the certificate of stock.

§ 406. Theft of certificates indorsed in blank.1— The corporation
has a duty to perform as regards certificates of stock which haye
been stolen from the owner who held them indorsed in blank.

If the owner notified the corporation of the theft it must refuse
to register a transfer to a purchaser of such stolen certificate.
Since the owner’s negligence may have estopped him from reclaim-
ing the stock, the corporation may refuse to recognize either party
as a stockholder, where there is a reasonable question of negligence,
and when sued ‘by either may interplead. If the corporation al-

‘lowed a registry before it. was notified of the theft, it is difficult to
see on what principle it is to be held liable to the owner. Such a
case seems not yet to have arisen. If notified of the theft before
anything is learned concerning the whereabouts of the certificate,
the case is to be treated tie same as when the certificate is alleged
to have been lost.

§ 407. Interpleader by the corporation? — Whenever there are two
or more conflicting claims made to stock and demands are made
‘on the,corporation to allow registry, it is the privilege of the cor-
poration, if there is a reasonable legal doubt as to the rights of the
parties, to refuse to register either party, and when sued by one to
interplead and compel the parties to contest the matter between
themselves in the courts. The law does not oblige the corporation
to turn itself into a court of justice and decide the rights of the
parties. The corporation, however, cannot interplead if it has
already committed itself by registering one of the claimants as the
stockholder. Nor can the corporation resort to an interpleader
where one of the claimants is clearly wrong. The right of inter-
pleader and the power of the corporation to refuse to register a

1See chapter XXI 2S8ee chapter XXII.
441
§$ 408-410.] RULES REGULATING REGISTRY. [cH. XXII,
«

transfer until compelled to do so by the courts, where an outstand-

ing certificate is not sur rendered, constitutes the two most effective

safeguards of the corporation in allowing or refusing registry.

§ 408. Restrictions by corporation on stockholder’ 8 ‘right to sell or
transfer.|— The law has uniformly and decisively discountenanced
and overruled all attempts of a corporation to prevent the sale and
transfer of its stock by the stockholder. Such attempted restric-
tions are generally made by means of by-laws. Thus, a by-law re-
quiring the consent of the directors or other corporate officers to a
transfer, or a by-law requiring the stockholder when he sells to sell

-his stock to specified persons, is null and void. Restrictions may

be created by a contract mutually agreed to by the stockholders,
but cannot be imposed upon them by the majority of the stock.
holders nor by the board of directors. When, however, such re
strictions are created by the charter, they are valid, since they i arise
with the corporation and stock itself. Thus, in England, the char-
ter frequently authorizes the directors to refuse a registry unless
the transferee is satisfactory to them. Even here, however, the
directors must be reasonable in the use of their discretion. In this
country the most frequent restriction created by charter is that of
a lien for debts due to the corporation from the transferrer.

§ 409. Lien of the corporation. — The charters of ‘many corpora-
tions contain an express provision that the corporation may refuse
to allow a stockholder to register a transfer of his stock until he
has paid any and all debts which he may at that time owe to the
corporation. Such a lien need not be stated in the certificate of
stock. While it may not: be created generally by a by-law, yet
certain phrases in charters have been held to uphold a lien that is
declared and made effectual by a by-law. Where the lien exists
the corporation may refuse to allow a registry of transfer of any
stock owned by the debtor until all debts due from him to the cor-
poration are paid, whether due or not due, including, it seems, un-
paid subscriptions. It does not apply, however, to debts due from
a transferee of the certificate who never obtained registry or ap-
peared as a stockholder on the corporate books. Nor does it apply
to debts due from the registered stockholder, but incurred after the
corporation was given notice that he had sold his stock to another.
The corporation may waive its lien and allow registry without the
debts of the old stockholder being paid. A registry without re-
quiring payment is a waiver in itself.

§ 410. Formalities of registry which the corporation may insist
upon.’ — Where, as is ordinarily the case, the owner of stock has

1 See chapter KX. 3 See chapter XXII,
* See chapter XXXI.
442
CH. XXIII. ] RULES REGULATING REGISTRY. [§ 410.

sold it by signing the transfer and power of attorney on the back
of the certificate, leaving the names of the transferee and of the
attorney blank, the corporation may require the names of the
transferee and of the attorney to be filled in before it allows a
registry. If it is in doubt as to the genuineness of the signature of
the former owner of the certificate, it may require his presence or
reasonable proof that he actually made the signature. It cannot
compel the transferrer to be present, but may require the pres-
ence of the attorney authorized to make the registry. The registry
itself is generally made by the corporate officer, but hé may require
the attorney to make it. A surrender of the old certificate is re-
quired, and new certificates in the name of the transferee are issued.
‘The by-laws may prescribe that the registry shall be in the pres-
ence of certain corporate officers. A mere request to register is not
_registry, although the old certificate is left with clerk, together
with the transfer, and he marks “ received for record” on the same.
The applicant may inquire of the corporate officer in charge for the
registry clerk, and is not bound to ascertain the individual himself.
Registry at a "branch office is not a legal registry until entered at
the main office. The corporate registry may be on its ledger
without any issue of certificate. If it keeps no registry at all,
mere notice to it of a transfer constitutes a legal registry: The
corporation has no right to delay registry unreasonably for the pur-
pose of obtaining advice or for any other reasons. It may require
that the power of attorney run directly from the former registered
stockholder and not from an intermediate one. A written accept-
ance of the stock by the transferee cannot be insisted on by the
corporation. The formalities of registry may be waived by the
corporation, and any act which indicates that it considers a trans-
feree to be a stockholder is effectual to make him such so far as the
corporation is concerned, though no registry was had.

Either the transferrer or the transferee or an intermediate un-
registered transferee may apply to the corporation for the pur- ,
pose of obtaining a registry. The corporation’ cannot refuse it.
merely because of the motive of the tranferrer or of the transferee
in making the sale and transfer. Whenever the corporation re-

‘fuses to allow a registry the applicant may sue it for damages, or
he may go into a court of equity and ask that the corporation
be decreed to allow registry or to pay damages in lieu thereof.
A few cases ‘hold that he may compel registry by a mandamus
against the corporation, but the weight of authority holds other-

Wise.
443
§ 411.
412.
413,

414,

415,

CHAPTER XXIV.

NON-NEGOTIABILITY OF STOCK AND DANGERS INCURRED IN THE ,
PURCHASE OF CERTIFICATES OF STOCK.

A. NON-NEGOTIABILITY.

Nature and kinds of negotiable
instruments,

Certificates of stock are not ne-
gotiable instruments.

The term “ quasi-negotiability,”
as applied to certificates of
stock, throws little light upon
the subject.

The distinction between the
“Jeval” and the “ equitable”
title in the transfer of certifi-
cates of stock is unsatisfac-

tory.
The only method of treatment

of the subject seems to be by’

inquiring under what facts
the holder or purchaser is pro-
tected.

The particular rules protecting
a bona fide putchaser of cer-
tificates of stock are based on
estoppel.

B. DANGERS INCURRED IN PURCHASING

§ 417.
418,
419.
420.

421,

422,

§ 411. Nature and kinds of negotiable instruments.—

STOCK.

Liabilities, risks and rights of
one who owns or purchases a
certificate of stock,

Liability on unpaid par value,
that is, the unpaid subscrip-
tion price of the stock,

Forfeiture for non-payment of
calls.

Statutory liability.

Liability where the purchaser
has the transfer made to a
nominal holder,

No liability for assessments after
the par value of stock has been
paid in,

 

§ 423.
424,
425.
426.
427,
428,
429,
430.

431,
482,

433.

434,
435.

436.
437.
438.
439,
440.
441,
449,
443.

444,

Liability when stock was issued
for property.

Liability as partners by reason
of defective incorporation or
for other reasons. :

Danger of ee lien.

Overissued stock

“Danger that transferrer or pre:

vious holder is an infant, mar-
vied woman or lunatic.

Purchase of stock by or from a
corporation.

Purchase from joint owners,
partners and agents.

Purchase of stock at sheriff's
execution sale, or from as-
signee in bankruptcy,. or for
benefit of creditors,

Purchase from a pledgee.

Pledgee is protected in the same
way as purchaser of stock.

Danger of purchasing from an
executor, administrator or
guardian, :

Purchase from a trustee.

Sale by vendor to another pur-
chaser without delivery of
certificates of stock. .

Danger of forgery.

Loss or theft of ‘certificates in-
dorsed in blank.

Danger that a previous holder
has been deprived of that same
stock .by fraud.

Statute of frauds.

Gambling sales of stock.

: Method of assigning a certificate

of stock,

Registry of transfer.

Purchaser not affected by rights
of holders of that stock back
of the last registry,

Summary,

A. NON-NEGOTIABILITY.
4;

Negotiable

instruments at the present day are promissory notes, bills of ex-
change, checks, bank-notes, bonds of the United States, states, for-

eign governments, cities and counties and municipalities generally,
444

'

 
/

CH. Xxiv.]

RISK IN PURCHASING 8TOOK. [§ 412.

railroad bonds, certificates of deposit and interest coupons. Bills
of lading have only a quasi-negotiability.2 These different instru-

‘ments, however, are not necessarily negotiable, but are so only

when in writing; when containing an unconditional promise or
order to pay; when the payment is to be in money only; when the
amount is certain; when it is payable to a specific person, and not
in the alternative; when it is payable at a certain time; when it
contains words such as “to A. or order,” or “to bearer,” or their
equivalent; and when delivery has been duly made.’ If the instru-
ment is lacking in any one of these quatitics it falls back into the cate-
gory of non- negotiable — that i is, merely assignable — instruments.
Again, a holder of one of the above- named negotiable instruments
can have the benefit of its negotiability, only when he has pur-
chased it in good faith, for value, before the instrument was due,
and without notice of the equitable rights of previous holders or
makers; that is, he must be a bona fide holder. When all these
elements of negotiability and ownership co-exist, the advantage of
negotiability over non-negotiability is this: that the holder of the
instrament is entitled to the face value thereof, and his right can-
not be affected, decreased or defeated by any facts or equities be-
tween previous holders which would defeat the security as between
them, unless it be void for usury or other similar cause.

§ 412. Certificates of stock are not negotiable instruments.— It is
very clear, and it is well established, that certificates of stock are
not negotiable instruments. A certificate of stock is not a prom-

‘ise or order to pay money, nor has it any of the essentials of a

negotiable instrument. Moreover, it has been repeatedly decided

‘by the courts that a certificate of stock is not negotiable, and no

custom of trade or of brokers can give to it that character.

1Daniel on Negotiable Instruments,
Bd ed., book VI; Dos Passos on Stock
Brokers, chapter IX.

21d. See, also, Bank of Batavia v.
N. Y., ete., R. R. Co,, 83 Hun, 589 (1894),

31d.

4¢* Certificates of stock are not secu-
rities for money in any sense; much
less are they negotiable securities.” Me-
chanics’ B’k v. New York & N. H.R. R.
Co., 13 N. Y., 599, 627 (1856); Barstow
v. Savage M. Co., 64 Cal., 391 (1883),

Weaver v. Barden, 49 N. Y., 286, 288

(1872), says that a certificate of stock has
none of the qualities of commercial or
negotiable paper. Leitch v. Wells, 48
N. Y., 585,.618 (1872), says: ‘“‘ Since the

decision of the case of McNeil v, Tenth
National Bank, . . . certificates of

‘stock, with blank assignments, and

powers of attorney attached, must be
nearly as negotiable as commercial
paper.” Weyer v. Second Nat’] B’k, 57
Ind., 198, 208 (1877), says: ‘* The differ-
ence between a promissory note and a
certificate of bank stock is so wide and
marked that a rule of law governing
the transfer of the former is by no
means applicable to the latter.” Sewall
v. Boston Water-power Co., 86 Mass.,
277 (1862), says: ‘ The authorities cited
show that a certificate of stock is not a
negotiable instrument, and without any
authorities it is apparent that it has

445
§§ 418, 414.] ‘RISK IN PURCHASING STOCK. [cH. XXIV,

§ 413. The term “ quasi-negotiability,” as applied to certificates of
stock, throws little light upon the subject. It is little satisfaction.
_to the court, the practitioner, the student or the owner of stocks
to be told that certificates of stock have aquasi-negotiability. The
term itself has been coined to describe the character of certain,
things which can be understood only by a study and knowledge of
the characteristics of the thing described. Especially i is this true
of certificates of stock. The “information sought is not whether
the certificate is quasi-negotiable, but whether the holder of it
is protected under different states of fact and circumstances. He
who intends to purchase such certificates wishes to know what dan-
gers or risks he incurs by the purchase, The practitioner is inter-
ested, not in the general character of the instrument, but in the
law as applicable to his particular case. Many of the cases.concede
to certificates of stock a quasi-negotiability; but it is extremely
doubtful whether such discussions do not confuse the understanding
of the character of such an instrument more than they. explain it.

§ 414. The distinction between the “legal” and the “equitable” title
in the transfer of certificates of stock is unsatisfactory Many of
the cases involving the rights of a transferee of stock discuss and

‘treat the subject from the point of view that the transferee is pro-

~

tected in his ownership when the legal title passes to him, but is not
so protected when only the equitable title passes. “Unfortunately
it happens that, under the same state of facts, one court will hold
that only the equitable title passes; another that the legal title:
passes; and a third court will hold that both the legal and equitable

not a negotiable character.” To same the public convenience.” In’ Bank v.

effect, Mandlebaum v. North Am. Min.
Co., 4 Mich., 465, 478 (1857), holding,
however, that by statute in that state
certificates of stock are practically ne-
gotiable. Shaw v. Spencer, 100 Mass.,
382 (1868), says: ‘“‘It is clear that a cer-
tificate of stock transferred in blank is
not a negotiable instrument. . . .
No commercial usage can give to such
an instrument the attributes of negotia-
bility.” Sherwood v. Meadow Valley
M. Co., 50 Cal., 412 (1875); Bridgeport
B'k v. New York & N. H. R, R. Co., 80

‘Conn., 281, 275 (1871), holding that

“the certificate accompanied by~ the
assignment and power of attorney thus
executed in blank has, perhaps, a spe-
cies of negotiability, although of a pe-
culiar character, but one necessary to

Lanier, 11 Wall.,' 369, 877, the court
say that although certificates of stock
‘‘neither in form nor character are ne-
gotiable paper, they approximate to it

-as nearly as practicable.”

1Daniel on Negotiable Instruments,
§ 1708, says: ‘‘ The phrase * quasi-nego-
tiability’’ has been termed an unhappy
one, and certainly it is far from satisfac-
tory, as it conveys no accurate, well-de-
fined meaning, But still it describes,
better than any other short-hand expres-
sion, the nature of those instruments
which, while not negotiable in the sense
of the law-merchant, are so framed and
so dealt with as frequently to convey as
good a title to the transferee as if they.
were negotiable,”

\

446
CH. XxIv.]

RISK IN PURCIASING STOCK.

[§ 415.

passes. The result is confusion, doubt and difficulty, with little light
as to the real status of certificates of stock.!

§ 415. The only method of treatment of the subject seems to be by
inquiring under what facts the holder or purchaser is protected.—
The court, the practitioner, the purchaser or the holder of cer-
tificates of stock wishes to know what liability and what dangers

1 Such also seems to be the view taken
in Lowell on Transfer of Stock (1884),
p. 105, where the learned authors say:
‘* It is often supposed, for example, that
the right of a creditor to seize stock
which has been sold before it is trans-
ferred upon the books depends upon the
passing of the legal title; but we shall at-
tempt to prove that the legal title has
in reality no effect upon the matter.”
The same authority shows the confusion
resulting from this distinction of the
legal from the equitable title in the fol-
lowing note to page 108: “‘ That the legal
title passes before the transfer on the
books. In the following cases this is
made part of the ratio decidendi: Ross
v. Southwestern R. Co., 58 Ga., 514,
582; Merchants’ Nat. Bank v, Richards,
6 Mo. App., 454, 463; 8. C., 74 Mo., 77;
Carroll v. Mullanphy Savings Bank, 8
Mo. App., 249, 252; McNeil v. Tenth Nat.
Bank, 46 N. Y., 325; Leitch v. Wells, 48
N. Y., 585; Smith v. American Coal Co.,
® Lans., 817; Noyes v. Spaulding, 27 Vt.;
420; Cherry v. Frost, 7 Lea, 1. In the
following cases the same principle was
laid down obiter: State v. Leete, 16
Nev., 242, 250; Eastman v. Fiske, 9 N.
H., 182; New York, etc., R, v. Schuyler,
34 N. Y., 80, 80; Grymes v. Home, 49
N. Y., 17; Johnson v. Underhill, 52 N.
Y., 208; Holbrook v. New Jersey Zinc
Co., 57 N. Y., 616; Cushman v, Thayer
Mfg. Co., 76N. Y., ane and see Purchase
v. Exchange B’k, 8 Rob., 164° .

That the legal title 5 dies not pass until
transfer on the books. In the following
cases this prirciple is made part of the
ratio decidendi: Union Bank w. Laird,
2 Wheat., 390; Lowry v. Commercial
Bank, Taney, 810; Brown v. Adams, 5
Biss., 181; Williams v, Mechanics’ Bank,

5 Blatch., 59; Becher v, Wells Flouring
Mill Co., 1 Fed. Rep., 276; Marlborough
Mfg. Co. v. Smith,.2 Conn., 579; North-
rop v. Newtown & Bridgeport Turnpike
Co., 3 Conn., 544; Oxford Turnpike Co.
v. Bunnell, 6 Conn., 552; Dutton v.
Connecticut B’k, 18 Conn., 493; Van-
sands v. Middlesex Co. B’k, 26 Conn.,
144; Coleman v. Spencer, 5 Blackf., 197;
Helm v. Swiggett, 12 Ind., 194 (semble);
Weyer v. Second Nat. B’k of Franklin,
57 Ind., 198; Fisher v. Essex B’k, 5
Gray, 378; Boyd v. Rockport Steam
Cotton Mills, 7 Gray, 406; Blanchard

‘y Dedman Gas Co., 12 Gray, 213;

McCourry v. Suydam, 5 Halst., 245;
Stebbins v, Phoenix Ins. Co.,

8 Paige, 850; Mechanics’ B’k v. New
York, etc., R. Co., 13 N. Y., 599; New
York, etc., R. Co. v. Schuyler, 88 Barb.,
534; Lockwood v. Mechanics’ Nat. B’k,
9 R. I., 808, 831, 885. In the follow-
ing cases the same doctrine is laid
down obiter;: Black v. Zacharie, 3 How.,
478; United States v. Cutts, 1 Sumner,
183 (this was, however, a case of gov-
ernment debt, not of corporate stock);
Pianters’ & Merchants’ Ins. Co. v. Selma
Savings B’k, 63 Ala., 585; Otis v. Gard-
ner, 105 Ill, 436 (semble); and see Kel-
logg v. Stockwell, 75 Ill., 68; People’s
Bk wv. Gridley, 91 Ill, 457; Bruce wv.
Smith, 44 Ind., 1; ‘Btate v, First Nat,
B’k of Jeffersonville, 89 Ind., 302; Shav,
v. Spencer, 100 Mass., 882 Sibley v. |
Quinsigamond Nat. B’k, 188 Mass., 515;
White v. Salisbury, 33 Mo., 150; Boat-
men’s Ins. Co, v. Able, 48 Mo., 186;.

. . Conant v. Seneca Co, Bik, 10,
St. +» 298; United States v. Vaughan, 8
Binn., 894 (semble); B’k of Commerce’s
Keosal, 73 Pa. St., 59; Fraser vy, Charles-
ton, 118, C., 486 (semble).”

447
§ 416.] RISK IN PURCHASING STOOK. [CH. XXIV.

are incurred by the purchase and ownership of a certificate of
stock. It becomes important for him to ascertain whether forgery
or theft; or improper registry by the corporation; or breach of
trust by a trustee, executor or agent formerly holding that par-
ticular stock; or fraud whereby a former owner was deprived of
that same stock; or legal proceedings, such as attachment, execu-
tion, mandamus and decrees of the court; or any other fact or
equitable right between former owners of the stock which he pur-
chases, can affect him, a bona fide purchaser for value and without
notice of those rights. These questions cannot.be solved or answered
by any general rules or theories, since certificates of stock havea
law, an origin and a nature different from other kinds of securities.
The fact that a registry of transfer is required to be made on the
corporate books adds further complication to the rights of a holder.
General rules. formed from and applicable to other instruments or
securities cannot, with any certainty, clearness or satisfactory re-
sults, be applied to certificates of stock. They should be treated of
by themselves. The future character and status of certificates of
stock will be much clearer, better and more satisfactory to the in-
vesting public if the law governing them be formed on its own
basis.

§ 416. The particular rules protecting a bona fide purchaser of
certificates of stock are based on estoppel Nearly all if not all
of the rules whereby a purchaser of stock is protected against the
rights of previous holders grow out of the fact that such previous
holder or holders have enabled persons to sell the stock, and con-
sequently are estopped from claiming that they did not intend so
to do.!' This law of estoppel protects the purchaser against not
only the rights of, previous holders, but against the claims of the
corporation itself. Indeed, to such an extent has the law of estop-
pel been applied to protect a bona fide purchaser of stock that he

1Wood’s Appeal, 92 Penn. St., 379,
890 (1880); McNeil v. Tenth Nat'l Bank,

transfer need not be by deed under seal,
Rumball v. Metropolitan Bk, L. B., 2

46 N. Y., 325, 829 (187i); Weaver v.
Barden, 49 N. Y., 286, 287 (1872); Moore
v. Metropolitan Nat'l B’k, 55 N. Y., 41,
@7 (1873); Mount Holly, etc., Co. v. Fer-
rie, 17. N. J. Eq., 117 (1864); Walker v.
Detroit. Transit R’y Co., 47 Mich., 888,
847 (1882), See, also, Fatman v, Lobach,
1 Duer, 854 (1852); Moodie v. Seventh
Nat'l Bik, 3 W. N. C., 118 (1881); Mat-
. thews v, Mass. Nat’l B’k, 1 Holmes, 896
(1874), In England certificates of stock
indorsed in blank convey title by estop-
pel to a bona fide purchaser when the

Q. B. D., 194 (1877); Exe parte Sargent,
L. R., 17 Eq., 273 (1878) But this is
generally not the case, Ortigosa v.
Brown, 47 L. J. (Ch.), 168 (1877); Don-
aldson v. Gillott, L, R., 8 Eq., 274 (18/6);
and the late case of France v, Clark,
L. R., 22 Ch. D., 880 (1883), gives no
protection to the bona fide purchaser |
until he is registered. See, also, Shrop-
shire, etc., Co. v. Queen, L. R., 7 H. L.,
496 (1875); Briggs v. Massey, 42 L. T.,
49 (1880). See, -also, §§ 825, 877, 380,
supra.

448,
Mes
CH. XXIv.] RISK IN PURCHASING STOOK. [S$ 417-419.

is protected now in almost. every instance where he would be pro-
tected if he were purchasing a promissory note or other negotiable
instrument. The courts are steadily extending the application of
the law of estoppel herein, and in the course of time it is possible
that certificates of stock may become more negotiable 1 than nego-
tiable instruments themselves,

'

B. DANGERS INCURRED IN PURCHASING STOCK.

§ 417. Liabilities, risks and rights of one who owns or purchases a
certificate of stock.— It is proposed to state separately and in detail
the liabilities on the subscription price and by statute incurred by
one who owns or purchases a certificate of stock; also the risks or
dangers incurred by a purchase of stock as affected by the rights
of previous holders of that stock; also a few of the rights of an
owner or purchaser of a certificate of stock as regards the general
incidents appertaining to stockholdership. These subjects are dis-
cussed in full i in other parts of this work, and consequently the au-
thority for rules laid down herein must be sought for in those parts.
The purpose here is to state succinctly and in language free from
technical phraseology the position occupied by a bona jide purchaser
of a certificate of stock.

§ 418. Liability on unpaid par value, that is, the unpaid subscrip-
tion price of the stock.\—In general the purchaser of a certificate
of stock is immediately liable on the subscription price of the stock
so far as it has not been paid by previous holders of the stock pur-
chased and has not been called by the corporation. The transferrer
is bound to pay all calls made before the transferee purchases. If
the transferee does not immediately register his transfer on the’ cor-
porate books he is liable to pay to the transferrer such calls as are
made after the transfer and which the corporation compels the
latter to pay. The transferee, it has been held, is not liable for
uncalled and unpaid parts of the subscription, even though the cer-
tificate is silent as to whether the par value of the stock has been
paid in or not. Where, however, the certificate states that the
stock is paid-up stock, or the transferee before purchasing inquires
of the corporation and is. told that the stock is paid up, he may
purchase in reliance thereon, and cannot afterwards be held liable,
even though the stock turns out not to have been fully paid up.

§ 419. Forfeiture for non-payment of calls.?— Where the corpora-
tion is given by its charter or by statute the right to forfeit and
sell stock for non-payment of the subscription price when called in
by the corporation, a notice to the stockholder of the intended for-
feiture is always required. This notice, however, is given always

1See chapter XV. .28ee chapter VIII
(29) 449
h ‘ : : ;
§§ 420-429. ] _ RISK IN PURCHASING STOOK. [cH. XxIv.

to him who appears by the corporate registry to be the stock.
holder. Accordingly a transferee or owner of stock who has not ob-
tained a registry of his transfer on the corporate books is liable to
lose his stock by a forfeiture for non-payment of calls, and may
lose it without knowledge of the call or forfeiture unless he ap-
pears on the registry of the corporation as the owner of the stock.

§ 420. Statutory liability.\— The liability by statute of a pur-
chaser of certificates of stock to corporate creditors, i in addition to
the subscription price which is treated of above, exists in a great
many cases. In the first place this liability may not exist at all
against any one, either transferrer or transferee. It rarely exists
in the case of.railroad corporations. Where the statutory liability
exists the liability of a purchaser of stock is as follows: If the
transferee immediately registers his transfer on the corporate books
he becomes at once liable by statute for debts of the corporation
contracted. after such registry, and the transferrer is not liable
thereon. The transferee may. or may not be liable on corporate
debts contracted before he purchased, according to the words of
the statute creating the liability. The transferrer is liable on cor-
porate debts contracted after he’sold the stock but before the
transfer was registered. In the latter case the transferrer has re-
course to the transferee. ’

$421. Liability where the purchaser has the transfer made to a
‘nominal holder.2— Where a person purchases stock and takes it in
the name of a “dummy,” the stock never having been registered
in the name of the real owner, the latter is not liable on such
stock, according to the English rule. In America a contrary rule
prevails, and the courts hold him liable on the ground that he is a
principal, and as such is liable as an undisclosed peneipal for the
acts of his agent, the “dummy.”

§ 422. No ‘liability Sor assessments after the par value of the stock
has been paid in.’— By well- established principles of law. stock-
holders are liable on their stock only to the extent: of the unpaid
par value of the stock, unless the statute expressly provides other-
wise. Neither the directors, nor all the other stockholders com-

_ bined, in corporate meeting assembled or otherwise, can compel a
dissenting stockholder to pay any more money into the corpora-
tion or subject him to further liability on his stock. Nor can the
legislature, subsequently to his purchase of the stock, pass a law
increasing his liability, unless the power to alter or amend the
charter is reserved to it, in which case auch a law would be consti-
tutional.

1See chapter XIL ; 3See chapter XIL
2 See 88 253, 265, :
450
‘
<

oH. xxiv.] — RISK IN PURCHASING STOOK. [$§ 423, 424.

§ 423. Liability when stock was issued for property.— Shares of
Stock may be issued under an agreement that payment is to be
‘made in labor, services, material or contract work. If so issued,
and the labor or material received by the corporation is fairly
equal in value to the par value of the stock, the transferee of such
stock takes it as full-paid stock, and cannot be held liable for any
further amount, even though the value of the property turns out
subsequently to have been overestimated, but was made in good
faith. Where, however, the property is intentionally overvalued
and stock is issued for it, the persons receiving the stock are liable
to have the transaction set aside, the value of the property or work
done credited to them, and the real value of the stock, not neces-
sarily the par value, charged to them, or be compelled to return
the stock. As to transferees the case may be different. If they
purchased with notice of the fraud they are not protected; but, if
they purchased without notice or knowledge that the property was
intentionally overvalued, but supposed that the stock was issued as
paid up by payment in property or work taken at a bona fide value,
or if they have no knowledge of how the stock was paid, but take
it as paid-up stock, they may retain the stock,.and are not liable
for any further amount thereon. 1

§ 424. Liability as partners by reason of defective incorporation
or for other reasons.?—— Where a supposed corporation has not been
duly incorporated, owing to a failure of the incorporators to com-
ply with the statutory requisites, or because a corporation for that.
business is not provided for, the supposed corporation is but a
partnership, and all the stockholders are liable as partners. Any
creditor of the assumed corporation may sue the stockholders as
partners, and is not estopped from so doing. A failure to file
the articles of association, or to sign and publish them, or the
omission from them of any of the essential facts required to be
stated, may defeat the attempted incorporation and render the
stockholders liable as partners. Again, the stockholders are, in
some jurisdictions, liable to be held to be partners, as regards cred-
itors of the enterprise, where the corporation organizes in one place
and proceeds to do all its business in another place. In some
flagrant cases the members have been held liable as partners, the
corporate character being disregarded. In most cases, however,
the corporation has been recognized and upheld, and the stock-
holders protected in their limited liability. The latter class of
decisions are the stronger, and certainly more to be commended
and followed. In any case, however, a transferee is not liable for

1 See chapters IT and IIT. 2See chapter XIII.
451
8§ 425-427. | RISK IN PURCHASING STOCK. ’ [cH. XxIv.

all precedent debts of the concern, but only 1 for those incurred sub-
sequently to the registry of his tr ansfer.

§ 425. Danger of corporate lien,'— Frequently corporations are
given by charter or statute a lien on a stockholder’s stock for debts
due from him to the corporation. ‘When such lien exists a pur-
chaser of the certificate in open market buys subject to the risk
that the one from whom he buys owes the corporation a debt, and
that the corporation will not allow the transferee of the certificate
to obtain a registry until such debt is paid. In many of the states
the lien of the corporation cannot be created by by-law. -Generally
it exists by reason of a provision of the charter. When it does
legally exist it extends to all debts owed by the last registered
stockholder, whether the debt be due or not due, and includes un-
called parts of the subscription price of the stock, It does not,
however, apply to debts due from one who has bought and sold
the certificate without appearing on the registry as a ’ stockholder.
The corporation may waive the lien, and a registry. without insist-
‘ing on the lien is such a waiver. The lien of the corporation ex-
tends to debts incurred by the transferrer after the transfer but
before the corporation is notified thereof.

§ 426. Overissued stock2— The capital stock of a corporation is
fixed by statute. There is no power in the corporation itself to
increase that amount. It can be done only by a legislative enact-
ment. Accordingly, if the corporation issues certificates of stock
when the whole capital stock has already been issued, ithe new
issue, if an equivalent amount of outstanding certificates is not
surrendered, is an overissue, and is void. Any issue of stock in
excess of the amount of the capital stock as fixed by the charter
is null and void. The purchaser of such certificates, however, is
not without his remedy. His certificate is so much waste paper,
and he is not a stockholder; but he may sue the corporation for
damages, and recover to the extent of his injury. The purchaser
may also sue the corporate officers who participated in the issue of
the spurious stock, and may recover damages. He cannot, how-
ever, hold an innocent transferrer liable. The latter, if he knew
nothing of the overissue, is not to be held as a guarantor of the
validity of the stock which he sells.

§ 427. Danger that transferrer or previous holder is an infant,
married woman or lunatic’— A purchase of stoek from an infantis -
a dangerous investment. When the infant comes of age he may
elect to disaffirm, and may hold the transferee liable for the stock,

1§ee chapter XXXI. 3See §§ 65, 66, 250, 308, 818, 819, 810.
2See chapter XVIL.
, 452
OH. XxIv. | RISK IN PURCHASING STOOK. [8§ 428, 429.

, There is less danger, however, in accepting a transfer of stock.

from an infant who has previously purchased the, stock which he
sells. This previous purchase, and also his sale of the stock, are
technically voidable acts; but after the stock has passed from his
- control the law disregards the doubtful medium of title, and con-
siders the purchaser from the infant as the legal. stockholder. As
regards married women, ‘the common law allowed the husband.
to sell her stock after he had reduced it to possession by register-
ing it in his own name on the corporate books. In modern times,
however, the right of a married woman to hold and convey per-
sonal property as though unmarried has been established in most
states by statute. Her right to sell shares of stock owned by her-

self exists where she may sell other personal property similarly |

owned, and this right depends upon the law and statutes of her
domicile. A purchase of stock from a lunatic is void.

§ 428. Purchase of stock by or from a corporation. 1_Tn England
a corporation cannot purchase shares of its own capital stock. In
this country there is a difference of opinion as to the law. The
statutes governing the corporation, however, sometimes prohibit
such purchases. Such is the case with national banks, and in
New York with railroad and banking corporations. In any case,
however, whether the corporation purchased the stock legally or
illegally, a purchaser of the same stock from the corporation itself
is not affected by the invalidity of the title of the corporation.
Again, it is a general rule, both in England and America, that one
corporation has no right to purchase stock in another corporation.
Sometimes the statutes allow such purchases, but more often ex-

pressly provide to the contrary by prohibiting them. Neverthe-,

less, whatever rule applies to a purchase by a corporation of stock
in another corporation, the law is very clear that a purchaser of
such stock from the corporation is protected i in his purchase. The
unauthorized act of the corporation in purchasing has no effect
upon the legality of its sale of the stock. ;

§ 429. Purchase from joint owners, partners and agents?— One
joint owner cannot sell stock standing in the name of two or more
as joint owners. One partner may sell and convey stock standing
in the partnership name. As regards purchases of stock from
agents, greater difficulty occurs. If the purchaser does not know
that the vendor is selling as an agent, but supposes he is buying
stock owned by the person with whom he is dealing, the purchaser
is always protected. The same rule, after considerable doubt and
discussion, has been established, even though the purchaser knows
that the agent is selling as agent. The sale is valid, and the pur-

1 See chapter XIX. 2 See chapter XIX.
453

+
§§ 430, 431.] RISK IN PURCHASING STOCK. (cH. xxrv.

chaser is protected, provided he has no reason to suspect that the
agent is selling in fraud of the owner's rights or in contradiction
of his orders.

§ 430. Purchase of stock at sheriff’s execution sale, or. from as-
signee in bankruptcy, or for benefit of creditors.'— A purchase of
stock at an execution sale by the sheriff is a dangerous investment.
Almost always the judgment debtor has already sold and trans-
ferred his certificates of stock to a bona fide purchaser. If such
bona fide purchaser has registered the transfer on the corporate
books before'the atbachivent or execution is levied, the purchaser
at the execution sale gets nothing. If no such registry has been
made, but the judgment debtor sold and transferred the certificate
before the levy of attachment or execution, in most of the states,
including New York, such a purchaser takes title and the execution
purchaser none. In Connecticut, New Hampshire and a few other
states a contrary rule prevails. If, however, the judgment debtor
sells the certificate after the attachment or exeolition is levied, the
purchaser takes no title — the execution purchaser is entitled to the
stock. A purchaser of stockfrom an assignee in bankruptcy or in-
solvency, or for the benefit of creditors, takes a good title if he ob-
tains the certificates of stock. If, however, the insolvent has sold
such certificates to another, the latter is entitled to the stock.

§ 431. Purchase from a pledgee2— A pledgee of stock has no
right to sell or repledge the stock held as collateral by him, unless
the pledgor intended that he should doso. If, however, the pledgee
sells or repledges the stock to one who takes it in good faith, for
value, and without notice of the fact that he is dealing with a
pledgee of the stock, such a bona fide purchaser is protected.. He
is protected absolutely, and can keep the stock if he purchased it.
If, however, he merely took it in pledge from the pledgee, he is
obliged to give up the stock to the real owner, where the latter tend-
ers to the repledgee the amount of the debt owed by the pledgee to
the repledgee, for which the stock was given as security. Where,
however, a person buys or takes in pledge stock from one who
makes known the fact that he is holding the stock as pledgee, the
former is not a bona fide purchaser. Moreover, he is not a bona:fide:
holder where he would not be a bona jide holder of a promissory
note transferred under similar circumstances, as, for instance, where
he loans the money at an usurious rate of interest; or where he
knows that the person with whom he is dealing is but an agent, and
is pledging his principal’s stock. In all these cases, where the pur-
chaser or pledgee of stock is not a bona fide holder, the real owner
and original pledgor of the stock may reclaim his stock from the

1See chapter XXVI. 2See chapters XIX, XXVI.

454
\
cH. Xxtv.] RISK IN PURCHASING STOOK. [$§ 432-434.

repledgee, or purchaser from the pledgee, where the original pledgor
could recover it from the first pledgee. The repledgee or purchaser
from the pledgee stands in the shoes of.the first pledgee, and has no
better rights than the latter. ,

§ 432. Pledgee is protected in the same way as purchaser. of stock.
The rules contained in this chapter explain the rights, dangers and
liabilities incurred by the purchaser of stock. The same rules pre-
vail for the most part in favor of one who receives stock in pledge.
A purchaser and a pledgee are treated in the cases as being simi-
larly protected or similarly not protected. There is, however, one
important exception to this rule. If a person who is about to take
stock from another knows that the latter is disposing of the stock
as an agent, the former may purchase the stock and be protected,
but cannot take it-in pledge and be similarly protected. An agent
to sell is not an agent to pledge. Another exception to the simi-
larity of position of a vendee and pledgee of stock is that by stat-
ute, frequently, the latter is not liable on stock where the former is
liable. ‘

§ 4838. Danger of purchasing from an executor, administrator or
guardian.— There is practically little danger incurred in purchas-
ing stock from any one of these. It is the duty and right of the
executors or administrators to sell the personal property and con-
vert it into money. As regards guardians they have the right to
change the funds from one investment to another unless a statute
prescribes otherwise. Accordingly a purehaser of stock from any
one of those is protected in his purchase, even though he knows
that his vendor is selling in his official capacity. If, however, the
vendee knows that a breach of trust is involved or contemplated,
hé is not a bona side purchaser and is not protected. All the ex-
ecutors or administrators need not join in a sale of the stock owned
by the estate. A sale and transfer by one is sufficient.

§ 484: Purchase from a trustee.-—An entirely different rule pre-
vails as regards stock held by a trustee as trustee. A purchaser of
stock which he knows the vendor holds as belonging to a trust es-
tate is bound to ascertain whether, by the instrument creating the
trust, the trustee has a power to sell. If he has nosuch power, and
the vendee knows that he is buying trust estate stock, the latter is
not protected, but is a party to any breach of trust that may be in-
volved by the sale. If, however, the purchaser has no notice or
knowledge that his vendor is selling trust stock, the former is a bona
fide purchaser to that extent. He is not bound to know that the
stock is trust estate stock, and consequently he is protected in ‘his

1 See chapter XIX, XXVI. 8 See chapter XIX,

2See chapter XIX, .
455
!
§§ 435-487.) © RISK IN PURCHASING STOOK. [oH. xxIv.

purchase. Any facts that would put an ordinarily intelligent man

on inquiry as to whether the stock belongs to a trust “estate is
notice, and prevents the purchaser from claiming to be a bona fide
purchaser. Thus, such a notice is held to be given by the fact that
on the face of the certificate of stock, and following the name of
the stockholder, the word “ trustee ” or equivalent words are writ-
ten. In California, however, the mere word “trustee” conveys no
notice.

_ § 435. Sale by vendor to another purchaser without delivery of
certificate of stock..— A purchaser of certificates of stock has no.
reason to fear that the vendor can sell the stock to another person
and thereby defeat the rights of the purchaser with the certificates.
If the purchaser without certificates does not obtain registry on
the corporate books, he obtains nothing as against the purchaser
with the certificates, even though the latter’s transaction was sub-
sequent in time to the former. If, however, the former obtains.
registry on the corporate books, the corporation is at fault, and is
liable to the purchaser with the certificates. The corporation must
either issue new certificates to the latter or pay damages.

§ 436. Danger of forgery.’ — Forgery cannot be the source of a
good title to any chose in action, whether a promissory note, bond
and mortgage, or a certificate of stock. Consequently a purchaser
of stock takes the risk that some previous owner of the, stock,
_ whose name appears on the certificate either as the registered
owner or as transferee, was deprived of his title by forgery. If
the forgery has been made, the purchaser cannot claim or hold the
stock, although he had no actual knowledge of the forgery. He,
however, has recourse to his vendor, and may compel him to repay
the amount paid for the stock. Where, however, the forgery was
committed prior to the last registered transfer of that stock, a bona
Jide purchaser from or subsequent to the last registered holder of
that stock is protected. All rights and equities to particular shares
of stock are cut off by a registry and sale of the new certificates.
' The party whose name was forged has recourse then only to the
corporation, or to the party obtaining registry, or to previous
holders. This limitation to the dangers incident to the purchase of
stock extends to other rights and wrongs as well as to a case of
forgery, and is of great.importance in profeating a bona fide pur-
chaser of stock.

§ 487. Loss or theft of certificates ‘nitowsed in blank.’ — It is ex-
tremely doubtful whether a purchaser of a certificate of stock
which was indorsed in-blank, and which has been lost by the owner

1See chapter XXI. 3 See chapter XXI.
2 See chapter XXI,
456
' CH. xxtv.] RISK IN PURCHASING STOCK.  ES$ 488, 439.

and found by another who sells it, or which has. been stolen by the
latter, would be protected in his purchase, even though he buys in
good faith. In a case of negotiable paper, such a purchaser would,

of course, be protected. But probably the purchaser of the certifi
cate of stock would not be. No case holds that he would be pro-
tected, while many hold that he would not. If the real owner was
guilty of gross negligence, perhaps the purchaser from the thief or
_ finder of the certificate indorsed in blank would be'protected. In
one case this question of negligence was submitted to the jury.
Again, sometimes a person sells stock without delivering the certifi-
cate — the vendor telling the vendee that the certificates have been.
lost. Such a title is very precarious. The purchaser should refuse
to buy until new certificates are issued by the corporation to the
vendor — an issue which the corporation will make upon a suitable
bond of indemnity being given to it by the person who alleges a
loss. If the purchaser does not take this precaution, he buys sub-

ject to having his title defeated by another purchaser who obtained
the certificates which are alleged to have been lost.

§ 438. Danger that a previous holder has been deprived of that
same stock by fraud.— Shares of stock are the same as other kinds
of property, in that a person who has been deprived of his stock by
fraud ‘cannot follow the stock and take it from the hands of a
bona fide purchaser for value. The remedy of the defrauded per-
son is for damages against the person defrauding him, or for a re-
transfer of the stock, if the latter still holds it, together with an
injunction against the transfer of the latter. But if the person ob- .
taining the stock by fraud sells it, even in violation of an injunc-
tion, the bona jide purchaser for value and without notice is protected.
The defrauded party may, however, sue the person defrauding him
in the state of the corporation, and, by an attachment or execution,
obtain the stock if it has not passed into bona jide hands. Such a
danger, however, is the ordinary danger of an attachment or execu-
tion. _ A ls pendens of a suit involving stock never charges the
vendor of the stock with notice, as is the case of a Jzs pendens af-
fecting real estate. Cases of fraud in the sale of stock frequently
arise in cases of sales by agents and an appropriation of the pro-
ceeds; also when fraudulent representations are made to the
vendor.

1, § 439. Statute of frauds— The statute of frauds requires that
sales of personal property exceeding in value a certain amount,
generally fifty dollars, shall be valid and enforceable only when ne
property is partly or wholly delivered, or partly or wholly paid for
at the time of the sale, or the terms of the sale are reduced to writ-

1 See chapter XX. 2See chapter XX,
457
§$ 440-442. ] RISK IN PURCHASING STOCK. [ow. xxrv.

ing. In this country asale of stock must conform to this statute.
Generally the sale is made by a delivery of the certificate indorsed
in blank. Such a sale constitutes a delivery, and is legal, and is not
void by the statute of frauds. The statute applies bath. to sales of
stock which are considered as completed and to sales which are to
be completed in the future.

§ 440. Gambling sales of stock..— A gambling sale or contract to
sell stock is void absolutely, and cannot be enforced. As a matter
of: practical experience, however, it is difficult to prove that a stock .
sale is a gambling sale. It is such only when both the vendor and
vendee intend, not to actually have a delivery of the stock, but to
wait and see whether the stock rises or falls in the market, and
then to settle the contract by the loser paying the loss. An intent
by one of the parties that there shall be no delivery will not make

‘the sale a gambling one. It must be the intent of both. :

§ 441. Method of assigning a certificate of stock.’— A certificate
of stock is generally assigned by the owners signing the blank trans-
fer and power of attorney on the back of the certificate. The
transfer gives title to him whose name is afterwards filled into the
blank transfer thus signed. The blank power of attorney is for an
entirely different purpose. It enables the person whose name is
filled in to register the transferee as a stockholder in the corporate
books. ‘Generally the power of attorney. is filled in with the name
of a clerk or agent of the transferee, or a clerk of the corporation
who has charge of the registry books. After the registered holder
has signed the transfer, leaving the transferee’s name in blank, the
certificate passes from hand to hand until some holder cares to fill
his name into the blank. He may then obtain registry, or he may
execute another transfer and sell the certificate. Transfers need
not be under seal in this country. In England, by statute, they
generally are required so to be.

$442. Registry of transfer? — A registry of transfer is made
by surrendering an old certificate of stock to the corporation,
making an entry of the transfer on the corporate registry, and
taking from the corporation a new certificate issued in the name
of the transferee. The entry is generally made by a corporate
officer, but he may insist on its being made by the person apply- .
ing for transfer. The object of obtaining the registry is to obtain
a right to vote, to receive dividends, and various other incidental
stockholders’ rights; also to cut off corporate liens and the rights
of third parties who may attach or claim the stock. If there isa
reasonable legal doubt as to the right of the applicant to obtain
registry, the corporation may refuse it, and thus obtain the protec-

TSee chapter XX. 2 See chapter XXII.
458
CH. XXIVv.] RISK IN PURCHASING STOCK. [$$ 443, 444.

tion of being compelled to make it by legal proceedings. If two
parties claim the stock, each denying the right of the other, the
corporation may interplead, provided there is a reasonable legal
doubt as to who is entitled to the stock. If the corporation im-
properly refuses to register a transfer when requested, the applicant
may have his remedy i in damages, but in most states cannot have a
mandamus.

§ 443. Purchaser not affected by rights of holders of that stock
back of the last registry.\— This rule is peculiar to stock certificates,
and cuts off rights even of a former owner who has been deprived
of the’ stock by forgery. In this respect certificates of stock are
more negotiable than negotiable paper itself. The person who
obtains registry first, after the illegal act. has been done, is not pro-
tected by this rule. But his bona jfide purchaser of the new certifi-
cates and all subsequent purchasers are protected, and cannot be
compelled to give up the stock to the prior owner who was de-
prived of it illegally.

§ 444. Summary.—- It will be seen, by a review of the sections of
this chapter, that the dangers of loss incurred by the purchase of a
certificate of stock are not serious or numerous; and it is well that
such is the result. Perhaps the most striking industrial feature of
modern times is the accumulation of personal property, and the in-
vestment of that property, not in landed estates, but in-the stocks
and bonds of corporations. Such investments are made, not alone
by capitalists, but by thousands whose savings have no other satis-
factory mode of disposition. The constant tendency of the statutes
and of the decisions of the courts to protect bona fide purchasers
of certificates of stock is to be commended and aided. Beyond all
question, the surplus wealth of the future will be invested in cor-
porate bonds and stocks. It is well, then, in these days of the forma-
tive period of the law governing stock, that the principles governing
the transfer of certificates should be formed for the protection and
security of an investing public, and should be against secret liens,
attachments, claims and negligence of both the corporation and
third persons.

1See §§ 367, 369.
459
t

PART IIL

MISCELLANEOUS INCIDENTS OF STOCK.

CHAPTER XXV.

STOCK-BROKERS AND THEIR CONTRACTS.

§ 445. Definitions and scope of the sub- | § 454. Privity of contract between

ject. broker and opposite parties,

446, Who may bea broker and cus-| 455. Privity of contract between the
tomer. opposite customers.

44%, Facts making persona brokeror; 456. Intervening sub-brokers and
customer unintentionally. sub-customers.

448, Broker must obey specific orders| 457. Purchases or sales on margins —
of customer. Broker as a pledgee.

449. Must act in good faith and in; 458. Broker’s rights and duties on
reasonable time. failure of margin.

450. Cannot purchase from or sell to} 459. What will excuse notice and de-
himself, ; mand for more margin.

451. Duties and liabilities of cus-! 460. Customer’s remedies and dam-
tomer towards broker. ages herein.

452. Duties and liabilities of a broker | 461. Broker’s remedies and damages
towards customer. herein,

458. Method of completing a broker’s| 462. Broker’s customs and usages.
contract. |

 

§ 445. Definitions and scope of the subject— By far the greater
part of purchases and sales of stock are made, both in this country
and in England, through organizations specially formed for that
purpose and called stock exchanges. A stock exchange is a place
of business where those who make up- the membership of the ex-
change buy and sell stocks and bonds. These persons are called
stock-brokers. A stock-broker is one who buys and sells stock as
the agent of another, the latter being called a customer of the
stock-broker.! Accordingly, in an ordinary purchase of stock
through stock-brokers, there are, generally, at least four persons

1In Sibbald v. The Bethlehem Iron Agency, § 28 (9th ed.), says: ‘The
Company, 88 N. Y., 378 (1881), Finch, true definition of a broker seems to be
J., favors the definition from Pott v. that he is an agent employed to make
Turner, 6 Bing., 702, 706, where a bargains and contracts between other
broker is defined as ‘‘one who makes a persons in matters of trade, commerce
bargain for another and receivesa com- or navigation, for a compensation com-
mission for so doing.” Story on monly called brokerage.” :

460
OH. XXV. |

BROKERS, AND THEIR CONTRACTS.

[§ 445.

involved — the two brokers and their respective customers. Stock-

brokers have a language of their own.
into general circulation certain phrases and terms descriptive of

They have coined and put

their business, These terms have become so closely identified with
the subject of stock and transactions in stock that the courts have
defined their meaning and explained their application.!

This chapter treats of the rights, duties and liabilities of stock-

1A “bull” is a dealer who endeavors
to make the price of stocks go higher.
A ‘‘ bear” is a dealer who endeavors to
make the price of stocks go lower. A
“short” sale is a sale of stocks which
the seller does not possess, but which
he expects to purchase later on at a lower
figure, thus fulfilling his contract and
making profit by the decline. In the
meantime the broker generally borrows
the stock from other parties to deliver
to the vendee, and to ‘be returned to the
person loaning the stock at the end of
the transaction. The broker is bound
to continue the transaction for a reason-
able time. The customer deposits with
the broker a small amount of money as

security, called a margin, and he is

bound to keep the margin good. Hess
vy. Rau, 95 N. Y., 359 (1884); White v.
Smith, 54 N. Y., 522 (1874); Knowlton
v. Fitch, 52 N. Y., 288 (1873); Appleman
v. Fisher, 54 Md., 540 (1871); Sistare v.
Best, 88 N.Y., 527, 533 (1882). A ‘long ”
purchase of stock is a purchase in the
expectation that the stock will rise in
value.

Stock options are of three kinds —
puts, calls, and straddles. <A ‘‘ put” is
a-contract whereby a person has the
privilege of requiring another person
to take from the former certain specified
stock at a specified price at any time
within a specified period of time, the
former not being bound to sell. See
Bigelow v. Benedict, 70 N. Y., 202
(1877). A “call” is a contract whereby
a person has the privilege of requiring
another person to sell or deliver to the
former certain specified stock at a
specified price at any time within a

actions,

certain specified period, the former not
being bound to purchase. A “straddle”
or “spread-eagle” is a combination of
a put and a call.
double privilege of delivering to or de-
manding from another person certain
stock ata certain price within aspecified
time. Harris v. Tumbridge, 83 N. Y.,
92 (1880); Story v. Salomon, 71 N. Y.,
420 (1877). A ‘‘corner” exists where
the “ bears ” have sold a large quantity

of stock ‘‘ short,” and cannot borrow the

stock to fill their contracts, but ‘must
buy it from those who have cornered
the market on thatstock. See Cameron
v, Durkheim, 55 N. Y., 425, 488 (1874).
As to the legality of these various trans-
see §§ 341-348, especially
§ 344, n,

~ A “loan” of stock is still another

transaction. The initiated do not re- ,

quire to be told that when a man sells
stock on the exchange he must deliver

‘it, and if he does not own any he must

borrow it of some one who does. When
he borrows the stock, he advances the
market price of it to the lender, who
pays interest on thismoney. The trans-
action is really a call loan. The lender
of the stock can call for his stock at any
time, and the borrower can call for his
money. When a strong bearish feeling
is running, and too much short selling
has been indulged in, stocks become
scarce, and those who, have them will
only lend at a concession, either at less
than current interest rates; or ‘‘ flat,”
that is, without interest; or actually at
a premium, according to the urgency of
the demand.

461

S

It gives a person the’
,

§§ 446, 447.] BROKERS AND THEIR CONTRACTS. [CH. XXv.

brokers.' There are various incidental subjects, however, which
enter largely into brokers’ contracts, such as pledges of stock? and
gambling sales of stock. These subjects are fully treated else-
where.

§ 446. Who may be a broker and customer.— Any person may be
a stock-broker who may make a contract, but it is beyond,the power
of a national bank to act asa broker.‘ Strict rules prevail as to
who may bea customer. An infant is not bound by his contracts
with or through a stock-broker any more.than he is bound by his
_ other contracts. Moreover, if the broker carries on stock transac-
tions for an infant he is liable to the latter for all moneys lost

thereby. 5

Again, a broker who sells or buys stock in the name of

an infant is ‘himself liable to the other party in case the contract

is not completed by reason of such infancy.®

On the other hand,

if the broker’s customer hands in the name of a third person, an
infant, as the seller or purchaser, such customer is liable to the
broker for liabilities thereby incurred by the latter.’

§ 447. Facts making person a broker or customer unintentionally.
The relationship of broker and customer may be established and
exist although one of the parties is personally ignorant of such a

relationship.®

A broker also may be liable as such in transactions

where he had no intention of incurring any. liability.®

See, also, on this subject, Lindley on
Partnership, 721, etc.

2 Chapter XXVI. ¢

3 See chapter XX.

4First Nat’l B’k of Allentown v. Hock,
89 Pa. St., 824; Weckler v. First Nat’l
B’k, 42 Md., 581 (1879). But Williamson
v. Mason, 12 Hun, 97 (1877), holds that
a bank has power to take stock from a
customer and agree to sell it and credit
customer with the proceeds, and that
the bank is liable for the conversion of
such stock by its cashier.

5 Ruchizky v. De Haven, 97 Pa. St.,
202 (1881). The transactions in this case
were held to be gambling contracts.
Heath v. Mahoney, 12 Week. Dig., 404
(1881). The broker himself may be an
infant and may repudiate his obliga-
tions. See 4 Law Notes, 314,

6 Nickalls v. Merry, L. R.,7 H. L., 520
(1875); Heritage v. Paine, 34 L. T., 947
(1876); Maxted v. Paine, L. R., 4 Ex.,
81 (1869). The first case holds him lia-

ble although ignorant of the infancy of
his customer. See same case, Merry v.
Nickalls, 41 L. J. (Ch.), 767 (1872). Broker
is liable although the name of the in-
fant was passed to him by another
broker. Dent v. Nickalls, 29 L. T., 536
(1873). “It is no defense to the broker
that the infant’s father was the real
customer. Nickalls v. Eaton, 23 L. T.,
689 (1871). See, also, § 250, supra, as to
liability to the corporation.

?Peppercorne v. Clinch, 26 L. T., 656
(1872).

8 Thus the customer may be bound by
the acts of his clerk. Webb v. Chal-
loner, 2 F. & F., 120 (1860). So also
where the firm does a broker business
through its agents, the transactions by
the agents on their own private ac-
counts, but ostensibly for the firm, will
bind the firm, Wells, Fargo & Co, v.
Welter, 15 Nev., 276 (1880). CfA 6N.
Y. Supp., 665,

9 As where he continues to allow his

462
 

i
Ps

cH. xxv.] BROKERS AND THEIR CONTRACTS. [§$§ 448, 449.

§ 448. Broker must obey specific orders of customer.— A broker
is bound to obey and carry out strictly the orders of his customer
in the purchase or sale of stock. This rule is rigidly insisted upon
by the courts. The orders of the customer may be such as he
wishes to give, and when given they must be obeyed, or liability
will be incurred by the broker.!. When the customer fixes a limit
at which the broker may purchase, the latter cannot bind the cus-
tomer by a purchase at a higher figure.? Frequently the customer
gives to the broker a “stop order,” which is an order to sell or
buy; as the case may be, ata certain specified figure, or upon a
specified contingency. Under this order the broker must sell or
buy when the price or contingency occurs, but not until after it
occurs. Ifthe market changes too quickly for him, he must sell
or buy at the nfarket price immediately after the fixed price or
contingency arises.? The customer may leave it in the discretion
of the broker as to the best time for buying or selling.* When
this is done the broker must exercise such discretion in good a
and with reasonably good judgment and care.

§ 449. Must act in good faith and in reasonable time.— The
broker must make the purchase or sale in good faith on the best
terms possible, and must give the customer. the advantage of the

“

name to remain in the firm name after -

its dissolution. Hixon v. Pixley, 15
Nev., 475 (1880). Also, where one of
the firm is a trustee and defaults therein,
the firm having charge of the trust es-
tate’s stocks. De Ribeyre v. Barclay,
23 Beav.,.107 (1856). Asa silent partner
he cannot prevent a customer from set-
ting off against a liability a debt per-
sonal to the ostensibly sole broker. Read
v. Jaudon, 35 How. Pr., 303 (1868). A
stock-broker ‘is bound to obey orders
promptly. Galigher v. Jones, 129 U.S.,
193,

1Parsons v. Martin, 77 Mass., 111
(1858). Thus, where the customer au-
thorizes a sale if the stock goes down to
51, but the broker sells when it goes
down to 52, he is liable for an unauthor-
ized sale. Clarke v. Meigs, 10 Bosw.,
837 (1868). Cf. Whelan v. Lynch, 60
N. Y., 469 (1875); Jones v. Marks, 40 Til,
313 (1866). But the broker may correct
a palpable error in the order given him
by his customer. Luffman v. Hay, 13
N. Y. Week. Dig., 324 (1881).

2 Whether a limit was fixed is a ques-
tion for the jury, if the facts are dis-
puted. Cf. Smith v. Bouvier, 70 Pa. St.,
875 (1872). The customer may ratify
the unauthorized purchase. Genin v.
Isaacson, 6 N. Y, Leg. Obs., 218 (1848).
If the power to sell depends on the con-
struction of writings, it is a question of
law only. Davis v. Gwynne, 57 N. Y.,
676 (1874); S. C., 4 Daly, 218 (1871).
But the written order may be subse-
quently modified by parol. Burkitt v.
Taylor, 86 N. Y., 618 (1881); Clarke v.
Meigs, 10 Bosw., 337 (1863). Or be
waived. Hope v. Lawrence, 50 Barb.,
258 (1867).

3 Porter v. Wormser, 94 N. Y., 481
(1884); Bertram v.' Godfrey, 1 Knapp’s
Rep. P. C., 881 (1830). The latter case
involved an absolute order. to sell should
the stock reach a certain price.

4Such discretion when given is re-
voked only by clear notice of revocation.
Davis v. Gwynne, 4 Daly, 218 (1871).

5 Harris v. Tumbridge, 83 N. Y., 92
(1880). ;

463
§ 450.]

BROKERS AND THEIR CONTRACTS.

[cH. xxv.

transaction as actually made. Any material failure to do this, or
to make the sale or purchase as directed, will release the customer
from the transaction, although it was reported to him as made in

accordance with orders.’

The broker is allowed a reasonable time

within which to make the sale or purchase.
§ 450. Cannot purchase from or sell to himself.— A broker can-
not, in behalf of his customer, buy or sell with himself as the other

principal.

The law will not allow him’to act both as agent and as

principal at the same time. Such an act is a constructive fraud on
account of his fiduciary relation, and will be set aside.’ Custom or

1 Where the broker buys in his own
name at a price less than the price re-
ported to the customer, sells without
notice, and subsequently pretends to

sell again, the whole transaction is void.

as to the customer. Levy v. Loeb, 85
"_N. Y., 865 (1881); 89 id., 886. So, like-
wise, where he purchases an option in-
stead of cash purchase, and reports a

higher price than that paid. Voris v. |

McCready, 16 How. Pr., 87 (1856). So,
likewise, where the broker varies the
order from a cash purchase to an op-
tion, he himself taking the risk of the
option. Dey v. Holmes, 103 Mass., 306;
Pickering v. Demerritt, 100 Mass., 416
(1868).
then reports no sale, but loans money
to the customer on the bonds as collat-
eral, may be held liable to account for
the sale. Bischoffsheim v. Brown, 34
Fed. Rep., 145 (1888).

2Fletcher v. Marshall, 15 Mees. & W.,
755 (1846). Cf. Dickinson v. Lilwal, 1
Starkie, 128 (1815), which holds that
the transaction must be carried out on
the day of the order. The broker is en-
titled to his commission although his
customer fails before the transaction is
made, Inchbald v, The Western Coffee
Co., 43 L. J. (C. P.), 15." The contract
is to be carried out within a reasonable
time. A broker’s custom is evidence as
to what is reasonable time. Stewart v.
Cauty, 8 Mees. & W., 160 (1840). A few
hours’ notice held insufficient. Johnson
v. Mulvy, 51 N. Y., 684 (1872), ** Usu-
ally the broker is entitled to a fair and
reasonable opportunity to' perform his

A broker who sells bonds and

obligation, subject of course to the right
of the seller to sell independently. But
that having been granted him, the
right of the principal to terminate his
authority is absolute and unrestricted,
except only that he may not do it in
bad faith and as a mere device to es
cape the payment of the broker’s com-
missions.” Sibbald y. The Bethlehem
Iron Co., 83 N. Y., 378, 884 (1881).
3Conkey v. Bond, 36N. Y., 427; Brooke
man v. Rothschild, 3 Sim., 153 (1829);
Marye v. Strouse, 5 Fed. Rep., 483 (1880);
Robinson v. Mollett, L. R., 7 H. L., 802,
818, 826 (1874). Even though the pur-
chase was in good faith and at a lower
figure than the market price. Taussig
v., Hart, 58 N. Y., 425 (1874); Gillett v.
Peppercorne, 3 Beav., 78 (1840). In
Bryan v. Baldwin, 58 N. Y., 232 (1878),
the court say: ‘‘The plaintiff, being
pledgee of the stock, and in that char-
acter exposing it for sale, could not be-
come the purchaser unless the defend-
ant assented to such:purchase. Story on
Bailments, § 819; Torry v. B’k of Or- |
leans, 7 Paige, 649 (1842); Hawley, v.
Cramer, 4 Cow., 786 (1825). This sale to
the plaintiff was not void, but voidable
at the election of the defendant. Ed-
wards on Bailments, 260. The defend-
ant was at liberty to ratify the sale, and
had he done so it would have been valid
for all purposes. The ratification would
have made it lawful, and relieved it
from any imputation of being tortious
as to him, But the defendant
has not done this, but has elected té
treat the purchase by the plaintiff as

464
CH. XXV.| BROKERS AND THEIR CONTRACTS. [§ 451.

usage cannot legalize such a transaction.! The broker may, how-
ever, show by parol evidence that he did not deal with himself,
though writings indicate otherwise.2 And there is no rule which
prevents the broker from‘acting as agent both for the selling and
the buying customer.’

§ 451. Duties and liabilities of customer towards broker.— A
oe broker is but the agent.of his customer. As such he may
bind his customer by acts.within the scope of his authority, and
compel the customer to respond to his liability. Thus, the broker
may proceed to close the transaction, paying out his own money as
though it was his own business, and may then compel the customer
to repay to him the money so expended in the customer’s behalf.
Or, if his customer refuses to carry out the transaction, the broker
may settle with the opposite party by paying the loss incurred by
buying or selling the stock elsewhere, and may then sue his cus-
tomer for the differences thus paid.’ - He may also recover his dis-
bursements, commissions and interest.’ The customer is liable to
the broker for stock purchased, although the stock turns out to be
spurious or unauthorized.” If the broker, however, seeks to recover.

illegal, This avoids the sale, and that
being avoidéd by the defendant, the
parties are remitted to their rights the
sanie as though no sale had been at-
tempted.”

1 Commonwealth v. Cooper, 180 Mass.,
285.(1881). The custom of brokers to
buy in large quantities and sell in small
quantities is illegal. Robinson v. Mol-
lett, L, R., 7H. L., 802 (1874).

2Porter v. Wormser, 94 N. Y., 481
(1884),

3 Knowlton v.- Fitch, 52 N. Y., 288

(1878),
' 4Bayley v. Wilkins, 7 C. B., 886 (1849);
Whitehouse v. Moore, 138 Abb. Pr., 142
(1861); Dails » Lloyd, 12 C. B., 581. Of.
Ex parte Neilson, 3 De G., M. & G., 556
(1858).

5Durant v. Burt, 98 Mass., 161 (1867);
Bayliffe v. Butterworth, 5 Railw. Cas.,
288, per Parke, B.; Marten v. Gibbon,
83 L, T., 561 (1876); Biederman v. Stone,
L. R., 2.C, P., 504 (1867),

8 Where the commissions and interest
were paid to other brokers, it may be
charged to the customer. Robinson v.
Norris, 61 How. Pr., 442 (1874). Even

(80)

though that interest be usurious. Smith:
v. Heath, 4 Daly, 123 (1871), On: com-
missions, see Inchbald v. Western Coffee
Co, 48 L. J. (C. P.), 15. Excessive ex-
penses will not be allowed, although cus-
tomary. Marye v. Strouse, 5 Fed. Rep.,
483 (1880). But the broker is entitled
to commissions only when he hag ren-.
dered some service to. the customer.

‘Sibbald v. The Bethlehem Iron Co., 83

N. Y., 878 (1881); Hoffman v. Living-
ston, 46 N. Y. Super. Ct., 552 (1880).
The case of Hatch v. Douglas, 48 Conn.,
116 (1880), holds that the broker’s cus-
tomary monthly charges and interest
thereon are not usurious. €f. Robin-
son v. Norris, 6 Hun, 288 (1875). The
broker may recover from the principal
the purchase price of stocks bought by
the broker, but not delivered, before the
corporation became insolvent. Chap-
man v. Shepherd, L. R., 2 C. P., 228.

7See Adamson v. Jarvis, 4 Bing., 66
(1827); Peckham v, Ketcham, 5 Bosw.,
506 (1859). So, also, for spurious stock
innocently given to the broker to sell.
Westropp v. Solaman, 8 C, B, 845
(1849).

465
\

‘oH. xxv.

§ 452.]} _ BROKERS AND THEIR CONTRACTS.

the full value of the stock, he must first tender the stock to the

customer, or he must sell it after due notice to the customer, and

thus accurately ascertain the loss.? If he is seeking to recover for

differences paid the opposite broker in settlement, asswumpsit is his

remedy.? He must clearly prove that the customer authorized the
erder.’

§ 452. Duties aia liabilities of a broker towards eustomer.— The
broker also owes certain duties, and incurs certain liabilities in his
relations towards his customer. It is said that he cannot sell on
credit, since that is not the usual course of his business.’ He is
liable in damages for failure to buy or sell in accordance with his
express orders.® Wkere the customer fails to carry out the trans-
action, but the broker does carry it out.at a profit, the profit ‘be-
longs to the customer.’ But the customer is not entitled to stock
held for him by the broker until he pays the broker all his reason-
able disbursements thereon.2 The broker may deposit a margin
with the opposite broker, according to custom, and not be respon-
sible to his customer if it is lost,® although the rule may be other.
wise as to a delivery of the stocks themselves.” The broker is
required to exercise reasonable diligence and care and no more."

1Merwin v. Hamilton, 6 Duer, 244
(1856); Bowlby v. Bell, 3 Com. B., 284
(1846). But, after once tendering it, he
need not continually keep it on hand.
Wynkoop v. Seal, 64 Pa. St., 361 (1870).

*Monroe v, Peck, 8 Daly, 128 (1869).
In Rosenstock v. Tormey, 32 Md., 169,
the necessary allegations were held to
be a purchase of stock according to an
order, at fair market price, which was
paid, and the customer notified and
payment demanded; willingness to de-
liver the stock; refusal of customer to
pay; notice of sale; a proper sale and
loss.

3 Pollock v. Stables, 12 Q. B., '765 (1848).
Contra, Child v. Morley, 8 Term R.,
610 (1800).

4Ward v. Van Duser, 2 Hall (N. Y.),
167 (1829). In White v. Baxter, 71 N. Y.,
254 (1877), the court held that a cus-
tomer’s contract with his broker to pro-
tect the latter against loss by expulsion
from the stock exchange for non-com-
pliance with its rules is a valid and en-
forceable contract,

52 Kent’s Com.,, 622 (b), 12th ed.

6 Speyer 2. Colgate, 4 Hun, 622 (1875);
Whelan v, Lynch, 60 N. Y., 469 (1875).
The case of a wool-broker, See, also,
Jones v. Marks, 40 IIl., 818 (1866), The
damages may sound in tort, thus pre-
venting a release in bankruptcy from
barring the action. Parker v. Crol, 5
Bing., 63 (1828). Under the New York
code he may be arrested ‘if he does not
use the money for the purpose desig-
nated. Dubois v. Thompson, 1 Daly,
809. And in England he is liable crim-
inally. Regina v. Cronmire, 64 L, T.
Rep., 580 (1885).

? Fowler v. N. Y. Gold Ex, B’k, 67.N.
Y., 188 (1876).

8 See McEwan v. Woods, 11 Q, B., 18,
where the broker paid calls made on the
stock after its sale,

9Gheen v, Johnson, 80 Pa, St., 88
(1879).

10 Brown v, Boorman, 11 Cl. & F., 1
(1844),

U Phillips v. Moir, 69 Ill, 155 (1978);
Gheen v. Johnson, 90 Pa. Ste, 88 (1879).
As to the construction of a contract
wherein the broker invests the cus-

466
4

CH. XXv.] BROKERS- AND THEIR CONTRACTS.

[8§ 458, 454.
The broker has a lien on the customer’s property in his hands for
all debts due to the former.! But he has no such lien if he knows
that the customer is acting as agent for another? It is a question
of doubt whether a broker who has received commissions from a
person guilty of embezzlement-is liable to pay over to the persons
injured by his’ customer commissions so received. A broker may,
by bill of discovery, be compelled to disclose acts amounting to
misconduct.

-§ 453. Method of completing a broker’s contract.— The. formal-
ities and method of completing a stock-broker’s contract are gov-
erned largely by the usages of the stock exchange. It is well
established law that, when a man sells or buys shares through his
broker on the stock exchange, he enters into an implied contract
to sell or buy according to the custom and usages prevalent in that
body.’ These usages and customs are to be found, for the most
part, in the rules of the stock exchange, so far as the formalities of
completing the contract are concerned. Occasionally, however,
such formalities are reviewed and sanctioned by the courts.®

§ 454. Privity of contract between broker and opposite parties.— '
‘A broker who buys or sells stock does so subject to certain liabili-
ties towards the parties to whom he sells or from whom he buys.
If he does not send in the name of his customer, he is liable on the
transaction as though he were the principal himself.7. He has been,
held liable for a forgery perpetrated by his customer.2 Where,
‘however, the broker hands in the name of his customer, and that

tomer’s money as the broker sees fit,
and the broker guaranties the return of
the capital and interest and all profits
made, see In -re Assignment of Ver-
milye, 10 Atl. Rep., 605 (N. J., 1887).

1 Jones v. Peppercorne, 5 Jur., N.8.,
Pt, 1, p. 140.

2Fisher v. Brown, 104 Mass., 259
(1870); Pearson v, Scott, L. R., 9 Ch. D.,
198 (1878).

3See Butler v. Finck, 21 Hun, 210
(1880), The case of Taft v. Chapman,
50 N. Y., 445 (1872), seems to hold that
the brofter is not liable where he acted
without knowledge of his customer’s
acts. See, also, 8. C. under name
Brownson v. Chapman, 63 N, Y., 625
(1875). See, also, Porter v. Parks, 49
N. Y., 564 (1872), § 350, n.

4 Green v. Weaver, 1 Sim., 404 (1827).
See Raulings v. Hall, 1Carr. & P. 11
(1823),

5 See § 462.

6 Thus, a usage by which the ultimate
purchaser’s name is handed to the seller
for the purpose of having the latter
execute a transfer to the former is up-
held. Sheppard v. Murphy, 16 W. R.,
948 (1868). The custom of giving the
seller time to investigate and object.to
a purchaser may be insisted on by the
seller. Sumner v.-Stewart, 69 Pa. St.,
821 (1871). The purchaser may be com-

pelled, by @ bill in equity, to register

the transfer made through brokers,
Paine v. Hutchinson, L. R., 3 Eg. Cas.,:
257 (1866),

7 Wynne v. Price, 8 De G. & Sm., 310
(1849).

8Royal Exchange Ins. Co. v. Moore,'
11 Week. Rep., 592 (1863). The broker:
herein sold in his own name, but the
opposite party, knew he acted as a
broker.

. 467
§ 455.] BROKERS AND THEIR CONTRACTS. [cH. XxXv.
name is accepted, the broker is thereby discharged,’ unless, of
course, the name is unauthorized, or is that of an infant? Upon
the disclosure by the broker of his customer’s name, the opposite
party has the option of holding either the broker or his customer
responsible, but cannot hold both.?

§ 455. Privity of contract between the opposite customers.— When
the broker of one customer has agreed with the broker of another
customer on the terms of a purchase and sale of stock, there im-
mediately arises a privity of contract between the two customers.
The purchasing customer is liable to the selling customer for all
calls and liabilities arising on the stock after the broker’s contract
is made, if the selling customer is obliged to pay such liabilities by
reason of his being the registered stockholder.‘ So also the pur-
chasing customer may hold the selling customer responsible for the
carrying out of the contract.’ It has been held that the remedy
may bean action at law Sor in equity.’7. The right of set-off for other
debts applies as between the two customers,* but not for debts due

from one of the brokers to the opposite customer.? ,

1Maxted v. Paine (2d action), L. R.,
6 Ex., 132 (1871), holding that the broker
does not guaranty his customer’s re-
sponsibility, nor that he is the real pur-
chaser. So also of the stock-jobber.
Grissell v. Bristowe, L. R., 4 C. P., 36
(1868), Contra, Cruse v. Paine, 37 L, J.
(Ch.), 711 (1868). .

2See § 446. Broker handing in the
name of a customer without authority
is himself liable. Maxted v. Norris, 21
L. T., 535. Cf. Shepherd v, Gillespie,
L. R., 5 Eg. Cas., 298 (1867),

3 Watson v. Miller, 11 Week. Notes,
18 (1876). A custom or usage releasing
the broker from this liability is void.
Magee v. Atkinson, 2 Mees. & W., 440
(1837). Cf. Jones wv.’ Littledale, 1 Nev.
& Per., 677 (1837), the sale being of
hemp. Also Thomson v. Davenport, 9
Barn. & Cr., 78 (1829), holding that the
purchaser’s option remains open until

, the name of the undisclosed principal is
given. Itisfor the jury to say which
one the opposite customer gave credit
to, irrespective of a stock exchange
custom. Mortimer v. McCatan, 6 Mees,
& W., 58 (1840).

4Hawkins v. Maltby, L. R., Ch. App.,
200 (1869); affirmed, 8. C., L. R., 6 Eq.,

505; Evans v. Wood, L. R., 5 Eq. Cas.,
9 (1867); Hodgkinson v. Kelly, L. R., 6
Eq. Cas., 496 (1868); 87 L. J. (Ch.), 887;
Remfrey v. Rutter, 1 Ell, Bl. & EIL,
887 (1858); Allan v. Graves, 39 L. J.,
157 (1870). A stock exchange custom,
making the broker a principal does not
prevent the customer suing as prin-
cipal, Langton v, Waite, 16 W. R,
508 (1868). Refusal of directors to reg-
ister the sale dves not enable tho pur-
chasing customer to recover back the
purchase price. Stray v. Russell, 1 El
& El, 888 (1859),

5Even though the selling customer
did not authorize the use of his name,
but knew of it and’ did not object.
Shepherd v. ones L. B., 5 Eq, Cas.,
293 (1867).

6 Street v. Moreau, L. R., 4 Ex., 884
See, also, Davis v. Haycock, L., RB, 4
Ex., 378 (1869).

7Sheppard v. Murphy, 16 W. R., 948
(1868).

8 Carr v. Hinchliff, 4 Barn, & Cr., 647
(1825).

9 Fish v. Kempton, 7 C. B., 687 (1849).
See, also, Sweeting v. Pearce, 7 C. B.,
N. S., 449 (1859), Unless, possibly,
where the customer supposed the op-

468
OH. XXV.] BROKERS AND THEIR CONTRACTS. [S$ 456, 457.

§ 456. Intervening sub-brokers and sub-customers.— Where a. cus-
tomer’s broker employs another broker to transact the business,
the customer cannot compel the second broker to complete the con-
tract as he might compel the first broker.!| The second broker
cannot claim a lien on the stock for debts due him from the first
»broker.? If the first broker merely introduces the parties he can-
not charge a commission therefor, although custom allows it.3 The
real customer may hold an intermediate customer liable.

§ 457. Purchases or sales on margins — Broker as a pledgee.—
By far the larger part of a stock-broker’s business consists of pur-
chases and sales of stock on what is called a “ margin.”4 The cus-
tomer deposits with the broker, as security, a sum of. money equal

. to but a small part of the value of the stock involved. This sum
of money is the “margin.” If the customer’s order is to purchase,
then the broker keeps both the margin and the purchased stock as
security against loss in the final] closing of the transaction. If the
customer’s order is to sell, then the broker sells; but, having no
stock to deliver, he borrows the same from other partics and de-
livers it to the purchaser, the broker still keeping the margin as
security. Frequently no stock passes, nor is intended to pass, but
merely the ultimate profit or loss called “differences” is paid; the
losing customer loses the whole or part of his margin, the winning
customer getting back his margin and also the profits, less com-
missions. This is a gambling contract, and, like all gambling con-
tracts, whether in or out of a stock exchange, is not enforceable.’
But a purchase or sale of stock on margins, where there is no proof
of an intent not to actually deliver the stock, is legal. The rela-

posite broker was the principal. See a broker’s gambling contracts are fully

Kelley v. Munson, 7 Mass., 318 (1811).

1 Booth v. Fielding, 1 Week. Notes,
245 (1866).

2¥Fisher v. Brown,
(1870).

$Gibson v. Crick, 1 Hurl. & C., 142
(1862). He may hold the intermediate
customer or agent liable for set-off due
from the latter to the broker. Jaycox
wv. Cameron, 49 N. Y., 645 (1872).

4A margin “means, in the broker’s
lexicon, additional collateral security
against loss to the broker while he is
; . carrying stock for his em-
ployer.” McNeil v. Tenth Nat. B’k of
N. Y., 55 Barb., 59 (1869).

5 McBurney v. Martin, 6 Conn., 502.

6See chapter XX, where the char-
acter, effect and non-enforceability of

104 Mass., 259

treated. A ‘‘margin” transaction is not
necessarily gambling and invalid. The
important case of Hatch v. Douglas, 48
Conn., 116 (1880), clearly sets out the
legality of such contracts. The court
said: ‘‘ It is pretty evident that the par-
ties did not contemplate that the stock
should be actually transferred to the
defendant, The defendant [cus-
tomer], through his agents, the plaint-
iffs, actually purchased the stock, and
there was an actual delivery — not to
the principal, but to the agents for the
principal.” The brokers knew “ that
the defendant was speculating, and that
they advanced him money for that pur-
pose. But that was neither illegal nor
immoral. No case has.been de-
cided which declares such a contract

469

!
§ 457.) BROKERS AND THEIR CONTRACTS. [OH. XXv.
tion between a customer and his broker, in cases where the broker

buys for his customer and retains the stock as security, is the relation

‘ ofa pledgor towards a pledgee, the customer being the pledgor, the

broker being the pledgee, and the stock being the article pledged.!
Some of the most important questions connected with brokers’
contracts arise out of this pledgee relationship. This subject, how,
ever, is fully treated. in the following chapter. Like an ordinary
plecgee of stock, the broker may have the stock transferred into
his own name;? he is not allowed to repledge the stock;* and he
can put his customer in default only by tendering the stook and

demanding Dayment for their whole value less the margin.‘

illegal. If we should so hold, it would
be difficult if not impossible to draw
the line between legal and illegal trans-
actions.”

I1Markham v, Jaudon, 41 N. Y., 235
(1869); Baker v, Drake, 66 N. Y., 518
(1876). The broker is bound to keep
constantly on hand the amount of stock
so held on margin, 7. e., pledged. Taussig
v. Hart, 58 N. Y., 425 (1874); Rogers
v. Gould, 6 Hun, 229 (1875). See, also,
§ 469, infra. In fact, the broker is obliged
to conform to the rules governing
pledges of stock — a subject treated in
chapter XXVI, The customer as pledgor
may claim his stock from the broker’s
assignee for the benefit of creditors if
the customer can identify it. Chamber-
lain v. Greenleaf, 4 Abb. N. C., 178
(1878). See Boylan v. Hye 8 Me., 345
(1878).

2 Horton v. Morgan, 19 N. Y., 170.

3 Dykers v. Allen, 7 Hill, 497. Where
it was understvod between a firm of
brokers and its customers, for whom
and on whose order it bought stocks on
the security of a margin, that the firm
might, according to the usual course of
business, pledge or hypothecate as se-
curity for loans to the firm the stocks
thus bought, held, that a mere pledge of
such stocks would not be of itself a con-
version. Chamberlain v. Greenleaf, 4
Abb. N. C., 178 (1878). See, also, Law-
rence v. Maxwell, 58 Barb., 511 (1878);
6 Lans., 469; 58 N. Y.,19. In Wood v.
Hayes, 15 Gray, 875 (1860), it was held

“that ‘‘ a broker who advanced money to

buy stock for another, and held it in his
own name, might, so long as he had not
been paid or tendered the amount of his
advances, pledge it as security for his
own debt to a third person, without
making himself liable to an action by
his employer; and this upon the groung
that the contract was conditional to de+
liver the shares upon the payment of
the money.” Approved in Covell v
Loud, 135 Mass., 41 (1883), where it was
held that, where the customer was un-
able to advance further margin and tells
the broker to do the best he can, he may
sell without notice. The decided weight
of authority, however, holds that, unless
the power is expressly given to the
broker to repledge the stock, he cannot
legally repledge it. See chapter XXVI.
This, however, does not affect the rights
of a repledgee or a purchaser of the
stock from the broker, A bona fide
transferee absolutely or in pledge from
a broker holding his customer’s stock in
pledge is protected to the extent of the
transfer, the transferee having no notice
of the fact that the stock was held in
pledge by the broker. Thompson 2.
Toland, 48 Cal,, 99 (1874); McNeil »v.
Tenth Nat. B’k of N. Y., 46 N. Y., 325
(1871); Zulick v. Markham, 6 Daly, 129
(1875); and see many cases in § 3821.
These cases apply equally whether the
person transferring contrary to law is
an agent or a pledgee, and equally, also,
whether he sells or only repledges.

4Read v, Lambert, 10 Abb. Pr., N.5.,
428 (1871).

470
CH, XXv.]: BROKERS AND THEIR CONTRACTS. [$§ 458, 459.

§ 458. Broker's rights and duties on failure of margin— When
the “margin” which the customer deposits with his broker hap-
pens to become exhausted by the fluctuations of the market ad-
versely to the customer, difficult questions arise as to the several
rights and duties of the broker and of the customer. If the broker
is under orders to close the transaction when the margin becomes
exhausted, he of course is obliged to do so! But, otherwise, the
rule is that the broker cannot summarily close the transaction, even
though he has fear of greater loss, involving a loss by himself. He
is obliged to demand further margin from his customer, at the same
time notifying him that the previous margin is exhausted; also
that, in case the margin is not made good, he will close the
transaction, holding the customer liable for the loss; also stating
the time and place of such threatened sale. The notice must be
given a reasonable time before such closing of the transaction, and
notice may be sent by mail.? If the broker fails to comply with
these rules and sells, he is guilty of conversion of the stock. Where
the broker is merely authorized to sell he is not bound to sell.®

§ 459. What will excuse notice and demand for more margin.—
All these rights of the customer to notice of failure of margin, de-
mand of more margin, notice of intent tosell, and of time and place.
of sale, may be waived; and brokers generally require their custom-

ers to sign written contracts to that effect. It is doubtful whether

1See § 448,

2Markham v. Jaudon, 41 N. Y., 235
(1869), overruling Hanks v. Drake, 49
Barb., 186 (1867), and Sterling v. Jau-
‘don, 48 Barb.; 459 (1867). See, also,
Kenfield y. Latham, 2 Cal. Leg. Rec.,
285 (1879). Cf. Worthington v. Tormey,
84 Md., 182 (1870); and see ch. XXVI.
Leaving notice at office held insufficient
where it did not reach the customer.
Bryan v. Baldwin, 52 N. Y., 232 (1878).
A formal demand for fur ‘her margin is
insufficient where, subsequently to that
demand, the broker negotiates with the
customer and tells him that he will con-
‘sider what to do. McGinnis v. Smythe,
4 Northeast. Rep., 759 (N. Y., 1886).

3 Worthington v. Tormey, 34 Md., 182
(1870). Two days’ notice held sufficient.
Stewart v. Drake, 46 N. Y., 449 (1871),
See, also, in general, § 477, infra.

4 Baker v. Drake, 66 N. Y., 518 (1876).

Cf. Gregory v. Wendall, 40 Mich., 432.

(1879), involving a purchase of corn.

Stocks alone, in brokers’ transactions,
give rise to the relation of pledgor and
pledgee.

5 Robinson v. Norris, 51 How. Pr., 442
(1874); Esser v. Linderman, 71 «Pa. St.,
76 (1872). Cf. Harris v. Tumbridge, 83
N. Y., 92 (1880). On a short sale of
grain the broker is not bound to sell as
soon as the principal refuses to advance
more margin. Perin v. Parker, 18
N. E. Rep., 747 (IIL, 1888).

6Thus, a written authority to the
brokers ‘‘ to sell at their discretion, at
public or privatesale, without any notice
whatever, the stocks or gold which they
might be carrying for the plaintiff,
whenever the margin should fall below ”
a certain figure, waives all the custon-
er’s rights herein. Wicks v. Hatch, 62
N. Y., 535 (1875). See, also, Cameron v.
Durkheim, 55 N. Y., 425 (1874). The
‘customer may waive his rights after the
broker has made the unauthorized sale,
Stewart v. Drake, 46 N. Y., 449 (1876);

AFL
§ 460. ] BROKERS AND THEIR CONTRACTS. [cH. xxv.
the death of the customer will authorize the broker to close the
transaction without notice.!| A custom of brokers to dispense with
these notices is void, and not binding on the customer.? The fact
that a panic occurs, or unusual fluctuations of the market happen,
does not excuse a broker from giving such notice.’

§ 460. Customer's remedies and damages herein.— For an un-
authorized sale by a broker of stock held upon a margin, the cus-
tomer has ample remedies. He may claim the benefit of the sale or
may claim the value of the stock.‘ Or the customer may require
the broker to replace the stock, and, upon his failure so to do, the
customer may replace it himself and charge the broker with the
‘loss. Or the customer may recover the advance in the market
price from the time of the sale up to a reasonable time to replace

the stock after notice of the sale.®

’

Milliken v. Dehon, 27 N. Y., 864 (1868).
But authority ‘‘to close the account,
without notice, by purchase or sale, at
public or private sale,” does not waive

right to notice of failure of margin and

demand for more. Stenton v. Jerome,
“64 N. Y., 480 (1873); Kenfield v. La-
tham, 2 -Cal. Leg. Rec,, 235. A com-
mon form of the contract which the bro-
ker requires the customer to sign is the
following:

“___ hereby agree to maintain with
you at all ‘times a margin of -—— per
centum of the par value of all stocks
and bonds against which you have made
or may hereafter make advances to ——,
and a like margin on stocks or bonds
which —— have borrowed or may here-
after borrow through you to make de-
liveries on sales made for —— account
or otherwise.

‘* In case. —— margin should become
impaired and the same is not promptly
made good in response to personal no-
tice or notice sent by wire or letter and
directed to —— usual address, you are
authorized in your discretion to buy or
sell at the N. Y. Stock Exchange or at
public or private sale, without further
notice, such securities as may be neces-
sary to place the account in condition
satisfactory to you, or to close the same
entirely, as you may prefer.

‘*In case of my decease you are hereby

The unauthorized sale by the

authorized to close my account by pur-
chase’ or sale of securities as the same
may require. ——”

1 The broker will be protected in con-
tinuing the transaction until personal
representatives are appointed. Hess v.
Rau, 95 N..Y., 359 (1884). Cf. Lacey v.
Hill, L. R., 8 Ch. App., 921 (1878).

2Markham v. Jaudon, 41 N. Y., 235
(1869); Taylor v. Ketchum, 35 How. Pr.,
289 (1861); S. C., 5 Robt., 507. Contra,
Appleman #. Fisher, 34 Md., 540 (1871),
a case of a gold-broker; also Colkert v.
Ellis, 10 Phil., 375 (1875), where both
parties were brokers and knew the cus-
tom. ‘If the customs are expressly made
a part of the contract, insolvency of the
customer authorizes sale without notice,
such being the custom. Lacy v. Hill,
L. R., 18 Hq., 182 (1874).

3 Markham v. Jaudon, 41 N. Y., 235
(1869); Brass » Worth, 40° Barb., 648
(1868); Ritter v. Cushman, 7 Robt., 294°
(1867).

4Taussig v. Hart, 58 N. Y., 425 (1874);
Caswell v. Putnam, N. Y. Daily Reg.,
March %, 1887; Strong v. Nat'l, etc.,
Ass'n, 45 N. Y., 718 (1871).

5 Baker v, Drake, 58 N. Y., 211, 217
(1873); Colt v. Owens, 90° ~ Y., 368
(1882).

&Colt v. Owens, 90 N. Y., 368 (1882),
holding that prices within thirty days
after the sale is a reasonable rule. See,

473
CH. XxXv.| BROKERS AND THEIR CONTRACTS.

[§ 460.

broker herein is not necessarily a fraudulent sale! The suit should
be at law,’ and demand and tender need not be alleged.

Where a broker buys or sells stock on his customer’s account in
violation of the terms of his contract, and thereby makes a profit,
the customer has his option either to repudiate the transaction
altogether and sue for damages, or he may adopt it and claim for
himself the benefit-made by his agent.t It has been held that,
where the broker fails to buy according to the instructions of his
customer, and the customer suffers a loss by reason of the failure,
the object of the purchase being to cover a short sale, the measure
of damages is the difference between the price at which the stock
was sold short and the market price upon the-day when the order
was given to the broker to buy in. In other words, the plaintiff
may in such a case recover the profits which he would necessarily
have made had his order been properly executed. And the-rule
is the same when the loss to the customer results from the failure
of the broker to sell as instructed, or where the broker sells at an

improper or manifestly unfavorable time.’

also, Gruman v, Smith, 81 N. Y., 25
(1880); Capron v. Thompson, 86 N. Y.,

418 (1881). Cf. Andrews vw. Clerke, 3
Bosw., 585 (1858).

1Stratford v. Jones, 97 N. Y., 586
(1885).

2Delevan v. Simonson, 3 J. & S., 248
(1878).

Clark v. Meigs, 22 How. Pr., 240
(1878); 18 Abb. Pr., 467.

4Kimber v. Barber, L. R., 8 Chan., 56
(1872); Marsh v. Keating, 1 Bing. N. C.,
198 (1884); Taussig v. Hart, 49 N. Y.,
801 (1872); S. C., 58 N.‘Y., 425 (1874);
Pickering v, Demeritt, 100 Mass., 416
(1868); Day v. Holmes, 103 id., 306
(1869).

5In an action to recover damages,
where a firm of stock-brokers sold, for
acustomer upon his order and for his
account, three hundred shares of stock,

short, at 186, and subsequently without -

the customer’s order or knowledge
bought in stock to cover the sale, and
then, a few days later, the stock having
declined several points, the customer
ordered them to cover their sale, to
which order no attention was paid, it
was held that the proper measure of
damages was the difference between

the price at which the stock was sold
short and the market price upon the
day when the order was received to
purchase, with interest, deducting com-
missions, etc. White v. Smith, 54N. Y.,
522 (1874). See Magee v. Atkinson, 2
Mees. & W., 440 (1837).

6In Harris v: Tumbridge, 83 N. Y., 92
(1880), it appears that the plaintiff pur-
chased through the agency of the de-
fendant’ a stock option, a privilege
known as a “straddle,” upon which the
defendants guarantied that the fluctua-
tions in the stock during the pendency
of the contract should amount to eight
per cent. On the next day after the
purchase defendant sold the stock,
short, which resulted in a loss to the
plaintiff, who had at the time [of the
purchase authorized defendant, as her
agent, to exercise the option. As tothe
measure of damages the court say:
“An objection is taken to the rule of
damages. It is insisted that, as plaintiff
never gave any directions to ‘put’ or
‘call’ the stock, she should not have
recovered as if she had. But in the ab-
sence of such directions it was defend-
ant’s duty, under the circumstances of
this case, as we have already said, to

473
§ 461.] BROKERS AND THEIR CONTRACTS. foH. xxv.

§ 461. Brokers’ remedies and damages herein.— Nevertheless, al-
though the broker makes an unauthorized closing of the ‘transac-
tion, yet he may compel his customer to pay him the loss incurred
therein, and the customer may set up as a counter-claim to tke
broker’s action the benefits which he would have realized if the
unauthorized act had not occurred.1 Where the broker’s act is
strictly according to law, he is of course. entitled to recover from
his customer any loss that has been sustained in excess of the mar-
gin? ;

It is a well-settled rule that if a broker, acting in good faith
and without default, incurs personal loss or damage in the course
of transacting the business of his agency, or in following the in-
structions of his principal, he may recover from the principal full
compensation therefor? Accordingly, where a broker buys stock

have'closed the ‘straddle’ contract by
exercising the option at the most favor-
able time, and to have acted for her in
that respect with reasonable care and
skill. As he did not do so, she is enti-
tled to recover what she has lost by his
neglect ; and the price of the stock from
day to day during the running of the
option having been shown, it was for
the jury to determine that amount.”
Cf. Speyer v. Colgate, 4 Hun, 622 (1875).
Where a broker sold stock for his cus-
“tomer without authority and in viola-
tion of an agreement not to sell, and it
appeared that for thirty days after no-
tice was given to the customer of the
sale the stock could have been pur-
chased in the market for the price at
which it was sold or even for less, it
was held, in an action to recover dam-
ages, that the customer, having had a
reasonable time after he was notified of
the sale of his stock to replace it at the
same or a lower price, was entitled only
to nominal damages. Colt v. Owens, 90
N. Y., 868 (1882). Cf. Randall v. Al-
bany City National Bank, 1 N. Y. State
Rep., 592 (Sept., 1886). See, also, McAr-
thur v. Seaforth, 2 Taunt., 257. But
when the action of the broker is fraud-
ulent the customer may, upon obtain-
ing knowledge of the facts, repudiate
the whole transaction and recover back
the money paid. Levy v. Loeb, 89 N.
YY., 386 (1882); reversing S. C., 15 Jones

& Spencer, 61. Cf. Stewart v. Drake,
46 N. Y., 449 (1871). In Baker v. Drake,
supra, where.a broker unauthorized to
do so sold stock which he was carrying
for his customer, it was held, in an ac-
tion for damages, that the measure of
damages was the advance in the market
price from the time of the sale up toa
reasonable time to replace it after notice
of sale.

! Gruman v. Smith, 81 N. Y., 25 (1880).
See, also, Capron v. Thompson, 86 N. Y.,
418 (1881). i

2 Schepeler v. Hisner, 3 Daly, 11 (1869).

3 2 Sedgwick on Damages (7th edition),
86; Lindley on Partnership (4th edi-
tion), 731 [where the English authorities
upon the right of a stock-broker to in
demnity from his principal, and tha
measure of damages in such cases, are
collected and fully considered]; citing
Sutton v. Tatham, 10 Ad. & E., 27
(1889); Bayliffe v. Butterworth, 1 Exch.,
425; Bowlby v. Bell, 3 C. B., 284; Bay-
ley v..Wilhins, 7 id., 886 (1849) ; McEwen
v. Woods, 2 Car. & K., 330; Taylor v.
Stray, 2 C. B. (N. S.), 175; Stray v. Rus-
sell, 1 El, & El., 888; Chapman v. Shep-
herd, L. R., 2 C. P., 228; Biederman v.
Stone, id., 504; Mollett v. Robinson, L.
RB.,7 H. L, 802;5. C.,7 C. P., 84; 5
C. P., 646; Pollock v. Stables, 12 Q. B.,
765; Lacey v. Hill, 8 Chan., 921; Dos
Passos on Stock-brokers, 123, 802.

474
CH. xxv. ] BROKERS AND THEIR CONTRACTS.

[$ 462.

upon his customer’s order and pays for it, and upon a decline in
value the customer refuses to accept it, the ‘broker may recover the
price paid by him, and not merely the difference between that
price and the market value on the day of his demand.!

§ 462. Brokers’ customs and usages.—It has been a greatly dis-
puted question as to how far and when a custom or usage among
stock-brokers or at stock exchanges may enter into and govern
stock-brokers’ contracts. At an early day the rule was laid down,
by the English courts, that he who buys or sells stock through a
stock-broker must be considered as dealing with him according to
the usages of the market in which he deals, and the customs which
prevail in relation to that species of business.2, The American rule
is more guarded, and allows usages of brokers to interpret the lan-
guage of the contract, and where it is obscure to ascertain its nat-
ure and extent, but not to vary its terms, introduce new conditions

or authorize acts contrary to its provisions.

1Giddings v. Sears, 103 Mass., 311.
Cf. Field v. Kinnear, 4 Kan., 476.
Where there is a rescission of a contract
for the sale of stock, the measure of
the damages is the value of the stock
at the time and place of the proposed
delivery. White v. Salisbury, 33 Mo.,
150 (1862); Vance v. Tourne, 13 La.,
225.

2In the case of Biederman v. Stone,
L. R., 2 Com. PL, 504 (1867), the court
says: ‘‘ It has been held in agreat num-
ber of cases that persons buying or sell-
ing stock or shares through members
of the stock exchange are bound by
the rules which govern the transactions
of that body.” To the same effect, see
Bayliffe v. Butterworth, 5 Railw. Cas.,
283, per Parke, B.; Mitchell v. New-
hall, 15 Mees. & W., 308 (1846); Maxted
v. Paine (2d action), L. R., 6 Ex., 182
(1871); Grissell v. Bristowe, L. R., 4 C.
P., 86, 47 (1868); Appleman v, Fisher,
84 Md., 540 (1871); Coles v. Bristowe,
L. R., 4 Ch. App., 3; Stray v. Russell,
1 El. & EL, 888 (1859); Davis v. May-
cock, L. R., 4 Ex., 873 (1869); Nickalls
v. Merry, L. R.,7 H. L., 580 (1875). Cf.
Pollock v. Stables, 12 Q. B., 765 (1848);
Taylor v. Stray, 2 C. B., N. S., 197
(1857); Morrice v. Hunter, 14 L. T., 897;
Kingsbury v. Kirwin, 43 Super. Ct., 451

The customer may,

(1878); 77 N. Y., 612. But the usage
must not be illegal.. Robinson v. Mol-
lett, L. R., 7 H. L., 802, 818, 826 (1874) ;
Hodkinson 1, Kelly, 87 L. J. (Ch.), 887
(1868); Taylor v. The Great Indian Pen-
insular R’y Co., 4 De G. & J., 559, 573
(1859). Nor be the custom established
by that one transaction. Westropp v.
Solaman, 8 C. B., 345 (1849). It must
be-reasonable. Goldschmidt v. Jones,:
32 L, T., N. &., 220. The usage may
show how the business is to be trans-
acted, but must not be unreasonable.
Rosenstock v. Tormey, 82 Md., 169
(1869), holding also that the broker’s
correspondence with his city broker is
not competent to prove purchases and
sales. A usage that is contrary to an
act of parliament, requiring the broker
to notify his customer of the particular
numbers of the shares purchased on his
account, is void. Perry wv. Barnett,
L, R., 15 Q. B. D., 388 (1885), Of. Sey-
mour v. Bridge, L. R., 14 Q. B. D., 460
(1885).

3Parsons v. Martin, 77 Mass., 111
(1858); Hopper v. Sage, 112 N. Y., 530
(1889); Lombardo v, Case, 30 How. Pr.,.
117 (1865); 1 Add. Contr. (4th Amer.,
8th Eng., ed., 1883), marg. p. 60, c. 2;
21 Am. L. Reg. (N. 8), 176. Cf. Wi-
nans v. Hassey, 48 Cal., 634 (1874.)

415 ;
§ 462.]

LROKERS AND THEIR CONTRACTS.

[ox. xxv.

however, by express agreement, waive his common-law rights and
allow usage to govern the transaction.!

The case of Baker v. Drake, 66 N. Y.,
618 (1876), holds that stock-brokers’
usage cannot add to or make part of
the contract. Cf. Horton v. Morgan,
19 N. Y., 170 (1859); Peckham v. Ketch-
um, 5 Bosw., 506 (1859); Whitehouse
v. Moore, 18 Abb., 142 (1861). If there
is doubt as to-the existence of the usage
the question is for the jury. Dent v.
Nickalls, 29 L. T., 636 (1873). Upon the
effect of usage in other transactions,
see Corn Ex. B’k v. Nassau Bank, 91
N. Y., 74 (1883); Richmond v. Union
Steamboat Co., 87 N. Y., 240 (1881);
Walls v. Bailey, 49 N. Y., 464 (1872);
Vail v. Rice, 5 N. Y., 155 (1851); Dela-
field v. State of Ill., 26 Wend., 192
(1841); Dawson v. Kittle, 4 Hill, 107
(1848); Boardman v, Gaillard, 1 Hun,
217 (1874); Minn. C. R’y Co. v. Morgan,
52 Barb., 217 (1868); Sipperly v. Stew-
art, 50 Barb., 62, 68 (1867); Duguid v.
Edwards, 50 Barb., 288 (1867); Haskins
v, Warren, 115 Mass., 514, 536 (1874);
Dickinson v. Gay, 89 Mass., 29; Parrott
v, Thatcher, 26 Mass., 426 (1830); Green-
leaf v. Moody, 13 Allen, 863 (1866);
Tilley v. County of Cook, 103 U. 8., 155
(1880); Nat. B’k v. Burkhardt, 100 U.S.,
686 (1879); Vermilye v. Adams Ex, Co.,
21 Wall., 188 (1874); Forrester v. Board-
man, 1 Story, 43 (1839); Oelrichs », Ford,
23 How., 49 (1859); Renner v. B’k of
Columbia, 9 Wheat., 582 (1824); Cape
v. Dodd, 13 Pa. St., 83 (1850); Corbett
v. Underwood, 83 Ill., 824 (1876); Phil-
lips v. Moir, 69 Ill, 155 (1878); Bissell
v. Ryan, 23 Il, 566 (1860); Williams v.

Gilman, 3 Maine, 276 (1825); Partridge
v, Forsythe, 29 Ala., 200 (1856); Hal-
werson v. Cole, 1 Spear (S. C.), 821
(1843); Hagg v. Snaith, 1 Taunton, 347
(1808); Gibson v. Crick, 1H. & C., 142
(1862); Fleet v. Murton, L. R., 7 Q. B.,
126 (1871). Brokers’ usages cannot vary
fixed principles of law. Hopper v.
Sage, 20 N. E. Rep., 350 (N. Y., 1889),

1Van Brunt, J., in Robinson v. Nor-
ris, 51 How. Pr., 442 (1874), says, in his
clear and decisive diction: ‘‘ It has been
settled by our court of appeals that no
custom among brokers can deprive par-
ties of rights which the law gives them,
but they have not decided that these
rights may not be waived by agree-
ment. I think it perfectly clear that, if
the broker informs his customer of the
terms upon which he will act for him
as his broker, and in view of that no-
tice the customer gives an order, he is
bound by the terms on which the broker
proposed to act for him.” See, also,
Baker v. Drake, 66 N. Y., 578 (1876).
See, in general, Colket v. Ellis, 82 Leg.
Int., 82 (1875); Sutton v. Tatham, i0
Ad. & El., 25 (1839); Bayley v. Wilkins,
18 L. J. (C. P.), 273 (1849); Duncan v.
Hill, L. R., 6 Ex., 255 (1871); Sheppard
v. Murphy, Jr., L. R., 2 Eq., 569 (1868);
Bowring v. Shepherd, L. R.,6 Q. B.,
809 (1871); Evans v. Wain, 71 Penn. St.,
69 (1872); Sweeting v. Pearce, 7 C. B.
(N. 8.), 449 (1859); Shaw v. Spencer, 100
Mass,, 382 (1868); Day v. Holmes, 103
Mass., 306 (1869).

4%6
CHAPTER XXVIL

PLEDGES AND MORTGAGES OF STOCK.

 

§ 463, Definitions of pledge, mortgage | § 471. Pledgee has no right to sell or
and lien.” repledge the stock, even tem-
464, Mortgages and pledges of stock. porarily. :
465. How a pledge of stock arises or | 472, Purchasers or pledgees of stock
is made, _ from pledgee with notice are
466. Pledgee may have the stock reg- not protected.-
istcred in his own name or| 478. Bona fide repledgees or pur-
the name of another, chasers of pledged stock are
467, Stock-broker purchasing stock protected.
for a customer on a marginis| 474, Pledges by agents, trustees, ex-
a pledgee. ecutors, etc., legally and in
468. Miscellaneous rights of pledgee breach of trust.
and pledgor, 475. Pledgor’s remedies,
469. Pledgee need ‘not retain or re-| 476. Pledgee's remedies when debt
turn to the pledgor the iden- secured is not paid.
tical certificates or shares of | 47%. Noticeof sale of stock by pledgee
stock which weré pledged, but to apply to debt secured,
must have ee quantity al- |} 478, Formalities of sale,
ways on hand. 479, Pledgee himself cannot purchase
470. Pledgee’s liability on subscrip- at the sale,
‘ tion oot statutory liability on
stock.

‘ \

—§ 463. Definitions of pledge, mortgage and lien.— A pledge may
be defined to be a delivery of personal property as a security for
some debt or engagement. A mortgage of personalty, on the
other hand, is a sale with the condition attached, that, if the mort-
gagor performs some act, the sale shall be void. Ina pledge the
title remains in the pledgor, and the pledgee has a special property
in the thing pledged.!. Ina mortgage the title passes to the mort-
gagee, subject to being revested in the mortgagor upon payment
of thedebt. In pledges the thing pledged must be delivered to the
pledgee. In mortgages, generally, the possession of the thing mort-
gaged remains with the mortgagor.

A pledge differs also froma lien. A pledge, by implication,
gives the pledgee a power to sell on due notice, in case the debt is
not paid on maturity, while a lien gives merely the power of de-
tention until the debt is paid.

§ 464. Mortgages and pledges of. stock.— Shares of stock may be |
the subject of a mortgage or pledge.’ A mortgage of stock, how-

1See Parsons on Contracts, I, p. 569; 3‘ Nothing is better settled than that

Il, p. 113; III, p. 272. shares in the capital stock of a corpora-

2Donald v, Suckling, L. R., 1Q.B., tion arethe subject of pledge.” Dayton

604, Nat’l Bk v. Merchants’ Nat'l B’k, 87
497
~

§ 464.]

. y i,
PLEDGE OF STOCK.

f
[cH. Xxv1.

ever, is not often made; and, unless there is a clear intent to the con-
trary, the courts will treat the transaction as a pledge rather than
a mortgage.’ In fact, it is difficult to ascertain from the cases how
shares of stock may be mortgaged; and a few early decisions, which
held certain transactions to be mortgages, would to-day be held
to be pledges.’ There are but few clear cases of a mortgage of stock
to be found. It seems that a formal instrument of chattel mort-

O. St., 208 (1881). “It was formerly
doubted whether it [stock] could be the
subject of a pledge, but it is now held
that it can be.” Newton v. Fay, 92
Mass., 505 (1865). The pledge may be
for a running liability, and is not re-
leased by an extension of any particu-
lar debt. Merchants’ Nat’! B’k v. Hall,
83 N. Y., 838 (1881), Stock may be
given by the debtor to his creditor to
sell for the benefit of the creditor, and
the surplus to be returned to the debtor;
Beckwith v. Burrough, 18 R. L, 294
(1881). This probably makes the cred-
itor the agent of the debtor. The pledge
may be to secure the carrying out of
a contract. Vaupell v. Woodward, 2
Sandf. Ch., 143 (1844),
cured by thé pledge of stock is usurious,
the pledgor may recover back the stock
without payment. The pledge is void,
Cousland v. Davis, 5 Bosw., 619 (1859).
The pledge of stock may provide that,
for part payments.of the debt, the
pledgor may withdraw part of the stock
pledged. First Nat’l B’k v. Root, 8 N.
E. Rep., 105 (Ind., 1886). If a person

‘agrees to deposit stock to secure the

debt of another and fails to do so he is
liable, not for the debt, but for the value
of the stock. Appeal of American, etc.,
Co., 12 Atl. Rep., 270 (Pa., 1887).

1Newton v, Fay, supra; Nabring v,
Bank of Mobile, 58 Ala., 204 (1877); Mer-
chants’ B’k v. Cook, 4 Pick., 405 (1826);
Mechanics’, etc., Association v, Conover,
14.N. J. Eq., 219 (1862); Doak v. B’k of
the State, 6 Ired. L., 809 (1846).

2Thus, in Huntington v. Mather, 2
Barb., 688 (1848), the courtsay: “‘ There
are two leading considerations to be
regarded in determining whether the

If the loan se-:

transaction is a pledge or a mortgage,
namely, the title and the possession, If
it is a mortgage, the legal title passes to
and is vested in the creditor. With a
pledge it is different ; the legal title, until
a sale on default of payment or redemp-
tion, continuing in the pledgor. .

The essential difference as to matter
of right is that in one the title passes
and in the other it does not. But the
difference in substance and fact is that,
in the case of a pawn or pledge, the por-
session must pass out of the pawnor,
but in the case of a mortgagor it need
not.” The court, however, influenced

probably by the equities of the case,

held the transaction to be a mortgage,
and that the right of the debtor to re-
deem was barred by the ten-year stat-
ute of limitations. Inthe case of Smith

v. 49 and 56 Quartz Min. Co., 14 @al.,

242 (1859), the court held the transaction
to be a mortgage rather than a condi-
tional sale of the stock. : The question
of pledge was not considered. Manns
v. Brookville Nat’l B’k, 73 Ind., 248
(1881), speaks’ of the transaction as a
mortgage;.and Williamson v. New Jer-
sey Southern R. R. Co., 26 N. J. Eq.,
898 (1875), says that such a mortgage
need not be recorded in the municipal
clerk’s office, as required by the chattel
mortgage act. In both cases the trans-
action might better have been treated
asa pledge. In Adderly v. Storm, 6
Hill, 624 (1844), the court said: ‘‘ I have
already said that this was not a pawn
or pledge of the stock; neither was it
strictly a mortgage.” At the present
day it would be held to bea pledge. Wil-
son v, Little, 2 N. Y., 443 (1849); Has-
brouck v. Vandervoort, 4 Sand., 74

478
t

OH. XXVI] PLEDGE OF S8TOOK.

[§ 464.
gage of stock, duly executed and registered at the municipal clerk’s
office, as required by law in case of chattel mortgages, would not
constitute an effectual mortgage of stock, and the mortgagee would
not be protected where he does not receive the certificate of stock
from the mortgagor, or does not obtain a registry of transfer on
the corporate books.! Where, on the other hand, the certificate of
stock is delivered to the creditor as security, it is evident that pos-
session of the property is given to the creditor, but that the debtor
still considers the stock to be his. Such a transaction is a pledge,
and not a mortgage; and consequently, since the giving of stock
certificates as security is almost invariably effected by a delivery
of the certificates, a mortgage of stock may be said to be possible
but not probable or even sensible.
stock with a blank power of SHOE} as collateral security, con-
stitutes a pledge and not a mortgage;? and the same rule prevails

The delivery of a certificate of

(1850). In the case of Brewster v. Hart-
ley, 87 Cal., 15 (1869), the court say:
“The transfer in writing of shares of
stock not only does not prove that the
transaction is not a pledge, but the
stock, unless it is expressly made assign-
able by the delivery of the certificates,
cannot be pledged in any other man-
ner. In the case of Thompson’ v. Hol-
laday, 14 Pac. Rep. (Oreg., 1887), a chat-
tel mortgage on shares of stock was in-
volved. It was declared void because
it was given to a receiver who previ-
ously held the stock as receiver. Some-
times a chattel mortgage of stock arises
where a railroad mortgage covers not
only real estate, but also all personal
property, bonds and stock, which are or
shall be owned by the mortgagor cor-
poration,

1 The clearest and most satisfactory
case is Spalding v. Paine’s Adm’r, 81
Ky., 416 (1883), where a chattel mort-
gage of a share of stock was duly re-
corded in the proper county, the mort-
gagor retaining the certificate of stock.
The mortgagor subsequently sold and
transferred the certificate of stock toa
bona fide purchaser. The court held
that the recording of the mortgage was
of no avail, that there could be no mort-
gage of choses in action, and that the
bona fide transferee took the stock,

statute of limitations.

Pryor, J., well says: ‘*Much of the
business of the country is conducted on
the faith of the pledge of such stock as
collaterals; and to adjudge that the
holder of the stock by transfer on the
books of the corporation, or by indorse-
ment and delivery by the owner, is sub-
ordinate in his claim to the mortgagee,
upon the doctrine of constructive notice,
woauld paralyze trade and open a wide
field for the fraudulent disposition of
such valuable interests at thé expense

of honest and confiding purchasers.”’

Cf. Manns v. Brookville Nat'l B’k, 72
Ind., 248 (1881); Foster v. Potter, 87 Mo.,
525; Vowell v,. Thompson, 3 Cranch,
428 (1859). A mortgage of stock is valid

as between mortgagor and mortgagee |

without a transfer of certificates. The
mortgagee after foreclosure may com-

‘pel the corporation to transfer without

making the transferee a party. Tregear
v. Etiwanda, etc., Co., 18 Pac. Rep., 658
(Cal., 1888). Stock may be mortgaged,
and no delivery of the certificates need
be made. Though a foreclosure is made
irregularly, the mortgagor may ratify
it, or may be barred by the six-year
Campbell wv,
Woodstock Iron Co., 8 S. Rep., 3869
(Ala., 1887). !

2 Mechanics’ B. & L, Association v.
Conover, 14 .N. J., Eq., 219 (1862); Lewis

; 479
‘

_PLEDGE OF STOCK. [CH. XXVI. »

§ 465.]

even though an absolute transfer or registry is made on the corpo-
rate books." :

§ 465. How a pledge of stock arises or is made.— A pledge of
stock is generally made by a delivery of the certificates of stock
indorsed in blank to the pledgee, and a memorandum in writing
to the effect that the stock is held in pledge is generally signed and
given to the pledgor, and a copy thereof attached to the certifi-
cates of stock.2, A mere delivery of the certificate of stock indorsed
in blank, however, is sufficient to constitute a pledge, without any
memorandum in writing to that effect, and without a registry of
the same being made on the corporate books.* Not even a por-
vision of: the charter or a by-law of the corporation to the. effect
that transfers are not valid until registered on the corporate books
can prevent a pledge of stock being made by a mere delivery of
the certificates indorsed in blank, or indorsed to the pledgee, with-
out such registry. The provision requiring such registry would
seem not to concern the pledgee in any way, except that he could

v. Graham, 4 Abb. Pr., 106 (1857). But
see Greene v. Dispean, 14R. I., 575 (1884).

_l Nabring v. Bank of Mobile, 58 Ala.,.
204 (1877); Wilson v. Little, 2 N. Y.
443 (1849).

2In a few cases a mere delivery of
the certificate without a written trans-
fer has been held sufficient to constitute
a pledge. See Brewster v, Hartley, 37
Cal., 15; Jarvis v. Rogers, 18 Mass., 105;
Robinson v. Harley, 11 Iowa, 410; but
see Lollande v. Ingram, 19 La. Ann.,
364 (1867); United States v. Cutts, Sum-
ner, 183. See, also, § 875, infra. A
pledge of the certificates of stock is ef-
fective without notice to the corpora-
tion. Crescent, etc., Co. v. Deblieux, 3
South. Rep., 726 (La., 1888),

’Mount Holly, ete., Co. v. Ferree, 17
N, J, Eq., 117 (1864); Finney’s Appeal,
59 Penn. St., 398 (1868); Blouin v. Liq-
uidators, etc., 80 La. Ann., 714 (1878) ;
Merchants’ Nat’) B’k v, Richards, 6 Mo.
App., 454 (1879); aff'd, 74 Mo, 77;
Broadway B’k v. McElrath, 13 N. J.
Eq., 24 (1860); Cornick v, Richards, 3
Lea, 1 (1879); Baldwin v. Canfield, 26
Minn., 48 (1879); Pitot v. Johnson, 33
La, Ann., 1286 (1881); New Orleans
Nat'l Banking Ass’n v, Wiltz, 10 Fed.
Rep., 380 (1881); Continental Nat’] B’k

v. Eliot Nat'l B’k, 12 Rep., 35 (1881).
Cf. State v. First Nat’] B’k, 89 Ind.,
302 (1883). The pledgor may, by word
of mouth, extend stock already pledged
to further advancements by the pledgee.
Van Blarcom v, Broadway Bank, 9
Bosw., 532 (1862).

4McNeil v. Tenth Nat’l Bank, 46
N. Y., 325 (1871); Dickinson v. Central
Nat’] B’k, 129 Mass., 279 (1880); Fraser
v. Charleston, 11S. C., 486 (1878); Fac-
tors’ & T. Ins. Co. v. Marine D. D. Co.,
81 La, Ann., 149 (1879): Pitot v. John-
son, 83 La. Ann., 1286(1881); Continen-
tal Nat'l B’k v. Elliot Nat'l B’k, supra;
Lowry v. Com. Bank, Taney, 310 (1848);
Blouin v. Liquidators, etc., 30 La. Aun.,
714 (1878); Lightner’s Appeal, 82 Penn.
St., 801; United States v. Cutts, 1
Sumin., 133 (1832); Leitch v. Wells, 48
N. Y., 585 (1872); Commercial B’k of
Buffalo v. Kortright, 22 Wend., 348
(1839); aff’ 20 Wend., 91; Otis v. Gard-
ner, 105 Ill, 486 (1888). As regards
such provisions requiring registry, a
pledge of stock stands on the same
footing as a sale of stock. See, also,
§ 879, supra. The unregistered pledge
is protected against the pledgor’s as-
signee in bankruptcy: Re Shelly, 34
L. J. (Bankr.), 6 (1865).

480
CH. XXVI.]

PLEDGE OF STOCK.

[§ 465.

not claim the dividends without the registry; and in.a few states,
where an attachment of the’stock for the pledgor’s debts would
cut off a previous unregistered vendee’s or pledgee’s rights, he by
not registering encounters that risk.1 A transfer of stock, whether
registered on the corporate books or not, may be shown to bea
pledge, and parol evidence is admissible to prove that fact.2 A
mere direction to the corporation cannot constitute a pledge? But
where no .certificate has been issued to the stockholder he may
pledge the stock by an instrument in writing.! A corporation may

1 Thus, in states where an attachment
has precedence over not only trans-
ferees without registry made after the
attachment is levied, but over unregis-
tered transfers made before the levy of
attachment, a pledge, like a sale of
stock, is protected against attachment
on the pledgor’s debts only by registry.
Weston v. Bear R. & A. Co., 5 Cal.,
186 (1855); ‘Williams v. Mechanics’ Bank,
5 Blatch., 59 (1862); State Ins. Co. v.
Sax, 2 Tenn. Ch., 507 (1875); State v.
First Nat’! B’k, 89 Ind., 302 (1883); Ship-
man v. Aitna Ins. Co., 29 Conn., 245
(1860); Pinkerton v. Manchester, etc.,
R. R. Co., 42 N. H., 424 (1861); Oxford
Turnpike Co. v. Brund, 6 Conn., 552
(1827). Cf. Strout v. Natoma W. \& M.
Co., 9 Cal.,. 78 (1858). But the pur-
chaser at the execution sale is not pro-
tected against the pledgee, if he pur-
chased with notice. Weston v.' Bear
R. & A. Co., 6 Cal., 425 (1856).
notice of the pledge is given to the
corporation, the pledgee is protected
against attachments, although no reg-
istry ishad. State Ins. Co. v. Gennett,
2 Tenn. Ch., 100 (1874). See, also,
§ 486 et seg. As regards the ordinary
rights of stockholdership, it is no ob-
ject to the pledgee to obtain registry.
Even if registered he cannot vote nor
have a voice in corporate meetings.
See § 468, As tothe dividends, how-
ever, he is entitled to them as against
the pledgor, but, of course, can obtain
them from the corporation only by ob-
taining registry.

2Brick v. Brick, 98 U. S., 514 (1878);
Wilson .v. Little, 2 N. Y., 448 (1849);
Ginz v. Stumph, 73 Ind., 209 (1880);

* (81)

_Rep., 902 (Ill, 1888).

And if ©

Newton v. Fay, 92 Mass., 505 (1865);
McMahon v. Macy, 51 N. Y., 155 (1872);
Becher v. Wells Flouring Mill Co., 1
Fed. Rep., 276 (1880); Burgess v. Selig-
man, 107 U.S., 20 (1882); Pinkerton v. ,
R. R. Co., 42 N. H.,.424; Butman v,.
Howell, 10 N. E. Rep., 504 (Mass., 1887).
An apparent sale of stock is not proven
to be a pledge on the evidence of plaint-
iff contradicted by defendant, when
the full value of the stock was paid
and a receipt therefor given by the
plaintiff. Travers v. Leopold, 16 N. E.
A pledgor may
bring a suit for. an accounting and to
establish the fact that the transfer of
stock was a pledge, and he may restrain
a suit by the pledgee against the corpo-
ration for the stock. McDowell’s Ap-
peal, 16 Atl. Rep., 753 (Pa., 1889); 5 N.
Y. Supp., 650. :
3Cumming v. Prescott, 2 Y. & C.
(Ex.), 488 (1837); Lallande v. Ingram, 19
La. Ann., 364 (1867), the court saying:
“In all cases of pledge, the pledgee
must be put in possession of the thing
pledged; and, if it be a claim, the evi-
dence of the obligation must be trans-
ferred and delivered. Shares in stock
cannot be pledged unless they be evi-
denced by certificates which must be
transferred and delivered to the
pledgee.” But see note 2, p, 480.
4¥First Nat. B’k v. Gifford, 47, Iowa,
575 (1877), where such a pledgee was
protected against a third person who
had advanced the money to the pledgor
to purchase the stock. . See, also, Brig-
ham v. Mead, 92 Mass., 245 (1865); Thorp
»”. Woodhull, 1 Sand. Ch,, 411 (1844). Un-
issued stock may be pledged by the

481
PLEDGE OF SsTOCK. [CH. XXVI,

§§ 466, 467.]

pledge its unissued staued but there is a difference of opinion as to
whether the. pledgee is Hable as an absolute stockholder on such
stock.2 The question of usury in the note secured by a pledge of

stock may affect the. pledge itself.* A bona fide pledgee of stock
is protected.against claims of former owners of that stock to the
same extent that an absolute purchaser of the stock would be pro-
tected. The guas¢ negotiability of certificates of stock protects a
pledgee and a vendee alike.‘

§ 466. Pledgee may have the stock registered in his own name or-
the name of another.— Where certificates of stock indorsed in blank
are delivered to a person in pledge as collateral security for a debt
or for any other purpose, the pledgee may fill in the ‘blanks and
have the stock registered in his own. name on the corporate books;>
or the pledgee may have the stock registered in the name of an-
other person, in order that he may protect his special property in
the stock and at the same time not be liable thereon.®

§ 467. Stock-broker purchasing stock for a customer on a mar-
gin is a pledgee of the. stock.—It has been well established that,
where a stock-broker purchases stock on an order from his customer,
and the customer does not pay for the stock, but deposits with the
broker a sum of money called a “margin,” to protect the broker
against loss, the broker is bound to have on hand the stock so pur-

chased during the entire time of

person entitled to it. When issued, the
pledge at once attaches. Appeal of Har-
ris, 12 Atl. Rep., 748 (Pa., 1888).

1 Brewster v. Hartley, 37 Cal., 15 (1869) ;
Fisher v. Seligman, 7 Mo. App., 383
(1879); Griswold v. Seligman, 72 Mo.,
110 (1880); Burgess v. Seligman, 107 U.
S., 20 (1882); Melvin v. Lamar Ins. Co.,
80 Ill., 446 (1875); Protection Ins. Co, v.
Osgood, 93 IIL, 69 (1879). Where a cor-
poration pledges its own stock, the
pledgee may sell that stock for non-
payment of the debt at less than par.
This rule prevails even though the char-
ter provides that the stock shall not be
sold below par. Peterborough, etc., R.
R. Co. v. Nashua, etc., R. R. Co., 59 N.
H., 385 (1879). Bonds may be pledged.
Union, etc., Co. v. International, etc.,
Co., 21 N. E. Rep.. 962 (Mass., 1889). Cf.
Drury v. Cross, 7 Wall., 299.

2 See 8§ 138, 247, 474,

3 See Little v. Barker, 1 Hoif. Ch., 487
(1840), and cases in § 451, n. 6, supra;
and see Frost v. Stokes, 55 N. Y, Sup.

the contract, and has the rights,

Ct., 76 (1887), holding that the New
York statute of 1882 allows any inier-
est if the debt is over $5,000 and stock
is pledged.

4See § 432, supra,

5Hubbell v. Drexel, 11 Fed. Rep,
115 (1882); Re Angelo, 5 De G. & S.,
278 (1852); Horton v. Morgan, 19 N.
Y., 170 (1859); Union & P. B’k ». Far-
rington, 18 Lea (Tenn.), 838 (1884);
Hiatt v. Griswold, 5 Fed. Rep., 573
(1881), holding also that a surety is not
thereby discharged; Day v. Holmes,
103° Mass., 306 (1869); Fitchburg Sav.

-B’k v, Torrey, 1384 Mass., 239 (1883), also

holding that a release of the stock by
the pledgee releases a surety; Fay uv
Gray, 124 Mass., 500 (1878). Corpora-
tion must allow the registry. Cornick
v. Richards, 3 Lea (Tenn.), 1 (1879).

‘6Day v. Holmes, supra; Heath v.
Griswold, 5 Fed. Rep., 573; Anderson
v. Philadelphia Warehouse Co., 111 U.
S., 479 (1884). See, also, § 470.

482
Vy

S
be

CH. Xxvi.]

\

PLEDGE OF STOCK.

[§ 468.

duties and liabilities of a pledgee, with the customer as a pledgor.!
The broker under such circumstances must conform to all the rules

governing a pledgee’s attitude towards a pledgor.

He cannot re-

pledge, nor sell without due notice, unless such rights be waived by

the customer, the pledgor.

§ 468. Miscellancous rights of pledgee and pledgor.—

Dividends

declared during the continuance of the pledge belong to the pledgee,
even though the latter is not registered as owner on the corporate
books.’ A pledgee may surrender his certificate to the corporation
and take a new certificate for a larger number of shares where the

corporation has decreased the par value of the stock.!

Where the

pledgor pledged the stock to secure the debts of another at a bank
and renewals thereof, the pledge continues though the pledgor dies.’
A pledgee has not the right to vote on the pledged stock, even
though he is registered as a stockholder.’ If so registered the
pledgor may compel him, by legal proceedings, to give a proxy for
voting purposes.’ A pledgee is not bound to protect the stock from

forfeiture for non-payment of calls.®

The pledgee is entitled to the

dividends on the stock, but must account for them when the pledge
isredeemed.® A.pledgee of certificates of stock is protected against
further sales or pledges of the same stock by the pledgor, such
other sales or pledges being without the delivery of any certificate,
the same as the vendee of a certificate of stock is protected against.
another sale of the stock to a purchaser who takes without any cer-
tificate.° The possession . of the certificate protects the pledgee.

herein.

The pledgee is not liable for a loss of the pledge by eet

there being no negligence on his part."

1 Baker v. Drake, 66 N. Y., 518 (1876) ;
Markham v. Jaudon, 41 N. Y., 235 (1869) ;
and see chapter XXV.

2See chapter XXV.

3 Herrman v. Maxwell, 47 Super. Ct.,
847 (1881). And the pledgor who collects
them holds them in trust for the pledgee.
Hill v. Newichawanick Co., 8 Hun,.459;
aff’d, 71 .N. Y., 599 (1887).

4Donnell v. Wyckoff, 7 Atl. Rep. is
672 (N. J., 1887).

5 Cotton v. Atlas Nat’l B’k, 12 North-
east. Rep., 850 (Mass., 1887).

6 Baldwin v. Canfield, 26 Minn., 43
(1879). See, also, Merchants’ B’k v.
Cook, 4 Pick., 405 (1826); Ew parte
Willcock, 7 Cowen, 402; McDaniels v.
Flower, etc., Co., 22 Vt., 274 (1850);
Laws of N. Y., 1850, ch. 140, § 5; But-
terworth v. Kennedy, 5 Bosw., 143

(1859). The pledgor may cause the cor-
porate property to be leased at a rental
which will not yield any dividends, and
yet the pledgee cannot attack the valid-
ity of the lease. Gibson v. Richmond,
etc., R. R. Co., 387 Fed. Rep., 743 (1889),

7See chapter XXXVII.

8 Southwestern R. R. B’k v. Douglas,
2 Spear (S. C.), 329 (1844).

SIsaac v, Clarke, 2 Bulst., 306 (1858);
Hasbrouck v. Vandervoort, 4 Sandf., 74
(1850); Edwards on Bailments, 800.

10 Maybin | v. Kirby, 4 Rich. Eq., 105.
See § 321, The cases therein cited are
partly cases of pledge and partly of sale
of certificates of stock. Therule applies
equally to both.

‘Ul Fleming v, Northampton Nat'l B’k,
62 How. Pr., 177 (U. 8..C. C., 1881),

483
3 t

PLEDGE OF STOCK.

§§ 469, 470. ] [CH. XXVI,

$469. Pledgee need not retain or return to the pledgor the identi-
cal certificates or shares of stock which were pledged, but must have
equal quantity always on hand.— One share of stock does not dif-
fer from another share of the same capital stock. Each is but an
undivided interest in the corporate rights, privileges and property.
Accordingly, it is held that a pledgee of stock need not retain in
his possession the identical shares of stock which were pledged to
him, but that the rights of the pledgor are fully preserved if sim-
ilar stock is retained by the pledgee until the termination of the
pledge! The pledgee must have on hand at all times the full
amount of the stock pledged, whether the debt secured is due or
not, since the law will not allow the pledgee.to speculate or deal
with the stock of another as though it were his own. It is not
enough that he can at once procure the stock from one to whom
it is loaned,* or that he had sufficient on hand for the plaintiff
pledgor, but not enptgh for all the pledgors whom he had at any
particular time.’ The law requires him to set aside as much stock
as has been pledged to him.

§ 470. Pledgee’s liability on subscription and statutory lability
on stock2— A pledgee who has obtained registry on the corporate
books appears to third parties as a full stockholder. Accordingly,
in case the corporation becomes insolvent, the registered pledgee
is held liable on. his stock, as though he were an absolute stock-
holder. In order to avoid ‘this ‘danger the .law allows the pledgee
to have the pledged stock registered on the corporate books in the
name of a nominee of the pledgee. 8 ‘Where such a registry ‘is -ob-
tained the pledgee has the advantage of a control of the stock, and
at the same time escapes the danger of liability as a stockholder.

1Nourse v. Prince, 4 Johns. Ch., 490 hand. In selling the pledgor’s stock

(1820); 8.,C., 7 Johns. Ch., 69 (1828);
Horton v. Morgan, 19 N. Y., 170 (1859);
Barclay v. Culver, 30 Hun, 1 (1883);
Noyes v. Spaulding, 27 Vt., 420 (1855);
Atkins v. Gamble, 42 Cal., 86; Price v.
Grover, 40 Md., 102 (1874); Gilpin v,
Howell, 5 Penn. St., 41.(1846); Harden-
burgh v. Bacon, 33 Cal., 356 (1867); Tay-
lor v. Ketchum, 85 How. Pr., 289 (1867);
Langton v. Waite, L. R., 6 Eq., 165
(1868); Thompson v. Toland, 48 Cal., 99
(1874); Le Cray v. Eastman, 10 Mod.,
499 (1785); Hubbell v. Drexel, 21 Am.
L. Reg., N. S., 452 (1882); S.C. 11
Fed. Rep., 115; Baylan v. Huguet, 8
Nev., 345 (1873). In the,case of Dykera
v, Allen, 7 Hill, 497 (1844), the pledgee at
one time seems to have had no stock on

on notice for non-payment of the debt,
the pledgee need not sell the identical
stock pledged. Berlin v. Eddy, 83 Mo.,
426 (1863).

2 Ex parte Dennison, 8 Ves. 552 (1797);

‘Taussig v. Hart, 58 .N. Y., 425 °(1874);

Thompson v. Toland, 48 Cal., 99 (1874);
Hubbell v.: Drexel, 21 Am, L. Reg., N.
S., 452 (1881). The pledgor may waive
this restriction by express agreement.
Ogden v. Lathrop, 65 N. Y., 158 (1875).

3Dykers v. Allen, 3 Hill, 593; 7 id.,
497 (1844); Ea parte Dennison, supra.

4 Fay v. Gray, 124 Mass., 500 (1878).

5 See chapter XIV, § 247.

6 Newry,. etc., R’'y Co. v. Moss, 14
Beav., 64 (1851). See § 466.

484
CH. XXvI.]

PLEDGE OF STOCK.

[$ 471.

§ 471. Pledgee has no right to sell or repledge the stock even tem-
porarily.— This necessarily follows from the principle of law that
a pledgee of stock must retain constantly in his possession shares
of stock equal in quantity to that pledged; that the pledgee cannot
legally part with the possession of such stock by a sale or repledge
of it; and that if he does so he is guilty of a conversion! In Penn-
sylvania it is a penal offense for the pledgee to repledge the

1Goss v. Hampton, 16 Nev., 185-(188i).
The case of Ex parte Sargent, L. R., 17
‘Eq... 278 (1874), contained a dictum giv-
ing a contrary rule; but the case ‘of
France v. Clark, L. R., 22 Ch. Div., 830
(1883), disapproves such dictum and
says: “As a general rule the pawnee of
chattels has no riglit to sell them, unless
a time was originally fixed for their re-
demption, and that time has expired, or
unless he had made a demand upon the
pawnor for the payment of what is due
to him.” In Langton v. Waite, L. R., 6
Eq., 165 (1868), the court say: ‘‘ Thelaw
is clear that, in the absence of express
contract to the contrary, a pawnee can-
not sell without the express permission
of the owner, and that if he does, the
owner can charge him with the excess
of the price over the loan.” The court,
however, seemed to think that the
pledgee could repledge the stock. Fay
v. Gray, 124 Mass., 500 (1878),. holds
that the pledgee has no right to sell,
lend or repledge the stock. In the
notes contained in 21 Am. Law Reg.,
N. S., 454, a contention is made that the
pledgee should be allowed to repledge,.
but it is admitted that-the weight of
authority holds otherwise. The follow-
ing cases are cited: Bank v. Trenholm,
12 Heisk. (Tenn.), 520 (1873); Bank vt.
Bryce, 19 Am. Law Reg., N. S., 508
(1880); Taussig v. Hart, 58 N. Y., 425
(1874); Work v. Bennett, 70 Penn. St.,
484 (1872); Wood v. Hayes, 15 Gray,
875 (1860); Thompson v. Patrick, 4
Watts (Pa.), 414 (1835); and see § 469.
In Gould v, Farmers’ Loan & Trust Co.,
23 Hun, 322 (1880), the court said that
the pledgee might repledge the stock to
the extent that he had in it. In Law-
rence v. Maxwell, 63 N. Y., 19 (1878),

the court say: ‘‘ Ordinarily, and in the
absence of an agreement or assent by
the pledgor, the pledgee would have no
right to use the thing pledged, and a
use of it would be illegal. But, under
special circumstances, depending some-
what upon the nature of the pledge,
and in all cases with the assent of the
pledgor, express or implied, the prop-

erty pledged’ may be used by the:

pledgee in any way consistent with the
general ownership and the ultimate
rights of the pledgor.” . Story on Bail-
ments, § 324, says, the pawnee ‘may
sell or assign all his interest in the
pawn, or he may convey the same in-
terest conditionally, by way of pawn, to
another person, without in either case
destroying or invalidating his security.”
See, also, Talty v. Freedman’s Sav., etc:,
Co., 93 U. §., 321 (1876); 2 Kent’s Com.,
579; Jarvis v. Rogers, 138 Mass., 105; 15
id., 389, 408; Mores v. Conham, Owen,
128 (1854); Ratcliffe v. Davis, 1 Buls.,
29 (1857); Anon., 2Salk., 522. Theright
of the pledgee to repledge may exist by
force of a custom understood by both
parties. Chamberlain v. Greenleaf, 4
Abb. N. C., 178 (1878). In the case of
Lewis v. Mott, 86 N. Y., 894 (1867),
where, after the debt was due and un-
paid, the pledgee turned over the debt
and security to another without’a fore-
closure or sale on notice, the court held

that the Jatter could hold the collateral.

stock until the pledgor tendered the
amount of the debt. The latest English
cases hold that, although the repledge
may be wrong, yet that the pledgor
cannot reclaim the stock from the re-
pledgee until the former pays the debt
for which the pledge was made.

485

Don-.
ald v. Suckling, L. R., 1 Q. B., 585.
§§ 472, 473.] PLEDGE OF STOCK. © [CH. XXVL
stock.! Although, apparently, the pledgor would not be injured
by the pledgee’s transferring to another the debt and the stock
pledged as collateral security, yet the law rigidly protects the in-
‘ terests of the debtor and pledgor, and will not compel -him to sub-
mit to the danger and trouble of transfers by the pledgee to distant,
or irresponsible persons. There may, of course, be an express
agreement or understanding to the contrary.’

§ 472. Purchasers or’ pledgees of stock from pledgee with notice
are not protected A person who purchases or takes in pledge
stock which he knows is held in pledge by the person from whom
he takes it is not a bona fide holder of such stock, and is not en-
titled to the rights of such. At the best he stands merely in the
place of the pledgee from whom he receives the stock. He must
restore the stock to the owner in case the pledgee would be obliged
to restore it had no second sale or pledge been made. The second
pledgée or vendee, with notice that he was taking pledged stock,
has no rights which the first pledgee has not. He is but an equi-
table assignee of the latter, and can be compelled by the owner to
deliver the stock in any case where the first pledgee could be so
compelled.? The same rule applies whether the pledgee assigns or
repledges both the debt and the stock or the stock alone.‘

$473. Bona fide repledgees or purchasers of pledged stock are
protected. Where, however, a pledgee of certificates of stock
indorsed in blank takes the certificates and sells or pledges,them _
to another, who takes such certificates in good faith and for value
and without notice that his vendor or pledgor held them as a

(1866); Halliday v. Holgate, L. R., 3 Ex.,
299 (1868). Where a broker, holding
stock in pledge on a margin, repledges
it without the consent of his customer,
it has been held that he can recover the
value of the stock from the customer on
a tender of the certificate. Clarkson v.
Snider,.5 Canadian Law Times, 587
(1885).

1 Act of May 25, 1878 (Purdon’s. Di-
gest, 2107), modified as to purchases by
broker on margin by act of June 10,
1881 (P. L. 1881, 107).

2Chouteau v. Allen, 70 Mo., 290
(1879).

3 Any fact, such as usury in the sec-
ond transaction, which prevents the
second pledgee or purchaser from being
a bona fide purchaser, applies to a re-
pledgee of stock. The repledgee is not
protected. Felt v. Heye, 23 How. Pr.,

359 (1862); Little v. Barker, 1 Hoff. Ch.,
487 (1840). So, also, where the repledgee
takes in consideration of a pre-existing
indebtedness. Ashton’s Appeal, 73
Penn. St., 153 (1873). A bank receiving
a collection with collateral is not. én-
titled to the latter where it becomes
insolvent before the collection is re-
mitted. Corn Exchange Bank v. Blye,
N. Y. Daily Reg., Sept. 9, 1886. In gen-
eral, see also Duncan v. Jaudon, 15
Wall., 165 (1872); Shaw v. Spencer, 100
Mass., 882 (1868); Ellis’ Appeal, 8 Weekly
Notes of Cases. (Penn.), 538; Porter v.
Parks, 49 N. Y., 564 (1872); Chouteau v.
Allen, supra.

4 Felt v. Heye, supra (1862). Nor can
the repledgee claim the benefit of the
debt not assigned to him, See, also,
Talty v. Freedman’s, etc., Co., 98 U. 8.,
321 (1876).

486
OH. XXVI.] [§ 473.

PLEDGE OF STOCK.

pledge, the purchaser or pledgee from the pledgee is as fully pro-

‘tected in his rights as though the person with whom he dealt was

the absolute owner of the stock.! This rule arises, not on the ground
that the certificate of stock is negotiable, but for the reason that
the owner is held to have enabled his pledgee to sell the stock as
the pledgee’s own, and that as between the owner and the bona fide
purchaser or pledgee from the pledgee the owner must bear the loss.

The law of estoppel prevents his denying the right of his pledgee
to sell or pledge as against a bona fide purchaser or pledgee from
the pledgee. So, also, this principle arises under the well-estab-

lished rule that, where one of two innocent parties must suffer from
the fraud of a third, the loss must fall upon him who enabled the
third party to perpetrate the fraud. If the pledgee has repledged
the stock the owner can obtain the stock only by paying to the
repledgee the amount of the latter’s ‘advancement to the first
pledgee.2 The pledgor of stock, under these rules, has practically:
no protection as to his stock except the honesty and responsibility

of his pledgee. The bona fide

1The important case of McNeil v.
Tenth Nat’l Bank, 46 N. Y., 325 (1871),
was on the rights of a bona fide re-
pledgee of stock, and fully sustains the
general rule. See, also, Fatman v. Lo-
bach, 1 Duer, 354 (1852); Wood’s Ap-
peal, 92 Penn. St., 379 (1880); Wood v.
Smith, 8 Week. Notes, 441; Goss v.
Hampton, 16 Nev., 185 (1881); Mount
Holly, etc., Co. v. Ferree, 17 N. J. Eq.,
117 (1864); Otis v. Gardner, 105 Ill, 436
(1888); Ex parte Sargent, L. R., 17 Eq.,
273 (1874); Cherry v. Frost, 7 Lea
(Tenn.), 1 (1881), the court saying that
in general a pledgee of personal prop-
erty cannot convey a good title to an-
other; but ‘‘if the owner intrusts to
another not merely the possession of
the property, but also written evidence
over his own signature of title thereto
and of unconditional power of dispo-
sition over it, the case is vastly dif-
ferent.” Thus a pledgee, without no-
tice, of bonds from a pledgor, who
turns out to have held the bonds as
securities for the cancellation of a
mortgage, is’ protected in his pledge.
Saloy v. Hibernia; etc., B’k, 1 South.
Rep., 657 (La., 1887)., In New York a
pledgee is not bona fide when he takes

purchaser or pledgee from the

bonds in pledge for a precedent debt.
Duncomb v. N. Y., etc., R. R. Co., 84
N. Y., 190 (1881). In the case of Orti-
gosa v. Brown, 47 L, J. (Ch.), 168 (1878),
the court, following the English doc-
trine that an unregistered transferee of
certificates of ‘railway stock has no
more rights than his transferrer, re-
fused to protect the unregistered re-
pledgee of stock.

2Wood’s Appeal, 92 Penn. St., 379
(1880); Fatman v. Lobach, 1 Duer, 354
(1852); Ea parte Sargent, L. R., 1% Eq.,
278 (1874) ; Cherry v. Frost, 7 Lea(Tenn.),
1 (1881), holding, however, that pay-
ments on the subscription by the
owner subsequently to the repledge do
not inure to the benefit of the latter.
If the repledgee has other collateral
also, it will be applied to the debt be-
fore the repledged stock is applied.
Gould v. Farmers’ Loan & Trust Co.,
28 Hun, 822 (1880). See, in. general,
Donald v. Suckling, L. R., 1 Q. B., 585
(1866); Moore v. Conham, Owen, 123
(1856); Ratcliffe v. Davis, Yelv., 178
(1710); Johnson v, Cumming, Scott’s C.
B., N. S., 381 (1819); Jarvis, Adm’r, v.
Rodgers, 15 Mass., 369 (1819).

487 i
§§ 474, 475.) PLEDGE OF STOCK. ‘Lou. xxvz
pledgee is equally protected whether the certificates of stock are.
indorsed by the pledgor or vendor, or are indorsed in blank by some.
previous holder! The repledgee or vendee is held to be a bona fide.
holder only where he would be held so to be in cases of promissory
notes and other similar cases.”

§-474. Pledges by agents, trustees, executors, ete., legally and in
breach of trust.— It is within the power of an executor or admin-
istrator to pledge shares of stock belonging to the estate, and the
pledgee is protected. even though he knew that the executor
pledged it as an executor.’ A trustee, on the other hand, has no
implied power to pledge or sell corporate stock belonging to the
trust! An agent’s pledges of his principal’s stock follow‘the same
rules as where a pledgee repledges the stock given to him in pledge.
A bona fide holder for value and without notice is protected, while
one who takes with notice is not protected.:| Where, however, the
one taking stock in pledge from an agent knows that the latter is
acting as agent, he is bound to inquire whether the principal has
authorized his agent to pledge the stock, since a power to pledge
cannot be presumed from a power to sell.5 The right-of corpora-
tions and persons to give and take stock in pledge is also treated
of elsewhere.® a
§ 475. Pledgor’s remedies.— Where the pledgee: of stock has
been guilty of a conversion of it, the pledgor’s remedy against him
is generally by an action at law ‘for damages. He need. not tender

_ to the pledgee the amount of the debt secured by the pledge, since

the pledgee may recoup to that extent and thus decrease the dam-

ages of the pledgor.’ The pledgor’s damages are measured by the

1 Goss v. Hampton, 16 Nev., 185 (1881).

2In California the. peculiar doctrine
is sustained that the word.“ trustee ”
on the face of the certificate is no no-
tice, and does not deprive the pledgee
of his. character of being.a bona fide
holder. Brewster v. Sime, 42 Cal., 139
(1871); Thompson v. Toland, 48 Cal., 99
(1874). If the repledgee receives the
stock as security for an antecedent in-
debtedness:he is not a bona fide holder.
Gould v. Farmers’ Loan & Trust.Co.,

23 Hun, 822 (1880). A pledgee is not:

bona fide when the name of another
pledgee in the certificate .is erased and

his own inserted. Denny v. Lyon, 38.

Penn. St., 98:(1860)..
3Goodwin, v. American Nat'l B’k, 48
Conn., 550 (1881); Wood’s Appeal, 92

Penn, St, 879. (1880);. Carter v Mts.
Nat'l B’k, 71.Me., 448 (1880), § 329;
Manhattan B’k v.. Walker, 130 U. S.,
267 (1889).

4See chapter XIX, §§ 323-327; Shaw
». Spencer, 100 Mass., 382 (1868), §.465. °

5See chapter XIX, § 821.

6 See chapter XIX,

7 Allen v. Dykers, 8 Hill, ‘98 (1842);
Vid., 497; New York, L. E. & W. R. RB.
Co, v. Davies, 88 Hun, 477 (1886); Work
v. Bennett, 70 Penn. St., 484 (1872);
Fisher v. Brown, 104 Mass., 259; Neiler
v. Kelly, 69 Penn. St., 403.(1871); Lang-
ton v. Waite, L. R., 6 Hg., 165 (1868);
Felt v. Heye, 28 How. Pr., 359 (1862);
‘Lewis v. Graham, 4 Abb, Pr., 106 (1857);
Cortelyou v. Lansing, 2 Caines’ Cas.;
200. However a later. case in Massa-

488
. CH. XXVI.] PLEDGE OF STOCK.

[§ 475.
market value of the stock at the time of the conversion, together
with interest and subsequent damages.! The: pledgor may be
barred from his action for damages by a waiver of the particular
act of conversion by the pledgee.? He has the option, however, of
ratifying the transaction and claiming the proceeds, or he may re-
pudiate the sale and sue for conversion.’ The pledgor ‘may, if he
prefers, begin suit in a. court of equity, when the pledgee has con-
verted the stock, and compel him either to replace the stock or
give compensation in damages.. The jurisdiction of a court of
equity in such a case has been questioned,’ but has been sustained
on the ground that only a court of equity can compel the pledgee.
to replace the stock or to take an accounting of the dividends de-
clared' while the pledge was running, or to reach third persons to
whom the pledgee has assigned the debt and pledge.® An unrea-

- chusetts — Cumnock v. Institution for.

Sav., 142 Mass., 342 (1886) — holds that a
tender of payment of a debt is neces-
sary to enable a pledgor to maintain
trover for a conversion of property
pledged, unless the. lien created by the
pledge has been otherwise discharged.
Pledgor’s vendee may tender amount
of debt and demand stock as condition
of payment. Action of trover lies for
refusal of pledgee to deliver. Pledgee
is liable for depreciations of stock after
such tender. An attachment of stock
against pledgor, but after sale by him,
is no defense to pledgee. Loughbor-
ough v. M’Nevin, 14 Pac. Rep., 369
(Cal., 1887). An assignee of the pledgor
_. of stock may tender the amount due

and demand the stock. The pledgee
cannot refuse, because the stock has
been attached, the assignee not being a
party thereto. Tender is sufficient with-
out paying. the money into court.
Loughborough v. MeNevin, 15° Pac.
Rep., 773: (Cal., 1887). See 118 N. Y.,
825.

!See chapter XXXV. In Fowle v.
Ward, 118 Mass., 548 (1873), the court
said the damages Should be ‘‘a sum of
money which would enable him to pur-
chase seventeen new shares to replace
those which have been taken from him,
with such additional sum as would in-
demnify him for the dividends which

he has lost since the sale, and also an
equitable allowance for interest.”

2Child v. Hugg, 41 Cal., 519 (1871).
See, also, sub, ;

3 Atkins v.°Gamble, 42 Cal., 86, 91
(1871). If there are several pledgors,
and the pledge is redeemed, and the
pledgee, at the request of one of the
pledgors, transfers the stock to third
parties, the pledgee is liable to the other
pledgors for loss incurred thereby. Mag-
nus v. Queensland, etc., B’k, 57 L. T.
Rep., 136 (1887).

4Genet v. Howland, 45 Barb., 560:
(1866). Remedy of pledgor is at law
after a tender, not by bill in equity to
redeem. Doak v. Bk of the State, 6
Tred.'L., 309 (1846).

5 Bryson v. Raynor, 25 Md., 424 (1866);
Conyngham’s Appeal, 57 Penn. St., 474.
(1868); Hasbrouck v. Vandervoort, °4 :
Sand., 74 (1850); Koons v. First Nat'l:
B’k, 89 Ind., 178 (1883). Where the re-
pledgee converts the stock the remedy
for conversion is with the first pledgee,
not with the first pledgor. Thompson
v. Toland, 48 Cal., 99 (1874). The pledgee.
must return the stock and stock divi-
dends and account for money dividends.
Vaughan v. Wood, 1M. & K., 403 (1888).
The assets applicable to the debt will
be marshaled. Hurbert v. Mechanics’
Bldg. & Loan Ass’n, 17 N. J. Eq., 497
(1864). And the pledgor’s interests pro-

489
8 475.]

PLEDGE OF STOOK.

[ow. XXvI

sonable delay or laches on the part of the pledgor will bar his
remedy against the pledgee.!. In New York a contrary rule pre-

vails.?

A pledge of stock to secure another person’s debt is released by
an extension of that debt. A pledgor cannot compel his pledgee
to sell the stock and apply the proceeds to the debt by a notice to
make such a sale.t When the pledgee causes the stock to be sold

tected. Gould v. Farmers’ L. & T. Co.,
23 Hun, 822 (1880). In case of a wrong-
ful repledge the pledgor may claim the
proceeds or redeem the stock from the
second pledgee. Chamberlain v. Green-
leaf, 4 Abb. N. C., 178 (1878). Where
the second pledgee has sold the stock
for non-payment of his debt the first
pledgor may claim the excess, the
amount retained by the repledgee being
more than the first pledgor’s debt. Re
Bonner, 8 Daly, 75 (1878). See, also,
Fowle v. Ward, 118 Mass., 548 (1878).
But see Lacombe v. Forstall’s Sons, 123
U. S., 562 (1887), An action to redeem
a pledge of stock is to be tried without
a jury, even though the defendant sets
up a counter-claim of false representa-.
tions. -Lynch v. Macdonald, 58 L. T.
Rep., 298 (1888).

1 Hight years’ delay by pledgor in com-
plaining of refusal of pledgee to deliver
up the stock on tender of the debt, the
stock having subsequently declined in
value, held fatal under the facts of this
case. Murriam v. Childs, 5S. W. Rep.,
615 (Mo., 1887). Where the pledgor’s
executor for value received sells the
pledgor’s interest to the pledgee, long
lapse of time after full knowledge
of the facts by all parties will raise a
presumption in favor of the pledgee’s
complete ownership. Lockwood v,
Brantly, 103 N. Y., 680 (1886), Equity
has jurisdiction to ascertain the amount
due on a pledge and to decree that
the pledgor may redeem. As to
the statute of limitations, see May-
nard v. Tilden, 28 Fed. Rep., 688, 708
(1886); Child v. Hugg, supra. In
Greene v. Dispean, 14 R. I, 575 (1884),
a pledge of stock was treated as a
mortgage, and the right to redeem

was held to be barred six years after
the date of the mortgage. Pledgor
waives informality: of notice, where,
after the sale, he, as an officer of the
corporation, enters a transfer of the
stock to the one who purchased at the
sale, Downing v. Whittier, 11 North-
east. Rep., 585 (Mass., 188%). Four
years’ delay in complaining is fatal.
Receiving the benefit of the sale is a
waiver of objections. M’Dowell »v,
Chicago Steel Works, 16 Northeast.
Rep., 854 (Ill, 1888). Although the
pledgee gives no public notice of the
sale, and although he purchases the
stock at the sale, yet the pledgor rati-
fies the sale by acquiescing and by
negotiating to buy the stock. Hill v.
Finigan, 19 Pac. Rep., 494 (Cal., 1888).
The statute of limitations is no bar to
an action to redeem a pledge of stock,
unless the statute was set running by
demand of payment and notice of in-
tent to sell. Gilmer v. Morris, 35 Fed.
Rep., 682 (1888). * :

2 Bailey v. Chamberlain, N. Y. Dail.
Reg., July 23, 1888. See Miner v. Beek-
man, 50 N. Y., 337%. Pledgee cannot
claim that he has held the stock, ad-
versely to the pledges, for a time more
than sufficient to give him title to it
under the statute of limitations. He is
not allowed to assert that he holds the
stock adversely. Cross u, Reid, 14 Pac.
Rep., 885 (Cal., 1887).

3Price v. Reed, 15. N. E. Rep., 754.
(Ill., 1888).

4Lawrence v. Maxwell, 58 N. Y., 19;
Robinson v. Hurley, 11 Iowa, 412;
O'Neill vu. Whigham, 88 Penn. St., 394;
Rozet v. McClellan, 48 Ill., 845; Smouse
v, Bail, 1 Grant, 397; Taggard v. Cur- ,
tenius, 45 Wend., 155; Fisher v, Fisher,

490
 

CH. XXvI.]

PLEDGE OF STOCK.

[§ 476.

the pledgor is entitled to the surplus proceeds of the sale remain-
ing after the debt and the expenses of the sale have been paid.

§ 476. Pledgce’s remedies when debt secured is not paid.— Where
shares of stock are pledged as collateral security for a debt and
the debt is not paid, and the pledgee wishes to apply the stock to
the payment of the debt, he has the right to pursue either one of
two remedies: he may file a bill in equity for the foreclosure and
sale of the pledge,’ or he may give notice fo the pledgor of an
intent to sell the stock, and may so sell it without any judicial pro-
ceedings, and apply the proceeds to the payment of the debt.2. No

98 Mass., 303; Napier wv. Central, etc.,
B’k, 68 Ga., 687, holding, however, that
where the pledgee does not sell, because
he and others were “‘ bearing ” the mar-

‘ket, there may be an element of fraud

which gives a cause of action.

1 And the pledgor’s assignee for the
benefit of creditors may claim it. The
pledgee bank has no banker’s lien on
the surplus for ‘other debts. Brown v.
New Bedford Inst. for Sav., 187 Mass.,
262 (1884). A pledgee bank cannot re-
fuse to deliver back the stock to pledgor
who tenders the amount due, on the
ground that the pledgee owes it still
another debt. McIntire v. Blakeley, 12
Atl. Rep., 325 (Pa., 1888). If the officers
of a pledgee bank refuse to deliver
back the pledged stock upon a tender
of the debt they are liable personally
in damages to the pledgor. McIntire
v. Blakeley, supra. If pledgee has

- also other security an unsecured cred-

itor of the pledgor may compel the
pledgee to resort to such other security
first.: Bishop, etc., Assoc. v. Kennedy,
12 Atl. Rep., 141 (N. J., 1887). Pledgee,
on sale of pledge, cannot apply the
excess to another debt due him from
the pledgor, who died before the sale
was made. Peters v. Nashville Sav-
ings Bank, 6 S. W.' Rep., 183 (Tenn.,
1887).

2Vaupell v. Woodward, 2 Sand. Ch.,
143 (1844). The pledge may be made to
secure the carrying out of a contract,
and a court of equity will foreclose it
although the damages are unliquidated.
Robinson v, Hurley, 11 Iowa, 410, from

which it seems that where the pledge
was made without a written transfer of
the certificate this is the only remedy.
See, also, Merchants’ Nat’! B’k v. Hall,
88 N. Y., 338 (1881); Smith v. Coale, 34
Leg. Intel., 54; Blouin v. Liquidators,
etc., 30 La. Ann., 714 (1878); Briggs v.
Oliver, 68 N. Y., 336; Johnson v. Dex-
ter, 2 MacArthur, 5380.

3Story on Bailments, 9th ed. (1877),
§ 310, saying: ‘‘ The law as at present
established leaves an election to the
pawnee. He may file a bill in equity
against the pawnor for a foreclosure
and sale; or he may proceed to sell ex
mero motu, upon giving due notice of
his intention to the pledgor. In the
latter case, if the sale is bona fide and
reasonably made, it will be equally ob-
ligatory asin the first case.” The lead-
ing case, allowing this remedy of the
pledgee against the pledge, is Tucker uv.
Wilson, 5 Bro. Par. Cases, 193 (1714),
rev’g1P. Wms., 261. In Browne. Ward,
8 Duer, 660 (1854), the court say: ‘‘ Since
the time of the case of Hart v. Ten
Eyck [2 Johns. Ch. Cas., 180], before
Chancellor Kent, the right of the
pledgee to sell after the debt is due,
upon reasonable notice, has been un-
questioned, anda custom has grown up
and has been sanctioned by the courts
of selling stocks at the Merchants’ Ex-
change.” To same effect, Diller v. Bru-
baker, 52 Penn. St., 498 (1866); Finney’s
Appeal, 59 Penn. St., 398 (1868); Mount
Holly, etc., Co. v. Ferree, 17 N. J. Eq.,
117 (1864), where the court say: ‘‘ Asale
of a pledge by the pawnee where rear

491
§ 476.) PLEDGE OF SOCK.

[CH. XXVI.

express power to sell need be contained in the memorandum of
pledge in order to authorize the latter remedy. It exists by force
of law.

The pledgee, however, is not bound to. pursue either remedy
merely because the debt is due and unpaid.’ He need not sell the
stock upon the maturity of the note secured, nor is he liable because
the stock declines in value.2 He may sue on the debt without tend-
ering back the stock.? The pledgor cannot compel him to sell by
merely giving him notice so to dot Nor is the pledgee bound to
sell on non-payment of the debt, although the memorandum of
pledge expressly authorizes a sale, but he may file a bill in equity
to foreclose instead of pursuing the other remedy. The pledgee’s
remedy by attaching the stock and selling it at an execution sale ®

sonably and bona fide made, and after
notice to the pawnor, is equally obliga-
tory as if made by judicial process.”
2 Kent’s Com., 582, saying that the
_Ppledgee ‘may file a bill in chancery
and have a judicial sale under a regular
decree of foreclosure, » and he
may sell without judicial process, upon
giving reasonable notice to the debtor
to redeem.” Stearns v. Marsh, 4 Denio,
227 (1847); Markham v. Jaudon, 41 N.
Y., 235, 241 (1869); Drury v. Cross, 7
Wall., 299 (1868). The parties may pro-
vide for any manner of disposing of
the pledge to satisfy the claim upon it
which is not in contravention of statute,
against public policy or fraudulent.
McNeil v. Tenth Nat. B’k, 46 N. Y., 325,
334, says: ‘‘ The distinction between a
lien and a pledge is said to be that a
mere lien cannot be enforced by sale by
the act of the party, but that a pledge
is a lien with a power of sale super-
added.” Pledgee’s power of attorney to
sell is coupled with an interest and is
not revocable. Renshaw v. Creditors,
3 8. Rep., 403 (La., 1888). Person se-
cured by pledge of stock in another’s
name: may sue Jatter for the amount
received by latter on a sale of the stock.
Maynard v. Lumberman’s Nat. B’k, 11
Atl, Rep., 529 (Pa., 1887).

10’Neil v. Whigham, 87 Penn. St.,
394 (1878); Rezet v. McClellan, 48 Ill.,
345 (1868); Palmer v. Hawes, 40 N. W. |
Rep., 676 (Wis,, 1888);:

2Simonton v. Kelly, 122 U. S., 220
(1887); Palmer v. Hawes, 40 N. W. Rep.,
676 (Wis., 1888). 4

3 Taylor v. Cheever, 6 Gray, 146; But-
man v. Howell, 10 Northeast. Rep.,
504 (Mass., 1887). Pledgee having sold
the stock, and there still being a balance
due him from the pledgor, may sue for
such balance, and need not allege that
the sale was on due notice and demand.
Wallace v. Berdell, 24 Hun, 379 (1881),
Where stock pledged to secure a note is
to be transferred as payment in case’
the note is not paid, the pledgee may
sue on the note if the pledgor has not
transferred the stock. Fullerton v. Mob-
ley, 15 Atl. Rep., 856 (Pa., 1888). As to
the duties of the pledgee towards ‘an:
indorser of the note, see Payne v, Com.
B’k, 14 Miss., 24 (1846). Misrepresenta-
tions by’pledgee of stock as to the value °
of the stock made after its pledge are no
defense for the pledgor when sued’ on™
the debt. Palmer v. Hawes, 40 N. W.
Rep., 676 (Wis., 1888).

4 See § 475.

5Cornick v. Richards, 3 Lea (Tenn.), 1
(1879); Coffinv. Chicago & N., etc., Co.,
4 Hun, 625 (1875). :

® Lee v. Citizens’ Nat. B’k, 2 Cin. Su-
per. Ct., 298 (1872). His remedies as a
pledgee are not released or affected by
his pursuit of other remedies. See
Sickles v. Richardson, 23 Hun, 559 (1881).
Judgment on the debt does: not release’:
the stock pledged. ‘‘ Until the debt‘is:

492
CH. XXvI.]
Ss
is his remedy as a creditor and not as a pledgee of the person in-
‘debted to him.
§ 477. Notice of sale of stock by pledgee to apply to debt secured.—
In case the pledgee pursues the remedy of selling the stock with-
out any judicial proceedings, he must give the pledgor reasonable
notice of the intent to sell and of the time and place of sale! A
sale without a notice is a conversion of the stock. The pledgee
must demand payment of the debt secured by the pledge of stock,
and a waiver of notice of sale is not a waiver of a right to have
such a demand made.’ A notice of intent to sell, however, is equiv-
alent to a demand of payment.‘ A broker’s custom to the effect
that no notice is necessary is illegal and void.’ The time and place
of the proposed sale must be specified in the notice. The time
-between the service of the notice and the time when the sale is to
_ take place must be reasonable in length, so as to give the debtor
an opportunity to ebtain money to -pay the debt.’ .In Massachu-

PLEDGE OF STOCK.

[g 477.

paid, the pledgor, under the terms of
the bailment, has no right. to have the
pledge given up to him.” Donnell v.
Wyckoff, 7 Atl. Rep., 672 (N. J., 1887).
In an action by the pledgee for the debt,
the pledgor may set up a conversion of
the stock pledged. Id. See, also, Hill
v. Beebe, 13 N. Y., 556, 568, 567.

1“ To authorize the defendants to sell
the stock .purchased, they were bound,
first, to call upon the plaintiff to make
good his margin; and, failing in that,
he was entitled, secondly, to notice of
‘the time and place where the stock
would be sold; which time and place,
thirdly, must be reasonable.” Mark-
ham v. Jaudon, 41 N. Y., 235, 248 (1869).
See, also, Stratford v. Jones, 97 N.-Y.,
586 (1885); Baker v. Drake, 66 N. Y.,
518 (1876); Conyngham’s Appeal, 57

‘Penn. St., 474; Stearns v. Marsh, 4
Denio, 227 (1847); Nejler v. Kelley, 69
' Penn. St., 408 (1871); Cushman v. Hayes,
46 Ill., 145 (4867). A joint. owner is
entitled to notice. Clark v. Sparhawk,
2 Weekly Notes, 115 (1875).
2Fowle v. Ward, 113 Mass., 548 (1873) ;
- Hemppling v. Burr, 26 Northwest. Rep.,
496 (Mich., 1886}; 21 N. E. Rep., 510
(Ill., 1889).

3Lewis v..Graham, 4 Abb. Pr., 106

(1857); Brass v. Worth, 40 Barb,, 59

(1863); Wilson v. Little, 2 N. V., 448,
448 (1849), saying: ‘‘It is well settled

that where no time is expressly fixed

by contract between the parties for the
payment of a debt secured by a pledge,
the pawnee cannot sell the pledge
without a previous demand of pay-
ment, although the debt is technically
due immediately.” Genet v. Howland,
45 Barb., 560 (1866).

4 Nabring v. B’k of Mobile, 58 Ala., 204
(1877). So, also, of notice of intent, to
foreclose. Howe v. Bemis, 2 Gray, 203.

5 Markham v. Jaudon, 41 N. Y., 235
(1869). /

6Conyngham’s Appeal, 57 Penn. St.,
474 (1868); Genet v. Howland, supra;
Canfield v. Minn., etc., Ass’n, 14 Fed.
Rep., 801. -See Schouler on Bailments,
206-212. It has been held in Maryland
that a notice of the place is unneces-
sary, Worthington v. Tormey, 34 Md.,
182 (1870). But such decision would be
unsafe, and probably would not be fol-
lowed elsewhere. In New York, the
place of sale formerly, by custom, was
at the Merchants’ Exchange, No, 111
Broadway, but is now at the Real Es-
tate Exchange in Liberty street.

7 In Maryland, etc., Co. v. Dalrymple,
25 Md., 242, a week’s notice was held

- sufficient. Lewis v. Graham, 4 Abb.

493
PLEDGE OF STOCK. _ (cu. XXYI,

§ 478.]

setts, b7 statute, sixty days’ notice must be given.’ A notice by a
newspaper advertisement is insufficient? It must be served per-
sonally, and it seems that it cannot be served on one who has
charge of the pledgor’s office for the transaction of business.’ By
an express agreement the pledgor may waive his right to notice of
the time and. place of the sale Such contracts are frequently en-
_ tered into with stock-brokers by customers buying stock on a mar-
gin. But an express power to the pledgee to sell the pledge on
certain contingencies is not a waiver of a right to notice.’

§ 478. Formatlities of sale— A sale of stock on notice by a
pledgee, for the purpose of applying the proceeds to the pledgor’s
debt, must be at public auction. <A private sale is unauthorized
and illegal, even though the utmost market price is obtained.’’ The
pledgee cannot have the sale made at a broker’s board or in a stock

Pr., 106 (1857), holding that thirty-four
days, where the pledgor resides in Illi-
nois and the sale is to be in New York,
is a sufficient; Bryan v. Baldwin, 7
Lans., 174 (1872);
holding that two days was sufficient;
Stevens v. Hurlbut B’k, 31 Conn., 146
(1862), holding that a sale on the same
day is unreasonable and the notice in-
sufficient. See other cases in chapter
XXV, §§ 457, 458: Willoughby v. Com-
stock, 3 Hill, 389 (1842), where two days
was held sufficient. Edwards on Bail-
ments, 285. As to place of sale, see
chapter XXV, §§ 458, 476.

1Gen. Stat., ch. 151, § 9.

2Lewis v. Graham, supra; and see
§ 119.

3 Bryan v. Baldwin, 52 N. Y., 282
(1878). Of. Milliken v. Dehon, 27 N. Y.,
364 (1858).

4Maryland Fire Ins, Co. v. Dalrym-
ple, 25 Md., 242 (1866); Genet v. How-
land, supra; and see chapter XXV,
§§ 459, 462; Milliken v. Dehon, 27 N. Y,,
864; Stevens v. Hurlbut B’k, 31 Conn.,
146; Hyatt v. Argenti, 3 Cal.,
Wheeler v. Newbould, 16 N. Y., 892;
Stenton v. Jerome, 54 N. Y., 480; Wicks
v. Hatch, 62 N. Y., 535. Pledgor of
stock may, by the terms of the agree-
ment creating the pledge, waive his
right to notice of sale for non-payment
of the debt. Appeal of Jeanes, 11 Atl.

aff'd, 52 N. Y., 282,

151;.

Rep., 862 (Pa., 1887), Formerly the va-
lidity of a waiver was doubted. Camp-
bell v. Parker, 9 Bosw., 322; Wilson v,
Little, 2 N. Y., 448, 448; Gilpin v. How-
ell, 5 Penn., 41: Hanks v. Drake, 40
Barb., 186; Sterling v. Jaudon, 48 id.,
459. Authority to the pledgee to sell
“‘at public or private sale, at his discre-
tion,” thirty days after notice, waives
notice of sale. McDowell v. Chicago,
etc, 16 N. E. Rep., 854 (Ill, 1888).
Notice may be waived. Chouteau v.
Allen, 70 Mo., 290 (1879).

5Stevens v. Hurlbut B’k, 31 Conn,
146 (1862). Of. Milliken v. Dehon, 27 N,
Y., 364 (1863). But an express power
to sell on a specified day is held to waive
right of notice. Bryson v, Raynor, 25
Md., 424 (1866).

6 Conyngham’s Appeal, 57 Penn. St.,
474 (1868); Rankin v. McCullough, 12
Barb., 103 (1851); Genet v. Howland, 45
Barb., 560 (1866); Ogden v. Lathrop, 65
N. Y., 158 (1875). An express power to
sell has been held to authorize a private
sale. Bryson v. Raynor, 25 Md., 424

(1866). Ora sale at a broker’s board. Idy

7Castello v. City B’k of Albany, 1
Leg. Obs., 25 (1842) ; Willoughby v. Com-
stock, 3 Hill, 889 (1842). Cf. Nabring v.
B’k of Mobile, 58 Ala., 205 (1877). The
pledgee’s right to object is waived by
long delay. Hayward v, Nat’l B’k, 96
U.S., 611 (1877).

494
OH. xxv] PLEDGE OF STOOK. [§ 479.

exchange, 1 since only the members of the association are allowed to
bid for stocks sold therein, while the law roars that the public
shall be. allowed to bid at a pledgee’s sale. Frequently a special
agreement is made between the pledgor and pledgee, especially be-
tween a customer and his stock-broker, whereby the pledgee is
allowed to sell at a broker’s board.’ Such an agreement, however,
‘does not authorize a private sale ata broker’s board.’ A sale is
valid though the stock is sold for only a small part of its value.‘

§ 479. Pledgee himself cannot purchase at the sale. It is a well-
established rule that, where a pledgee pursues the remedy of selling
the stock upon notice, the pledgee himself is disqualified from pur-
chasing the stock.’ The rule is based on the principle that the law
carefully protects the interest of the pledgor, and will not open the
door to possible devices of the pledgee for purchasing the stock for
himself at a low price. The pledgee cannot purchase, either di-
rectly or indirectly, in his own name or in the name of another.®
The effect of a purchase by the pledgee for himself is that the
whole proceeding of the pledgee for subjecting the pledge to the
payment of the debt is utterly futile, and voidable at the election
of the pledgor. The pledgor cannot claim that the pledgee has
converted the stock by purchasing at the sale,’ but he may disre-
gard the notice and sale and whole proceeding as being ineffectual

!
ant.” ‘Maryland Fire Ins. Co. v. Dal-
rymple, 25 Md., 242 (1866). Nor can he

1 Brass v. Worth, 40 Barb., 648 (1863) ;
Rankin v. McCullough, 12 Bardis 103

(1851).

2 Wicks v. Hatch, 62 N. Y., 535 (1875).
In Maryland a contrary rule prevails.
Maryland Fire Ins. Co. v. Dalrymple, 25
Md., 242 (1866). See chapter XXV.

8 Allen v. Dykers, 8 Hill, 503; 7 id.,
497.

4A bona fide purchaser at a pledgee’s
sale is protected, though he purchased
for less than the real value of the stock,
and though areceiver had previously
been appointed of the pledgor’s prop-
erty and it had been transferred to the
receiver. Dudley v. Gould, 6 Hun, 97
(1875). :
5Bryan v. Baldwin, 52 N. Y., 482
(1878), the court saying: ‘‘ The plaintiff
being the pledgee of the stock, and in

that character exposing it for sale, could

not become the purchaser unless the de-
fendant assented tosuch purchase. This
sale to the plaintiff was not void, but
- yoidable, at the election of the defend-

buy where the pledge is being sold on
a forfeiture sale for non-payment of
calls. Freeman v. Harwood, 49 Me.,
195 (1859). See, also, Sickles v. Richard-
son, 23 Hun, 559 (1881), where the sale

‘of the property pledged was on an at-
_ tachment.

The pledgor’s silence may
constitute a ratification of the pledgee’s
purchase. Carroll v. Mullanphy Sav.
B’k, 8 Mo. App., 249 (1880). If the
pledgee is a corporation, its president
cannot purchase for it. Star Fire Ins,
Co. v. Palmer, 41 Super. Ct., 267 (1876).
Lewis v. Graham, 4 Abb. Pr., 106 (1857),
holds that a special partner of the
pledgee firm may purchase. And see
chapter XXV, § 450. Cf. Finney’s Ap-
peal, 59 Penn. St., 398 (1868).

6 Minnesota Assoc. v. Canfield, 121 U.
S., 295 (1887).

TBryan v. Baldwin, 52 N. Y., 282
(1878).

495
§ 479.] PLEDGE OF STOCK. [CH. XXVI,

and voidable. The pledge relationship continues as though no
attempt had been made by the pledgee to subject the pledge to the
payment of the debt. Where, however, the pledge is foreclosed
by legal proceedings similar to those for the foreclosure of chattel
mortgages, it seems to be in the power of the court to insert in the
decree a provision allowing the pledgee to purchase on the sale.
The pledgor may authorize the pledgee to purchase at the sale and
retain the pledge.? Stock held in pledge to secure a debt cannot
be sold before the debt is due.’

1 Bryson v. Raynor, 25 Md., 424 (1866); 2Chouteau v. Allen, 70 Mo., 290 (1879),
Middlesex B’k v. Minot, 45 Mass., 325 8 National B’k v. Baker, 21 N. E, Rep.,
(1842); Hestonville, etc., R. R. Co. v. 510 (Ill., 1889). ‘

Shields, 3 Brews. (Penn.), 257 (1869).
496
CHAPTER XXVII.

LEVY OF ATTACHMENT AND EXECUTION UPON SHARES OF STOCK.

§ 480. An execution at common law
could not reach shares of
stock,

Nor, it seems, could a court of
equity subject stock to the
payment of debts.

By. statutory provisions execu-
tions are generally sufficient
to reach the debtor’s stock.

Attachment of stock as allowed
by the statutes of the various
states.

Attachment of pledge, etc., and
of stock which the debtor
has fraudulently transferred
away.

Stock can be attached only in
the state creating the corpo-
ration.

481.

482,

483.

484,

485,

 

§ 486. Rights of an unregistered trans-
feree of a certificate of stock
as against an attachment or
execution levied on that stock.

Rule in New York, Pennsylva-
nia, New Jersey, South Caro-
lina, Texas, Louisiana, and
the federal courts. e

Rights and duties of the corpo- |
ration in such, cases. |

Rule in Connecticut, Maine,
New Hampshire,’ Vermont,
Indiana, Illinois, Iowa, Mary-
land, Wisconsin and Califor-
nia.

Rule in Massachusetts. ;

Shares of stock cannot be sub-
jected to. the payment of the
stockholder’s debts by the pro-
cess of garnishment.

487,

488.
489,

490.
491,

§ 480. An execution at common law could not reach shares of

stock.—A share of stock is in the nature of a chose in action, and
at common law a chose in action could not be reached by or made
subject to alevy of execution. Consequently it has been uniformly
held by the courts that at common law a levy of execution could
not be made on shares of stock. Unless, therefore, the process of
execution has been extended by statute so as to reach such prop-
erty, the stock of a judgment debtor cannot be subject to the pay-

ment of his debts by means of an execution.!

1Van Norman v. Jackson County
Circuit Judge, 45 Mich., 204 (1881);
Goss v. Phillips, etc.,.Co., 4 Bradw.,
510 (1879); Blair v. Compton, 33 Mich.,
414 (1876); Slaymaker v. Bank of
Gettysburg, 10 Penn. St., 373 (1849);
Foster v. Potter, 37 Mo., 525 (1866);
Howe v. Starkweather, 17 Mass., 240
(1821); Nabring v, B’k of Mobile, 58
Ala,, 204 (1877);:Denton v. Livingston,
9 Johns., 96 (1812), per Chancellor Kent;
Nashville B’k v. Ragsdale, Peck (Tenn.),
296 (1823). Even where the stock is held
to be real estate. Cooper v, Canal Co.,

(82)

An attachment,

2 Murph. (N. C.), 195 (1812). Cf. Gue
v. Tide-water Canal Co., 24 How: (U. 8.),
257 (1860). Atanearly day, when the
nature of stock was little understood,
an attachment was attempted on the
corporate property for the debts of a
stockholder. It failed. Williamson v.
Smoot, 7 Mart. (La.), 81 (1819). Stock
cannot be taken on a tax warrant.
Barnes v. Hall, 55 Vt. Rep., 420, Of.
M’Neal v. Mechanics’, etc., Assoc., 8
Atl Rep., 125 (N. J., 1885); Smith »,
Northampton B’k, 4 Cush., 1 (1849), and
§ 566. Execution against the corpo-

497
[CH. XXVI;,

being, entirely statutory, can be levied on shares of stock only
when the words of the statute declare that an attachment may be
levied on such property.'
§ 481. Nor, it seems, could a court of equity subject stock. to the
lies of debts.— There is some doubt whether a court of equity
has power to subject a judgment debtor’s choses in action to the
payment of his debts, where the only ground for the interference of
the court is that, unless it does interfere, such property cannot be
reached by the judgment creditor. In New York, previous to the
statutes regulating this subject, the javisHichien of a court of equity
therein was emphatically denied in one case,’ and with equal em-
phasis declared to exist in another case.? The English authorities
are quite uniform in holding that.a court of equity has no such
jurisdiction. And in America, for the most part, a similar con-
clusion is arrived at.5 Where, however, the debtor has conveyed
away his stock for the purpose of defrauding his creditors, a court
of equity will aid the judgment creditor, inasmuch as it has juris-
diction in all matters involving fraud, trust or accident, or other
ingredient of similar character. 6
6 482. By statutory provisions executions are generally sufficient
to reach the debtor’s stock.— Nearly all of the states of the Union

88 481, 402] ATTACHMENT AND EXECUTION.

ration cannot be levied on stock owned of equity subjected to the payment of
by the corporation itself, such stock a debt the debtor's reversionary interest
having been purchased by it under in an annuity. In Horn v, Horn,
statutory authority at a forfeiture sale Ambl.,'79 (1749), the court refused aid,
for non-payment of calls. Robinson v. inasmuch as the debtor had been im-
Spaulding, etc., Co.,13 Pac. Rep., 65 prisoned under a cap. satis.
(Cal., 1887). An attachment of stock Williams v, Reynolds, 7 Ind., 622
does not prevent asale of property by (1856); Disborough v. Outcalt, Saxton’s
the corporation. Gottfried v., Miller, Ch. (N, J.), 298, 806 (1831); McFerran v.
104U. S.,; 521 (1881). Jones, 2 Litt. (Ky.), 219 (1822); Erwin v.
1 Plimpton v. Bigelow, 93 N. Y¥., 692, Oldman, 6 Yerg., 185 (1884), Contra,
602 (1883); Merchants’ Mut. Ins. Co. % dictum, Watkins v. Dorsett, 1 Bland’s

Brower, 88 Texas, 230 (1878).

2Donovan v. Finn, Hopk, Ch., 67, 91
(1828). See, also, Daniell’s Ch. Pr., vol.
II, p. 1087, note,

3Storm v. Waddel, 2 Sand. Ch., 495,
511 (1845),

4 Dundas v. Dutens, 1 Ves., 196 (1790);
Bk of Eng. v. Lunn, 15 Ves., 569 (1809);
Grogan v, Cooke, 2 Ball & B. (Ir. Ch.),
280 (1812); Nantes v. Corrock, 9 Ves.,
183 (1803); McCarthy v, Gould, 1 Ball &
B. (Ir. Ch.), 887 (1810), applying the
same rule to dividends. In King »v.
Dupine, 2 Atk., 603, note (1744), a court

Ch., 530 (1828), In Brightwell v, Mallory,
10 Yerg..(Tenn.), 198 (1836), the proceed-
ing was statutory.

6 See $8 889, 340, on Statute of Frauds;
also Taylor v. Jones, 2 Atk., 600 (1748),
holding that the debtor's transfer of
stock in trust was in fraud of creditors;
Hadden v, Spader, 20 Johns. (N. Y.)
554 (1822); Scott v. Indianapolis Wagon
Works, 48 Ind., 75 (1874); Van Norman
v. Jackson Circuit Judge, 45 Mich., 204
(1881); Lathrop’ v. McBurney, 71 Ga.,
815 (1888); Gillett v. Bate, 86 N. Y., 87.
See 23 Hun, 410, and &§ 482, 484,

498
CH. XXVIz]

ATTACHMENT AND EXECUTION.. [§ 482.

have enacted statutes extending the scope of executions so as to
render subject to them all choses in action, including shares of
stock in a corporation. Frequently special provisions are made
applicable to stock, and prescribing the steps which are necessary
in rendering the execution levy effectual. Where an execution is
levied in accordance with such statutes its provisions must be sub-
stantially complied with, and if not complied with the sale is not
merely voidable, but is wholly unauthorized and void. It is fatal -
to the levy and.sale if the sheriff fails to give to the corporation
the notice that is generally required by statute;? or if the sale by
the sheriff is not made promptly as advertised in accordance with
the statute.’ The saleitself is not complete until the sheriff gives the -
proper instruments of title to the purchaser, and until then the cor-
poration is not obliged to recognize the latter as having any rights.‘
Whether or not an execution can be levied on stock which has
been fraudulently transferred away by the judgment debtor de-
pends upon the wording of the statute allowing the levy of execu-
tion on stock. If it allows a levy on all interests of the debtor,
whether legal or equitable, then the fraudulent transfer may be
disregarded and the stock seized as though still standing in the
name of the judgment debtor.’ If, however, the statute does not
expressly provide for a levy on an equitable interest, the judg-

1Blair v. Compton, 83 Mich., 414
(1876), holding that, where the sheriff
sold without knowing or stating how
many shares of stock the debtor owned,
and which were being sold, the sale
was void. See, also, People v. Goss,
etc., Mfg. Co., 99 Ill., 855 (1881), re-
versing Goss, etc., Mfg. Co. v. Peo-
ple, 4 Bradw., 510. The procedure in
levy of execution on stock, as laid down
by the charter of the corporation, super-

-sedes the procedure of a previous gen-
eral statute. Titcomb v. Union Marine,
etc., Ins. Co., 8 Mass., 326 (1811). And
vice versa,, Howe v. Starkweather, 17
Mass., 240 (1821). The sheriff need not
sell the stock in parcels, but may sell
the whole at once. Morris v. Conn., etc.,
R. R. Co. (Montreal Ct. of Appeal, Sep=
tember, 1886), An execution sale of
stock will be set aside where it was
made with an intentional concealment
of the sale from the stockholder, the
execution debtor. Voorhis v. Terhune,
13 Atl, Rep., 891 (N. J., 1888).

?Princeton B’k v. Crozer, 22 N. J.
Law, 383 (1850), where no notice was
given, but the stock was merely men-
tioned in the inventory returned by the,
sheriff.

8 Titcomb v. Union Marine, etc., Ins.
Co., 8 Mass., 326 (1811), and Howe v.
Starkweather, 17 Mass., 240 (1821),
where the sale was made after the
proper day, without a re-advertisement,
and consequently was held to be void.
The court said: ‘‘ The sale of them upon
execution not being justifiable at com-
mon law, the statute must be strictly
pursued to give any property to the
purchaser.” An execution sale of stock
at 9 o’clock at night, when few are
present, is void. McNaughton v. Mc-
Lean, 41 N. W. Rep., 267 (Mich., 1889),

4 Morgan v. Thames B’k, 14 Conn., 99
(1840). ‘

5 Scott v. Indianapolis Wagon Works,
48 Ind., 75 (1874). Cf. State v. Warren
Foundry, etc., Co, 82 N. J. L., 489
(1868); § 484, infra. \

499
§ 483.] ATTACHMENT AND EXECUTION. fou. XXvII.

ment creditor’s remedy is not an execution, but a suit in equity to
set aside the fraudulent transfer.' Ifthe statute prescribes that
the corporation shall register as a stockholder the purchaser at the
execution sale, the writ at mandamus will lie to compel the corpo-
ration to make such registry ;* but the relator must allege that he
presented to the corporation the required papers, and was refused
such registry.’

§ 483. Attachment of stock as allowed by the statutes of the vari-
ous states.— The states of the Union have quite generally passed
statutes providing for the attachment of a debtor’s property where
the debtor is a non-resident or is guilty of a fraud, or where other
facts exist which bring the case within the attachment statute. In-
asmuch as in modern times a large part of the property of indi-
viduals consists of shares of stock in corporations, the attachment
statutes generally provide specially for the attachment of stock,
and give specific directions in reference to the steps necessary to
be taken in making. such attachment.* In New York an attach-
ment of stock is provided for; but an execution without a previous

1Van Norman v. Jackson County
Circuit Judge, 45 Mich., 204 (1881).

2 Bailey v. Strohecker, 88 Ga., 259
' (1868). See, also, § 390.

3Lippett v. American Wood Paper
Co., 14 R. I., 301 (1888).

4 California, Code of C. Proc., §'5141;
Colorado, Code of C. Proc., § 97; Con-
necticut, Gen. Stat. (1875), § 6; Georgia,
Code of 1882, §§ 3289-3291; Indiana,
R. 8. (1881), § 938; Iowa (McClain’s An-
notated Stat., 1880), § 2967; Maine,
R. 8. 1884, ch. 81, § 27; Maryland, R.
Code of 1874, § 20; Massachusetts, Pub-
lic Stat. 1852, ch. 161, §§ 71-78; Mich-
igan (Howell’s Annotated Stat., 1883);
Minnesota, Gen. Stat. 1878, § 156; Mis-
couri, R. §., 1879, § 417; Nebraska,
Com. Laws 1881, ch. 8, § 201; Nevada,
Gen. Stat. 1885, ch. 4, §3 3149, 3150;
New Hampshire, Gen. L. 1878, ch. 224,
$18; New York, Code of Civil Proc.,
§ 647; also § 649, as amd. by L. 1879,
ch. 541; also §s 650, 651, 708 (2); Ohio,
R. 8. 1880, title 1, div. 6, ch. 2, § 5524;
Pennsylvania, Brightley’s P. Dig., § 71;
South Carolina, Code of C. Proc., ch. 4,
8§ 256-258; Wisconsin, R. 8. 1878,
§ 2788. Where both an attachment and
an execution on stock are allowed by

statute, the former is said to be the
preferable remedy when the corpora-
tion has a lien on the stock or there i is
a claimant to the stock. Weaver v.

Huntingdon, etc., Coal Co., 50 Penn.

St., 314 (1865); Lex v. Potters, 16 Penn.
St., 295 (1851). An attachment of stock
covers the dividends also. Upon va-
cating the attachment damages may be
recovered. Jacobus v. Monongahela,
etc., B’k, 35 Fed. Rep., 395 (1888). De-
crease in value of stock while subject
to attachment does not render the sure-
ties on the undertaking liable therefor.
Miller v. Terry, 50 Hun, 256 (i888), In
New York shares of stock cannot be
levied on under a writ of execution, al--
though they may be attached and sub-
sequently sold by execution in that suit,
Code of Civil Procedure, §§ 647, 649-651.
See 4 Wait’s Pr., 36, J. Stock may be
reached, however, by proceedings sup-
plementary to execution. See, in gen-
eral, Barnes uv. Morgan, 8 Hun, 708
(1875); O’Brien v, Mechanics’ & T. Ins.
Co., 56 N. Y., 52 (1874); Smoot v. Heim,
1 Civ. Proc. Rep., 208 (1881),—- cases
arising under the attachment law. Un-
der the English statutes, 1 and 2 Vict.,
ch, 110, § 14, and 3 and 4 Vict., ch. 82,

500
OH. XXVIl.] ATTACHMENT AND EXECUTION. [§ 484.

attachment is not allowed.’ It has been held that shares of stock
may be attached under the general provisions of an attachment
law which does not specify shares of stock as being subject to an
attachment. The formalities prescribed by the statute must. be
complied with fully as in the case of a levy of execution upon
stock.

§ 484. Attachment of pledge, etc., and of stock which the debtor
has fraudulently transferred away— As has been said in the case
of an execution levied on shares of stock, an attachment may be
levied on the same when the words of the attachment statute are
so broad as to render subject to the attachment all equitable. inter-

ests of the debtor whose stock is attached. Thus, it has been held

in Ohio and New Jersey that, where the debtor has transferred his
stock for the purpose of defrauding his creditors, an attachment of
the stock will lie nevertheless. An attachment may be levied upon
stock although the stock has been mortgaged or pledged, and the
attaching creditor is seeking to reach merely the equity of redemp-
tion’ An attachment is not the best remedy for a pledgee who

§ 1, stock in any public company stand-
ing in the name of any person against
whom judgment shall have been ob-
tained, whether “in his own right or
in the name of any person in trust for
him,” may be charged by a judge’s or-
der with the payment of the amount of
the judgment. The statute says: ‘‘ The
interest of any judgment debtor,
whether in possession, remainder or
reversion, and whether vested or con-
tingent,” may be so reached. Cragg v.
Taylor, L. R., 2 Ex., 181 (1867); Baker
v. Tynte, 2 Ell. & E., 897 (1860).
11d.
2 Chesapeake & O. R. R. Co. v. Paine,
_ 29 Gratt. (Va.), 502 (1877), where stock
was held to be included under the word
“‘ estate,” and the procedure prescribed
for garnishment was followed and up-
held. So, also, Curtis v. Steever, 36
N. J. L. Rep., 304 (1878), where an at-
tachment of stock was upheld, though
the statute merely allowed attachment
of ‘‘rights and credits.” In Haley v.
Reid, 16 Ga., 487 (1854), however, an
attachment of stock was not allowed
where the statute allowed levy ‘‘ upon
the estate, both real and personal.”
_ See, also, Merchants’ M. Ins. Co. ».

Brower, 38 Texas, 230 (18738). It has
been held that there can be no attach-
ment of stock under a statute which
allows an attachment of ‘‘real and
personal property.” Foster v. Potter,
37 Mo., 525. ‘

3Stamford B’k v. Ferris, 17 Conn.,
259 (1845), where the attachment failed
because the sheriff did not leave a copy
of the writ, duly indorsed, with the
corporation, even though the cashier of
the corporation was absent, A transfer
subsequent to such irregular attach-
ment is valid and carries title.

4Nat’l B’k of N. L. v. Lake Shore &
M.S. R. RB. Co., 21.0. St., 221 (1871),
holding also. that the attachment is
good, even though the corporation deny
that the defendant owns any stock
therein; Curtis v. Steever, 36 N. J. L.
Rep., 804 (1873), the court saying that
the attachment is good, since the fraud-
ulent transfer is void; and holding that
the transferee may bring a suit for

trespass, and that the attaching. cred- -

itor may then set up the fraud in de-
fense.
etc., Co., 32 N. J. L., 489 (1868).
aso, § 482, supra.

5 Edwards v. Beugnot, 7 Cal., 162

See,

501

Cf. State v. Warren Foundry, -
§ 485.] ATTACHMENT AND EXECUTION. (cH. XXvVIL
wishes to subject the pledge to the payment of the debt.! His
remedy is by foreclosure or a public sale on notice to the pledgor.
Dividends on the stock which is attached follow the stock, and are
covered by the attachment. An. attachment will lie in Rhode
Island for stock which is registered in the name of a person other
than the defendant, the transfer by the defendant having been in
fraud of creditors.? Where the corporation has a lien on stock for
debts due from the stockholder to the corporation, it may enforce
the lien by an attachment.! ,

§ 485. Stock can be attached only in the state creating the corpo-
ration.— Shares of stock in a,corporation are personal property,
whose location is in the state where the corporation is created. It
is true that, for purposes of taxation and some other similar pur-
poses, stock follows the domicile of its owner; but, considered as
property separated from its owner, stock is in existence only in the
state of the corporation. All attachment statutes provide for the
attachment of a non-resident debtor’s property in the state, and
generally, under such statutes, the stock owned by a non- resident
in a corporation created by the state wherein the suit is brought
may be attached and jurisdiction be thereby acquired to the extent

of the value of the stock attached.®

can an attachment be levied on

(1857), holding also that, if the mort-
gage is recorded on the corporate books,
notice must be served on the mortgagee
also; and that, where one attachment
was served on the corporation and an-
other on the mortgagee, the latter
attachment prevails and takes the sur-
plus; Norton v. Norton, 43 O. St., 509
(1885), holding that the court will order
the stock to be sold, the pledgee paid
and the balance held under the attach-
ment. See, also, Vantine v. Morse, 104
Mass., 275 (1870); New Eng., etc., Co.
v. Chandler, 16 Mass., 275 (1820). Cf.
Cooke v. Hallett, 119 Mass., 148 (1875).
A garnishment for the surplus is inef-
fectual. Kyle v. Montgomery, 73 Ga.,
337 (1884); Seeligson v. Brown, 61
Texas, 114 (1884); Mechanics’, etc.,
Ass’n v. Conover, 14 N. J. Eqg., 219
(1862); Foster v. Potter, 37 Mo., 525
(1866); Manns v. Brookville Nat’l B’k,
73 Ind., 248 (1881); Nabring v. B’k of
Mobile, 58 Ala., 204 (1877). See, also,
_ $$ 840, 491,

But under no circumstances
a defendant’s shares of stock in

lLee v. Citizens’ Natl B’k, 2 Cin.
Super. Ct., 298, 312 (1872). See § 476.

2Moore v. Gennett, 2 Tenn. Ch., 375
(1875).

3 Beckwith v. Burroughs, 14 R. L., 366
(1884), And the purchaser at the exe-
cution sale may file a bill in equity to
clear the title to the stock. Cf. 8. C., 13
R. L, 294 (1881).

‘Sabin v. Bk of Woodstock, 21 Vt.,
858 (1849). ;

5 Evens v. Monet, 4 Jones’ Kg. (N. C.),
227 (1858),

6 Natl B’k of N. L. v. Lake Shore &
M. 8, R. R. Co., 21 O. St., 221 (1871);
Chesapeake & O. R. R. Co. v. Paine, 29
Gratt. (Va.), 502 (1877). An attachment
and sale of stock made on a debt not
justly due will be enjoined as regards
registry on the corporate books, and the
sale declared void. Seligman v. St.
Louis, etc., R. R. Co., 22 Fed, Rep., 89
(1884),

502
oH. XxvIL]- ATTACHMENT AND EXECUTION.* [§ 485.
an action commenced outside of the state wherein the corpora-
tion is incorporated, For purposes of attachment, stock is located
where the corporation is incorporated and nowhere else.! The
shares owned by a non-resident defendant in the stock of a foreign
corporation cannot be reached and levied upon by virtue of an at-
tachment, although officers of the corporation are within the state
engaged in carrying on the corporate business.?’ Nor can such an
attachment be levied although the foreign corporation hasa branch
registry office in the state where the attachment is levied, and al-
though the certificates of stock are also in such state.* Certificates
of stock are not the stock itself—they are but evidence of the
stock; and the stock itself cannot be attached by a levy of attach.
ment on the certificate. As was well said by the supreme court of
Pennsylvania, stock cannot be attached by attaching the certificate
any more than lands situated in another state can he attached by
an attachment in Pennsylvania levied on the title deeds to such
land. There can be no attachment of stock as the property of an

1 Winslow v. Fletcher, 13 Am. & Eng.
Corp. Cas., 89 (Conn., 1886), the court
saying that ‘‘ stock in a corporation for
the purposes of an attachment has its
situs where the corporation is located.”
Under the statutes of Tennessee, how-
ever, requiring a foreign corporation
doing business in that state to file its
articles of incorporation with the secre-
tary of state, it was held that it became
a domestic corporation sufficiently to
authorize an.attachment of stock in
that state; Young v. South, etc., Iron
Co., 2 S. W. Rep., 202 (Lenn,, 1886).
Bonds which are pledged by a non-resi-
dent cannot be attached by serving a
notice on the pledgee. Tweedy v. Bo-

_ gart, 15 Atl. Rep., 374 (N. J., 1888).

2Plimpton v. Bigelow, 98 N. Y., 592
(1883), reversing 29 Hun, 362, the court
saying: ‘ We do not doubt that shares
for the purpose of attachment proceed-
ings may be deemed to be in the posses-
sion of the corperation which issued
them, but only at the place where the
corporation by intendment of law. al-
ways remains, to wit, in the state or
country of its creation. Mani-
festly the res cannot be within the ju-
risdietion, as a mere consequence of a
leg’slative declaration, when the actual

locality is undeniably elsewhere.” Gar-
nishment proceedings also will not ap-
ply. The defendant may move tu have
the attachment levy set aside. Martin
v. Mobile & O. R. R. Co., 7 Bush (Ky.),

-116 (1870), holds that a statute authoriz-

ing a foreign corporation to exercise
certain powers does not make it a do-
mestic corporation, Certificates of
stock in a corporation of another state
cannot be subjected to the payment of —
the stockholders’ debts, either by attach-
ment or a bill in equity. Morton v.
Grafflin, 18 Atl. Rep., 341 (Md., 1888).

%Christmas v. Biddle, 18 Penn. St.,
228 (1850), approved in Childs v. Digby,
24 Penn. St., 23 (1854). In this case the
attachment was levied in Pennsylvania
on certificates of stock in Pennsylvania,
but belonging to a vitizen of Mississippi,
and the corporation was created by the
laws of Mississippi. ,

'4Christmas v. Biddle, supra; Moore
v. Gennett, 2 Tenn. Ch., 375 (1875).

5 Christmas v. Biddle, supra. In Wins-
low v, Fletcher, 13 Am, & Eag. Corp.
Cas,, 39 (Conn., 1886), the court well
says: ‘‘ While the certificates are in
themselves valuable for some purposes,
and to some extent may properly be re-
garded as property, yet they are dis-

503 °
&§ 486, 487.] -ATTACHMENT AND EXECUTION. [cH. xxvII.
unregistered holder through whom title has passed to another.!
This rule is peculiar to certificates of stock.

§ 486. Rights of an unregistered transferee of a certificate of
stock as against an attachment or execution levied on that stock—
The most difficult and unsettled question connected with an attach-
ment or execution levied on stock is the question of how far a pur-
chasér of the certificate of stock from the stockholder and debtor is
protected in his ownership where such purchaser does not have his
transfer registered on the corporate books before the attachment
or execution is levied. This question is especially important, since
it affects the rights of a bona jide purchaser of stock in the open
market, and constitutes one of the greatest dangers incurred in the
purchase of certificates of stock. On one point it seems that the
courts of all the states agree. If a stockholder whose stock has
been already attached or ‘sold on execution, sells his certificate of
stock after the levy of such attachment or execution, the vendee or
transferee buys subject to such levy, even though he had no knowl.
edge of it. The stock, in contemplation of law, has already been
seized by the levy, and the purchaser is bound to take notice of that
fact.2 The only means of avoiding this danger in the purchase of
stock is by an inquiry, at the otlice of the corporation at the time
of making the purchase. <A different question presents itself when
the stockholder against whose stock an attachment or execution is
levied has already and before such levy sold and transferred his
certificate of stock, but that transfer has not been registered on the
corporate books. The courts of the different states are in irrecon-
cilable conflict on this question of whether the unregistered trans-
feree is protected in his purchase.

§ 487. Rule in New York, Pennsylvania, New Jersey, South
Carolina, Texas, Louisiana and the federal cowrts—— The decided
weight of authority holds that he who purchases for a valuable.
consideration a certificate of stock is protected in his ownership
of the stock, and is not affected by a subsequent attachment or
execution levied on such stock for the debts of the registered stock-

tinct from the holders’ interest in the
capital stock of the corporation, and are

1 Lippett v. American, etc., Co., 14
R. 1, 801 (1885). Thus, where A.,, the

not goods and effects within the mean-
ing of the statute relating to foreign at-
tachment. They are no more subject
to an attachment or a trustee process
than a promissory note. The debt is
subject to attachment, but the note
itself, which is simply evidence of the
debt, is not. So with stock. That may
be attached, but the certificate cannot
be.”

registered stockholder, tr ansfers the cer:
tificate of stock to B. and B. transfers it
to C., and C. obtains registry directly:
from A., there can be no attachment of
the stock against B.

2Chesapeake & O. R. R. Co. v. Paine,
29 Gratt. (Va.), 502 (1877); Shenan:ivah
Valley R. R. Co. v. Griffith, 76 Va., 918
(1882), Cf. Dudtey v. Gould, 6 Hun, 97

(1875).

504
CH. XXvIt.]

ATTACHMENT AND EXECUTION.

[§ 487,

holder, even though such purchaser has neglected to have his
transfer registered on the corporate books, thereby allowing his
transferrer to appear to be the owner of the stock upon which the
attachment or execution is levied. Such is the rule prevailing in
the federal courts and in the courts of the above-named states.!
Frequently this rule is justified and explained on the ground that

1The case of Smith v. American Coal,
Co., 7 Lans., 317 (1878), fully discusses
and sustains this rule. See, also, Co-
meau v. Guild Farm Oil Co.,3 Daly,
218 (1870), where Van Brunt, J., says
that the sheriff, ‘‘ by the levy of such an
attachment, could not acquire any bet-
ter or greater title to the stock than a
person would have done who had pur-
chased this stock of the person in whose
name it stood on the day of the levy of
the attachment. And the principle is
well established in this state that such
a purchaser would not acquire any in-
terest whatever as against a prior pur-
chaser for value.” For Pennsylvania,
see Eby v. Guest, 94 Penn. St., 160 (1880);
Finney’s Appeal, 59 Penn. St., 398
(1868); Commonwealth v. Watmouth, 6
Whart., 117 (1840), holding also that the
sheriff need not levy on stock which he
knows has already been sold to an un-
* registered transferee, When the trans-
ferrer notifies the corporation of the
transfer a subsequent attachment of the
stock as the property of the transferrer
is not good, although the transfer was
not recorded in the corporate book.
Tilford, etc., Co. v. Gerhab, 13 Atl. Rep.,
90 (Pa., 1888); United States v. Vaughan,
8 Binn., 394 (1811), where the unreg-
istered transferees resided in foreign
lands. See, also, for other states,
Broadway Bank v. McElrath, 13 N. J.
Eq., 24 (1860); 8.°C., sub mom, Hunt-
erdon B’k v. Nassau B’k, 2 C. E. Gr.,
496; Rogers v. Stevens,'8 N. J, Eq., 167
(1849); Fraser v. Charleston, 11 8. C.,
486, 519 (1878); Seeligson v. Brown, 61
Texas, 114 (1884); Pitot v. Johnson, 33
La. Ann., 1286 (1881); Smith v. Crescent
City, etc., Co., 30 La. Ann., 1378 (1878).
In regard to stock in national banks,

the federal courts have firmly estab-
\

lished the rule that the unregistered
transferee is protected against a subse-
quent attachment or execution. Con-
tinental National B’k v. Eliot Nat. B’k,
5 Fed. Rep., 369 (1881), with a full re-
view of the authorities by Judge Low-
ell. Scott v. Pequonnock Nat. B’k, 15
Fed. Rep., 494 (1883), where the rule
was applied, although the national bank
was in Connecticut, a state which
strongly favors the opposite rule. The
court said: ‘‘The tendency of modern
decisions | is to regard certificates of
stock attached toan execution blank, as-
signment, and power to transfer, as ap-
proximating to negotiable securities,
though neither in form nor character
negotiable.” Even in Massachusetts,
where the courts upheld an opposite
tule, the state courts will follow the
above rule when the stock of a national
bank is in question. Sibley v. Quinsig-
amond Nat. B’k, 188 Mass., 515 (1882)5
but see State v. First Nat. Bk of J.,
89 Ind., 302 (1883). Williams v. Me-
chanics’ B’k, 5 Blatch., 59 (1862), is not
in accord with the other federal decis-
ions. As regards Tennessee, compare
Cornick v. Richards, 3 Lea, 1 (1879),
with State Ins. Co. v. Sax, 2 Tenn,
Ch., 507 (1875). By statute, in Ala-
bama, a bona fide transferee of cer-
tificates of stock is protected against a
subsequent levy of attachment or execu-
tion, although the transfer is not re-
corded. Code, § 1673. In Maryland, by
statute, stock which is pledged cannot
be attached. Morton v. Grafflin, 15 Atl,
Rep., 298 (1888). Cf. § 489. An assign-
ment of the certificates to a receiver in
another state takes precedence of an at-
tachment against the stock at the home
of the corporation, The court will di-
rect the corporation to register the

505
§ 488.] ATTACHMENT AND EXECUTION. [cH. XxvII,

registry and by-laws or charter provisions requiring registry of
transfers on the corporate books are not for the purpose of notify-
ing the creditors of the old registered stockholder that he no longer
owns the stock, nor for any similar purpose, but are for the pur-
pose of protecting the corporation in paying dividends and allowing
the stock to be voted. Another and stronger reason is that the
law favors the transfer of stock certificates, and decreases, so far
as possible, all secret dangers incurred in their purchase. ;

By protecting the purchaser against subsequent attachments and
executions the law removes one of the chief risks incurred by hold-
ing certificates of stock without a registry, and thereby increases
the safety and desirability of such investments. Ifthe corporation
improperly refuses to allow the transferee of stock to register his -
transfer, and the stock is afterwards attached by a creditor of the
stockholder, the transferee may, if he chooses, hold the corporation
liable in damages for its refusal to allow the registry.

§ 488. Rights and duties of the corporation in such cases.— The
corporation has a dangerous duty to perform when stock has been
attached or sold under levy of execution, and a registry is requested
by the purchaser at such sale or by a purchaser of the outstanding
certificate of stock. If the purchaser of the certificate demands
registry before registry has been allowed to the purchaser at the
execution sale,‘and if the former claims to have purchased the cer-
tificate before the attachment or execution was levied, the right of
the corporation is clear. It may refuse to allow the registry, and
when sued therefor may interplead and compel the claimants to _
litigate the matter between themselves.? But where the corpora-
tion does not know whether the outstanding certificate is in the
hands of a purchaser or not, and a registry is demanded, by a pur-
chaser at an execution sale, the rights and duties of the corporation
are not so clear. It has two courses open to it:* it may refuse to
allow a registry, until compelled to do so by a court, or it may al-
low registry without being so compelled. The former is the safer
‘course, since the corporation will probably be thereby protected
from all liability to a possible purchaser of the outstanding certifi-

transfer. _Weller v. Pace, etc., Co., 5
Ry & Corp. L. J., 5 (N. Y. Sup. Ct,
1888), See, also, §§ 359, 465, supra.

1 Robinson v. Nat. B’k of New Berne,
95 N. Y., 687 (1884). See, also, Plymouth
BE: v. Bk of Norfolk, 27 Mass., 454
(1830).

2 See chapter XXII, § 887%. The proper
remedy for the purchaser from the
judgment debtor to pursue under such

circumstances is to enjoin the corpora-
tion and the purchaser at the execution
sale from registering the ‘latter as a
stockholder. Smith v. Crescent City,
etc., Co., 80 La, Ann., 1878 (1878). If
an attachment has been levied he should
enjoin that, Cheever v. Meyer, 52 Vt.,
66 (1879).

3 Robinson v, Nat'l B’k of New Berne,
95 N. Y., 687 (1884),

506
CH, XXVII.] ATTACHMENT AND EXECUTION. ‘TS 489.

cate.’ The corporation, it seems, is protected in its obedience to
the decree of a court.’ It is quite probable, also, that no court in
any of the above-named states would require the corporation to
issue new certificates of stock to a purchaser of stock at an execu-
tion sale unless such purchaser give to the corporation a bond of
indemnity, whereby an unknown purchaser of the outstanding cer-
tificate may be protected.’ The other course open to the corporation,
that of allowing a registry by the purchaser at the execution sale
without being compelled to do so by a court, is pursued by the cor-

poration at its peril. If it afterwards transpires that the outstanding
certificate had been purchased before the attachment or execution
was levied, the corporation is liable in damages to such purchaser
for allowing the registry,‘ but not unless such purchaser gave a
valuable consideration for the certificate and alleges that fact in
his pleading.’ Until such purchaser demands a registry from the:

1“ Where a judicial tribunal of com-
petent jurisdiction of last resort, after a
fair contest in good faith by the corpo-
ration, orders the stock to be transferred
to the purchaser under such seizure and
sale, the corporation cannot be liable to
the holder of the certificate who took
no steps to protect himself.” Fried-
lander v..Slaughter-house Co., 31 La.
Ann., 523 (1879). Where, also, the un-
registered transferee contested in the
courts the right of the purchaser at the
execution sale, and was defeated in the
lower court, and appealed without stay-
ing the decree below, the corporation is
not liable for obeying the decree of the
lower court, although the appeal is suc-
cessful. Chapman v. New Orleans Gas
Light, etc., Co., 4 La, Ann., 153 (1849),

2 See $§ 359, 388.

3The supreme court of Ohio, in Nat'l
Bk of N. L. v. Lake Shore & M.S. R.
R. Co., 21 O. St., 221 (1871), very prop-
erly and very distinctly refused to com-
pel a registry, although conceding that
the execution purchaser is entitled to
dividends, The.court said: ‘‘Can it be
that, because the defendant refused to
assume the peril of deciding between
the contending claimants by issuing
other certificates for the same stock to
the plaintiff upon demand, that it
thereby became a wrong-doer and con-

507

’

verted the plaintiff’s stock to his own
use, and rendered itself liable to respond
in the full value of the stock to the
claimant who could establish his right
in a court of Jaw? The very statement
of the proposition refutes, it.” Where
the attachment is on stock that the’
complainant alleges was transferred in
fraud of creditors, mandamus will not
lie to compel the corporation to allow a
registry under the execution sale. State
v. Warren Foundry & M. Co., 32 N. J.
L., 439 (1868). :
4 Smith v. American Coal Co., 7 Lans.
(N. Y.), 817 (1878), If the purchaser at
the execution sale still has the certifi-
cates the purchaser of the old certifi-
cate may bring suit against him and
the corporation to compel a retransfer.
Rogers v. Stevens, 8 N. J. Hg., 167
(1849), Ina suit by a purchaser at an
execution sale to cut off the rights of a
judgment debtor the corporation is an
indispensable party, since it alone can
allow a transfer on the books. St. Louis
& San. F. R'y Co. v, Wilson, 114 U.S,
60 (1884). See, also, the late case of
Hazard v. Nat'l Ex. B’k, 26 Fed. Rep.,
94 (1886), holding the corporation liable
in damages to the purchaser of the out-
standing certificate.
5 Littell v. Scranton Gas & Water Co.,

42 Penn. St., 500 (1862),
’

§ 489.] ATTAOHMENT AND EXECUTION. [CH. XXVII.

corporation it may safely pay dividends to the execution purchaser-!
These rules are complicated, but they protect all parties. :

Ԥ 489. Rule in Connecticut, Maine, New Hampshire, Vermont,
Indiana, Illinois, Iowa, Maryland, Wisconsin and California.
The courts of these states all hold that, where regulations exist re-
quiring a transfer of stock to be registered on the corporate books
in order to be effectual, an attachment or execution levied on stock
standing in the defendant debtor’s name will cut off the rights of
a previous purchaser of the certificate who -has not completed his
transfer by registry.2 Sometimes these regulations requiring a |
registry are contained in the charter, sometimes only in the by-
laws, and sometimes are merely printed on the face of the certifi-
cate of stock.? Even in these states, however, it is well established
that if the person who levies the attachment or purchases at the

‘ execution sale has notice that the defendant debtor had transferred
his certificate before the attachment or execution was levied, the
purchaser of the outstanding certificate. may have his remedy. If
the attaching creditor has notice before the attachment is’ levied
the purchaser may obtain a perpetual injunction against the attach-
ment.t Moreover, if the purchaser at the execution sale has notice,

1Smith v, American Coal Co., supra.

2 See note following.
3Oxford Turnpike Co. v. Bunnell, 6
Conn., 552 (1827); Dutton v. Conn. B’k,
18 Cons, 493 (1840), where the provis-
ion was in the by-laws; Skowhegan B’k
v. Cutler, 49 Me,, 315 (1860); Fiske v.
Carr, 20 Me., 301 (1841); Pinkerton .v.
R. BR. Co., 42 N. H., 424 (1861); Warren
‘v Brandon Mfg. Co., cited in 52 Vt.,
75 (1879); State v. First Nat'l B’k of J.,
89 Ind., 302 (1883) ; Coleman v. Spencer,
5 Blackf, (Ind.), 197 (1889); People’s B’k
v. Gridley, 91 Ill., 457 (1879); Fort Mad-
ison, etc., Co, v. Batavian B’k, 82 N. W.
Rep., 336 (lowa, 1887); 42 id., 331; Re
Murphy, 51 Wis., 519 (1881), where the
provision was by statute. Also, undera
statute, Weston v. Bear River, etc,, Min.
Co., 5 Cal., 186 (1855); Nagle v. Pacific
Wharf Co., 20 Cal., 529 (1862). Cf. Sup-
ply, etc., Co. v. Elliott, 15 Pac. Rep., 691
(Cal., 1887). If the purchaser at the exe-
cution sale buys with knowledge that
the judgment debtor does not own the
stock at the time of the sale he takes no
title to the stock. Blakeman v. Puget

Sound Iron Co,, 18 Pac, Rep., 872 (Cal.,
5

1887). If the unregistered purchaser
buys the judgment obtained under the
attachment the latter is merged. Strout
v. Natoma Water & Min, Co., 9 Cal.,
78 (1858) As ‘to North Carolina, see
Morehead v. Western N. C. R. R. Co., 2
S. E. Rep., 247 (1887). The statutory .
law of Alabama on this subject is in-
dicated in Fisher v. Jones, 3 South.
Rep., 138 (Ala., 1887), In. Maryland a
subsequent attachment precedes a
pledge of the certificates. Noble wv.
Turner, 16 Atl. Rep., 124 (Md., 1888),
Where’ an agreement to sell is negoti-
ated, but before the certificate is trans-
ferred an attachment is levied on the
stock, it is held in Tennessee that the
attachment prevailed. Young v. South,
etc., Iron Co., 2S. W. Rep., 202 (Tenn.,
1886). A sale of stock after an attach-
ment suit has failed, and before that
decision is reversed, gives the purchaser
good title. Loveland v. Alvord, etc.,
Co., 18 Pac. Rep., 682 (Cal., 1888).
4Cheever v. Meyer, 52 Vt., 66 (1879);
Scripture v. Francistown Soapstone Co.,
50 N. H., 571 (1871); Black v. Zacharie,

3 How., 482 (1845).
08

 
e

-

CH. XXVIL.] ATTACHMENT AND EXECUTION.

[§ 490.

‘she may be prevented from obtaining registry and claiming the
stock.’ Itis also held that where the unregistered transferee of
the certificate of stock has notified the corporation thereof and de-
manded registry, which is not granted, any attachment or execu-
tion levied subsequently to the improper refusal by the corporation
to register does not take precedence over such purchaser.2 Where
the unregistered purchaser is cut off by an attachment he cannot
compel his vendee to pay for the stock which is made valueless by
the attachment.*

§ 490. Rule in Massachusetts —— The courts of Massachusetts
were the first to lay down the rule which places an attachment or
execution levy ahead of an unregistered purchaser of the certificate
of stock. The evil consequences of the rule, however, seem to have
become apparent to her courts; and it was held that, although the
unregistered purchaser was not protected where the charter of
the corporation required registry, yet, where only the by-laws or
the certificate itself created such a requirement, the unregistered
purchaser was protected and took precedence over the attachment

. or execution.®

1People v. Elmore, 35 Cal., 658 (1868);
Weston v. Bear River, etc., Min. Co.,
6 Cal., 425 (1856) ; Van Cise v. Merchants’
Nat. B’k, 33 Northwest. Rep., 897 (Dak.,
1887); Farmers’ Nat. Gold B’k v. Wil-

son, 58 Cal., 600 (1881), holding, also, '

that the execution sale will not be en-
joined, since the claimant may attend
and give notice to his claim; Newberry
v. Detroit, etc,, Iron Co., 17 Mich., 141,
158 (1868), per Cooley, J. Where the
plaintiff bought for itself at the execu-
tion sale and had notice it is liable in
tort to the unregistered purchaser of
the old certificates. Bridgewater Iron
Co, v. Lissberger, 116 U. 8., 8 (1885),
But Jones v. Latham, 70 Ala., 164,
seems to hold that, if the execution is
levied without notice of an unrecorded
transfer, a subsequent notice before the
sale to the purchaser at the sale is in-
effectual, and does not affect the latter.

2Merchants’ Nat. B’k v. Richards, 6
Mo. App., 454 (1879); aff'd, 72 Mo., 77;
Colt v. Ives, 81 Conn., 25 (1862); State
Ins. Co. v. Gennett, 2 Tenn. Ch., 100

(1874); Plymouth B’k v, B’k of Norfolk, -

27 Mass., 454 (1830); Sargent v. Franklin
Ins, Co., 25 Mass., 90 (1829). Contra,

The legislature of Massachusetts seems to have had

Fiske v. Carr, 20 Me., 301 (1841). But
not if the transferee merely sends a let-
ter to the corporation requesting a trans-
fer, without sending the evidences of his
title and the old certificate. Newall v.
Williston, 138 Mass., 240 (1885). The
corporation is liable in damages if it
levies the attachment under such cir-
cumstances. Sargent v. Franklin, etc.,.
Co., supra, Where registry is allowed
it cuts off a subsequent attachment,
even though the transferee has not
formally accepted the stock as required
by statute. Woodruff v. Harris, 11
U. C., Q. B., 490 (1854),

3 Rock v. Nichols, 85 Mass., 342 (1862).

4¥Fisher v. Essex B’k, 71 Mass., 873
(1855); Newall v. Williston, 188 Mass.,
240 (1885) ; Central Nat’l Bank v, Willis-
ton, 188 Mass., 244 (1885); Boyd v. Rock-
port Steam Cotton Mills, 73 Mass., 406
(1856); Blanchard v, Dedham Gas Cant
Co., 78 Mass., 218 (1858), ;

5Sargent v. Essex M. R’y Co., 26
Mass., 202 (1829); Boston. Music Hall »,
Cory, 129 Mass., 435 (1880), holding that
a delay of four years was not fatal to
the unregistered purchaser's rights,

509
ATTACHMENT AND EXECUTION. (cx. XXVII.

§ 491.]

a still clearer perception of the demands of trade and of the inter-
ests of those who invest in certificates of stock, and, in 1884, en-
acted a statute which probably will be construed to make an
attachment or execution levied on stock no more effective than in
“New York state.

§ 491. Shares of stock cannot be subjected to the payment of tha
stockholder’s debits by the process of garnishment.— The process of
garnishment is proper only where a debt is due from a third person
to the defendant debtor. It is not a proper remedy for reaching
shares of stock owned by the debtor. The corporation owes the
stockholder no debt, and by no fiction of law can it be held to be
a debtor of the defendant debtor. Consequently, where the sheriff
levies an attachment, not according to the procedure governing
attachments, but according to the procedure of garnishment, the
whole proceeding is void, and a subsequent transfer of the stock by

the defendant debtor is valid.

1‘* The delivery of a stock certificate
of a corporation to a bona fide purchaser
or pledgee for value, together with a
written transfer of the same, signed by
the owner of the certificate, shall be a
sufficient delivery to transfer the title
as against all parties; but no such trans-
fer shall effect the right of the corpora-
tion to pay any dividend due upon the
stock, or to treat the holder of record
as the holder in fact, until such trans-
fer is recorded upon the books of the
corporation, or a new certificate is
issued to the person to whom it has been
so transferred.” Act of May 9, 1884,
The enactment of a similar statute is
respectfully recommended to the states
mentioned in § 489. Since the first
edition of this work was printed several

states have enacted a statute similar to

_ this Massachusetts statute.

2 Planters & M. B’k v. Leavens, 4 Ala,
N.8., 753 (1843); Ross v. Ross, 25 Ga.,
297 (1858), where the court say: ‘Is
stock in this railroad such a debt (‘in-
debtedness’) of the railroad to thestock-
holder that a garnishing creditor of the
stockholder can enter up judgment for
it against the railroad? It isnot; itisa
debt which the railroad dare not pay,
even to the stockholder himself. The
road may pay him dividends on it, but
that isall.” See, also, Foster v. Potter,
87 Mo., 525; § 484, n.

3 Mooar v. Walker, 46 Iowa, 164 (1877).
Cf. Chesapeake & O. R, R. Co. v. Paine,
29 Gratt. (Va.), 502. But see Harrell v
Mexico, etc., Co, 11 SW. Rep., 863
(Texas, 1889),

610
CHAPTER XXVIII.

CONSTITUTIONALITY OF AMENDMENTS TO CHARTERS — RIGHT OF A
STOCKHOLDER TO OBJECT.

A corporate charter is a con-
tract between three parties —
the state, the corporation and
the stockholders,

The charter as a contract be-
tween the corporation and the
stockholders. :

Charter as a contract between
the state and the corporation.

Charter as a contract between
the state and the stockhold-
ers.

Charter amendments imposed
upon the stockholders, _

Charter amendments offered to
the stockholders,

§ 492,

493,

494,
495.

497.
498,

4

 

§ 499, Auxiliary and incidental
amendments are constitu-
tional, ‘though some of the
stockholders dissent. f

Material amendments offered to
the stockholders can be ac- -
cepted only by a unanimous
vote,

Amendments under the re-
served power of the state to
alter or amend the charter.

Dissenting stockholder’s rem-

* edy against an illegal amend-
ment,

Assent’ and acquiescence as a
bar to the stockholder’s rem-

edy.

500.

601.

502.

503.

§ 492. A corporate charter is a contract between three parties —

the state, the corporation and the stockholders.— The charter of a
corporation having a capital stock is a contract between three par-
ties, and forms the basis of three distinct contracts.! The charter
is a contract between the state and the corporation; second, it is a
contract between the corporation and the stockholders; third, it is
a contract between the stockholders and the state.

§ 498. The charter as a contract between the corporation and the
stockholders.— That the charter is a contract between the corpora-
tion and the stockholders has within the last fifty years been firmly
established, and is now unquestioned law. The cases of Natusch
v. Irving? in England, and Livingston v. Lynch® in this country,

1See State Bank of Ohio v. Knoop, 16
How., 369 (1853); Northern R, R. Co, v.
Miller, 10 Barb., 260 (1851); Cooley on
Constitutional Limitations, 5th ed.,
p. 837, where the learned author says:
“Those charters of incorporation, how-
ever, which are granted, not as a part
of the machinery of the government,
but for the private benefit or purposes
of the corporators, stand upon a differ-
ent footing, and are held to be contracts
between the legislature and the corpo-
rators, having for their consideration

the liabilities and duties which the cor-
porators assume by accepting them;
and the grant of the franchise can no
more be resumed by the legislature, or
its benefits diminished or impaired
without the consent of the grantees,
than any other grant of property or
valuable thing, unless the right to do
so is reserved in the charter itself.”

2 This case, decided by Lord Eldon in
1824, is reported in Gow on Partnership,
898; also 2 Cooper’s Ch., 358,

34 Johns. Ch., 578 (1820). Thus, in

611
§ 494.] AMENDMENTS TO CHARTERS. [CH. XXVIIL,

followed by a long line of supporting decisions, distinctly hold that
the charter is a contract prescribing to the corporation that it shall
not attempt to materially change, extend, alter or abandon the
particular business which that charter authorizes the corporation’ to
do. Any attempt of the corporation to make such a change, ex-
tension, alteration or abandonment of that business is called an
ultra vires act. It isan act which a single stockholder may pre-
vent by injunction or set aside by a suit in equity. This subject,
however, is fully treated in another part of this work.!

§ 494. Charter as a contract between the state and the corpora-
tion.— As between the state and the corporation the corporate
charter is a contract, protected. by that provision of the United
States constitution which prohibits a state from passing any law
“which will impair the obligation of a contract.’ Hence, it is beyond
the power of the state to repeal or materially annul such a cor-
porate charter, unless the power of amendment and repeal has
been expressly reserved by the state, or unless all the parties to the
contract consent to the change. All the franchises, privileges and
express and implied powers necessary and essential to carrying
out the corporate purposes are protected by this contract.? This
branch of the law is important to stockholders in cases where the
‘corporation neglects or refuses to protect itself against legislative
amendments or repeals violating the charter contract between the.

Clearwater v. Meredith, 1 Wall., 25
(1863), the court say: ‘‘ The relation be-
tween the corporation and the stock-
holders is one of contract. The stock-
holder subjects his interest to the con-
trol of the proper authorities to accom-
plish the object of the organization ; but
he does not agree that the purpose shall
be changed in its character at the will
of the directors, or a majority of the
stockholders even. The contract can-
‘not be changed without the consent of
both contracting parties.”

1 See chapter XL.

? This rule of law, first enunciated in
the case of Trustees of Dartmouth Col-
lege v. Woodward, 4 Wheat., 518 (1819),

‘by Marshall, C. J., has become thor-
oughly established. As early as 1806 a
court said: ‘‘ We are also satisfied that
the rights legally vested in this or in
any corporation cannot be controlled
or destroyed by any subsequent statute,
unless a power for that purpose be re-

served to the legislature in the act of in-
corporation.” Wales v. Stetson, 2 Mass.,
148 (1806).. In England the unwritten
constitution i is not superior to the powers
of parliament, and consequently the
rule is different. In that country, as is
said by Lord Coke, ‘‘the power and
jurisdiction of parliament is so tran-
scendental and absolute that it cannot
be controlled or confined, either for
causes or purposes, within any bounds.”
Stevens v, Rutland & Burlington R. R.
Co., 29 Vt., 545 (1854); Thorpe v Rut-
land & Burlington R. R. Co., 27 Vt., 140
(1857); Trustees of Dartmouth College
uv, Woodward, 4 Wheat., 518, 648 (1819).
Consequently, the English authorities
are of little use in this chapter.

3 State B’k of Ohio v. Knoop, 16 How.,
869 (1858); Thorpe v. Rutland & Bur-
lington R. R, Co., 27 Vt., 140 (1857), per
Redfield, J. The latter case discusses
the nature of the privilege thus prc-
tected.

512
CH. XXVIII. ] AMENDMENTS TO CHARTERS. [S$ 495, 497.
corporation and the state. In such cases the stockholder may en-

join or remedy the wrong by bringing an action in place of and on
behalf of the corporation, making it a party defendant, together
with the parties who, under the ‘authority of the state, have vio-
lated the contract! A stockholder’s action to prevent the payment
of a tax levied upon the corporation in violation of a statutory ex-
emption from taxation is an action of this character.’

§ 495. Charter as a contract between the state and the stockhold-
ers.— As between the state and the stockholders, also, the corporate
charter is a contract protected by the United States constitution.’
In consequence thereof the state cannot materially amend the char-
ter, except by the unanimous consent of the stockholders, unless
the power of amendment is expressly reserved by the state at the

' time of granting the charter.

It, is this contract which constitutes

the subject of the present chapter. .
§ 497. Charter amendments imposed upon the stockholders.— The
right of the legislature to amend a charter against the will of the

stockholders has been the subject of much litigation.

ments are clearly divisible into

1Greenwood v. Freight Co., 105 U.8.,
13 (1881). The character of such an
action, also the parties, pleadings and
rules of relief, are explained in Part
IV.

2Dodge v. Woolsey, 18 How., 331
(1855); State B’k of Ohio v. Knoop, 16
How., 369 (1853). See, also, Wilmington
R. RB. v. Reid, 138 Wall., 264 (1871); Dela-
ware R. R. Tax, 18 Wall., 206 (1873),
See, also, § 562.

3“ A charter of incorporation granted
by a state creates a contract between
the state and the corporators which the
state cannot violate.”
held so often by this court that ‘it is

supererogation to repeat it.” Wilming: '

ton R. R. v. Reid, 18 Wall., 264 (1871).
Ir ‘‘has been the settled law of this
court since the Dartmouth College
case.” Delaware R. R. Tax, 18 Wall.,
206 (1873). To the same effect, see Za-
briskie v. Hackensack & N. Y. R. R.
Co., 18 N. J. Eq., 178 (1867); Lothrop v.
Stedman, 42 Conn., 583 (1875); Stevens
v. Rutland & Burlington R. R. Co., 29
Vt., 545 (1854), ‘‘An act granting cor-
porate privileges to a body of men is,
when accepted, a contract between the

(38)

This has been’

* $18

Such amend-

two kinds. The first are those

state and the corporators. . . . It
is sustained by everything that we are
bound to regard as authority ” — by the
courts, by the opinion of the legal pro-
fession and by the acquiescence of the
people. Erie & Northeast. R. R. v.
Casey, 26 Pa. St., 287 (1856), per Jere-
miah Black, J. See, also, Sinking Fund
Cases, 99 U. S., 700 (1878). ‘That an
act of incorporation is a contract be-
tween the state and the stockholders is
held for settled law by the federal courts
and by every state court in the Union.
All the cases on the subject are sat-
urated with this doctrine. It is sus-
tained not by a current but by a tor-
rent of authorities. No judge who has
a decent respect for the principle of
stare decisis—that great principle
which is the sheet-anchor of our juris-
prudence —can deny that it is immov- ~
ably established.” ‘If anything is
settled it is this rule of construction’
that a corporation takes nothing by its
charter except what is plainly, ex-
pressly and unequivocally granted.”
Per Black, J. B’kof Penn. v. Common- |
wealth, 19 Pa. St., 144 (1852).

\
§ 497.] AMENDMENTS TO CHARTERS. [cH. xxvur.
which, by their terms, are absolute and compulsory, and become a
‘part of the charter irrespective of the action or willingness of the
corporation or the stockholders to accept them. ‘Such amend.
ments are unconstitutional and void, unless made under a re-
served power toamend.’ Of sucha kind are amendments repealing
an exemption of stockholders from taxation.? So, also, a statute
passed subsequent to the granting of a charter, and increasing the
liability of a stockholder on his stock for the debts already incurred,
1s unconstitutional and. void unless the legislature has reserved the

right to alter or amend the charter.’

1 Such as an amendment changing the
route and terminus. Ames ?. Lake, etc.,
R. R., 21 Minn., 241 (1875), Amend-
ment under reserved right cannot affect
rights of previous creditors against the
corporation.
McVeigh, 20 Gratt., 457 (1871). A cor-
porate charter right to take certain rate
of interest is a contract and is protected
against subsequent legislation. Hazen
v. Union B’k of Tenn., 1 Sneed, 115
(1853). See, also, dictum in Phil, etc.,
Co.’s Appeal, 102 Pa. St., 128 (1888), that
an amendment to a charter which
enlarges it without imposing any new
or additional burden upon, it is a mere
license and may be revoked, citing John-
son v. Crow, 6 Norris, 184; Christ
Church v, Phil., 24 How., 300. “May
subsequent to charter authorize sale of
corporate franchises, etc., to pay debts,
Louisville, etc., T. R. Co. v. Ballard,
2 Mete. (Ky.), 165 (1859).

The case of Cross v. Peach Bottom
R’y Co., 90 Pa. St., 392 (1879), holds that
“the legislative reservation is in the
nature of a police power, designed for
the protection of the public welfare; and
where such protection becomes neces-
sary, the law-making power may act
without consulting either the interests
or will of the company ; and in such case
it may well be that not only the com-
pany but its stockholders must submit.

The reservation. was
only intended to enable the legislature
to act without the consent and against
the will of the corporation.” Under its
reserved power -to amend, the legisla-

B’k of Old Dominion v. |

Under such a reservation the

ture may require several railroads to ac-
quire, build to and use a union depot,
Mayor, etc., v. Norwich, etc., R, R., 109
Mass., 103 (1871).

2 Thus, ina case of a statute authoriz-
ing the taxation of ‘stock which by the
corporate charter is exempt, the statute
is unconstitutional. Gordon v. Appeal
Tax Court, 8 How., 133 (1845); Farring-
ton v. Tennessee, 95-U. S., 679 (1877).
See § 568.

3It certainly is as regards corporate
debts already incurred. Commonwealth
v. Cochituate B’k, 8 Mass., 42; Wheeler
v. Frontier B’k, 23 Me., 308. And has
been held to be so as regards future cor-
poratedebts. Ireland v. Palestine, etc.,
Turnpike Co., 19 Ohio St., 369 (1869).
Contra, Stenley v. Stanley, 26 Me., 191
(1846) ; Coffin v. Rich, 45 Me., 507 (1858);
Shufeldt v. Carver, 8 Ill. App., 545
(1881); Fogg v. Sidwell, 8 Tl, App., 551
(1881); Child v. Coffin, 17 Mass., 64
(1820), dictum ; Gray v. Coffin, 63 Mass.,
192, 200 (1852); Stanley v. Stanley, 26
Me., 191 (1846); Hathorn v. Calef, 53
Me., 471 (1866). See Weidenger v. Spru-
ance, 101 Ill, 278 (1881). And it is said

‘that a stockholder may restrain by a

proper proceeding the acceptance by the
corporation of an unconditional amend-
ment to the charter by which the lia-
bility of the shareholders is increased.
Owen v. Purdy, 12 Ohio St., 73 (1861);
Fry’s Ex’r v. Lexington, etc., R. R. Co.,
2 Mete. (Ky.), 814 (1859), Cy. Bailey v.
Hollister, 26. N. Y., 112 (1862); Thomp-
son v. Guion, 5 Jones’ Eq, (N. C.), 118
(1859); Mowrey v. Indianapolis, etc., R.

514
CH. XXVUI.]

Or rae TO CHARTERS.

“[g 497.

statute is legal and binding.! The limits of this reserved power of
the legislature are stated elsewhere in this chapter.

A statute imposing additional liability upon the shareholders
cannot be repealed so as to affect those who were corporate cred-
itors previously to the repeal.’ But, whenever the statute imposing

R. Co., 4 Biss., 78 (1866); Lauman vw.
Lebanon Valley R. R. Co., 30 Penn. St.,
42 (1858); Hamilton, etc., Ins, Co. v.
Hobart, 2 Gray, 548 (1854); Gardner v.
Hamilton, etc., Ins. Co., 33 N. Y., 421
(1865). Where the incident of individ-
‘ual liability was repealed by an amend-
ment to the state (Mo.) constitution after
the debt accrued, but before the in-
crease of stock was issued, the holders
of the new stock were not held liable
under the former constitution. * Ochil-
tree v. R. R, Co., 21 Wall., 249 (1874).

1 Frequently, and now almost univer-
sally, the legislature has a reserved
power to alter, amend or repeal the
charters of corporations granted by it.
New York Const. of 1846, art. 8, §§ 1 and
2; Matter of New York Elevated R. BR.
Co., 70 N. Y., 327 (1877); Johnson v.
Hudson River R. R. Co.,, 49 id., 455
(1872); Bank of Chenango v. Brown, 26

id., 467 (1863); Ashuelot R. R. Co. . ,

Elliott, 58 N. H., 451, 454 (1878). Under
this reserved power the legislature, it
is held, may impose a statutory liability,
in addition to the liability at common
law, upon stockholders after they have
been incorporated and gone into busi-
ness under a charter which does not im-
pose such liability. The exercise of this
power by the legislature, in such a case,
is held to be only a repeal of part of
the corporate franchises. South Bay
Meadow-Dam Co, v. Gray, 30 Me., 547
(1849); Sleeper v. Goodwin, 31 N. W.
Rep., 835 (Wis., 1887). Cf. Close v. Glen-
wood Cemetery, 107 U. 8., 466 (1882).
See §§ 242, 280, supra. So, also, it is
said that under this reserved power the
legislature may impose a statutory lia-
bility for the future debts and obliga-
tions of the corporetion, Sherman v.
Smith, 1 Black, 587 (1861); Matter of
Lee’s Bank of Buffalo, 21 N. Y., 9 (1860);

26 Barb.,

Matter of the Empire City Bank, 18 id.,’
199 (1858). Of. Bailey v. Hollister, 26
N. Y., 112 (1862); Sinking Fund Cases,
99 U.S., 700 (1878); Oldtown, etc., R.
R. Co. uv. Veazie, 89 Me., 571 (1855);
Green v. Biddle, 8 Wheaton, 1, 84 (1823);
Gardner v, Hope Ins. Co., 9 R, I., 194
(1869). Such increased liability may be
imposed, by a new constitution of the
state. Re Reciprocity B’k, 22 N. Y.,
9 (1860); Re Empire B’k, 18 N. Y., 199
(1858); Re Lee’s B’k of Buffalo, 21 N. Y.,
9 (1860); aff'd, sub nom. Sherman v.
Smith, 1 Black, 587(1861). In The Con-
solidated Ass’n v. Lord, 35 La. Ann.,
425 (1883), the court refused to uphold
an amendment which imposed further
liability on the stockholder.
2Hawthorne v. Calef, 2 Wall., 106
(1864); Conant v. Van Shaick, 24 Barb.,
87 (1857); Norris v. Wrenschall, 34 Md.,
492 (1871); Provident Savings Instita--
tion v. Jackson Place, ‘etc., Co., 52 Mo.,.
552 (1878); St. Louis R. R., etc., Co. v..
Harbine, 2 Mo. App., 184 (1876); Cen-
tral, etc., Mechanical Association v. Ala-
bama, etc., Insurance Co., 70 Ala., 120
(1881); Woodruff v. Trapnall, 10 How.,
190. See, also, Story v. Furman, 25
N. Y., 214 (1862); Rochester v. Barnes,
657 (1858); Sinking Fund
Cases, 99 U..S., 700 (1878). Cf. Jerman’s
Adm’r v. Benton, 79 Mo., 148; Wood-
house v. Commonwealth Ins. Co., 54
Pa. St., 307 (1867); Re State Insurance
Co., 14 Fed. Rep., 28 (1882); S. C., 11
Biss., 801; Palfrey v. Paulding, 7 La.
Ann., 363 (1852); Re Telegraph Con-
struction Co., L. R., 10 Ey., 384 (1870);

‘Cooper v. Frederick, 9 Ala., 742 (1846);

In re Credit Fancier of England, L. R.,

- 11 Eq., 356 (1871); Coffin v. Rich, 45 Me.,

507; 58. Rep., 120 (Ala., 1888). A statute
giving the corporation a summary rem-
edy against a stockholder for non-pay-

515
AMENDMENTS TO CHARTERS. [cH. XXVIIE.

§§ 498, 499.]
the liability is penal in its nature, a repeal of it, even so as to affect
existing debts, is constitutional at any time atone the corporate
creditor obtains judgment on his claim.!’ An important exception
to the general rule stated above exists in regard to amendments
under the police power of the state. The state may amend the
charter of a railroad corporation by reducing its tratfic charges,
requiring it to build fences, and in various other ways for the pro-
tection of the public.

§ 498. Charter amendments offered to the stockholders.— The sec-
ond class of amend ments to acharter —the amendments which occur
most frequently and give rise to many difficulties — are those which
allow the corporate directors or a majority of the stockholders in
corporate meeting assembled to engage in a new or different or
more extensive or more contracted business than that authorized
by the original and unamended charter.

§ 499. Auciliary and incidental amendments are constitutional,
though some of the stockholders dissent. An amendment made to
a corporate charter is either a material and fundamental change
from the original plan, or it is an auxiliary and incidental change,
consistent with the carrying out of the original plan. The latter
class of amendments are constitutional and valid. The acceptance
_ of av auxiliary amendment should be by the stockholders in meet-
ing assembled instead of by the board of directors. But acceptance
may arise from user;* and hence it generally happens that an inci-
dental or auxiliary amendment to a charter is deemed. to have been
accepted by user and a vote of acceptance by the directors or by
user alone.6- An amendment may be said to be auxiliary and inci-

nent of calls may be repealed. Ex parte
Northeast, etc., R. R. Co,, 37 Ala,, 679.

1 Breitung v. Lindauer, 37 Mich., 217
(1877); Union Iron Co. v. Pierce, 4 Biss.,
327 (1869) ; Gregory v. German Bank, 3
Col.,
Limitations (5th ed.), 444, 474. See § 223.

2See § 675, infra.

3 The general principle of law govern-
ing this branch of the subject is well
expressed in Woodfork v. Union B’k,
3 Coldw. (Tenn.}, 488 (1866). ‘‘ The con-
tract or charter, after acceptance, is
inviolable between the state and the

corporation, as it is also between the.

corporation and stockholders. Neither
the one nor the other can disregard its
obligations or alter its essential fran-
chises without the unanimous concur-
rence of the stockholders. . . . If

832 (1877); Cooley’s Constitutional -

the alterations proposed in the charter
of a private corporation by legislative
enactment are merely auxiliary and not
fundamental, they may be accepted by
a majority of the corporators; and
wher so assented to they are binding on
the whole; but it is otherwise

when the alterations are fundamental,
radical and vital. The acceptance must
then be unanimous.”

4Marlborough Mfg. Co. v. Smith, 2
Conn., 579 (1818); Brown v. Fairmount
Mine Co., 10 Phil., 82 (4873). Cf. Ven-
ner v. Atchison, etc., R. R., sub.

5 See § 640.

6 Illinois, etc., R. R. v. Zimmer, 20
Ill., 658 (1858). See, also, Blatchford tv.
Ross, 5 Abb. Pr., N. S., 484 (1869); Pe
Excelsior Co., 16 Abb. Pr., 14. (1862).
In Venner v, Atchison, etc., R. R., 28

516
4

OH. XXVI.] AMENDMENTS TO CHARTERS: [§ 499.

dental when it merely grants new powers or authorizes new meth-
ods and new-plans for the purpose of carrying out the original
plan and effecting the real object of that plan. The individual
motives and interests of a stockholder are disregarded. Whatever
is for the benefit of the corporation is conclusively presumed to be
for the benefit of each stockholder. A change immaterial to the
corporation is immaterial to each and every stockholder.'
Whether an amendment materially changes the corporate plans
or not is a question of law for the court upon facts ascertained by
the jury.? Accordingly each case is to be decided according to the
peculiar circumstances of that case, and no general rules can be

laid down which will apply to all cases.?

Fed. Rep., 581 (1886), it is held that the
directors are the proper persons to accept
an amendment.

1Supervisors of Fulton County ‘v.
Miss. & Wabash R. R. Co., 21 IIl., 338
(1859); Delaware -.R. R. Co. v. Tharp, 1
Hous. (Del.), 149 (1856); Irvine v. Turn-
pike Co., 2 Penn. & W., 466; Ill. Riv.
R. R. Co. v. Zimmer, 20 Ill., 654 (1858);
Sprague v. Ill. River R. R. Co., 19 TIL,
174; Banet v. Alton & Sangamon R. R.
Co., 18 IL, 504 (1851). Cf. Hester v.

‘Memphis & Charleston R. R. Co., 32

Miss. 378 (1856); Witter v. Miss., Oua-
chita & Red River R. R. Co., 20 Ark.,
463 (1859). The cases of Zabriskie v.
Hackensack & N. Y. R. R. Co., 18 N. J.
Eq., 178 (1867); Dayton & Cincinnati R.
R. Co, v. Hatch, 1 Disney, 84, and Cen-
tral R. R. Co. v. Collins, 40 Ga., 617,
repudiate the distinction between the
material and immaterial changes. All
changes are held to be equally mate-
rial. |

2 Winter v. Muscogee R. R. Co., 11
Ga., 488 (1852); Witter v. Miss., Oua-
chita & Red River R. RB. Co., 20 Ark.,
463 (1859); Memphis Branch R. R. Co.
v. Sullivan, 57 Ga., 240 (1876). Cf.
Southern Penn., Iron & R. R. Co. v.
Stevens, Ex’r, 87 Pa. St., 190 (1878).

3Certain changes in the route of a
railroad have been held to be imma-
terial, Wilson v. Willes Valley R. R.
Co., 33 Ga., 466 (1863); Johnson v. Pen-
sacola & Ga. R. R. Co., 9 Fla., 299
(1860); Peoria & Oquawka R. R. Co. v.

Elting, 17 Ill., 429 (1856); Banet v. Al-
ton & Sangamon R, R. Co., 13 Ill, 504
(1851); building branch lines, Peoria &
Rock Island R. R. Co. v. Preston, 35
Iowa, 115 (1872); Greenville & Colum-
bia R. R. Co. v. Coleman, 5 Rich. Law
(S. C.), 118 (1851); issuing preferred
stock, Everhart v. ‘West Chester &
Phila. ‘R. R. Co., 28 Pa. St., 339 (1857);
Rutland & Burlington R. R. Co. v.
Thrall, 35 Vt., 536 (1863); Curry v.
Scott, 54 Pa. St., 270 (1867); or more
common stock, City of Cov. v. Cov. &
Cin. Bridge Co., 10 Bush, 69 (1878);
Buffalo, etc., R. R. v. Dudley, 14 N. Y.,
336 (1856); Joslyn v. Pacific, etc., Co.,
12 Abb. Pr., N. S., 3829 (1872). Cf
Hughes v. Antietam, etc., Co., 34 Md.,
316 (1870); extending the time for com-
pleting- the road, Agri. Branch R. R.
Co. v, Winchester, 18 Allen, 29 (1866);
Poughkeepsie, etc., Co. v. Griffin, 24
N. Y., 150 (1861); Bailey v. Hollister,
26 N. Y., 112 (1862); power to amend
being reserved, Taggart v. Western
R. BR. Co., 24 Md. 563 (1866); Union
Hotel Co. v. Hersee, 79 N. Y., 454
(1880); Danbury, etc, R. R. Co. wv
Wilson, 22 Conn., 485 (1853); consoli-
dations that take the place of part of
the line as laid out, Sprague v. Ill.
River R. R. Co., 19 Ill, 174 (1857);
Hanna v. Cin. & Fort Wayne R. R.
Co., 20 Ind., 30 (1863); change of cor-
porate name, Bucksport & Bangor
R. R. Co. v. Buck, 68 Me., 81 (1878);
Clark v. Monongahela Nav. | Co., 10

517

\
§ 500.]

AMENDMENTS TO CHARTERS.

‘

[CH. XXVIII.

§°500. “Material amendments offered to the stockholders can be
accepted only by a unanimous vote— On the other hand, a mate
rial and fundamental change in the charter by an amendment to
that charter is an unconstitutional violation of the contract rights
of any stockholder who-does not assent to such an amendment,
Considerable difficulty is experienced in determining what is a

material and fundamental change.

Each case is decided upon its

own facts, and consequently the best light as to the spirit of what
constitutes a material change is obtained by a study of the facts of

cases which have been decided.!

Watts (Tenn.), 364 (1840); changiflg the
terminus, Pacific R. R. v. Renshaw, 18
Mo., 210 (1852); Ross v. Chicago, ete.,
R. R. Co., 77: Tl, 184 (1875); reduction
of capital stock and shortening of the
road, Troy & Rutland R. R. Co. v.
Kerr, 17 Barb., 588 (1854). Cf. Old-
town, etc., R. R. v. Veazie, 39 Mo.,
571 (1855); or enlarging the capital
stock and extending the road, such
. changes not appearing on the record
to be detrimental, Peoria & Oquawka
R. R. Co. v. Hlting, 17 Ill., 420 (1856);
Rice v. Rock Island R. R. Co., 21 IIL,
93; and minor changes in general,
‘Union Agri. & Stock Ass’n v. Mill, 31
Towa, 95 (1870); also extensive changes,
‘Tl. River R. R. Co. v. Zimmer, 20 IIL,
654 (1858); such as extending the road,
Cross v. Peach Bottom R’y Co., 90 Pa,
St., 892 (1879); purchasing another rail-
road, Venner v, Atchison, etc., R. R.
Co., 28 Fed. Rep., 581 (1886); or in-
creasing the number of directors,
Mower v. Staples, 32 Minn., 284 (1884).
See, also, Gray v. Coffin, 9 Cush., 192
(1852);' Child v. Coffin, 17 Mass., 64
(1820); Langley ‘v. Little, 26 Me., 162
(1846); Payson v. Withers, 5 Biss.,
269 (1873); Joy v. Jackson, etc., Co., 11
Mich., 155 (1863); Bank v. Richardson,
1 Me., 79; Greenville, etc., R. R. Co. v.
Johnson, 8 Baxt.,.382; Fall River Iron
Works v, Old Colony R. R. Co., 5’Allen,
221. In the case of Atchison, etc., R. R.
Co. v. Fletcher, 10 Pac. Rep., 596 (Kan.,
1886), an amendment authorizing a cor-
poration to buy the stock of another
railroad corporation and to guaranty

518

its bonds was held to be valid. The
court said: ‘‘It is settled that the legis-
lature may authorize a body of cor-
porators to exercise new powers or
franchises without impairing those pre-
viously granted, and, if the new powers
can be exercised without a departure
from the original compact between the
corporators, there is mo reason why
they should not be accepted and exer-
cised on behalf of the company by a
majority of the stockholders. . .
No franchises are diminished, no con-
tract impaired. At mostits powers are
enlarged to carry out successfully the
object of its incorporation. So to
speak, auxiliary powers are added, but
its charter not violated or the benefits
thereby granted infringed.”

1Under the circumstances of the
cases it has been held a material change
to shorten and vary the route, Winter
v. Muscogee R. R. Co.,' 11 Ga, 438
(1852); to vary the route, Middlesex
Turnpike Corporation v. Locke, 8 Mass.,
268 (1811); Same~v. Swan, 10 Mass., 384
(1818); Hester v. Memphis & Charleston

R. R. Co., 82 Miss., 878 (1856); Witter

v. Miss., Ouachita & Red River R. R
Co., 20 Ark., 463 (1859); Champion v.
Memphis, etc., R..R. Co., 35 Miss., 692;
Simpson v. Denison, 10 Hare, 54; chang-
ing a terminus, Manheim, etc., Co. v.
Arndt, 81 Penn. St., 317 (1858); Mari-
etta, etc., R. R. Co. v. Elliott, 100. St.,
57; Middlesex, etc., Co..v. Locke, 8
Mass., 267; Same v, Swan, id., 385;
Thompson v. Guion, 5 Jones’ Eq., 113;
permitting a railroad to go into water
1

CH. xxvii]

AMENDMENTS TO CHARTERS.

[§ 501,

$501. Amendments under the reserved power of the state to alter,
amend or repeal the charter.— The extent of the power of the leg-
islature to amend a charter, where it has reserved that power, is

transportation business, Hartford &
New Haven R. R. Co. v. Croswell, 5
Hill, 883 (1843), aleading case; Marietta
& Cin. R. R. Co. v. Elliott, 10 O. St.,
57 (1859); shortening the line, B’k v.
City of Charlotte, 85 N. C., 483 (1881);
allowing. business to be commenced be-
fore the full capital stock is subscribed,
Memphis Branch R. R. Co. v. Sullivan,
57 Ga., 240(1876); dividing the line and
forming two or more corporations,
Leed & Evensburg Turnpike Road Co.
v, Phillips, 2 Penr. & Watts (Pa.), 184
(1880); Supervisors of Fulton County v.
Miss. & Wabash R. R. Co., 21 Ill, 388
(1859); Carlisle v. Terre Haute & Rich-
mond R. R. Co., 6 Ind, 316 (1855);
transferring a railroad subscription
from one railroad to another, Pitts-
burg, etc., R. R. v. Gazzam, 32 Pa. St.,
340 (1858); making the charter perpet-
ual and increasing power to hold prop-

erty, Prop. of the Union Lock & Canals .
v. Towne, 1 N. H., 44 (181%); allowing ’

a life insurance company to insure
against fire and marine loss, Ashton v.
Burbank, 2 Dill., 485; extending the
line, Stevens v. Rutland & Burlington
R. R. Co., 29 Vt., 545 (1855). See, also,
Noesen v. Town of Port Washington,
37 Wis., 168 (1875), where there was an
amendment authorizing the purchase
of a railroad running at right angles to
the old, but a release was upheld; in-
creasing the par value of the stock,
Mahon v. Wood, 44 Cal., 462 (1872);
consolidating the corporation with an-
other corporation, Il. Grand Trunk R.
R. Co. v. Cook, 29 Ill., 237 (1862);
McCray v. Junction R. R. Co., 9 Ind.,
358 (1857) ; Shelby ville & Rushville Turn-
pike Co. v. Barnes, 42 Ind., 498 (1873);
Booe v. Junction R. R. Co., 10-Ind., 93
(1857); New Orleans, Jackson & Great
Northern R. R. Co, v. Harris, 27 Miss.,
517 (1854); Clearwater v. Meredith, 1
Wall, 25 (1868); Knoxville v. R. R.

Co., 22 Fed. Rep., 758; Kean v. John-
son, 1 Stock, 9 N. J. Eq.), 401 (1858);
Black v. Del. & Raritan Canal Co., 24
N, J. Eq., 455 (1878); criticised in Mow-
rey v. Ind. & Cin. R. R. Co., 4 Biss., 78.
Cf. Lauman v, Lebanon Valley R. R.
Co., 80 Pa. St., 42 (1858); Fry’s Execu-
tor v. Lexington, etc, R. R. Co., 2
Mete. ‘(Ky.), 314 (1859), the court say-
ing: ‘‘ Each shareholder in an incorpo-
rate company has a right to insist on
the prosecution of the particular objects ©
of the charter. He cannot be deprived
of his rights and privileges without his
assent. Such alterations of the charter
as are necessary to carry into effect its
main design may be made without his
consent. But an alteration which ma-
terially and fundamentally changes the
responsibilities and duties of the com-

‘pany, or which superadds an entirely

new enterprise to that which was orig-
inally contemplated, may be resisted
by the stockholders, unless such altera-
tions are provided for in the charter
itself, or in the general laws of the
state in force at the time the act of in-
corporation was passed.” Until, how-
ever, the corporation accepts such
amendment, the stockholders cannot
complain. To. same effect, Delaware,
etc., R. R. Co. v. Irick, 28 N. J. L., 321
(1852). See, in general, Pearce v. Madi-
son R. R. Co., 21 How., 441; Tuttle v.
Mich. Air Line Co., 35 Mich., 247 (1877);
New Jersey, etc., R. R. Co. v. Strait, 35
N, J. L., 822 (1872). In all these cases
neither 4 mandatory statute, nor a vote

_of the directors, nor a majority of the

stockholders, can compel a dissenting
stockholder to accept the change. It
would be unconstitutional. The stock-
holder may. say: ‘‘I have agreed to be-
come interested in a railroad company,
and have contracted in view of the
profits to be expected and the perils
and losses incident to that description

519
§ 501.] AMENDMENTS TO CHARTERS. (oH. XXVIIT.
not yet fully settled, and is full of difficulties. There is a strong
tendency in the decisions, and a tendency which is deserving of
the highest commendation, to limit the power of the legislature to
amend a charter under this reserved power. It should be restricted

_to those amendments only in which the state has a public interest.
Any attempt to use this power of amendment for the purpose of
authorizing a majority of the stockholders to force upon the mi-
nority a material change in the enterprise is contrary to law and
the spirit of justice. Under such reserved power the legislature
has only that right to amend the charter which it would have had
in case the Dartmouth College case had decided that charters were
not contracts.! In other words, by this reserved right the restraint
of the federal constitution is done away with. The power to make

amendments and to repeal and alter charters has been reserved in '

of business; but I have not agreed that
those to be intrusted with the capital I
contribute shall have power to use it in
a business of a different character, and
attended with hazards of a different
description.” Marietta, ‘etc., R. R. Co.
v. Elliott, 10 O. St., 57 (1859). The leg-
islature cannot, in the amendment itself,
authorize the majority to bind the mi-
nority herein. New Orleans, etc, R.
R. Co. v. Harris, 27 Miss., 517 (1854).
-On the right of a dissenting stockholder
in general, see,- also, Goodin v. Evans,
18 O. St., 150, 166 (1868); Railway Co.
v. Allerton, 18 Wall, 288, 2385 (1878);
Printing House v. Trustees, 104 U. S.,
11 (1881); Roberts’ Appeal, 92 Penn.
8t., 407; Buffalo, etc., R. R. Co. v. Pot-
ter, 23 Barb., 21 (1856); Hoey v. Hen-
derson, 32 La. Ann., 1069; Waring v.
Mayor, etc., of Mobile, 24 Ala, 701

(1854); Miss., etc., R. R. Co. v. Cross, 20°

Ark,, 448 (1859); Clinch v. Financial Co.,
L. R., 4 Ch., 117 (1868); Dougan’s Case,
L. R., 8 Ch., 540; Barrett v. Alton, etc.,
R, R. Co., 18 Ill., 504 (1857). See, also,
Gray v. Monongahela Nav. Co., 2 Watts
& S., 156 (1841); Currie v. Mut. Ass.
_Soc., 4 Hen, & M., 815 (1809); Zabriskie
v, Cleveland, etc., R. R. Co., 28 How.,
381 (1859); Cincinnati, etc., R. R. Co. v.
Cole, 29 .O. St., 126 (1876); St. Mary’s
Church, 7 Serg. & R., 517; Lyons v.
Orange, etc., R. R. Co., 32 Md., 18
(1869); Ill. Riv. R. R. Co. v, Beers, 27

Ill, 185 (1862); Hope Ins. Co. v, Beck-
man, 47 Mo., 98 (1870); Same v. Koeller,
47 id., 129 (1870); Wetumka & Cooso R,
R. Co. v. Bingham, 5 Ala., 657 (1843);.
Palfrey v. Paulding, 7 La. Ann., 363
(1852); State v. Sibley, 25 Minn., 387
(1879); Bangor, etc., R. R. Co. v. Smith,
47 Me., 34 (1859); Shields v. Ohio, 26 O..
St., 86 (1875); S. C., 95 U. S., 319; State
v. Maine, etc., R. R. Co., 66 Me., 488;

8 CG, 96 U. S., 499; New Jersey v.

Yard, 95 id., 104, 113 (1877); S.C,
contra, 37 N. J. L., 228; Smead v, In-
dianapolis, etc., R. R. Co.,°11 Ind., 104
(1858); Sumrall v. Mut. Ins. Co., 40.
Mo., 27 (1867); Kenton Co. Court v
Bank Lick Turnp. Co., 10 Bush, 525.
(1874); Regents v. Wiliams, 9 Gill & J.,
865 (1839); S. C.,-31 Am. Dec., 72; St.
Jobn’s College v. Purnell, etc., 23 Md.,.
629 (1865); White v. Syracuse R: R. Co.,
14 Barb., 560 (1853); Schenectady, etc.,
Plank R. Co, v. Thatcher, 11 N. Y., 102:
(1854); Caley v. Philadelphia, etc., R. R.
Co., 80 Penn. St., 868 (1876). See, also,
Burlington, etc., R. R. Co. v. White, 5:
Iowa, 409 (1857); South Georgia, ete.,.
R. R. Co. v. Ayres, 56 Ga., 230 (1876),
where, however, a sale of the road was.
made without legislative authority.
1County of San Mateo v. Southern
Pacific R. R. Co., 8 Sawyer, 288, 27%
(1882); Detroit v. Detroit & Howelk
Plank-road Co., 48 Mich.,, 140 (1880).

520
CH. XXviml. |

most of the states of the Union.

AMENDMENTS TO CHARTERS.

[§ 501.

It is clearly established that the

legislature cannot, under this reserved power, amend the charter
so as to change the whole character of the enterprise and compel
the corporation to proceed under the amended charter. The re-
strictions of the state constitution still exist, and individuals cannot

be forced by the state into new contracts.3

1 Constitution of Ala., XIII, 1; Ark.,
V, 48; Cal., IV, 81; 1879, XII, 1; Col.,
1876, XV, 8; Del., II, 17; Iowa, VIII;
12; Kan., XII, 1; Me., Laws of 1831,
Mass., St. 1830, ch. 81, R. S., ch. 44:
§ 23, Gen. St., ch. 68, § 41; Md., III, 48,
par. 2; Mich., XV, 1, 8; Mo., VIII, 14;
N, J., Amend. IV, 7, par. 11, cl. 11;

NLY., VIL, 1, RB. S., pt. I, ch, XVIIL,

title 3, § 8; N. Car., VIII, 1; Neb.,
1875, XI; Nev., VII, 1; O., XVII, 2;
Or., XI, 2; Penn., XVI, 10; 8. Car,
XII, 1; Tenn., XI, 8; Tex., 1875, XII,
5, 7; Wis., XT, 1.

2In Pennsylvania it is held that the
reserved power, when used so as to
make an amendment compulsory on the
corporation, ‘‘is in the nature of a po-
lice power, designed for the protection
of the public welfare.” Cross v. Peach
Bottom R’y Co., 90 Pa. St., 392 (1879).
‘The power of amendment was never
reserved with reference to any question
between the corporation and its stock
subscribers, but solely with reference to
questions between the corporation and
the state, where the latter desired to
make compulsory amendments against
the will of the former.” The corpora-
tion cannot be compelled to proceed.
All the state ‘‘can do is to grant it the
power, and then it is for the corporation
to accept it or not, as it pleases.” Under
its reserved power to amend, the state
may give a remedy against a mill-dam
‘corporation for injuries by flood. Mo-
nongahela Nav. Co. v. Coon, 6 Pa. St.,
879 (1847), holding, also, that by accept-
ing an amendment which is granted
on condition that the reserved power to
amend shall apply to the corporation, it
is subject to such power. Kenosha,
Rockford & Rock Island R. R. Co. v.
Marsh, 17 Wis., 18 (1862); Troy & Rut-

An amendment under

land R. R. Co, v. Kerr, 17 Barb., 581
(1854), In The City of Knoxville v.
Railroad Co,, 22 Fed. Rep., 758 (1884),
the court say: ‘It was not competent
for the legislature to do more in this re-
spect than to waive the public rights.

‘It could not divest or impair the rights

of the shareholders, as between them-
selves, as guarantied by the company’s
charter, without their consent. It was
upon the faith of the stipulations con-
tained in the said charter that the share-
holders subscribed to the capital stock,
and thereby made themselves members
of the corporation.” In the case, also,
of Orr v, Bracken County, etc., 81 Ky.,
593 (1884), an amendment under the re-
served power, changing the method of
voting, was decided to be of no effect
until the stockholders accepted it. The
court said: ‘‘The right to amend the
‘charter may be expressly reserved, but
that right does not confer the favor of
taking from the corporators the control
of the corporate property.” See, also,
§ 609, as to amendments affecting the
right to vote. Query, whether a man-
datory consolidation would be legal.
Mowrey v. Ind. & Cin. R. R. Co., 4Biss.,
78 (1866). When legal, a mandatory
change does not require acceptance by
the stockholders. Zabriskie v. Hacken-
sack & N. Y. RB. R. Co., 18 N. J. Eq.,
178 (1867). But when the mandatory
amendment goes beyond the legal lim-
its, it must be accepted by the corpora-
tion as though it were made optional
with the corporation. Kenosha, Rock-
ford & Rock Island R. R. Co. v. Marsh,
17 Wis., 13 (1868). See, also, § 497, supra.

3Cooley on Constitutional Limita-
tions, 5th ed., 454. As to repeals of
charters under this reserved power, see
chapter XXXVIII.

d21
$501.) . AMENDMENTS TO CHARTERS. (OH. XXVIII,

the reserved power cannot change the character of the enterprise,
nor take away rights already acquired under the charter. It
must not be foreign to the purposes and objects of the original
charter.!

It may, however, go to any extent in authorizing the corporation
itself, by a unanimous vote of the stockholders, to make funda-
mental changes. The latest and best view taken of this reserved
power of the state is that under it a fundamental amendment to
the charter does not authorize a majority of the stockholders to
accept the amendment and proceed, but that unanimous consent of

the stockholders is necessary.”

1 This power has its\limits. ‘It can
repeal or suspend the charter; it can
alter or modify it; it can take away the
charter ; but it cannot impose a new one
and oblige the stockholders to accept
it. The power to alter and
modify does not give power to make
any substantial additions to the work.”
Zabriskie v. Hackensack & N. Y. R. R.
Co., 18 N. J. Eq., 178 (1867). ‘The
power of alteration and amendment is
not without limit; the alterations must
be reasonable; they must be made in
good faith, and be consistent with the
scope and object of the act of incorpo-
ration. Sheer oppression and wrong
cannot be inflicted under the guise of
amendment or alteration.” Shields v.
Ohio, 95 U. S., 825 (1877); Spring Val-
ley Water-works v. Bd. of Supervisors
of San Francisco, 61 Cal., 3 (1881). The
amendment must ‘‘ not defeat or subse-
quently impair the object of the grant,
or any rights vested under it.” Close
v, Glenwood Cemetery, 107 U.S., 466
(1882). See, also, Miller v. State, 15
Wall., 478 (1872); Mayor, etc., of Wor-
cester v. Norwich & Worcester R. R. Co.,
109 Mass., 103 (1871). The motives of
the legislators cannot be inquired into.
Northern R. R. Co. v. Miller, 10 Barb.,
260 (1851) ; Matter of Elevated R. R. Co.,
70 N. Y., 827, 851. See 118 N. Y., 111.

2Mills v. Central R. R, Co., 41 N. J.
Eq., 5 (1886), where a statute subsequent
to the charter authorized the consolida-
tion of railroad companies. The court
said: ‘* The legislature did not intend to

affect the rights of stockholders inter
sese, and the act does not do so, either
expressly or by implication. . .

After shareholders had entered into a

‘contract among themselves, under leg-

islative sanction, and expended their
money in the’execution of the plan
mutually agreed upon, the plan could
not, even by virtue of legislative enact-
ment, be radically changed by the ma-
jority alone, and dissentient stockhold-
ers be compelled to engage in a new and
totally different undertaking, because
such action would impair the obligation
of the dissenting stockholders’ contract
with their associates and the state.”
The court said, also, that, under its re-
served power to amend a charter, the
state cannot give ‘‘a power to one part
of the corporators as against the other
which they did not have before,” It
has been held, however, that, under ita
reserved power, the legislature may
authorize a road to lease another. Dur-
fee v. Old Colony & Fall River R. R.
Co., 87 Mass., 230 (1862). A consolida-
tion thereunder has been held legal.
Bishop v. Brainerd, 28 Conn., 289 (1859);
Durfee v. Old Colony, etc, R. R., 87
Mass., 230 (1862), Also not legal. Ke-
nosha, Rockford & Rock Island R. R.
Co. v. Marsh, 17 Wis., 18 (1862); Mow-
rey v. Ind. & Cin. R. R. Co., 4 Biss., 78
(1866). Authorizing one railroad to sub-
scribe for stock in another railroad has
been held legal. White v. Syracuse &
Utica R. R. Co., 14 Barb., 559 (1858),
Also borrowing money and building

522
CH. XXVIII. |

AMENDMENTS TO CHARTERS.

§ 502. Dissenting stockholder’ 8 remedy against an illegal amend-
ment.— Where an unauthorized and illegal amendment has been
accepted by a corporation and is about to be acted upon, a stock-

holder has two remedies. If he

has not paid his subscription, he

may consider himself released from his liability to pay the sub-
scription, or he may begin suit in equity to obtain an injunction
against or to set aside any action by the corporation under the
amendment.' If the stockholder has already paid his subscription,
then his only remedy is an injunction or a suit to set aside? ~ In
Pennsylvania it has been held that the stockholder may have an
injunction herein, but only until the corporation shall have pur-

branches, Northern R. R. Co. v. Miller,
10 Barb., 260 (1851). Also reducing cap-
italstock. Joslyn. Pacific Mail Steam-
ship Co., 12 Abb. Pr. R. (N. 8.), 329
(1872). See, also, White Hall &, Platts-
burgh R. R. Co. v. Myers, 16 Abb. Pr.
(N. 8.), 34 (1872); State v. Accommoda-
‘tion B’k of La., 26 La. Ann., 288 (1874);
Kenosha, Rockford & Rock Island R. R.
Co. v. Marsh, 17 Wis., 18 (1868). The
extension of the line from six to seven-
teen miles was held to require a unan-
imous acceptance in Zabriskie v. Hack-
»» ensack & N. Y. BR. RB. Co., 18 N. J..Eq.,
178 (1867). _

1This rule is recognized and applied
in most of the cases of this chapter.
See, also, Clearwater v. Meredith, 1
Wall., 25, holding that the stockholder
was released, and saying: ‘‘ Clearwater
could have prevented this consolidation
had he chosen to do so.” Nugent v.
Supervisors, 19 Wall., 241 (1878); Cham-
pion v. Memphis, etc., R. R. Co., 35
Miss., 692 (1858). A charter amend-
ment enlarging the corporate objects
from fire and accident to fire, marine
and inland releases dissenting stock-
holders. Ashton v, Burbank, 2 Dill,
435 (1873). In England cases generally
arise releasing the subscriber when the
memoranda of association vary from
the prospectus. Stewart's Case, L. R.,
1 Ch., 574 (1866); Webster’s Case, L. R.,
2 Eq., 741 (1866); Ship’s Case, 2 De G.,
J. & S., 544 (1865); Dawes v. Ship, L. R.,
3 H. of L., 343 (1868). Cf. Nixon vw.

man v. Mitchell, 5 De G., M. & G., 648
(1854). See, also, Dorris v. Sweeney, 60

N. Y., 463 (1875). After a winding-up |

has commenced there can be no release
herein, Oakes v. Turquand, L. R., 2
H. L., 325 (1867). In opposition to this
rule of law there are some decisions
holding that the subscribers’ only rem-
edy is an injunction. Were it not that
the great weight of authority holds
otherwise, this view would be com-
mended as the only logical result of the
law. There is no reason why a stock-
holder who has not paid his subscrip-
tion should be better off than he who
has met that obligation. See § 187; also
Hays v. Ottawa, etc., R. R. Co., 61 Ill.,
422 (1871); Pacific R. R. v. Hughes, 22
Mo., 291 (1855); also Martin v. Pensacola
R. R. Co., 8.Fla., 389 (1859); Ware vu
Grand, etc., R’y Co., 2 Russ. & M., 470
(1831); Bank v. Charlotte, 85 N. C., 483
(1881).

jury to the defendant sued on his sub-
scription. Hawkins v. Miss. & Tenn,
R. R. Co., 35 Miss., 688 (1858).

2This remedy also is supported by a

large number of the cases in this chap-

ter. See Stevens v. Rutland & Burling-
ton R. R. Co., 29 Vt., 545 (1855); Black
v. Del. & Raritan Canal Co., 24 N. J.
Kq., 455 (1878); Mowrey v. Ind. & Cin,
R. R. Co., 4 Biss., 78 (1866), The stock-
holder cannot enjoin parties from ap-
plying to the legislature for the amend-
ment. Story v. Jersey, etc., Co, 16 N,

[$ 502.

The plea of release must allege.
acceptance by the corporation, and in-

‘ Brownlaw, 3 H. & N., 686 (1858) ; Nor-
528

’ t

J. Eqg., 18 (1863), reviewing the cases;
eo
§ 503.] AMENDMENTS TO CITARTERS. [CH. XXVIII
chased his interest in the corporation.!. This decision, however,
has been doubted, and hardly seems consistent with well-estab-
lished principles protecting persons in their rights to retain their
property except as taken from them under the power of eminent
domain.’

§ 503. Assent and acquiescence as a-bar to the stockholder’s rem-
edy.— A stockholder may be estopped from objecting to an amend-
ment by his express or implied acquiescence therein. Any acts
indicating an acceptance by him of the amendment bind him and
bar his suit.? Acquiescence may sometimes grow out of his silence, ©
under circumstances that called’on him to dissent if he so intended.‘
His assent, however, is not to be presumed, but must be proven.’

Stevens v. Rutland, etc., R. R. Co., 29 R. R. Co. v. Vermont Cent. R. R.Co.,

Vt., 545 (1855).

1Lauman v. Lebanon Valley R. R.
Co., 80 Pa. St., 42 (1858); approved in
Slate v. Bailey, 16 Ind., 46 (1861). Cf.
Ship v. Crosskill, L. R., 10 Eq., 738
(1870); Stewart v. Austin, L. R., 3 Eq.,
299 (1866), holding that the recovery
back cannot be in a court of equity.

2Mowrey v. Ind. & Cin. R. R. Co., 4
Biss., 78 (1866).

3 Bedford R. R. Co. v. Bowser, 48 Pa.
St., 29 (1864), Long delay may consti-
tute a ratification herein. Gifford v.
New Jersey R. R. Co., 10 N. J. Eq.,
171 (1854); Bangor, etc., R. R, Co. v.
Smith, 47 Me., 34 (1859); State v. Sib-
ley, 25 Minn., 387 (1879); Hope, etc.,
Ins, Co. v. Beckman, 47 Mo., 93 (1870);
Hope, etc., Ins. Co. v, Koeller, 47 Mo.,
129 (1870); Covington v. Covington,
etc., Co., 10 Bush, 69 (1878); Kenton,
etc., Court v. Bank, etc., Co., 10 Bush,
529 (1874); Sumrall v. Sun, etc., Co., 40
Mo., 27 (1867); Smead v. Indianapolis,
etc, R. R., 11 Ind., 104 (1858), Cf.
Pingry v. Washburn, 1 Aiken (Vt.),
264 (1826). See, in general, Memphis,
etc., R. R. Co. v. Sullivan, 57 Ga, 240;
Heuston v. Jefferson College, 63 Penn.-
St., 428; Danbury, etc., R. R. Co. v.

' Wilson, 22 Conn., 435; Vermont, etc.,

34 Vt., 2; Hayworth v. Junction R. R.
Co., 18 Ind.,; 348 (1859); Mills v. Central
R. R. Co, 41 N. Ji Eq,., 1 (1886); Za-
briskie v. Hackensack, etc., R. R. Co:,
18N. J. Eq., 178; Hx parte Booker, 18
Ark., 338; Upton v. Jackson, 1 Flipp.
C. C., 418; Goodin v. Evans, 18 O. St.,
150, and chapter XLIV. If the stock-
holder subscribed after the amendment
was made he cannot complain. Eppes
v. Miss., etc., R. R. Co., 85 Ala, (N. 8.),
54 (1859); McClure v. People’s Freight
Co., 90 Pa. St., 269 (1879). If a stock-
holder does not object to an amend-
ment, it is not for a person whose land
is being taken under eminent domain
proceedings to object. Ames v. Lake
Superior, etc., R. R., 21 Minn., 241,
291 (1875).

4 Commonwealth v. Cullen, 18 Pa. 8t.,
133 (1850); Martin v. Pensacola & Ga.
R. R. Co., 8 Fla., 370 (1869); Owen v.
Purdy, 12 O. St., 78 (1861). Contra,
Hamilton Mutual Ins. Co. v. Hobart, 2
Gray, 5438 (1854), \

5 March v. Eastern R. R. Co., 43 N.
H., 515 (1862); Prop., etc., Union Lock
& Canals v. Towne, 1 N. H., 44 (1817);
Ireland v. Palestine, etc., Turnpike Co.,
19 O. St., 369 (1869).

524
CHAPTER XXIX.

“TRUSTS” AND UNINCORPORATED JOINT-STOCK ASSOCIATIONS.

A, “ TRUSTS.”

§ 503a. Definition and legality of a

“ trust.”

508b. Further inquiry as to the le-
gality of a “trust.”

508e. Liability of trustee and certif-
icate-holders,

503d. Qualifications, powers, etc., of
the trustees and of certif-
icate-holders. ~

§ 503a. Definition and legality of a “trust.”—

B, UNINCORPORATED JOINT-STOCK AS-
SOCIATIONS,
§ 504. Definitions,
505. Statutory joint-stock compa-
nies.
506. Joint-stock companies may arise
by implication of law.
507. How a person becomes a mem-
ber— Transfers.
508. Liability of members to cred-
itors and to the company.
509. Actions by members against
officers and the company.
510. Dissolution.

The word “ trust”

was first used to mean an agreement, between many stockhold-
ers in many corporations, to place all their stock in the hands of
trustees and to receive therefor trust certificates from the trustees.
The stockholders thereby consolidated their interests and became
trust certificate holders. The trustees own the stock, vote it, elect
the officers of the various corporations, control the business, receive
all the dividends on the stock, and use all these dividends to pay

dividends on the trust. eontificntes,
elected by the trust certificate-holders.

The trustees are periodically
The purpose of the “trust”

is to control prices, prevent competition and echeapen the cost of

production.

The Standard Oil Trust, the American Cotton-Seed

Oil Trust and the Sugar Trust are examples of this method of com-

bination.!

1The committee of the house of rep-
resentatives at Washington, in their re-
port, explain the nature of the Standard
Oil Trust and Sugar Trust very clearly.
The committee reports ‘‘ that there exist
a certain number of corporations or-
ganized under the laws of the different
states and subject to their control; that
these corporations have issued their
stock to various individuals, and that
these individual stockholders have sur-
rendered their stock to the trustees
amet in the agreements creating these

525

\
\

trusts, and accepted in lieu thereof ecer-
tificates issued by the trustees named
therein. The agreements provide that
the various corporations whose stock is
surrendered to the trustees shall pre-
serve their identity and carry on their
business.” See 4 R’y & Corp. L. J., 98.
Mr. S. C. T. Dodd, the general solicitor
and originator of be Standard Oil Trust,
defines a trust as ‘‘an arrangement by
which the stockholders of various cor-
porations place their stocks in the hands
of certain trustees, and take in lieu
ean

3

“ pRUSTS ”

§ 503a.] AND UNINCORPORATED ASSOCIATIONS. [CH. XXIX,

But the word “trust” has a wider and more popular use. It is
used to designate any combination of producers for the purpose of
controlling prices and suppressing competition. In this sense of the

word, all pools, contracts, agreements and schémes whereby those

who were competitors combine to regulate prices are “ trusts.” }
The first question that arises is whether such combinations are
legal —are they not void on the ground that they are combinations

and contracts in restraint of trade?

The law is clear that any com-

bination of competing concerns for the purpose of controlling prices,
or limiting production, or suppressing competition, is contrary to
public policy and is void. There are many cases to this effect.

thereof certificates showing each share-
holder’s equitable interest in all the
stocks so held. The result is twofold:
1. The stockholders thereby become in-
terested in all the corporations whose
stocks are thus held. 2. The trustees
elect the directors of the several cor-
porations.”

1 For explanation and illustrations of
the various methods of organizing
“trusts,” see Cook on Trusts, 2d ed.,
Appendix, 1888.

2 Where all the manufacturers of lum-
ber at a certain point contracted to sell
to a corporation all the product of the
mills so far as such product was sold in
four counties, and the mills agreed not
to sell to any other parties in those
counties except, upon a forfeit to the cor-
poration, the court held that any one of
the mills could repudiate the contract.
In a suit brought by the corporation

- against one of the mills for refusing to
live up to the contract, the court held
that the corporation could not recover.
Santa Clara, etc., Co. v. Hayes, 18 Pac.
Rep., 391 (Cal., 1888).

In Ohio many salt manufacturers
formed a ‘‘ trust,” by agreeing to sell all
their product to an unincorporated
joint-stock association. The latter was
composed of, and its directors were
elected by, the manufacturers, The
purpose of the combination was to have
the association buy the sali from the
manufacturers and sell it to the public.
Competition would thereby be pre-
vented. The court held that the com-

bination was void, and refused to enjoin
one of the parties from breaking his
contract with the association. Central
Ohio Salt Co. v. Guthrie, 35 O. St., 666
(1880), the court saying: ‘‘ Public policy
unquestionably favors competition in
trade, to the end that its commodities
may be afforded to the consumer as
cheaply as possible, and is opposed to
monopolies which tend to advance mar-

‘ket prices to the injury of the general

public. . . The clear tendency of such
an-agreement is to establish a-monopoly
and to destroy competition in trad¢; and
for that reason, on the grounds of pub-
lic policy, courts will not aid in its en-
forcement. It is no answer to say that
competition in the salt trade was notin
fact destroyed, or that the price of the
commodity was not unreasonably ad-
vanced. Courts will not stop to inquire
as to the degree of injury inflicted upon
the public; itis enough to know that
the inevitable tendency of such con-
tracts is injurious to the public.” In the
important case of State v. North, etc.,
Co., 3 N. Y. Supp., 401 (1889); 8. C., 6
R’y & Corp. L. J., 56, Judge Barrett held
that the state, by judicial proceedings,
may forfeit the charter of a corporation,
all of whose shares of stock are placed
in the hands of trustees, where such
trustees hold similarly the stock of com-
peting corporations in the sugar refin-
ing business, and where such trustees
use their power to effect a monopoly in
such business,

526

a
:

OH. XxIx.] “TRUSTS”

AND UNINCORPORATED ' ASSOCIATIONS. ,

!

[§ 5034,

In more recent times, in England, the genuine “trust” has been

used for legitimate investment purposes.

In Pennsylvania five Pennsylvania
coal corporations, which together con-
. trolled a certain kind of coal, combined
and agreed that sales should be made
through a committee and a general
agent, and that thereby prices should be
fixed, freights made, and sales and de-
liveries adjusted. If any company sold
more than a fixed proportion it was to
pay a certain amount to the cthers.
The combination was made and carried
out in New York. In the course of
time one of the companies sued another
to recover its proportion of the amount

which the latter was to pay for the ex-

cess of coal sold by it. The Pennsylva-
nia court held that he could not recover;
that the combination was illegal and
void ; and that it was a conspiracy under
the New York statute against the com-
mission of any act by two or more per-
sons “injurious . . totrade or com-
merce.” Morris Run Coal Co. v. Bar-
clay Coal Co., 68 Pa. St., 1'78 (1871).

.In New York a coal company bought
coal from several corporations upon
their contract not to sell to any other
parties in that locality. The purpose
was to enable the purchaser of the coal
to have a monopoly of the market. The
party which purchased the coal did not
pay for it. The coal company which
had sold brought suit for the price, but
the court held that the suit’ must fail.
The company had taken part in an ille-
gal contratt and combination. In such
eases the parties are outside of the pale
and protection of the law. The courts
will not. aid either party. Arnot v.
Pittston, etc., Coal’ Co.; 68 N. Y., 558
(1877). 5

In Louisiana, where several firms
owned a large quantity of Indian bag-
ging, and combined and agreed not to
sell except upon the consent of a ma-
jority of those who were parties. to the
agreement, the court refused to uphold
the agreement, and refused to enjoin

The trustees are author-

one of the parties from violating his
compact. India Bagging Association v.
Kock, 14 La. Ann., 168 (1859). The
court said: “The agreement between
the parties was palpably and unequiv-
ocally a combination in restraint of
trade, and to enhance the price in the
market of an article of primary neces-
sity to cotton planters. Such combina-
tions are contrary to public order, and
cannot be enforced in a court of jus-
tice, ” In another case many manu-
facturers, in consequence of troubles be-
tween themselves and their employees;
entered into an agreement and gave a
bond that they all would abide by the
rates of labor, hours of work and other

regulations which a majority of those

who entered into the combination
should decide upon. The court held
that the compact was in restraint of
trade; that it was illegal and void, and
that the bond could not be enforced.
Hilton v. Eckersley, 6 El. & BL, 47
(1856).

Tn Illinois all the grain dealers in a
town secretly combined and made con-
tracts by which they controlled the

‘price of grain and the local store-house

accommodations, The parties suc-
ceeded, but disagreed in their division
of the profits. An action for an ac-
counting was brought by one against
another. The court refused to aid
either party. The law will leave the
guilty conspirators as it finds them.
Craft v. McConoughy, 79 Ill, 846 (1875),
the court saying: ‘‘ The ae firms, by
a shrewd,-deep-laid, secret combination,
attempted to control and monopolize
the entire grain trade of the town and
surrounding country. That the effect
of this contract was to restrain the
trade and commerce of the country isa
proposition that cannot be successfully
denied.”. It is to be mentioned that,
some twenty-five years previous to this
decision, a case involving somewhat

‘ 527
er)

§ 508a.]

‘TRUSTS ”” AND UNINCORPORATED ASSOCIATIONS.

[cH. XXIx,

ized to invest the funds of the “trust ” in the stocks and bonds of
miscellaneous corporations. Generally, however, they are limited

similar facts came before the supreme
court of Wisconsin, and was decided the
other way. Kellogg v. Larkin, 3 Pin,
(Wis.), 123 (1851). A company which is
organized in violation of a statute can-
not collect debts which are due to it.
Jennings v. Hammond, 51 L. J. (Q. B.),
492 (1882), the company in this case
being organized in violation of a stat-
ute which prohibited more than twenty
persons uniting in an association or part-
nership except under certain condi-
tions.

In New York the proprietors of five
lines of boats engaged in canal trans-
portation agreed to combine and do
business at certain rates for freight and
passage. The net earnings were to be
divided among themselves in a fixed
proportion. One of the parties sued
another to compel him to make pay-
ment. The court held that the com-
bination was void under the statutes of
New York, and said: ‘‘It is a familiar
maxim that competition is the life of
trade. It follows that whatever de-
stroys or even relaxes competition in
trade is injurious if not fatal to it.”
Hooker v. Vandewater, 4 Denio, 349
(1847). +

All gas companies owe a duty to
the public. An agreement of two com-
panies in one city to keep out of each
other’s territory is void. Chicago, etc.,
Co. v. People’s, etc., Co., 13 N. E. Rep.,
169 (Ill., 1887). An agreement of man-
ufacturers that one shall not employ
the discharged hands of any other ex-
cept upon the written consent of the
latter is void. Mineral Water, etc.,
Co. v. Booth, 57 L. T. Rep., 573 (1887).
A combination of four cotton-seed oil
corporations by an agreement that the
possession and use of all their property
should be turned over to certain per-
sons to run is a partnership, and con-
trary to the rule of law that a corpora-
tion cannot become a partner. One of

528

the four corporations sued and recov-
ered repossession of its property. Mal-
lory v. Hanover, etc., Works, 8 8. W.
Rep., 346 (Tenn., 1888).

Additional light is thrown upon this
subject by cases where grain or stock
speculators attempt to form a ‘‘ corner”
in grain or stock. <A ‘‘corner” on an
article is made by buying up all of the
article, and then buying more to be
delivered at a future time. When that
future time comes the person who sold
is ‘“cornered;” he can find none of the
article to deliver. But the ‘‘corner”
fares ill at the hands of the courts. It
is declared to be illegal and void.
Sampson v. Shaw, 101 Mass., 145 (1869);
Raymond v. Leavitt, 40 Mich., 447
(1881). See Petrie v. Hannay, 3 Term
Rep., 418 (1789).

The victim of the ‘‘ corner,” being in-
nocent of any participation in the con-
spiracy, may bring suit in a court of
equity, and may, recover back the
money which has been illegally exacted
from him. Barry v. Croskey, 2 J. &
H., 1 (1861). See, in general, §§ 341-348.

The whole tendency of the law is to
declare illegal and void all combinations
which destroy competition in trade.
Thus, in New York, a large number
of the proprietors of boats on the
canals made-a combination. The in-
come from every boat, over and above
a certain amount allowed to the boat
for expenses and wear and tear, was
turned into the ‘‘pool.” At certain
times the fund in the ‘‘ pool” was to
be divided among the parties accord-
ing to the number of their boats, In
an action to enforce payment under
the agreement the court held that the
whole arrangement was illegal, void
and not enforceable. Stanton v. Allen,
5 Denio, 484 (1848), where the court
said: ‘‘Though the branch of the law

relating to public policy is liable to be

misunderstood and extended beyond its
CH. XXIx. |

“pRUSTS” AND UNINCORPORATED ASSOCIATIONS.

[§ 508a.

in the amount which they may invest in any one direction. That
which is lost in one investment is expected to be made up by large

proper dimensions, still it must not on
that account be neglected or dispar-
aged. The rule that contracts and
agreements are void when contrary to
public policy, when properly under-
stood and applied, is one of the great
preservative principles of a state.”
Many salt manufacturers in New
York state combined to limit the pro-
duction and control the price of salt.
They formed a corporation, and each of
the parties leased to the corporation his
manufactory of.salt. Each of the par-
ties was, however, to continue the manu-
facturé of salt in his manufactory, but

only to a limited extent, and was to sell -

the product to a corporation at a fixed
price. The agreement was carried out.
One of the parties could not collect
from the corporation the price for the
salt delivered to it, and accordingly he
brought'suit. But the court decided
that he could not collect. He lost his
salt, and also the price of it. The law
declares such combinations illegal, and
will not aid any of the parties. Clancy
v, Onondaga Fine Salt, etc., Co, 62
Barb., 395 (1862), the court saying:
‘This court has held repeatedly that
the purposes which were attempted to
be accomplished through the corpora-
tion were illegal. The end to be at-
tained being illegal, the contracts and
agreements entered into to secure the
end must be equally so.” And, indeed,
ever since the days of Lord Coke, who,
in the great and leading ‘‘ Case of the
Monopolies,” 11 Coke, 84 (1711), declared
that a monopoly was illegal and void,
there has been a continuous line of
cases which have protected trade and
the public against any and all schemes
and devices of competitors to unite and
regulate prices. Even the few cases
which may seem to vary this principle
of law are found, on close examination,
to sustain.and uphold it. In Common-
wealth v. Smith, 9 Northeast. Rep.,
(34)

629 (Mass., 1887), where certain shade-
roller manufacturers formed a corpora-
tion to sell their product, the court en-
joined one of the parties from repudiat-
ing the agreement, but clearly said:
“The agreement does not refer to an
article of prime necessity, nor to a sta-
ple of commerce, nor to merchandise to
be bought and sold in the market. . . .
It does not look to affecting competi-
tion from outside —the parties have a
monopoly by their patents — but only
to restrict competition in price between
themselves. . . When it appears
that the combination is used to the pub-
lic detriment, a different question will
be presented from that now before us.”
See, also, Skrainka v. Scharringhausen,
8 Mo. App., 522 (1880), upholding a
pooling contract of certain owners of
stone quarries located in St. Louis, on
the ground that the restraint was local in
its effects. Wicken v. Evans, 3G. & J.,
318 (1829); Marsh v. Russell, 66 N. Y.,
288 (1876); and see, also, Ontario Salt
Co. v. Merchants’ Salt Co., 18 Grant’s
Ch., 540 (1871), where a Canadian
‘*pool” on salt was sustained. Dia-
mond Match Co. v. Roeber, 106 N. Y.,
473 (1887), relied upon by many “‘ trust”
lawyers, was not at all a “ trust ” case,
and is no authority on the subject. In
the important.case, however, of Mogul,
etc, Co. v. McGregor, 59 L. T. Rep.,
514 (1888), most of the ship-owners
doing business between London and
China formed a ‘‘ conference” or com-
bination whereby their patrons were
allowed a certain rebate if no ship-
ments were made with competitors of
the combination, but no rebate was al-
owed otherwise. A competitor sued
the combination for damages for con-
spiracy. Held, that he could not re-
cover; that the plan of operating was
in itself legal, and that illegality could
arise only in using illegal means to
carry out the plan. Chief Justice Cole-

529
§503a.] “TRUSTS” AND UNINCORPORATED ASSOCIATIONS. [CH. XXIX.

profits in another. It is a mode of investment on a large scale,
and is made on the principle of an average gain and loss. “Trusts”

ridge said: ‘Trade not being infi-
nite—nay, the trade of a ‘particular
place or district being ‘ possibly very
limited — what one man gains another
loses. In the hand-to-hand war of com-
merce, as in the conflicts of public
lite, whether at the bar, in parliament,
in medicine, in engineering, men fight
on without much thought of others,
except a desire to'excel or to defeat
them. Very lofty minds, like Sir Philip
Sidney with his cup of water, will not
stoop to take an advantage if they
think another wantsit more. Our age,
in spite of high authority to the con-
trary, is not without its Philip Sidneys;
but these are counsels ‘of perfection
which it would be silly indeed to make
the measure of the rough business of
the world as pursued by ordinary men
of business. The line is difficult to
draw; but I cannot see that these de-
fendants have passed the line which
separates the reasonable and legitimate
selfishness of traders from wrong and
malice.” Aff’d (1889), 6 R’y & Corp.
L. J., 136. In New York it is established
‘that no contracts are void as being in
general restraint of trade where they
operate simply to prevent a party from
engaging or competing in the same
business.” Hence, an agreement of one
steamship company to pay another
company a certain sum for withdraw-
ing its line of boats was upheld as
against the dissent of a stockholder in
the former company. Leslie v. Loril-
lard, 110 N. Y., 519 (1888).

The position of the law, however, is

clear. Combinations to restrict pro-
duction, or to prevent competition, or
to regulate prices, are illegal and void.
A combination for any one of these
purposes is condemned by the law, and
the parties are given no standing in the
courts. The law declares that public
policy, the interests of trade, the pro-
tection of the public and the welfare

of the state demand that this rule be
sustained. But the state will not for-
feit the charter of a corporation merely
because it acquires the property of com-
peting companies. People v. Chicago,
etc., Co, 5 R’y & Corp.. L. J., 586
(1889). j

The word “monopoly” originally
meant an exclusive privilege granted
by the crown. The courts held that
the crown could not grant it. See Case
of the Monopolies, supra; Mitchell v.
Reynclds, 1 P. Williams, 181, 187. But
the word as now used in popular lan-
guage has a much wider significance,
and may appropriately be applied to
many successful combinations now in
existence.

Lord Coke well said that a monopoly
led to three results: an increase in
price; a decrease in quality; and the
impoverishment of artisans and others.

The “trust” mode of organization
is adopted evidently because thereby
the failure of any one of the constitu-
ent corporations will not render the
“trust” insolvent. The stock of the
corporations may be ‘‘ watered” with
impunity by the issue of quantities of
trust certificates in payment for it.
Speculation in trust certificates can be
promoted and made profitable to ‘the
select few; and plots for restricting
production of, the raw or finished prod-
ucts, or for crushing out a competitor,
or for raising prices to the consumer,
or for lowering prices paid for the raw
material, may be secretly, silently, yet
effectually carried out. ‘

The author repeats the words which
he has written concerning the ‘‘ trust.”
“Tt is neither a corporation nor a well-
defined common-law trust; it avoids
the checks and safeguards which a wise
public policy has thrown around cor-
porate acts; its articles of agreement
are secret and jealously guarded even
from the investor himself; no charter

530

*
CH. XxIx.] ‘“TRusTs”

AND UNINCORPORATED ASSOCIATIONS.

[§ 508a.

of this character are'said to be of French origin. They have not

appeared as yet in America.

There is still another kind of “ trust.”

or statements need be filed for public
inspection; no reports need be made or
published ; it may carry on any business
it desires; the principles of ultra vires
acts do not check it; no limit is placed
by statute on its capital stock; no law
prevents an increase or decrease of its
trust certificates; no qualifications are
prescribed for its trustees; no tax is
laid on its charter or franchises or cap-
ital stock; no limit is placed by the pub-
lic on the powers and discretion of its
trustees; no publicity is given to its
acts. It may move from state to state;
it may .evade taxation and defy the
powers of courts; it wields vast sums of
money, secretly, instantaneously and

effectively to accomplish its nefarious.

ends; and it does all this, not for the
advancement of the community and the
nation, but for purposes of extortion
and for the annihilation of independent
firms. . . . It raises prices, perse-
cutes those who refuse to come into the
combination, crushes out competition,
punishes or ruins single independent
producers, lowers the price paid for raw
material, restricts production, forces
iniquitous bargains with railroads, tam-
pers with legislative bodies and renders
fair competition impossible. All this is
done, not by honorable methods, but by
threats, fear, dishonesty, bribery and
discrimination — even fraud and crime
have been charged. The idea is made
prevalent that unscrupulous methods
and evil ends are justified, provided
they are successful.” Cook on Trusts,
p. 54,

1See Healey on Company Law and
Practice; p. 191. For the form of arti-
cles of agreement of this kind of a
‘trust,” and for a detailed statement of
the various provisions that are made,
varying according to the character of
the enterprise and the purposes of the
participants, see Sykes v. Beadon, L.

This also is legitimate in
R., 11 Ch. D., 170 (1879); Smith v. An-
dexsonls R., 15 Ch, D., 247 (1880); Wig-
field v. Potter, 45 L. T., 612 (1882);
Credit Mobilier v. Commonwealth, 67
Pa. St.,. 283 (1870), the last case being a
“trust” created to construct a railroad,
the cestui que trust being the stock-
holders of a designated corporation. In
Smith v. Anderson, L. R., 15 Ch. D.,
247 (1880), the court said: ‘‘The deed
appears to me to be merely a trust deed
of property for investment, the invest-
ment being spread over a number of
different securities, so as to enable per-
sons who choose to invest their money
in this way to avail themselves of that
which, I believe, is one of the most cer-
tain things in the world, viz., what’ is
called the doctrine of averages; that is
to say, that, if a large number of differ~
ent independent securities of a hazard-
ous description are held together, the
loss upon some will be compensated by
the gain on the others, so that a toler--.
ably uniform average rate of interest.
will be obtained. The object, and the
legitimate object, of the persons who

‘were invited to join in this company

was to have an investment of their
money under such circumstances that
they might look to have a high divi-

_dend, with a very considerable security’

for the capital which they were invest-
ing init. Ican see nothing like an at-
tempt at evading the act or at doing
anything but making investments upon
a large scale, so as to obtain the benefit
of the doctrine of averages,”

Cotton, L. J., said: “As I understand
it, this is a scheme for enabling a large
sum of money provided by various per-
sons to be invested on a large aggregate
of securities of different companies of a
particular class —an aggregate includ-
the securities of so many companies as
ing to give a fair average in that partic-
ular class of security. . . .”

531
§ 503a.] “TRUSTS” AND UNINCORPORATED ASSOCIATIONS. [OH. XXIX.

its operations and plan. Itis the American “ Car Trust.” It is
practically an agreement of several owners of cars to place them in
the hands of an agent to sell on the instalment plan, the agent hav-
ing the power to issue certificates. representing an interest in the

instalments.!

In addition to all these there are “trusts” of stock which are

1In the case of Ricker v. American
Loan & Trust Co., 140 Mass., 346 (1885),
a car trust was described as being
formed by an instrument in writing
containing numerous articles, for the
purpose of buying, selling and leasing
railroad rolling stock, to be sold or
leased to a certain railroad company,
with provisions for admitting other per-
sons to membership. The members of
the association were to furnish money
for the purchase of the rolling stock,
and were to have certificates for the
amounts so furnished. The principal
sum contributed by each member was
to be repaid in ten annual instalments
with jinterest. Both principal and in-
terest were payable only out of the rent-
als received for the rolling stock. A
plan was adopted by which the asso-
ciation delivered the property to a cor-
poration as trustee, which issued the
certificates to the members of the asso-
ciation, and also executed the leases: to
the railroad company, with provisions
for a rental sufficient to meet the above
payments of principal and interest, in
addition to expenses, including taxes.
At the end of ten years the rolling stock
was to become the property of the rail-
road company. The original board of
managers was named in the articles of
association, but the shareholders were
to have the power to remove them and
elect others. At all meetings every
shareholder was to have one vote for
each share of stock owned by him, and

provision was made for the transfer of |

‘shares. The association was not to be
dissolved by the death of members.
Every owner of one or more shares was
to be entitled to-a proportional share of
the rental received.

In an able address by Mr. Francis

Rawle, before the American Bar Asso-
ciation in 1885, on the subject of ‘Car
Trust Securities,” the following clear
statement. of the character of a “Car
Trust Association,” or a “Car Trust,”
is made: ‘The articles of association
fix the amount of the capital stock, and
provide that those persons who sign the
articles of association, and any others
that may join it, or hold certificates of
its stock, shall constitute its member-
ship; that neither the death, insolvency
or bankruptcy of any stockholder, nor
the transfer of shares, nor the admis»
‘sion of new members into the associae
‘tion, shall work its dissolution; that
when a member céases to be a stock-
holder he ceases to be a member of the
association, and shall not afterwards\be
liable on any contract, and any person
purchasing a share shall thereby become
a member of the association; that only
the property of the association shall be
liable for its debts, and all its contracts
shall contain a provision that only its
funds and property shall be liable for its
debts, and that no member of the board
of managers nor any stockholder shall
be so liable personally; that its entire
business shall be ‘transacted and all
contracts sliall be made only by the
board of managers, who are chosen
from the stockholders and named in the
articles, with a provision for filling va-
cancies in the board and for removing
any of its members at a meeting of the
stockholders called for that ‘purpose;
that upon payment of the stock sub-
scribed the stockholder shall receive a
certificate of his ownership; that the
rolling stock, when built, shall be deliv-
ered to a trustee naaied in the articles,
and that this trustee shall have’ power

to contract for the association with
‘582
CH. XxIx.| “‘rRustrs”

AND UNINCORPORATED ASSOCIATIONS.

[§ 5082,

formed in order to obtain or retain the control of a single corpora-
tion or to “tie up” the stock of a: corporation. .

(usually) a special-railroad company to
furnish it with rolling stock upon cer-
tain specified terms.

“‘The board of managers of the asso-
ciation then purchase the rolling stock
and arrange to furnish it to the railroad
company through the medium of a
trustee. The latter takes the legai title

to the property, executes the contract.

with the railroad company, receives and
holds the company’s obligation to pay
for it, issues certificates to the persons
entitled, usually in sums of a thousand
dollars each, receives the periodical
payments under the contract, and pays

_ the amounts of principal and interest
due to the certificate-holders until the
rolling stock has been fully paid for,
when it becomes the property of the
railroad company under the terms of
the contract.

“Formerly it was the practice to pay
off the principal of the cértificates by
successive drawings, but now it has be-
come more common to execute the cer-
tificates in series. with a fixed maturity
for each, usually running from. one to
ten years.”.

A car-trust company wherein the sub-

_ seribers were to have certificates rep-
resenting their interest, and the roll-

ing stock owned by the company was.

to be rented at a certain rental, which
was to go to the subscribers until their
subscriptions were repaid, and then the
rolling stock was to belong to the lessee,
is a joint-stock company— a mere volun-
tary association. Ricker v. American
Loan & Trust Co., 140 Mass., 346 (1885).
See, also, Mills v. Hurd, 29 Fed, Rep.,
410 (1887). The holders of car-trust
certificates have been held to be merely
bondholders subject.to prior mortgages.
Central, etc., Co. v. Ohio, etc., R. R., 36
Fed. Rep., 520 (1888).

1Thus, frequently, the various holders
of the stock wish to act together in hold-
ing, selling or voting upon it. They aim

/

to place the stock in such a position

that no one of the parties can break his

agreement to act with the others. Vari-

ous devices have been tried. ‘‘Irrevo-

cable” proxies to vote upon the stock

have been given by all the parties to a
designated person, who acted as their

agent. But the courts decided that

these proxies were not irrevocable, but

‘might be revoked at any time. Wood-

ruff v. Dubuque, etc., R. R. Co., 30 Fed.

Rep., 91 (1887). In this case the stock

certificates were turned over to trustees

to transfer to themselves, with power

to vote, hold or sell the same. ‘“‘ Trust”

certificates were issued. The court held

that:at any time previous to an actual
sale by the trustees a certificate-holder

might revoke his interest in the ‘‘ trust”

and demand back. his part of the stock.

Tosame effect and on very similar facts,

see Griffith v. Jewett,'15 Weekly Law

Bull, 419; Vanderbilt 7 Bennett, 2 R’y

& Corp. L. J., 409. (Penn., 1887). Such.
irrevocable proxies are not necessarily

void as against public policy. Brown

v. Pacific Mail Steamship Co., 5 Blatch.,

525.(1867). It simply is revocable. A,
proxy given for a valuable consideration

may nevertheless be revoked if it is.
about to. be used for a fraudulent pur-

pose. Reed v. B’k of Newburgh, 6 Paige,

837 (1887). This plan wasa failure. Any

party could at any time sell his interest,
and the transferrer could demand his

part of the stock held in trust.

Another device was tried. The par-
ties. contracted together not to sell their
stock for a specified time, and agreed
that if they did they would sell to-
gether or to a purchaser who would
be agreeable to the old stockholders,.
But this plan also did not succeed,
If it prohibited any sale whatsoever,
and did not limit the time during
which the agreement was to last,
it was void as an illegal restraint of
trade. Fisher v. Bush, 35 Hun (N. Y.),

533

'
‘

§ 5030.) “TRUSTS” AND UNINCORPORATED ASSOCIATIONS. [OH. XXIX.

§ 5036. Further inquiry as to the. legality of a “ trust.”— There
are other things to be considered in determining whether or not a
“trust” is legal. Does it vest personal property or real estate in
a trustee for a longer period than is allowed by law? Is the for-
mation of a trust for the purpose of carrying on business authorized
by law? Is the shifting of the parties interested — that is, the cer-

- tificate-holders — allowed in cases of trusts? These questions will

South. Rep., 742 (Ala., 1888).

be considered in the order named.

It is the policy of the law to limit the time during which a per-
son may tie up his personal property or real estate. Generally this
time is fixed as the life-time of the survivor of any two persons then
living and designated by the person creating the trust. Each state
by its statutes generally provides and names the time during which
property may be tied up by a trust, and if a trust is formed for a
period longer than that allowed by statute the trust itself is void.

641 (1885). Moreover, it constituted no to liability after an offer to sell to the
check on the parties. At anytime any company. But this device is not open
one of the parties might sell his stock. to corporations. Their charters are gen-
The only remedy of the other parties erally obtained by filing a certificate in
against him, then, was a doubtful, dif- accordance with a general law. A spe-
ficult, protracted and expensive suit for cial provision inserted in the certificate,.
damages. See Havemeyer v. Have- limiting the right to transfer stock,
meyer, 48 N. Y. Super. Ct., 506 (1878); would be ineffectual and void. Nor’
13 id., 464; 86 N. Y., 618. Although can a by-law of the corporation accom-
many stockholders transfer their stock plish the result. By-laws are not al-
to a trustee to hold and vote it for three | lowed to restrict the sale and transfer-
years, and agree not to sell until they ability of stock. See § 382, infra.
have offered to sell to each other, yet These same dangers apply to the
any one may sell to an outsider, and Standard Oil Trust and Sugar Trust.
the latter may demand back his stock An outside stockholder*cannot ob-
from the trustee. Moses v. Scott, 4 ject to other stockholders uniting their
_ interests in a ‘‘trust,” and thereby
Still another plan had been tried. An obtaining control of the corporation.
unincorporated joint-stock association Zimmermann », Jewett, 19 Abb. N.C,
had been formed to carry on the busi- 459 (Ohio, 1886): But he can object
ness. A provision was inserted in the when the purpose of the “trust” is to
articles of association of the company work out some scheme which is illegal
restricting the right of a shareholder to initself. Hafer v. New York, etc., R. R.

_ sell his stock. This provision was up- Co., 14 Cin. Law Bull., 68 (Ohio, 1886).

held by the courts. The purchaser of 1Gerard’s ‘Titles to Real Estate,”
a certificate of stock, sold in violation p. 228, Moreover, if the time is to be
of the agreement, received no right to measured by the life of a person then
vote or participate in the company. He living, a trust which is to exist for a
merely was entitled to the dividends on fixed period, however short, without
his stock. Harper v. Raymond, 3 Bosw. reference to the life of a person then
(WW. Y.), 29 (1888). See, also, Kingman living, is void. Id., pp. 228, 229. In
v. Spurr, 7 Pick., 284 (1828). See, also, New York the suspension can be for
Taft v. Harrison, 10 Hare, 489 (1853), as only two lives in being, and, in certain
5384

‘
'
4

CH. XXIX.] “TRUSTS” AND UNINCORPORATED assooraTions.  [§ 5030.

There is little doubt that merchandise, land and shares of stock
may be placed in trust. The law is clear that “every kind of val-
uable property, both real and personal, that can be assigned at law
may be the subject-matter of a trust.’’!

A different question arises, however, in determining whether a
trust may be created to carry on business and trade, or to control
a concern which carries on business.?

At common law the placing of personal property in trust for the
purpose of carrying on business in the name and under the manage-
ment of the trustees is legal and allowable.* The statutes of the
various states, however, must be consulted in reference to this point.

cases, twenty-one years thereafter. 2 in conflict with the statute régulating
R. 8., 723, § 15 (p. 2176, 7th ed.). This the accumulation of interest and pro-
statute applies equally to real and per- tecting the suspension of absolute own-
sonal property. Gerard on Titles of ership in property of that character, is
Real Estate, 235; Howe v. Van Schaick,. valid when the trustee is competent to
7 Paige, 221 (1838); Bean v. Bowen, 47 take, anda trust is for a lawful purpose
How. Pr., 306; Holmes v. Mead, 52 well defined, soas to be capable of be-
N. Y., 882, 344 (1873). The statutory ing specifically executed by the court.
prohibition against the accumulation . . . Trusts of personal property are
of the income of trust property, except not affected by the statute of uses and
in the case of infants, applies both to trusts, which applies only to trusts in
real estate and personalty. Gerard’s real property.” In Gott v. Cook, 7 Paige,
‘Titles to Real Estate,” p. 238. . 521, 584 (1889), the chancellor said :

1 Perry on Trusts, § 67, : “The Revised Statutes have not at-

2Under the statutes of New York a tempted to define the objects for which
trust of property consisting of real express trusts of personal property may
estate is void, unless the purpose of ' becreated, as they have done in relation
the trust is to sell the land forthe bene- to trusts of real estate. ~ Such trusts,
fit of creditors; or to sell, mortgage or therefore, may be created for any pur-
lease it for the benefit of legatees or for poses which are not illegal.” See, also,
satisfying a lien on the land; orto re- Graff v. Bonnett, 81 N. ¥., 139 (1865),
ceive the rent and use it for the sup- In Power v, Cassidy, 79 N. Y., 602, 613
port of a certain person; or to accumu- (1880), the court said: ‘‘ The law does
late the rent for a certain person. See not limit or confine trusts as to personal
2R.S. of N. Y., 728, § 55 (p. 2181, 7th property except in referenceto the sus-
ed.). Accordingly a modern “trust,” pension of ownership, and they may be
whose property consists of real estate created for any purpose not forbidden
in New York would be void. But as by law.” To same effect, Bucklin v.
to personal property the law is gen- Bucklin, 1 Keyes (N. Y.), 141 (1864);
erally different. 113 N. Y., 405.

3 For decisions at common law to the 4 Many of them, including Michigan,
effect that property may be vested in Wisconsin, Minnesota, California, Da-
trustees for the purpose of carrying on kota, North Carolina, Georgia, Penn-
business, see Ex parte Garland, 10 Ves., sylvania, Connecticut, Kentucky and
110 (1888); Scott v. Izou, 34 Beav., 4834 Vermont, have statutes expressly speci-
(1865). In the case of Holmes v. Mead, fying the objects for which a trust may
52 N, Y., 332 (1873), the court said: ‘‘A be created. See Stimson’s American
trust in personal property, which is not Statute Law, § 1708,

585 «
“CpRUSTS”? AND UNINCORPORATED ASSOCIATIONS. [CH. XXIX.

§ 5038¢.]
There is little difficulty in determining the question whether it is
allowable in law to create a trust where the cestwis que trust — that
is, the certificate-holders— change and fluctuate in their identity.
The law does not require the cestui que trust to remain continuously
one and the same person. He is not indefinite, even though by
transfer of interest his identity may change.!
’ Amore formidable objection to the legality of “trusts” is that
they are similar to an unincorporated joint-stock association, and
that the latter are illegal, inasmuch as they assume the powers,
privileges and name of a corporation. It was on this ground that
the recent decision in Louisiana declared that the American Cotton
Oil Trust was illegal, and was disqualified to do business within
that state. The court held that, under the statutes of Louisiana, an
unincorporated joint-stock association is illegal; that a “trust” was.
one kind of an unincorporated joint-stock association, and_conse-
quently that it was illegal and void.?

But this view of the law would not be sustained elsewhere in this
country; nor would it be sustained under the old’ common law of
England. Unincorporated joint-stock companies have existed for
years and are common throughout all the other states of the Union.
They are legal methods of carrying on business.’

§ 508c. Liability of trustee and certificate-holders.— The law is
clear that a trustee who carries on any kind of business is liable
personally, and to the entire extent of his private fortune, for all the
debts incurred in the management and execution of the trust.‘ It

1 See Harrison v. Harrison, 36 N. Y.,
648 (1867); aff’g 42 Barb., 162; Holmes v.
Mead, 52 N. Y., 332, 343 (1878); Conk-
ling v, Washington University, 2 Md.
Ch., 497 (1849); Perry on Trusts, § 66.
In regard to this matter, a ‘ trust” is
legal on the same principle that it is
legal for a bondholder secured by a rail-
way trust deed or mortgage to sell and
transfer his interest:to another.

2 State of Louisiana v, American Cot-
ton Oil Trust, 1 R’y and Corp. L. J.,
609 (1887), the court saying: ‘‘ A joint-
stock company is not known to the laws
of Louisiana.”

3See § 504, infra. In England there
formerly was doubt upon this subject,
but this doubt was due to the “ Bubble
Act.” This statute was passed in 1720
for the purpose of suppressing unin-
eorporated companies. At that time
they were regarded as ‘dangerous, mis-

chievous and, in short, public nui-
sances.” But the statute was repealed
in 1826, and Lindley, the great English

‘judge and jurist, says of ‘it: *‘Juster

views of political economy and of the
limits within which legislative enact-
ments should be confined have led to
the repeal of the statute in question,
which, though deemed highly beneficial
half a century ago, probably gave rise
to much more mischief than it pre-

vented,” Lindley on Partnership, 193— _

the great English work on corporations.
Moreover, a careful examination of the
English authorities up to the present
day shows conclusively that at common
law an unincorporated joint-stock as-
sociation is legal and valid. Id., 192,
196. Of. 21.N, E. Rep., 605 (Ill, 1889).

4Thompson v. Brown, 4 Johns. Ch.,
619 (1820); Wild v. Davenport, 7 Atl.
Rep., 295 (N. J., 1887); Stephens v.

586
CH. xx1x.| “ TRUSIS” AND UNINCORPORATED ASSOCIATIONS. [$ 508¢.
is possible, however, that the use of the words “as trustee,” in the
contract entered into, will protect him against this liability.| And
there is little doubt that the creditors of the trust may collect their
debts from its property. This has been a doubtful point, but is now
reasonably well settled. It matters not whether the trustees have
expressly bound the trust property to pay the debts. Where the
trustee is insolvent, a creditor of the trust may proceed against its
property to procure payment of a debt incurred in the execution of
the trust.’

But a different rule prevails as regards the cestui que trust, the
beneficiary. The cestwi gue trust cannot be held liable for the
debts created by the trustees or for debts incurred in the execution
of the trust. This question has arisen chiefly in cases where —
trustees have carried on the business of an insolvent person for the
benefit of the creditors of the latter.’ And the same conclusion is

reached: in cases where an executor, administrator or trustee car-
ries on a business for the benefit of a beneficiary.‘

James, 3 Southeast. Rep., 160 (Ga.,
1887); Rogers v. Wheeler, 43 N. Y., 598
(1871); Jones v. Seligman, 81 N. Y., 190
(1880).

1 Contracts entered into by the trust-
ees of a trust deed for many share-
holders bind the latter but not the
former personally, where the trustees
were authorized to.-make the contracts
and did so as trustees. Itis immaterial
that the contracts are under seal. Cook
v. Gray, 183 Mass., 106 (1882). But-see
Stephenson v. Pold, 32'N. W. Rep., 340
(lowa, 1887); 1 Parsons on Contracts,
6th ed., *122. ‘

2Cater v. Everleigh, 4 Tessas: +, 19
(1809); James v. Mayrant, 4 Desaus., 691
(1815); Montgomery v. Everleigh, 1 "Mo-
Cord, Ch., 267 (1826); Magwood v. Pat-
terson, 1 Hiles, Ch., 228 (1883); Gaudy
v. Barrit; 56 Ga., 640 (1876); Tennant.
Stoney, 1 Rich. Hg., 222, 248 (1845);
Wylly v. Collins, 9 Ga., 223 (1851); Frost
v. Shackleford, 57 Ga., 261 (1876); Fer-
rin v. Myrick, 41 N. Y., 315 (1869). Con-
tra, Worral v. Harford, 8 Ves. Jr., 8
(1802); Mvlhall v. Williams, 32 Ala,
489 (1858); Jones v. Dawson, 19 Ala.,
672 (1851), See, also, New v. Nicoll, 73
N. Y., 127 (1878); Moyes v, Blakeman,
6N. Y., 567 (1852).

3Storrs v. Flint, 14 J. & S. (N. Y,),-
498 (1880); Cox v. Hickman, 8 H. L.
Cases, 268 (1860); Re Stanton Iron Co.,
21 Beav., 164 (1855); Selwyn v. Harrison,
2 J. & H, 334 (1869). See Bingaman:
v. Hickman, 8 Atl. Rep., 644 (Pa., 1887).

4In the case of Ew parte Garland, 10
Ves., 110 (1803), where a testator di-
rected that a certain sum be used to
carry on a business, and the executor
so used it, and the business became in-
solvent, held, per Lord Eldon, that no
other part of the testator’s property. was
liable for the debts thereby incurred;
overruling Hankey v. Hammond, 1
Cooke’s. Bank. Law, 67 (1786). Lord
Eldon further said: ‘‘On the other
hand, the case of the executor is, hard.
He becomes liable, as personally re-
sponsible, to the extent of all his prop- ,
erty, ... . though he is but a trustee. |
But he places himself in that position
by his own choice.” In thecase of In re
Johnson, L. R., 15 Ch. D., 548 (1880),
the cases are reviewed. Lord Eldon's
decision that it is not the general estate
of the testator which is liable, but only
so much as he has authorized to be em-
ployed in the business, is stated to be
still the law. See, also, Strickland v,
Symons, L. R., 26 Ch. D., 245 (1884),

. 537
\

§ 503c.]

A

“rpusts” AND UNINCORPORATED ASSOCIATIONS. [OH. XXIX,

It has been held also that the trustee cannot render the cestut
que trust liable, even though the trustee contracts with the creditor

to that effect."

There is little doubt that these old principles of law are appli-

cable to “trusts.”

The courts of England have decided that a

modern “trust” is not a partnership or mere association, but is

similar to an old common-law trust estate.

This conclusion was

reached in construing an English statute which prohibits certain
partnerships or associations from doing business.?

Such being the case, it seems to be clear that the trustees and
the property of a modern “trust” are liable for all debts incurred
by it, but that the holders of the trust certificates are not in any

1Stanton v. King, 8 Hun (N. Y.), 4
(1876); aff’d, 69 N. Y., 609. See 15 Am.
L, Rev., 456; Burch v. Breckenridge, 16
B. Mon., 488; New v. Nicoll, 12 Hun,
431 (1877); aff’d, 73 N. Y., 127.

2In England a statute exists which
forbids any company, association or
partnership consisting of more than
twenty persons from carrying on any
business for the acquisition of gain, un-
less it is registered as a company under
the Joint-stock Company’s Act, and
complies therewith as regards reports,
etc. It has been held that a “ trust” is
not a ‘“‘company, association or part-
nership,” and consequently is not af-
fected by this statute. Wigfield v. Pot-
ter, 45 L. T., 612 (1882); Crowther »v.
Thorley, 32 W. R., 380 (1884); In re
Siddall, L. R., 29 Ch. D., 1 (1885); Smith
v, Anderson, L. R., 15 Ch. D., 247
(1880). The last case cited was an ac-
tion to have the “trust” dissolved on
the ground that it was a partnership,
and was doing business in violation of
the statute. The court refused to grant
the relief desired, and said that the cer-
tificate-holders were not partners and
cid not form an association. ‘‘There
has never been anything creating any
mutual rights or obligations between
these persons. They are from the first
entire strangers, who have entered into

no contract whatever with each other,’

nor has either of them entered into any
contract with the trustees or any trustee

on behalf of the other, there being
nothing in the deed pointing to any
mandate or delegation of authority to
act for the certificate-holders as between
themselves, and nothing, as it appears
to me, by which any liability could
ever be cast upon the certificate-holders
either as between themselves or as be
tween themselves and anybody else,

. Ifthere is any business at all,
it is to be carried on by the trustees,
Whatever is to be done is to be done by
the trustees.” And Cotton, L. J., said:
‘The trustees here are the only persons
who are dealing. with the investments,
and they are dealing, not as agents for
some principal, but as trustees in whom
the property and the management of it
are vested, and who have the power of
changing the investments and securi-
ties. That.is just like the case which
often occurs where the executors or
trustees of a will are directed to carry
on a business, The fact that they are
to account to others for the profits
made is a matter utterly immaterial as
between them and those with whom
they deal. They deal with those per-
sons as the only persons contracting,
and hold themselves ouf as personally
liable. These persons have no right
whatever as against the persons bene-
ficially entitled.” This case was one
involving a “trust.” See, also, dicta
to the same effect in Credit Mobilier v.
Commonwealth, 67 Pa. St., 233 (1870).

538
!

cH. Xx1x.] “TRUSTS” AND UNINCORPORATED ASSOCIATIONS.

[§ 508¢.
way liable therefor, unless they have expressly agreed to assume
that liability.

These rules-apply also to trusts whose property consists of shares
of stock in corporations. A trustee of. stock who is recorded on the
corporate books as a stockholder is, at common law, liable on such
stock, as though he were the absolute owner of the same.
the rule even though he is recorded on the corporate books not as
an absolute owner, but as a trustee of the stock.! And thé liability
of the trustee is not limited by the amount of the trust property.
Each trustee is liable not merely for his proportion, but for the
whole amount due upon the stock.’

The cestut que trust is not liable on the stock held by the trust-
ees. The corporation cannot hold him liable; neither can the cor-
porate creditors. The cestus que trust cannot be held either on the
unpaid subscription or on the statutory liability of the stock. He
is a stranger to the corporation and its creditors.

But here the exemption of the cestui gue trust ceases. He does
not entirely escape liability. His exemption from’ liability to the

This is’

creditors of the trust does not protect him from liability to the |

trustee. He is bound to indemnify the trustee and to repay to him
any debts which the latter may have paid in the administration of

the trust.

1Chapman & Barker’s Case, L. R., 3'

Eq., 361 (1866); Davis v. Essex, etc.,
Soc., 44 Conn., 582; Bugg’s Case, 2 Dr.
& Sm., 952; Muir v. City of Glasgow
Bank, L. R., 4 App. Cas., 337 (1879).
See, also, Sales v. Bates, 6 East. Rep.,
703 (R. L, 1886); Holt’s Case, 1 Sim., N.
S., 389 (1851); Mitchell’s Case, L. R., 9
Eq., 363 (1870); King’s Case, L. R., 6
Ch., 196 (1871); Grew v. Breed, 10 Metc.,
569 (1846); Leifchild’s Case, L. R., 1
Kq., 231 (1865); Hemming v. Maddick,
L. R., 9 Eq., 175 (1870); Ea parte Orien-
tal, etc., L. R., 8 Ch., 791 (1868); Ind’s
Case, L. R., 7 Ch., 485 (1872). Cf.
Saunders’ Case, 2 De G., J. & S., 101.

2Hoare’s Case, 2 John. & H., 229
(1862).

3Cunningham v. City of Glasgow,
L. R., 4 App. Cas., 607 (1879).

4 Mitchell’s Case, L. R., 9 Eq., 368;
Ex parte Bugg, 2 Drew & Sm., 452
(1865); Williams’-Case, L. R., 1 Ch.
Div., 576; King’s Case, L. R., 6 Ch.
App., 196 (1871); Fenwick’s Case, 1

The indemnity which the trustee may claim from him

De G. & Sm., 557 (1849); Newry, etc.,
Co. v. Moss, 14 Beav., 64. Frequently,
however, the statutes of the state creat-
ing the corporation change these rules,
In New York, by statute, trustees hold-
ing stock in railroad or manufacturing
corporations are released from liability.
Laws of 1850, ch. 140, § 11; Laws of
1848, ch. 40, § 18. By the statutes of
the United States a similar provision
applies to national banks. R. 8., § 5152.
But this exemption does not protect the
trustee unless the stock registered in
his name is registered to him as
“trustee.” Davis v. Essex, etc,, Soc., 44
Conn., 582 (1877). A trustee is not lia-
ble on national bank stock, his trustee-
ship appearing on the books. Welles
v. Larrabee, 36 Fed. Rep., 866 (1888),
These statutes, however, apply, of
course, only to stock issued by corpora-
tione which have been incorporated by
the government which enacted the
statute.

5 Butler v. Cumpston, L. R., % Eq., 16

539 ee
§ 508¢.]

,

“~RUSTS ” AND UNINCORPORATED ASSOCIATIONS. (OH. XXIX.

cannot be denied on the ground that the trustee is irresponsible,
and consequently that the corporation cannot get anything from

him.!

But until the trustee is.actually called on by the corporation

to pay, he cannot compel the cestuz gue trust to give indemnity?
All this liability, however, of the cestwi gue trust may be avoided.

If the trustees are willing to provide in the trust instrument that

the cestut que trust shall not be liable, such a provision is legal and

effectual.
completely.

(1868); James v. May, L. R., 6 H. of L.;
828 (1873); Re National Financial Co.,
L. R., 3Ch., 791 (1868); Perry on Trusts,
§§ 485, 486. In the case of Jervis v.
Wolferston, L. R., 18 Eq., 16 (1874), the
court said, in enforcing indemnity to
the trustees of stock: “I take it to be a
general rule that where persons accept
a trust at the request of another, and
that other is « cestut que trust, he is
personally liable to indemnify the
trustees for any loss accruing in the
due execution of the trust; and under
that doctrine I shall hold that the estate
‘of the testator becomes liable to in-
demnify the trustees against. the pay-
ment of this large sum of money.”
Hemming v. Maddick, L. R., 7 Ch.
App., 395 (1872), where the court held
‘also that the trustee might authorize
the corporation to use the. trustee’s
name and collect from the cestui que
trust. In Hughes v. India, etc., Co.,
L. R., 22 Ch. D., 561 (1882), it is held
that the trustees cannot sue for indém-
nity before the corporation has de-
manded payment. See, also, Phene vw,
Gildan, 5 Hare, 11 (1845), where a mort-
gagor of stock was held liable to in-
demnify the mortgagee, who had been
held liable on the stock, The court
said the mortgagor was liable the same
as a “‘trustee of leasehold property
under covenants for the benefit of a
cestui que trust.” In Balsh vu. Hyham,
2 P. Williams, 453 (1728), the lord chan-
cellor, said that ‘‘it is a rule that the
cestui que trust oughi to save the trustee
harmless as to all damages relating to
the trust,” and consequently that the

540

The cestwi gue trust then escapes liability absolutely and

cestui que trust must repay Ao the
trustee money borrowed by the latter
and given to the cestui que trust, the
trust cohsisting of stock which was
pledged to secure the loan. Approvedin
Ex parte Chippendale, 4 De G., M. &
G., 19, 54 (1854), Lindley on Partner-
ship, pp. 758, 759, says: ‘‘The right of
a trustee to indemnity from his cestui
que trust very closely resembles the
right of an agent to indemnity from
his principal. A trustee is
clearly entitled to be indemnified out:
of the trust property against all costs,
charges and expenses properly incurred, .
and against all losses sustained by him '
in the execution of his trust; and if
the trust property is not sufficient for.
the purpose of indemnifying him in rey.
spect of such matters, his cestui que
trust, if under no disability, is per-

‘sonally liable to indemnify him, unless

such liability is excluded by some spe-
cial circumstance. . . . If there is
an express covenant to indemnify, the:
obligation will be limited by the cov-
enant.”

1In re National Financial Co., L, R,
8 Ch., 791 (1868); Cruse v. Paine, L. R.,
6 Eq., 641 (1868).

2 Hughes-Hallett v. Indian, ete., Co.,
L.R., 22 Ch. D., 561 (1892),

’ Thus, Ex parte Chippendale, 4 DeG.,
M. & G., 19, 52.(1854). The court,says,
ina dictum: ‘‘No doubt a company’s
deed, or any other deed, may be so
formed -as to deprive directors or
trustees of the right to indemnity; and,
if parties think proper to accept direct-
orships or trusts under deeds soframed,
~ 4 ‘
CH. XXIX.| “TRUSTS” AND UNINCORPORATED ASSOCIATIONS.

[§ 508d.

But is there any way by which the trustee may attempt to avoid
the liability on stock? There is but one, and that is futile. He
may resort to a “dummy ;” that is, a man of straw, an irresponsible
person. Stock is often placed in the name of a “ dummy ” by men
who subscribe for or buy stock, and do not wish to be subject to
the liability of a regular s tockholder. The “dummy” is generally
a relative, a child, an agent, an employee or a friend. The real
owner supposes that he “thereby escapes liability; and so he does,
if he can conceal the fact that he is the real owner of the stock.
But, if he is discovered, then he is liable. The corporation or the
corporate creditors may reach him. The “dummy” is the agent

_and the real owner is the principal. The agent is liable, and so is
the undisclosed principal. The device to escape liability fails.
Chief Justice Waite, of the supreme court of the United States,
clearly established this principle of corporation law in the year
1879,

§ 503d. Qualifications, powers, rights and duties of the managers
and certificate-holders of a “trust.” Any person may serve as a
trustee, provided that person is competent to take the legal title.
to the property.’

The trustees of a “trust.” correspond somewhat to the directors
of a corporation. They generally are elected annually by the
certificate-holders in a regularly called meeting of themselves.
The instruments creating the “trust” usually provide for the elec-
tion of trustees, and for their succession and term of office. There
is nothing in the old law of trust estates which forbids this change

of trustees.*

they must abide by the consequences.”
See, also, Gillan v. Morrison, 1 De G. &
Sm., 421 (1847), holding that an express
agreement that the cestui que trust
shall be liable to the trustee to a certain
extent and no more is binding on the
trustee.

1Davis v. Stevens, 17 Blatch., 259
(1879), where the question was,
‘* Whether, in an action at law by a re-
ceiver of the bank, the real owner of
stock in a national bank, standing by
his procurement in the name of an-
other, and never having been in his own
name on the books, can be charged as a

shareholder with the statutory liability ,

for debts?” Held, that the real owner
is liable. ‘‘ Every principal is responsi-
ble for the obligations of his agency.
The debt of the agent is the debt of the

principal, and always recoverable from
the principal.” See, also, to same ef-
fect, Case v. Small, 10 Fed. Rep., 722
(1881); Castleman v. Holmes, 4 J. J.
Marsh., 1 (1830). In England, under its
statutes, a different rule prevails. See
King’s Case, L. R., 6 Ch. App., 196
(1871); William’s Case, L. R., 1 Ch. D.,
576; Fenwick’s Case, 1 De G. & Sm.,
557 (1849); Cox’s Case, 4 DeG., J. &8., 58
(1863). See, also, chapter XIV. The real
owner of stock is likewise liable where
he transfers it from his own name to
that of an irresponsible person. § 265,
infra.

2 Perry on Trusts, § 39.

3«*The person who creates the trust
may mould it into whatever form he
pleases; he may therefore determine in .
what manner, in what event and_upon

541
§ 508d.] “‘rrusTS” AND UNINCORPORATED ASSOCIATIONS. [CH. XXIX.

‘Where, by the trust deed, a majority of the cestuis que trust have
power to fill a vacancy caused by the incapacity or inability of the
trustee, they may substitute a new trustee when the old trustee re-
moves to and becomes a resident of a foreign country."

The extent of the powers of the trustees of a “trust” is a mat-
ter of great interest to the public and the certificate-holders. Espe-
cially is this the case since the extent of the trustees’ powers is kept
a secret from all except the favored few. Often the certificate-
holders are not allowed to examine and know the contents of the
trust instrument which defines the powers of trustees. Itis true that
the law guards jealously against any assumption of powers by the
trustee beyond those which are expressly conferred by the trust in-

what condition the original trustees
may retire and new trustees may be
substituted. All this is fully within his
power, and he can make any legal pro-
visions which he may think proper for
the continuation and succession of
trustees during the continuation of the
trust.” Perry on Trusts, § 28%. In
England, under the vesting acts, the
court held that it had power to vest the
~estate of a modern ‘‘trust” in new
trustees where one of the old trustees
was dead, another was insane, and
under the trust agreement the certifi-
cate-holders had elected new trustees.
In re Siddall, L. R., 29 Ch. D., 1 (1885).
A similar power was given to trustees
of personal property in New York, by
ch, 185, L. 1882. As regards the com-
mon-law rules and powers of the courts
herein, see Perry on Trusts, § 356
et seq. At common law upon the death
of the surviving trustee, his executor
or administrator became the trustee.
Boone v. Citizens’ B’k, etc., 84 N. Y.,
83, 87 (1881); De Peyster v. Beekman,
55 How. Pr. Rep., 90 (1877). In the
Cost-book Company Case of Johnson
v. Goslett, 18 C. B., 728 (1856), the fol-
lowing provision appears: ‘‘ The trustees
of the said lease shall, when and if re-
quired by the directors, execute a deed
declaring that they hold the said mine
under and by virtue of such lease as
trustees for the benefit of the share-
holders in the said company, according
to their respective shares and interests

therein; and if any or either of the said
trustees‘ or any future trustees shall
resign or die or become incapable or
unwilling to act, then new trustees
or a new trustee may be appointed
by any of the general meetings of
shareholders hereinafter provided for,
in the place of the trustees or trustee
so resigning or dying or becoming in-
capable or unwilling to act as afore-
said; and the said premises shall be
forthwith assigned to and vested in the
said new trustee or trustees jointly with
the continuing trustee or trustees, or in
such new trustees only, as the case may
require, at the expense of the said com-
pany.”

1Farmers’ Loan & Trust Co. v
Hughes, 11 Hun, 180 (1877), In this
case the deed of trust provided that the
trustees or their survivor might be re-
moved by the vote of a majority in
interest of the holders of the bonds re-
ferred to in the trust deed, at any meet-
ing called for that purpose; and fur-
ther, by a separate and distinct provis-
ion, that in case of the death, removal,
resignation incapacity or inability of
both or either of said trustees to act in
the execution of the trust, then a ma-
jority of the holders of such bonds might
designate and select, in writing, one or
more competent persons to fill the va-
cancy so occurring. The property may

-be made to vest in new trustees without

transfer, if the trust instrument is 50
drawn. Perry on Trusts, § 284.

542
OH. XxIx.|, “rRusTS” AND UNINCORPORATED assoolations. [§ 503d.
strument.'! But it is also true that the law allows a grant to the
trustees of any powers which the creators of the trust may see fit
to confer. Strict limitations, such as are imposed upon corpora-
tions, are avoided by the “trust.” The dangerous rules of ultra
vires acts —rules which check and frighten corporations — have no
restraint upon the “trust.” It is practically free and irresponsible.
Its powers are limited only by the wealth, the daring, the ambi-
tion, the moral restraints and the intellectual force of its promoters

and manipulators.

It is a power that becomes absolute; and itis a

power well fitted to control or destroy, as serves its policy best.
There are other incidents which explain the -position of the

trustee.

He may sue and be sued in his'own name on all matters

and contracts pertaining to the trust.?
He is not liable to the cestuc que trust for losses incurred by his

management of tHe property of the trust.

He is bound merely to

exercise ordinary discretion and to obey the directions of the instru-

ment creating the trust.

It is only for a breach of trust that he

may be made to account to the cestue que trust.
In the case of the modern “trust” it has been doubted wiciiee
the consent of all the trustees is essential to its contracts and acts,

as is the case with the old common-law trust.!

But, in general,

these matters are regulated and provided for by the instrument

which creates the “trust.”

The compensation of the trustee is usually fixed by the trust deed.
If not, it falls within the provisions of the statutes, or a reasonable
compensation is allowed by the common law.®

The property of the “trust” cannot be seized for the individual
debts of the trustee,® but the interest of the certificate-holder may

1 Perry on Trusts, §§ 454, 460; 88 Fed.
Rep., 886.

2In this respect the trustee is not the
same as the director of a corporation.
“A trustee is a man who is the owner
of the property, and deals with it as
principal, as owner and as master, sub-
ject only to an equitable obligation to
account to some persons to whom he
stands in the relation of trustee, and
who are his cestuis que trust. . . .«
The office of director is that of a paid
servant of the company. A director
never enters into a contract for himself,
but he enters into contracts for his prin-
cipal; that is, for the company of whom
he is a director and for whom he is act-
ing. He cannot sue on such contracts,

nor be sued on them unless he exceeds
his authority. That seems to me to be
the broad distinction between trustees
and directors.” Smith v. Anderson, L,
R., 15 Ch. D., 247 (1880).

3Simonton v. Sibley, 122 U. 8., 220
(1887). Where a railroad construction
contract is assigned to trustees to be
carried out and the profits to be paid to
the stockholders of a designated corpo-
ration, the stockholders may compel the
trustees to pay over such profits. The
trustees cannot set up that they were
also directors of the railroad. Hazard v.
Dillon, 34 Fed. Rep., 485 (1888).

4 Mills v. Hurd, 29 Fed. Rep., 410 (1887).

5 Perry on Trusts, § 917.

6 Gibson v. Stevens, 7 N. H., 852 (1884),

” 548

'
/

”

AND UNINCORPORATED ASSOCIATIONS. e [cH. XXIX.

§ 5038¢.]  “TRusts

be reached so as to subject it to the payment of his debts.' In this
respect the certificates resemble shares of stock.

The trust property, where it consists of personal property in the
nature of bonds, stocks, notes or evidences of indebtedness, or cor-
responds to the capital stock of a corporation, may be taxed at the
place where the main office or place of business of the “trust”
exists. The extent of the taxation depends, of-course, upon the
statutes of the state wherein the tax is laid.

There is more difficulty in determining whether a certificate-
holder may terminate his interest in the “trust” and demand his
proportion of the property. In certain Poa whose property
consists of shares of stock, he undoubtedly may.’ But in general
a single certificate-holder cannot have the whole “trust ” dissolved
and wound up before the time fixed by its trust agreement for its
dissolution has arrived.‘

If the “trust” itself is forbidden by the statutes of the state
wherein it exists, it never will be wound up by the courts. The
law -will not compel a trustee to account for property or trans-
actions which grow out of a contract which is prohibited by stat-

ute.

The courts leave the parties where they are found. They

are outside of the protection of the law.®
If, however, the “trust,” is legal it may be terminated at any
time by a decree of a court, upon the consent of all the parties

who are interested in it.®

But a “ trust” will not be dissolved and

wound up merely because the trustees have been guilty of a breach

of trust. The remedy in such a

where a trustee was authorized to con-
tinue the testator’s business. The
property was held not subject to the
trustee’s personal debts,

1It can be reached, doubtless, just as
the bonds of a bondholder under a rail-
road mortgage or trust deed may be
reached, As to the rule at common law,
see 2 Albany L. Journal, 261, 288. In
New York, by statute, all transfers of
personal property made in trust, for use
of the person making the same, are
void as against his creditors, existing or
subsequent. 2 R.S., 185, §1 (7th ed.,
p. 23827, and cases there cited). See, also,
Graff v. Bonnett, 31 N. Y., 1, 14, 18.

2 Ricker v. American Loan & Trust,

Co., 140 Mass., 346 (1885). See, also,
People v. Assessors, etc., 40 N. Y.} 154
1869); In re County of Washington v.
Estate of Jefferson, 28 N. W. Rep., 256

case is to enjoin or remove the

(Minn., 1886), citing many cases on this
subject. Itis wellsettled in New York
state that under its statutes no shares of
stock in either domestic or foreign cor-
porations are subject to taxation except

shares of stock in national banks. See
§ 565, infra. 7
3 See § 503d.

4Smith v, Anderson, L, R,, 15 Ch, D.,
247 (1880). The same rule prevails in
unincorporated joint-stock associations.
See Smith v. Virgin, 33 Me., 148 (1851).
See, also, Waterbury v. Mercantile,
etc., Ex, Co., 50 Barb., 157 (1867), hold-
‘ing that such a company will not be
wound up merely because the directors
have been guilty of a breach of trust.

5In re Padstow, etc., Co., L, R., 20
Ch. D., 137 (1882).

6 Perry on Trusts, § 920,

544
cH. Xx1x.] “TRUSTS” AND UNINCORPORATED ASSOCIATIONS.

[8 B04.
trustees! Where, however, the trust is insolvent and incapable of
proceeding, a dissolution and winding up of its business will be de-
creed by a court.

It is a question whether a receiver can be appointed to take the
trust estate out of the hands of a trustee. A receiver of a “ trust”
probably would be appointed only in cases where a receiver would
be appointed of property held and invested by an executor or ad-
ministrator. In the latter case the law is settled that a receiver is
appointed only when there is danger of loss or injury to the prop-
erty arising from the waste, misconduct, incapacity or insolvency
of the executor or administrator.

B. UNINCORPORATED JOINT-STOCK ASSOCIATIONS.

§ 504. Definitions — Joint-stock companies.— A joint-stock com--
pany may be defined to be an association of persons for the pur-
pose of business, having a capital stock divided into shares, and.
governed by articles of association which prescribe its objects, or-.
ganization and procedure, and the rights and liabilities of the
members, except that the articles cannot release the members from.

their liability as- partners to the creditors.of the company.’

1Id., §§ 816-853,

2 See Baring v. Dix, 1 Cox, 213 (1786);
Bailey v. Ford, 13 Sim., 495 (1843); Jen-
nings v. Baddeley, 3K. & J., 77 (1856),
where insolvent copartnerships were

wound up, though the time for which .

they were to exist had not yet expired.
See, also; Seighortner v. Weissenborn,
20 N. J. Eq., 172 (1869); Howell v,
Harvey, 5 Ark., 270 (1842); Van Ness v.
Fisher, 5 Lans., 236 (1871); Brien v.
Harriman, 1 Tenn. Ch., 467 (1878); Hal-
laday v. Elliott, 8 Oreg., 84 (1879); Bag-
ley v. Smith, 10 N. Y., 489 (1853). In
Sibley v. Minton, 27 L. J. (Eq.), 53
(1858), the court held that, in an action
by an adventurer in a cost-book mining
company to wind up the company and
adjust the losses, all the co-adventurers

were necessary parties.

3See Beach on Receivers, § 596.

4In Hedge & Horne’s Appeal, 63 Pa.
St., 273 (1869), it is defined to be “a
partnership whereof the capital is di-
vided or agreed to be divided into shares,
and so as to be transferable without the
express consent of all the copartners.”
In the statutes of Massachusetts the
(85)

words “joint-stock company” are used!
to mean a corporation organized under.
the general incorporation act of the
state. Att’y-Gen. v. Mercantile Ins..
Co., 121 Mass., 524 (1877). But this is not
an accurate use of the term. ‘‘The ar—
ticles of association of an unincorpo--
rated joint-stock company bear the
same relation to it that the charter bears
to an incorporated company. They
regulate the duties of the officers and-
the duties and obligations of the mem-
bers of such a company among them-
selves; they specify the capital, limit
the duration and define the business of
the company.”
N. Y., 600 (1880), per Earl, J. See, also,
White v. Brownell, 42 Abb, Pr., N.S,
162, 193 (1862). In Robbins v. Butler, 24
Tl, 387, 426, 482 (1866), it is said that
joint-stock companies ‘‘have none of
the rights and imrhunities of . . . a
regularly incorporated company. These
stock companies are nothing more than
partnerships; and every member of the ,
company is liable for the debts of the
concern, no matter what the private ar-
rangements among themselves may be.”

545

i

’

Bray v. Farwell, 81 \-
§ 504.]

'

“TRUSTS”? AND UNINCORPORATED ASSOCIATIONS. [CH. XX1Lx,

A joint-stock company lies midway between a corporation and a

copartnership. It is, however, ‘to

be distinguished from them,! and |

also from clubs,? from social, benevolent® and mutual aid‘ organi-

To the same effect, see Moore v. Brink,
4 Hun, 402 (1875); Skinner v. Dayton,
19 Johns., 513 (1822); Wells v. Gates, 18
Barb., 554 (1854); Keasley v. Codd, 2
Carr. & P., 408 (1826), ‘‘ The term joint-
stock company appears to have origi-
nated in England in comparatively re-
cent times, Joint-stock companies may
be said to be partnerships or individuals
associated for some specified purpose
under a designated name or description,
to which, by some general or special
statute, when they have been formed or,
composed in a specified manner, some
of the powers or proper attributes of a
Corporation have been given.” Dayton,
ete., R. R. Co. v. Hatch, 1 Disney, Cin.
Super. Ct., 84, 90 (1855). Factors’, etc.,
Insurance Co, v. Harbor, etc., Co., 37
La. Ann., 233, 289 (1885), speaks of a
joint-stock company as ‘‘a nondescript
organization, composed of the owners
of certificates showing the proportion of
their respective interest in its assets and
liability for its obligations, and who are
co-owners or proprietors in common,
As no one is bound to own property in
indivision, it follows that such owners
who wish a division have a right to have
that property sold, and after a liquida-
tion of the affairs of the concern to have
the residue distributed ratably among
themselves.” At common law a part-,
nership or joint-stock association may
do business under any name that it
chooses. See § 238; Preachers’, etc.,
Soc. v. Rich, 45 Me., 552; 2 Perry on
Trusts, § 780; Swasey v. American
Bible Soc., 57 Me., 528; Cory, ete., Soc.
v. Beatty, 27 N. J. Eq., 570. |

1]; differs from acqrporation in thata
joint-3tock company has no limited lia-
bility as regards its stockholders; and
it cannot sue or be sued in the name of
the association. It differs from a co-
partnership, in that it is not dissolved |
by a transfer of stock; and each mem-

ber has not the same powers of trans.
acting business and disposing of the as-
sets as in a partnership. See Cox v,
Bodfish, 35 Me., 302 (1853),

2Park v. Spaulding, 10 Hun, 128
(1877); Ridgely v. Dobson, 8 Watts &
S., 118 (1842); Loubat v. Le Roy, 40 Hun,
646 (1836); Flemyng v. Hector, 2 Mees,
& W., 172 (1836); Re St. James Club, 2
De G., M. & G., 383 (1852); Ewing v.
Midlock, 5 Port. (Ala.), 82 (1837); Todd
v. Emly, 8 M. & W., 505 (1841); Ray-
nell v. Lewis, 15 M. & W., 517 (1846);
Wood v, Finch, 2 F. & F., 447 (1861);
Cross v1. Williams, 10 W. R., 802 (1862);
Cockerel v. Aucompe, 5 W. RB, 633
(1857); Koehler v. Brown, 31 How., 235
(1866); Waller v. Thomas, 42 How., 387
(1871); Hopkinson v, Marquis of Exeter,
16 W. R., 266 (1869); Gardner: v, Fru-
natte, 19 W. R., 256 (1870); Delanney v.
Strickland, 2 tark., 416; Wood v. Finch,
2 Fost, & F., 447; Coldicott v. Griffiths,
8 Ex., 88; Ebbinghousen v. Worth
Club, 4 Abb. N. C., 800.

8Penfield v, Skinner, 11 Vt, 296
(1839) ; Beaumont v. Meredith, 3 Ves, &

‘B., 180 (1814). See, also, Thomas ». Bll-

maker, 1 Parson’s Sel. Eq. Cases, 98
(1844). Or Masonic lodges, See Ash
Guie, 97 Penn. St., 493 (1881). See, also,
Cohn v. Borst, 86 Hun, 562 (1885);
Goodman v, Jedidjah Lodge, 9 Atl,
Rep., 13 (Md., 1887); Schmidt v. Abra-
ham, etc., Lodge, 2 S. W. Rep., 156
(Ky., 1883), By-law of benevolent so-
ciety that, fur non-payment of dues,
name shall be dropped, is legal and
self-executing. Rood v, Railway, ete,
Ass’n, 81 Fed, Rep., 62 (1887). See
McCallion v, Hibernia, etc,, Soc,, 12 Pac.
Rep., 114 (Cal., 1886), involving a seces-
sion from a benevolent assoviation.
Benevolent associations are not neces-
sarily coparinerships. Brown v, Stoer-
kel, 41 N. W, Rep., 921 (Mich., 1889).
4Lafand v. Deems, 81 N. Y., 507

546

‘
cH. XxIx.] “TRUSTS” AND UNINCORPORATED ASSOCIATIONS.

[§ 504.
zations, and from associations formed for business purposes, but
without a capital stock.’ A joint-stock company, although it ex-
ercises the power to issue stock, the same as a corporation, yet, |
when organized for the purpose of transacting any lawful business,

is itself a lawful mode of carrying on business.?
The earlier cases declaring that joint-stock companies were ille-
gal were so decided largely because of the Bubble act, existing

from 1720 to 1826.3

Very high English authority, after a thorough review of the
English cases, gives the opinion that at common-law joint-stock

associations are legal.*

(1880); Frits v. Muck, 62 How. Pr., 69
(1881); Pipe v. Bateman, 1 Iowa, 369
(1875). Cf. Thomas v. Ellmaker, 1 Par-
son’s Sel. Eq. Cases, 98 (1844); Olery v.
Brown, 51 How. Pr., 92 (1875). See,
also, Boone on Corporations, § 338.

1 Such as stock exchanges. See White

v. Brownell, 4 Daly, 162; Clute v. Love- ‘

land, California (1885); Leech v. Har-
ris, 2 Brews., 571 (1869); Slate v. Cham-
ber of Com., 20 Wis., 63 (1865); Weston
v. Ives, 97 N. Y., 222 (1884), relative to
sale of a seat by the exchange to pay
the member’s debts. See, also, Platt v.
Jones, 96 N. Y., 24 (1884). Seat of a
member of an exchange may be reached,
though by-laws contra. Habenicht v.
Lissak, 20 Pac. Rep., 874 (Cal., 1889).
Stock exchanges cannot expel members
for carrying case into courts instead of
arbitrating. People v. N. Y. Cotton
Ex., 8 Hun, 216 (1876). As to power of
board of trade to expel member, see
Pitcher v. B’d of Trade of Chicago, 13
Northeast. Rep., 187 (Ill, 1887). Ex-
pulsion from unincorporated associa-
tions. Otto v. Journeymen, etc., Union,
17 Pac. Rep., 217 (Cal., 1888). See, also,
§ 7000, infra. For improving a water-
power. Troy Iron & Nail Factory v.
Corning, 45 Barb., 231 (1864). For build-
ing a school-house. Marston v. Durgin,
54N, H., 347 (1874). For protecting busi-
ness interests. Caldicott v. Griffiths,
8 Ex., 898 (1853). See, also, Tenney v.
New Eng. Protection Union, 37 Vt., 64
' (1864); Abels v. McKean, 18 N. J. Eq,
462 (1867); Henry v. Jackson, 37 Vt., 431

(1865); Frost v. Walker, 60 Me., 468
(1865). Building associations. Strohen
v, Franklin, etc., Ass’n, 8 Atl, Rep., 843
(Pa., 1887); Quein v. Smith, 108 Pa. St.,
825; Jackson v, Cassidy, 4 8S. W. Rep.,
541 (Tex., 1887); Auld v. Glasgow, etc.,
Society, 56 L. T. Rep., 776 (1887).

2“ Tt is too late to contend that part-
nerships with transferable shares are
illegal in this commonwealth. .

The grounds upon which they were

formerly said to be illegal in England,

apart from statute, have been aban-
doned in modern times.” Phillips v.
Blatchford, 187 Mass., 510 (1884). ‘‘ These
companies, being consonant with the
wants of a growing and wealthy com-
munity, have forced their way into ex-
istence, whether fostered by the law or
opposed to it.” Greenwood’s Case, 3
De G., M. & G., 459, 477 (1854); Towns- '
end v. Goewey, 19 Wend., 423. A labor-
ing men’s association for the purpose of
opposing capitalists has been upheld.
Snow v. Wheeler, 113 Mass., 179 (1873).

3 Enacted, 6 Geo. 1, ch. 18, § 18; re-
pealed, 6 Geo. 4, ch. 91. Lindley says
of this act: ‘‘Juster views of political
economy and of the limits within which
legislative enactments should be con-
fined have led toithe repeal of the stat-
ute in question, which, though deemed
highly beneficial half a century ago,
probably gave rise to much more mis-
chief than it prevented.”

4 Lindley on Partnership, 192. In a
thorough and exhaustive note on this
subject the learned author refers to Rex

547
§ 504.

'
‘

“pRusTs’? AND UNINCORPORATED AssoctaTions. [CH. Xxx.

In Louisiana and Illinois a contrary conclusion has been arrived at.!
The real estate of an unincorporated joint-stock association is

generally held in the names of trustees for its benefit. The En-.

glish cost-book mining companies were organized on this principle?

v. Dodd, 9 East, 406 (1808), holding that
a company with a prospectus limit-
ing the liability of subscribers is illegal,
as a trap to ensnare the unwary; Jo-
sephs v. Pebrer, 3 B. & C., 639 (1825),
holding that unincorporated companies
with transferable shares are illegal, and
Buck v. Buck, 1 Campb., 547 (1808).
R. v. Stratton, id., 549, n., to same ef-
fect. That Kinder v. Taylor, Coll. on
Partn., 917, 2d ed. (1810); Duverger v.
Fellows, 5 Bing., 248; aff’d, 10B. & C.,
826, and Blundell v. Winsor, 8 Sim.,
601, contained dicta only so far as they
passed on the legality of these compa-
nies, The following cases clearly es-
tablish the legality of joint-stock as-
sociations: Harrison v. Heathorn, 6
Man. & Gr., 81 (1843); Garrard v, Had-
ley, 5 Man. & Gr., 471; Ea parte Bar-
clay, 26 Beav., 177; Ea parte Aston, 27
Beav., 474; Ex parte Grisewood, 4DeG.
& J., 544; Sheppard v, Oxenford, 1 K.
& J., 491; R. v Webb, 14 East, 516;
Walburn v. Ingilby, 1 M. & K., 61;
and see Pratt v. Hutchinson, 15 East,
511; Ellison v. Bignold, 2 J. & W., 510;
Nockels v. Crosby, 3 B. & C., 814;
Kimpson v, Saunders, 4 Bing., 5; Brown
v. Holt, 4 Taunt., 587. And the learned
jurist comes to this conclusion: ‘‘ The
case of Blundell v, Winsor, always re-
lied upon as an authority by those who
contend that such a company is illegal,
has never met with approbation from
the bench, nor has it ever been fol-
lowed. Upon the whole, therefore, it
appears that there is no case deciding
that a joint-stock company with trans-
ferable shares, and not incorporated by
charter or act of parliament, is illegal
‘ at common law; that opinions have
nevertheless differed upon this ques-
tion; that the tendency of the courts
was formerly to declare such companies
illegal; that this tendency exists no

longer ; and that an unincorporated com-

pany with transferable shares will not,

be held illegal at common law unless
it can be shown to be of a dangerous
and mischievous character, tending to

the grievance of her majesty’s subjects. —

The legality at common law of’ such
companies may therefore be considered
as finally established.”

1See § 508b, supra; 21 N. EB, Rep., 605
(TL, 1889).

2'These mining companies existed in
the counties of Cornwall and Devon-
shire, They were first heard of in the
courts about the year 1850, Their plan
of organization and operation arose
from custom. Their organization and
mode of business were as follows:
Many persons, desirous of working a
mine, would cause the title or lease
thereto to be taken in the names of one
or more persons called trustees. The
business was then carried on by an
agent called a ‘‘ purser,” or by a board
of managers elected by the participants,
who were called the “adventurers.”
The latter, of course, were the bene-
ficiaries of the “trust.® Any advent-
urer had a right to transfer his interest
to a transferee.
capital stock. Calls for money were
made on the adventurers, according to
their shares, as often as it was needed,
For a full statement ofthe character of
these mining companies, see Kittow %
Liskeard Union, L. R., 10 Q B. D
(1874). See, also, In re Bodwin, etc.,
Co., 23 Beav., 870 (1857), holding that
the court would not take judicial notice
of the nature of a cost-book mining
company; Hybart v, Parker, 4 C. B,
N.S., 209 (1858), holding that the purser
could not sue at law on an unpaid call;
In re Wrysgan, etc., Co., 28 L, J. (Ch.),
894 (1859), as to right to relinquish
shares, also describing the functions of

548

There was no fixed .
1

CH, XXIX.] “TRUSTS” AND UNINCORPORATED ASSOCIATIONS.

‘

[8 505.

§ 505. Statutory joint-stock companies.— There is an essential dif-
ference between a joint-stock company as it exists at common law
and a joint-stock company having extensive statutory powers con-

the purser and managing directors;
Johnson v, Goslett, 18 Cf. B., 728 (1856),
aff'd in 3 C. B., N. S., 569 (1857), giving
the full terms of the articles of agree-
ment; Thomas v. Clarke, 18 C. B., 662
(1856), where the court said: ‘‘ Every
partnership has a right to make its own
regulations as to the mode of transfer-
ring shares or interests therein;” In re
Prosper, etc., Co., L. R., 7 Ch., 286 (1872),
relative to rights upon a resignation;
Mayhew’s Case, 5 De G., M. & G., 887
(1854), holding that by a transfer of his
. share “the liability of the transferrer is
entirely divested from him and passes
to the transferee;” In re Wrysgan Co.,
5 Jur., N.S., 215 (1859), where the court
said: ‘The various phases of absurdity
which these joint-stoek companies dis-
play are such that the marvel in my
mind is daily increasing how any fnan

can become a member of a joint-stock ,

company;” Northey v. Johnson, 19 L.
T., 104 (1852), holding that after trans-
fer the transferrer: is not liable for the
debts incurred.

It is clearly established that the ad-
venturers in a cost-book mining com-
pany are personally and individually
liable as partners’ for the debts incurred
in the enterprise. Peel v. Thomas, 15
C. B., 714 (1855); Newton v. Daly, 1 F.
& F., 26 (1858); Harvey v. Clough, 8 L.
T., N. S., 324 (1863); Tredwen v. Bourne,
6M. & W., 461 (1840); Ellis v. Schmoeck,
5 Bing., 521 (1829); Lanyon v. Smith, 3
B, & &., 938 (1863), holding a transferrer
liable for debts incurred previous to
the transfer. To same effect, Teake v.
Jackson, 15 W. R., 338 (1867). They are
liable, also, to indemnify the directors
or trustees. Ha parte Chippendale, 4
De G., M. & G., 19, 52 (1854). See, also,
Birch’s Case, 2 De G. & J., 10 (1857),
and Fenn’s Case, 4 De G., M. & G., 285
(1854), where the members who had ex-
ercised their right to withdraw were

held not liable. In Hart v. Clarke, 6
De G., M. & G., 282 (1855), an advent-
urer compelled the company to ac--
count to him for his share of the profits.
The adventurers have no interest in the

land, and consequently a transfer of ;

their shares is not a transfer of an
interest in land. Sparling v. Parker,

9 Beav., 450; Powell v. Jessopp, 18 C. -

B., 336 (1856); Hayter v. Tucker, 4 K.
& J., 243 (1857). The cost-book mining
company was frequently spoken of asa
species of joint-stock company. In re
Wrysgan Co., supra; Teake v. Jackson,
15 W. R., 888 (1867); Watson v. Sprat-
ley, 10 Ex., 222 (1854). See Watson v.
Spratley, supra, where the court said:
“The interest of the shareholder in the
great incorporated joint-stock compa-
nies, and in the smallest mine con-
ducted upon the cost-book principle, is,
in its essential nature and quality, iden-
tical. For an American mining case
applying similar principles, see Treat v.
Hiles, 32 N. W. Rep., 517 (Wis., 1887).
It is well settled that the shareholders
in an unincorporated association cannot
convey or dedicate to the public any
land that may be held by trustees for

‘its benefit. Ward v. Davis, 3 Sandf.

Rep. (N. Y.), 502 (1850), The interest of
one of the cestwis que trust of sucha
trust, consisting of real estate, is per-
sonalty, and descends as such upon his
death. Mallory v. Russell, 82 N. W.
Rep., 102 (lowa, 1887). As to the effect
of a deed, grant or bequest of real es-
tate to an unincorporated association,
see Webb vw. Weatherhead, 17 How.,
576 (1854) ; Gerard’s Titles to Real Estate,

-p. 490 (2d ed.); Owens v. Missionary

Soc. of the M. E. Church, 14 N. Y., 380
(1867); Washburn on Real Prop., vol.
TH, -p. 264 (4th ed.); Holmes v. Mead, 52

-N. Y., 882 (1872); Goesele v. Bimeler, 5

McLean, 223 (1851); German Land As-
sociation v. Scholler, 10 Minn., 331

549

é
§ 505.] “pRUSTS ”

AND UNINCORPORATED ASSOCIATIONS.
\

[CH, XXIx,

ferred upon it by the state within which it is organized. The lat-
ter kind of joint-stock companies are found in England and in the
state of New York. To such an extent have these statutory powers
been conferred on joint-stock companies that they differ from cor-
porations only in not having a seal, and in the members not being
exempt from liability as partners for the debts of the company.
Accordingly, joint-stock companies, both those of England and
New York, have been held to be corporations in many respects,
although expressly declared by statute not to have that character.!

(1865); Peabody v. Eastern Methodist
Society in Lynn, 67 Mass., 540 (1857);
Towar v. Hale, 46 Barb., 361 (1866);
‘Dart on Vendors and Purchasers, vol. I,
p. 21 (5th ed.); Chapin v. First, etc.,
Soc., 74 Mass., 582 (1857); African, etc.,
Church v, Conover, 27 N. J. Eq., 157;
Leonard v. Davenport, 58 How. Pr.,
884; Sherwood v. American Bible Soc.,
4 Abb. App., 227; Goesele v. Bimeler, 5
McLean, 223; McKeon v. Kearney, 57
How. Pr., 349; Gibson v. McCall, 1
Rich., 174; Byam v. Beckford, 140
Mass., 31 (1885), holding that, although

a deed to the association is ineffectual,

yet that it passes title to the members
of the association. They cannot take
by devise in New York. White v.
Howard, 46 N. Y., 144 (1871); Trustees,
etc., v. Hart’s Ex’rs, 4 Wheat, 1
(1819).

1For New York statutes herein, see
Sess. Laws 1854, ch. 245;
1867, ch: 289; Sess, Laws 1868, ch. 290;
Sess. Laws 1881, ch. 599; Sess. Laws
1858, ch. 172, See Thomas v, Dakin, 22

Wend., 9 (1830); Warner v. Beers, 25°

‘Wend., 103; Parmley v. Tenth Ward B’k,
3 Edw. , 395 (1838) ; People v. Watertown,
1 Hill, 616 (1841); B’k of Watertown v.
Watertown, 25 Wend., 686 (1841); Wil-
doughby v. Comstock, 3 Hill, 389 (1842);
Leavitt v. Yates, 4 Edw., 134 (1840);
Leavitt v. Tyler, 1 Sandf. Ch., 207; -Peo-
pie v. Niagara, 4 Hill, 20 (1842); Bois-
gerard v. New York Banking Co., 2
Sandf. Gh., 231 (1844); Matter of Bank
of Danville, 6 Hill, 370; Gifford v. Liv-
ingston, 2 Den., 880 (1845); Case v. Me-
chanics’ Banking Assoc,, 1 Sandf., 693;

third person.” It

Sess, Laws .

Leavitt v. Blatchford, 17 N. Y., 521
(1842); 5 Barb., 9; Culver v. Sanford, 8
Barb., 225 (1850); Gillett v. Moody, 3
N. Y., 478 (1850); Talmage v, Pell, 7
N. Y., 828 (1852); Tracy v. Talmage, 18
Barb., 456 (1854); Gillett v. Phillips, 18
N. Y., 114 (1855) ; Falconer v. Campbell,
2 McLean, 195 (1840); Duncan v. Jones,
32 Hun, 12 (1884). The English jointe
stock company is much the same,
‘*The company has a name as an asso-
ciation, maintaining the identity of the
body through all changes of its mem-
bers; its property is'divided into trans-
ferable shares, and it has conferred
upon it the legal capacity to sue and be
sued in the name of one of its officers,
and such asuit . . . may be brought
by or against a member as well as a

though the English statute declares it
is not. Oliver v. Liverpool & London
Life & Fire Ins. Co., 100 Mass., 531
(1868); aff’d, sub nom. Liverpool Ins,
Co. v. Mass., 10 Wall., 566 (1870). So,
also, with the New York joint-stock
companies. Fargo v. Louisville, New
Albany & Chicago R’y Co., 6 Fed. Rep.,
"87 (1881); Sanford v. B’d of Supervis-
ors of N, Y., 15 How. Pr., 172 (1858);
Waterbury v. Merchants’ Union Ex.
Co., 50 Barb., 157 (1867). As regards
the liability of the members for the
debts of the company, it is held to bea
copartnership. Boston & Albany R. R.
Co. v. Pearson, 128 Mass., 445 (1880);
Oliver v. Liverpool & London Life &
Fire Ins. Co., ubt supra, The refusal
of the legislature to call them corpora-
tions is important as cutting off the ex-

550

is a corporation .

¥
cu. XxIx.] “TRUSTS” AND UNINCORPORATED assooraTions. [$$ 506-8.
§ 506. Joint-stock companies may arise by implication of law.—
Joint-stock companies are generally formed by the mutual agree-
ment and direct intent of the parties. They may, however, arise
by implication of law. Thus, an ineffectual attempt at an incorpo-
ration may make the parties members, not of a corporation, but of
a joint-stock company.! In like manner, after the charter of a
corporation expires and the pene continue to do business, they
do so as a joint-stock company?
A person
becomes a member of a joint-stock company by any act which in-
dicates an intent to become a member on his part, and a consent
or acquiescence therein by the company itself. He may also be-
come a member by a transfer made to him of another member’s
interest, unless the articles of association restrict the right of

                                  

transfer.‘

§ 508. Liability of members to creditors and to the company.—
A joint-stock company is, in regard to the liability of its members

emption of the members from liability
to creditors; an exemption which, at
common law, belongs to all corpora-
tions. Joint-stock companies in Eng-
land have always been largely statu-
tory. See Van Sandau v. Moore, 1 Russ.,

391 [*441], (1826), In the state of New

York the English decisions on these com-

panies are doubtless good authority, since

they exist under statutes which are much
alike. A New York joint stock associa-
tion cannot sue as such in the federal
courts. Chapman v. Barney, 129 U. &.,

677 (1889). “They are corporations for

purposes of taxation. People v. Wem-

ple, 62 Hun, 434. Contra, People v.
_ Coleman, 5 N. Y. Supp., 394. Cf. Mut-

ual Ins. Co. v. Supervisors, etc., 4 N.

Y., 442 (1851); Sandford v. B’d, etc., 15

How. Pr., 172 (1858),

i Re Mendenhall, 9 Bankr, Reg., 497;

Whipple v, Parker, 29 Mich., 369, 380
: (1874); and see chapter XIII.
ter v. Pray, 29 Northwest. Rep., 155
(Minn., 1886). .

‘2Nat. B’k of Watertown v. London,
45 N. Y., 410 (1871).

‘The formalities need be no greater
than in forming an ordinary partner-
ship. Nat. B’k v. Van Derwerker, 74
N. Y., 234 (1878); Epeue v. Atkins, 60

Cf. Fos- .

/

Tll., 454 (1871); Machinists’ B’k v. Dean,
124 Mass., 81 (1878). Cf. Volger v. Ray,
181 id., 439 (1881). It is not necessary
that certificates of the stock be issued
in order to constitute membership.
Dennis v. Kennedy, 19 Barb., 517 (1854) ;
Boston & Albany R. R, Co. v. Pearson,
128 Mass., 445 (1880). Evidence of sub-
scription and payment of an assessment
is sufficient. Frost v. Walker, 60 Me.,
468 ‘1872). But not of subscription
without any participation. Hedge &
Horne’s Appeal, 63 Pa. St., 273 (1869),

4Transfer of the certificate of stock
has euch effect although not regis-
tered in the stock-book. Butterfield v.
Beardsley, 28 Mich., 412 (1874). Trans-
fer may be before the certificates are
issued. Butterfield v. Spencer, 1 Bosw.,
1 (1856). But if the articles of associa-
tion prohibit transfer, the transfereee
takes only the right to profits, not as a
partner but as an assignee, Harper v.
Raymond, 3 Bosw., 29 (1858). .So also
where transfer is allowed only on con-
sent of certain officers who refuse.
Kingman v. Spurr, 7 Pick., 234 (1828).
A transfer does not carry dividends al-
ready declared. Harper v. Raymond,
ubi supra. . Ifa transfer is improperly
allowed, the company is liable to the

551
§ 508.)

“ ppusts”” AND UNINCORPORATED ASSOCIATIONS.

[oH. XxXIx.

- to creditors of the company, a partnership ;! its members are liable
as partners;” and the ordinary rules of partnership exist between

party injured. Cohen v. Gwynn, 4 Md.
Ch., 857 (1848).

Likelloge Bridge Co. v. United States,
15 Ct. of Cl, 111. Cf. Chandler v.
Brainard, 31 Mass., 285 (1838).

2 Westcott v. Fargo, 61 N. Y., 542
(1875); Witherhead v. Allen, 3 Keyes,
562; Cross v. Jackson, 5 Hill, 478 (1843);
Skinner v. Dayton, 19 Johns., 513 (1822);
Wells v. Gates, 18 Barb., 554 (1854);
Boston & Albany R. R. Co. v. Pearson,
128 Mass., 445 (1880) Taft v. Ward, 106
Mass., 518 (1871); S. C.,111 Mass., 518
(1873); Bodwell v. Eastman, 106 Mass.,
525 (1871); Tappan v. Bailey, 45 Mass.,
529 (1842); Cutter v. Estate of Thomas,
25 Vt., 73 (1852); Frost v. Walker, 60
Me., 468 (1872): Kramer v. Arthurs, 7
Pa. St., 165 (1847); Gutt v Dinsmore,
111 Mass., 45 (1872); Newell v. Borden,
128 id.,-31 (1879). See, also, § 504. Con-
tra, Irvine v. Forbes, 11 Barb., 587
(1852); Livingston v. Lynch, 4 Johns.
Ch., 573 (1820), overruled as dicta by
Townsend v. Goéewey, 19 Wend., 423
(1838); Ridenour v. Mayo, 40 O: St., 9
(1883). They are liable even though
their articles of association provided
otherwise. Manning v. Gasharie, 27
Ind., 399 (1866). In Frost v. Walker,
60 Me., 468 (1872), the court said:

An unincorporated joint-stock com-
pany is a mere partnership, and each
inember is personally liable for all its
debts. It is important for the. pub-
lic to know that if persons connect
themselves with a company of this de-
scription they are every one of them
liable to pay the demands upon it.” A
member who transfers his interest is
nevertheless liable for precedent debts
of the association. Morgan’s Case, 1
De G. & Sm., 750 (1849); Tyrrell v.
Washburn, 88 Mass., 466 (1868). Trans-
feree of a share in an unincorporated
company is liable for all debts existing
at the time of or after the transfer.
Taylor v. Ifill, 1 N. R., 566 (1863). The

officers who enter into a contract for
the company are liable thereon person-
ally. ‘‘It is immaterial whether they
be so held because they held themselves
out as agents for a principal that had
no existence, or on the ground that
they must, under the contract, be re-
garded as principals, for the simple rea-
son that there is no other principal in
existence.” Lewis v. Tilton, 64 Iowa,
220 (1884); Fredenhall v. Taylor, 26
Wis., 286 (1870). The death of a stock-
holder does not dissolve the association,
nor release his estate from subsequently
ineurred debts. Phillips v. Blatchford,
137 Mass,, 510 (1884). A lease to an un-
incorporated association binds person-
ally all members assenting to it. Reding
v. Anderson, 34 N. W. Rep., 300 (Iowa,
1887).

Menibers of co-operative trading as-
sociations are liable as partners for
the debts of the concern. Davison v.
Holden, 10 Atl. Rep., 515 (Conn., 1887).
And sometimes are liable also for
debts contracted after they have sold
their stock. See Shamburg uv. Ab-
bott, 4 Atl. Rep., 518 (Pa., 1886), In
enforcing the liability of members of a
joint-stock company, if the parties are
very numerous or unknown they need
not all be joined as defendants. Mande-
ville v. Riggs, 2 Pet., 482 (1829), revers-
ing Riggs v. Swann, 3 Cr., 183. See,
also, Phipps v. Jones, 20 Penn. St., 260
(1853); Dennis v. Kennedy, 19 Barb.,
517 (1854); Wood v. Draper, 24 Barb..
187 (1857); Smith v. Lockwood, 1 Code
Rep., N. 8., 319 (1851); Birmingham v.

Gallagher, 112 Mass., 190 (1873); Snow

v. Wheeler, 118 Mass., 179 (1878); Pipe
v. Bateman, 1 Iowa, 869 (1855); Mar-
shall v. Loveless, Cam. & N., 217 (1801);
Lloyd v. Loaring, 6 Ves., 773 (1802);
Deems v. Albany, etc., Line, 14 Blatch.,
471 (1878), The question whether a
stockholder may limit his common-law
or statutory liability by an express con-

552
CH. XXIx.] “TRUSTS” AND UNINCORPORATED ASSOOIATIONS.

!

[$ 508.

the members themselves, including the right to contribution as be-
tween themselves,’ and also. between a member and third persons.
The member’s subscription may be enforced by a suit at law. The
rights and liabilities of a member depend upon the law of the ‘place
of the domicile of the company itself.6 The rules applicable to stock-
holders in corporations are, by analogy, applied to members in
these companies, especially as regards their defenses to subscrip-

tract with the company’s creditors to
that effect is discussed elsewhere. See
§ 216, supra. The supposition or belief
of the members that they are not liable
beyond the par value of their stock
does not protect them from liability,
Farnum v. Patch, 60 N. H., 294; and
see § 233, note. As regards the prac-
tice in bringing actions against mem-
bers of an unincorporated association,
see Kneeland on Attachments, chapter
XVI. Suits by or against unincorpo-

rated associations must be brought in °

the name of all the members, Will-
jams v. B’k of Mich., 7 Wend., 542
(1831); Detroit, etc., Bank v. Detroit,
etc., Verein, 44 Mich., 318 (1880); Mears
v. Moulton, 30 Md., 142 (1868); Mc-
Greary v. Chandler, 58 Me., 587 (1870).
One or more members, of an unincor-
porated association may sue for the
benefit of all. Liggett v. Ladd, 21 Pac.
‘Rep., 183 (Oreg., 1888).

_1 Bullard v. Kinney, 10 Cal., 60 (1858),
One member cannot sue another at law
for his part of the profits of the busi-
ness, which is‘under control of the lat-
ter. Myrick v. Dame, 63 Mass., 248
(1852); Duff v. Maguire, 99 Mass., 300
(1868); Whitehouse v. Sprague, 7 Atl.
Rep., 17 (Conn., 1886). Person induced
to put money into an enterprise on false
representations that it is a joint-stock’
company may recover back his money.
Libby v. Ahrens, 2 S. E. Rep., 387 (S.
C., 1887). Director of an unincorpo-
rated association who contracts for it is
not liable personally. Abbott v. Cobb,
1% Vt., 593 (1845); Alexander v. Wor-
man, 6 H. & N., 100 (1860),

2Morrissey v, Weed, 12 Hun, . 491

(1878); Skinner v. Dayton, 19 Johns.,
513 (1822); Ray v. Powers, 184 Mass.,
22 (1883); Whitman v. Porter, 107 Mass.,
522 (1871); Tyrrell v. Washburn, 88
Mass., 466 (1863). But not if the expense
was incurred contrary to the articles of
association. Danforth v, Allen, 8 Metc.,
334 (1844); Clark v. Reed, 28 Mass., 446
(1831). One stockholder cannot sue an-
other at law for his part of the assets,
Whitehouse v. Sprague, 7 Atl, Rep., 17
(Mass., 1886).

3His interest cannot be reached by
execution. Kramer v. Arthurs, 7 Pa.
St., 165 (1847). But see Lindley on
Partn., 2d ed., 696. Acquiescence in
the dealings of other members with
third persons binds a member. Penn.
Ins. Co. v. Murphy, 5 Minn., 36 (1860);
Wells v. Yates, 18 Barb., 554 (1854).
For the liability as affected by the trans-
fer of stock, see Smith v. Virginia, 33
Me., 148 (1851).

4If the subscription runs to the trust-
ees personally they may sue thereon.
Otherwise all must join as plaintiffs,
Cross v. Jackson, 5 Hill, 478 (1848).
Townsend’ v. Goewey, 19 Wend., 428
(1838). It seems that a subscription to
a voluntary association is enforceable
by a corporation which took the place
of the proposed voluntary association,
where the subscriber Knew of the
change of plan and did not object.
City Sav. B’k v. Whittle, 63 N. H., 587
(1885). Subscription to its stock is col-
lectible the same as subscriptions’ to
stock of corporations. Bullock v. Fal-
mouth, etc., Co., 3S. W. Rep., 129 (Ky.,
1887). :

5Cutler v. Estate of Thomas, 25 Vt.,
78 (1852).

553

4

cy
§§ 509, 510.] “rusts” AND UNINCORPORATED ASSOCIATIONS.

tions' and meetings of the company.’

[CH. XXIx.

These associations cannot

‘be taxed on a franchise, as corporations may be.’
§ 509. Actions by members against officers and the company.—The
members may bring an action to remedy the fraud,' ultra vires

acts’ and negligence ® of the trustees.

In New York a member

may, by statute, sue the company, in the same manner that a stock-
holder in a corporation may sue the corporation.’

§ 510. Dissolution.—W here the term of existence of a joint-stock
company is fixed by its articles of association, it cannot be dis-

1 That the full capital stock must be
subscribed before any subscription is
collectible, see Bray v. Farwell, 81 N.
Y., 600(1880). Contra, Tappan tv. Bailey,
45 Mass., 529 (1842); Boston & Albany
R. R. Co. v. Pearson, 128 Mass., 445
(1880); Pitchford v. Davis, 5 Mees. &
W., 2 (1839). Forfeiture of stock re-
eases the member only as to subse-
quent debts. Skinner v. Dayton, 19
Johns., 513 (1822).
2Notice of the time and place must
be given. Irvine v. Forbes, 11 Barb.,
587 (1852). The members cannot act
except in meeting assembled. The ma-
jority, do not rule. Livingston v.
Lynch, 4 Johns. Ch., 573 (1820); Irvine
v. Forbes, ubi supra. But the articles
may provide otherwise. Waterbury v.
Merchants’ Union Ex. Co., 50 Barb., 157
(1867).
3Hoadley v. County Com’rs, 105
Mass., 519 (1870); Gleason v. McKay,
134 Mass., 419 (1878), holding the statute
‘to be unconstitutional. Cf. § 505.
4The other members are not proper
parties. Boody v. Drew, 46 How. Pr.,
459 (1874). An officer may be enjoined
but not removed. The suit must not
be in the interest of a rival company.
Waterbury v. Merchants’ Union Ex-
press Co., 50 Barb., 157 (1867), Trustees
receiving gifts are liable therefor to the
company. In re Fry, 4 Phil. Rep., 129
(1860). Cannot sell to the company.
Robbins v. Butler, 24 IL., 387 (1860)
Treasurer may be compelled to pay
over funds belonging to the company.
Sharp v. Warren, 6 Price, 131 (1818).
The trustees are liable in tort for their

\

‘fraudson the company. Dennis v. Ken-

nedy, 19 Barb., 517 (1854), A committee
to build may be made to account where
they secretly contract with themselves,
though the contract is nominally with
other persons. Whitman v. Bowden,
28. E. Rep., 630 (8. C., 1887).

5 A member cannot be compelled to
accept the stock of another company
for his interest, a consolidation of-the
two having been made. Frothingham
v. Barney, 138 Hun, 366. But he may
not be able to prevent the consolidation.
McVicker v. Ross; 55 Barb., 247 (1869).
An uljira vires act may be enjoined.
Abels v. McKean, 18 N. J. Eq., 462
(1867). The members need not make
good to the officers debts paid by the
latter, growing out of ultra vires acts.
Crum’s Appeal, 66 Pa. St., 474 (1878).
But the officers themselves are liable to
third persons. Sullivan v. Campbell,
2 Hall. (N. Y.), 271 (1829). And possibly
the members. Id. If a member has
not participated or acquiesced in the
ultra vires act he is not liable thereon.
Roberts’ Appeal, 92 Penn. St., 407 (1880).
Cf Van Aernam v. Bleistein, 102 N. Y.,
355 (1886), holding the members liable
for a libel; aff’g 32 Hun, 316.

6In re Fry, 4 Phil. Rep., 129 (1860).

7Code of Civil Procedure, § 1919;
Westcott v. Fargo, 61 N. Y., 542 (1874);
Saltsman v. Shults, 14 Hun, 256. At
common law the name is not recognized
and the suit would fail. Habicht v.
Pemberton, 4 Sandf., 657 (1851); Pipe
». Bateman, 1 Iowa, 369 (1855); Ewing
v. Medlock, 5 Port. (Ala.), 82 (1837):
Schmidt v. Gunther, 5 Daly, 452 (1874).

554
'

\ ’

OH. XxIx.]' “TRUSTS” AND UNINCORPORATED ASSOCIATIONS.

[§ 510.

solved at the instance of a member before the expiration a that
time.’ It may be dissolved where the enterprise becomes wholly
impracticable or its attainment impossible, but not always because

of the misconduct of its officers.?

Upon dissolution the trustees

of the company are bound to convert the property into cash and
distribute it. In proceedings for a dissolution all the members

need not be made parties.‘

lVon Schmidt v, Huntington, 1 Cal.,
55. See, also, Smith v. Virgin, 33 Me.,
148 (1851). Cf. Lindley on Partn., 284;
Lafond v. Deems, 81 N. Y., 507 (1880).
The minority cannot force a dissolution
asin the case of partnership. Equity
will not aid, unless there be good reason
for dissolution. Hinkley v. Blether, 3
Atl. Rep., 655 (Me., 1886). Minority of
an Odd Fellows’ lodge cannot compel
sale of property and distribution. Rob-
bins. v. Waldo; 7 Atl Rep., 540 (Me.,
1887); and see Bagley v. Smith, 10N. Y.,
489. A court will wind, up a partner-
ship even before its fixed time of exist-
ence has expired, if it is insolvent or
unprofitable or incapable of proceeding.
Jennings v. Baddeley, 3 K. & J., %8;
Baring v. Dix, 1 Cox, 2138; Bailey v.
Ford, 18 Sim., 495; Holladay v. Elliott,
8 Oreg., 84; Seighortner v. Weissen-
born, 20 N. J. Eq., 172; Brien v. Har-
riman, 1 Tenn. Ch., 467; Howell v. Har-

vey, 5 Ark., 270; Van Ness v. Fisher,

5 Lans., 236. The death of a member

does not dissolve it.. Phillips v. Blatch-
ford, 187 Mass., 510 (1884).

2 Waterbury v. Merchants’ Union Ex-
press Co., 50 Barb., 157 (1867). Contra,
Mills v. Hurd, 82 Fed. Rep., 127 (1887).

3Frothingham v. Barney, 138 Hun,
366; Butterfield v. Beardsley, 28 Mich.,
412 (1874). Upon the expiration of the
time for which the company was or-
ganized it becomes dissolved, and the
assets must be distributed if any one of
the members insists thereon. Mann v.
Butler, 2 Barb. Ch., 362 (1847).

4Such as non-residents who cannot
be reached. Angell v. Lawton, 76 N.
Y., 540 (1879). The complainant may
bring the proceeding in behalf of him-
self and others having a common inter-
est with him. Mann v, Butler, 2 Barb.
Ch., 362 (1847). .

555
CHAPTER XXX.

STOCKHOLDERS’ RIGHT TO INSPECT THE BOOKS OF THE CORPO-

RATION.
§ 511. Common-law rights. , § 516. Allegations and form of writ.

512. Common-law actionfordamages| 517. Right to inspect minutes of
for refusal. meetings of directors.

518. Mandamus is the preferable} 518. Statutes giving right of inspec-
remedy, ‘ tion.

514. Not granted as a matter of| 519. Orders to corporation to allow
course. inspection — Subpoena duces

515. When it will and will not be tecum — Bill of discovery.
granted,

\

§ 511. Commonlaw rights.— The stockholders of a corporation
had, at common law, a right to examine at any reasonable time
any one or all of the books and records of the corporation. This

1Stockholders ‘‘have the right, at
common law, to examine and inspect
all the books and records of the corpo-
ration at all seasonable times, and to
‘be thereby informed of the condition of
the corporation and its property.” Per
‘Redfield, J., in Lewis v. Brainerd, 53
Vt., 519 (1881). In the case of Common-
wealth v. Phosnix Iron Co., 105 Pa. St.,
111 (1884), the court said: ‘‘In the ab-
sence of agreement, every shareholder
has the right to inspect the accounts —
aright subject to the necessities of the
company, yet existing.” Also, ‘‘ The
doctrine of the law is that the books and

papers of the corporation, though. of:

necessity kept in some one hand, are
the common property of all the stock-
holders.” The right exists although
“its exercise be inconvenient to the
book-keepers and managers of the part-
nership business.” In the case of Huy-
lar v. Cragin Cattle Co., 40 N. J. Eq.,
892 (1885), the court said: ‘‘ Stockhold-
ers are entitled to inspect the books of
the company for proper purposes at
proper times, and they are entitled to
such inspection though their only ob-

ject is to ascertain whether their affairs
have been properly conducted by the
directors or managers. Such a right is
necessary to their protection.” Dead-
erick v. Wilson, 8 Baxt. (Teun.), 108.
Mr. Simon Sterne, in the Cyclopedia
of Political Science, Political Economy
and United States History, vol. ILI,
p. 526, says: ‘* Another problem pre-
sented by the existing condition of the
railways in the United States is that
which arises from s2crecy of manage:
ment. This evil must be dealt with
radically. One of the prime motives
for secrecy of management is the enor-
mous advantage which at the present
day it gives to the managers in the
maintenance of their power. They
alone know where the stockholders are
to be found, and can therefore control
votes by the knowledge of how to reach
or buy them, thus perpetuating their
control. Another motive is the advan-
tage thus afforded for stock speculations.
The board of managers, by keeping unto
themselves the knowledge that their
property is losing heavily in compara-
tive traffic, can sell their own holdings
4

CH. XXx.] [S$ 512, 513.

INSPECTION OF CORPORATE BOOKS.
rule grew out of an analogous rule applicable to public corpora-
tions and to ordinary copartnerships, the books of which, by well-
established law, are always open to the inspection of members.!

A creditor of the corporation or any person who is a stranger to
it can obtain access to its records by a bill in equity for discovery.?

§ 512. Common-law action Sor damages for refusal, — The legal
right of a stockholder of a corporation to examine the corporate
books is a right which gives him a cause of action at law for dam-
ages against the corporate officers if they refuse to allow the in-
spection.? The plaintiff is entitled to nominal damages, and to
such further damages as he may prove. He need not allege or
prove any special reason or purpose of his desire and request to

examine the books.*

XN

§ 513. Mandamus is the preferable remedy.— But an action for
damages is generally totally inadequate as a remedy. The stock-

and go short of the market under cir-
cumstances which will‘yield them an
absolute certainty of profit on the trans-
action. This gives them an enormous
advantage over the community by de-
pleting the pockets of the unwary, who
find themselves saddled with stocks at
high prices, bought months in advance
of the public announcement that the
road is in difficulties. The knowledge
of rapid gains in the development of
business likewise gives, so long as it
can be kept secret, a like advantage in
purchase of stock. This advantage has
been exploited to such a degree in the
United States that the investing public
has become inspired with a general dis-
trust for railroad stock investment.”

1 Commonwealth v, Phosnix Iron Co.,
supra. ;

2 Bill of discovery lies at instance of
corporate creditors in courts of one
state to compel corporate officers to
give names of stockholders of corpora-
tion in another state with view to en-
forcing statutory liability in latter state.
Post v, Toledo, etc., R. R. Co., 11 N. BE.
Rep., 540 (Mass., 1887); 144 Mass., 841.
As to the remedy by subpoena, etc., see
§ 519, infra, As to the general right of
a stockholder to examine the books of a
corporation and the recognition of such
right in equity by discovery, see Gres-

ley’s Kq. Ev., 116, 117; Kynaston v. East
India Co., 3 Swanst., 249; Bolton v.

‘Liverpool, 8 Sim., 467; 1 Myl. & K.,

88; Brace v. Ormond, 1 Meriv., 408.

3 Lewis v. Brainerd, 53 Vt., 510 (1881).
As to the right to inspection and to take
copies of records in a county clerk’s or
register’s office, see Randolph v. State,
2 South. Rep., 714 (Ala., 1887); Han-
son v. Eichstaedt, 85 N. W. Rep., 30
(Wis., 1887); Brewer v. Watson, 71 Ala.,
299; Phelan v. State, 76 Ala., 49; Web-
ber v. Townley, 48 Mich., 584; ‘Diamond
Match Co. v. Powers, 51 Mich., 145;
People v. Cornell, 47 Barb., 329; People
v. Reilly, 88 Hun, 429; People v. Cady,
99 N. ¥., 620.

4 Lewis v. Brainerd, 53 Vt., 510 (1881),

5In Cockburn v. Union B’k, 18 La,
Ann., 289 (1858), the court said a suit
for damages “might last for a long
time and petitioner suffer great loss by
being debarred from an examination”
of the books, ‘‘He does not ask for
damages, but for the exercise of a right.
If he has the right he ought to have
the exercise of it as soon as possible;
for the deprivation of his right cannot,
perhaps, be accurately estimated in
damages. It may be many years.before.
the amount of the damage can be
known.”

557
[cH. xxx.

§ 514.] INSPECTION OF CORPORATE BOOKS.

holder wishes to inspect the corporate books and does not wish
damages or a lawsuit. Accordingly, in certain cases, upon the
application of a stockholder who has been denied the privilege of
examining the corporate records, it has been the ‘practice of the
courts to issue a mandamus to the corporate officers commanding
them to allow a specified stockholder to examine the books of the
corporation.! .

§ 514. Not granted as a matter of cowrse.— The writ of manda-
mus, however, does not issue herein as a matter of course. It is an
extraordinary remedy to be invoked only upon special occasions.
The courts do not grant the mandamus until it has taken into care-
ful consideration all the facts and circumstances of the case. The
condition and character of the books, the reasons for refusal by the
corporation, the specific purpose of the stockholder in demanding
inspection, the general reasonableness of the request, and the effect
on the orderly transaction of the corporate business in case it is
granted, are all considered in granting or refusing the writ. It is

granted only in furtherance of essential justice.’

1«<T¢ would seem, from the weight of

authority and in reason, that a share-

holder is entitled to mandamus to com-

pel the custos of corporate documents

to allow him an inspection and copies
of them at reasonable times for a speci-
fied and proper purpose upon showing
a refusal on the part of the custos to
allow it, and not otherwise.” Common-
wealth v. Phoenix Iron Co., supra;
8. C., 6 Atl. Rep., 75 (1886), explaining
the method of procedure, and holding
that the applicant need not apply to a
court of equity. The old rule that man-
damus will issue only for a public pur-
pose is no longer-a rule of Jaw so as to
prevent its use herein. Commonwealth,
etc., supra, questioning King v. B’k of
Eng., 2B, & Ald., 620 (1819); and King
v. London, etc., Co, 5 B, & Ald., 899
(1822). See, also, King v. Clear, 4 Barn.
& C., 899 (1825); 6S. Rep,, 88 (Ala,, 1889),

2 The application is addressed tothe
sound discretion of the court.” The
reasons for granting it ‘‘ should be clear
and cogent. . To hold that every
person who shows himself to be a holder
of stock is at liberty to demand an ex-
amination of the transfer-books when

558

and as often as he pleases, and if re-
fused to apply for a writ of mandamus
to enforce an absolute right, would .be
to establish a rule highly prejudicial to
the interests of all corporations and
their stockholders. . . The power
of the court should be exercised in such
cases with great discrimination and
care.” People v. Lake Shore & M. 8.
R. R. Co., 11 Hun, 1 (1877); aff'd, sub.

,nom, Re Sage, 70 N. Y.,°220 (1877).

See, also, People ex rel. Field v. North-
ern Pac. R. R, Co., 50 N. Y. Super. Ct.,
456 (1884); 8. C., 18 Fed. Rep, 471.
“ Discretion in these matters should be
exercised in a reasonable manner and
subject to precedent.”’. Reg. v. Wilts.
& Berks, Canal Nav., 29 L. T., 922
(1874). A reference may be ordered by
the court to determine the truth of
the allegations in the affidavits used to
obtain a mandamus. People v, -St.
Louis, ete., R’y Co., 44 Hun, 552 (1887).
Under the Wisconsin statute authoriz-
ing a stockholder to examine the stock-
books and accounts a mandamus may
be issued to the officer having the books
in charge. State v. Bergenthal, 89 N.
W. Rep., 566 (Wis., 1888),
 

OW. XXX. ]

INSPECTION OF CORPORATE BOOKS.

[§ 515.

\

§ 515. When it will and will not be granted.— It will not be
granted to gratify curiosity, nor to aid the stock-market specula-
tions of the stockholders.! Hither some property rights of the
stockholder must be involved, or some controversy exist, or some
specific and valuable intense be in question, to settle whicl an

inspection of the corporate records becomes necessary.?

1 The writ will not be ‘‘ granted to en-
able a corporator to gratify idle curios-
ity.” People v. Walker, 9 Mich., 328
(1861). ‘* The interests of all the corpo-
rators require that the writ shall not go
at the caprice of the curious or suspi-
cious.” Commonwealth v. Phoenix Iron
Co., supra. ‘‘Court3s should guard
against all attempts by combinations to
use its writ of mandamus to accomplish
their personal or speculative ends.”
People v. Lake Shore & M.S. R. R. Co.,
supra, Nor will the court grant
‘‘a mere wrecking petition to ruin
a going concern.” Jn re West Devon,
etc., Mine, L. R., 27 Ch. D., 106 (1884).
Mere suspicion is not enough, even
though the applicant stockholder in-
tends to bring suit against the directors.
: Central, etc., R. R. Co, v. Twenty, ete.,
R’y Co,, 53 How. Pr., 45 (1877).

2 Thus, where there had been no divi-
dends for nine years, and the officers
were partners in a competing concern,
and refused to allow inspection, it was
granted in order to enable the applicant
to ascertain whether the real facts jus-
tified an action for fraud on the part of
the officers. Commonwealth v. Phoenix
Iron Co,, supra. Granted also to allow
applicant, to ascertain whether a by-law

existed entitling him te an office by:

promotion. Reg. v. The Saddlers’ Co.,
10 W. 'R., 77 (1861). “Mismanagement
and intent to bring suit need not be al-
leged. ‘* Oftentimes frauds are discov-
erable only by examination of the books
by an expert accountant.”
Cragin Cattle Co., supra. Itis granted
also to a stockholder who has a suit or
controversy with a party other than the
corporation itself. Mayor of Southamp-
ton v. Graves, 8 T. R., 590 (1800); Rex
v. Newcastle, 2 Strange, 1223 (1787), It

Huyler v,-

It is

has been granted to enable a stock-
holder to see the discount book, al-
though there is no suit between him
and the corporation, and no intent to
bring one. Cockburn v. Union B’k,13
La. Ann., 289 (1858). Atan early day,
however, it was held that ‘‘the mem-
bers have no right, on speculative
grounds, to call for an examination of
the books and muniments in order to
see if, by possibility, the company’s af-
fairs may be better administered than
they think they are at present. If they .
have any complaint to make, some suit
should be instituted, some definite mat-
ter charged, + . « or there should
be some particular matter in dispute be-
tween members, or between the: corpo-
ration and individuals in it; there must
be some controversy, some specific pur-
pose, in respect of which the examina-
tion becomes necessary.” King v. The
Merchant Tailors’ Co., 2 Barn. & Ad.,,
115 (1832). The applicant must allege
the extent of his interest, also wherein
his object of inspection is just and use-
ful. Hatch v. City B’k of New Orl., 1
Rob, (La.), 470 (1842), The case of State
v. Bienvilla Oil Works, 28 La, Ann.,
204 (1876), states that the two preceding
cases ‘‘ failed through want of precision
and definiteness in stating some well-
defined purpose, some reasonable cause,
and showing that they had some inter-
est in the matter.” A charter provision
that the corporate powers ‘shall be ex-
ercised by a board of directors” is im-
material herein. Id. Where areduction
of capital stock i is contemplated, a large
stockholder has a right to inspection to
ascertain whether the business is being
‘prudently and profitably ” carried on,
Id. Not granted to allow applicant, a
director, to inspect and make entries,

559
§ 516.] INSPECTION OF CORPORATE BOOKS.

[CH. Xxx,
doubtful even whether it would issue in order to enable the appli-
cant to ascertain who are stockholders, with a view to canvassing
their votes for an election.’

§ 516. Allegation and form of writ. — The writ should run to the
person or officer who has control of the records.” The stockholder

‘may make the inspection through an agent, and may have the aid
of an interpreter, attorney or expert.’ The request to inspect the
books, for refusal of which the mandamus is asked, must be alleged
to have been made at a proper time and place, and of the proper
person, and to have been refused.‘ The application should also
state what information the applicant. needs, and what books of the

corporation he wishes to inspect.°
é \

Rosenfield v. Einstein, 46 N. J. L., 479
(1884). General purpose of ascertaining
‘‘the condition of the company” held
insufficient. People v. Walker, 9 Mich.,
828 (1861). The stockholder may take
memoranda or alist of the stockholders.
Commonwealth v. Phoenix Iron Co.,
105 Pa, St., 111 (1884); Cotheal v. Brower,
5 N. Y¥., 562 (1851); aff’g Brower v.
Cotheal, 10 Barb., 216 (1850); Hide wv.
Holmes, 2 Molloy, 372. In the case of
Stettaner v. New York, etc., Co., 6 Atl.
Rep., 808 (N. J., 1886), where a stock-
holder filed a bill in equity to compel
corporate officers to allow himself and
his accountant to examine the corporate
books, its business haying been closed
and distribution of assets made, but a
statement of its affairs refused, the
court held that the bill would not lie,
since no fraud or insufficient distribu-
tion of assets were alleged. ,. Mandamus
is thé proper remedy. Swift v. State, 6
Atl. Rep., 856 (Del., 1886), holds that
mandamus will issue to the officers of a
foreign corporation to exhibit,its books
then in the state and allow copies of
records to be taken by a stockholder
who intends to commence suit against
a pledgee of his stock, the controversy
turning on the question of the earnings
and expenses of the corporation. Man-
damus to open the stock-ledger was de-
nied in a case where the owner of four
shares of stock alleged that little or no
dividends were paid, and the stock was
depreciating, no mismanagement being

charged, A by-law authorizing inspec-
tion of books of account does not au-
thorize inspection of stock-ledger. Lyon.
v. American, etc., Co., 17 Atl: _Rep., 61
(R. L., 1889).

1 Mandamus was granted to a stock-
holder who wished to persuade other

‘stockholders not to appeal a suit in

which he was interested advérsely to
the corporation, the defeated party.
Rég. v. Wilts. & Berks. Canal Nav., 29
L. T., 922 (1874). See, also, State v.
Lake Shore é& M. SS. R. BR, Co., 11 Hun,
1 (1877).

2 “The writshall be directed to him
who is to do the thing required to be
done.” A director may demand inspec-
tion though hostile to the corporation.

People v, Throop, 12 Wend., 181 (1834).

3 May inspect through his duly-au-
thorized agent. State v. Bienville Oil
Works Co., 28 La. Ann., 204(1876). See,
also, § 519,

4 The stockholder must first apply to
the proper corporate officer having au-
thority to grant inspection. King v,
Prop. of the Wilts. & Berks. Canal
Nav., 3 Ad. & El., 477 (1835). And must
state to him the reason why he desires
inspection. Id. Also King v. Clear, 4
Barn. & Cr., 899 (1825); People
Walker, 9 Mich., 328 (1861),

5 Morgan’s Case, L. R., 28 Ch. D., 620
(1884), This case also states that in Eng-
land it is customary for many banking
companies to insert in their constitu-
tions a provision forbidding the inspec-

560
OH. xxx.] INSPECTION OF CORPORATE BOOKS. [$§ 517, 518.
§ 517. Right to imspect minutes of meetings of directors.—It
would take a strong case to induce a court to issue a mandamus
commanding the corporate officers to allow a stockholder to inspect
the minutes of the meetings of the directors! The success of the
corporate enterprise depends frequently upon the secrecy of the
plans of the directors. In connection with litigations the rule, of
“course, is different; but, aside from this, it seems that a stockholder
is not entitled as a matter of right to a mandamus to allow him to
inspect the minutes of the: directors? meetings. The same rule
would seem to apply to miscellaneous questions asked of the direct-
ors at stockholders’ meetings.

§ 518. Statutes giving right of inspection-— The right to inspect
corporate records is frequently given to stockholders by statutory
provisions. Sometimes this statutory right extends only to the
corporate transfer book.2 Sometimes it includes all corporate rec-

tion of customers’ accounts by share-
holders or creditors. Irrelevant parts of
the books may be sealed up. Jones v.
Andrews, 58 L. T. Rep., 601 (1888);
Earp v. Lloyd, 3 K. & J., 549; Napier v.
Staples, 2 Moll, 570; Hill v. Great W.
R’y Co., 10 C. B., N. S., 148; Clifford v.
Taylor, 1 Taunt., 167; Gerard v. Pens-
wick, 1 Swanst., 533; Dias v. Merle, 2
Paige, 494; Titus v. Cortelyou, 1 Barb.,
444; People v. Pacific Co., 50 Barb., 280;
Pynchon v. Day (Il.), 22 Reporter, 234.

But if such irrelevant matter cannot be,
+
separated, the party must produce the

whole. Carew v. White, 5 Beav., 172.

1 Tt is highly proper that an inspec-
tion of the books containing. the pro-
-ceedings of the directors should be ob-
tained on special occasions and for spe-
-cial purposes ; . but the proposed
daily and hourly inspection and publi-
cation of all their proceedings would be
tantamount to admitting the presence
of strangers at all their meetings, and
would probably ere long be found very
prejudicial to the shareholders.” Queen
v. Mariquita Mining Co., 1 Ell. & EIl.,
289 (1858). ‘<A private stockholder of
an incorporated company has no right
to have access to the minutes of the
proceedings of the directors unless that
right is expressly given by the charter ;
and consequently and of necessity he

must remain ignorant of their action
until they choose to make that action
-known” (dictum), Ala. & Fla. R. R. Co.
v. Rowley, 9 Fla., 508, 514 (1861). See,
also, Lindley on Partn., 4th ed., 809.
2In New York, see 1 R. S., chapter
XVIII, title 4, § 1, applying to all cor-
porations, Construed in Cotheal v.
Brower, 5 N. Y., 562 (1851); People v.
Pacific Mail Steamship Co., 50 Barb.,
280 (1867); Kennedy v. R. R. Co., 14
Abb. N. C.,826; People v. Mott, 1 How.
Pr., 247; Kelsey v. Pfaudler, etc., Co.,
3 N.Y. Supp., 723 (1889): 1 RB. S., chap-
ter XVIII, tit. 2, § 45, for moneyed cor-
porations, applied in People v. Throop,
12 Wend., 183 (1834) ; Laws 1842, ch. 165,
for transfer agents in this state of for-

‘eign corporations; construed in People

v. Lake Shore & M.S. R. RB. Co,, 11
Hun, 1 (1877); People ex rel, Field v.
Northern Pacific R. R. Co., 50 N. ¥

Super. Ct. R., 456 (1884); S. C., 18 Fed.
Rep., 471; Kennedy VY Chicas, etc.,
R. R., 14 Abb. N. C., 326 (1884); Laws
of 1848, § 25, for manufacturing corpo-
rations. For New Jersey, see Revision

“of 1877, p. 183, § 36; Huylar v. Cragin

Cattle Co., 40 N. J. Eq., 392 (1885); ‘8. C.,
7 Atl. Rep., 521 (1887); Ind. R. S. (1881),
8S 8010, 8011. Connecticut, see Pratt v,
Meriden Co., 35 Conn., 36; Sykes’ Case,
10 Beav., 162; Ervin v Oregon R, Co.,:

(86) 561 .
§ 519.] j

ords.!

shall have certain rights of inspection.

INSPECTION OF CORPORATE BOOKS.

[cH. xxx,

Frequently the charter itself states that the stockholder

In England the Companies

Act regulates specifically the stockholders’ right of inspection, and
provides for a committee of investigation in behalf of the stock-
holders whenever an investigation is desired by them.’

§ 519. Orders to corporation to allow inspection — Subpena duces

tecum — Bill of discovery.

—An inspection of corporate records is

often desired in connection with an action which is pending in the
courts, and it has been the practice of the courts to grant applica-

tions for this purpose.

22 Hun, 566; Cain v. Pullen, 34 La. Ann.,
511. A delay of one day in allowing
the inspection, owing to the absence of
the person having charge of them, does
not cause the penalty to attach. Kel-
sey v. Pfaudler, etc., Co., 41 Hun, 20
(1886).

1Rev, Stat. of Ohio (1886), § 3312; Cal-
ifornia Civil Code, $$ 377, 378; Penal
Code, 565; R. I. Pub. St., ch. 153, § 21,
and ch, 158, § 24 (1882); Mich. Gen. St.,
§ 3173, for banks. See, also, Colorado
Gen. St., 1882, § 249;.Mo. R. 8., 1879,
8§ 720, 721; Vt. R. Laws, 1880, $3 3294,
8295; Mass., 1860, ch. 68, § 10; Ill. R.
' §., 1874, ch. 82, § 13. The pleading in
a cause of action arising under a statute
herein must clearly bring the case within
the statute. Lewis v. Brainerd, 5: Vt.,
510 (1881). That the officer had notice
of plaintiff’s stockholdership must be
alleged. Williams v. College Corner &
Richmond Gravel Road Co., 45 Ind.,
170 (1873). The purpose of the inspec-
tion need not be stated to the officer.
Lewis v. Brainerd, 58 Vt., 510 (1881).
Cf. Queen v. Undertakers of the Grand
Canal, 1 Ir. L. R., 387. Mandamus lies
to enforce the statutory right of inspec-
tion. People v. Pacific Mail Steamship
Co., 50 Barb., 280 (1861). The common-
law right of inspection remains, al-
though a special statutory right is algo
given. People v. Lake Shore & M.S.
R. R. Co., supra.

225 and 26 Vict., ch. 89, Table A, No. 78
and Nos. 60 and 86, In England, under
the statute allowing a stockholder to in-
spect the corporate rights. of stockhold-

The order to allow an inspection may be

ers, etc., an injunction lies to restrain
corporate officers from: refusing this
right. Holland v. Dickson, 58 L. T. Rep.,
845 (1888). Under the English statute
a stockholder may inspect the transfer
book and take copies, even though he is
acting in the interest of a rival com-
pany. Mutter v. Eastern, etc., R’y, 59
L, T. Rep., 117 (1888); also 36 W, R., 401,
A stockholder suing to set aside a fraud-
ulent contract may have inspection even
of privileged matters between the com-
pany and its attorney. Gourand v.
Edison, etc.,. Co., 59 L. T. Rep., 812
(1888).

3The evidence sought must be di-
rectly material to the cause. Rex v.
Newcastle, 2 Strange, 1223 (1787); Rex
v. Babb, 3 Term R., 579 (1790); Mayor,
etc., v. Graves, 8 T. R., 590 (1800), holding
thata stranger has no more right to have
an inspection here than in a case where
he sues a copartnership: See Central.
Nat. Bank v. White, 5 J. & S., 297 (1874),
holding that in New York the inspection
is proper if the evidence is material and
cannot otherwise be obtained; Clinch
v. Financial Co., L. R., 2 Eq., 271 (1866),
where a director was compelled to pro-
duce. In the federal courts an inspec-
tion will not be granted in order to
frame a complaint. Paine v. Warren,
33 Fed. Rep., 357 (1888).

In a bill alleging fraud on the part
of the directors, whereby complainant,
a stockholder, has been injured, he
may obtain such inspection, Walburn
v. Ingilby, 1 Myl. & K., 61 (1832); Stan-
ton v. Chadwick, 3 Macn. & G., 575

562
'

CH, XXX. ]

made at any stage of the action.

INSPECTION OF CORPORATE BOOKS.

[§ 519.
A stockholder has this right to

aid him in suits with strangers, and his right herein is more extensive

(1851). See Bassford v. Blakesley, 6
Beav., 131. On a.verified petition by
a single shareholder stating that a
mine owned by the company is being
worked at a loss, an inspection of the
company’s books will be granted. West
Devon, etc., Case, L. R., 27 Ch. Div.,
106. In a suit to hold the directors of a
life insurance company personally re-
sponsible for large losses alleged to
have been caused by moneys improperly
paid on policies, an inspection has been
allowed, although plaintiff was said to
have but a trifling interest in the com-
pany and was desirous of injuring it,
and had published prejudicial state-
ments in regard to the matter, Will-
jams v. Prince of Wales Ins. Co., 23
Beav., 338, Where a company was
being wound up, an application on be-
half of twenty-four out of eight hun-
dred and fifty-six shareholders, who
had associated themselves together for
an investigation into the company’s af-
fairs, was allowed, with permission to
employ an accountant to carry on the
examination of the books. Joint-stock
Discount Co.’s Case, 36 L. J. Eq., 150.
See Emma Silver Mining Co. Case, L. R.,
10 Ch. App., 194; People v. Lake Shore
Road, 11 Hun, 1 (1877); 70 N. Y., 220;
Ex parte Buchan, 36 L. J. Ch., 150
(1867). Not granted to ‘fish out a de-
fense. Birmingham Co..v. White, 1
Q. B., 282 (1841); Imperial Gas Co. v.
Clarke, 7 Bing., 95 (1830). See Hoyt v.
Amer. Ex. Bank, 1 Duer, 652 (1853);
Shoe and Leather Ass’n v. Bailey, 17
Jones & S. (N. Y.), 885 (1883). Nor to
furnish materials to the other side for a
new trial. Pratt v. Goswell, 9 C. B.
(N. S.), 706 (1861). Nor to ascertain
whether petitioner might better accept,
with the other shareholders, what was
offered her for her holding in an old
company, which was being wound up,
instead of proceeding with an arbitra-
tion. Glamorganshire Banking Co.,

L. R., 28 Ch. Div., 620. Nor to estab-
lish a justification in an action against
the petitioner for libel, imputing insolv-
ency to the company. Metropolitan
Co, v. Hawkins, 4 H. & N., 146 (1859).
See Finlay v. Lindsay, 7 Irish, C. L., 1;
Collins v. Yates, 27 L. J., Exch., 150
(1858); Opdyke v. Marble, 44 Barb., 64
(1864). Nor to examine all the books
of the company for the fifty ‘years
back, because petitioner alleges that he
is dissatisfied with the management of
the company and with the accounts,
besides other grounds. Reg. v. Grand
Canal, 1 Irish Law Rep., 337 (1889). Nor
where the petition does not specify the
particular books asked for, nor the ob-
ject of the petitioner in making the
application to the officers and to the
court. Reg. v. London and St. Cather-
ine’s Docks Co., 44 L. J., Q. B., 4 (1874).
See Hunt v. Hewitt, 7 Exch., 236 (1852);
Pepper v. Chambers, 7 Exch., 226 (1852) ;.
New England Iron Co. v. N. Y. Loan.
Co., 55 How. Pr., 351 (1878); Central
R. R. v. Twenty-third St. R., 58 How.
Pr., 45 (1877); Comm’rs v. Lemley, 85.
N. C., 841 (1881);. Walker v. Granite
Bank, 44 Barb., 39 (1865). The court.
may direct the manner of the exami-
nation. Williams v. Prince of Wales
Ins. Co., 23 Beav., 338 (1857). An ap-
peal may be taken from an order
granting a party leave to inspect and
examine the books of a corporation, the
appellant. Thompson v. Erie R. Co., 9
Abb. Pr. (N. §.), 212 (1870); Lancashire
Co. v. Greatorex, 14 L. T. (N. S.), 390
(1866); Cummer v. Kent, 88 Mich.,
851 (1878) ; Comm’rs v. Lemley, 85 N. C.,
341 (1881). See Saxby v. Easterbrook,
L. R. 7 Exch., 207 (1872); Bustros wu
White; L. R. 1Q. B. Div., 428 (1876);
Clyde v. Rogers, 24 Hun, 145 (1881);
McCargo v. Crutcher, 27 Ala., 171 (1855);
Sage’s Case, 70 N. Y., 221. As to the
costs of an inspection, see Hill v. Philp,
% Exch., 232 (1852); Davey v. Pember-

563
INSPECTION

§ 519.]

OF CORPORATE BOOKS.

(oH. xxx.

than the rights of the other party to the action. In fact, a person who

is not a stockholder has no more

right to an inspection of the cor-

porate books than he has to inspect ; the books of a copartnership,
This is the rule even though he is suing or being sued by a stock-
holder. If a stockholder, and sometimes a third person, is suing
or being sued by a corporation, he is entitled to the usual right of a
notice to produce documents,” or by an order,’ or by compelling

ton, 11 C. B. (N. S.), 629 (1862) ; Gardner
v. Dangerfield, 5 Beav., 389, (1842).
Stockholders obtaining inspection may
be ordered not to disclose the ‘informa-
tion received. In re Birmingham, etc.,
Co., 86 L. J. (Ch.), 150 (1867); Williams
v. Prince, etc., Co., 23 Beav., 340 (1857),
May examine through an attorney.
Williams v. Prince, etc., Co., 23 Beav.,
888 (1857). Professional accountant may

be used. Bonnardet v. Taylor, 1 J. &

H., 886 (1861); 1 Greenl. on Ev., § 474.
Inspection of stock-ledger allowed.
People v. Pacific, etc., Co., 50 Barb.,
280 (1864). Of discount-book. Cock-
burn v. Union B’k, 13 La. Ann., 289
(1858); Peoplev. Throop, 12 Wend., 183.
Of by-laws. Harrison v. Williams, 3 B.
& C., 162 .(1824); Reg. v. Saddlers’ Co.,
10 W. R., 77 (1861). See, also, Walburn
v. Ingleby, 1 Myl. & K., 61 (1832), where
the order was to a third person having
charge of the books. ‘‘The courts of
common law may also make an order
for the inspection of writings in the
possession of one party to a suit in favor
of the other.” Greenleaf’s’Ev., vol. I,
§ 559. An article of the company tak-
ing away the right of inspection does
not prevent a rule issuing requiring its
allowance in pending litigation. Hall
v. Connell, 3 Younge & Col., 707 (1840).
The rule applies to joint-stock compa-
nies.; Woods v. De Figaniere, 1 Rob.,
681. In the federal courts the right is
statutory. U.S. RB. 5S., § 724.

1Strangers have no more right to de-.

mand inspection of the books of a cor-
poration during litigation in which the
corporation is not interested than they
have to demand a similar right of any
other person. Mayor of Southampton

v. Graves, 8 T. R., 590 (1800), overruling
earlier cases. See, also, Opdyke v. Mar-
ble, 44 Barb., 64 (1864); Morgan v. Mor-
gan, 16 Abb. Pr., N. S., 291 (1874), A
corporation will not be compelled to
open its records for the purposes of a
litigation in which it is not a party,
Henry v. Travelers’ Ins. Co., 85 Fed,
Rep., 15 (1888).
2See Wait on Insolvent Corporations,
§ 519. See, also, § 714, infra.
\ %King v. Travannion, 2 Chitty, 366
(1818); Swansea Vale R’y Co. v. Budd,
L. R., 2 Eq. Cas., 274 (1866); Macintosh
v. Flint, etc,, R. R. Co., 1 Ry & Corp.
L. J., 384 (Mich., 1887), a stockhold-
er’s case. The affidavit to obtain the
order must show that the information
sought is essential. Imperial Gas Co,
v. Clarke,.? Bing., 95; Williams v. Sav-
age, etc., Co., 3 Md. Ch., 418, 428 (1851),
See Lindley on Partn., 809. The offi-
cers may be orally examined by the
court with reference to where the books
are. Lacharme v. Quartz Rock Mari-
_posa Gold Min, Co., 1 Hurl. & Colt., 134
(1862). They may be required to make
affidavits. Ranger v. Great, etc., R. R.
Co., 4 De G. & J., 74 (1859); Re Barton,
31 L. J:. Q. B., 62 (1861). Such inspec-
tions may be through agents, Bon-
nardet v. Taylor, 1 J. & H., 383 (1861);
Draper v. Manchester, etc., R. R. Co., 7
Jur., N. S., pt. 1, 86 (1861), But see
In re West Devon, etc., Mine, L. R., 27
Ch. D., 106 (1884); B’k of Utica v. Hil-
liard, 6 Cowen, 62. In an action against
a corporation the plaintiff is entitled to
inspect all the minutes and entries in
the company’s books having reference
to the subject in litigation. Hill »
Great Western R. Co., 10 C, B, (N. 5.)

564
CH. XXX. ]

INSPECTION OF CORPORATE BOOKS.

[§ 519.

the corporate officers to swear to the pleading of the corporation,
where the facts sought for are brought out by that pleading ! or by

a bill of discovery.

148; Harrison v, Williams, 3 B. & C.,
162; Burton & Saddlers’ Co., 31 L. J.
(Q. B.), 62; Sinclair v. Gray, 9 Fla., 71:
See Hill v. Manchester Co., 5 B. & Ad.,
866; Rex v. Buckingham, 8 B. & C.,
875; Imperial Gas Co. v. Clarke, 7 Bing.,
95. It includes the agent, solicitor,
counsel or expert of the party asking the
inspection. Hide v. Holmes, 2 Moll.,
872; Blair v. Massey, L. R., 5 Irish Eq.,
623; Joint-stock Discount Co.’s Case,
36 L. J. Eg., 150; Bonnardet v. Taylor,

1 Johns. & H., 383; Att’y-Gen’l v. Whit-
wood, 40 L, J. (Ch. Div.), 592; Lindsay .

v. Gladstone, L. R. 9 Eq., 182 Will-
jams v. Prince of Wales Ins. Co., 23
Beav., 3388; State v. Bienville Co., 28
La. Ann., 204; Ballin v. Ferst, 55 Ga.,
646. Butsee Bartley v. Bartley, 1 Drew.,
233; Summerfield v. Pritchard, 17 Beav.,
9; Draper v. Manchester R. R., 3 De G.,
F. & J., 23; West Devon Mine Case,
L. R., 27 Ch. Div., 106. And a share-
holder who is also the solicitor of op-
posing litigants is nevertheless so enti-
tled. Reg.'v. Wilts Co., 29L. T. (N.S.),
922; Kingsford v. Great Western R’y.
Co., 16 C. B. (N. S.), 761. But see
Hutt’s Case, 7 Dowl. Pr., 690; Hersch-
field v, Clark, 11 Exch., 712. See, also,
notes, supra. Manner of inspection
must be gentlemanly. Williams v.
Prince, etc., Co., 23 Beav., 338. (1857).
The plaintiff may have inspection of
corporate minutes in a suit by a super-
intendent against the corporation. Hill
v Great, etc., R’y, 10 C. B., N. S., 148
(1861), Or in a suit by a claimant of
office. In re Burton, etc., Co., 31 L. J.
(Q. B.), 62 (1861). See, also, § 714, infra.
An order will not be granted for the
purpose of fishing out a defense. Bir-
mingham, Bristol & Thames Junction
Ry Co. v., White, 1 Q. B., 282. See,
+ also, Credit Co. v. Webster, 53 L. T.

Rep., 419 (1885). In New York theright
‘of inspection by order is regulated by

- right to subpoena a corporation.

statute. Code of Civil Proc., §§ 803-
809. See Boorman v, Atlantic & Pacific
R. R. Co., 78 N. Y., 599 (1879); Ervin v.
Oregon Ry & Nav. Co., 22 Hun, 566
(1880), holding that where the books are
in use only sworn copies can be required;
Johnson v. Consol. Silv. Min. Co., 2
Abb. Pr,, N. S., 418; Walker v. Granite
B’k, 19 Abb., 111; Thompson v, Erie
R’y Co., 9 Abb., N.S., 280; N. Y. Daily
Reg., October 22, 1887, January 31,
1888, January 26, 1888. So, also, is the
‘Code
of Civil Proc., §§ 868, 869, 872, 873. See
N. Y., ete, R. R. Co. v. Carhart, 36
Hun, 288 (1885); Richman v. Manhat-
tan Co., 26 Hun, 483 (1882); Ch. 536,
L. 1880; Fenlon v. Dempsey, 50 Hun,
131 (1888); Russell v. Manhattan R’y
Co., Daily Register, Dec. 8, 1887; Peo-
ple v. Mutual Gas, etc., Co., 74 N. Y.,

434 (1878); N. Y. Daily Reg., Dec. 17,
1887. The transfer-book may be thus
examined. See Fenlon v. Dempsey, 50
Hun, 131 (1888).

1 Formerly in equity suits it was the
practice to make as co-defendants with
the corporation such officers as. could
answer under oath such matters as the
complainant desired to know. See § 738,
infra. Glasscott v. Copper, etc., Co.,
11 Sim., 305 (1840); Jn re Barnet’s,
etc., Co., L. R., 2 Ch., 850 (1867); French
v. First Nat’l B’k, 7 Ben., 488 (1874),
This rule prevails because the corpora-
tion itself cannot be convicted of per-
jury. McKim v. Odom, 8 Bland, Ch,
(Md.), 407, 420 (1828); Wych v. Meal,
3P. Wms., 811 (1784); Bevans v. Ding-
man’s, etc., 10 Pa. St., 174 (1849). The
corporation itself may be compelled to
answer fully. See Gamewell, etc., Co.
v. Mayor, etc., 31 Fed. Rep., 312, citing
cases.

2 A bill lies in equity to compel a cor-
poration to discover, in aid of a suit at
Jaw, for damages for infringement of

565
/

1

§ 519.]

INSPECTION OF CORPORATE BOOKS.

A bill of discovery may be brought-‘to discover the names of

stockholders in order to enforce their statutory liability.}

Some-

times a subpoena duces tecum may be issued in behalf of a stock-

holder or of a third person.’

patent. Colgate v. Compagnie, etc., 23
Fed. Rep., 82 (1885). See, also, as to a
bill of discovery, McComb v. Chicago,
etc., R. R., 19 Blatch., 69 (1881); Costa
Rica v. Erlanger, 1 Ch. D., 171 (1875);
Glasscott v. Copper, etc., Co., 11 Sim.,
805 (1840); Moodalay v. Morton, 1 Bro.
C. C., 469 (1785); Colgate v. Compagnie,
ete., 23 Fed. Rep.; 82; Stettauer v. New
York, etc., Co., 42 N. J. Eq., 46 (1886);
French v. First Nat’l B’k, 7 Ben., 488
(1874). But a bill of discovery will not
lie against one who is merely a witness.
Fenton v. Hughes, 7 Ves., 288 (1802);
Dummer v. Corp’n, etc., 14 id., 245
(1807). As to the difference between a
bill of discovery and other bills, see
McIntyre v. Trustees, etc., 6 Paige, 239
(1837); Many v. Beekman, etc., Co., 9
' Paige, 188 (1841).

1 Post v. Toledo, etc., R. R., 144 Mass.,
846 (1887).

2The right of a stockholder to compel
a corporation to produce in court the
corporate records has been the subject
of some controversy. It has been held
that a subpoena duces tecum will not
always lie herein, but that an order to
the corporation to allow an inspection
is the proper remedy. La Farge »,
La Farge Fire Ins. Co., 14 How. Pr., 26
(1857); Cent. Nat’l B’k v.. White, 37
N. Y. Super. Ct., 297 (1874). In Iowa
a corporate servant who is required by
a subpoena to produce the corporate

‘books, which show that the corporation

has violated the liquor laws, need not
do so if the books are not in his posses-
sion, But otherwise he is guilty of
contempt. United States Ex. Co. v,
Henderson, 28 Northwest. Rep., 426
(Iowa, 1886), See, also, preceding notes,

566

[cH. Xxx,
' CHAPTER XXXII.

ane OF THE CORPORATION ON STOCK FOR THE STOCKHOLDER’S
DEBTS TO THE CORPORATION.

§ 521. No lien at common law.

522-24. A lien may be created by
statute, by charter, or pos-
sibly by by-law.

525. What phrases in charters or
statutes will or will not au-
thorize the corporation to cre-
ate or enforce a lien on stock.

626. The lien,
covers all the stockholders’
shares and dividends.

52%. The lien- protects the corpora-
tion as to all the debts due to
it from the shareholders.

§ 521. No lien at common law.—

when established, .

§ 528. Right of lien as against miscel-
Janeous parties, -
The lien can be enforced for the

529.
a of the corporation
on

580. Metheds of enforcing the lien.

581. ay corporation may waive its
ien.

582, The lien as affected by transfers

: and notice.

33.

The lien on national bank stock.

Corporations, both in this coun-

try and in England, frequently possess and exercise a lien on a
shareholder’s stock for debts due from that shareholder to the cor-

poration.

In this chapter it is proposed to consider the origin of

the lien; the extent to which it may be exercised and enforced;
the waiver of it by the corporation; and-its effect generally upon -

the transfer of shares. -

It is clear that at common law a corporation has no lien upon the
shares of its stockholders for debts due from them to the company."

1 Massachusetts Iron Co, v. Hooper, 61
Mass., 188 (1851); Bates vu. New York
Insurance Co., 3 Johns. Cas., 238 (1802);
Steamship Dock Co. v. Heron’s Adm’x,
52 Penn. St., 280 (1866); Merchants’
Bank v. Shouse, 102 id., 488 (1883); Fitz-
hugh v. Bank of Shepherdsville, 3 Mon-
roe, 126 (1825); Williams v. Lowe, 4
Neb., 882, 398 (1876); Dana v. Brown, 1
J. J. Marsh., 304 (1829); Heart v. State
Bank, 2 Dev. Eq. (N. C.), 111 (1881);
Farmers’, etc., Bank v...Wasson, 48
Iowa, 386 (1878); People v. Crockett, 9
Cal., 112 (1858); Sargent v. Franklin In-
surance Co., 25 Mass., 90 (1829); Neale

v, Janney, 2 Cranch, C. C., 188 (1819);

McMurrich v. Bond Head Harbor Co.,
9 U. C., Q. B., 338 (1852). Cf. Weston’s

Case, L. R., 4 Chan., 20 (1868). See,
also, Gibson, Assignee of Evans, v. Hud-
son’s Bay Company, MS. Rep. Michael.,
12 Geo. I. (1726); 7 Viner’s Abridgment
(2d London ed.), 125; Pinkett v. Wright,
2 Hare’s Chan., 120 (1842); Byrne wv.
Union Bank of Louisiana, 9 Rob. (La.),
433 (1845); Hussey v. Manuf. & Mech.
Bank, 27 Mass., 415 (1830); Bryon v.
Carter, 22 La, Ann., 98 (1870). In New
York the rule that there is no lien at
common law is applied to banking cor-
porations. Bank of Attica v. Manuf.,
etc., Bank, 20 N. Y., 501 (1859). And to
corporations formed under the General
Manufacturing Companies Act. Dris-
coll v. West Bradley, etc., Manuf’g Co.,
59 id., 96 (1874).

567
ay
§ 522.] LIEN OF THE CORPORATION ON STOCK. (cH. XxxI.

The policy of the common law has always been to discountenance
secret liens, inasmuch as they hinder trade and restrict the safe and
speedy transfer of property. It is upon this ground that the courts
‘refuse to enforce a lien upon stock when such lien is not created
by charter or by by-law.

§ 522. A lien may be created by statute, by charter, or possibly by
by-law.— Such a lien as this in favor of the corporation may be
created by statute, by charter? and the weight of authority holds
that it may be created by by-law.

With respect to the right of a corporation to enact a by-law
creating such a lien, it is held in many jurisdictions that such a by-
law is valid and binding upon all persons who buy or transfer the
shares.’ There is, nevertheless, strong authority for the rule that
such a by-law cannot create a lien on the stock so as to bind a bona
Jide purchaser, or other person into whose hands the shares may

1 Pittsburg, etc., R. R. Co. v. Clarke,
29 Penn. St., 146 (1857); First National
Bank v. Hartford, etc., Ins. Co., 45
Conn., 22 (1877); Presbyterian Cong. v.
Carlisle Bank, 5 Penn. St., 345 (1847);
Rogers v. Huntington Bank, 12 Serg. &
R., 77 (1824); National Bank v. Watson-
town Bank, 105 U. S., 217 (1881). In
New York a statute gives railway cor-
porations which operate railroads in
foreign countries a lien upon the stock
for the amount of the unpaid calls.
New York Session Laws, 1881, ch. 468,
§ 12.

2Bradford Banking Co. v. Briggs, L.
R., 81 Chan. Div., 19 (1885); 8. C., 53 L.
T. Rep. (N. S.), 846; reversing S. C., L,
R., 29 Chan. Div., 149 (1885); Union
Bank v. Laird, 2 Wheat., 390 (1817);
Stebbins v. Phoenix Fire Ins. Co., 3
Paige, 350 (1832); Reese v Bank of
Commerce, 14 Md., 271 (1859); Brent v.
Bank of Washington, 10 Peters, 596
(1836); German Security Bank v. Jeffer-
son, 10 Bush (Ky.), 326 (1874); Arnold
v. Suffolk Bank, 27 Barb., 424 (1857);
Leggett v. Bank of Sing Sing, 24 N. Y.,
283 (1863); Bank of Utica v. Smalley, 2
Cowen, 770 (1824); Farmers’ Bank of
Maryland v. Iglehart, 6 Gill 50 (1847);
Bohmer v. City Bank, 77 Va., 445 (1888) ;
Hodges v. Planters’ Bank, 7 Gill & J.,
806 (1835); Sabin v. Bank of Woodstock,

21 Vt., 353 (1849); Cross v. Phenix Bank,
1R. L, 39 (1840).

3 Knight v. Old National Bank, 8 Clif-
ford, 429 (1871); McDowell v. Bank of
Wilmington, 1 Harr. (Del.), 27 (1882);
Bank of Holly Springs v. Pinson, 58
Miss., 421 (1880); St. Louis Perpetual
Ins. Co. v. Goodfellow, 9 Mo., 149 (1845);
Mechanics’ Bank v. Merchants’ Bank,

45: Mo., 513 (1870); Spurlock v. Pacific

R. RB. Co., 61 Mo., 319 (1875); In re Bach-
man, 12 Nat. Bank. 'Reg., 223 (1875);
People v. Crockett, 9 Cal., 112 (1858);
Pendergast v. Bank of Stockton, 2 Saw-
yer, 108 (1871); Lockwood v, Mechanics:
National Bank, 9 R. I., 308 (1869) ; Cun-
ningham v. Alabama, etc., Trust Co., 4
Ala. (N. S.), 652 (1848); Geyer v. Western
Ins. Co., 3 Pittsb., 41, (1867); In re
Dunkerson, 4 Biss., 227 (1868); Young
v. Vough, 23 N. J. Eq., 825 (1873); Brent
v. Bank of Washington, 10 Peters, 6596,
615 (1836); Child v. Hudson Bay Co., 2
P. Wuns., 207 (1723); Planters’, etc., Ins.
Co. v. Selma Savings Bank, 63 Ala., 585
(1879). Cf. Heart v. State Bank, 2 Dev.
(Eq.), N: C., 111 (1881); Farmers’, etc.,
Bank v. Wasson, 48 Iowa, 836, 340 (1878).
In Tuttle v. Walton, 1 Ga., 43 (1846), it
was said that as between the corporators
themselves such a by-law will be held
valid.

568
OH. XXxI.] LIEN OF THE CORPORATION ON STOOK. [§ 528.

come, to whom actual knowledge of the by-law cannot be im-
puted. .

Such is the rule in New York,! Louisiana,’ Massachusetts,’ Ala-
bama,* Pennsylvania,® California,$ Mississippi’ and, it seems, in some
other states? It is also the rule declared by the supreme court of
the United States in cases that involve the right of the national
banks to enact such by-laws.?

Upon the whole it may be said that the question whether a cor-
poration may, by by-law, create a lien in its own favor upon the
shares of its stockholders for debts due by them to the corporation
is not settled. The weight of authority in this country is against
the validity of the by-law, and such would seem to be a result most

in-accord with a wise and broad public policy.
§ 523. In Pennsylvania it is the statutory law that the transfer

1Driscoll v. West Bradley, etc., Co.,
59 N. Y., 96 (1874); Bank of Attica v.
Manufacturers’ Bank, 20 id., 501 (1859);
Rosenback v. Salt Spring National Bank,
53 Barb., 495 (1868); Conklin v. Second
National Bank, id., 512 (1868); S. C.,
aff’d, 45 N. Y., 655 (1871).
last cited it was held that not even
where the certificate of stock contained
a provision that the stock was not trans-
ferable until all the liabilities of the
stockholder to the bank were paid did
the bank acquire a lien upon the shares
for the subsequent indebtedness of the
Bhare-owner. And all the New York
decisions proceed upon the broad ground
that the policy of the law is to protect
a bona fide vendee of shares of stock
against secret or equitable claims
thereto. Cf. Leggett v. Bank of Sing
Sing, 24 N. Y., 283 (1862); McCready v.
Rumsey, 6 Quer, 574 (1857); Arnold v.
Suffolk Bank, 52 Barb., 424 (1857).

2Bryon v. Carter, 22 La. Ann., 98
(1870); Pitot v. Johnson, 33 id., 1286
(1881). Cf. New Orleans National Bank-
ing Association v. Wiltz, 4 Woods, 43
(1881); S. C., 10 Fed. Rep., 230.

3In Nesmith v. Washington Bank, 23
Mass., 324 (1828), the court doubted
whether a by-law could under any cir-
cumstances create alien on the shares
as against the creditors of the’ share-
owner, but did not decide the point. In
Sargent v. Franklin Ins. Co., 25 Mass.,

In the case.

90 (1829), ‘there is a somewhat decided
ground taken against the validity of
any -by-law which tends to limit the
free transfer of shares. In Plymouth
Bank v. Bank of Norfolk, 27 Mass., 454
(1830), Chief Justice Shaw seems to
doubt the validity of a by-law giving
the bank a lien on its own stock.

‘Planters’, etc., Mutual Ins. Co. v.
Selma Savings Bank, 63 Ala., 585 (1879).

5Steamship Dock Co. v. Heron’s
Adm’x, 52 Penn. St., 280 (1866); Mer-
chants’ Bank v. Shouse, 102 Penn. St.,
488 (1883).

6 Anglo-Californian Bank v. Grangers’
Bank, 63 Cal., 359 (1883). .

7 Bank of Holly Springs v. Pinson, 58
Miss., 421 (1880).

8 Carroll v. Mullanphy Savings Bank,
8 Mo. App., 249 (1880); Evansville Na-
tional Bank v. Metropolitan National
Bank, 2 Biss. , 527 (1871); Lee v. Citizens’
National Bank, 2 Cin. Super. Ct., 298
(1872). Cf. Neale v. Janney, 2 Cranch,
C. C., 188 (1819), A lien of the corpora-
tion on stock is prevented by a statu-
tory provision that the company should
not-loan money on the security of its
own stock. ‘Nicollet National Bank v.
City Bank, 85 N. W. Rep., 577 (Minn.,
1887).

9 Bank v. Lanier, 11 Wall., 869 (1870) ;
Bullard v. Bank, 18 id., 589 (1878).
Vide § 525, infra,

569

e

‘
§ 524.) LIEN OF THE CORPORATION ON STOCK. [CH. XXXI.
of shares of stock in a railway corporation can be made only upon
payment of any indebtedness that may exist on the part of the
shareholders who seek to transfer, unless the lien is waived by the
corporation.! In New Hampshire liens upon shares are forbidden
by statute.’

When a lien.is expressly given to the corporation by its charter
or by statute, all persons dealing with the corporation are affected
by it and must take notice of it.2 A statutory lien need not be set
out in the certificate in order to give notice to the transferee. And
where the lien is not authorized by the charter or by statute, the
mere declaration of its existence in the certificate will not avail
against a bona fide purchaser.®

§ 524. It is a salutary rule that a lien created by by-law can bind
‘only those who take the stock with notice of the by-law. This is
because by-laws do not, of themselves impart or convey notice.’ So,
too, a by-law enacted subsequently to a transfer, although the
transfer has not been recorded on the corporate books, cannot affect
the rights of the parties as to that transfer.’ By-laws creating liens
on stock have been, however, held valid and enforceable as against

the assignees in bankruptcy or in

1 Pittsburgh, etc., R. R. Co. v. Clarke,
29 Penn. St., 146 (1857); Rogers v. Hunt-
ingdon Bank, 12 Serg. & R., 77.(1824).
Cf. Everhart v. West Chester R. R. Co.,
28 Penn. St., 339 (1857).

2Hill v. Pine River Bank, 45 N. H.,
300, 309 (1864).

3 Bishop v. Globe Company, 135 Mass.,
182 (1883) ; Union Bank of Georgetown v.
Laird, 2 Wheat., 390 (1817); Bohmer »v,
City Bank of Richmond, 77 Va., 445
(1883); _Downer’s Adm’r v. Zanesville
Bank, Wright (Ohio), 477 (1833); Grant
v. Mechanics’ Bank, 15 Serg. & R., 140
(1826); St. Louis Perpetual Life Insur-
ance Co. v. Goodfellow, 9 Mo., 149 (1845);
Bank of Utica v. Smalley, 2 Cowen, 770
(1824); Rogers v. Huntingdon Bank, 12
Serg. & R., 77 (1824); Sewall v. Lan-
caster Bank, 17 id., 285(1828). Cf. Steb-
bins v. Phoenix, etc., Insurance Co., 3
Paige, 350 (1882).

4McCready v. Rumsey, 6 Duer, 594
(1857); Reese v. B’k of Com., 14 Md,
271 (1859); First Nat'l B’k v. Hartford,

etc., Ins. Co., 45 Conn., 22 (1877).

' §Conklin v. Second National Bank, 45
N. Y., 655 (1871), But in Vanuands v.

insolvency.®

Middlesex County Bank, 26 Conn., 144
(1857), it is held that a statement on the
face of the certificate of stock that it is
issued subject to all debts due from the
owners to the corporation will bind a
transferee as a qualification or restric-
tion of the transferrer’s title, and that,
too, although no charter provision or by-
law authorizes such a lien on the stock.
So, also, 21 Pac. Rep., 852 (Cal., 1889.)

8 Driscoll v. West Bradley, etc., Co.,
59 N. Y., 96, 109 (1874); Bank of Holly
Springs v. Pinson, 58 Miss., 421, 485
(1880); Anglo - Californian Bank wv.
Grangers’ Bank, 68 Cal., 359 (1888).
See, also, People ex rel. Krohn v

‘Miller, Treas., 39 Hun, 557 (1886), con-

cerning the validity and effect of by-

laws regulating the sale and transfer of

seats or membership in the commercial
exchanges, and the enforcement of the
liens created thereupon by such by-laws
in favor of other members of the corpe
ration.

7People v. Crockett, 9 Cal., 112 (1858).

‘8 Morgan v. Bank of North America,
8 Serg. & R., '78 (1822); 8S. C., 11 Am.
Dec., 575; Vansands v. Middlesex Co.

570
OH. XXXI.] LIEN OF THE CORPORATION ON STOCK.

[$ 525.
A clause in a charter declaring that debts due from the stock-
holders must be paid before a transfer will be allowed is sufficient
to create a lien on the stock without other action on the part of
the corporation. And so, also, a power conferred by the charter
upon the directors to refuse a transfer so long as the shareholder
who wishes to transfer is indebted to the corporation, when exer-
cised by the corporate management, supports the lien.?

It has been held that a lien may be created by special agreement
among the shareholders.’ And even that a mere usage of a cor-
poration not to transfer shares while the owner is indebted to the
corporation is sufficient to create a lien on stock, valid between the
corporation and its shareholders, and one which will bind a share-
holder. who borrows money with knowledge of it.‘

§ 525. What phrases in charters or statutes will or will not au-
thorize the corporation to create or enforce alien on stock.—The
question sometimes arises whether or not the corporation, by the
charter or the statute under which it acts, has authority to enact a
by-law creating a lien upon its stock in favor of the corporation

. for debts due it by the shareholders. It has been held that, where
‘the directors are authorized to make “ regulations ” as to transfers,
they may make a by-law creating alien.’ So various other phrases
have been held sufficient to confer this power. But even where

Bank, 26 Conn., 144 (1857); In re Bige- yer, 108 (1871). Cf. Tuttle v. Walton,

low, 1 Nat. Bank. Reg., 632, 667 (1868).

1Farmers’ Bank of Maryland Case, 2
Bland’s Chan., 394 (1880); Kenton -Ins.
Co, v. Bowman, 18. W. Rep., 717 (Ky.,
(1886).

2 Arnold v, Suffolk Bank, 27 Barb.,
424 (1857).

3 Vansands v. Middlesex County Bank,
26°Conn., 144 (1857).

4 Waln’s Assignees v. Bank of North
America, 8 Serg. & R. 738, 88 (1822); 8.
C., 11 Am. Dec., 515. Cf. Vansands v.
Middlesex Co. Bank, 26 Conn., 144
(1857). So in Bryon v. Carter, 22 La.
Ann., 98 (1870), it is held that a by-law
creating a lien, while it may be valid as
between the parties if it be brought.to
their knowledge, is not binding on the
judgment creditors of the sharehold-
ers,

5 Cunningham v. Alabama, etc., Trust
Co., 4 Ala. (N. S.), 652 (1848); Spurlock
v. Pacific R. R. Co., 61 Mo., 319 (1875);
Pendergast v. Bank of Stockton, 2 Saw-

1 Ga, 48 (1846).

6Bryon v. Carter, 22 La. Ann., 98
(1870); Brent v. Bank of Wash., 10
Peters, 596, 611 et seg. (1836); Pender-
gast v. Bank of Stockton, 2 Sawyer, 108
(Cal., 1871). Except when such power
is expressly given. to the directors it can
only be exercised by vote of the stock-
holders. Carroll v. Mullanphy Sav.
Bank, 8 Mo. App., 249 (1880). A char-
ter power given to the directors of a
corporation ‘‘to make all by-laws not in-
consistent with any existing law of the
state for the management of its prop-
erty, the regulation of its affairs and
the transfer of its stock,” has been, held
in Missouri to include the power in
question, Mechanics’’ Bank v. Mech,
Bank, 45 Mo., 513 (1870). But in New
York the same language used in the
general statute was held not to include
it. Driscoll v. West Bradley, etc., Co.,
59 N. Y., 96 (1874). See, also, Perpetual
Ins, Co. v. Goodfellow, 9 Mo., 149 (1845);

571
§ 526.] LIEN OF THE CORPORATION ON STOCK. (CH. XxXxI.
the legal title to shares can only be acquired by a transfer made in
a prescribed mode, yet a complete equitable title may be otherwise
acquired, and the Tien may attach thereto;' and stock standing on
the corporate books in the name of a fictitious person is subject to
a lien for the indebtedness of the real owner.’

A pledgee who is duly registered on the corporate books as a
shareholder, but to whom no certificate has been issued, is never-
theless protected against liens upon his shares for the indebtedness
of the pledgor.’ But a pledgee who neglects to notify the corpora-
tion that he holds the stock in pledge, or to take the proper steps
to secure title to the stock in his own name, will not be protected
against the lien of the corporation upon the stock to secure the
payment of an indebtedness contracted to the bank by the pledgor
in the meantime and subsequently to the pledge of the shares. A
corporate lien will not attach to stock for the debts of a legatee
unless the legatee accept the shares,*

§ 526. The lien, when established, covers all the stockholder’s
shares and dividends.— A valid lien in favor of the corporation,
when regularly established, attaches to all the shares and dividends
of the indebted stockholder. Thus, it attaches to all the shares the
stockholder owns, although the debt be for calls due and unpaid
upon only a part of them.§ The lien attaches not only to the stock
itself but to dividends declared on the stock.’ It is accordingly

Vansands v. Middlesex Bank, 26 Conn.,
144 (1857); Bank of Attica v. Manuf.,
etc., Bank, 20 N. Y., 501 (1859), Fora
discussion of this question as applied to
national banks, see § 533.

10 on the re-organization of a part-
nership. Planters’, etc., Ins. Co. v.
Selma Sav. Bank, 63 Ala., 585 (1879).

‘2 Stebbins v. Phoenix Fire Ins. Co., 3
Paige, 350 (1882), where the president
of a corporation with fraudulent in-
tent procured shares to be recorded in
a fictitious name, and, having himself
become indebted to the corporation, pro-
cured an assignment of the shares to
another creditor, who sought to have
the transfer recorded. Held, that the
lien still attached for the debts of the
original holder.

8 National Bank v. Watsontown Bank,
105 U. S., 207 (1881).

‘Platt v. Birmingham Axle Co., 14
Conn., 255, 264 (1874); 21 Pac. Rep., 852
(Cal., 1889.)

5 Farmers’ Bank of Maryland v. Igle-
hart, 6 Gill (Md.), 50 (1847).

6 Stebbins v. Phoenix Fire Ins. Co., 3
Paige, 350 (1832). Cf. Brent v. Bank of
Washington, 2 Cranch, C. C., 517 (1824).
In Virginia, however, it seems that
there can be no lien on wholly paid up
shares to secure the payment of an un-
paid subscription to other shares. Shen-
andoah Valley R. R. Co. v, Griffith, 76
Va., 913 (1882). Cf. Va. Code, 1887,
8§ 1127, 1128, 1130; Petersburg Savings,
etc,, Co. v. Lumsden, 75 Va. 827 (1881)..
And in England a lien on stuck for un-
paid calls is a lien only on those partic-
ular shares upon which the call is made
and not on other shares. Hubbersty v. .
Manchester, etc., R’y Co., L. R., 2 Q. B.,
471 (1867).

7 Thus, it attaches to the dividends
even though only ‘‘shares and stock’
be specifically named in the statute or
charter as subject to the lien Hague
v. Dandeson, 2 Exch., 147 — 1848), and

572
f

CH. XXxI.] LIEN OF THE CORPORATION ON STOCK.

[§ 527.
held that a corporation may lawfully retain dividends, and apply
them to the payment of a debt due to it from the shareholder,
since in an action by the shareholder to enforce payment of his
dividends the corporation may plead the debt by way of set-off.!
But dividends declared after the death of the stockholder are not
subject to a lien for his debts.2 The lien attaches to the shares
even after a liquidation or dissolution of the company.’ It attaches
not only to valid stock, but to spurious stock obtained by forgery.‘
So also the lien attaches to trust stock for debts due from a trustee -
who holds stock in trust, but in his own name, and without any in-
dication of the trust.’ And where a cestui gue trust owes the cor-
poration a debt, the lien attaches to his stock though held for him .
in the name of a trustee.®

§ 527. The lien protects the corporation as to all the debts due to
it from the shareholder.— It is a general rule that a lien upon stock
is a lien for all debts of the shareholder due to the ‘corporation ;"
and it is not necessary that the debt be due and payable at the
time when the lien is sought to be enforced. It covers debts which
are not due as well as those that are due, and all indebtedness to

the corporation, whether payable presently or at a future time.

though, in the absence of express pro-
vision, it is held that no such lien im-
pliedly exists. Sargent v. Franklin Ins.
Co., 25 Mass., 90 (1829); Bates v. N. Y.
Ins. Co., 8 Johns, Cas., 238 (1802). So,
in Hagar v. Union Nat’! B’k, 63 Me., 509
(1874), it was held that the terms of the
act of 1864 which are inconsistent with
the existence of a stock lien do not pre-
clude a lien on dividends.

1Hagar v. Union National Bank, 63
Me., 509 (1874); Sargent v. Franklin Ins.
Co., 25 Mass., 90 (1829); Bates v. New
York Ins. Co., 3 Johns. Cas., 288 (1802).
_ Cf. Merchants’ Bank v. Shouse, 102

Penn. St., 488 (1888); S. C., 16 Rep.,
'442; Brent v. Bank of Washington, 2
Cranch, C. C., 517 (1824). See, also,
§ 545, infra.

2 Brent v. Bank of Washington, supra;
Merchants’ B’k v. Shouse, supra.

3 In re General Exchange Bank, L. R.,
6 Chan., 818 (1871).

4Mt. Holly Paper Co.’s Appeal, 99
Penn, St., 513 (1882).

’New London & Brazilian Bank v.
Brocklebank, L. R., 21 Chan. Div., 802

894 (Va.,

(1882); Young v. Vough, 23 N. J. Eq.,
825, (1873); Burns v. Lawrie’s Trustees,
2 Scotch. Ct. of Sessions Cas. (2d series),
1348 (1840); otherwise cited, 2 Dunlap,
Bell & Murray, 1348.

$ Stebbins v. Phoenix Fire Ins. Co., 3
Paige, 250 (1882).

7 Union Bank of Georgetown v. Laird,
2 Wheat., 390 (1817); Mobile Mutual Ins.
Co. v. McCallum, 49 Ala., 558 (1878);
Cunningham v. Ala., etc., Trust Co., 4.
Ala. (N. S.), 652 (1848); Bosere v. Hunt-
ingdon Bank, 12 Serg. & R., 77 (1824);
Ex parte Stringer, L. R., 9 Q. B. Div.,
436 (1882); In re Peebles, 2 Hughes,
1875); Planters’, etc., Mutual ,
Ins, Co, v. Selma Savings Bank, 68 Ala.,
585 (1879).

8 Pittsburgh, etc., R. R. Co. v. Clarke,
29 Penn. St., 146 (1857); Im re Bachman,
12 Nat. Bank. Reg., 223 (1875); Down-
er’s Adm’r v. Zanesville Bank, Wright
(Ohio), 477 (1833); Brent v. Bank of
Washington, 10 Peters, 596 (1836); Grant
®, Mechanics’ Bank, 15 Serg. & R., 140 .
(1826); Rogers v. Huntingdon Bank, 12
id., 77 (1824); Sewall v. Lancaster Bank,

572°

1
§ 527.]

LIEN OF THE CORPORATION ON STOCK. ,

[CH. XxXI.

The lien also will continue for the benefit of the corporation, al-
though the debt be barred by the statute of limitations! The lier
attaches whether the stockholder’s debt to the corporation accrued

before or after he became a stockholder.?

It also secures debts for

which the shareholder is liable only as surety,> and debts due from
a partnership in which the stockholder is a partner.‘ So, also, it
secures the corporation for unpaid calls upon the original subscrip-

tion}

17 id., 285 (1828); McCready v. Rumsey,
6 Duer, 574 (1857); St. Louis Perpetual
Insurance Co. v. Goodfellow, 9 Mo., 149
(1845); Cunningham v. Ala., etc., Trust
'Co., 4 Ala. (N. 8.), 652 (1848); Hall v.
United States Ins. Co., 5 Gill (Md.), 484
(1847) ; Leggett v. Bank of Sing Sing,
24N. Y., 283 (1862); In re Stockton Mal-
leable Iron Co., L. R., 2 Chan. Div., 101
(1875). In Grant v. Mechanics’ Bank,
supra, it was held that. a bank organ-
ized under the Pennsylvania law of
March 21, 1814, might lawfully refuse
to permit the transfer of the stock of a
shareholder who was the drawer of a
bill discounted by the bank, but not
payable at the time the transfer was de-
manded — both the shareholder and his
indorser having, since the discount of
the paper, become insolvent. So, also,
Downer’s Adm’r v. Zanesville Bank,
supra. But where the lien is expressly
made a security for debts ‘‘ actually due
and payable,” it will be held to cover
only debts due and payable. Reese v.
Bank of Commerce, 14 Md., 271 (1859).
Cf. Downer’s Adm’r v. Zanesville Bank,
supra.

1 Farmers’ Bank of Md. v. Iglehart, 6
Gill (Md.), 50 (1847); Geyer v. Western
Ins. Co., 3 Pittsb., 41 (1867); Brent v.
Bank of Washington, 10 Peters, 596, 617
(1836).

*Schmidt v. Hennepin, etc., Co., 35
Minn., 511 (1886).

3’ McLean v. Lafayette Bank, 3 McL.,
587 (1846); Leggett v. B’k of Sing Sing,
24 N. Y., 283 (1862); Union Bank of
Georgetown v. Laird, 2 Wheat., 390
(1817); McDowell v. Bank of Wilming-
ton, 1 Harr. (Del.), 27 (1882); Brent v.

Bank of Washington, 10 Peters, 596,
615 (1886); St. Louis, Perpetual Ins.
Co. v. Goodfellow, 9 Mo., 149 (1845).
Cf. Miles v. New Zealand, etc., Co., 54
L. T. Rep., 582 (1886) ; West Branch
Bank v. Armstrong, 40 Penn. St., 278
(1861). A corporation, on discounting
a bill or note, may take security from
one of the parties, and also hold the
shares of another party as security for
the same loan. Union B’k v. Laird,
supra. Cf. Conant v. Seneca Co. B’k,
10. St., 298 (1853); Helm w. Swiggett,
12 Ind., 194 (1859);, Dunlop v. Dunlop,
L. R., 21 Chan. Div., 583 (1882), holding
that where the corporation has other
security it is not obliged to resort to the
lien.

4In the Matter of Bigelow, 2 Bene-
dict, 469 (N. Y., 1868); Geyer v. West-
ern Ins. Co., 3 Pittsb., 41 (1867); Arnold
v, Suffolk Bank, 27 Barb, 424 (1887);
Planters’, etc., Ins, Co. v. Selma Savings
Bank, 63 Ala., 585 (1879).

5Spurlock v. Pacific R. R. Co., 61 Mo.,
819 (1875); McCready v. Rumsey, 6
Duer, 574 (1857); Regina v. Wing, 33
Eng. L. & E., 80 (1855); Ea parte Lit-
tledale, L. R., 9 Chan., 257 (1874); Com-
panies Clauses Consolidation Act, 1845
(8 Vict., ch. 16, § 16); Shaw v. Row-
ley, 5 Eng. R’y & Canal Cas., 47 (1847);
Ex parte Tooke, 6 id., 1 (1849) Cf.
Newry, etc., R’y Co. v, Edniunds, 2
Exch,, 118 (1848); Ambergate, etc., R'y
Co. v..Mitchell, 4 id., 540 (1849); Great
North of Eng. R’y Co. v. Biddulph, 7
Mees. & W., 243 (1840); Pittsb., etc.,
R. R. Co. v. Clarke, 29 Penn. St., 146
(1857): Rogers v. Huntingdon B’k, 12
Serg. & R., 77 (1824); Petersburg Sav.,

574
CH. XXX1.]

LIEN OF THE CORPORATION ON sTOOK.  [8§ 528, 529.
“4 %

Whether the lien will avail to protect the corporation as to in-
stalments on the stock not called seems not to be settled. Whether:
it does or not will depend upon the wording of the provision au-
thorizing the lien. Generally no such lien exists.!/ The lien also
attaches to the stock of a depositor who has overdrawn his ac-
count.”

§ 528. Right of lien as against miscellaneous parties — The lien
of a corporation on shares of stock as security for the payment of
debts due to the corporation from the owner is a lien only as to
the indebtedness of duly recorded shareholders. There is no lien
on the stock as to debts of an intervening unrecorded owner of the.
stock.®

§ 529. The eh can be enforced for the benefit of the corporation:
only.— The right of a corporation to a lien on the stock of its
shareholders as security for the payment of their debts to the cor-
poration is a right to be enforced only by the corporation and
exclusively for its own benefit. Accordingly, it is held that the
corporation cannot become the assignee of the claim of some third
person against one of its shareholders in order to enforce payment
of that claim for the benefit of the third person by a recourse to
the corporate lien on the shareholder’s stock.! Neither can the
corporation be compelled, for the benefit of sureties as to a part of
the shareholder’s indebtedness, to apply the proceeds of the sale of
the stock to the liquidation of that part of their claim which is
secured. ‘The lien is for the benefit of the corporation, and it may
apply the proceeds of the sale of the stock in such a way as best
to subserve its own interest. But where one pays a debt as surety

etc., Co. v. Lumsden, 75 Va., 827 (1881).
Cf. Hall v. U. S. Ins. Co., 5 Gill (Md.),
484, 499 (1847), holding that instalments
not called: in constituted’ no such in-
debtedness as was contemplated in the
statutory provision for the lien. Such
a construction ‘would be to render
its stock wholly untransferable until
the par amount of it had been. paid
up, although the requisite instalments
for that purpose had never been called
in.”

1Hall v. United States Ins. Co., 5 Gill
(Mad.), 484 (1847. Cf. Im re Bachman,
12 Nat. Bank. Reg., 223 (1875); Pitts-
burgh, etc., R. R. Co. v. Clarke, 29 Pa,
St., 146 (1857)!

2 Reese v. Bank of Commerce, 14 Md.,
271 (1859).

3 Helm »v. Swiggett, 12 Ind., as (1859).

4White’s Bank v. Toledo, etc., Ins,
Co., 12 O. St., 601 (1861). To the point
that this lien is one exclusively for the
benefit of the corporation, see Bank of
Utica v. Smalley, 2 Cowen, 770 (1824).

5Cross v. Phenix Bank, 1 R. IL, 39
(1840). But see Kuhns v. Westmore-
land Bank, 2 Watts (Penn.), 136 (1833),
where it is said that ‘‘the principle that
a surety is entitled to the benefit of all
the creditor’s securities is of such uni-
versal application that it would require
strong evidence of legislative intention
to make the present case an exception
toit. Cf. also Klopp v. Lebanon Bank,
46 Penn. St., 88 (1868); Petersburg Sav-
ings Co. v. Lumsden, 75 Va., 327, es
(1881).

6 Planters’, etc., Ins. Co. v. Selma es,
Bk, 63 Ala., 585 (1879); Mt. Holly Paper °

575
§ 530.] LIEN OF THE CORPORATION ON STOOK. [CH. XXx1.
for a shareholder, he is entitled to be subrogated to the rights of
the corporation by way of lien on’ the shiarohdldar's tock? And
where the transferee pays the transferrer’s debt to the corporation
in order to obtain a registry of the transfer, he of course: may
have his action to recover back from his transferrer the amount
so paid? 4

§ 530. Methods of enforcing the lien.— When a corporation has
a lien upon the stock of those of its shareholders who are indebted
to it, it may refuse to allow a transfer of the stock until the debt is
paid or secured to its satisfaction. This is the usual method of en-
forcing the lien.? And the corporation may insist upon its lien and
hold the stock even against a bona fide purchaser.* It may, more-
over, hold the whole amount of the shareholder’s stock, although
the amount of the debt be less than the value of the-shares. It can-
not be compelled to transfer so much of the stock as is in excess of
the amount of the debt.’ But the corporation can enforce its lien

against the transferee only by a refusal to allow the transfer.

Co.’s Appeal, 99 Penn. St., 518 (1882);
Anglo-Cal, B’k v.’ Grangers’ Bank, 68
Cal., 359 (1883); Bishop v. Globe Co.,
185 Mass., 182 (1888).

1Young v. Vough, 23 N. J. Hq., 325
(1878); Hodges v. Planters’ Bank, 7 Gill
& J., 306, 310 (1835); West Branch Bank
v. Armstrong, 40 Penn. St., 278 (1861);
Klopp v. Lebanon Bank, 46 id., 88 (1863).
Cf. Higgs v. Assam Tea Co., L. R., 4
Exch., 387 (1869); In re Northern As-
sam. Tea Co., L. R., 10 Eq., 458 (1870);
National Exchange Bank v, Silliman,
65 N. Y., 475 (1875).

2 Bates v. New York Ins. Co., 3 Johns,
Cas., 288 (1802). See, also, § 262, supra.

‘3 Reese v. Bank of Commerce, 14 Md.,
271 (1859); Brent v. Bank’ of Washing-

ton, 10 Peters, 596 (1886); First National —

Bank of Hartford v. Hartford, etc., Ins,
Co., 45 Conn., 22 (1877); Vansands v.
Middlesex County Bank, 26 Conn., 144
(1857) ; Farmers’ Bank of Maryland v.
Iglehart, 6 Gill (Md.), 50 (1847); Me-
Cready v. Rumsey, 6 Duer, 574 (1857);
Tuttle v. Walton, 1 Ga., 48 (1846); Sewall
v. Lancaster Bank, 17 Serg. & R., 285
(1828); Rogers v. Huntingdon Bank, 12
id., '7'7 (1824); Grant v. Mechanics’ Bank,
15 id., 140 (1826). Cf. Sabin v. Bank
of ‘Woodstock, 21 Vt., 853 (1849; West

It.

Branch Bank v, Armstrong, 40 Penn.
St., 278 (1861). In Bishop v. Globe Co, |
185 Mass., 182 (1888), the rule is declared
that if by the law of the state under.
which a corporation is organized the cor-
poration has a lien on the stock of-any
shareholder for a debt due from him to
the corporation that the lien is a good
defense to an action in_ another state
against the corporation by a person to
whom the shareholder has transferred
his stock, but in whose name, by reason
of the lien, the corporati6n has wenised
to register the transfer. ass

4Newbury v. Detroit, etc., RR. Co.,”
17, Mich., 141 (1868); ‘Stcomb 7: Union,
etc., Ins. Co., 8 Mass., 326 (1811); Rog-
ers v. Huntingdon Bank, 12 Serg. & R.,
77 (1824); Grant v. Mechanics’ Bank, 15
id., 140 (1826); Sewall v. Lancaster
Bank, 17 id., 285 (1828); West Branch
Bank v. Armstrong, 40 Penn. St., 278
(1861); Mechanics’ Bank v. Merchants’
Bank, 45 Mo., 518 (1870); St. Louis Per-
petual Life Ins. Co. v. Goodfellow, 9 id.,
149 (1845); Tuttle v. Walton, 1 Ga., 48
(1846). ~

3 Sewall v, Lancaster Bank, 17 Serg.
& R., 285 (1828); Pierson v. Bank of
Winehinveai, 3 Cranch, C, C., 363 (1828).

576
CH. XXxI.] LIEN OF THE CORPORATION ON STOCK.

[sy 581-
cannot elect to make the transferee personally liable for the
debt.

As against the transferrer, however, the corporation may proceed
by an attachment of the stock.’ So, also, upon non-payment of the
debt, the corporation may make an application to a court of chan-
cery and have the shares sold in the usual.way, as in other cases of
‘property held under a lien? A decree authorizing the sale of stock
for the payment of the debt need not give the shareholder the right
of redemption. An absolute and valid title may pass to the pur-
chaser immediately upon the sale? A valid lien in favor of a bank
upon shares of stock in the bank belonging to the estate of a de-
ceased person will not yield to a prior claim against the. estate in
favor of the government.* But an unwarranted claim of lien by a
corporation, and a consequent refusal to register a transfer until
the debt as to which the lien is asserted is paid, is a conversion of
the shares, and the transferrer may have his action against the cor--
poration therefor.’ In order, however, to put the corporation in
the wrong fora refusal to transfer where it claims more than is-
due, the shareholder must tender what he admits to be due.®

§ 531. The corporation may waive its lien.— A corporation which
has a lien upon its stockholders’ stock for debts due to it from them.
need not necessarily depend upon or insist upon its lien for the col--
lection of the debt. It has two remedies — one to enforce the lien,,.
the other to collect the debt as though there was no lien. Hence

1 Sabin v. Bank of Woodstock, 21. Vt.,
358 (1849).

2In re Morrison, 10 Nat’l Bank. Reg.,
105 (1874); Farmers’ Bank of Maryland’s
Case, 2 Bland’s Chan. (Md.), 394 (1830);
Brent v“Bank of Washington, 10 Peters,
596 (1836).

3 Reese v. Bank of Commerce, 14 Md.,
271, 284, (1859).
was held to be equivalent to a pledge;
and it was held that, after giving due
notice to the delinquent shareholder, the
corporation might sell at public auction
without filing a bill to foreclose. Farm-
ers’ Bank of Maryland’s Case, supra, In
this case it’is also held that, where the
corporation neglects or refuses to sell the
stock of a deceased shareholder who is
in arrears, the administrator may file a
bill and obtain an order. of sale directed
to the corporation.

en

In one case the lien

4 Brent v. Bank of Washington, 10.
Peters, 596 (1836).

5 Bank of America v. McNeil, 10 Bush,.
54 (1878). Cf. Dickinson v, Central Na-.
tional Bank, 129 Mass., 279 (1880); Case
v. Bank, 100 U. §., 446 (1879); Skinner v:
City of London Co., 53 L. T., 191 (1885),.
holding, also, that only nominal dam-
ages could be recovered where the terms
of the transfer were secret. ‘

6Pierson v. Bank of Washington, 3
Cranch, C. C., 868 (1828). In German Se-
curity Bank v. Jefferson, 10 Bush, 326
(1874), it was held that, where the stock
sold under the lien realized a sum insuf-
ficient to satisfy the corporate debt, the
unpaid balance of the claim of the cor-
poration could not be paid until there
had been a proportionate payment of
the claims of other creditors of the
shareholder out of his general assets,
Cf. In re Peebles, 2 Hughes, 394 (1875),

577
i

LIEN OF THE CORPORATION ON STOCK. [cx. XXXI.

§ 581.]

it is that the lien of a corporation on stock may be asserted and
enforced, or in the discretion of the corporation it may be waived.!
Where the corporation has other security it is not obliged to re-
sort to the lien.2 Cases may arise where the intervening - rights of
other creditors of the shareholder render it inequitable for the cor-
poration to waive its lien on the stock,’ but in general the right of
the corporation to waive the lien at its option is absolute. g
Accordingly, where a note discounted for a shareholder was pro-
tested for non-payment, it was held that the bank might waive its
lien on the stockholder’s shares in the bank and proceed directly
against the indorser.t And the corporation, by waiving the lien,
does not discharge a surety unless the surety has given ‘the, corpo-
ration express notice not to waive the lien.2 The corporation will
not be held to have waived its lien upon the stock of its debtor
merely because it has taken other or additional security for the
debts;* nor because it assents to a general assignment by the share-
holder for the benefit of creditors.’ And the corporation may
allow the transfer of a portion of a shareholder’s stock without
waiving its lien on the rest. But a waiver of the lien for a limited
time is fatal, provided the stock is transferred during that time?
A waiver which will bind the corporation may, in the absence of
something to qualify the power, be made by the cashier of a bank,
acting by virtue of an express or implied authority for the board

1 National Bank v. Watsontown Bank,
105 U. S., 217 (1881); 8. C., sub nom.
Cecil National Bank v, Watsontown
Bank, 21 Am. Law Reg. (N. 8.), 545;
Hodges v. Planters’ Bank, 7 Gill & J.,
806 (1885); Hall v. United States Ins.
Co., 5 Gill (Md.), 484 (1847); In re Hoy
Lake R’y Co., L. R., 9 Chan., 257, 259
(1874). But see Conant v. Seneca Co,
Bank, 1 Ohio St., 298, 801 (1853); In re
Bigelow, 1 Nat. Bank. Reg., 667 (1868).
A waiver is the intentional relinquish-
ment of a known right. It is not to be
inferred and imputed to a corporation
in the absence of proof of it, and a
mere failure to assert the lien is not
equivalent to a relinquishment or
waiver of it. First National Bank of
Hartford v. Hartford, etc., Ins. Co,, 45
Conn., 23, 44 (1877).

2 Dunlop v. Dunlop, L, R., 21 Ch. D.,
583 (1882).

8In re Bachman, 12 Nat. Bank. Reg.,
228 (1875),
4Cross v, Phenix Bank, 1 R. L, 89

(1840).
5 Perrine v, Fireman’s. Ins. Co., 22
Ala., 575 (1853), *

6 Union Bank of Georgetown ®. Laird,
2 Wheat., 390 (1817).

TDobbins v, Walton, 87 Ga, 614
(1863),

8 First National Bank of Hartford v.
Hartford, etc., Insurance Co., 45 Conn.,
22 (1877). But ef. Presbyterian Congre-
gation v. Carlisle Bank, 5 Penn. St., 845
(1847).

® Thus, if within such time the stock
is pledged for a debt, the right of the
corporation, after the expiration of the
time to acquire its charter lien, is subor-
dinate to the right of the pledgee until
the debt is paid or the pledge is re-
leased.’ Bank of America v, McNeil, 10
Bush (Ky.), 54 (1878),

578
CH. XxxI.], LIEN: OF THE CORPORATION ON STOCK.

[§ 531.
of directors ;' or the secretary of an insurance company ;? or the gen-
eral manager or properly-qualified general agent of the corporation,
especially if that is a general custom of the company.’ Accord-
ingly, where one buys,shares on the faith of a representation of the

corporate officers that the stock is unincumbered, he is entitled to.

the shares free from any corporate lien.‘

And where the corporate officers allow a transfer to be regis-
tered and a new certificate to be issued, there is a waiver of the
corporate lien as to the debts of the transferrer.

It is held that a failure to recite the lien on the face of the cer-

tificate is not a waiver of the lien,’ and that a statement in the
certificate that the holder is entitled to a certain number of shares,.

transferable upon presentation and surrender thereof, is not a
waiver of the lien, though there be no assertion of the lien, but is
-a mere indication of the manner in which the shares are to be
transferred.’ When the lien is given to the corporation by the
charter, or the articles of association or by statute, there is con-
structive notice to all persons dealing with the corporation that
they must at their peril, without reference to what the certificate
recites or fails to recite, inform themselves as to any debts to the
corporation that may affect the shares they propose to buy. If

there is a lien they are held to have known it, whether the certifi-

cate declares it or not. As already explained, where the lien is
created by a by-law it is something of which purchasers of the

1 National Bank v, Watsontown Bank,
105 U.S., 217 (1881). So, also, the re-
fusal of the cashier to permit a transfer
is the act of the bank, for which it may
be charged. -Case:v. Bank, 100 U. S.,
446 (1879).

2 Chambersburg Ins, Co. v. Smith, 11
Penn. St., 120 (1849). Of. Kenton Ins.
Co. v. Bowman, 1 8. W. Rep., 717 (Ky.,
1886).

3See Bishop v. Globe Company, 135
Mass., 182 (1883); Young v. Vough, 23
N. J. Hig., 325 (1878).

4Moore v. Bank of Commerce, 52
Mo., 377 (1878).

5 Hill v, Paine River Bank, 45 N. H.,
800 (1864); Higgs v. Assam Tea Co., L.
R., 4 Exch., 887 (1869); In-re Northern
Assam Tea Co., L. R., 10 Eq., 458 (1870).
So, also, a by-law requiring the con-
sent of the board of directors to a
transfer by one indebted to the corpo-
ration is held to be repealed where a

custom of disregarding it has been
shown, it appearing also that the secre-
tary had been allowed to exercise his
own discretion about such transfers
without consulting the directors. In

such a case the consent of the secretary.

to the transfer is a waiver of the lien.
Chambersburg Ins. Co. v. Smith, 11
Penn. St., 120 (1849).

6See § 523. But where the by-law
under which the lien is claimed directs
that notice of the lien should be.given
in the certificate of stock, this provision
must be regarded as meaning that the
lien should not be asserted against a per-
son not having notice by the certificate.
And the issuance of certificates: not
containing this notice is a waiver of the
lien contemplated by such by-law.
Bank of Holly. Springs v. Pinson, 58
Miss., 421 (1880).

7See § 528.

579

/
§ 532.] Lf{EN OF THE CORPORATION ON SYTOOK. [CH. XXXI.
4

shares cannot be held to have had constructive notice. In such a

case, if the certificate does not disclose the lien, and actual knowl.

edge of it be shown, a bona jide purchaser would be protected.

But the rule is otherwise where the lien is created by statute or the

charter of the corporation.!

§ 532. The lien as affected by transfers and notice.— Upon a trans-
fer of stock the title thereto passes absolutely as between trans-
ferrer and ‘transferee, even though the corporation, in the assertion
of a lien upon the stock for the indebtedness of the transferee, re-
fuses to register the transfer until a certain debt is paid or secured.?
But of course the assignee or transferee, or whoever succeeds to

-the rights of the shareholder in the’ atock, takes it subject to the
‘lien of the corporation.?

And when the stock is sold by the cor-
poration to pay the debts of the transferrer, the transferee is en-
titled to the surplus, if any there be, which remains after the claim

of the corporation is satisfied.*

‘

The corporation cannot, after it has been regularly notified of
the transfer, assert a lien upon the stock to secure an indebtedness

of the transferrer contracted subsequently to the notice.®

A mere

notice to the bank is, in such a case, sufficient to protect the trans-

1 Bank of Holly Springs v. Pinson,
58 Miss., 421 (1880); Anglo-Californian
Bank v. Grangers’ Bank, 63 Cal., 859
(1883). See § 523,

2 National Bank v. Watsontown Bank,
105 U. §., 217 (1881); Johnson v. Laflin,
103 id., 800 (1880); Fitzhugh v. Bank
of Shepherdsville, 8 Mon. (Ky.), 126
(1825); St. Louis Perpetual Life Ins.
Co. v. Goodfellow, 9 Mo., 149 (1845);

‘Commercial Bank of Buffalo v. Kort-

right, 22 Wend., 348 (1839); 8. C., sub
nom. Kortright v. Buffalo Commercial
Bank, 20 id., 91 (1888); Bank of Utica
v. Smalley, 2 Cowen, 770 (1824); McNeil

v. Tenth National Bank, 46 N. Y., 825.

(1871); People ex rel. Krohn v. Miller,
89 Hun, 557, 563 (1886). Cf. Dunn v,
Commercial Bank of Buffalo, 11 Barb.,
580; Merchants’ Bank v. Livingston, 74
N. Y., 228 (1878); Pittsburgh, ete., R. R.
Co. v, Clarke, 29 Penn. St., 146 (1857);
Sargent v. Essex Marine R’y Corp., 26
Mass., 202 (1829); Carroll v. Mullanphy
Savings Bank, 8 Mo. App., 249 (1880).
Corporations having a. statutory lien
on stock for debts nevertheless must

allow transfer to one who takes subject
to the corporate lien for part of the un-
paid subscription, Herdegen v, Cotz
hausen, 86. N. W. Rep., 885 (Wis., 1888).
The lien attaches when a call is made
and not when it becomes due. Queen
v ae etc., R’y, 13 Q. B., 998
(1849).

3 Mobile Mutual Ins, Co. v. Cullom,
49 Ala., 558 (1873); New Orleans Na-
tional Banking Association v. Wiltz, 4
Woods, 48 (1881); S. C., 10 Fed. Rep.,
330.

4 Weston v. Bear River, etc., Mining.
Co., 5 Cal., 186 (1855); Tuttle v. Walton,
1 Ga., (1846); Foster v. Potter, 37 Mo.,
825 (1866); West Branch Bank v, Arm-
strong, 40 Penn. St., 278 (1861).

Conant v. Seneca County Bank, 1
O. St., 298 (1853); Nesmith v. Washing-
ton Bank, 6 Pick., 824 (1828). The same
rule applies where the stock is pledged.
Bradford, etc., Co. v. Briggs, 66 L, T.
Rep., 62 (1886), But where the share-
holder transfers his stock, and subse-
quently, without notifying the corpo-
tion of the transfer, borrows money

580
CH. XXxI.],

LIEN OF THE CORPORATION ON 8TOOK. [§ 533,

feree. ‘It is immaterial that the transfer was not registered.! And
‘in a case where the transfer was registered but no certificate haa
been issued, it was held that a pledgee was protected.2 But where
there is neither a register of the transfer nor notice of it served
upon the corporation, the stock may properly be subjected to a cor-
porate lien for the indebtedness of the transferrer incurred sub-
sequently to the transfer.*

§ 533. Liens on national bank stock.— National banks were for-
merly held to have power to enact by-laws creating a lien on stock
in the bank for debts owed by its owner to the “pank:! But the
supreme court of the United States, when the question came be-
fore it, refused to enforce such a by-law, and decided that its
enactment was not within the spirit of those provisions of the
National Banking Act of 1864 which confer power upon the man- |
agement of a national bank to regulate the business of the bank
and to conduct its affairs.» In the present state of the law, there-
fore, no national bank can, by any by-law, create any lien upon
shares of stock in the bank to secure the payment of any indebt-

from the corporation in regular course
of business, the corporation may refuse
to register the transfer and may insist
upon the lien. Platt v. Birmingham
Axle Co., 41 Conn., 255 (1874).

1Bank of America v. McNeil,
Bush, 54 (1873).

2 Cecil National Bank v. Watsontown
Bank, 21 Am. Law Reg. (N. S.), 545
(1881); 8. C., sub nom. National Bank v.
Watsontown Bank, 105 U. §., 217.

$Platt v. Birmingham Axle Co., 41
Conn., 255 (1874). In England the rule
has been recently settled, after. much
contest, that a provision in the articles
of association creating a paramount lien
on shares in favor of the corporation
gives the company priority over a mort-
.gagee of the shares, or over one whose
claim is'an equitable one, of whose
charge upon the shares the company
had notice before the specific liability
of the shareholder toward the company
has been incurred. Bradford Banking
Co, v. Briggs, L. R., 81 Chan. Div., 19
(1885); S. C., 53 L. T. Rep. (N. S.), 846;
reversing S. C., L. R., 29 Chan. Div., 149
(1885). See, also, Miles v. New Zealand
Alford Estate Company, 54 L. J. Chan.,
1085 (1885); S. C., Week. Notes (1885),

10

page 142; 8.C., 538 L. T. Rep. (N. 8.),
219; Re Dunlop, 48 L. T. Rep. (N. 8.),
89 (1883); Societe Generale de Par's +.
Tramways Union Co., L. B., 14 Q. B.
Div., 424 (1884); New London & Bra-
zilian Bank v, Brockleebank, L. R., 21
Chan. Div., 302 (1882), In England,
however, unrecorded transferees of
stock have few if any rights as against
the corporation; and this is the reason
for these decisions. Contra, Pitot v._
Johnson, 33 La. Ann., 1286. See § 377,
infra,

4The leading case was Knight v. The
Old National Bank, 3 Clifford, 429 (1871),
upholding the lien. To the same effect
see Lockwood v. Mechanics’ Nationa}
Bank, 9 R. I., 308 (1869); In re Dunker-
son, 4 Biss., 227 (1868); Young v. Vough,
23 .N. J. Eq., 235 (1873),

5 Bullard v. Bank, 18 Wall., 589 (1878).
See, also, Bank v. Lanier, 11 id., 869
(1870); Case v. Bank, 100 U. S., 446
(1879). The reason for denying, this
power to national banks is that they
are prohibited from loaning money to
stockholders on the security of their
stock. The decisions, therefore, do not
militate against the general doctrine as
above set forth.

581
$533]

LIEN OF THE CORPORATION ON STOOK.

fou. xxxr.

..edness which the owner of the shares may contract to the bank.®

This conclusion is in accord with the well-settled policy of the fed-
eral courts to protect purchasers of certificates of stock against all

secret dangers.

6 Delaware, etc., R. R. Co. v. Oxford
Iron Co., 88 N. J. Eq., 340 (1884); Myers
v. Valley National Bank, 18 Nat. Bank,
Reg., 84 (1878); Hagar v. Union Na-
.tional Bank, 63 Me., 511 (1874); New
Orleans National Bank v. Wiltz, 10 Fed.
Rep., 330 (1881); S. C., 4 Woods, 48;

, Second National Bank of .Louisville v.
‘National State Bank of New Jersey, 10
‘Bush, 867 (1874); Lee v. Citizens’ Na-
tional Bank, 2 Cin., 298, 306; Evans-
ville National Bank v. Metropolitan
‘National Bank, 2 Biss., 527 (1871). In
the case last cited, which upon appeal
was affirmed by the supreme court of
the United States, it was held that such
.a-by-law was in its operation the same

thing as though a loan were made by
the bank upon the security of ‘the
stock —a transaction forbidden by the
thirty-fifth section of the National Bank-
ing Act. Conklin v. Second Nat’l B’k,
45 N. Y., 655 (1871). Cf. National Bank
of Xenia v. Stewart, 107 U. 8., 676
(1882); Rosenbach v. Salt Springs Na-
tional Bank, 53 Barb., 495 (1868). This
accords with the more general rule in
New York, which holds all such by-laws
of any corporation in that state invalid.
See §§ 522, 525. A bank, however, may
attach the stock of one of its stock-
holders for debts due from him to it,
Hagar v. Union Nat’! B’k, supra,

582
CHAPTER XXXII.

DIVIDENDS ON STOCK.

§ 534-5. Definition of a dividend and
~ the four kinds of dividends.

587.
528,
539.
540.

541.
542.

543.

dividends.
Stock dividends.
Interest-bearing stock. ’

declaring dividends.
To whom the corporation is to
pay the dividend.

Dividends must be equal and
without preferences.

Dividend, when declared, is a
debt due absolutely to the
shareholder.

Scrip dividends and property |
Discretion of the directors as to

‘To whom the dividend belongs.:

 

§ 544,
545.

It is a debt which may be col-
lected by legal proceedings.
Right of the corporation to ap-
ply dividends to the payment
of debts due to it bythe share-

holder.

Dividends can be made only
from net profits — Net profits
defined.

Dividends which
capital stock are illegal, and
may be recovered back from

-the stockholders.

Proceedings to recover back
such a dividend.

The liability herein of the cor-
porate officers.

546.

547,

548,
549,

§ 534-5. Definition of a dividend and the four kinds of divi-

dends.—

A dividend is a corporate profit set aside, declared and

ordered by the proper corporate authorities to be paid to the stock-

holders on demand or at a fixed time.)

Until the dividend is de-

clared these corporate profits belong to the corporation, not to the
shareholders, and are liable for corporate indebtedness.’
A corporation may, in general, make four different kinds of divi-

impair the’

dends: namely, a dividend payable in cash, in certificates of stock, .

in scrip, or in property. In the absence of a special provision to
the contrary, dividends will be presumed to be payable in cash, and
in lawful or current money.’

§ 536. Scrip dividends and property dividends.— A scrip dividend
is a dividend of certificates giving the holder certain rights which
are specified.in the certificate itself. These dividends are usually
declared when the company has profits which are not in the shape
of money, but are in other forms of property, and the company

461, 474 (1874); Hyatt v. Allen, supra;
Mickles v. Rochester, etc., B’k, 11 Paige,

‘I Lockhardt v. Van Alstyne, 31 Mich.,
6 (1875); Webb v. Earle, L. R., 20 Eq.,

556 (1875); Chaffee v. Rutland R. R. Co.,
.55 Vt., 110 (1882); Hyatt v. Allen, 56
N. Y., 553 (1874).

2Curry v. Woodward, 44 Ala., 305
(1870); Goodwin v. Hardy, 57 Me., 148,
145 (1869); Rand », Hubbell, 115 Mass.,

118 (1844), holding that stockholders are
neither tenants in common nor copart-
ners of corporate property.

3Ehle v. Chittenango Bank, 24 N. Y.,
548 (1862); Scott v. Central Railway,
etc., Co. of Georgia, 52 Barb., 45 (1868).

583
DIVIDENDS. (OH. xxxiL.

§ 536.]
wishes to anticipate the time when the property may be sold for

cash, and the cash distributed by a money dividend.’ The certifi-
cate sometimes entitles the holder to a sum of money payable with
interest at a certain time after date, or at the option of the com-
pany, or when the company shall have accumulated sufficient sur-
plus to pay the certificates in full. Sometimes the certificates are
made convertible at the option of the holder into bonds or stocks;!
and sometimes the certificate entitles. the holder to exchange the |
certificate for lands of the corporation to an amount equivalent i in
value to the face value of the certificate; or to receive from the
corporation any other benefit or advantage which the corporation
may lawfully confer. In issuing such certificates the corporation
often reserves the right to redeem them either at a fixed time or at
its option, either in money or stock or bonds? Sometimes the cer-
tificate so far partakes of the character of a certificate of stock
that it entitles the holder to dividends.’ - Where the corporation,
having a large surplus, issues such certificates, they are held not to
transfer the title to that surplus from the corporation to the hold-
ers of the certificates* In general the issue of scrip dividends is
entirely lawful, and-they are upheld by the courts; but when they
are declared in fraud of the rights of third parties they may be
set aside.» A property dividend is rarely made, but in this coun-

1Chaffee v. Rutland R. R. Co., 55 Vt.,
110 (1882); State v. Baltimore, etc., Co.,
6 Gill (Md.), 363 (1848); Brown v. Lehigh
Coal Navigation Co., 49 Penn. St., 270
(1865); Bailey v. Citizens’ Gas Light Co.,
27 N. J. Eq., 196 (1876); Brundage v.
Brundage, 1 N. ¥. 8S. C. (T. & C.), 82
(1878) ; affirmed, 60 N. Y., 544 (1875), hold-
_ ing that assignable ‘‘interest certifi-
cates” representing earnings spent for
improvements, and payable out of fut-
ure earnings with dividends or converti-
ble into stock, did not pass with a be-
quest of a life interest in certain shares
of the stock. See, also, Butler v. Glen
Cove, etc., Co., 18 Hun, 47 (1879). See
$ 283.

2 Brown v. Lehigh Coal & Navigation
Co., 49 Penn. St., 270 (1865).

3 Bailey v. Railroad Co,, 22 Wall., 604
(1874). Cf. Brundage v. Brundage, 60
N. Y., 644 (1875).

4 People v. Board of Assessors, 76 N.
Y., 202 (1879); affirming 8. C., 16 Hun,
196. In this case it was held that the

issue of these certificates could not
operate to relieve the corporation from
their obligations to pay their tax upon
the surplus, because the surplus re-
mained in the hands, of the company,
and as such was liable to assessment
and taxation. See, also, Bailey v. Rail-
road Co., 22 Wall., 604 (1874). Cf. Com-
monwealth v. Pittsburgh, etc., R. R.
Co., 74 Penn. St., 83 (1873).

5 While negotiations were pending be-
tween two gas companies for their con-
solidation upon a certain basis of capi-
tal and indebtedness, one of them with-
out the knowledge of the other passed
a resolution declaring a scrip dividend
of ten per cent. on its capital stock,
thus increasing its indebtedness to that
amount. The certificates were accord-
ingly issued; but after the consolidation,
upon a bill filed for that purpose, the
scrip was declared void. Bailey 2.
Citizens’ Gas Light Co., 27. J. Eq., 196
(1876).

584
OH. XXXII]

"(8 537.

DIVIDENDS.

try it would unquestionably. be lawful, and is sometimes found con-
venient.! A bond dividend may be legal.?

§ 537. Stock dividends.— A stock dividend, as the name imports,
is a dividend of the stock of the corporation. Such a dividend is
lawful when an amount of money or property equivalent in value
to the full par value of the stock distributed as a dividend has been
accumulated and is permanently added to the capital stock of the
corporation. Corporations frequently make a dividend of this
character when improvements of the corporate property or exten-
sion of the business have been made out of the profits earned. It
is also made when the corporate plant has increased in value and
it seers better to issue new stock to represent the excess of value
than to sell the increase and declare a cash dividend. Ini this country
these dividends are frequently made and are constantly sustained by
the courts.2 The shareholders, having voted to declare such a divi-
dend, may, at any time before the certificates are issued, reconsider
the matter.and revoke the dividend.* Preferred stockholders are
entitled to share equally with the common stockholders in the dis-
tribution of stock by a stock dividend.® In some of the states a
stock dividend is prohibited by statute or constitutional provision.®

1In Scott v. Central Railroad, etc.,
Co, of Georgia, 52 Barb., 45 (1868), divi-
dends' paid during the civil war by a
Georgia corporation, in Confederate cur-
rency, were upheld as though dividends

_of property. Land scrip. Rogers v.
Phelps, N. Y. L. J., July 18, 1889.

* Where a corporation has used its sur-
plus earnings toimprove its property, it
may issue bonds to its preferred stock-
holders as a dividend in lieu of acash div-
idend. Wood v. Lary, 47 Hun, 550 (1888);
State v. Baltimore, etc., Co., supra.

3 Williams v. Western ‘Union Tele-
graph Co., 98 N. Y., 162, 188 eb seg.
(1888); City of Ohio v. Cleveland, etc.,
R. RB. Co., 6 O. St., 489 (1856); Howell v.
Chicago, etc., R. R. Co., 51 Barb., 378
(1868); Clarkson v. Clarkson, 18 id., 646
(1855); Simpson v. Moore, 30_id., 637
(1859) ; Gordon’s Executor v. Richmond,
etc., R. R. Co., 78 Va., 501 (1884); Minot
v. Paine, 99 Mass., 101 (1868); Boston,
etc., R. R. Co. v. Commonwealth, 100
id., 899 (1868); Deland v. Williams, 101
id., 571 (1869); Leland v. Hayden, 102 id.,
542 (1869); Rand v. Hubbell, 115 id., 461,

585

474 (1874); Gibbons v. Mahon, 4 Mackey,

180 (1885); Jones v. Morrison, 31 Minn.,
140 (1888); Earp’s Appeal, 28 Penn.
St., 868 (1857); Wiltbank’s Appeal, 64
id., 256 (1870); Commonwealth v. Pitts-
burgh, etc., R. R. Co., 74 id., 88 (1878);
Brown v. Lehigh Coal & Nav. Co., 49
Penn. St., 270 (1865); State v. Balti-
more, ete., R. R. Co., 6 Gill, 363 (1847).
See Harris v. San Francisco, etc., 41
Cal., 393 (1871), holding that a stock.
dividend represents undivided profits to

_ the same amount; and one who is enti-

tled to such a dividend cannot maintain
an action to compel a distribution of
such profits. See, also, § 51, supra, In
England a stock dividend has been de-
elared to be ultra vires.

4Terry v. Eagle Lock Co., supra.
After cancellation there is no statutory
liability on such stock. Hollingshead
v. Woodward, 35 Hun, 410 (1885).

5Gordon’s Executors v. Richmond,
etc., R. R. Co:, 78 Va., 501 (1884). See,
also, Phillips v. Eastern R. R. Co., 188
Mass., 122 (1884).
6 See §$ 51, 287, supra.
§§ 538, 539.] DIVIDENDS. ‘(cH. xxxm,

§ 538. Interest-bearing stock.—It has already been shown that
a corporation may issue stock and make a contract with the sub-
scriber that the company will pay interest upon the sums paid in
-by the subscriber! Such a contract is legal, however, only when
the interest is to be paid from the net profits of the enterprise, and
not from the capital stock. Unless net prolits have been earned
the stipulated interest cannot legally be paid. Consequently there
ds little difference between interest-bearing stock and preferred
stock. :

§ 539. Discretion of the directors as to declaring dividends:— In
general itis for the directors, and not the shareholders, to deter-
‘mine whether or not a dividend is to be declared, When, there-
fore, the directors have exercised this discretion and declared or
‘refused to declare a dividend, there will be no interference by the
courts with their decision, unless they are guilty of a wilful abuse
of their discretionary powers or of bad faith or of a neglect of
‘duty. Accordingly the directors may, in the fair exercise of their
discretion, invest profits to extend and develop the business,’ or for

1See § 277, supra.

2 Howell v. Chicago, etc., R.,B. Co.,
51 Barb., 378 (1868); Ely v. Sprague,
Clarke's Chan. (N. Y.), 351 (1840); Will-
iams v. Western Union Telegraph Co.,
93 N. Y., 162 (1883); Park v. Grant Lo-
comotive Works, 40 N. J. Eq., 114 (1885);
Barnard v. Vermont, etc., R. R. Co.; 7
Allen, 512 (1863); Chaffee v. Rutland
‘R. R. Co., 55 Vt., 110 (1882); Smith v.
Prattville Manuf’g Co., 29 Ala., 503
(1857); Barry v. Merchants’ Exchange
Co., 1 Sandf. Chan., 280 (1844); The
King v. Bank of England, 2 Barn. &
.Ald,, 620 (1819), where the court refused
to examine the accounts with a view
to compeling a dividend; Stringer’s
Gase, L. R., 4 Ch., 475, holding that,
‘where a balance sheet was not delusive,
a dividend based partly on uncertain
assets — as a debt due from the Confed-
erate States— must be considered as
made out of profits, although the com-
pany had to borrow money to pay it;
Browne v. Monmouthshire R’y & Canal
Co., 4 Eng. Law & Eq., 118; 8. C., 13
Beay., 32 (1851). The directors are
‘bound to distribute as profits only such
part of the net income as they think
proper; and their judgment of what is

proper is conclusive upon the stock-
holders. State v. Baltimore, etc., R. R.
Co., 6 Gill, 363 (1848); State of Loui-
siana v. Bank of Louisiana, 6 La., 745
(1834), In consequence, an action at
law cannot be maintained against a cor-
poration by one of its stockholders to
compel it to declare and pay a dividend
from funds on hand. Karnes v. Roch-
ester, 'etc., R. R. Co., 4 Abb. Prac. (N. 8.),
107 (1867); Carpenter v. N. Y., etc, R.
R.,5 Abb. Pr., 277 (185%), where the
court refused to enjoin the payment of
a dividend... A very strong case must
be made to justify a court in interfer-
ing with the discretion of the directors

in relation to the quantum of profits of

the corporation which they are to divide
as dividend. State of Louisiana v.
Bank of Louisiana, 6 La., 745 (1834);
Lambert v. Neuchatel Asphalte Co., 51
L. J., Chan., 882 (1882). Cf. Dent ».
London Tramways Co., 50 L. J. Chan.,
190 (1880); S. C., L. R., 16 Chan. Div..
344; Davison v. Gillies, id.,
(1879). See, also, cases and rules in
§ 271, supra.

8 Where a corporation having a large
surplus proposed, with the concurrence
of a majority ‘of the shareholders, to

586 q

192, note .
CH. Xxxu1.] DIVIDENDS. [§ 540,
the payment of probable future indebtedness, though it is not yet
due." The free exercise of their discretion cannot be ‘interfered
with by-the contracts of promoters or original incorporators as to
the disposition of corporate. profits.?

Nevertheless the discretion of the directors in the matter of de-
claring or refusing to declare a dividend is not absolute. The courts
exercise a supervisory power in this matter; and where there is a
clear abuse of power in refusing to declare the dividend, a court of
equity will, at the instance of any shareholder, compel the proper
authorities to declare and pay the dividend? Laches on the part
‘of the shareholders in failing to commence their suit to compel the
.payment of a dividend until the corporation becomes insolvent is
fatal* And the court will also consider that the aggrieved share-
‘holders, may, if a majority, refuse to re-elect the directors at the
next election, or may sell their shares.5

§ 540. To whom the corporation is to pay the dividend.— The
question as to whom a dividend shall be paid after it has been regu-
larly declared is one which sometimes involves the corporation in
considerable difficulty. It is not always easy to decide which one
.of two or more claimants is entitled to the dividend.

The general rule is that the corporation may pay the dividend to
the person in whose name the stock stands registered upon the cor-
porate stock-book.’ It may do so without inquiring whether he

employ the surplus in extending the
‘business, although such extension was
opposed by a minority of the sharehold-
-ers, it appearing that the proposed en-
dlargement of the corporate enterprise
was clearly intra vires, it was held, on
a bill brought by the dissenting minor-
ity for an injunction against the pro-
posed use of the surplus, and praying a
distribution of it among the sharehold-
ers, that the facts were not such as to
require the interposition of the court
on behalf of the minority. Pratt v.
‘Pratt, 83 Conn., 446 (1866). Cf. Park v.
Grant Locomotive Works, 40 N. J. Eq.,
114 (1885),

1 Karnes v. Rochester, etc., R. R. Co.,
4 Abb. Prac. (N. 8.), 107 (1867).

2Coyote, etc., Co. v. Ruble, 8 Oregon,
284 (1880). Cf. Richardson v. Railroad
‘@o., 44 Vt., 613 (1872).

3 Stevens v. South Devon. R’y Co., 9
Hare, 818 (1851); Brown v. Buffalo, etc.,

R. R. Co., 27 Hun, 342 (1882). See, also,
68

Park v. Grant Locomotive Works, 40
N. J. Eq., 114 (1885); Scott v. Eagle
Fire Ins. Co,, 7 Paige, 198 (1838);.State
of Louisiana v. Bank of Louisiana, 6 La.,
(45 (1834); Pratt v. Pratt, 33 Conn., 446
(1866); Beers v. Bridgeport Spring Co.,
42 id., 17 (1875). Upon a sale of all the
property of the corporation the direct-
ors may be compeiled to declare a divi-
dend. Cramer v. Bird, 6 Eq., 143 (1868),
A stockholder cannot sue for profits
until a dividend declared. Beveridge v,
N. Y., etc., R. R. Co., 19 N. E. Rep.,
489 (N. Y., 1889); 112 N. Y., 1.

4 Seott v. Eagle Fire Ins. Co., supra.

5 Barry v. Merchants’ Exchange Co.,,
1 Sandf. Chan., 280 (1844).

6 Brisbane v. Delaware, etc., R. R. Co.,
94 N. Y,, 204 (1883); aff’g 25 Hun, 438

(1881); Jones v. Terre Haute, etc., R. R.

Co., 29 Barb., 353 (1859); Northrup .
Newtown, etc., Turnpike Co., 3 Conn.,
544 (1821). Cf. Manning v. Quicksilver
Mining Co., 24 Hun, 360 (1881), in ree
7
§ 540.] ; DIVIDENDS. (ou. xxxu1.
has transferred the stock, and without requiring the production of
the certificate. Moreover, it is a well-settled rule that the corpora-
tion is protected in paying dividends to a recorded shareholder, al-
though he may have transferred his shares.? But after notice of a
transfer the corporation may pay the dividend to the transferee,
although no registry has been made.’ And between two claimants
of the dividend, one being the cestwz gue trust and the other a bona
Jide transferee, the corporation may interplead.

The right to dividends does not, however, depend upon the issue
of the certificate; and the owner of shares may claim his dividends
though’ no certificate has ever been issued by the corporation.’
The heirs of a stockholder must, in order to entitle themsclves to
dividends, procure a transfer of their ancestor’s shares into their
own names on the corporate books. Moreover, the corporation is
protected if it pay dividends to the administrator without notice
of a transfer by him.? With respect.to the dividends on the stock
of a married woman, the corporation must pay them to the hus-
band or not, according to the law of the domicile of the corpora-
tion, and not at all according to the law of the domicile of the mar-

ried woman.’ And the husband by collecting dividends on his

wife’s shares does not thereby reduce the stock to possession.?

gard to the assignment of dividends.
The guaranty accumulations of an
insurance company conducted both on
the mutual and stock principle be-
long to the stockholders and not to
the policy-holders. Traders’, etc., Ins.
Co. v. Brown, 8 Northeast. Rep., 134
(Mass., 1886). As to dividends on a
tontine insurance policy, see Pierce
v. Equitable Life Assurance Co., 12
Northeast. Rep., 858 (Mass., 1887). As
to a dividend by way of redeeming
stock in a building association, see Ap-
peal of Mechanics’, etc., Ass’n, 7 Atl.
Rep., 728 (Penn., 1887).

1 Brisbane v. Delaware, etc., R. R.
Co,, 94.N. Y., 204 (1888), aff’'g 25 Hun,
488; Cleveland, etc., R.-R. Co, v, Rob-
bins, 35 O. St., 483 (1880).

2Bank of Commerce's Appeal, "3
Penn. St., 59 (1878); Bell v. Lafferty, 1
Penn. Sup. Court, 454 (1881); Bank of
Utica v. Smalley, 2 Cowen, 770 (1824);
Smith v. American Coal Co., 7 Lans.,
817 (1878); Jones v, Cleveland, etc., R. R.
Co, v. Robbins, 35 O. St, 488 (1880), the

corporation not having been notified;
Bell v. Lafferty, 1 Penn. Sup. Court,
454 (1881); Smith v. American Coal
Co., 7 Lans., 317 (1878), to same effect.

31d. The corporation is liable to a
transferee for dividends declared after
a registry has been requested and im-

properly refused. Robinson vw Nat'l

B’k, 95 N. Y., 687.

4Salisbury Mills v. Townsend, 109
Mass., 115 (1871); Cross v. Reid, 14 Pac.
Rep., 885 (Cal., 1887), a case between
pledgor and pledgee. See, also, § 387,

5 Ellis v. Proprietors of Essex Merri-
mack Bridge, 19 Mass., 248 (1824),

6State v. New Orleans, etc, R. BR.
Co., 30 La. Ann., 308 (1878).

7Brisbane v. Delaware, etc., R. R
Co., 94.N. Y., 204 (1883).

8Graham »v, First National Bank of
Norfolk, 84 N, Y., 393 (1881); affirming
8. C., 20 Hun, 825. Cf. Dow v. Gould
& Curry Silver Mining Co., 31 Cal., 629
(1867). ~

9Burr v. Sherwood, 8 Bradf, (N. Y.
Surrogate), 85 (1854), Cf. Harcum v.

588

-
cH. Xxx11.] DIVIDENDS. [$ 541.

' Even though’ the corporation closes its transfer-book several days
before a dividend is declared, nevertheless those are entitled to
the dividend who apply for registry on or before the day of the
declaration of the dividend.!

§ 541. To whom the dividend belongs.— As between the vendor
and vendee of shares of stock, it is a settled rule that the vendee is
entitled to all the dividends on the stock which are declared after
the sale of the stock. Even though the transfer has not been re-
corded the transferee has a right to the dividends as against the
transferrer. The law, moreover, refuses to investigate the question
when. the dividend was earned. In contemplation of law the net.
profits are carned at the instant the dividend is declared? But of
course any agreement between vendor and vendee, modifying or
changing this rule, will be upheld. It is a proper subject for a
contract, and a valid contract may be made in reference to it.*
The question of whether a dividend is Bpportienaliton is considered
elsewhere.!

When a dividend is made payable on a day seared to the day
on which it is formally declared, it belongs to the stockholder who
owns the shares on the day the dividend is declared, and not to the
owner at the time it is payable. A dividend declared but pay-

Hudnall, 14 Gratt., 869, 882 (1858); Sear- 420 (1865); Black v, Homersham, L. R.,
ing v. Searing, 9 Paige, 288 (1841); Hart 4 Exch. Div., 24 (1878); Bates v. McKin-
v. Stephens, 6 Adol. & Ellis (N. 8.), 987 ley, 31 L. J. Chan., 389 (1862). King v.
(1845), A receipt of dividends by the Follett, 8 Vt., 885; Abercrombie v. Rid-
husband only reduces the dividendsinto dle, 8 Md. Ch., 820, Cf. Kane v. Blood-
possession and not the stock. Sée § 319. good, 7 Johns, Ch., 90 (1828), A person
1Jones v. Terre Haute, etc., R. R. who guaranties to another a dividend
Co., 57 N, Y¥., 196, 205 (1874); Robinson and is obliged to pay it himself cannot
v. Nat'l B’k, supra. Frequently, how- claim a subsequent dividend by way of
ever, the charter or statutes provide reimbursement. Parks v. Automatic,
otherwise. etc,, Co. (Super. Ct.), N. Y. Daily Reg.,
2Jermain v. Lake Shore, etc., R. R. May 12, 1888.
Co., 91 N. Y., 488; March v. R. R. Co., ° %Brewster v. Lathrop, 15 Cal., 21
43 N. H., 520 (1862); Central R. R. and (1860); Hyatt v, Allen, 56 N. ¥., 558
Banking Co. of Ga. v. Papot, 59 Ga., (1874). Cf. Union Screw Co, v. Amer.,
842 (1877); Ryan v. Leavenworth, etc., etc., Co., 11 R. I., 569 (1877); aff'd, 18
R. R. Co, 21 Kan., 865, 403 (1879); R. L, 678 (1880), in which it was held
Foot, Appellant, 22 Pick., 299 (1839); that where a contract between two cor-
Jones v. Terre Haute, etc,, R. R. Co., porations for the purchase of the stock
57 N. Y., 196 (1874); Currie v, White, of one of them on a certain day was by
45 id., 822 (1871); Brundage v. Brun- agreement postponed to a later day, a
dage, 65 Barb., 897, 408 (1878); aff'd, 60 dividend declared in the interval be-
N. Y., 544; Goodwin v, Hardy, 57 Me.,, longed to the purchaser.
148 (1869); Hill v, Newichawanick Co., 4See § 558, infra,
8 Hun, 459 (1876); aff'd, 71 N. Y.,693 6 Wright vu. Tuckett, 1 Johns. & H,
(1877); Spear v, Hart, 8 Rob. (N. Y.), - (1860) ; De Gendre v, Kent, L. R., 4
j 58
~

§ 541.] DIVIDENDS. [cH. Xxx

able at a future day may be assigned apart from the stock itself.!
A transfer of stock passes all dividends declared subsequently to

the transfer, although the dividend was earned before the transfer:

was made.? And a purchaser of stock at a tax sale, if the proceed-
ings are legal and regular, is entitled to a certificate and to divi-
dends subsequently declared.

A legatee of shares takes the stock as it was at the time of the
testator’s death. All dividends declared previous to that event go
to the administrator! Where stock is bought deliverable at the
seller’s option, the dividends declared between the day of the pur-
chase and the. delivery belong to the purchaser.’ So also an offer
to sell shares, which is subsequently accepted, entitles the vendee
to dividends received by the owner. while the offer was open. But

(Eng. Chan.), 600 (1854).

Kq., 283 (1867); Hill v. Newichawanick
Co., 71 N. Y., 593 (1877); affirming 8.
C., 8 Hun, 459; 48 How. Prac., 427
(1874); Spear v. Hart, 3 Robertson, 420
(1865); Bright v. Lord, 51 Ind., 272
(1875). Cf. Brundage v. Brundage, 60
N. Y., 544 (1875); affirming 8 C., 65
Barb., 897 (1878); Hopper v. Sage, 47 N.
Y. Super Ct., 77 (1881); Manning v.
Quicksilver Mining Co., 24 Hun, 360
(1881); Boardman v, Lake Shore, etc.,
R. R. Co., 84. N. Y., 157, 178 (1881); City
of Ohio v. Cleveland, etc., R. R. Co., 6
O. St., 489 (1855); Re Kernochan, 104
N. Y., 618 (1887); Clive v. Clive, Kay
Contra, Bur-
roughs v. North Carolina R. R, Co., 67
N. C., 376 (1872).

1Brundage v. Brundage, 60 N. Y.,
644 (1875); affirming S. C., 1 Thomp.
& C., 82 (1873); also 65 Barb., 397 (1878);
Black v. Homersham, L. R., 4 ‘Exch.
Div., 24 (1878); Curry v. Woodward, 44
Ala., 305 (1870).

2 Kane v. Bloodgood, 7 Johns. Ch., 90
(1828), by Chancellor Kent; Bailey v,
Railroad Co., 22 Wall., 604, 687 (1874);
Goodwin v. Hardy, 57 Me., 148 (1869);
March v. Eastern R. R, Co, 48 N. HL,
515 (1862); State of Louisiana v. Bank
of Louisiana, 6 La., 745 (1834); Phelps
v. Farmers’ & Mechanics’ Bank, 26
Conn., 269 (1857); Brundage v, Brun-
dage, 1 Thomp. &C., 82; aff'd, 60 N. Y.,
544 (1875); Jones v. Terre Haute, etc.,
R. BR. Co., 57 N. Y., 196 (1874); Currie

v. White, 45 id.,, 822 (1871); Dow ».
Gould and Curry Silver Mining Co., 31
Cal., 629 (1867); Goodwin v. Hardy, 57
Me., 148 (1869).

3Smith v. Northampton Bank, 58
Mass., 1 (1849).

4 Brundage v. Brundage, 60 N. Y., 544

(1875); Re Kernochan, 104 N, Y., 618

(1887), where it was payable after the
testator’s death. Cf. Ji ohnson », Bridge-
water Iron Mfg. Co., 14 Gray, 274 (1859) ;
§ 301. . The profits and surplus funds of
a corporation whenever they may have
accrued are, until separated from the
capital by the declaring of a dividend,
a part of the stock itself, and will pass
under that name in a transfer or be-
quest. Phelps v. Farmers’ & Mechanics’
Bank, 26 Conn., 269 (1857), Cf. Clapp
v. Astor, 2 Edw. Chan., 879 (1884). In
regard to the rights of of ‘a life tenant
of stock as against a remainder-man,
see chapter XXXIII,_,

5 Currie v. White, 45 N. Y., 822 (1871);
Black v. Homersham, L. R., 4 Ex. D;
24 (1878), Under a contract of a person
to buy certain stock within a certain
time if the other party desired to sell
(a ‘*put”), the first person reserving all
dividends ‘declared during the time,”
a dividend declared before but payable
during the time of the option belongs to
the iseller. Hopper v. Sage, 20 N. EB.
Rep., 850 (N. Y., 1889); 112 N. Y., 550

6 Harris v, Stevens, 7 N, H., 454 (1885)

596

‘
OH. XXXII.] DIVIDENDS. [$ 542.
a contract to sell on demand entitles the vendor to dividends de-
clared before the demand is made.

A person who claims to be the owner of stock cannot establish
his rights in a court by suing the party in possession of the stock
for the dividends declared and paid.?

§ 542. Dividends must be equal and without preferences — Divi-
dends among stockholders of the same class must be always pro
rata, equal and without preference. If the company has issued pre-
ferred stock, the holders thereof constitute a class for themselves,
and shareholders of that class will be entitled, as a class, to divi-'
dends in preference to holders of the common stock. But as be-
tween shareholders of the same class there can be no discrimination,
and profits set aside for dividends raust be evenly divided among
the stockholders according to the amount of stock each one owns.?
Accordingly there can be no lawful discrimination in the division
of dividends, although the subscription price of part of the stock is
due and unpaid;‘ nor can.there, be a discrimination between the’
large and small stockholders of a company as to the manner of.

payment of dividends.°

Bright v. Lord, 51 Ind., 272 (1875).
cf. Central R. R. & Banking Co. of
Georgia v. Papot, 59 Ga., 342 (1877);
Southwestern R. R. Co. v. Papot, 67
Ga., 675, 690 (1881), where stock had
been advanced to a construction com-
pany upon an agreement of the con-
tractors to account for the accruing div-
idends upon a final settlement.

2Peckbam.v. Van Wagenen, 83 N. Y.,
40 (1880).

8 Luling v. Atlantic Mutual Ins. Co.,
45 Barb., 510 (1865); Howell v. Chicago,
ete., R. R. Co., 51 id., 378 (1868); Jones
v, Terre Haute, etc., R. R. Co., 57 N.
Y., 196 (1874); affirming 8S. C., 20 Barb.,
853 (1859); Ryder v. Alton, etc,, R. R.
Co., 18 Ill., 516 (1851); State v. Balti-
more, etc., R. R. Co., 6 Gill, 868 (1847);
Atlantic, etc., Telegraph Co, v. Com-
monwealth, 8 Brewster (Penn.), 366
(1870); Hale 7. Republican River Bridge
Co,, 8 Kan., 466 (1871); Coey v. Belfast,
ete,, R’y Co. (Irish Rep.), 2 C. L., 112
(1866); Harrison v. Mexican R’y Co., L,
R., 19 Eq., 858 (1875); Jackson’s Adm’rs
», Newark Plank-road Co., 81 N. J.
Law, 277 (1865), Cf. Chase v. Vander-
bilt, 62 N. Y., 807 (1875). Holder of re-

‘penalty upon those in arrears.

After paying a dividend to a part of the

ceipt under re-organization, entitling
him to preferred stock in the new
company, is entitled to dividends de-
clared before he obtains the certificates.
Ellsworth v. New York, ete., R. R., 19
Weekly Dig., 221; aff’d, 98 N. Y., 648.

4Oakbank Oil Co. v, Crum, L, R., 8
App., 65 (1882),

5 Accordingly, where a dividend was
declared, viz., to all stockholders own-
ing less than fifty shares, cash, but to
all of fifty shares and over, part cash
and part in interest-bearing bonds of
the corporation, the discrimination was
held invalid and unlawful. State vw.
Baltimore, etc., R. R. Co., 6 Gill, 363
(1848); Jones v. Terre Haute, etc., R. R.
Co., 57 N, Y., 196 (1874). So, also, where
a part of the authorized capital stock
remained untaken, and a resolution of
the directors was carried into effect, by
which the untaken portion of the stock
was issued to those shareholders not in
arrears upon shares previously taken,
to the exclusion, as to the new shares,
of those in arrears upon the original
issue, it was held an invalid discrimina-
tion and an unlawful imposition of a
Reese v,:

591
§ 543.] DIVIDENDS. »

[CH. XXXIL,

.

shareholders the corporation cannot refuse to pay the rest upon
the ground that by so doing the capital stock will be impaired,! or
that allthe surplus earnings have been either paid out-as dividends
or invested in permanent improvements.”
A bill in equity may be maintained by a stockholder to prevent
an unequal or unfair distribution of the profits of the company,?
and for an injunction to restrain a dividend when stock has been
fraudulently overissued, until a true list of the holders of genuine
stock can be obtained.‘

§ 543. A dividend when declared is a debt due absolutely to the
shareholder.— When a dividend out of the earnings of the company
has been regularly declared and is due it becomes immediately the
individual property of the shareholder. There is, co dnstanti, &
severance, for the use and benefit of the members of the corpora»
tion, of so much of the accumulated earnings as are declared; and
the dividend thereafter exists as a separate fund, distinct from the
capital stock or surplus profits. It then becomes the absolute prop-
erty of the stockholders.®

Accordingly, whenever a dividend is regularly declated and
credited to a depositor it becomes his property, to which he is en-
titled in preference to the creditors of the corporation.’ If the
funds to pay a dividend are placed by the corporation on deposit
at a bank or elsewhere, the deposit is made and remains at the risk |

Bank of Montgomery County, Be Penn.
‘St., 78 (1855).

1 §toddard v. Shetucket ere
84 Conn., 542 (1868).

‘Beers v. Bridgeport Spring Co., 42
Conn., 17 (1875). - See, also, Coleman v
Columbia Oil Co., 51 Penn. St., 74 (1865);
Miller v, Illinois Central R. R. Co., se
Barb., 312 (1857).

3Luling v. Atlantic Mutual Ins. ox,
45 Barb., 510 (1865). In New Jersey the
action may be at law, as for a breach of
the contract for an equal distribution
which the law implies. Jackson’s
Adm’r v. Newark Plank-road Co., 81 N.
J. Law, 277 (1865).

4 Underwood v. New York, ete., R. R.
Co., 17 How. Prac., 587 (1859), a case
growing out of the Schuyler frauds in
New York.

5Van Dyck v. McQuade, 86N. Y., 88
(1881); Jermain v. Lake Shore, : etc.,
R. R. Co,, 91 id., 488 (1888); Keppul’s
Adi’r v, Petersburg R. R, Co., Chase’s

\

Dec., 167 (1868); King v. Paterson, etc.,
R. R. Co., 29 N. J. Law, 82, 604 (1860);
Hill v, Newichawanick.Co., 71 New
York Rep., 593 (1877), affirming S. C., 8
Hun, 459 (1876); Brundage v. Brun-
dage, 60 N. Y¥., 544 (1875), affirming
8. C., 65 Barb., 897 (1873); Spear v. Hart,
8 Robertson, 420 (1865); Scott v. Central
R. R. and Banking Co. of Georgia, 52
Barb., 45 (1868); Manning v. Quicksilver
Co., 24 Hun, 360; Bloodgood v. Kain, 7
Johns. Ch., 90; Beers v. Bridgeport
Spring Co,, 42 Conn., 17 (1875); Faw-
cett v. Laurie, 1 Drew & Sm., 192
(1860); Carlisle v, Southeastern R’y Co.,
1 Mac. & G., 689 (1850); Matter of Le
Blanc, 14 Hun, 8 (1878), Upon the late
ter point compare People v, Merchants’
and Mechanics’ Bank, 78 N. Y., 269
(1879).

6 Van Dyck v. McQuade, 86 N. Y¥., 38
(1881); Peckham v. Van Wagener, 83
N. Y., 40.

592
’

OH. XXXi1.| [§ 544,

DIVIDENDS.
of the corporation and not of the shareholders, until a reasonable
time after actual notice is given to the latter.1 But it cannot be
withdrawn and reclaimed either by the corporation or a receiver of
the corporation, since the shareholders acquire, by virtue of the
declaration of the dividend, a lien in equity upon the deposit.?
And the shareholders’ right to a dividend regularly declared, and
to the fund set apart by the corporation to pay the dividend, is
not affected by the subsequent insolvency of the corporation.? But
where no specific fund has been set aside, a shareholder not having
claimed or received his dividend has, upon the insolvency of the
corporation, merely a claim of debt against’ the corporation, and
must come in and fare as the other creditors do.t A dividend is
. something distinct and separable from the fund upon which it is
declared, and it may be the subject of assignment by a shareholder
before it is received from the corporation. So it is held thata
dividend must be made payable within a reasonable time after it
is declared, and when once declared cannot be revoked. And not
only must the time of payment be reasonable, but a reasonable
place of payment must be designated, and the entire transaction
must be in good faith.’

§ 544. It is a debt which may be collected by legal proceedings.—
The debt which the corporation owes its shareholders, when a divi-
dend is declared and the day of payment arrives, is one which may
be collected by the usual action at law. A suit to enforce the
declaration of a dividend must be in equity; but when the divi-
dend is not paid after’it has been regularly declared the share-
‘holder’s action is at law, and he may sue in indebitatus assumpsit
for the amount due him by the resolution declaring the dividend.’

1King v, Paterson, etc., R. R. Co., 29
N. J. Law, 82, 504 (1860).

2 Matter of Le Blanc, 14 Hun, 8 (1878);
Beers v. Bridgeport Spring Co., 42
Conn., 17% (1875).

3Le Roy v. Globe Insurance Co., 2
Edw. Chan., 657 (1836).

4Lowne v. American Fire Insurance
Co., 6 Paige, 482 (1837).

5Marten v. Gibbon, 83 L. T. Rep.
(N. 8.), 561 (1875). Cf. Jermain v. Lake
Shore, etc., R. R. Co., 91 N. Y., 483
(1888). Bargains in prospective div-

idends are transactions which, by rule

61 of the stock exchange, the committee
will not recognize or enforce. The con-
tract is, however, one which is not con-
trary to law, and it is good between
the parties. Marten v. Gibbon, supra.

(38)

6 Beers v. Bridgeport Spring Co., 42
Conn., 17 (1875).

7King v. Paterson, etc., R. R. Co., 29
N. J. Law, 82 (1860). :

8Coey v. Belfast, etc., R’y Co., Irish
Rep., 2 CG L., 112 (1866); Jackson’s
Adm’rs v. Newark Plank-road Co., 31 -
N. J. Law, 277 (1865); West Chester,
etc., R. R, Co. v. Jackson, 77 Penn. St.,
821 (1875); King v. Paterson, etc., R. R.
Co., 29 N. J. Law, 504 (1860); Keppel’s
Adny’rs v. Petersburg R. R. Co., Chase’s
Dec., 167 (1868); Stoddard v. Shetucket
Foundry Co., 34 Conn., 542 (1868); Hall
wv, Rose Hill, ete., Co., 70 Ill., 673 (1878);
City of Ohio v. Cleveland, ete, R. R.
Co., 6 Ohio St., 489 (1856). Cf. Marine
Bank of Baltimore v, Biays, 4 Har. &
J., 838 (1818); State v. Baltimore, etc.,

593
§ 5£4.] , DIVIDENDS. [CH. XXxI.
But mandamus is not a proper remedy in sucha case! A contract
of directors to pay a dividend as a debt at fixed intervals, being in
reality a preferred dividend, cannot be enforced either at law or in
equity, except out of net profits like other dividends.? A demand
is necessary before the action at law by the shareholder can be
maintained,’ and a mere letter of inquiry has been held under this
rule an insufficient demand.*| A demand while the shares are under
and subject to an attachment by the corporation is not such a de-
mand as this rule contemplates.’ It has been held, however, that
the commencement of the suit constitutes in itself a sufficient de-
mand. Under ordinary circumstances interest is not recoverable
upon dividends which have been declared, but which the share-
holder has not claimed. The right to interest arises only upon a
demand and a refusal to pay.’ In the case of interest on preferred

‘dividends, the rule of course is different.’

The actions at law for the payment of a dividend which has
been declared should be against the corporation, and not against
the corporate officers.® But where the treasurer of an incorpo-
rated company withheld a dividend belonging to one of the stock-
holders on the ground that he himself owned the stock, an action

R. R. Co., 6 Gill, 363 (1847); Kane v.
Bloodgood, 4% Johns. Chan., 90,- 132
(1828); Jones v. Terre Haute, etc., R.
R. Co., 57 N. Y., 196 (1874); Fawcett v.
Laurie, 1 Drew. & Sm., 192 (1860);
Dalton v. Midland Counties R’y Co., 18
C. B., 474 (1853); Scott v. Central Rail-
road, etc., Co. of Georgia, 52 Barb., 45
(1868). See Beers v. Bridgeport Spring
Co., 42 Conn., 17 (1875), sustaining a
remedy inequity. But if ashareholder
is not entitled to share in the dividend
according to the terms of.the resolu-

tion declaring it, he cannot have his

action of assumpsit. State v. Balti-
more, etc., R. R. Co., 6 Gill, 863 (1848).

1Van Norman v. Central Car, etc.,
Co., 41 Mich., 166 (1879).

*Painesville, etc., R. R. Co. v. King,
17 0. St., 584 (1867). See, also, § 270,
supra.

3 Hagar v. Union Nat’l Bank, 68 Me.,
509 (1874); Scott v. Central R. R. &
Banking Co. of Ga., 52 Barb., 45 (1868);
State v. Baltimore, etc., R. R. Co., 6
Gill, 363 (1847); King v. Paterson, etc.,
R. R. Co., 29 N, J. Law, 504 (1860),

4Scott v. Central R. R. & Banking
Co. of Ga., supra.

5Hagar v. Union Nat’l Bank, supra.
_ §Robinson v. National Bank of New
Berne, 95 N. Y., 637 (1884); Keppel’s
Adm’r v. Petersburg R. R. Co., Chase’s
Dec., 167 (1868). This accords with the
settled theory of the law as to demand
in similar cases, See Hast New York,
etc., R. R. Co. v. Elmore, 5 Hun, 214
(1875); Delamater v. Miller, 1 Cowen,
75 (1828); Everett v. Coffin, 6 Wend.,
698 (1831); Walradt v. Maynard, 3
Barb., 584 (1848); Carroll v. Cone, 40
Barb., 220 (1862); Ayer v. Ayer, 16
Pick., 827 (1835).

7 Keppel’s Adm’r v. Petersburg R. R.
Co., supra; Boardman v. Lake Shore,
etc., R. R. Co., 84 N. Y., 157, 187 (1881);
State v. Baltimore, etc, R. BR. Co, 6
Gill, 363, 887 (1847); Phil., etc., R. RB.
Co. v. Cowell, 28 Pa. St., 329 (1857);

Bk of Louisvillé v. Gray, 28. W. Rep.,

168 (Ky., 1886).

8 See § 272, supra.

9 French v. Fuller, 40 Mass,, 108 (1839);
Smith v. Poor, 40 Me., 415 (1855); 8. C.,
3 Ware, 148 (1858).

594
. OH, XXXII]

DIVIDENDS. [$$ 545, 546.

of assumpsit against him individually was sustained.’ And in a

case where a stockholder had been unjustly deprived of his stock,

it was held that he could not sue an individual shareholder to re-
cover a dividend which should have been paid to him, but that his
action was properly against the corporation? In actions on the
part of shareholders to enforce the payment of dividends the valid-
ity or legality of the dividend cannot be questioned by the cor-
poration.? But when a corporation is sued for a dividend by two
claimants therefor it may support a bill of interpleader boueen
them.*

§ 545. Right of the corporation to apply dividends to the panne
of debts due to it by the shareholder.— It is well settled that if, at
the time a dividend becomes payable, the stockholder owes the
corporation any debt, the dividend due that shareholder may be
applied in liquidation of the indebtedness; and if the corporation
is sued for the dividend it may set up the debt by way of set-off or
counter-claim.’ This, however, amounts to a corporate lien on the
stock so far as dividends are concerned; and it is doubtful whether
it should be upheld where the registered stockholder has sold and
transferred his certificate of stock before the dividend is declared.

§ 546. Dividends can be made only from net profits — Net profits
defined. A dividend can lawfully be made only out of net profits.
The payment of it must leave the capital stock of the company in-

1 Williams v. Fullerton, 20 Vt., 346
(1848).

2 Peckham v. Van Wagenen, 83 N., Y.,
40 (1880).

3 Stoddard v. Shetucket Foundry Co.,
84 Conn., 542 (1868).

4Salisbury Mills v. Townsend, 109
Mass., 115 (1871). See, also, § 387. In
England the rule was formerly other-
wise. Dalton v. Midland R’y Co., 12
C. B., 458 (1852); Scott v. Central R. R.
& Banking Co. of Ga., 52 Barb., 45
(1868). Where a corporation is sued by
a stockholder for a dividend declared
by the directors, and all the other stock-
holders have received their dividends
and retained them, the company can-
not be allowed to set up its defense to
the suit that the dividend has not been
earned, and that its payment would
withdraw a part of the capital of the
company. Stoddard v. Shetucket Foun-
dry Co., supra.

5 Hagar v. Union National Bank, 63.
Me., 509 (1874) ; King v. Paterson, etc.,
R’y Co., 29 N. J. Law, 504 (1860); Sar-
gent v. Franklin Ins. Co., 8 Pick., 90°
(1829); Bates v. New York Ins. Co., 3.
Johns, Cas., 238 (1802). See, also, § 526,.
supra. Buta contrary rule prevails as
to a deceased stockholder. See Mer-
chants’ B’k, etc., v. Shouse, 102 Pa. St.,
488 (1883); Brent v. B’k of Washington,
2 Cranch, C. C., 517 (1824). See, also,
contra, in general, Ex parte Winsor, 8
Story, C. C., 411 (1844).. By agreement
a dividend may be applied to an un-
paid call. Kenton, etc., Co. v. McAlpin,
5 Fed. Rep., 787 (1880). For a contract
of a corporation to sell to its superin-
tendent shares of its stock at his op-
tion, and to allow him to pay for the
stock by the dividends, see Appeal of
Goodwin, etc., Co., 12 Atl. Rep., 736 ,
(Pa., 1888).

595
§ 546.] DIVIDENDS. | [OH. Xxxm,
tact and unimpaired, or the dividend itself will be held fraudulent
and void.!

In view of the rule thaf dividends can be made only from net
profits, it becomes important to ascertain what part of the income
of a corporation constitutes “ net profits.” This question has caused
the courts considerable difficulty. There have been various defini-.

tions, explanations and different states of facts involved in the cases

which have come before the courts.

A general idea of what con-

stitutes net profits available for dividends, can be obtained only by

a study of the cases themselves.’

1 Chaffee v. Rutland R. R. Co., 55 Vt.,
-110; Lockhardt v. Van Alstyne, 31
Mich., 76 (1875); Elkins v. Camden, etc.,

R. R. Co., 36 N. J. Eq., 283 (1882); Car-

penter v. New York, etc., R. R. Co., 5
Abb. Prac., 277 (1857); Hughes v. Ver-
mont Copper Mining Co., 72 N. Y., 207,
210 (1878); Pittsburgh, etc., R. R. Co. v.
County of Allegheny, 63 Penn. St. 126
(1869).

2Mr. Justice Blatchford, by way of a
definition having special reference to
the case of the net profits and net earn-
‘ings of a railway company, says: ‘‘ Net
earnings are, properly, the gross re-
ceipts, less the expenses of operating
the road to earn such receipts. Interest
on debts is paid out of what thus re-
mains; that is, out of 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 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 v. Erie R’y Co., 10 Blatch., 271,
279 (1872); S. C. aff'd, 22 Wall, 1386
(1874); Warren v. King, 108 U. 8., 389
(1882). Cf. Union Pacific R. R. Co. v.
United States, 99 U. S., 402, 418 (1878);
Sioux City, etc., R. R. Co. v. United
States, 110 U. S., 205. Net income, it is
clear, is the same thing as net profits.
People v. Supervisors of Niagara, 4
Hill, 20, 23 (1842). See Park v. Grant
Locomotive Works, 40 N. J. Eq., 114
(1885). ‘Surplus earnings” are said to

596

’

be net profits in Williams v. Western
Union Telegraph Co., 98 N. Y., 162, 191
(1883). And in Van Dyck v. McQuade, 86
N. Y.,38, 47 (1881), it is held that savings
banks organized under the act of 1875
(Laws of 1875, ch. 371) can lawfully pay
dividends only from surplus. profits,
which, as the statute itself provides
(Laws of 1875, ch. 371, § 3), are to be
ascertained by deductions from “ actual
profits,” ‘‘the interest paid or then due
or accrued on debts owing by the com-
pany.” In New York the statutes pro-
vide very explicitly as to the declaration
of dividends by moneyed corporations
and as to the manner in which surplus
profits are to be ascertained. R.S. of
New York, ch. XVIII, title 2, art. 1,§3
(7th ed., 1865); id., title 4, § 2 (7th ed.,
p. 1533). ‘‘Net earnings” is a term
synonymous with ‘‘net income.” Phil-
lips v. Eastern R. R. Co., ‘138 Mass., 122
(1884). In Belfast, etc., R. R. Co, v. Bel-
fast, '77 Me., 445 (1885), it is said that the
term ‘net earnings” does not imply
that the company is wholly out of debt;
and in Myles v. Northern, etc., R’y Co.,
L. RB. 5 Chan: App., 621 (1870), Lord
Hatherly, -L. C., said: ‘‘Mr. Dickinson
started a very curious theory, which I
apprehend never found its way into any
mercantile arrangement: that there
never can be any available income or
any profit so long as there is any debt
remaining unpaid. If that beso, I sup-
pose there is hardly a railway in the
kingdom which could pay any divi-
dends at all to their stockholders.” Cy.
OH. XXx11. |

DIVIDENDS, [§ 546.

The term net profits has been held to mean net earnings after

deducting current working expenses, without including interest

on money borrowed;! but a better definition is that which re-
mains after the deduction of all charges and every outlay.2. Upon
a reduction of the capital stock, the surplus funds over and above
the full amount of the capital stock as reduced may be divided
among the stockholders, the only restriction being that such a dis-
tribution must leave the reduced: capital stock entire and unim-
paired.? When the company has used profits for improvements, it
may lawfully borrow an equivalent sum of money for the purpose

Barry v. Merchants’ Exchange -Co., 1
Sandf. Chan., 280, 807 (1844). Unearned
premiums received by an insurance
company, on which the risks are still
running, are not surplus profits out of

which dividends can legally be made,

there not being a sufficient surplus on
hand in excess of the capital stock, to
meet the probable losses on risks not
yet terminated. De Peyster v. Ameri-
can Fire Ins. Co., 6 Paige, 486 (1887).
See, also, Scott v. Eagle Fire Ins. Co., 7
id., 198 (1888); Lexington, etc., Ins. Co.
v. Page, 17 B, Mon., 412 (1856), In
Gratz v. Redd, 4 B. Mon., 178, 187
(1848), it is held that capital paid in on
stock which is afterwards forfeited does
not thereby become profits and liable
to be distributed as a dividend. Money
paid in as capital must remain and
be treated and expended as capital,
whether the stock that represents it is
forfeited or not. To distribute such

“money as profits is to squander and

dissipate the capital stock. In the fol-
lowing cases the term ‘net profits,” or

‘an equivalent phrase, is defined: Colt-

ness Iron Co. v. Black, 51 L. J. (Q. B.
Div.), 626 (1881); New York, etc., R. R.
Co. v. Nickols, 119 U. S.- 296 (1886); Sal-
isbury v. Met. R’y, 88 L. J., Chan., 249
(1869); Park v. Grant Locomotive
Works, 40 N. J. Eq., 114 (1885). For a
learned and very satisfactory discussion
of when net earnings are to be retained
for the purpose of accumulating a fund
to pay a corporate debt not yet due, see
Hazeltine v. Belfast, etc., R. R. Co., 10
Atl. Rep., 328 (Me., 1887).

29 Beav., 263 (1860).

. 1 Corry v. Londonderry, etc., R'y Co.,
Cf. People v. The
Supervisors, 4 Hill, 20 (1842). Whether
the interest on debentures can be legally
charged upon the capital account of the
company, the revenue available for
dividend being thereby increased, seems
to be doubtful. Bloxam v. Metropoli-
tan R’y Co., 3 Ch., 837, 344, 350.

*St. John v. Erie R’y Co., 22 Wall.,
186 (1874). Cf. Warren v. King,-108
U. S., 889 (1882). In Iowa it has been
held that where a bank with a capital
of $106,860; assets of $156,904; liabili-
ties of $56,065, declares and pays a
dividend of ten per, cent., 7. e., $10,686,
the corporate creditors could not com-
pel the stockholders to return the divi-
dend. Miller v. Bradish, 28 N. W. Rep.,
594 (Iowa, 1886). ; _

3Seeley v. New York National Ex-
change Bank, 8 Daly, 400 (1877); S..C.,
Thompson Nat’l Bank Cas., 804; aff’d,
78 N, Y., 608 (1879); Strong v. Brodk-
lyn Crosstown R. R. Co., 98 N. Y., 426,
435 (1883); Parker v. Mason, 8 R. L,
427 (1867), See, also, § 548. A savings
bank cannot legally pay, ‘as a dividend
to its stockholders and depositors on the
profits arising from its business, any
portion of the interest upon its loans or
investments tbat may have matured or
accrued, but which have not been actu-
ally collected and received in money.”
People v. San Francisco, etc., Union, 13
Pac. Rep., 498 (Cal., 1887), citing Con-
nolly v. Davidson, 15 Minn., 519; Ey-
ster v. Centennial, etc., 94 U. S., 500.
See, also, as to what constitutes a pay-

597
‘

§.546.] DIVIDENDS. [CH. XXXII.

of a dividend! And profits earned and accumulated in times of
prosperity may properly be paid out as dividends subsequently and
at a time when no dividends have been earned?

It is not required that a corporation be entirely free from debt
before it may lawfully make a dividend to its shareholders? An
it may properly borrow money to pay a dividend if, upon a fair
estimate of its assets and liabilities, it has assets in excess of its
liabilities equal to the amount of the proposed dividend.* The sub-
sequent insolvency of the corporation does not invalidate a divi-

dend declared when there were net profits.°
A court of chancery will, upon the application of any dissenting
member, enjoin an attempt to distribute any part of the capital

stock as a dividend.®

ment of dividends out of capital, 3 R’y
& Corp. L. J., 409, reviewing recent
English decisions.

1 Mills v. Northern Railway of Buenos
Ayres Co., L. R., 5 Chan., 621 (1870);
Stringer’s Case, L. R., 4 Chan. , 475 (1869),

2 Mills v. Northern Railway of Buenos
Ayres Co., supra. Cf. Hoole v.' Great
Western R’y Co, L. R., 3 Chan., 262
(1867); Beers v. Bridgeport Spring Co.,
42 Conn., 17 (1875). Where a consolida-
tion takes place it is unlawful to take
the profits of any of the old corpora-
tions for a dividend to the shareholders
ofthe new organization. Such profits
belong exclusively to the shareholders
of the corporation by which they were
earned. Chase v. Vanderbilt, 37 N. Y.
Super. Ct., 334 (1874). So also in March
v. Eastern R. R. Go., 43 N. H., 515 (1862),
where one railroad leased its entire
property and franchises to another, it
was held that, under the provisions of
the lease, there was neither a union of
interest and capital between the two
roads, nor any warrant of an equality
of dividends between the stockholders
of the two corporations.

3 Mills v. Northern Railway of Buenos
Ayres Co., L. Ri, 5 Ch., 621 (1870).
Though the capital stock has been im-
paired in time past, it has been held that
dividends may be declared out of prof-
its subsequently earned without setting
them aside to restore the lost capital.

But it has been held that an injunction will

Healey on Companies’ Law and Prac-

tice, 122.

4Stringer’s Case, L. R., 4 Ch., 475
(1869). See, also, § 539, supra.

5 Reid v. Eaton Iron Mfg. Co., 40 Ga.,
98 (1869) ; Le Roy v. Globe Ins. Co., 2
Edw. Ch., 657 (1886). In deciding
whether a dividend was rightfully made
the’ transaction must be viewed from
the stand-point of that time and not in
the light of subsequent events. Notes
or overdrafts by persons then consid-
ered abundantly good, included among
the corporate assets when the dividend
was declared and paid, should not be
regarded as losses sustained by the
corporation because they afterwards
proved to be unavailable, Main v. Mills,
6 Biss., 98 (1874); In re Mercantile.
Trading Co., L. R., 4 Ch., 475 (1869).
Cf.. Fliteroft’s Case, L. R., 21 Ch. D.,
519 (1882).

6 Macdougall v. Jersey Imperial Hotel
Co., 2 Hem. & M., 528 (1864); Bloxam
v. Metropolitan R’y Co, L. R., 8 Ch.,
‘887 (1867); Salisbury v. Metropolitan
R’y Co., 38 L. J., Ch., 249 (1869) €f.
Carlisle . Southeastern R’y Co., 2 Hall
& Tw., 366 (1850); Morgan v. Great
Eastern R’y Co., 1 Hem. & M., 560
(1868); Carpenter v. New York, etc., R
R. Co., 5 Abb. Prac., 277 (1857); Ward
v. Sittingbourne, etc., R’y Co., L. B., 9
Chan., 488 (1874); Davison v. Gillies,
'L, R., 16 Ch. D., 347, n. (1879).

598
CH. XXX. ] DIVIDENDS.

[g 847.

!

not be granted, at the instanceof corporate creditors, to restrain
the payment of such a dividend or other acts tending | to decrease
the amount of corporate assets.'_ Nor will equity restrain the pay-
ment of a dividend merely upon allegations that an account hon-
estly made out and published in good faith contains certain immate-
rial errors in calculation,? or that there is not actually cash in hand
or at the banker’ s to the full amount of the proposed dividend.’

The courts of one state will not enjoin a corporation created by
another state from declaring a dividend unless a fraud is being
perpetrated on citizens of the first-mentioned state.'

§ 547. Dividends which impair the capital stock are illegal, and
may be recovered back from the stockholders.—As: already shown, a
dividend can be lawfully.declared only when sufficient net profits
have been earned to pay that dividend. Accordingly, a dividend
paid wholly or partly from the capital stock is illegal, and subjects

the corporation and the shareholders who are parties to it to serious

1Mills v. Northern R’y of Buenos
Ayres Co., L. R., 5 Chan., 621 (1870).
A dividend by an asphalt company
will not be enjoined on the ground that
no provision has been made for the de-
preciation in the amount of asphalt
owned by the company, where’ such
amount cannot be exhausted by the
company. Lee v, Neuchatel, etc, Co.,
58 L. T. Rep., 553 (1882). /

2Yool v. Great Western R’y Co., 20
L. T. (N. S.), '74 (1869). But it is other-
wise when there is an intentional mis-
representation. Rance’s Case, L. R., 6
‘Chan., 104 (1870).

3Stringer’s Case, L. R., 4 Chan., 475
(1869). The facts may be such that
equity would restrain the declaration
of the dividend, but not the payment

of it after it has been declared. Car-

penter 7. New York, etc., R. R. Co., 5
Abb. Prac., 277 (1857), holding that
after a dividend has been declared out
of earnings on hand the court has no
zight or authority, on application of a
stockholder, to require the directors to
retain’ such dividend to. create a fund
to liquidate debts which may or may
not be established. In Carlisle v. South-
eastern R’y Co., 1 Macn. & G., 689
(1850), upon a bill filed to restrain the
railway company from paying any

dividend, either declared or to be de-
clared contrary to the provisions of an
act of parliament, it was held proper
to grant the injunction as to future
dividends, but to refuse it as to a divi-
dend declared, on the ground that the
plaintiff showed no title to share in
such dividend, and that the general
body of the shareholders who were in-
terested in the dividend were not ade-
quately represented. But see Browne
v. Monmouthshire R’y & Canal Co., 13
Beav., 32 (1851); Coates v. Nottingham
Water-works Co., 30 id., 86 (1861). In
Virginia it is the rule that interest upon
guarantied ‘stock isto be paid out of
the gross earnings of the corporation.
Gordon’s Executors v. Richmond, etc.,
R. R.-Co., 78 Va., 501 (1884). See chap-
ter XVI.

4 Howell v. Chicago, etc., R. R. Co.,
51 Barb., 878 (1868), In Massachusetts no
equitable relief can be granted against
a foreign corporation, which has neither
officers nor place. of business in that
state, for a failure to declare and pay

dividends ,according to the stipulations

of their certificates of stock. Willis-
ton v. Michigan Southern, etc., R. R.
Co., 18 Allen, 400 (1866) ;.Berford v. N.
Y., etc., Co., 4.N. Y. Supp., 836 (Super.
Ct., 1889).

s

599
’

DIVIDENDS. [ou. xxx.

§ 547.)
liability, It is the well-determined doctrine of the. courts of this
country that the capital stock is a trust fund to be jealously pre-
served intact for the benefit of corporate creditors! Hence the
rule has been firmly established that, where dividends are paid

in whole or in part out of the ‘capital atock, corporate creditors,

being such when the dividend was declared, or becoming such at
any subsequent time, may, to the extent of their claims, compel
the shareholders to whom the dividend has been paid to refund
whatever portion of the dividend was taken out of the capital
stock? In this country shareholders are bound to take notice of
the true character and condition of the capital stock, and they can-
not escape liability by reason of their ignorance.

Many of the states now have statutes concerning the payment
of dividends out of the capital stock. In Massachusetts at an early
day it was held that an action at law would not lie.* If a dividend
has been paid out of the capital stock the stockholders are conclu-
sively presumed to have known it, and are liable to an action fora

repayment.
bona fide holders.”

1See § 199, supra; Goodwin v. Mc- .

Gehee, 15 Ala., 232, 296, holding that a
corporation cannot give away its effects
to the prejudice of creditors; and any
arrangement made by it with its stock-
holders to defeat the claims of creditors
will be held void both in law and in
equity.

2Curran v. State of Arkansas, 15
How., 304 (1858); Railroad Company v.
Howard, 7 Wall., 392 (1868); Johnson v.
Laflin,.5 Dill., 65, 85, note (1878); Hast-
ings v; Drew, 76: N. Y., 919 (1879);
Sagory v. Dubois, 3 Sand. Ch., 466
(1846); Wood v. Dummer, 8 Mason,
808 (1824); Gratz v. Redd, 4 B, Mon,
178 (1843); Bank of St. Marys v. St.
John, 25 Ala, 566 (1854); Bartlett v.
Drew, 57 N. Y., 587 (1874); Osgood v.
Laytin, 48 Barb., 468 (1867); S. G,
8 Keyes, 521; Heman v, Britton, 88 Mo.,
549 (1886); Story’s Equity Juris. (18th
ed,, 1886), § 1252. In Lexington Life,
etc., Ins, Co. v. Page, 17 B. Mon., 412
(1856), it is held that the action to re-
cover the dividend in such a case may
be maintained by the directors. The
shareholders of a corporation have, in
Louisiana, no right to appropriate any

They cannot claim to hold the position of innocent or .

part of its assets to pay salaries due
them as officers of the company, or due
them on any other account; until all
creditors who are not stockholders have
been paid. Cochran v. Ocean Dry Dock
Co., 80 La. Ann., 1865 (1878). Cf.

Skrainka v. Allen, 7 Mo. App., 484

(1879); Ward ¥. Sittingbourne, etc., R.
R, Co., L, R., 9 Ch., 488 (1874); Clapp v.
Peterson, 104 IIL, 26, holding that the
property so withdrawn was liable for
the creditor’s whole debi and not merely
for a pro rata share thereof,

3Vose v. Grant, 15 Mass., 505, 51%
(1819); Spear v. Grant, 16 id., 9, 15 (1819).
Cf. Paschall v. Whitsett, 11 Ala, 472
(1847), to the point that after dissolution
of the corporation a shareholder is not
liable to the process of garnishment at
the suit of a corporate creditor.

4 Peterson v. Illinois Land & Loan Oo.,
6 Bradw., 257 (1880); Clapp v. Peterson,
104 Ill., 26 (1882). See, also, Bank of
St. Marys v. St. John, 25 Ala., 566 (1854);

Osgood v. Laytin, 3 Keyes, 521 (1867).

As to the rule in England, see In re Den-
ham & Co., L. R., 25 Ch. D., 752 (1883);
Holmes v. New castle-upon-Tyne Abat-
toir Co., 45 L. J., Chan,, 888 (1875), A

600 '

a ok
CH. XXx1I.] ' DIVIDENDS. [$ 548.

§ 548. Proceedings to recover back such a dividend.—It is in
general the practice, where dividends have been paid out of the
capital stock in prejudice of the rights of corporate creditors, for a
judgment creditor, upon the return of his common-law execution
against the corporation wholly or partly unsatisfied, to commence
an action in equity on behalf of himself and all other creditors who
may come in, in the nature of a creditor’s bill, against the stock-
holders to whom the dividend was unlawfully paid, to recover
back so much thereof as was paid out of the capital stock! In such
a suit the private property of the shareholder may be reached to
satisfy the claim of a creditor of the corporation, at least to the ex-
tent that the money received by that stockholder impaired the cap-
ital stock of the corporation.? It is a necessary condition prece- .
dent to the right to bring this action that a valid judgment shall
have been obtained against the corporation, and that execution
thereon shall have been returned wholly or partly unsatisfied, and
this judgment is conclusive as to the merits of the creditor’s claim.’

stockholder who receives dividends
wrongfully declared cannot then, as a
corporate creditor, hold other stock-
holders liable on a statutory liability
for wrongfully declaring dividends.
Thompson v. Bemis, etc., Co., 127 Mass.,
595 (1879).

1 Hastings v. Drew, 76 N. Y., 9 (1879);
Bartlett v. Drew, 57 N. Y., 587 (1874);
McLean v. Eastman, 21 Hun, 312 (1880);
Bank of St. Marys v. St. John, 25 Ala.,
566 (1854). Cf. Gratz v. Redd, 4 B.
Mon., 178 (1848); Curran v. State of Ar-
kansas, 15 How., 804 (1853). See, also,
U. 8. v. Globe Works, 7 Fed. Rep., 530
(1881); Brewer v. Michigan Salt As-
sociation, 58 Mich., 351 (1885). And
see Vose v. Grant, 15 Mass., 505 (1819),
where it was held that an action as for
tort could not be maintained by a cred-
itor against an individual stockholder
who had received dividends. Spear v.
Grant, 16 Mass., 9, 15 (1819), holding
that an action at law will not lie, ,

2Bartholomew v. Bentley, 15 Ohio,
659 (1846).

3 Sturges v. Vanderbilt, 73 N. Y., 384
(1878). In this case there was no re-
covery against a director who had sold
his stock and ceased to participate in
the company’s affairs five years before

the Cissolution. Andrew v. Vanderbilt,
37 Hun, 468 (1885); Hastings v. Drew, 76
N. Y., 9 (1879), where this liability was
enforced against one who had become
a purchaser of stock after the cause of
action arose upon which the judg-
ment was secured, the shares being by
the terms of the transfer subject to all
claims against it. See Brewer v. Michi-
gan Salt Association, 58 Mich., 351
(1885); but see Bank, etc., v. St. John,
supra. In New York the receiver of an
insolvent corporation may maintain an
action for the benefit of the creditors
against the shareholders to recover the
sums received by them as dividends at
the time the company was insolvent;
and in such an action the creditors of
the corporation are proper parties for
the purpose of restraining them from
proceeding individually against the
shareholders separately to recover the
unlawful dividends. Osgood v, Laytin,
3 Keyes, 521 (1867). See, also, Lexington
Life, etc., Ins. Co. v. Page, 17 B. Mon.,
312 (1856). But a receiver’s suit cannot
in such acase be brought for the benefit
of the stockholders. Butterworth v.
O'Brien, 39 Barb., 192, (1868); S. C., 24
How. Prac., 488. Cf. McLean v. acl
man, 21 Hun, 312 (1880),

601
DIVIDENDS. [cu. XXXII.

§ 549.]
i

In the creditor’s suit all the stockholders who can be reached
should be made parties defendant, and as to those unknown or in-
solvent or beyond the jurisdiction there should be a proper aver-
ment in the bill.!| The corporation also should be made a party
defendant to the bill2 The shareholder who is compelled to pay
more than his equitable proportion of any unpaid corporate debt
may, in a proper proceeding, resort to his associates for contribution?
A transferee of stock against which creditors have this claim at the
time of transfer is not liable to respond in a creditor’s suit therefor.
The statute of limitations runs in favor of shareholders who receive
such dividends in good faith and without actual notice from the
time they are declared as against the corporation and its creditors

§ 549. The liability herein of the corporate officers The liability
of the corporate officers as to dividends paid out of the capital
stock is not definitely determined. That they are liable for the
amount of any such dividend that they themselves receive as share-

holders cannot, perhaps, be questioned.

1Wood v. Dummer, 8 Mason, 308
(1824); Bartlett v. Drew, 57 N. Y., 587
(1874), In the case last cited — a lead-
ing authority in New York — it is held
that the creditor is not required to bring
his suit on behalf of other creditors
who may choose to come in, but may
sue alone and for his own benefit ex-
clusively, and that he need not make
all the stockholders parties, but may
pursue one, any or all as he may elect,
upon the theory that with the equities
between the stockholders themselves he
has nothing to do unless he choose to
intervene to settle them. Brewer v.
Michigan Salt, etc., 58 Mich., 851 (1885)..
See, also, Pacific R. R. Co. v. Cutting,
Jr., 27 Fed. Rep., 638 (1886); Williams
v. Boice, 88 N. J. Eq., 364 (1884),

2¥irst National Bank of Hannibal v.
Smith, 6 Fed. Rep., 215 (1879), followed
in Dormitzer v. Illinois, etc., Bridge Co.,
6 Fed. Rep., 217 (1881).

3 Bartlett v. Drew, supra.

4 Hurlbut v. Tayler, 62 Wis., 607 (1885),

5 Lexington Life, etc., Ins. Co. v. Page,
17 B. Mon., 412 (1856). See, also, Mam-
moth Copperapolis, etc.,-Co., 50 L. J.
(Ch.), 11.

6Main v. Mills, 6 Biss., 98, and the
note (1874), where a dividend not legiti-

mately earned was recovered from the
president of a bank by the assignee in
bankruptcy; Rance’s Case, L. R., 6
Chan., 104 (1870), which was the case of a
marine insurance company, where the
directors declared a bonus on the shares
of stock without making outa profit and
loss account, and it was held that a di-
rector who had received such bonus on
a balance sheet thus carelessly drawn
up should, in consequence of his neglect
of duty, repay the amount to the liqui-
dator. It was the gross neglect of the
directors which militated so strongly
against them, and both the lord jus-
tices declared the court would not have
so held had there been bona fides and
regularity in the declaration of the
bonus. Jn re Denham & Co., L. R., 25
Chan. Div., 752 (1888). Here it was held
that an innocent director was not per-
sonally responsible for the fraudulent
reports and balance sheets and the divi-
dends paid under them, and that—
having regard to the extraordinary
powers vested by the articles -in the
chairman, and to the fact that the

books had been kept and audited by

duly authorized officers, and that the

director sought to be charged had no

reason to suspect any misconduct —he
602
CH. Xxxu. | DIVIDENDS.

[$ 549.

Many cases go to the full extent of holding the directors liable,
absolutely for all dividends paid out of capital stock. But the bet-
ter rule is that when the directors declare a dividend in good faith
and without negligence, they are not to be held liable merely be-
cause the dividend turns out to have impaired the capital stock.t,
Where the directors wilfully and knowingly declare and pay a div-
idend out of the capital stock, they are personally liable to refund
that dividend.’ Frequently also, when a dividend is paid out of the

was not liable to repay any of the divi-
dends so received by him, although
they were in fact paid out of the capital.

1Excelsior Petroleum Co. v. Lacey, 68
N. Y., 422 (1875). In Stringer’s Case,
L. R., 4 Chan., 475 (1869), it was held, in
accordance with this view, that where
the action of a board of directors in
making a dividend was bona fide, they
are not liable for errors of judgment in
preparing a balance sheet showing the
assets of the concern. In this case it
appears that the directors included
among the corporate assets a debt due
the company by the government of the
Confederate States; some cotton owned
by the company but stored within the
limits of the Confederacy; and certain
merchant ships engaged in running the
blockade, all which were estimated at
their full value. These assets being
subsequently destroyed and lost to the
company, its bankruptcy followed. Os-
good v, Laytin, 3 Keyes (N. Y.), 521, was
an action by a receiver to recover divi-
dends improperly declared. The court
said: ‘Ignorance of facts that it was
the duty of the managers to know —
not to know which was gross igno-
rance — cannot excuse the managers
and impart any virtue or validity to
acts otherwise clearly illegal, and which
were a palpable fraud upon the cred-
itors.” But the directors of a bank
are not liable for dividends declared in
good faith, even though it subsequently
turns out that debts to the bank which
they considered good were found to be
bad. Witters v. Sowles, 31 Fed. Rep., 1
(188%). However, the court in Re Ox-
ford, etc., Society, 55 L, T. Rep., 598

(1886), say it is settled that ‘ directors
who improperly pay dividends out of

capital are liable to repay such divi-

dends personally upon the company be-
ing wound up;” that the company or
a creditor or a liquidator may enforce
it; that the acquiescence of the stock-
holders does not affect creditors; that
the statute of limitations does not apply;
and that the innocent intent of the di-
rectors is no defense.

2 In re National Funds, etc., Co., L. R.,
10 Ch. D., 118 (1878); Gratz v. Redd, 4
B. Mon., 178, 194 (1848); Hill v. Frazier,
22 Pa. St., 320 (1853); Im re Alexander
Palace Co., L. R., 21 Chan. Div., 149
(1882); Salisbury v. Metropolitan R’y
Co., 22 L. T. (N. S.}, 889 (1870), where
the suit was by a non-participating
stockholder; Flitcroft’s Case, L, R., 21
Chan. Div., 519 (1882); Evans v. Cov-
entry, 8 De G., M. & G., 885 (1857);
Tarquand v. Marshall, L. R., 4 Chan.,
376 (1869), denying this remedy to the
stockholders as a body. In Burnes v.
Pennell, 2 House of Lords Cases, 497,
531 (1849), Lord Brougham said: ‘‘T beg
to be understood as going with those
who view with the greatest severity the
conduct of railway directors in declar-
ing dividends which can only be paid
out of capital, because I consider that
that is of itself a most vicious and
fraudulent course of conduct. It is
telling the world that their profits are
large when it may be that their profits
are nil, or that their losses are large
with no profits. Itis a false and fraud-
ulent representation by act and deed,
much to be reprobated; and I go to the
full length of what my noble and

603
§ 549.]

DIVIDENDS.

{cH. XXXII

capital stock, the directors are made liable therefor by statute
without reference to any fraud or fraudulent intent on their part.
Under certain circumstances, in the absence of actual frand, the
directors who have been compelled to pay the claims of corporate
creditors may in turn recover what they have paid in an action
against the shareholders.? But a director from whom a recovery is
had under the Pennsylvania statute,’ as a wrong-doer, has no right
of subrogation as against the corporation. And claims against
directors who are made liable by statute in these cases may, in the
absence of actual fraud on their part, be barred by laches.*

learned friend has laid down, that it
would be a just ground, if a course of
conduct of this sort were pursued,
coupled with such circumstances as
clearly to show a fraudulent intent, for
proceedings of a graver nature against
these parties.” The payment of a divi-
dend out of the capital stock is ultra
vires, and incapable of ratification by
the shareholders. Accordingly, where
the directors mislead the shareholders
by representing in the reports and bal-
ance sheets as good debts which they
know to be bad, and thus knowingly
pay dividends which in fact impair the
capital stock, it is not a defense that
the shareholders, relying in good faith
upon the representations and reports of
the directors, pass resolutions declaring
the dividends at regular meetings of the
corporation; and an action will lie on
behalf of creditors to compel the direct-
ors to refund, In such an action the
directors cannot set off any money due
from the company to them, nor have
théy recourse to the shareholders who
took the dividends bona fide. In re
Exchange Banking Co., L. R., 21 Chan.
Div., 519 (1882); Im re County Marine
Ins. Co., L. R., 6 Chan., 104 (1870). See,
also, Scott v. Eagle Fire Ins. Co., 7
Paige, 198 (1838). In Kentucky it is
doubted whether directors are liable to
creditors, the courts of that state seem-
ing to incline to hold them liable only
to the corporation or the stockholders.
Lexington, etc., R. R. Co, v. Bridges, 7
B. Mon., 556, 559 (1847),

1In Massachusetts officers of a cor-

poration can be charged, under the
statute in force upon the subject in that
state (Stat. 1862, ch. 218, § 3; Stat.
1870, ch. 224, §$ 40, 42), with corpo-
rate debts after a judgment against the

corporation, and after a demand and

return upon the execution. Chamber-
lin v. Huguenot Manufacturing Co., 118
Mass., 532, 536 (1875); Priest v, Essex
Manufacturing Co., 115 id., 380 (1874).
So, in New Jersey, directors are simi-
larly liable by statute. Rev. of N. J.
(1877), p. 178; Williams v. Boice, 38
N. J. Eq., 364 (1885). And in New
York, 1 Rev. Stat., ch. XVIII, tit. 2,
art. 1, §§ 1, 10. Dividing the property
is equivalent to declarations of dividend
so far as the directors are concerned.
Rorke v. Thomas, 56 N. Y., 559 (1874).
In Massachusetts the liability of the di-
rectors has been held to be enforceable
by corporate creditors only. Smith v.
Hurd, 12 Metc., 371 (1847), and the cases
supra,

2Salisbury v. Metropolitan R’y Co.,
22 L, T. (N. S.), 889 (1870); In re Alex-
andra Palace Co., L. R., 21 Chan. Div.,
149 (1882). CF. § 548, supra.

3 Act of 7th April, 1849, § 9.

4 Hill vw. Frazier, 22 Pa. St., 320 (1858).
In this case it was held that, in the
creditor’s suit against the director, ‘the
corporation itself is not a necessary co-
defendant.

5In re Mammoth Copperopolis of
Utah, 50 L. J., Chan., 11 (1880). This is
a decision construing section 165 of the
Companies Act of 1862.

604
CHAPTER XXXL.

LIFE ESTATES AND REMAINDERS IN SHARES OF STOCK.

§ 552. Cash dividends belong to the life { § 558. The apportionment of dividends.
tenant. _ 5 The right to subscribe for new
553. Stock or property dividends. shares as between life tenant
554. The Pennsylvania rule. and remainder-man.
555. The Massachusetts rule. 560. Miscellaneous questions herein.
656. The English rule.

§ 552. Cash dividends belong to the life tenant.— A cash dividend
of profits which have been earned since the last preceding dividend,
such last preceding dividend having been made in a regular and
reasonable time previously, belongs to a life tenant of stock, and
not to the remainder-man.! This rule applies even though it may
be shown that the dividend in question was earned, wholly or in
part, before the commencement of the life estate? A dividend de-
clared before but payable after the testator’s death belongs to the
estate.?

§ 553. Stock or property dividends.— When a stock or property
dividend is declared upon shares held in trust, or owned in such a
way that one person has an estate therein for life and another per-
son the remainder over, there at once arises a contest between life.
tenant and remainder-man. Their interests necessarily conflict, be-
cause, if such dividend is held to be income, it belongs to the tenant
for life; whereas if it is held to be a part of the corpus, or priuci-
pal, it inures to the benefit of the remainder-man’s estate. We _

1 Barclay v. Wainewright, 14 Ves., 66
(1807); Norris v. Harrison, 2 Madd., 268
(1817); Clive vu. Clive, Kay, 600 (1854);
Murray v. Glasse, 17 Jur., 816 (1853);
Preston v. Melville, 16 Sim., 163 (1848);
Cuming v. Boswell, 2 Jur. (N. 8.), 1005
(1856). Cf. Ware v. McCandlish, 11
Leigh (Va.), 595 (1841); Price v. Ander-
son, 15 Sim., 473 (1847); Barclay v.
Wainewright, 14 Ves., 66 (1807); Witt
v. Steere, 18 id., 268 (1807). As will be
seen hereafter, in England a different
rule prevails if the cash dividend is
made from long-accumulated profits.

2Richardson v. Richardson, 75 Me.,

570 (1884); S. C., 4 Am. Prob. Rep., 352;
Bates v. Mackinley, 31 Beav., 280 (1862);
Jones v. Ogle, L. R., 8 Chan., 192 (1872);
Goldsmith v. Swift, 25 Hun, 201 (1881);
Jermain v. Lake Shore, etc., R. R. Co.,
91 N.' Y., 483 (1883).

3De Gendre v. Kent, L. R., 4 Eq., 283
(1867). Cf. Browne v, Collins, L. R., 12
Eq., 586, 594; Locke v. Venables, 27
Beav., 598 (1859). See, also, Cogswell
v. Cogswell, 2 Edw. Chan., 281 (1834);
Abercrombie v. Riddle, 3 Md. Chan.,
820 (1850); Wright v. Tuckett, 1 Johns.
& Hem., 266 (1860); Furley v. Hydes, 42
L. J. Chan., 626.

605
88 554, 555.] LIFE ESTATES AND REMAINDERS IN STOCK. [CH. XXXII.

find three well-defined rules upon this subject, which may be de-
nominated respectively the Pennsylvania, the Massachusetts and
the English rule. They lead to essentially contrary conclusions
and will be considered in order.

§ 554. The Pennsylvania rule.— This rule, inasmuch as it ob-
tains in every state in the Union excepting Georgia and Massa-
chusetts, night well be called the American rule. It proceeds
upon the theory that the court, in disposing of stock or property
dividends, as between life tenant and remainder-man, may properly
inquire as to the time when the fund out of which the extraordi-
nary dividend is to be paid was earned or accumulated. If it is
found to have accrued or been earned before the life estate arose,
it is held to be principal, and, without. reference to the time when it
is declared or made payable, to belong to the corpus of the estate,
and not to go to the life tenant. But when it is found that the
fund out of which the dividend is paid accrued or was earned, not
before but after the life estate arose, then it is held that the divi-
dend is income, and belongs to the tenant for life! This salutary
rule prevails not only-in Pennsylvania, where it seems to have first
been clearly declared, but also in many other jurisdictions.?

§ 555. The Massachusetts rule.— This rule, which prevails only
in Massachusetts and Georgia, is sometimes called “the rule in
Minot’s Case.” It regards cash dividends, whether Jarge or small,
as income, and stock dividends, whenever earned and however
declared, as capital; and the rule, accordingly, is a simple one.
Cash dividends belong to the tenant for life and stock dividends to

1 Earp’s Appeal, 28 Pa. St., 368 (1857); H., 307 (1846); Peirce v. Burroughs, 58
Wiltbank’s Appeal, 64 Pa. St., 256 N. H., 302 (1878). For New York, Riggs
(1870). See, also, the following later v. Cragg, 89 N. Y., 479 (1882); In re

Pennsylvania cases in point: Moss’ Ap-
peal, 83 Pa. St., 264 (1877); Biddle’s Ap-
peal, 99 id., 278 (1882); S. C., 3 Am.
Prob. Rep., 442; Vinton’s Appeal, 99
Pa, St., 484 (1882); 8. C., 8 Am. Prob.
‘Rep., 231; In re Thompson’s Estate, 11
Week. Notes Cas., 482 (1882). Cf. Rob-
evts’ Appeal, 92 Pa. St., 407 (1880);
Thompson’s Appeal, 89 id., 36 (1879).
A scrip dividend convertible into stock
belongs to the life tenant. Philadel-
phia, etc., Co.’s Appeal, 16 Atl. Rep.,
734 (Pa., 1889).

2Van Doren v. Olden; 19 N. J. Eq.,
176 (1868); Ashhurst v.. Field’s Adm’r,
26 id., 1 (1875); Lord v. Brooks, 52 N.
H., 72 (1872); Wheeler v, Perry, 18 N.

606

Kernochan, 104 N. Y., 618 (1887); Riggs
v. Cragg, 26 Hun, 89 (1881); Clarkson v.
Clarkson, 18 Barb., 646 (1855); Simpson
v. Moore, 30 Barb., 687 (1859); Estate of
Woodruff, 1 Tucker (New York Surro-
gate Ct.), 58 (1865), and Goldsmith v.
Swift, 25 Hun, 201 (1881) Cf. Cragg
v. Riggs, 5 Redf., 82 (1880); Scovil v,
Roosevelt, 5 id., 121 (1881). Profits
upon the sale of stock are principal and
not income in New York. Whitney v.
Phoenix, 4 Redf., 180 (1880). In Hyatt
.v, Allen, 56 N. Y., 558, 557 (1874), the
court of appeals intimated plainly its

disapproval of the rule prevailing in .

England upon this subject. Hite’s Ex’rs
v. Hite’s Devisees, 2 R’y & Corp. L. Ji,

t

‘
 

CH. XXXIIL. |

LIFE ESTATES AND REMAINDERS IN STOCK.

[§ 555.

the corpus. There is little doubt that in many cases great hard-
ship and injustice is the result of this rule.

The court may, however, in deciding whether in a given case
the distribution is a stock or a cash dividend consider the actual |
and substantial character of the transaction, and not its nominal

character merely?

568(Ky., 1887). Cf. Farwell v. Tweddle,
10 Abb. N. C., 94.

1 Minot v. Paine, 99 Mass., 101 (1868).
In this case the principle is thus stated:
“A simple rule is to regard cash divi-
dends, however large, as income, and
stock dividends, however made, as capi-
tal.”
been affirmed and elaborated. Daland
v. Williams, 101’ Mass., 571 (1869); Le-
land v. Hayden, 102 id., 542 (1869);
Heard v. Eldridge, 109 id., 258 (1872);
Rand v. Hubbell, 115 id., 461 (1874);
Gifford v. Thompson, 115 id., 478 (1874) ;
Hemenway v. Hemenway, 184 id., 446
(1883); New England Trust Co. v. Eaton,
140 Mass., 532 (1886). See, also,- Har-
vard Coll. v. Amory, 9 Pick., 446 (1830);
‘Balch v,: Hallet, 10 Gray, 402 (1858);
Atkins v. Albree, 94 Mass., 359 (1866).

2Thus, in Daland wv. Williams, 101
Mass., 571 (1869), where the directors,
having voted to increase the capital
stock by three thousand shares, declared
a cash dividend of forty’ per cent., and
authorized the treasurer to receive that
dividend in payment for, two thousand
eight hundred of the shares, the remain-
ing two hundred shares to be sold, the
court held that the transaction was virt-
ually a stock dividend, and that the
shares must go to the remainder-man’s
fund. Cf. Rand v. Hubbell, 115 Mass.,
461 (1874), In Leland v, Hayden, 102
Mass., 542 (1869), where it appeared that
the company had invested its surplus
earnings in its own stock, and subse-
quently declared a dividend of that
stock, the life tenant: was held abso-
lutely entitled to it. See, also, Heard v.

Eldridge, 109 Mass., 258 (1872); Balch v.'

Hallett, 10 Gray, 402 (1858); Reed v,
Head, 6 Allen, 174 (1863); Harvard Col-
lege v. Amory, 9 Pick., 446 (1830); Gif-

In subsequent cases this rule has.

ford v. Thompson, 115 Mass., 478 (1874);
Hemenway v. Hemenway, 134 Mass.,
446 (1883). In New England Trust Co.
v. Eaton, 140 Mass., 532 (1886), it was
held, inan elaborate opinion by Devens,
J., that the gain or loss arising from the
sale of stock held in trust is the gain or
loss of the corpus, and that the sum re-
ceived constitutes a new principal. Ac-
cordingly, a trustee who has invested in
bonds at a premium may retain anou-
ally from the income payable to the life
tenant such sums as will restore to the
fund at its maturity what was taken
therefrom at the time of the invest-
ment. See, also, the dissenting opinion
of Mr. Justice Holmes in this case; and
cf. Bowker v. Pierce, 180 Mass., 262
(1881); Dodd v. Winship, 133 id., 359
(1882); Wright v. White, 136 id., 470
(1884); Parsons v. Wiuslow, 16 id., 361
(1820); Lovell v. Minot, 20 Pick., 116
(1888). See three interesting and valu-
able little pamphlets, by a layman,
wherein the merits of the question are
fully and learnedly discussed, published
by G. P. Putnam’s Sons, New York, and
entitled respectively ‘‘Common Sense
versus Judicial Legislation,” ‘Stock
Dividends, the Rule in Minot’s Case
Restated, with Variations by the Su-
preme Judicial Court of Massachu-
setts,” and ‘‘A Third Chapter on the
Rule in Minot’s Case.” See 5 Am, Law
Rev., 720 (July, 1871); Perry on Trusts
(8d edition), 8§ 544, 545, and the notes.
For the rule in Maine, see Richardson v.
Richardson, 75 Me., 570 (1884). A stock
dividend of a company purchased by an
issue of its bonds belongs not to the life
estate but to the body of the estate.
Gilkey v. Paine, 14 Atl. Rep., 205 (Me.,
1888), In Georgia the code is construed
so as to follow the Massachusetts rule,

607
LIFE ESTATES AND REMAINDERS IN STOCK. (cH. XXXII.

§ 556.]

In Rhode Island the courts have adopted a-rule somewhat like
“the rule in Minot’s Case,” without the modification ingrafted upon
it by the subsequent decisions of the Massachusetts courts. It isa
rule which in general prefers the remainder-man to the life tenant!

The court will take into consideration, in determining the ques-
tion as between life tenant and remainder-man, the whole character
of the transaction, and the nature and source of the property dis-

tributed, with due regard to all the facts preceding,

, attending and

resulting from the declaration of the dividend.
§ 556. The English rule.--In England an ordinary, regular,
usual cash dividend or stock or property dividend belongs to the

life tenant,

dend belongs to the corpus of the trust:®

while an extraordinary cash or stock or property divi-

This rule was established

in 1799, and still prevails in England.

Millan v. Guerrard, 67 Ga., 284 (1881);
Code of Georgia, § 2256. A similar rule
is favored in the District of Columbia.
Gibbons v. Mahon, 4 Mackey, 180.

1 Parker v. Mason, 8 R. I., 427 (1867);
Busbee v. Freeman, 11 R. I., 149 (1875);
Petition of Brown, 14 R. I, 3871 (1884).

2 Deland v. Williams, 101 Mass., 571
(1869); Leland v. Hayden, 102 id., 542
(1869); Rand v, Hubbell, 115 id., 461
(1874). In Minot v. Paine, 99 Mass., 101
(1868), the rule was laid down that the
form in which the dividend was de-
clared should determine to whom it
should go. This position is qualified by
‘the subsequent cases. So in Heard v.
Eldridge, 109 Mass., 258 (1872), it is
said: ‘The suggestion that the inten-
tion of the directors shall determine the
question whether the dividend is capi-
tal or income cannot be correct.

It is more safe to look at the character
of the property and the transaction.”

3 The courts, perhaps’ uniformly, in-
sist upon this distinction. Extraordi-

nary dividends may be either of cash.

or stock, and appear under a variety of
names, such as ‘‘ participations,” ‘‘ dis-
tributions,” or, more commonly, ‘ bo-
nuses.” See Witts v. Steere, 13 Vesey,
368 (1807); Norris v. Harrison, 2 Madd.,
268 (1817); Hooper v. Rossiter, McClel-
and, 527 (1824); Bates v. MacKinley, 31
Beav., 280 (1862). To the point that
reeuiae dividends, though increased in

amount, go as income to the owner of
the life estate, see Barclay v. Waine-
wright, 14 Vesey, 66 (1807); Price v,
Anderson, 15 Sim., 473 (1847). There is
no question that regular dividends, or-
dinary in amount, go to the life tenant.
See § 552, supra. All the authorities
assume this as unquestioned. To the
point that “extra” or unusual divi-
dends, whether of cash or shares, go ta
augment the principal of the trust fund,
see Irving v. Houstoun, 4 Paton’s H. of
L. Cases, 521, 1803’ (a stock dividend);
Hooper v. Rossiter, McCleland, 527, 1824
(a stock dividend); In re Barton’s Trust,
L. R., 5 Eq., 238, 1868 (a stock dividend);
Paris v. Paris, 10 Vesey, 185, 1804 (a
cash dividend); Clayton v. Gresham, 10
Vesey, 288, 1804 (a cash dividend);
Witts v. Steere, 18 Vesey, 363, 1807 (a
eash dividend); Price v. Anderson, 15
Sim., 478, 1847 (a cash dividend); Bates
v. MacKinley, 31 Beav., 280, 1862 (acash
dividend). Cf. Gillv. Burley, 22 Beav.,
619 (1856); Straker v, Wilson, L. R., 6
Chan., 508 (1871).

4Brander v. Brander, 4 Vesey,. 800
(1799); Paris v. Paris, 10 Vesey, 185
(1804); Irving v. Houstoun, 4 Paton’s
H. of L., 521 (1803); Preston v. Milville,
16 Sim., 163 (1848); Barclay v. Waine-
wright 14 Vesey, 66 (1807); Murray v.
Glassee, 17 Jur., 816 (1852); Johnson v.
Johnson, 15 .Jur., 714 (1850); Witts v.
Steere, 18 Vesey, 363 (1807); In re Bar-

608 ‘
CH. XXXIII. |

LIFE ESTATES’ AND REMAINDERS IN STOOK.

[§ 556.

Where it is shown that dividends have been fraudulently re-
tained in prejudice of the rights of the life tenant, and subsequently
a bonus is paid upon the shares, it belongs, as income deferred, to
the tenant for life, even though it be called a bonus.

In all cases, however, the intent of the grantor or testator is the
pole-star, and will be carried out by the courts.

ton’s Trust, L. R., 5 Eq., 288 (1868);
Plumbe v. Neild, 6 Jur. (N. S.), 529
(1860); Hollis v. Allen, 12 Jur. (N. 8.),
638 (1866); Hooper v. Rossiter, 13 Price,

'74. (1824); Bates v. MacKinley, 31 Beav.,

280 (1862). See, also, In re Hopkin’s
Trust, L. R., 18 Eq., 696 (1874); Schole-
field v. Redfern, 382 L. J., Chan., 627
(1863); Hartley v. Allen, 4 Jur. (N. S.),
500; Lock v. Venables, 27 Beav., 598
(1859), holding to the effect that a spe-
cific bequest of “‘ the dividends, inter-

est and proceeds” of shares will not:

pass a bonus on the shares. In Al-
cock v. Sloper, 2 Mylne & K., 699
(1833), the ‘‘income of the testator’s
long annuities” was given to the’life
denant. Wilday v. Sandys, L. R., 7
Eq., 455 (1869). In Lane v. Loughran,
7 Vict. L. R., Eq., 19 (1881), it was held
that the premium on a lease of part of a
trust estate belonged to the tenant for
life and not to the corpus. An exec-
utor may plainly transfer the stock to
pay the decedent’s debts, although it
is bequeathed for life with remainder
over., Franklin v. Bank of England, 1
Russ., 575 (1826). In Clive v. Clive, Kay
(Eng. Chan.), 600 (1854), by the terms of
the deed of settlement the net profits
of the concern were to be divided rata-
bly to such an amount as should be de-
clared at the semi-annual meetings, and
were to be paid within twenty-one days
thereafter; and it was provided that a
shareholder was not to receive any divi-
dend after the period at which he ceased
to be a proprietor. of shares, but the
dividends on such shares were to con-
tinue in suspense until some other per-
son should become proprietor of them.
When a shareholder died sixty-nine
days after a half-yearly meeting at
which a dividend had been declared,

(39) \

but before notice had been given that
such dividend was payable, having by
his will bequeathed the interest and an-
nual income arising from all his shares
to one for life, and then in remainder
to others, it was held that this divi-
dend belonged to the legatee for life,
and not to the general personal estate
of the testator. See, also, Title to Divi-
dends, 19 Am. Law Rev., 571 (1885);
Bostock v. Blakeney, 2 Brown’s Chan.,
653 (1788); Re Willoughby, 53 Law
Times Rep., 926 (1886); 2 Perry on
Trusts, §§ 544, 545. Mr. Moak’s note, 31
Eng. Rep., 828, 332; Browne v. Collins,
L. R., 12 Eq., 586 (1871), is to the effect
that profits of a partnership accrued and
earned before, but not ‘set aside qua
profits until after the death of the tes-
tator, belong to the corpus of the estate,
and that profits accruing after his death
go to the tenant for life as income. See,
also, the recent and important review
of the whole subject in Bouche v.
Sproule, 57 L. T., 345 (H. of L., 1887),
reversing the court below, Bouche wv,

Sproule, 29 Ch. D., 635 (1885).

1 Maclaren v. Stainton, L. R., 11 Eq.,
882; 5S. C., 3DeG., F. & J., 202 (1861);
reversing 8. C., 27 Beav., 460 (1859);
Edmondson v. Crosthwaite, 34 Beav., 30
(1864); Dale v. Hayes, 40 L. J. Chan.,
244 (1871); 8. C., 24 L. T.(N. S.), 12; 19
W. R., 299. Cf. Lean v. Lean, 32 L. T.
(N. 8.), 305; S. C., 28 W. R., 484; Lam-
bert v. Lambert, 29 L. T. (N. 8.), 878
(1874); 8. C., 22 W. R., 359; In re Tink-
ler, 45 L. J. (Chan. Div.), 135.

2In re Bouch, L, R., 29 Chan. Div.,
635 (1885); In re Hopkin’s Trusts, L. R.,
18 Eq., 696 (1874); Jones v. Ogle, L. R.,
14 Eq., 419 (1872); Re Box’s Trusts, 9 L.
T. (N. S.), 872 (1863). Cf. Read v. Head,
6 Allen, 174 (1863); Clarkson v. Clark-

609
§ 558.] LIFE ESTATES AND REMAINDERS IN STOOK. [OH. XXXII,

§ 558. The apportionment of dividends. When a life tenant dies
‘before the date at which a dividend is declared, the question arises
whether the dividend declared next after his death ought or ought
not to be apportioned between the reversioner or remainder-man
and the estate of the life tenant for the period of time partially
covered by the life estate. It is, in general, the rule in such a case.
that the dividend is not apportionable, but belongs entirely to the
corpus of the trust fund.'- But where a tenant for life dies after
the dividend is declared, but before the dividend becomes due, his
estate will be entitled to the whole of that dividend.? In England,
however, under the statute known as the Apportionment Act of
1870, dividends are apportionable in these cases between the estate
of the life tenant and the corpus,* and in this country at common
law, in one or two jurisdictions, there is a tendency to hold that
dividends are apportionable.!
\
son, 18 Barb., 646 (1855); Millen v.Guer- tain stock the share of dividends earned
rard, 67 Ga., 284 (1881); Thomson’s Ap- in the life-time of his testator, but de-
peal, 89 Penn..St., 36 (1879). ' clared after his death; the court hold-
1Pearly v. Smith, 8 Atk., 260 (1745); ing that asale or gift of stock carries
Sherrard v. Sherrard, id., 502 (1747); with it all dividends declared after it
Wilson v, Harman, 2 Vesey, Sen., 672 takes effect, whether earned ‘before or
(1755); Hartley v. Allen, 4 Jur. (N.8.), not.
500 (1858); In re Maxwell’s Trusts, 1 2 Wright v. Tuckett, 1 J. & H., 266
Hem. & M., 610 (1863); Scholefield v (1860); Paton v. PREP ERS: 10 Sim., 186
Redfern, 2 Drew. & Sm., 173 (1868); (1839).
Foote, Appellant, 22 Pick., 299 (1839); 3 33.and 34 Vict., ch. 35, § 2; Pollock v.
Granger v. Bassett, 98 Mass., 462 (1868); Pollock, L. R., 18 Eq., 829 (1874), quali-
Clapp v. Astor, 2 Edw, Chan., 879 fying or explaining Whitehead v.
(1884). Of. Hyatt v. Allen, 56.N. Y.,553 Whitehead, L. R., 16 Eg., 528 (1873);
(1874); Brundage v. Brundage, 60 id., Beavan v, Beavan, 53 L. T. Rep., 245
544, 551 (1875); Perry on Trusts, § 556; (1885). Cf. Capron v. Capron, L. R., 17
1 Williams on Executors, § 836, notem. Hg., 288(1874); and see Banner v. Lowe,
But in Massachusetts it has been held 18 Ves., 185 (1806); Hay v. Palmer,
that sometimes dividends declared after 2 P. Wms., 501 (1727). The statute ap-
the life tenant’s death will, neverthe- plies only to dividends upon the stock
less, go to his estate. Thus, a life ten- of corporations, strictly speaking, and
aucy in stock for the support of the tes- not to those upon the shares in private
tator’s widow and children was held to trading corporations. Jones v. Ogle, L.
entitle the widow’s estate toa dividend R., 8 Chan., 192 (1872). And does not
declared after her death, but for a apply -to stock dividends. Hartley v.
period which expired before that event. Allen, 4 Jur., N. 8., 500 (1858).
Johnson v. Bridgewater Mfg. Co., 14 4In Ex parte Rutledge, 1 Harper's
Gray, 274 (1859).' See, also, Ellis v. Pro- Eq. (S. C.), 65 (1824); S. C., 14 Am. Dec.,
prietors of Essex Merrimack Bridge, 2 696, a dividend was apportioned be-
Pick., 248 (1824); Gifford v. Thompson, tween life tenant and remainder-man.
115 Mass., 478 (1874). Cf. King v. Follett, This is regarded a leading case in favor
3 Vt., 385 (1831), in which the residuary of apportionment. In Pennsylvania the
‘Vpettee claimed from the legatee of cer- interest on municipal bonds and on
610
CH. XXXI1Lj] LIFE ESTAIES AND REMAINDERS IN sTOOK.' [8§ 559, 560.

§ 559. The right to subscribe for new shares as between life tenant
and remainder-man.— The right to subscribe for new shares at par
upon.an increase of the capital stock, Which, is an incident of the
ownership of the stock, does not belong as a privilege to the life
tenant, but such an increment musty be treated as capital, and be
added to the trust fund for the benefit of the remainder-man. This
is equally the rule whether the trustee subscribes for the new stock
for the benefit of the trust or sells the right to subscribe for a valu-
able consideration. In either event the increase goes to the corpus
The subsequent income, however, of such increase belongs, during
the continuance of the life tenancy, to the life tenant as income;
the new shares are part of the corpus, and the life tenant, being
entitled to the income from the corpus, takes the income from the
accretions thereto.’

§ 560. Miscellaneous questions herein.— The life tenant must pay
calls which are made? and taxes levied ‘ during the continuance of

the bonds of private corporations is 1 Biss., 461 (1864). In Londesborough

apportionable; but quere whether or
not the interest on government bonds
would be. Wilson’s Appeal, 108 Penn.
St., 344 (1885), overruling Earp’s Will, 1
Parson’s Eq. Cas., 553. But in Massa-
chusetts the statute of apportionment
is held not to apply to dividends upon
the stock of corporations. Granger v.
Bassett, 98 Mass., 362, 469 (1868), con-
struing Gen. Stat. of Mass., ch. 97, § 24.
In New York an apportionment is pro-
vided for by Laws of 1875, ch. 542. See
Goldsmith v. Swift, 25 Hun, 201 (1881).

1 Atkins v. Albree, 94 Mass., 359 (1866) ;
Brinley v. Grou, 50 Conn., 66 (1882);
Biddle’s Appeal, 99 Penn. St., 278 (1882);
Moss’ Appeal, 83 Penn. St., 264 (1877);
Vinton’s Appeal, 99 Penn. St., 434 (1882) ;
Goldsmith v. Swift, 25 Hun, 201 (1881) ;
Sanders v. Bromley, 55 L.' T. (N. S.),
Chan. Div., 145 (1886). Profit upon the
sale of stock is corpus, and not income
for the life tenant. Whitney v. Phe-
nix, 4,Redf. (N. Y. Sur.), 180 (1880).
Cf. Leith v. Wells, 48 N. Y., 585 (1872).
Hemenway v. Hemenway, 134 Mass.,
446 (1888). New England Trust Co, v.
Eaton, 140 Mass., 582 (1886); S. C.7 4
Am. Prob. Rep., 368. Sometimes cer-
tificates of new stock are not stock div-
idends. Chicago, etc. R. R. Co. v. Page,

v. Somerville, 19 Beav., 295 (1854), where
consols were sold just before a dividend

-day and the proceeds invested in realty,

a tenant for life was held entitled to be
paid, as income on the consols, the dif-
ference between the price obtained and
the value exclusive of the next divi-
dend. See, also, in general, § 286, supra.

2 Moss’ Appeal, 83 Penn. St., 264 (1877);.
Biddle’s Appeal, 99 Penn. St., 278 (1882),.
and the cases generally cited in the pre- .
ceding note; In re Bromley,.55 L. T.
(N. S., Chan. Div.), 145 (1886).

3 Re Box’s Trusts, 9 L. T. (N. 8.), 372
(1868); Day v. Day, 1 Dr. & Sm., 261.
In case of a life estate, followed by a
life estate, followed by a remainder to
the nominees of the first life tenant, the
estate of the first life tenant is liable for
calls made after the remainder com-
mences. Hobbs v.’ Wayet, 57 L. T.
Rep., 225 (1887). If a call becomes due
the day after the testator dies it is the

- duty of the executor to pay it from the

general fund. Emery v. Wason, 107
Mass., 507 (1871).

4 Webb v. Town of Burlington, 28 Vt.,
188 (1856); Citizens’ Mutual Ins. Co. v.
Lott, 45 Ala, 185 (1871). Cf. Nat. Al-
bany Exchange Bank v, Wells, 18
Blatch., 478 (1880).

611

N
4

§ 560.]

LIFE ESTATES AND REMAINDERS IN STOCK.

[CH. XXXII,

his estate upon shares held in trust for his benefit. And where
stock to produce a fixed income is bequeathed for life, a subsequent
increase in the earnings from that stock inures to the benefit of the
life tenant. But the enhanced price for which stock sells by reason
of dividends earned but not declared belongs entirely to the re-

mainder.’
to him on the corporate books.’

A life tenant is not entitled to have the stock transferred

But the corporation, if it had no-

tice of the trust, may be held liable for transferring shares in prej-
udice of the rights of the life tenant.* And an administrator who
permits.an irregular transfer in fraud of the life tenant’s rights

makes himself personally liable.

1Russell v. Loring, 3 Allen, 121 (1861).
But when a fixed income is bequeathed
and the income fails or falls short, the
principal must be resorted to. Bonham
v. Bonham, 33 N. J. Eq., 476; Haydel

‘y. Hurck, 72 Mo., 253. The opposite
rule, however, prevails in New York.
Delaney v. Van Aulen, 84N. Y., 16 (1881);
reversing S. C., 21 Hun, 274. Cf. Craw-
ford v. Dox, 5 Hun, 507 (1875). See,
also, § 304.

2Scholefield v. Redfern, 32 L. J. Chan.,
627 (1868); Abercrombie v. Riddle, 3 Md.
Chan., 320 (1850); Van Blarcom v. Daget,
81 N. J. Eq., 783 (1879).
borough v. Somerville, 19 Beav., 295
(1854); Matter of Stutzer, 26 Hun, 481
(1882); Re Accounting of Gerry, 103 N,
Y., 445. ;

Cf. Londes-

3Collier v. Collier, 3 O. St. 369
(1854). Cf. State v. Robinson, 57 Md.,
486 (1881). If the corporation transfer
the stock to’ the life tenant, even by
orders of the court, but issues a certifi-
cate not stating the facts of life ten-
ancy, and tells a purchaser of the cer-
tificate that it is all right, the corporag-
tion is liable to the remainder-man,
Caulkins v. Memphis, etc., Co., 48. W.
Rep., 287 (Tenn., 1887). See, also, Lind-
ley on Partnership, p. 1079, etc.

4Stewart v. Fireman’s Ins, Co., 53
Md., 564 (1880).

5 Keeney v. Globe Mill Co., 39 Conn.,
145 (1872). See, also, Ames v, William-
son, 17 West Va., 673 (1881).

612
CHAPTER XXXIV.

TAXATION OF SHARES OF STOCK AND OF CORPORATIONS.

§ 568.

 

§ 561. The four methods of taxing cor- Exemptions from taxation as
porate interests. oe tax on shares of
stock.

“A. TAXATION OF SHARES OF STOCK. 569. Taxation of national bank stock.

570. Place in which shares in na-
§ 562. The first three methods of taxa- tional bank stock may be
tion. taxed. :

568. Taxon shares of stock as dis-| 671. The tax must not be greater
tinguished from the other] than that imposed on other
‘methods. ““ moneyed. capital.”

564. Tax on stockholders residing in| 572. The bank may bring suit to re-
the state creating the corpo- strain illegal tax on its stock-
ration. — holders. —

565. Tax on resident stockholders in
a non-resident or foreign cor-| B. OTHER METHODS OF TAXING CORPO-
poration. RATIONS.

566. Tax on non-resident stockhold-
ers in resident or domestic} § 572a. General principles.

. " corporation. ' §72b. Exemptions from taxation.

667. Double taxation. 572c. Taxation of foreign corpora-

tions.

§ 561. The four methods of taxing corporate interests— There

are, in general, four methods of taxing corporate interests. These

are, first, by a tax on the franchise; second, on the capital stock;
third, on the real estate and personal property of the corporation;
fourth, by a tax on the shares of stock in the hands of the stock-
holders.! There is another mode of taxation which is sometimes
adopted — a tax on corporate dividends; but since this is generally
construed to be only a method of valuing the franchise or capital
stock, it cari hardly be called a fifth method of taxing corporate
interests.’

It is entirely within the discretion of the legislature to say which
one of these four methods of taxation shall be adopted, where the
matter is not regulated by the state constitution. Not only this,
but it is also within the discretion of the legislature to tax the cor-
poration in two or more of these ways — to levy a double tax on the
corporate interests, and even to levy a treble or quadruple tax

- thereon. j

1 Redfield on Railways, vol. II, 8ded. § ?2See State of Ohio v. Franklin B’k, 10
p. 458; Ottawa Glass Co, v. McCaleb, O., 91 (1840); People v. Home Ins. Co.,
81 Ill, 556 (1876); Louisville, etc.,R. R. 92 .N. Y., 328 (1883).

Co. v, State, 8 Heisk. (Tenn.), 663, 795.
613
(cH. XXXIV,

88 562, 563.] TAXATION OF STOCK AND CORPORATIONS.

'
A. TAXATION OF SHARES OF. STOCK.

' $562. The first three methods of taxation.— The stockholders, in
a corporation have very little to do directly with any of the first
three modes of taxing corporate interests. The tax is levied di-
rectly against the corporation, and is paid by the corporate officers.
out of the treasury of the corporation. If the tax is unauthorized
or illegal, or improperly assessed, or is based on too high a valua-
tion, it is ordinarily the duty of the corporate officers to rectify or
oppose such tax. The stockholders have nothing to do with the
ordinary transaction of corporate business, of which this forms a
part. Where, however, the corporate officers refuse, upon request
of one or more stockholders, to oppose or decline to pay an unau-
+thorized tax levied in any one of the three methods mentioned
above, the stockholder himself may bring a suit in a court of
equity, in behalf of and for the protection of the corporate inter-
ests, to enjoin the payment and collection of such unauthorized
tax.!

§ 563. Tax on shares of stock as distinguished from the other
methods.— A tax on shares of stock is clearly different from a tax
upon the franchise, the corporate property or the capital stock.
Especially is it important to distinguish a tax on shares of stock
from a tax on the capital stock.’ The latter is always taxed against

1Dodge v. Woolsey, 18 How., 331
(1855); State B’k of Ohio v. Knoop, 16
id., 869 (1853); Wilmington R. R. Co. v.
Reed, 13 Wall., 264 (1871); Delaware R.
R. Tax, 18 id., 206 (1878); Greenwood v.
Freight Co., 105 U. S., 13 (1881); Paine
v. Wright, 6 McClain, 395 (1855); Foote
uv. Linck, 5 McClain, 616 (1853), holding
also that the corporation is a necessary
party, and that if the complainant is a
non-resident he may bring the suit in
the United States circuit court; Daven-
port v. Dows, 18 Wall., 626 (1878), also
holding that the éorporabion is a nec-
essary party defendant: Bailey v. At-
lantic, etc., R. R. Co., 5 Dill., 22 (1874);
Parmley v. R. R. Cos., 5 Dill., 18, 25
(1874). But the stockholder must allege
actual tender of the amount of tax con-
ceded to be due. Allegation of readi-
ness to pay is insufficient. Huntington
v. Palmer, 8 Fed. Rep., 449 (1881), See,
also, Trask v. Maguire, 18 Wall., 391
(1878) ; Wood v. Draper, 24 Barb., 187

(1857); London »v. City of Wilmington,
78 N. C., 190 (1878); § 494. The case of
State v. Flavell, 24 N. J. L., 370 (1854),
denies this right. A stockholder’s in-
junction against a tax in corporate prop-
erty falls when the property is subse-_
quently sold under execution. Secor v.
Singleton, 35 Fed. Rep., 376 (1888). The
general.character of such a suit as this
comes under the principles of law set
forth in Part IV, infra.

2In' the case of Porter v. Rockford,
R. L, ete, R. R. Co., 76 Ill., 561 (187),
the court clearly recognized this dis-
tinction, and said: ‘‘ The legal property
of the shareholder is quite distinct from
that of the corporation, although the
shares of stock have no value save that
which they derive from the corporate
property and franchise, and a tax levied
upon the property of the one is not, in
a legal sense, levied upon the property
of the other.” See, also, Bradley v.
Bauder, 36 O, St., 28 (1880), Cf. Dela-

614
CH. XXXIV.]| | TAXATION OF STOCK AND CORPORATIONS. [§ 564.
the corporation, is paid by the corporation, and is based on a val-
uation which does not necessarily depend on the value of the shares
of stock. A tax on the shares of stock is generally levied directly
against the stockholders themselves at their place of residence, is
based on the market value of the stock, and is entirely distinct
from the location, interests, property or taxes of the corporation
itself. There are, ‘however, some instances of taxation herein which
are on the border-line between the two. Thus, a statute expressly
laying a tax on the shares of stock, but requiring the corporation
to pay that tax from the corporate funds, has been held in Iowa to
be a tax not on the shares of stock but on the capital stock. In
other jurisdictions it has been held to be a tax on the shares of
stock. A tax laid on shares owned by non-residents of the state
which creates the corporation and which levies the tax is a tax on
the shares of stock and not on the capital stock, even though the
corporation is required to pay it and to collect the same from the

owners of those shares.

ware R. R. Tax, 18 Wall., 206, '230
(1878); Farrington v. Tennessee, 95 U.
8., 679, where the distinction is clearly
drawn; Quincy Bridge Co. v, Adams
Co., 88 Tll., 615 (1878). In the case of
North Ward National Bank v, City of
Newark, 89 N. J. L., 880 (1877), the
court said: ‘‘ The moneyed capital of a
bank is an entirely different thing from
its capital stock. The former is the
property of the corporation. It may
consist of cash or bills discounted, or be
in part invested in real estate or in the
securities of federal government. In
whatever form it is invested, it is owned
by the bank as a corporate entity and
not by the stockholders. The stock or
shares represent the interests of the
shareholders, which entitle them to par-
ticipate in the net profits of the bank in
the employment of its capital, and is a
distinct and independent interest or
property in the shareholders, held by
them like other property.” The case
of Porter v. Rockford, etc., R. R. Co.,
supra, holds also that a tax on the
es capital stock ” means the property of
the corporation and not the aggregate
of the shares of stock. See, also, State
v, Hamilton, 5 Ind., 310 (1854), where
the word “stock” was construed to

mean the tangible property of the cor-
poration. But see Trask v. Maguire, 18
Wall, 391 (1873). And even though
the value of the capital stock is esti-
mated by the aggregate value of the
shares, it is still a tax on the capital stock.
New O., etc.,,R. R. Co. v. B’d of Asses-
sors, 82 La, Ann., 19 (1880). See, also,
State Bank of Va, v. City of Richmond,
49 Va., 118. So, also, where the fran-
chise is valued in that manner for tax-
ation. Commonwealth v. Hamilton
Mfg. Co., 94 Mass., 298 (1866); Att’y-
Gen. v. Bay State Min. Co., 99 Mass.,
148 (1868). Hamilton Co. v. Massachu-
setts, 6 Wall., 632 (1867), holds that a
tax on the excess of the market value
of the stock over the value of the corpo-
rate realty and machinery is a fran-
chise tax. In Indiana itis held thata
tax on the shares of stock is the proper
mode of taxation, unless the statute
provides otherwise. Whitney v. City
of Madison, 28 Ind., 831 (1864). Cf.
Wright v. Stelz, 27 Ind., 388 (1866).
The mere fact that the corporation is
compelled to pay the tax does not pre-
vent its being considered a tax on the

shares. National Bank v. Common-
wealth, 9 Wall., 358, 360 (1869), per
Miller, J.

615
’

§§ 564.] TAXATION OF STOCK AND CORPORATIONS. (om. xxxIv.
§ 564. Tax on stockholders residing in the state creating the cor-
. poration.— The right of the state to tax resident stockholders of a
resident corporation on their shares of Stock is undoubted, and has
been unquestioned except where double taxation would result
therefrom and is prohibited; or where a constitutional provision
restricts this mode of taxation.! Generally such a tax on resident
stockholders is levied on them, not in the municipality where the
corporation is, but in the cities, counties or towns where the stock-
holders respectively reside. This is always the rule if the statute
is silent, and is the rule unless the statute expressly provides other-
wise. :

Controversies sometimes arise as to the power of a municipality
to tax stockholders living in the state, but not in the municipality
which levies a tax on their shares of stock, the corporation itself
being located within that municipality. The law plainly is that
such a tax is unauthorized, illegal and not collectible- unless the
municipality is authorized by statute to levy the tax.2 A mere

1JIn Illinois, under the act of 1872
taxing railroad corporations, resident
stockholders in domestic corporations
are not taxed. Porter v. Rockford, etc.,
R. R. Co., 76 TIL, 561 (1875). In Iowa
stock is taxed under section 813 of the
code. See Cook v. City of Burlington,
69 Iowa, 251 (1882); Henkle v. Town of
Keota, 27 N. W: Rep., 250 (1886). Cf.
Nat'l State B’k v. Young, 25 Iowa, 311.
In Iowa, where deductions for debts are
allowed to persons taxed on their
“ credits,” no deduction is allowed
from the tax on shares of stock. They
are not ‘‘ credits.” Bridgman v. City
of Keokuk, 33 N. W. Rep.; 355 (Iowa,
1887). As to the valuation of the shares
of stock, see St. Charles, etc., R.. R. Co.
v. Assessors, 31 La. Ann., 852 (1879), If
the corporation owns shares of its own
stock it is taxable the same as though
owned by another. Richmond, etc., R.
R. Co. v. Alamance Co., 84 N. C., 504
(1881).

2City of Evansville v, Hall, 14 Ind.,
27 (1859). A pledgor is the proper per-
son to be assessed on stock which has
been pledged. Tucker v. Aiken, 7N. 8.,
118 (1884). A pledgee of stock is not
subject to a tax levied on the shares of
stock held by him. Waltham Bank v.

Waltham, 51 Mass., 334 (1845). In Mas-
sachusetts shares held by executors or
administrators are taxed in the town of
which the deceased was an inhabitant
at the time of his death, and shares
held by trustees are taxed in the towns
in which the cestuis que trust respect-
ively reside. Revere v: Boston, 123
Mass., 375 (1877). As to the legal rem-
edy in Massachusetts for an unjust val-
uation of stock for taxation, see Boston.
Mfg. Co. v. Commonwealth, 12 N. E.
Rep., 362 (Mass., 1887). As to taxation
of stock under the Vermont law, see
Willard v. Pike, 9 Atl. Rep., 907 (Vt.,
1887).

3Stetson v. City of Bangor, 56 Me.,
274 (1868), the court saying: ‘‘Munici-
palities can tax shares of stock only
when authorized so to do by some law
of the state. They are the creatures of
state law, and derive their powers in .
this respect solely from state enact-
ments.” Griffith v. Watson, 19 Kan.,
23 (1877); City of Evansville v. Hall, 14
Ind., 27 (1859); Conwell v. Town of.Con-
nersville, 15 Ind., 150 (1860). Such a
tax’ may be levied under a general:
power of the municipality to tax prop-
erty. Gordon’s Ex’rs v. Mayor, ete, 5
Gill (Md.), 231 (1847), Cf. Richmond ».

616
Tee

* ee

CH. XXXIV.] TAXATION OF STOCK AND CORPORATIONS. L$ 565.
general authority to the municipality to tax all property within its
boundaries will authorize a tax by it of shares of stock owned by
persons living within it.’ But such authority does not sustain a
tax on stockholders residing out of the municipality, although
within the state. The location of such shares of stock, as property
for purposes of taxation, is not where the corporation is located,
but where the stockholder lives.’ The statutes of the state may
change this sétws of the stock so as to render it taxable where the
corporation is; but unless there is a statute to that effect such a
tax by a aanioipality is unauthorized and void.

§ 565. Tax on resident stockholders in a non-resident or foreign
corporation.— It is undoubtedly within the constitutional power of
the legislature of a state to enact a statute that persons residing in
that state, who are stockholders in a cor poration created by an-
other state, shall be taxed on their shares of stock at their resi-
dence within the former state. This principle of law is based on

the fact that shares of stock are personal property; that they are

distinct from the corporate property, franchises and capital stock;
that they follow the domicile of their owner like other personal
property, and that consequently he may be taxed therefor wherever
he may reside. It accordingly is a question of policy and expedi-
ency with a state whether or not it will tax its citizens who are
stockholders in foreign corporations. A few of the states‘ levy

Daniels, 14 Gratt., 385; Augusta v. Nat.
B’k, 37 Ga., 620 (1868). Markoe v. Hart-
ranft, 6 Am. L. Reg., N. S., 487 (1867),
holds that in Pennsylvania such a tax
is unconstitutional, and that a tax must
be levied where the stockholder resides.
See, also, Craft v. Tuttle, 27 Ind., 332
(1866).

1But a municipality can levy a fee

only when specially authorized so to
do, and can tax only such property as
the statute permits it to tax. Cooley
on Taxation (2d ed.), 678. Hence power
to a municipality to levy a tax for
watchmen purposes will not authorize
a tax on shares of stock. B’k of Ga. v.
Savannah, Dudley (Ga.), 180 (1832).

2See § 566.

3 Worthington v. Sebastian, 25 O. St.,
4 (1874): Bradley v. Bauder, 36 O. St..
28 (1880), holding it valid, although the
corporation is taxed in the state where
it exists. .To same effect, Seward v.

City of Rising Sun, 79 Ind., 351 (1881);
-—> 61

Dyer v. Osborn, 11 R. IL, 321 (1876):
McKeen v. County of Northampton, 49
Penn. St., 519 (1865); Dwight v. Boston,
12 Allen, 316 (1866); Whitesell v. Same,
id., 526; Great Barrington v. County
Com’rs, 33 Mass., 572 (1835); Worth v.
Com’rs, 82 N. C., 420: (1880); S. C., 90
N. C., 409 (1884). In Illinois, also, resi-
dent stockholders in foreign corpora-
tions are taxed on their shares of stock.
Porter v. Rockford, etc., R. R. Co., 76
Tll., 561 (1875); Cooley on Taxation
(2d ed.), 57, 221; Holton v. Bangor,’ 23
Me., 264; Smith v. Exeter, 37 N. H.,
556 (1859).

4 State v. Hannibal & St. J. R. R. Co.,

” 87 Mo., 265 (1866); Ogden wv. City of St.

Joseph; 3 8S. W. Rep., 25 (Mo., 1887);
Sturges v. Carter, 114 U..S., 511 (1884),
upholding such a tax in Ohio; Newark
City B’k v. Assessor, 30 N. J. L., 1
(1862). See, also, Webb v. Burlington,
28 Vt., 188 (1856). See: Penn. Act of

April 29, 1844; Lycoming County v.
7 ;
TAXATION OF STOCK .AND CORPORATIONS.

§ 565.) [cH. XXXIV.

such taxes. But New York pursues the more broad and liberal policy
that corporate interests should be taxed where the corporation ex-
ists; that the state which creates, protects and furnishes facilities
to the corporation for the earning of dividends should have the
sole benefit of taxes on such corporate interests; that its tax on
resident stockholders in non-resident corporations would generally
result in a double taxation of stockholders. not residing in the state
creating the corporation; and that interstate comity, interests
and financial investments are promoted best by each state taxing
its own corporations directly, and no state levying a tax on either
’ resident stockholders in non-resident corporations or resident stock-

holders in resident corporations.!

Gamble, 47 Penn. St., 106 (1864). See,
also, In re Short’s Estate, 16 Penn. St.,
63 (1851), where a decedent who died a
resident of Pennsylvania, left a fortune
in stocks of non-resident corporations.
The stocks were held subject to a col-
lateral inheritance tax. ‘In 1879, how-
ever, Pennsylvania adopted in large
part the system of taxation that pre-
vails in New York for the taxation of
corporations. See Hunter’s Appeal, 10
Atl. Rep., 429 (Penn., 1887). By the
still later statute of 1885, manufactur-
ing corporations are specially favored
in the way of taxation, MacKellar,
etc., Co. v. Commonwealth, 10 Atl.
Rep., 780 (Penn., 1887). In New Jersey
now there is no tax on shares of stock
except in banks. See Newark B. Co,
v, Newark, 121 U. S., 163 (1887). In
Texas shares of stock are not taxed
where the capital or property of the
corporation is taxed. Gillespie v. Gas-
ton, 48. W, Rep., 248 (Tex., 1887). Cali-
fornia made a wise resolution when, in
1881, it repealed § 3640 of its political
code taxing shares of stock, and added
the following (§ 3608) to the code:
‘* Shares of stock in corporations possess
no intrinsic value over and above the
actual value of the property of the cor-
poration which they stand for and repre-
sent, and the assessment and taxation
of such shares and also of the corpo-
rate property would be double taxation
Theréfore all property belonging to cor.
Porations shall be assessed’ and taxed;

The injustice of a tax on resi-

but. no assessment shall be made of |
shares of stock, nor shall any holder
thereof be taxed therefor.” Sustained
and applied in Burke v. Badlam, 57
Cal., 502; Spring Valley W. W. ».
Schottler, 62 Cal., 69, 118 (1882). But
the temptation to tax stockholders in
non-resident corporations was yielded
to. See San Francisco v. Fry, 68 Cal.,

‘470 (1883); Same v. Flood, 64 Cal., 504

(1884). As to Ohio, see R. S, 1886,
§§ 2787, 2739, 2744, construed in Jones
v. Davis, 35 O. St., 474 (1880). See,.also,
Worth w. Com’rs of Ashe County, 90
N. C., 409 (1884); Seward wv. City of
Rising Sun, 79 Ind., 351. . As to taxa-
tion of shares of stock in foreign cor
porations under the Michigan stat utes,
see Graham v. St. Joseph, 35 N. W.
Rep., 808 (1888). Shares of stock may
be taxed although the corporation is
also taxed. The corporation may be
compelled to pay the tax on the shares
of stock by deducting it from dividends.

South, etc., R.-R. Co. « Morrow, 118,

W. Rep., 348 (Tenn., 1889). In Ohio
resident stockholders in foreign cor-
porations may be taxed on their stock.’
Lee v. Sturges, 19 N. E. Rep., 560 (O.,
1889).

11 RS. of N. Y., ch. XIII, title 1,
§ 7 (p. 982, 7th ed.), provides as follows:
“The owner or holder of stock in any
incorporated company liable to taxation
on its capital shall not be taxed as an
individual for such stock.” See, also,
People v. Com. of Taxes, 4 Hun, 595

618
CH. XXXIV.] | | TAXATION OF STOCK. AND CORPORATIONS. {§ 566.
dent stockholders in foreign corporations is at once apparent when
it is considered that the state creating the corporation nearly
always taxes the corporation itself or all its stockholders, resident

and non-resident; and that if stockholders residing elsewhere are
taxed again where they reside, they are taxed both in the state of
the corporation, directly or indirectly, and also directly in the state
where they reside. No reduction need be allowed in the latter
state for taxation of the corporation levied in another state.! 7

§ 566. Tax on non-resident stockholders in resident or domestic
corporation.— When it is determined by a state that it prefers to
levy a tax on shares of stock rather than on the franchises, capital °
stock, or tangible property of the corporation, or to levy a tax on
both, there is no doubt as to its right to tax the stockholders resid-
ing within the state. But more difficulty occurs as to the right of
the state to tax non-resident stockholders in corporations created
by the state. This right has been strenuously denied on the ground.
that shares of stock are not located at the domicile of the corpora-
tion, but follow the domicile of the stockholder.

Tt i is the well-established rule, however, that although shares of
‘stock have at common law no situs except the domicile of the
shareholder, yet that a statute enacted by the state creating the
corporation may give to the shares of stock a situs at the location
of the corporation; that such a statute may thus determine the situs
of shares of non-resident stockholders without changing the situs
of shares of resident stockholders; and that consequently, under a

(1875); aff'd, 62 N. Y., 680, holding that on their franchises, See People v. Home

residents of this state, owning shares of
stock in a corporation created under
and by the laws of this state or of any
foreign state, are not, subject to be per-
sonally assessed and taxed thereon under
the laws of this state. Also People v.
Com’rs, 5 Hun, 200 (1875); In re Eus-
ton’s Estate, 21 N. E. Rep., 87 (N. Y., 1889).
For the purpose, however, of making
the taxation of moneyed corporations
correspond to taxation of shareholders
in national banks, and for the purpose of
taxing the latter, stockholders in banks
incorporated under the laws of New
York are now taxed on their shares of
stock, under the following statutes:
Laws of 1866, ch. 671; Laws of 1880,
ch. 140; Laws of 1880, ch. 596; Laws of
1881, ch. 477; Laws of 1882, ch. 410,
§ 848, The tax generally levied on cor-
porations in New York is held to be a tax

Ins. Co., 92 N. Y., 328 (1883); Same v..
McLean, 80 N. Y., 254 (1880); Same v.
Ferguson, 38 N. Y., 89 (1868); Same wv.
Williamsburgh Gas Light Co., 76 N. Y.,
202 (1879); Laws of 1880, ch. 542, as
am’d by Laws of 1881, ch. 361; also
Laws of 1883, ch. 359. See People v.
New York, etc., Co., 92. N. Y., 487 (1883);
Same v. Davenport, 91 N. Y., 574 (1883);
Nassau, etc., Co. v. City of Brooklyn, 89
N. Y., 409 (1882); Oswego, etc., Factory
v. Dolloway, 21 N. Y., 449 (1860); Peo-
ple v. Com’rs, 95 N. Y., 554 (1884);
Valle v. Ziegler, 84 Mo., 214 (1884);
People v. Bradley, 39 Iowa, 180 (1866).
Cf. B’k of Republic v. County of Hamil-
ton, 21 -Ill., 54 (1858). See, also, Smith
\v. Exeter, 87 N. H., 556 (1859), and
Jersey City Gas Light Co, v. Jersey City,
46 N, J. L., 194 (1884).
1 See note 3, p. 617.

619
‘

§ 566.)

TAXATION OF STOCK AND CORPORATIONS.

[CH. XXXIV.

statute expressly authorizing such a tax, non-resident stockholders
in a resident corporation may be taxed thereon in the place where
the corporation has its domicile! The method of enforcing the

lIn the case of Ottawa Glass Co. v.
McCaleb, 81 Ill, 556 (1876), the court
said that the legislature might ‘‘re-
quire the taxes to be paid by the corpo-
ration, and collected by them of the
shareholder, by deducting the amount.
from'his dividends or otherwise.” State

.v. Mayhew, 2 Gill (Md.), 487 (1845),
where the corporation was to pay the
tax from dividends if declared, and
from profits if no dividends were de-
clared; St. Albans v. National Car Co.,
57 Vt., 68 (1884), holding that the stat-
ute giving shares of stock a situs at the
location of the corporation may be
passed after the incorporation, and that
mandamus lies to compel the corpora-
tion to pay the tax. In the case of Tap-
pan v. Merchants’ Nat’l Bk, 19 Wall.,
490, 499 (1878), the court said: ‘‘ Per-
sonal property, in the absence of any
law to the contrary, follows the person
of the owner, and has its situs at: his
domicile. But, for the purpose of tax-
ation, it may be separated from him,
and he may be taxed on.its account at
the place where it is actually located.
See, also, Whitney v. Ragsdale, 83 Ind.,
107 (1870); Tallman v. Butler Co., 12
Iowa, 531 (1861); Faxton v. McCarter, id.,
527 (1861); Mayor, etc., of Baltimore v.
Baltimore, etc., R’y Co., 57 Md., 31 (1881).
The last case holds that stock in street
railways in Maryland may be taxed, al-
though by statute stock in steam rail-
ways cannot be. See, bowever, City of
Richmond v. Daniel, 14 Gratt. (Va.), 385
(1858); also the case of Oliver v. Wash-
ington Mills, 93 Mass., 268 (1865), which
‘holds such a tax to be unconstitutional.
The common-law rule is well expressed
in Union B’k v. State, 9 Yerg. (Tenn.),
490 (1836), where the court say: ‘‘ The

power to tax non-resident stockholders:

is denied, and we think correctly ; from
its very nature it must be a tax in per-
sonam and notin rem. Stock is in the

nature of a chose in action and can have
no locality ; it must, therefore, of neces-
sity follow the person of the owner,

Bank stock is not a thing in it-
self capable of being taxed on account
of its locality, and any tax imposed
upon it must be in the nature of a tax
upon income and of necessity confined
to the person of the owner; and if he be
a non-resident he is beyond the jurisdic-
tion of the state, and not subject to her
laws.” See, also, Minot v. Railroad Co.,
18 Wall., 276; City of Davenport v. Miss,
& Mo. R. R. Co., 12 Iowa, 539 (1861);
Howell v. Cassopolis, 35 Mich., 471
(1877). In Bradley v. Bauder, 36 O. St.,
28 (1880), the court said ‘‘ that shares
of stock may be separated from the per-
son of the owner by statute, and given
a situs of their own, was held in Tap-
pan v. Merchants’ Nat'l B’k, 19 Wall.,
490. But when not so separated, that
this situs follows and adheres to the
domicile of the owner, is supported by
a great weight of authority.” See State
Tax on Foreign-held Bonds, 15 Wall,
300 (1872). See, also, Jenkins v, Charles-
ton, 5 8S. C., 893 (1874). In Nat’l
Com, B’k v. Mobile, 62-Ala., 284 (1878),
the court well say: ‘‘It may be made
the duty of a bank to pay for its share-
holders the tax legally assessed against
their respective shares, whether the
stockholders reside in the state of Ala-
bama or not. Contestations upon these

_ points have been made time and again,

sometimes by the banks and sometimes
by the shareholders to avoid this liabil-
ity. But it is established by repeated
adjudications, and ought to be consid-
ered definitely settled.” Aid in First
Nat’l B’k v. Smith, 65 Ill, 44 (1872), the
court say: ‘‘ The separation of the situs
of personal property from the domicile
of the owner for the purposes of tax-
ation is familiar doctrine of the courts
of this country, and has been sanctioned

620
.

OH. XXXIV.] ;

TAXATION OF STOOK AND CORPORATIONS.

[$ 566.

payment of this tax may be by compelling the corporation to pay
it and giving it a lien therefor on the stock, or authorizing it to. de-
duct the tax from the non-resident stockholders’ dividends; or, if
the statute is silent as to the mode of collection, a tax warrant or
an attachment and execution therefor may be levied on the shares

of stock.1 In New York, where

by this court in various cases.

The act of congress itself caiibesnplates
a severance of the situs of such shares
from the person of their owner by pro-
viding that they should not be taxed
except in the state where the bank is
established. But, apart from this, it is
really much more reasonable to fix the
situs of shares at the place where the
bank is located, and where it must con-
tinue to do its business or wind up its
affairs, than to separate by legislation
tangible personal property from the
person of its owner.” In the case of
St. Louis Nat’l B’k v. Papin, 4 Dill., 29
(1876), the following statute was sus-
tained: ‘‘The taxes assessed on shares
of stock embraced in such list shall be
paid by the corporations respectively,
and they may recover from the owners
of such shares the amount so paid by
them, or deduct the same from the divi-
dends accruing on such shares; and the
amount so paid shall be a lien on such
shares respectively, and shall be paid
before a transfer thereof can be made.”
And again, in American Coal Co. v.
County Com’rs, 59 Md., 185 (1882), the
court say: ‘‘The state may give the

shares of stock held by individual stock- '

holders a special or particular situs for
purposes of taxation, and may provide
special modes for the collection of the
tax levied thereon.” But where the
statute merely made the bank the agent
to pay the tax and to deduct it from the
dividends, the bank is not liable if there
have been no dividends. Hershire v.
First Nat'l B’k, 35 Iowa, 272.

1In Farrington v. Tennessee, 95 U. S.,
679, 687 (1877), the court say: “The
bank may be required to pay the tax
out of its corporate funds or be author-
ized to deduct the amount paid for each

621

neither resident nor non-resident

stockholder out of his dividend.” And,
in general, under the act of congress
allowing taxation of shares of stock in
national banks, a situs is given by stat-
ute to the shares so as to locate them
where the bank is located, even though
the shareholders be non-resident. But
collections cannot be enforced against
the corporation unless the statute spe-
cially authorizes it. First Nat’l Bk v.
Fancher, 48 N. Y., 524 (1872). Collec-
tion by execution, see Gordon’s Ex’rs v.
Mayor, etc., 5 Gill (Md.), 231 (1847); Weld
v. City of Bangor, 59 Me., 416. Buta
levy of execution on stock can only
exist when the statute allows stock to
be so taken. Barnes v. Hall, 55 Vt.,
420 (1883). Or under a tax warrant.
McNeal v. Mechanics’, etc., Ass’n (N. J.,
1885). But if the stockholder pays the
tax, even under protest, he cannot re-
cover back the money paid. Sowles v.
Soule, 7 Atl. Rep., 715 (Vt., 1887). See,
also, § 480. In the case of State v.
Thomas, 26 N. J. L., 181 (1857), the

court refused to compel the corpora- '

tion to pay the tax on stock of non-
residents, and said: ‘It has been de-
cided by this court that the bonds and
stocks of corporations in this state held
by non-residents are not liable to taxa-
tion, though they are clearly within the
letter of the act.” A state may collect
a non-resident stockholder’s tax from
the corporation and give it a lien there-
for on his stock, North Ward Nat'l B’k
v. City of Newark, 39 N. J. L., 380
(1877); but see Raleigh, etc., R. R. Co.
wv. Conner, 87 N. C., 414. Cooley on
Taxation, 2d ed., 433, clearly upholds
the rule that the state may levy a tax
on shares of stock and compel the cor-
poration to pay it, citing Maltby v.
Reading R. R. Co., 52 Penn. St., 140

1;
 

§ 567.] TAXATION OF STOCK AND CORPORATIONS.  [CH. XXXIV.
stockholders in either foreign or domestic corporations, excepting
banking corporations, are taxed on their shares of stock, these inter-
state complications, hardships and jealousies do not arise.!

§ 567. Double taxation.— The most objectionable feature of a tax
levied on shares of stock is that almost inevitably it operates to
impose a double tax on a part or all of the stockholders.? Such a
double tax exists where either the corporate realty or personalty
or franchise or capital is taxed, and a tax is also levied on the
shares of stock without any deduction for the former taxation?
There has been some controversy as to the, right of a state to levy
a double tax on property. Sometimes the state constitution pro-
hibits such taxation. But aside from constitutional restrictions it
unquestionably is within the power jof the state to levy, not only a
double tax, but even a treble or quadruple tax, if it so chooses?

(1866); Haight v. Railroad Co., 6 Wall.,
15 (1867); National Bank v. Common-
wealth, 9 Wall., 353 (1869); United
States v. Railroad Co., 17 Wall., 322
(1872); Minot v. Railroad Co., 18 Wall.,

206 (1873); Ottawa, etc., v. McCaleb, 81
Ill, 556 (1876); New Orleans v. Saving,
etc., Co., 31 La. Ann., 826 (1879); Balti-
more v. City Passenger R. Co., 57 Md.,
81 (1881); St. Albans v. National Car Co.,
57 Vt., 68 (1884); American Coal Co. v.
Allegany County, 59 Md., 185 (1882);
Barney v. State, 42 Md., 480 (1875);
McVeagh v. Chicago, 49 Ill., 318 (1868);
First Nat’?] B’k v. Fancher, 48 N. Y.,

524 (1872); Leonberger v. Rowse, 48

Mo., 67 ( (1868): Relfe v, Life Ins, Co., 11.

Mo. App., 374 (1882).
1See § 565, note.

2In Ohio such double taxation is ad- |

vocated and recommended. In Frazer
v. Seibern, 16 O. St., 614 (1866), the
court said that an equitable system of
taxation ‘‘is best attained in case of a
corporation or joint-stock company by
taxing the stockholders, the persons
who own its property! upon the full
value of their shares therein, including,
of course, their interest in the franchise
or privilege, and’ in all tangible: prop-
erty owned by the company; and by
taxing the corporation also. upon the
_value of such tangible property. The
stockholder is thus taxed, as all other

individuals who own tangible and in-
tangible property are sdmetimes una-
voidably taxed, once upon all he is
worth, and a second time upon that
part of his property which is tangible.”

'This is practically the result, In
the case of Farrington v. Tennessee, 95
U. S., 679, 687 (1877), however, “the
court says in a dictum: “The capital ~
stock and the shares may both be taxed,
and it is not double taxation.” See,
also, New Orleans v. Houston, 119 U. 8.,
265, 277 (1886). Cf. Ryan v. Com’rs, 30
Kan., 185 (1883), ;

4County Com’rs v. Farmers’ Nat’! B’k,
48 Md., 117 (1877), the constitution say-
ing that each person shall pay a tax
‘according to his actual worth in real
or personal property.” See, also, City
of San Francisco v. Mackey, 21 Fed.
Rep., 589 (1884); Burke v, Badlam, 57
Cal., 594 (1881), relative to the Califor:
nia constitution, art, XII, § 1, that ‘all
property shall be taxed in proportion
to its value.”

5 Salem Iron, etc., Co. v. Danvers, 10
Mass., 514 (1818), where corporate realty
was taxed although the shares of stock
were also taxed. See, also, Belo v
Com’rs of Forsyth, 82 N. C., 415 (1880).
In the remarkable case of Toll Bridge
Co. v, Osborn, 85 Conn., 7 (1868), it
seems that the realty, capital stock and
shares of stock of a corporation were

622

'
CH. XXXIV. |

TORATION OF STOCK AND CORPORATIONS.

[§ 568

The injustice of such taxation, however, generally prevents its oc-

currence.

The courts also do their utmost to prevent double tax-

ation, and will construe a taxation statute so as to avoid Such a
result, and sometimes even in opposition to the plain words of the

statute itself.!

§ 568. Exemptions from taxation as affecting tax on shares of

stock.—

An exemption of shares of stock is a contract protected

by that provision of the constitution of the United States which
prevents a state from passing a law which will impair the validity

taxed, and that the chief stockholder,
a railroad, was taxed on its capital
stock and shares of stock, making four
or five taxations of the same property.
Evidently corporations were not popu-
lar in Connecticut in 1868, except for
taxation purposes. Cf. Jones, etc., Co.
v, Commonwealth, 69 Penn. St., 137.
See, also, Cook v. City of Burlington,
59-Iowa, 251 (1882); State v. Branin, 23
N. J. L., 484 (1852); Same v. Bentley,
‘id., 532; City of Memphis v. Ensley, 6
Bax, (Tenn.), 553 (1878); Prov., etc., R.
R. Co. v. Wright, 2 R. I., 459, 464 (1858),
holding that a tax on the stock does
not raise a presumption that a munici-

pality is thereby prevented from taxing

the corporate realty. See, also, Han-
nibal, etc., R. R. Co. v. Shacklett, 30
Mo., 550, 560 (1860).

1 Thus, in Illinois, in cases where the

capital stock ts taxed by the state, the-

shares of stock are held to be free from
taxation. Republic Life Ins. Co. v. Pol-
lok, 75 Ill., 292 (1874). See, also, County
of Lackawanna v. First Nat’l B’k, 94
Penn. St., 221 (1880), holding that under
the act of March 31, 1870, releasing cor-
porations from all other taxes if they
pay a one per cent. tax'on the par value
of the stock, the corporate realty can-
not be taxed after such one per cent.
has been paid. State v. Hannibal &
St. J. R. R. Co., 87 Mo., 265 (1866);
Jersey City, etc., Co. v. Jersey City, 46,
N, J. L., 194 (1884); Cheshire, etc., Tele-
phone Co. v. State, 68 N. H., 167 (1884) ;
_ Valle v. Zeigler, 84 Mo., 214 (1884): Tax
Cases, 12 G. & J. (Md.), 117 (1841);

Prov. Inst. for Sav. v. Gardiner, 4 R. I.,
484 (1857); Mechanics’ B’k v. Thomas,
26 N. J. L., 181 (1857); American B’k
v. Mumford, id., 478 (1857); State v.
Tunis, 23 N. J. L., 546 (1852); Smith v.
Burley, 9 N. H., 423 (1838); Frazer v.
Siebern, 16 O. St., 614 (1866); Savings
B’k v. Nashua, 46 N. H., 389 (1866), the
court saying: ‘‘It is a fundamental
principle in taxation that the same
property shall not be subject toa double
tax, payable by the same party, either
directly or indirectly; and where- it is
once decided that any kind or class of
property is liable to be taxed under one
provision of the statutes, it has been
held to follow as a legal conclusion that
the legislature could not have intended
the same property would be subject to
another tax, though there may be gen-
eral errors in the law which would
seem to imply that it was to be taxed
a second time.” In Michigan, where
shares of stock in savings banks are
taxed, a reduction being allowed for
realty, which is taxed separately, the
courts held that no other tax can be
levied against the corporation. Leva-
wee, etc., B’k v. City of Adrian, 33 N.
W. Rep., 304 (Mich., 1887). The Ken-
tucky tax statutes are so construed that
a corporation need not pay a tax on its
property in addition to the tax on the
stock. Louisville, etc., Co. v. Barbour,
9 S. W. Rep., 516 (Ky., 1888); Com, w.
St. Bernard Coal Co., id., 709. The Penn-
sylvania acts are construed so as to pre-
vent double taxation. Penn. Co., etc.,
v. Com., 15 Atl. ae 456 (Pa., 1888),

‘ 623
§ 568.] TAXATION OF STOCK AND CORPORATIONS.  [CH. XXXIV.
of contracts.! This provision has frequently been construed and
applied in cases involving the taxation of the corporate franchises,
capital stock or tangible property. Aside from questions of this
nature there are two classes of cases of exemptions from taxation
which affect the taxation of shares of stock. The first class in-
volves the question whether an exemption of the corporate prop-
erty, franchises or capital stock from taxation exempts also the
shares of stock from any tax; the second, whether an exemption
of the shares of stock from taxation exempts the corporate prop-
erty, franchises and capital stock. As regards the former exemp-
tion, the effect thereof depends largely on the words used in the
statute or charter granting the exemption. The question has given
rise to a. difference of opinions. In the federal courts, New Jersey,
Indiana and Kentucky, it has been decided that an exemption of
the corporation from taxation on one or more of the first three
methods of taxation exempts by implication the shares of stock.
But in Tennessee, North Carolina and Maryland a contrary rule

prevails.*

1 Farrington Vv Tennessee, 95 U. &.,
679 (1877). See, also, § 497. An ex-
emption of the stock of a railroad com-
pany does not exempt stock issued for
constructing branch roads of that com-
pany, such construction being subse-
quent to a constitutional provision pro-
hibiting exemptions. Chicago, etc., R.
R. Co. v. Guffey, 120 U. S., 569.

2State v. Branin, 23 N. J. L., 484
(1852); Same v. Bentley, id., 582; John-
son v, Commonwealth, 7 Dana (Ky.),
338 (1838); King v. City of Madison, 17
Ind., 48 (1861), holding that an exemp-
tion of the capital stock exempts shares
of stock. Gordon v. Appeal Tax Court,
3 How., 183 (1845), held that an exemp-
tion prohibiting any ‘‘further tax or
burden upon them,” the banks, ex-
empted the shares of stock. Again,
where the charter provided that ‘“ the
capital stock of said company shall be
forever exempt from taxation, the
shares of stock cannot be taxed.
Each share is a part of the whole, and,
as the whole is exempt from taxation,
it follows that each part or share must
also be exempt.” State of Tenn. v.
Whitworth, 22 Fed. Rep., 75 (1884).
And the purchaser and successor of a

railroad, taking by statute all its rights
and privileges, is also exempt in same
manner. Id., 81; aff'd, 117 U. S, 139
(1886). An exemption of the corpora-:
tion exempts ‘it from a tax upon the
shares of shareholders, which the coms
pany is required to pay irrespective of
any dividends or profits’ payable to the
shareholder, since this is substantially
a tax on the corporation itself. New
Orleans v. Houston, 119 U. S., 265
(1881). Cf. U. 8. v. R. R. Co., 17 Wall.,
322. An exemption of shares of stock
from taxation is waived by the accept-
ance of subsequent statutes imposing a
tax. Hannibal & St. & R. RB, Co. v.
Shacklett, 30 Mo., 550 (1860); Cooley on
Taxation, 2d ed., 212.

3Union B’k v. State, 9 Yerg. (Tenn.),
490 (1836), holding that an exemption of
the capital stock did not exempt shares
of stock. To same effect, City of Mem-
phis v. Farrington, 8 Baxter (Tenn.), 539
(1876), the court saying: ‘The capital
stock and'shares of stock are two dis- |
tinct properties, and an exemption of
the one does not thereby necessarily ex-
empt the other, nor the taxation of the
latter operate asa tax on the former, so
as to interfere with its exemption from

624
CH. XXXIV. |

TAXATION OF STOCK AND CORPORATIONS.

ee
.

[§ 568.

As regards the second class of exemptions, it seems to. be estab-
lished by the great weight of authority that an exemption of the
. Shares of stock from taxation exempts also, by implication, the cor-
porate franchises, capital stock and tangible property from any tax.!
Exemptions, however, have no effect and are of no avail beyond
the boundaries of the state granting them; and accordingly a non-
resident stockholder, who is taxed on his stock j in the state where
he resides, cannot defeat that tax by reason of exemptions enjoyed
within the state creating the corporation.?

such burdens.” Belo v. Com’rs of For-
syth, 82 N. C., 415 (1880), holding that
-an exemption of the corporate realty
does not exempt the shares of stock;
Appeal Tax Court v. Rice, 50 Md., 802
(1878); Tax Cases, 12 G. & J. (Md.), 117
(1841), In the case of County Com’rs v.
Annapolis, etc., R. R. Co., 47 Md., 592
(1377), the court say: ‘‘To make out the
claim to this exemption from the taxing
power of the state, so essential to the
support of its government, it is incum-
bent upon corporations to show that the
power to tax has been clearly relin-
quished by the state; and if this has not
been done in clear and explicit terms, or
by necessary implication, the question
whether or not the exemption has been
granted must be resolved in favor of
he state.” Citing Prov. B’k v. Billings,
4 Pet., 514 (1830); Wilmington R. R.
Co. v. Reid, 18 Wall., 264; Phil. & Wil-
mington R. R. Co, v. State, 10 How.,
876 (1850), But a clear exemption of
the shares of stock is a contract which
is protected by the United States con-
stitution. State v. Baltimore & O. R. R.
Co., 48 Md., 49 (1877). A charter pro-
vision, however, that a certain tax
shall be paid by the corporation does
not prevent asubsequent change in that
tax. Delaware Rai'road Tax, 18 Wall.,
206 (1878). And an exemption by the
state has been held not to exempt the
shares from taxation by a municipality.
Gordon’s Ex’rs v. Mayor, etc., 5 Gill
(Md.), 231 (184).

Scotland Co. v. Mo., Iowa, etc., R’y
Co,, 65 Mo,, 128 (1877), the court saying:
“Tt is clear that a tax on the property

(49)

+

represented by the stock is substantially
a tax on the stock.”
Com’rs v. Annapolis, etc., R. R. Co., 47
Md., 592 (1877), where the court say:
“Tt is settled by repeated decisions of
this court, which we are not disposed to
disturb, that the exemption of the shares

of the capital stock operates as an ex--
emption of the property of the corpora--

tion, or so much of it as the corporation
is fairly authorized to hold for the proper

exercise of its franchises; and this upon:

the principle that the shares of the stock
in the hands of the shareholders repre-
sent the property held by the corpora-
tion;” B’k of Cape Fear v. Edwards, 5
Tred. Law (N. C.), 516 (1845), where the
charter said: ‘‘ The said bank shall not
be liable to any further tax;” Mayor,
ete., of Baltimore v. Baltimore & O. R.
R, Co., 6 Gill (Md.), 288 (1848); Tax
Cages, 12 G. & J. (Md.), 117 (1841); Gor-
don’s Ex’rs v. Mayor, etc., of Baltimore,
5 Gill (Md.), 231 (1847). In the case,
however, of Wilmington & W. R. R.
Co, v. Reid, 64 N. C., 226 (1870), it was
held that an exemption of shares of
stock does not exempt the corporate
franchise from taxation. Raleigh, etc.,
R. R..v. Reid, id., 155 (1870), And in
State v. Petway, 2 Jones’ Eg. (N. C.),
896 (1856), it was held’ that a charter
provision that the shares of stock should
be taxed a certain amount did not pre-
vent a tax on dividends,

2 Appeal Tax Court v. Patterson, 50
Md., 354 (1878); Same w. Gill, id., 877,
See, also, Railroad Co. v. Pennsylvania,
15 Wall,, 300 (1872).

625

See, also, County .

\
§ 569.] TAXATION OF STOCK AND CORPORATIONS.  [CH. XXXIV.

§ 569. Taxation of national bank stock.— It is one of the estab-
lished principles of constitutional law in this country that the in-
struments of government by the United States shall not be taxed
by any state, and also that those of a state shall not be taxed by
the United States. Accordingly, the bonds issued by the United
States government cannot be taxed by any state! So, also, when
the old United States bank was in existence, it was held that neither
the bank rior its capital stock could be taxed by a state. But it
was also held that, inasmuch as the interest of the stockholders in
‘the bank was different from the franchises, property, capital stock

and the United States bonds held by the bank; such interest of the
shareholder could be taxed by a state, and that such taxation

would be constitutional and legal.?
A state tax on the capital stock of the
But a tax on its real estate or on its shares

-present national banks.
-bank is illegal and void.

1Cooley on Taxation, 2d ed., 84, 85.
‘Formerly government bonds were called
stock both in England and in this coun-
“try. This use of the term, however, has
become practically obsolete. See B’k of
‘Commerce v. New York, 2 Black, 620
(1832); Weston v. City, etc., of Charles-
ton, 2 Peters, 449 (1829).

2National B'k v. Commonwealth, 9
Wall, 353 (1869), per Miller, J.; M’Cul-
loch v. State’of Maryland, 4 Wheat.,
316, 486 (1819); Bulow v. City of Charles-
ston, 1 Nott & McCord (8. C.), 527 (1819),
‘See, also, Berney v. Tax Collector, 2
-Bailey (S. C.), 654 (1881).

3B’k of Omaha v. Douglas County, 8

Dill., 298 (1878); Collins v. Chicago, 4.
.Biss., 472; Salt Lake, etc,, B’k v. Gold-
ing, 2 Utah, 1 (1876); Mayor, etc., of
Macon v. First Nat’! B’k, 59 Ga., 648
(1877); Bradley v. Illinois, 6 Am. L

Reg. N. S., 466; B’k of Commerce v. N. :

Y. City, 2 Black, 620, reversing People
v, Com'rs of Assessments, 23 N. Y., 192;
8 C., 32 Barb., 509, and declaring un-
constitutional the New York statutes
under which the national banks were
taxed. New York has been exceedingly
unfortunate in its efforts to tax national
banks. After the decision in B’k of
Commerce v. N. Y. City, supra, came
Bank Tax Case, 2 Wall., 200 (1864), de-
claring unconstitutional the New York

The same rules apply to the

statute of 29th April, 1863, for the taxa-
tion of national banks, the tax still be-

‘ing on the capital stock. Next came

Van Allen v. The Assessors, 3 Wall.,
573 (1865) (reversing City of Utica v,
Churchill, 33 N, Y., 161. See, also, First
National B’k v. Fancher, 48 N. Y., 524,
1872), declaring unconstitutional the
New York statute of 9th March, 1865,
taxing the shareholders in national
banks, because the act did not prescribe
expressly that the tax should be no
greater than the tax on other shares of
stock, and because taxes in New York
on other corporations were not on shares
of stock but on the capital stock, New
York then passed the act of 23d April,
1866, which was sustained in People v. ,
Com’rs, 4 Wall., 244 (1866). Still later
came the case of People v. Weaver, 100
U. 8., 539 (1879), reversing 67 N. Y., 516,
overruling People v. Dolan, 36 N. Y.,
59, and declaring void the New York
tax of national bank stock, for the rea-
son that the New York court of appeals
construed the New York taxation stat-
ute to allow persons taxed on ordinary
securities a deduction for debts, whilea
similar deduction was not allowed to
stockholders in banks, state or national.
Supervisors v. Stanley, 103 U. 8., 805
(1881) [see People v. Dolan, 86 N, Y., 59,
1867], practically modified the prsol

626
A

\
/

CH. XXXIV. ] TAXATION OF STOCK AND CORPORATIONS.

[§ 570.
of stock is upheld as legal and enforceable.! This is the law, al-
though a large part or all of the bank’s capital stock is invested in
United States bonds? The authority of a state to tax shares of
stock in national banks is expressly conferred by the statutes of
the United States which create and regulate these banks.* The
only questions of importance that are still unsettled turn upon the
meaning and application of that statute; and, accordingly, the law
is stated most clearly when it is connected with the various pro-
visions of these statutes.

§ 570. Place in which shares of national bank stock may be
taxed.— The revised statutes of the United States expressly declare
that non-resident stockholders in a national bank are to be taxed
at the place where the bank is located.‘ Under this statute a non-
resident of the state within which the bank is situated can be taxed
on his stock only where the bank is located.’ The state where he
resides cannot also tax him on such stock. As regards residents of
the state within which the bank is located, the state itself deter-
mines where the tax is to be levied.* If the state statute requires

ing case, however, by holding that a
stockholder who owed no debts could
not complain, and that those who did
owe debts were entitled not to a re-
lease from the tax altogether, but only
to the extent of what the state ought to
have allowed as adeduction. The last
case in New York was decided by Judge
Wallace in November, 1886. States
cannot tax national bank currency.
Horne v. Greene, 52 Miss., 452. Cf.
Ruffin v. B’d of Com’rs, 69 N. C., 498;
Lily v. Com’rs, 69 N. C., 300; B’d of
Com’rs v. Elston, 82 Ind., 27 (1869).

lAustin v. Boston, 96 Mass., 359
(1867); First Nat. B’k v. Douglas County,
5 Dill., 880 (1874), upholding the Ne-
braska statute herein of 27th of Febru-
ary, 1878; Stetson v. City of Bangor,
56 Me., 274 (1868).

2Van Allen v, Assessors, 8 Wall., 573
(1865); People v. Com’rs, 4 Wall., 244
(1866). See, also, Home Ins. Co, v. N.
Y., 119 U. S., 129 (1886).

3K, S., U. S., § 5219 (taken from act
of 3d June, 1864, as amended by act of
February 10, 1868), The case of People
v. Weaver, 100 U. S., 589, 543 (1879),
says that the effect of the act of con-
gress, as regards the taxation of na-

tional banks, is that congress says to
the states: ‘‘ You may tax the real es-
tate of the banks as other real estate is
taxed, and you may tax the shares of
the bank as the personal property of the
owner to the same extent you tax other
moneyed capital invested in your state.
It was conceived that by this qualifica-
tion of the power of taxation equality
would be secured and injustice pre-
vehted.” Wasson v. First Nat’l B’k, 8
N. E. Rep., 97 (Ind., 1886). New shares
cannot be taxed until the increase has
been approved by the comptroller of
the currency. Charleston v. People’s
Nat’! B’k, 5 8. C., 103.

4Such was the effect of the amend-
ment of 1866. Previous to that time
there was controversy herein as to the
meaning of the act of 1863. See Aus-
tin v. Boston, 96 Mass., 359 (1867).

5 See McIver v. Robinson, 58 Ala., 456;
Weaver v. Weaver, 75 N. Y., 830; Kyle
v. Fayetteville, 75 N. C., 445; Nat'l B’k
». Commonwealth, 9 Wall., 353; Lion-
berger v. Rowse, 9 Wall., 468.

® Austin v.. Aldermen, 7 Wali., 694
(1886), The tax may be levied on resi-
dent stockholders in the city, county or
town where they reside. Austin v. Bos-

627
'

\

TAXATION OF STOCK AND CORPORATIONS. [cH. XXXIV.

§ STL]

that the whole tax shall be paid in the city, county or town where

the bank is located, even though some of the stockholders reside |

in other counties or cities, the statute must be obeyed.! Generally,
howefer, the statute requires that-stockholders residing in the state
shall be taxed at their place of residence on stock owned by them
in a national bank within that state” If the statute is silent herein,
then the state statutes regulating the taxation of stockholders in
other corporations are to apply to stockholders in national banks
situated within the state.

§ 571. The tax must not be greater than that imposed on other
“moneyed capital.’— The most difficult, unsettled and litigated
questions connected with the taxation of shares of stock in national
banks arise from the meaning and application of that provision of
the statutes of the United States requiring that the taxation of na-
tional bank shares of stock shall not be ata higher rate than the
taxation of other “ moneyed capital” within the state. The words
“moneyed capital” have been construed to mean “not only bonds,
stocks and money loaned, but all credits and demands of every
character in favor of the tax-payer.”*® This has been the subject of

ton, 96 Mass,, 359 (1867). And the cash-
ier of the bank may be required by stat-
ute to send to the clerks of the various
towns the names of such stockholders
as reside in those towns. Waite v. Dow-
ley, 94U. S., 527 (1876).

1National Bank v. Commonwealth, 9
Wall., 353 (1869); Tappan v. Merchants’
Nat'l B’k, 19 Wall., 490 (1873); Prov.
Inst. v. City of Boston, 101 Mass., 575
(1869); McLaughlin v. Chadwell, 7
Heisk. (Tenn.), 389 (1872). Craft v. Tut-
tle, 27 Ind., 332 (1866), holds that if a
municipality has no power to tax shares
in state banks, it cannot tax national
bank shares.

2Clapp v. City of Burlington, 42 Vt.,
579 (1870). See Trustees of Eminence
v. Deposit B’k, 12 Bush, 588 (1877);
Farmers’ Nat’] B’k v. Cook, 32 N. J. L.,
347 (1867). Cf. State v. Hart, 31 N. J.
L., 484 (1866); State v. Haight, 81 N. J.
L., 399 (1866) — objectionable and un-
fortunate decisions in all respects. The
decision in Tenth Ward Nat’! B’k v. City
of Newark, 39 N. J. L., 380 (1877), how-
ever, placed New Jersey among the states
which levy the tax in the most approved
manner, residents being taxed where

they reside, non-residents being taxed
at the domicile of the corporation. See,
also, Kyle v. Mayor, etc., 75 N. 0., 445
(1876); Buell v. Com’rs of Fayetteville,
79 N. C., 267 (1878); Austin v, City of
Boston; 96 Mass., 859 (1867); First Nat'l
Bk v. Smith, 65 Il, 44 (1872); Baker v.
First Nat'l B’k, 67 Ill, 297 (1873); Clapp
v. City of Burlington, 42 Vt., 579 (1870);
Howell v. Cassopolis, 8§ Mich., 471
(1877). Cf. Mintzer v. County of Mont-
gomery, 54 Penn. St., 139 (1867). For
taxation of national bank stock under
the Alabama,act, see Maguire v. Board
of Revenue, 71 Ala., 401 (1882),
3.Wasson v. First Nat’l B’k, 8 N. E.
Rep., 87 (Ind., 1886); Boyer v. Boyer,
118 U.S., 689 (1884). Shares of stock in
banks are other moneyed capital, but
shares of stock in other corporations
are not necessarily so. ‘‘ Moneyed capi-
tal” means money put out by way of

‘loan, discount, etc., or,invested in

stocks of banks, etc., which put out
money by way of loan, discount, etc.
Trust companies are different from
banks herein. Mercantile B’k v. N. Y.,
121 U. S., 188 (1887), aff’'g 28 Fed. Rep.,
776, A tax on national bank stock is

628
CH. XXXIV. |

TAXATION OF STOCK AND CORPORATIONS,

[§ S71.

much controversy, however; and the latest decisions go very far in
upholding the tax, if substantial justice has been done.!
The method of taxing shares of stock need not correspond to

that followed in taxing other corporations in the state.’

legal although stock in state and sav-
ings banks is not taxed directly, but
the corporation itself is taxed in another
way. Richards v. Town, etc., 31 Fed.
Rep., 505 (1887). See, also, Hepburn v.
School Directors, 23 Wall., 480 (1874).

1 People v. Commissioners, 4 Wall., 256;
Adams v. Nashville, 95 U. 8., 19 (1877).
A recent case in New York— In re
McMahon, 102 N. Y., 176 (1886) — holds
that shares of stock in railroad, man-
ufacturing and other corporations are
not “ moneyed capital” in the sense in
which these terms are used in the act
of congress. See, also, First Nat'l B’k
v. Waters, 19 Blatch., 242. Prov. Inst.
wv. City of Boston, 101 Mass., 575 (1869),
holds that the comparison is to be made
with other moneyed capital in the same
town or city where the tax is levied.
See, also, People v. Moore, Idaho, 504
(1878). Subject to this rule the shares
of national banks may be assessed at
their value even above par. Hepburn
v. School Directors, supra (1874); Peo-
ple v. Commissioners, etc., 94 U. S.,
415 (1876); S. C., 67 N. Y., 516 (1876);
aff'g 8 Hun, 536. St. Louis Nat'l B’k
v. Papin, 4 Dill., 29 (1876), the court
saying, also, that the assessors may as-
eertain that value by including “all
reserve funds, profits, earnings and
other values” when the intent of the
statute is to basé the tax “‘ upon an in-
quiry, inter alia, into the actual value
of the property of the banks so far as
this imparts or confers a value upon
the shares.” Stockholder cannot en-
join the tax unless he first pays such
part of it as he admits is legal. Ro-
senburg v. Weekes, 4 S. W. Rep.,
899 (Texas, 1887). The stock is listed
against the stockholder, not against
the bank. Miller v. First, etc., B’k, 21
N. E. Rep., 860 (O., 1889).

2Davenport B’k v. Davenport, 123

The ma-

0. S., 83 (1887). ‘‘There is no reason
to suppose that congress cared at all
about the mode the states might adopt
for the collection of their taxes. A tax
imposed on the capital or property ofa
corporation falls as effectually on the
capital of the shareholder represented
by his shares as does a tax upon the
shares directly; and although, in legal
discrimination, a tax upon the former
is not a tax upon the latter, practically
and substantially taxation of the capi-
tal of the corporation is taxation of the
capital of the shareholder.” Tax on
national bank stock upheld, though all
other stock except bank stock is ex-
empt, the tax being on capital stock.
Mercantile Nat'l B’k v. N. Y., 28 Fed.
Rep., 776-785 (1886). Wallace, J., aff’d
121 U. S., 188. The mode of collection
need nut be the same. The state may
compel the bank to pay the tax.  Na-
tional B'k v. Commonwealth, 9 Wall.,
353, 363 (1869), per Miller, J. But if the
assessment is illegal in that no notice
and opportunity is given to the share-
holder to appear and resist the tax it
cannot be enforced. Albany City Nat.
Bk v. Maher, 20 Blatch., 341 (1882).
In general cf. Van Allen v. Assessors,
38 Wall., 573; Bradley v. People, 4
Wall., 459 (1866); Hubbard v. Johnson
County, 23 Iowa, 130 (1867); People v.
Assessors, 29 How. Pr., 3871 (1865);
Wright v. Stelz, 27 Ind., 338 (1866),
overruling Whitney v. Madison, 23 Ind.,
231, on certain points; Cooley on Taxa-
tion, 2d ed., 390. Contra, People v.
Bradley, 39 Il.,'180 (1866). See, also,
Frazier v. Siebern, 16 O. St., 614; Smith

v. First Nat. B’k, 17 Mich., 479; Van,

Slyke v. State, 23 Wis., 656; Boynoll v.
State, 25 Wis., 112. Where a state and
also a local tax are levied on shares of
stock in a state bank, and the local tax
is declared illegal, the same local tax

629:
§ 571.]

TAXATION OF STOCK AND CORPORATIONS.

[CH. XXXIV.

terial point is that national bank stock must not, as a result, be

taxed higher than other moneyed investments.

If this rule is

observed, it is of little consequence whether the tax on national
bank stock i is levied and assessed in the same way as other corpo-

rations are taxed.

If the state laws allow a deduction to a person taxed on bonds,
notes and similar property for debts due from him to others, a
similar deduction must be allowed to stockholders taxed on their

shares in a national bank.!

is illegal as regards shares in national
banks. City Nat. B’k v. Paducah, 2
Flippin, 61 (1877).

1 Evansville B’k v. Britton, 105 U. S.,
822 (1881), aff’'g 8 Fed. Rep., 867. But
a deduction to individuals for United
States bonds held by them will not in-
validate a tax on the national bank
stock without a deduction for bonds
held by the bank. Bressler v. Wayne
County, 41 N. W. Rep., 356 (Neb., 1889) ;
People v. Com’rs, 4 Wall., 244 (1866).
In the recent case of Wasson v. First
Nat'l B’k, 8 N. E. Rep., 97 (Ind., 1886),
the court held that the deduction al-
lowed to others is fatal to a tax on
national bank shares without that de-
duction only when it is ‘‘ material and
serious;” and that that depends on the
proportion of moneyed capital which is
allowed the deduction to that moneyed
capital which is not allowed it. If ma-
terial, the national bank share tax is to
be allowed a similar deduction. Na-
tional bank stock cannot be taxed ata
higher valuation on its actual value
than other moneyed property is val-
ued at. Deductions allowed to other
moneyed capital must also be allowed
on national bank stock. Whitbeck v.
Mercantile, etc., B’k, 127 U. 8., 193
(1888).

Where a tax on stock is not illegal
except in that that the assessors have
proceeded in a wrong manner, the court
will not enjoin its collection unless
the plaintiff stockholders pay in such a
tax as would have been legal. Frazer
v. Seibern, 16 O. St., 614 (1866); Cum-
mings v. Merchants’ Nat'l B’k, 101 U,.

If the statute does not allow the same

S., 153 (1879); Supervisors v. Stanley,
105 U.S., 805 (1881); 5. C., sub. nom.
Stanley v. Supervisors, 121 U.S&., 535
(1887), holding that the stockholder can-
not recover back the excess of tax
where he has not attempted to have the
tax remedied. Hills v. Exchange B’k,
105 U.8., 319 (1881); rev’g Nat’l Albany
Exchange B’k v. Wells, 18 Blatch., 478
(1880); 5 Fed. Rep., 248. In consequence
of this escape of the stockholders from
taxation, a special statute was passed
levying a back tax. See N. Y. Laws, 1883,
ch, 341. Such a statute is constitutional.
See McVeigh v. Loomis, 49 Ill, 318
(1868). The legislature may cure ary
defects in the levy of taxes in past
years, provided such defects could have
been so modified before the levy was
made. Williams v. Supervisors of Al-
bany, 122 U. S., 154’ (1887), sustaining
ch. 845, Laws of 1883. Cf. City Nat'l
Bk v. Paducah, 2 Flippin, 61 (1877).
And a deduction to other moneyed cor-
porations for their real estate must be
allowed in taxing national bank shares.
Pollard v. State, 65 Ala., 528 (1880); over-
ruling McIver v. Robinson, 58 Ala., 456,
and Sumbre County v. Nat’l B’k, 62
Ala., 464. In general see, also, Rug-
gles v. City of Fond du Lac, 53 Wis.,
486 (1881); Miller v. Heilbron, 58 Cal.,
188 (1881); St. Louis Nat'l B’k v. Papin,
4 Dill., 29 (1876); Covington, etc., B’k v.
Covington, 21 Fed. Rep., 484 (1884), De-
duction for debts, if allowed to persons
taxed, generally must be allowed na-
tional bank stockholders who are taxed
on their stock. McAden v. Com’rs, etc.,
28. E. Rep., 670 (N. C., 1887). Deduc-

630
CH. XXXIV.] | TAXATION OF STOCK AND CORPORATIONS.

($571.

to the latter, and the courts of the state refuses to allow the deduc-
tion, then the tax is illegal. Such was the result of a tax in New
York on national bank stock.!

A refusal to allow a deduction to stockholders in national banks
similar to a deduction allowed on a tax levied on other “ moneyed
capital” was held to be a discrimination in contravention of the
statute. Special exemptions, however, of certain stocks or other
forms of “moneyed capital” do not require that a similar exemp-

tion should be made on national bank stock.?

tions are to be allowed the national
bank stockholder for debts due from
him to others where the state statute
permits its citizens to deduct their debts
from the valuation of their personal
property. Richards v. Town, etc., 31
Fed. Rep., 505 (1887); Peavey v. Town,
etc., 9 Atl. Rep:, 722 (N. H., 1887). As
regards deductions for surplus funds
which are already taxed, see Strafford
Nat'l B’k v. Dover, 58 N. H., 316 (1878).
Cf. North Ward, etc., Bk v. City of
Newark, 69 N. J. L., 380 (1877); First
Nat'l B’k v, Peterborough, 56 N. H., 38
(1875). As regards its realty, see Com’rs
‘ot Rice County v. Citizens’ Nat’l' B’k,
23 Minn., 280 (1877). In Indiana the
national bank stockholder may recover
back such part of the tax as should have
been deducted by reason of his indebted-
ness, City of Indianapolis v. Vajen, 12
Northeast. Rep., 311 (Ind., 1887); Ex-
change Nat'l B’k v. Miller, 19 Fed. Rep.,
372 (1884).

1People v. Weaver, 100 U. S., 539
(1879). The New York court held that
** the effect of the state law is to permit,
a citizen of New York, who has mon-
eyed capital invested otherwise than in
banks to deduct from that capital the
sum of all his debts, leaving the re-
mainder alone subject to taxation, while.
he whose money is invested in shares
of bank stock can make no such deduc-
tion.” The supreme court of the United
States declared the tax on the national
bank shares to be invalid. But the case
of Supervisors v. Stanley, 105 U. S.,
305, 315 (1881), holds that the tax is not
‘void absolutely, If the stockholder

owned no debts he is not injured; and
even if he owes debts he cannot defeat
the tax altogether, but is allowed a sim-
ilar deduction. No discrimination, al-
though the state taxes banks and
nothing else. Gorge’s Appeal, 79 Pa.
St., 149 (1875) No discrimination,
though a deduction for debts is allowed
to those whose property consists of
debts due them; but no deduction other-
wise. First Natl B’k v. St. Joseph, 46
Mich., 526 (1881). The exemption of all
capital which is wholly invested in min-
ing is not a discrimination. B’d of
Com’rs v. Davis, 12 Pac. Rep., 688
(Mont., 1887). Exemption of savings
banks, municipal bonds and shares of
stock in all foreign and domestic cor-
porations other than banks from taxa-
tion does not invalidate tax on shares
of stock in national banks. Mercantile
Bk v. N. Y., 121 U. S., 188 (1887); New-
ark, etc., Co. v. Newark, 121 U. S., 163
(1887); B’k of Redemption v. Boston,
125 id., 60 (1888). No discrimination
exists in taxation of national bank stock
in territory where the shares of stock.
in corporations paying taxes on their
property or capital stock are exempted
from taxation. County of Silver Bow
v. Davis, 12 Pac. Rep., 688 (Mont., 1887).

Thus, aspecial contract exemption of
afew state bonds from taxation will
not exempt the national bonds. Lion-
berger v. Rowse, 9 Wall. 468 (1869);
Hepburn v. School Directors, 23 Wall..
480 (1874), where an exemption of mort-
gages, judgments and contracts to sell
land were immaterial herein. See, also,
Adams v. Nashville, 95 U. 8, 19 (1877);

631
§ 572.) TAXATION OF STOCK AND CORPORATIONS. [Ol. XXXIV.

Again, the national bank act cannot be evaded by an unfair as-
sessment of the shares in national banks as compared with the
assessment of other moneyed capital. It is a well-known fact and
an understood matter in nearly all localities that no kinds of prop-
erty are valued at their-actual selling worth in making the valuation
for taxation purposes. Consequently, if other moneyed capital is
valued, in the assessment rolls at a certain proportion of the actual
value, and national bank stock at a ingher proportion, the tax is
illegal and cannot be collected.

$572. The bank may bring suit to restrain illegal tax on tts
stockholders.— There has been some doubt as to whether a national
bank could bring suit to restrain an illegal tax on its stockholders.
Ordinarily, a corporation cannot do so. Each stockholder must
protect his own interests. But where, as in the case of national
banks, the tax is paid by the bank itself and collected by it from
its stockholders, if the latter refuse to pay the bank or recognize
its payment as legal, many suits would result. Accordingly, i in
order to avoid a multiplicity of suits, it is now well established
that the bank itself may file a bill in equity to prevent and enjoin

the collection of an illegal tax on its stockholders.?

Supervisors v. Stanley, 105 U. Ss. 305,
317 (1881); In re McMahon, 102 N. Y.,
176 (1886); McLoughlin v. Chadwell, 7
Heisk. (Tenn.), 389 (1872); Boyer v.
Boyer, 113 U. S., 689; Everitt’s Appeal,
77 Penn. St., 216; Albany, ete, Bk v.
Maher, 19 Blatch., 175 (1882). See, also,
City of Richmond v. Scott, 48 Ind., 568
(1874); Mercantile Nat'l B’k v. City of
N. Y., 28 Fed. Rep., 776, 785,( 1886).

l Pelton v. National B’k, 101 U.S., 148
(1879), the court saying that ‘‘ any sys-
tem of assessment of taxes which exacts
from the owner of the shares of a na-
tional bank a larger sum in proportion
to their actual value than it does from
the- owner of other moneyed capital
valued in like manner does tax them at
a greater rate within the meaning of
the act of congress.” Where, however,
the assessors assess ordinary securities
at three-fifths of their actual value, and
assess bank stock at its full actual value,
and such method of unequal assess-
ments is contrary to the constitution of
the state, the court will relieve the
stockhalders only upon payment by

due.

them of such a tax as would.have been
legal. Cummings v. Merchants’ National
B’k of Toledo, 101 U. S., 158 (1879);
Supervisors v. Stanley, 105 U. S., 805
(1881). When the national bank stock
is assessed too low, the fact that another
bank is assessed still lower will not in-
validate the tax against the former.
People v. Assessors, etc., 2 Hun, 583
(1874). In the recent case of First Nat'l
Bk of Toledo v. Treasurer, 25 Fed. Rep.,
749 (1885), where ordinary moneyed cap-
ital was assessed at six-tenths of its:
actual value, while shares in national
banks were assessed at a higher propor-
tion of the real value, the collection
thereof was enjoined upon the com-
plainant paying the tax admitted to be
As to the pleadings, see National
B’k v., Kimball, 103 U. S., 782 (1880).
Lower valuation of ather property has
been held to be immaitcrial. Wagoner
v. Loomis, 87 O. St., 571 (1881).

2City Nat'l Bk v. City of Paducah, 2
Flippin, 61 (1877), where the court say:
‘The bank is so far the trustee of the
stockholders and the custodian of the

682
 

CH. XXXIV. |

TAXA'1ION OF STOCK AND CORPORATIONS,

[§ 5720.

B. OTHER METHODS OF TAXING CORPORATIONS.

§ 5720. General principles.— A state may tax corporations. The
rate of taxation may be greater or less than or equal to the rate
at which individuals are taxed.!| The method of assessing taxes
upon corporations varies in the different states.?

dividends, that it is entitled to maintain
the bill. It might be subjected to great

annoyance by stockholders who denied *

the legality of the tax, and gave the
bank notice that it would pay at the
peril of being sued by them. It is cer-
tainly no hardship to permit the whole
question to. be litigated in a single ac-
tion.” This case holds also that an in-
junction against the collection of the
illegal tax will be granted., In general
see, also, Albany City Nat'l B’k v,
Maher, 20 Biatch., 341 (1882): North
‘ Ward Nat'l B’k v. Newark, 40 N. J. L.,
558 (1878). Cf. Dows v. City of Chi-
cago, 11 Wall., 108 (1870); Tappan w.
Merchants’ Natl B’k, 19, Wall., 490
(1878); Pelton v. Nat’l B’k, 101 U.S.,
148 (1879); Cummings v. Nat'l B’k, 101
.U.S., 153. Contra, First Nat’l B’k of
Hannibal v. Meredith, 44 Mo., 500 (1879).
See, also, Union Nat’l B’k v. Chicago, 8
Biss., 82 (1871). As tothe rule in New
York, see People v. Wall Street Bank,
39 Hun, 525; People v; Coleman, 41
Hun, 344. The same rule does not ap-
ply to a corporation which brings suit
‘to prevent the levy upon and sale of a
non-resident stockholder’s stocks for
non-payment of his tax. Waseca Co.
B’k v, McKenna, 32 Minn., 468 (1884).
~The case of Farmers’ Nat’! B’k v. Cook,
82 N, J. L., 347 (1867), denies the right
of the bank to bring the action, and
says: ‘‘The corporation is not the agent
of the stockholders for ‘any such pur-
pose.” It is clear, where shares of
stock are sold under a tax warrant, that
the corporation isnot obliged to oppose
the sale. McNeal v. Mechanics’ Build-
_ ing, etc., Ass’p, 12 Am. & Eng. Corp.
Cas., 181 (N. J., 1885),

i

1It is constitutional to tax corpora-
tions without taxing individuals. Singer
Mfg. Co. v. Wright, 88 Fed. Rep., 121
(1837); State R. R. Tax Cases, 92 U.
8., 575. Cf. .The Railroad Tax Cases,
18 Fed. Rep., 722 (1882); Santa Clara
Co. v. R. R., 18 id., 885; 5. C., 118 U. S.,
396 (1885),

2 Bank Tax Case, 2 Wall., 207 (1864),

where a state tax upon banks was made
**on a valuation equal to the amount of
their capital stock paid in or secured to
be paid in.” It was held to be a tax
upon property. Society for Savings v,
Coite, 6 Wall., 594 (1867), in which a tax
upon the deposits of savings banks hav-
ing no capital stock was held to be a
tax upon the franchise and not upon
property ; Delaware Railroad Tax Case,
18 Wall., 206 (1878), holding that the tax
may be proportioned to the income of
the corporation; and such a tax, when
based upon the value of the stock of
railroads, with a proviso that the esti-
mate be made- upon the proportion
which the total stock bears to the num-
ber of miles‘of their lines within the
state. is not in conflict with the consti-
tution of the United States relating to
commerce between the states; State v.
Housatonic R. R. Co., 48 Conn, 44
(1880), involving a tax upon the valua-
tion and franchise of a railroad in pro-
portion to its mileage within the state
as compared with its total length; Com-
monwealth v. Lowell Gas Light Co.) 12
Allen, 75 (1866), holding that the legis-
lature lias power to impose a tax upon
the excess of the market value of stock
over the value of the property of the
corporation. In this case the tax was
upheld, though the only corporate prop-

633 :

,
§ 572a.]

TAXATION OF STOCK AND OORPORATIONS.

[CH. XXXIV.

New York and Pennsylvania have perhaps the most complete and
effective systems for taxing corporations, and many decisions have
been made in those states in ‘the application of their taxation statutes.!

erty was real estate, which was also
taxed. San F. & N. P. R. BR. Co. v.
Board of Equalization, 60 Cal., 12 (1881),
holding that a statutory provision that
the property of railroads which are
operated in more than one county shall
be assessed by the state board of equali-
zation and not by the local assessors is
not in conflict with the XIVth amend-
ment to the federal constitution, which
provides that no state shall deny to any
person the equal protection of the laws,
To same effect, Central P. R. R. Co. v.
B’'d of Equal., 60 Cal., 35 (1881); Phila-
delphia Contributionship, etc., v. Com-
monwealth, 98 Pa. St., 48 (1881), where
the tax was based upon net earnings;
State Treasurer v. Somerville, etc., R.
R. Co., 28 N. J. L., 21 (1859), holding
that a charter providing for a tax upon
the cost of"the road requires taxes only
upon a railroad and its appendages and
not upon its rolling stock. The phrase,
‘‘road with its appendages,” in a char-
ter applies only to the real estate. Peo-
ple v. Commissioners of Taxes, 82N. Y.,

459 (1880), holding that the structures of

an elevated road are to be considered
real estate under the N. Y. statute.
1People v. Home Insurance Co., 92
N. Y., 328 (1883), holding that the fact
that the computation is based upon div-
idends, a portion of which are derived
from securities exempted by law from
taxation, does not invalidate the taxes;
Commonwealth v. Pittsburg, F. W. &
C. R’y Co., 74 Pa. St., (1873), holding
that by declaring a dividend a corpo-
ration is estopped from claiming that
it has not been earned, and that profits
paid to stockholders without declaring
a dividend may be the basis of the tax.
See, also, City of Phila. v. Ridge, etc., R.
R., 102 id., 190 (1883); Commonwealth wv.
Erie & Pittsburg R. RB. Co., 74 Pa. St.,

94 (1878), holding that the giving to
stockholders the option to purchase
stock does not constitute a dividend as
regards taxation; People v. Assessor, 40
N. Y., 154 (1869), where funds of foreign

‘corporations owned and held‘ by a

trustee in New York were held subject
te taxation in that state. But see Peo-
ple v. Tax Commissioners (N. Y. Sup.
Ct. Special T.), N. Y. Daily Register
April 30, 1888. The New York act has
been held to apply only to the general
state taxes, and not to affect the right of
imposing taxes for municipal or county
revenues. People v. Fire Ass’n, 92 N.
Y., 311 (1888); People v. Davenport, 91
N. Y., 574 (1883); Eastern Trans. Co.
v. Commissioners, 26 Hun, 446 (1882),
In New York the assessment is based
upon the value of the stock. People t.
Commissioners, 1 T. & C., 635 (1873);
affirmed, 60 N. Y., 688; Oswego Starch
Factory v. Dolloway, 21 N. Y., 449
(1860); Chadwick v. Crapsey, 35 N. Y.,
196 (1866). Under the New York statute
subjecting. the capital stock of a com-
pany at its actual value to taxation, the
assessors may arrive at the valuation by
any one of ‘* the tests and*measures of
value which men ordinarily adopt for
business purposes in estimating and
measuring values of property.” People
v. Coleman, 107 N. Y., 541 (1887). In
estimating the value of stock the offi-
cers may ‘take into account the amount
of indebtedness of the corporation; but
such indebtedness should not be de-
ducted from the valuation. . People v.
Commissioners,,1 T. & C., 635 (1878);
affirmed, 60 N. Y., 638 (1875); People v.
Austen, 100 N. Y., 597 (1885). See, also,
People v. Commissioners, 95 N, Y., 554
(1884). Nor are they obliged to deduct
the value of United States bonds. Peo-
ple v. Home Ins, Co., 92 N. Y., 328

684
OH. XXXIv.}

TAXATION OF STOCK AND CORPORATIONS.

[8 872a.

The taxation statutes of Illinois have also given rise to much

controversy.!

In Pennsylvania, where the tax is upon the excess of dividends
over a specified per cent., the estimate is to be made upon the
amount of capital actually paid in, and not upon the authorized

capital nor the cost of the plant.’

(1888), They are not concluded in mak-
ing the estimate by the fact that the
officers of the corporation have sworn
to the value of the stock. People wv.
Austen, 100 N. Y., 597 (1885). For the
purpose of taxation the certificate of in-
corporation is conclusive of the location
of the principal office of a corporation.
Western Trans. Co, v. Scheu, 19 N. Y.,
408 (1859); Oswego Co. v. Dolloway, 21
N. Y., 449 (1860); Chadwick v. Crapsey,
85 N. Y., 196 (1866); Union 8. S. Co. v,
Buffalo, 82 N. Y., 351 (1880); Pelton »v.
Northern, etc., Co., 37 O, St., 450 (1882).
Real estate is to be taxed in the place
where it is located. Western Trans. Co.
v. Scheu, 19 N. Y., 408 (1859); Oswego
Co. v. Dolloway, 21 N. Y., 449 (1860);
Hudson River Co. v. Patterson, 74 N,
Y., 865 (1878). A New York corporation
owning real estate in another state
may have its value deducted from the
capital stock upon which it is taxed.
People v. Coleman, 21 N. E. Rep. (N.
Y., 1889). Surplus profits may be sub-
jected to taxation. People v. Will-
iamsburgh Gas Co., 76 N. Y., 202 (1879) ;
People v. Commissioners, 76 N. Y., 64
(1879); People v. Commissioners, 28
Hun, 261 (1882), The act applies to for-
eign corporations only to the extent of
their business transacted in New York.
People v. Equitable Trust Co., 96 N. Y.,
887 (1884). A full statement of the va-
rious taxation statutes of all the states
and territories is given in ‘‘Cook on
Corporations, as created and regulated
by statutes and constitutions of the
various states and territories, of the
federal government and of England,
Canada, France and Germany.”

1Under the Illinois statutes relative
to taxation it has been held that the
capital stock of corporations is personal
property, Cooper v. Corbin, 105 IIl., 224
(1883); and as such is subject to taxa-
tion, Parsons v. Gas, etc., Co., 108 id.,
880 (1884); Belleville Nail Co. v. P., 98
id., 399 (1881); that capital stock means
all property and rights of the corpora-
tion of every kind and nature, wher-
ever located within the state, Ohio, etce.,
R. R. v. Weber, 96 id., 448 (1880). Cf.
Pacific Hotel Co. v. Lieb, 83 Ill, 602
(1876); that the value of the capital
stock and franchises may be found by
adding to the value of the stock the
debts of the corporation and deducting
the value of its tangible. property, Ot-
tawa, etc., Co. v. McCaleb, 81 id., 556
(1876); and that assessments by a state
board are legal, Chicago, etc., R. R. Co.
v. Raymond, ‘97 id., 212 (1881); Porter
v. Rockford, etc., R. R. Co., 76 id., 561
(1875); but that the courts may review
the board’s action, Chicago, etc., R. R.
v. Cole, 75 id., 591 (1874), A tax may
be levied upon the tangible property
and also upon the capital stock of the
company. Danville, etc., Co. v. Parks,
88 Ill, 463 (1878).

2Second & Third Street Passenger
R’y Co. v. Philadelphia, 51 Pa. St., 465.
(1866); Citizens’ Passenger R’y Co. v.
Philadelphia, 49 Pa. St., 251 (1865). In
Pennsylvania debts due from corpora-
tions to residents are taxed, and the
corporation itself pays the tax and de-
ducts it from interest money. Com-
monwealth v. Delaware, etc., Co., 16
Atl. Rep., 584 (Pa., 1889).

636
§ 5720.] TAXATION OF STOCK AND CORPORATIONS. [| CH. XXXIV.

Generally, the statutes prescribe that a corporation shall be taxed
where its principal office or place of business is located."

The rolling stock of a railroad is to be taxed to the railroad cor-
poration owning it, and in the state of itsdomicile? Freight-houses,
shops, etc., are taxed not as realty but as part of the “railroad
track; ” * and this is so though it be leased to another road.*- Wheré
a railroad company of one state is consolidated with companies of
other states the consolidated company is considered, for the pur-
poses of taxation, to be a corporation of each state to the extent
that its property is in that state. It is taxed in the state on the
capital stock of the company which it absorbed.’

§ 5720. Exemptions from taxation.— A state, if not restricted by
its constitution, may exempt the property of a corporation from
taxation. Such an exemption constitutes a contract between the
state and the corporation, which cannot be repealed or changed by
subsequent legislation, unless the right to alter or repeal it has been

reserved by the state.

1 People v. McLean, 17 Hun, 204 (1879);
Pelton v. Northern Trans. Co., 37 O. St.,
450 (1882); Baltimore v. Baltimore City
Pass. R’y Co., 57 Md., 81 (1881); West-
ern Transportation Co. v. Stevens, 19
N. Y., 408 (1859); Glaize v. South Caro-
lina R. R. Co., 1 Strobh., 70 (1846), hold-
ing that a corporation may have a spe-
cial or constructive residence extending
to the territorial limits of the jurisdic-
tion which granted its charter for pur-
poses of taxation.

2 Baltimore & Ohio R.'R. Co. v, Allen,
22 Fed. Rep., 376 (1884); Kennedy wv.
St. Louis, V. & T. H. R. R. Co., 62 Tll.,
395.

3 Chicago, etc., R. R. v. People, 98 Ill,

850 (1881).

4 Baltimore & Ohio R, R. Co, v. Allen,
supra; Appeal Tax Court v. Pullman
P. C. Co., 50 Md., 452 (1878); Appeal
Tax Court v. Northern Central R. Co.,
50 Md., 417 (1878).

5Ohio & Mississippi R. R. Co. v
‘Weber, 96 Ill., 443 (1880); Chicago &
N. W. R’y Co. v. Auditor-General, 58
Mich., 79 (1884); Railroad Co. v. Vance,
96 U. S., 450 (1877). In this case a rail-
road corporation of Indiana which had

'

been recognized by an act of the Illinois
legislature as a corporation of that state
was held for taxes upon the capital and

franchises of a road leased by it in Ii-

nois and assessed to the lessor company,
but charged to the lessee company and
to be collected from it. Quincy R. R.
Bridge Co. v. County of Adams, 88 IIL,
615 (1878), where a bridge company orig-
inally incorporated by two states and
consolidated by articles which were con-
firmed by the legislature of one of them
(Illinois) was held to be & corporation
of that state for purposes of taxation.
6Tomlinson v. Branch, 15 Wall., 460
(1872); Home of the Friendless v. Rowse,
8 Wall., 480 (1869); Wilmington R. R.
v. Reid, 18 Wall., 264 (1871); Mobile &
Ohio R. R. Co. v. Moseley, 52 Miss., 127
(1876); Jefferson Bank v, Skelley, 1
Black, 436 (1861), where the charter pro-
vided for the payment of six per cent.
of the bank’s profits in lieu of taxes;
Livingston Co, v. Hannibal & St. J.B.
R. Co., 60 Mo., 516 (1875), where, how-
ever, an exemption from county taxes
was held not to include.a school tax
which originated after the charter was
granted; Hannibal & St. Joseph R. R.

636
 

CH. Xxxiv.]

TAXATION OF STOCK AND CORPORATIONS.

[$ 5728.

Where a corporation whose property is exempt from taxation is
merged into or consolidated with another, the question of whether

Co. v. St. Joseph, 39 Mo. 476 (1867), hold-
ing that an exemption from county tax-
ation will not prevent taxation by acity.
A contract between the state and a rail-
road, that the latter shall pay a certain
tax and no more, is not repealable by
the state. State v. Morris, etc., R. R.,
7 Atl. Rep., 872(N. J., 1886). Though
a charter may be repealable, yet an
amendment giving an exemption from
taxation may be irrepealable, since the
latter may be a contract and not a fran-
chise. Ibid. A bonus to the state on
increase of capital stock cannot apply to
previous charters having charter right
to increase. Commonwealth v. Erie,
etc., Co., 107 Pa. St., 112 (1884); Rail-
road Companies v. Gaines, 97 U. S., 698
(1878), holding that a new corporation
invested with the powers and privileges
of, and subject to the obligations of the
charter of another corporation, does not
take an exemption from taxation. To
same effect, Railroad Co. v. Commis-
sioners, 103 U. S., 1 (1880); Dauphin &
Lafayette R'y Co. v. Kennerly, 74 Ala.,
583 (1888). But see East Tennessee, V.
& G.R. Co. v, Pickerd, 24 Fed. Rep.,
614 (1885); The Delaware Railroad Tax,
18 Wall., 206 (1873); Dartmouth College
v. Woodward, 4 Wheat., 518 (1819);
Providence Bank v. Billings, 4 Pet., 514
(1830); The Binghampton Bridge, 3
‘Wall., 51 (1865); Hamphreys v. Pegues,
16 Wall, 244 (1872); Pacific R. R. v.
Maguire, 20 Wall., 36 (1878); North Mo.
R. RB. Co, v. Maguire, 20 Wall., 46 (1878) ;
People v. Soldiers’ Home, etc., 95 IIL,
561 (1880); University v. People, 99 U.
S., 809 (1878), holding void a statute
limiting a general exemption previously
conferred to property in immediate use
by a corporation ; Farrington v. Ten-
nessee, 95 U. 8., 679 (1877); Railway Co.
v. Philadelphia, 101 U. 8., 528 (1879);
Hoge v. Railway Co., 99 U. S, 848
(1878); Dodge v. Woolsey, 18 How., 331
. (1855), holding that the adoption of a

new constitution declaring that corpo-
rate property shall be taxed will not be
allowed to impair the contract; Mobile
& Spring Hill R. R. Co.'2. Kennerly, 74
Ala., 566 (1883); City of Richmond v.
Richmond & Danville R. R. Co., 21
Gratt., 604 (1872), holding, also, that an
exemption of corporate property in a
city from taxation, which conflicts with
the charter of the city previously
granted, is not unconstitutional if the
city has remaining ample means of tax-
ation to meet its needs; Commonwealth
v. Fayette R. R. Co., 55 Pa. St., 452
(1867), holding that, where power to
alter or repeal the exemption is re-
served, the exercise of the power is no
impairment of the contract; State v.
Miller, 30 N. J. L., 368 (1863), holding
that the repeal may be made by a gen-
eral law; State v. Commissioners of
Taxation, 37 N. J. L., 240 (1874), hold-
ing that, where a general exemption
from taxation is granted to a corpora-
tion without reserving the power to
alter or repeal it, and there is a provis-
ion for a special mode of assessing its
property, it may consent to another
mode of assessment without surrender-~
ing or altering its exemption from gen-
eral taxation; East Tennessee, V. & G.
R. Co. v. Pickerd, 24 Fed. Rep., 614
(1885); Temple Grove Seminary v.
Cramer, 98 N. Y., 121 (1885), holding
that an incorporated academy does not
waive or forfeit its exemption from tax-
ation by reason of having leased its
building for a boarding-house during
vacations; Elizabethtown & P. R, R.
v. Elizabethtown, 12 Bush (Ky.), 283
(1876), holding that an exemption of
railroad property from taxation pre-
cludes any imposition of taxes by the
state, whether for state or local pur-
poses. In Mott v. Penn. R. R, Co., 80
Pa. St., 9 (1858), a sale of a railroad and
canal by the state on terms exempting
the vendee from future taxes was en-

637
8 572b.]

TAXATION OF STOCK: AND CORPORATIONS.

[CH. XxxIVv.

the exemption from taxation passes with its property to the lessee,
vendee or consolidated company is a question which turns largely
on the words granting the exemption.!

Where a consolidation is effected after the adoption of constitu-
tional provisions prohibiting the legislature from exempting the
property of corporations from taxation, the consolidated company
is looked upon as a new corporation, which is not entitled to ex-

joined. The exemption was held to be
unconstitutional. County Com’rs v.
Woodstock Iron Co., 82 Ala., 151 (1886),
holding that an exemption of private
corporations from taxation made by a
general law was not a contract, but only
a legislative bounty, subject to be re-
pealed.

The act by which the exemption from
taxation is made must be clear and un-

equivocal; the intent to confer the im-'

munity must be beyond reasonable doubt.
Ohio, etc., Trust Co. v. Debolt, 16 How.,
416 (1853); The Delaware Railroad Tax,
18 Wall., 206 (1878); North Missouri R.
R. Co, v. Maguire, 20 Wall., 46 (1878);
Mobile & Spribg Hill R. R. Co. v. Ken-
nedy, 74 Ala., 566 (1883), holding that a
reasonable doubt is to be construed
against the exemption; Dauphin & La-
fayette R’y Co. v. Kennedy, 74 Ala.,

588 (1888); City of Richmond »v, Rich--

mond & Danville R. R. Co., 21 Gratt.,
604 (1872). An exemption of a corpora-
tion from taxation upon payment of a

fixed annual tax on the capital stock is:

not voidable. State v. Butler, 8 S. W.
Rep., 586 (Tenn., 1888), A particular
mode of taxation may be changed under
the reserved right to amend the charter,
Detroit St. R’ys v. Guthard, 51 Mich.,
180 (1883). See, also, B’k of Republic
v. County of Hamilton, 21 Ill., 58 (1858);
Mayor, ete., v. Twenty, etc., R. R. Co.,
118 N. Y., 811 (1889). A specific rate of
taxation prescribed in the charter raises
no implication of a legislative contract
to impose no further burdens by way
of taxation, Iron City B’k v. City of
Pittsburgh, 37 Pa. St., 840 (1860). A
constitutional prohibition as to exemp-
tions from taxation does not apply to

railroad corporations, they being quasi
public. Yazoo, etc., R. R. v. B’d, etc.,
87 Fed. Rep., 24 (1888). A charter ex-
emption from all taxation upon pay-
ment of a certain tax is legal. Frank-
lin, etc., v. Deposit B’k, 9 8S. W. Rep.,
212 (Ky., 1888).

1An exemption from taxation per-
tains to the franchise as a corporation,
and does not pass with the sale of the
franchise to operate the road. Chesa-
peake & Ohio R’y Co. wv. Miller, 114 U.
S., 176 (1885); Memphis R. R. Co, v
Com’rs, 112 U. 8., 609 (1884); Tomlin-
son v. Branch, 15 Wall., 460 (1872);
Branch v. Charleston, 92 U. S,, 677 (1875);
Central R. R. Co, v. Georgia, 92 U.S,
665 (1875), reversing S. C., 54 Ga., 401;
Chesapeake & O. R. R. Co. v Virginia,
94 U.S., 718 (1876); The Delaware Rail-
road Tax, 18 Wall., 266 (1878), See,
also, cases in preceding note. Where by
statute “all rights” of a railway are to
pass to another, an exemption from tax-
ation passes. - Atlantic, etce., R. R. vw
Allen, 15 Fla., 637 (1876), It certainly
will not be extended to the property of
other corporations consolidated with it.
Philadelphia, W. & B. R. R, Co. %
Maryland, 10 How., 876 (1850) i Chesa-
peake & O. R. R. Co. v. Virginia, 94 U.
S., 718 (1876); The Delaware Railroad
Tax, 18 Wall., 206 (1878). See, also,
Wait on Insolvent Corporations, 381.
An exemption of a corporation may not
exempt also its timber lands. County
of Todd v, St. Paul, etc., R’y, 86 N. W.
Rep., 109 (Minn., 1888). An exemption
of railroad lands from taxation may
pass to the grantee railroads thereof and
of the franchises. Jn re County of Ste-
vens, 31 N. W. Rep., 942 (Minn., 1887).

638
t

TAXATION OF STOCK AND CORPORATIONS. [§ 572e.

CH. XXxXIv. |

emptions from taxation possessed by the companies of which it is
composed.!

If the franchises and property of a corporation be transferred by
a sale in foreclosure, an exemption from taxation does not accom-
pany the transfer.
a franchise? A statute exempting the property of a corporation
from being taxed does not prevent the taxation of land held by it
merely for convenience and not necessary to its operation.’ In
general, an exemption from taxation by the state is not an exemp-
tion also from municipal taxation for local purposes;! nor from

The exemption is a personal privilege and not:

assessments for improvements.’

§ 572c, Taxation of foreign corporations.— Any state may tax
foreign corporations doing business within its borders.*

l1Memphis & Little Rock R. R. Co,
v. Berry, 112 U. 8., 609 (1884); St.
Louis, Iron Mt. & 8. R. R. Co. v. Berry,
113 U. 8, 465 (1885); Chesapeake &
Ohio R. R. Co, v. Miller, 114 U. S., 176
(1885). Where the legislature ceded to
a company to be formed ‘‘all the right,
“ interest and privileges of whatever
kind” of a defunct railroad company
it was held that an exemption from
taxation conferred on the old company
was not vested in the new one. Rail-
road Co. v. Georgia, 98 U. 8., 359 (1878).
In this case the restriction upon grant-
ing exemptions was in a statute instead
of a constitutional provision.

2Morgan v. Louisiana, 93 U. S., 217
(1876); Louisville & N, R. R. Co. v. Pal-
mer, 109 U. S., 224 (1883); Wilson v.
Gaines, 103 U. S., 417 (1880), where the
transfer was under proceedings to en-
force a statutory lien of a state; Ar-
kansas, Midland R. R. Co, # Berry, 44
Ark., 17 (1884), See, also, 130 U. S., 687,
and p. 637, supra. Where the exemp-
tion is as to all the property of a railroad
its franchise is included, Wilmington
R. R. v, Reid, 18 Wall., 264 (1871).

3S8tate v. Commissioners, etc., 23 N.
J. Law, 610 (1852); State v. Collectors,
etc., 25 N. J. Law, 315 (1855), In these
cases lands owned by a railroad and
occupied by dwellings for employees,
car and locomotive works, coal mines,
etc,, were held to be subject to taxa-

tion. See, also, Toll-bridge Co. v. Os-
born, 35 Conn., 7 (1868), where lands
held for wharves by a bridge company
by authority of law were held taxable
as real estate —a provision in its char-
ter that all its property should be consid-
ered personal property and be divided
into shares being construed to relate to
the property of the stockholders as rep-
resented by the shares; Jn re Swigert,

119 Ill, 83 (1886), holding thata railroad —

exemption did not exempt its elevator.

4Elizabethtown & P. R. R. uv. Eliza-
bethtown, 12 Bush (Ky.), 233 (1876);
Roosevelt. Hospital v, Mayor of New
York; 84 N. Y., 108 (1881), where real es-
tate exempted from state taxation was
held to be subject to assessment by a
city for the construction of a sewer,
Cf. Applegate v. Ernst, 3 Bush (Ky.),
648 (1868), where a tax by a county upon
a railroad to obtain money to pay a
county subscription for the purpose of
completing the road was held to be un-
lawful.

5 New Jersey, etc., R. R. v. Jersey
City, 42 N. J. L., 97 (1880).

6 Liverpool Ins. Co. v. Massachusetts,
10 Wall., 66 (1870); S. C., Oliver v, Liv-
erpool, etc., Co., 100 Mass., 531 (1868);
Western Union Tel..Co, v. Lieb, 76 IIl.,
172 (1875); Western Union Tel. Co. v.
Mayer, 28 O. St., 521 (1876), holding,
also, that such a tax does not violate
the clause in the federal constitution

639
8 5T2c.]

TAXATION OF STOCK AND CORPORATIONS.

[CH. XXXIV,

A state may impose on foreign insurance companies a tax equal
to the tax levied by the state creating the foreign corporation on
corporations foreign to the latter state. a Where a railroad corpora-
tion is incorporated by the United States, a state cannot tax its
franchises; it may tax the tangible property, but not the franchise.2

The power of a state to levy taxes is limited to persons, property

and business within her jurisdiction.

for the regulation of interstate com-
merce. The Pennsylvania statute im-
posing a quarter of a mill license tax
on the capital stock of foreign corpora-
tions having an office in the state, and
prohibiting such offices unless the tax
is paid, the act applying to all foreign
corporations except insurance com-
panies, is constitutional. A state may
exclude or impose conditions upon for-
eign corporations unless they are en-
gaged in interstate or foreign com-
merce, or are employed by the govern-
ment. Pembina Min. Co. v. Pennsyl-
vania, 125 U. S., 181 (1888); Blackstone
Mfg. Co. v, Blackstone, 13 Gray; 488
(1859); State v. Lathrop, 10 La. Ann.,
402 (1855); State v. Fosdick, 21 La.
Ann., 484 (1869); Tatem v. Wright, 23
N. J. L., 429 (1852); State v. Western
Union Tel. Co., 73 Me., 518 (1882); Com-
monwealth v. Western Union Tel. Co.,
98 Pa. St., 105 (1881); Norfolk, etc., R. R.
+. Commonwealth, 114 id., 256 (1836);
Commonwealth v. Milton, 12 B. M.,
212, 218 (1851); Boston Loan Co. wv.
Boston, 187 Mass., 332 (1884); Singer
Mfg. Co. v. County Com’rs, 1389 Mass,,
266 (1885); Att’y-Gen. v. Bay State, etc.,
Co., 99 Mass., 148 (1868); Common-
wealth v. Texas & Pac. R. R. Co., 98
Pa, St., 90 (1881), holding, however, that
a corporation created by the United
States congress is not a foreign corpo-
ration within the revenue act of Penn-
sylvania; Commonwealth @. Gloucester,
etc., Ferry Co., 98 id., 105 (1881); Peo-
ple v. Assessor, etc., 40 N. Y., 154, hold-
ing that funds of a foreign corporation
owned and held by a trustee in New
York are taxable in that state. See;
however, People v. Tax Com’r, N. Y.

_for taxes.

Bonds of domestic corpora-

Daily Reg., April 30 (1888); People v.
Equitable Trust Co., 96 N. Y., 387 (1884),
holding that a tax may be imposed
upon the business done by a foreign
corporation in New York, but nat upon
its property in other states, nor upon its
franchise. For the New York act which
applies to foreign corporations, see Par-
ker Mills v. Commissioners, etc., 29
N. Y., 242 (1861); People v. Horn, etc,
Co., 105 id., 76 (1887). They are to be
taxed where their principal offices in
the state are situated. People, etc., v.
McLean, 17 Hun, 204 (1879). A corpo-
ration chartered by the federal govern-
ment is not such a foreign corporation
as is obliged to pay a license fee under
the Pennsylvania statutes. Common-
wealth v. Texas, etc., R. R. Co., 98 Pa.

St., 90 (1881). Unless a statute other-
wise provides, a lien upon corporate
property for state taxes attaches in
preference to pre-existing judgments
or decrees; it has been held that a sale
under a judgment or decree will not
avoid such alien. Osterburg v. Union
Trust Co., 93 U. S., 424 (1876). In New
York it is held that the rolling stock of
a railroad is subject to seizure and sale
“Randall v. Elwell, 52 N. Y.,

521 (1878). But not so in Kentucky.
Elizabethtown & P. R. R. v,. Elizabeth-
town, 12 Bush, 233 (1876).

1Home Ins, Co. v. Swigert, 104 Ill,
653 (1882); Phila. Fire Ass’n v. New
York, 119 U. §., 110 (1886).

* California v. Pacific R. R. Co., 127
U.S., 1, 40 (1888). A county ordinance
requiring a railroad chartered by the
United States to take out a license is
void. San Benito, etc,. v. Southern P.
R. R. Co., 19 Pac. Rep. (Cal., 1888).

640
CH. XXxIv.]

TAXATION OF STOCK AND CORPORATIONS.

f

[§ 572c.

tions held by non-residents are therefore not taxable by the states
creating the corporations.! Where an assessment of taxes against
a railroad company has been affirmed by the supreme court, manda-
mus may be used to compel payment of them if there is no other
adequate remedy.’ The tax lien on a railroad may by delay be ren-
dered subordinate to a mortgage.? The right of the state to tax cor-
porations must not interfere with interstate commerce.!

1 Railroad Co. v. Jackson, 7 Wall., 262
(1868); State tax on foreign-held bonds,
15 Wall., 300 (1872); Davenport v. Mis-
sissippi & Missouri R. R. Co., 12 Towa,
539 (1861); Commonwealth v. Chesa-
peake & Ohio R. R. Co., 27 Gratt., 344
(1876); People v. Eastman, 25 Cal., 603
(1864), where the same principle was
applied between counties in the same
state. Contra, Maltby v. Reading &
Columbia R. R. Co., 52 Pa. St., 140
(1866). As to the rule where part of the
capital stock is used out of the state, see
Commonwealth v. Standard Oil Co., 101
Pa. St., 119 (1882); State Treas. v.
Auditor-General, 46 Mich., 224 (1881);
People v. Equitable, etc., Co., 96 U. S.,
387 (1884). /

2 Person v. Warren R. R. Co., 82 N.
J. L., 441 (1868); Silverthorne v. War-
ren R. R. Co., 88 N. J. L., 178 (1868).
And the party making return to an
alternative mandamus must show that
he has complied with‘the order to the
extent of his ability; want of funds is
not a sufficient return where it is the
result of the voluntary act of the party.

® Cooper v. Corbin, 105 Tll., 224 (1883);
Parsons v. East, etc., Co., 108 Ill, 380
(1884), .

4 A tax on sleeping-car companies may
be illegal as interfering with interstate
commerce. State v. Woodruff, etc., Co.,
15 N. E. Rep., 514 (Ind., 1888). A state
tax on interstate railroad earnings is

(41)

unconstitutional. Fargo v, Michigan,
121 U. S., 230 (1887); Phila., etc., Co. v.
Penn., 122 U. S., 326 (1887); Delaware,
etc., Co. v..Commonwealth, 17 Atl.
Rep., 175 (Pa., 1888); Northern, etc., R’y
Co. v. Raymond, 40 N. W. Rep., 588
(Dak., 1888). A state may taxa foreign
telegraph company on such a propor-
tion of its capital stock as its lines in
the state bear to all of its lines; but the
state cannot enjoin the operation of the
telegraph until the tax is paid. Western
etc., Tel. Co. v. Massachusetts, 125 U. S.,
530 (1888); Erie R’y Co. v. New Jersey,
31 N. J. L., 581 (1864), holding that a
state tax upon foreign corporations
transporting passengers and freight
through the state graduated by the
number of passengers and weight of the
goods is in violation of that clause of
the United States constitution giving
congress the right to regulate commerce
between the states; Indiana v. Ameri-
can Express Co., 7 Biss., 227 (1876),
where a tax upon transportation
through a state was held to be an inter-
ference with interstate commerce and
unconstitutional. So held, also, of a
tax upon locomotives, cars, etc., of a
foreign railroad company in Minot v.
Philadelphia, Wilmington & B. R. R.
Co., 2 Abb. (U. S. C. C.), 323 (1870), As
to an interstate bridge, see Anderson v."
C. B., etc., R. R., 117 IIL, 26 (1886).

641
CHAPTER XXXV.

FORMS OF ACTIONS AND MEASURE OF DAMAGES WHERE A STOCK-
HOLDER HAS BEEN DEPRIVED OF HIS STOCK.

§573. Pleading and practice in actions {| §581. Measure of damages. (a) The
relative to stock. ~ first rule. :
574, Assumpsit. 582. (b) The second rule.
575. Trespass on the case. 583. (c) The third rule.
576. Trover. 584, Interest, dividends and accre-
577. Detinue and replevin. tions.
578. Money had and received, 586. Nominal damages,
579. Bill in equity. 587. Inactions between stock-brokers
580. Pleading under the codes. and their customers.

§ 573. Pleading and practice in actions relative to stock.— When
an owner of stock who is out of possession brings an action for its
recovery, or for the recovery of the certificate, or for damages for
the detention or conversion of either the stock or the certificate, it
is important to determine what action will lie, in what court the
action is to be prosecuted, and what is the measure of damages.
Similar questions arise when suits are brought for breach of con-
tract to subscribe for stock, or of contracts’ to sell and convey
stock. There are certain well-settled rules as to the form of the
action in these cases which are deduced from the older common-
law pleading and practice. These rules, even in the code states,
where forms of action are little regarded, and where the old actions
have been abolished in name, are still at least partially applicable.
Some knowledge, therefore, of the procedure at common law in
stock cases is necessary. ,

§ 574. Assumpsit.— An action of asswmpsit, or indebitatus as-
sumpsit at common law, lies against a corporation for unjustly re-
fusing to register a transfer, or for refusing to issue a certificate
to one entitled to it.) So, also, assumpsit lies for breach of contract

1 The King v. Bank of England, Doug.,
524 (1780); Kortright v. Buffalo Com-
mercial Bank, 20 Wend., 90 (1838); Ar-
nold v. Suffolk Bank, 27 Barb., 424
(1857); Wyman v. American Powder
Co., 8 Cush., 168 (1851); Sargent v.
Franklin Ins. Co., 8 Pick., 90 (1829);
Hayden v. Middlesex Turnpike Co., 10

Mass., 397 (1813); Pinkerton v. Man-

chester, etc., R. R. Co., 42 N. H., 424

(1861); Hill v. Pine River Bank, 45 id,
300 (1864). Cf. Foster v. Essex Bank,
17 Mass., 479 (1821); Eastern R. R. Co.
v. Benedict, 10 Gray, 212 (1857). . As-
sumpsit does not lie against a corpora-
tion for refusal to register a transfer
of stock, Action on the case istherem- .
edy. Telford, etc., Co. v. Gerhab, 13
Atl. Rep., 90 (Pa., 1888).

642
CH. XXXv.] ACTIONS AND MEASURE OF DAMAGES. [§§ 575, 576.
to return borrowed bank stock on demand.! But mandamus is not
a proper remedy in these cases, and it will not lie to compel a cor-
poration to transfer.’

§ 575. Trespass on the case.— An action of trespass, or an action
of trespass on the case, may also be brought against the corpora-
tion for a denial toa stockholder of a certificate of stock,’ and an
action on the case lies for a conversion of shares of stock.*

§ 576. Trover.—It is a very generally-accepted rule that trover
will lie for the conversion of shares of stock. This is the favorite
remedy when the shareholder has been unjustly deprived of his
stock; and it is nowhere denied, except in Pennsylvania,® that this
form of action is proper. But even there, for the conversion of a
certificate of stock, trover will lie.” For the maintenance of the ac-

 

1McKenney v. Haines, 63 Me., 74
(1878).

2See § 390.

3 Bank of Ireland v. Trustee of Evans’
Charities, 5 H. of L. Cas., 389 (1855);
The King v. Bank of England, Doug.,
§24 (1780); Davis v. Bank of England, 2
Bing., 398 (1824); Coles v. Bank of Eng-
land, 10 Ad. & Ellis, 487 (1839); Gray v.
' Portland Bank, 3 Mass., 364, 881 (1807);
North American Building Association v.
Sutton, 85 Penn. St., 463 (1860); Web-
ster v. Grand Trunk R’y Co., 3 Lower
Can. Jur., 148 (1859); S. C., 2 id., 291
(construing the judicature act, 12 Vict.
ch, 88, § 87); Protection Life Ins, Co.
», Osgood, 93 Ill., 69 (1879); Baker v.
Wasson, 53 Texas, 150 (1880); Smith v.
- Poor, 40 Me. 415 (1855); Catchpole v. Am-
bergate, etc., R’y Co., 1 Ellis & B., 111
(1852); Daly v. Thompson, Sec’y, etc., of
the Anti-Dry-Rot Co., 10 Mees. & W., 309
(1842). Cf. Swan v. North British Aus-
tralasian Co., 7 Hurl. & N., 603 (1862);
Kortright v. Buffalo Commercial Bank,
20 Wend., 90 (1888). Tort with a count
in contract for refusal to transfer.
Bond v. Mount Hope Iron Co,, 99 Mass.,
505 (1868). -

4 Daggett v. Davis, 53 Mich., 35 (1884);
Ayres v. French, 41 Conn., 142 (1874);
Bank of America v. McNeil, 10 Bush,
54; Parsons v. Martin, 11 Gray, 111
(1858); Boylan v. Hugtiet, 8 Nev., 845
(1873); Nabring v. Bank of Mobile, 58
Ala., 204 (1877). ;

5 Payne v. Elliot, 54 Cal., 339 (1880);
Kuhn v. McAllister, 1 Utah, 273. (1875) ;
8. C., 96 U. S., 87 (1877); Bank of Amer-
ica v. McNeil, 10 Bush, 54; Boylan v.
Huguet, 8 Nev., 345 (1873); Nabring v.
Bank of Mobile, 58 Ala., 204 (1877);
Morton v. Preston, 18 Mich., 60 (1869);
Jarvis v. Rogers, 15 Mass., 389 (1810) —
a case where trover was held to lie for
the value of Mississippi'scrip, represent--
ing one hundred and fifty thousand
acres of land; Anderson v. Nicholas, 28-
N. Y., 600 (1864); Freeman v. Harwood,
49 Me., 195 (1859); Ayres v. French, 41
Conn., 142 (1874); Connor v. Hillier, 11.
Rich. Law, 193 (1857); Sturges v. Keith, .
57 Ill, 451 (1870); Budd v. Multnomah:
Street’ R. R. Co., 12 Oregon, 271 (1885);
8. C., 22 Am. & Eng. R. R. Cas., 2%
(1885). Cf. Atkins v. Gamble, 42 Cal.,
86, 100 (1871); Maryland Fire Ins. Co.
v. Dalrymple, 25 Md., 242, 267 (1866).
Trover and arrest lies for conversion of
certificates of stock. Barry v. Calder,
48 Hun, 449(1888). The action for con-
version lies, even though the plaintiff
uses the term ‘‘shares of stock” and
‘‘certificates of stock ” interchangeably.
Godfrey v. Pell, 49 N. Y. Sup. Ct., 226
(1883) Ey

®'Sewall v. Lancaster B’k, 17 Serg. &
R., 285 (1828); Neiler v. Kelley, 69 Penn.
St., 403 (1871). ‘

7 Biddle v. Bayard, 13 Penn. St., 160
(1850). Cf. Aull v. Colket, 2 Week.
Notes Cas., 322 (1875), So in Michi-

648
ACTIONS AND MEASURE OF DAMAGES. [cz. XXXV.

§ 576.]

tion of trover there must be title in the plaintiff to the subject of
the action, and an actual conversion by the defendant. If either
of these elements is wanting the action will not lie. Thus, trover
will not lie for the conversion of a certificate where the title to the
shares is divested.

And, upon the other hand, withholding possession of a certificate
of stock cannot amount to a conversion of the stock itself so long
as the certificate is not indorsed; but it may amount to a technical
conversion of the certificate.’ It is well. established that a refusal
of a corporation to register a transfer in the name of one entitled
to the stock is a conversion of the shares.? And likewise a failure
or refusal by the corporation to issue a certificate to an original
subscriber when by the terms of the contract of subscription it
ought to be issued may be treated as a conversion.’ So, also, a fail-
ure to deliver stock according to a contract for delivery,° or to re-
turn borrowed stock on demand, or at the time when by agree-
ment it ought to be returned ;§ and an unauthorized sale of stock
by a pledgee i in violation of the terms of the contract of bailment,’

gan. Daggett v. Davis, 58 Mich., 35 sufficient complaint in trover for shares,

(1884).

1 Broadbent v. Farley, 12 C. B. (N.S.),
214 (1862). Trover does not lie against
a person to whom stock is given to sell
and use the proceeds to start in business.
Borland v. Stokes, 14 Atl. Rep., 61 (Pa.,
1888). Where several shareholders mut-

ually agree to contribute a number of.

shares each, to be sold for the benefit of
the corporation, one of them cannot,
after the rest have contributed their
proportion, refuse to allow his shares to
be sold as agreed ; and if the corporation
takes them under the agreement and
sells them he cannot have an action of
trover. Conrad v. LaRue, 52 Mich., 83
(1883).

2 Daggett v. Davis, 58 Mich., 35 (1884).
Cf. Morton v. Preston, 18 id., 60 (1869).
Where an administrator sells stock
pledged to the deceased in his life-time
as security for a loan of money and re-
ceives the proceeds and properly ac-
counts to the estate, this is not a con-
version of the shares, and the pledgor
cannot have an action of trover. If any
action lies it is for money had and re-
ceived. Von Schmidt v. Bourn, 50 Cal.,
616 (1875), For an example of an in-

in that there was no sufficient averment
of a conversion or of facts from which
a conversion might be inferred, see
Edwards v. Sonoma Valley Bank, 59
Cal., 136 (1881); and see, also, Cumnock
v. Inst. for Sav., 7 N. E) Rep., 869
(Mass., 1886).

3North America Building Assoc. v.
Sutton, 35 Penn. St., 463 (1860); West
Branch, etc., Canal Co.’s. Appeal, 81*

‘Penn. St., 19(1870); Baltimore City, etc.,

R’y Co. vw. Sewell, 35 Md., 288 (1871);
McMurrich v. Bond Head Harbour Co.,
9 Upp. Can. (Q. B.), 383 (1852).

4 See § 60.

5 Huntington, etc., Coal Co. v. En-
glish, 86 Penn. St., 247 (1878); North 2.
Phillips, 89 id., 250 (1879); Noonan ».
Ilsley, 17 Wis,, 314 (1863); Pinkerton v.
Manchester, etc., R. R, Co., 42 N, H,
424 (1861).

6McKenney v. Haines, 63 Me., 74
(1878); Fosdick v. Greene, 27 O. St., 484
(1875); Forrest v. ae 4 Ves., 493
(1799),

7™Maryland Fire Ins. Co. v. Dalrym-
ple, 25 Md., 242, 267 (1866); Freeman v.
Harwood, 49 Me., 195 (1859); Fisher v.
Brown, 104 Mass., 259 (1870).

644

*
CH. XXXv.] ACTIONS AND MEASURE OF DAMAGES.

[$$ 577-579.
or by a broker in violation of his contract,! are examples of con-
version of stock. In a late case in Oregon it is said that any inter-
ference subversive of the right of the owner of stock to enjoy and
control it is a conversion.2?, In New York a transferee may try his
right to registry in an action for dividends,’ but not after. com-
mencing an action for conversion.t Where there are conflicting
interests in and contending claimants for the same stock, the cor-
poration is not liable for conversion at the suit of one of them in
tort, because it may refuse to transfer, pending the contest between
the claimants.®

§ 577. Detinue and replevin.— The common-law action of detinue
will lie for the recovery of a certificate of stock unlawfully de-
tained.6 In this action the judgment is conditional, either to re-
store the thing detained, or pay the value and damages for the
detention. The more modern action of replevin or its equivalent
will doubtless lie for the recovery of a certificate, as for any other
tangible personal property.

§ 578. Money had and receiwed.iA pledgor whose stock has
been wrongfully sold by the pledgee, in violation of the contract of
bailment, may have an action against the pledgee for money had
and received.’

§ 579. Bill in equity A bill in equity may be maintained by a
bona fide purchaser of stock against the corporation to compel a
transfer of the stock upon the corporate books.’ A bill in equity
may be filed also to relieve a stockholder from an unauthorized
forfeiture;® to rescind a subscription obtained by fraud; to com-

1See chapter XXV, supra; Sadler v.
Lee, 6 Beav., 324 (1848).

2Budd v. Multnomah St. R’y Co., 12
Oregon, 271 (1885).

3 Robinson v. National Bank of New
Berne, 95 N. Y., 637 (1884).

4Hughes v, Vermont Copper Mining
Co., 72 N. Y., 207 (1878).

5 National Bank of New London v.
Lake Shore, etc., R. R. Co., 21 O. St.,
221, 232 (1871). See, also, § 387, supra.
In trover the goods ought to be set out
with some degree of certainty of de-
scription; but the same certainty is not
required as in detinue and replevin,
damages being recovered in trover, the
very articles in detinue and replevin.
Neiler v, Kelley, 69 Penn. St., 403
(1871).

6 Williams v. Peel, etc., Co., 55 L. T,

Rep., 689 (1886); Williams v. Archer, 5
C. B., 318 (1847); 8. C, 5 Railway &
Canal Cas., 289, where it was held that
detinue lay to recover two hundred and
fifty scrip certificates; Peters v. Hey-
wood, Cro. Jac., 682.(21 Jac. 1, 1624),
where detinue was allowed for a bond
detained.

7Von Schmidt v. Bourn, 50 Cal., 616
(1875); Marsh v. Keating, 1 Bing, N.
C.) 198 (1834). Cf. Jones v. Brinley, 1
East, 1 (1800); The King v. Church-
wardens, etc., of the Parish of St. John
Maddermarket, 6 id., 182 (1805). In an
old case a contrary rule is laid down.
Nightingal v. Devisme, 5*Burr., 2589
(1770).

8 See § 891, supra.

9 See § 134, supra.

10 See S§ 155, 156, supra.

645
§§ 580, 581.] ACTIONS AND MEASURE OF DAMAGES. [CH. XXXv.

pel a specific performance of, an agreement to sell stock; to rem-
edy a purchase, sale or transfer of stock induced by fraud;? and to
redeem stock held in pledge? A preliminary injunction against’
transferring stock is also frequently granted.‘

§ 580. Pleading under the codes.— In general, a pleading under
the code is not a safe pleading, unless it conforms substantially to
the rules of pleading at common law. Some verbiage may be
omitted, but the relief granted by the various common-law actions
cannot be obtained even under the code without the necessary
averments entitling the plaintiff to that relief.

The crucial test under the code is whether the facts alleged are
sufficient to entitle the plaintiff to relief. It is the allegation of
the facts, and not the method of alleging them, that constitutes a
sufficient pleading under the code.®

§ 581. The measure of damages— (a) The first rule.— Great dif-
ficulty has been experienced in determining what shall be the
measure of damages for the conversion of stock. As the manner
and conditions of the conversion vary, so also will the measure of
damages vary from nominal damages to the highest value of the
stock with dividends and interest, and also any special dam-

ages which the plaintiff can establish.

1 See § 338, supra.

2 See § 356, supra.

3 See § 475, supra. +

4Heck v. Bulkley, 1 S. W. Rep., 612
(fenn., 1886), holding, also, that a vio-
lation of the injunction is a bar to dam-
ages upon a dissolution of it. The pre-
liminary injunction, being an equitable
remedy, is not granted if only legal
relief is sought by the action. See
McHenry v. Jewett, 90 N. Y., 58 (1882).

5 Brisbane v. Delaware, etc., R. R. Co.,
94 N. Y., 204 (1888); Burrall v. Bush-
wick R. R. Co., 75 id., 211 (1878). Cf.
Tackerson v. Chapin, 52 N. Y. Super.
Ct., 16 (1885). In Nevada there is a

statutory action of claim and delivery. |

Bercich v. Marye, 9 Nev., 312 (1874). See
Webster v. Grand Trunk R’y of Canada,
8 Lower Can. Jur., 148 (1859); S. C., 2
id., 291, for a construction of that pro-
vision of the judicature act [12 Vict.,
ch. 38, § 87] which governs actions of
this nature in the Canadian provinces,
In Kuhn v. McAllister, 1 Utah, 275
(1875), it is held that the language used

Ve

In general, the, courts,

in the pleadings in these actions is not
material, or that the language is that of
one form of action or another or of no
form, but that the question is whether
the facts entitle the plaintiff to recover.
A declaration in an action for the
wrongful conversion of the shares of
the capital stock of a corporation is sut-
ficient for the purposes of pleading if it
states the ultimate facts to be proven.
The circumstances which tend to prove
those facts may be used for the pur-
pose of evidence; but they have no
place in the pleadings. McAllister v.
Kuhn, 96 U. S., 87 (1877); affiuming
Kuhn v, McAllister, 1 Utah, 275 (1875),
As to a misjoinder of causes of action
under the California code, where the
plaintiff sues to recover certain stock,
see Johnson v. Kirby, 65 Cal, 462 (1884).
Upon the question of what is, in New
York, a sufficient pleading in an action
to compel delivery of stock, see Burrall
v. Bushwick R. R. Co., 75 W, Y,, 2uf
(1878; See, also, Chitty on Fleadings,
vol. 2, p. 618; Lowell on Transfers, § 11.

646

FERS
 

CH. XXXV. |

ACTIONS AND MEASURE OF DAMAGES.

[§ 581.

incline to the rule that the true measure of damages is the value
of the stock at the time of the conversion,! or a reasonable time |

1 In re Bahia & San Francisco R’y Co.,
83 Q. B., 584 (1868); Williams v. Archer,
5 Rail. & Canal Cas., 289 (1847); S. C.,

5 0 B, 318:17 L. J. (C. B.), 82; Tem-

pest v. Kilner, 3 C. B., 249 (1846); Shaw
v. Holland, 15 Mees. & W., 136 (1846);
Pott v. Flather, 5 Ry. & Canal Cas.,
85 (1847); Davidson v. Tulloch, 6 Jur.
(N. S.), 543 (1860); Wells v. Abernethy,
5 Conn., 222 (1824); O’Meara v. North
American Mining Co., 2 Nev., 112 (1866);
Baker v. Drake, 53 N. Y., 211 (1873);
8S. C., 66 N. Y., 518 (1876); Colt uv
Owens, 90 N. Y., 368 (1882); Gruman v.
Smith, 81 id., 25 (1880); Ormsby v. Ver-
mont Copper Mining Co., 56 id., 623
(1874); Pinkerton’ v. Manchester, etc.,
R. RB, Co., 42 N. H., 424 (1861); McKen-
ney v. Haines, 63 Me., 74 (1878); Sturges
v. Keith, 57 Il, 451 (1870); Noohan’ v.
‘Isley, 17 Wis., 314 (1863); Bull v. Doug-
las, 4 Munf. (Va.), 303 (1814); Enders v.
Board of Public Works, 1 Gratt., 364
(1845); White v. Salisbury, 33 Mo., 150
(1862); Connor v. Hillier, 11 Rich. Law,
193 (1857); Nabring v. Bank of Mobile,
58 Ala., 204 (1877); Eastern R. R. Co. v.
Benedict, 10 Gray, 212 (1857); Boylan v.
Huguet, 8 Nev., 345 (1873); Bercich v.
Marye, 9 id., 312 (1874); Sargent v.
Franklin Ins. Co., 8 Pick., 90 (1829);
Fisher v. Brown, 104 Mass., 259 (1870);
Wyman v, American Powder Co., 8
Cush., 168 (1857); North v. Phillips, 89
Penn. St., 250 (1879); Huntington, etc.,
Coal Co. v. English, 86 id., 247 (1878);
Neiler v. Kelley, 69 id., 403 (1871); Ran-
dall v. Albany City National Bank, 1
N. Y. State Rep., 592 (Sept., 1886);
Douglas v. Merceles, 25 N. J. Eq., 144
(1874). See, also, Hicholz v. Fox, 12
‘Phila., 382 (1878); Larrabee v. Badger,
45 Ill., 440 (1867); Barned v. Hamilton,
2 Rail. & Canal Cas., 624 (1841); Blyth
v. Carpenter, L. R., 2 Eq., 501 (1866).
Cf. Moody v. Caulk, 14 Fla., 50 (1872);
Kent v. Ginter, 23 Ind., 1 (1864); Orange,
etc., R. R. Co. v. Fulvey, 17 Gratt., 366

(1867); Jefferson v. Hale, 31 Ark., 286
(1876); Third National Bank v. Boyd, 44
Md., 47 (1875); Thomas v. Sternheimer,
29 id., 268 (1868),

In an action to recover damages for
the unlawful conversion of a quantity
of grain it seems that the rule in New
York is that the highest price up to the
time of the trial is the proper measure of
damages. Lordell v. Stowell, 51 N. Y.,
70 (1872). To same effect, Kent v. Gin-
ter, 23 Ind., 1 (1864). See 1 Sedgwick
on Damages (7th edition), 578, and note ,
(a). Cf. Burt v. Dutcher, 34 N. Y., 493
(1866); Scott v. Rogers, 31 id., 676 (1864);
Devlin v. Pike, 5 Daly (N. Y.), C. P., 85.
In Pennsylvania where one is account-
able for stock as trustee, and converts
it, he is chargeable with the highest
market value. Reitenbaugh v, Lud-
wick, 31 Penn. St., 181 (1858); North v.
Phillips, 89 Penn. St., 250 (1879). See,
also, Kid v. Mitchell, 1 Nott & McCord,
834 (1818); Central, etc., R. R. Co. v. At-
lantic, etc., R. R. Co., 50 Ga., 444 (1873).
Cf. Bates v. Wiles, 1 Handy (Ohio), 532
(1855). In California the civil code pro-
vides that the measure of damages in
the case of a conversion of personal
property shall be the value at conver-
sion, or, where the action is brought
promptly, the highest market value.
Cal. Civil Code, § 8886. The courts have
held that this section of the code. applies
to the conversion of shares of stock, but
they have not worked out a very con-
sistent rule on the subject. In Douglass
v. Craft, 9 Cal., 562 (1867), the ‘‘ highest
value” rule is adopted, but in later cases
the court seems to incline toward the
modern New York rule. Hamer v,
Hathaway, 33 Cal., 117; Page v. Fowler,
39 id., 412; Dent v. Holbrook, 54 id.,
145 (1880); Tully v. Tranor, 53 id., 274;
Thompson v. Toland, 48 id., 99 (1874);
Fromm v. Sierra Nevada Silver Mining
Co., 61 Cal., 629 (1882). For the meas-
ure of damages where a broker converts

647.
8 581]

ACTIONS AND MEASURE OF DAMAGES.

[CH. XXXv.

after! By the term the value of the stock is usually to be under-

stood as the market value.?

The fact that the business of the cor-

poration is very profitable, and that its shares of stock have no
known market value, or are greatly enhanced by the good-will of
a growing business, will not vary the ruie where the actual value
is ascertainable in an action to recover damages.’ The question
of what was the market value at the time of the conversion is.
generally a question for the jury;* and it may be shown by tables

his customer’s securities, and then is
unable by reason of his insolvency to
replace them, see Chamberlain v. Green-
leaf, 4 Abb. New Cas., 92, 178. Some-
times an advance in the price of the
stock, within a reasonable time after
notice of the conversion is received, is
allowed. Gruman v. Smith, 81 N. Y., 25
(1880); Burridge v. Anthony, N. Y. Ma-
rine Ct. (1880); Page v. Fowler, 39 Cal.,
412. See § 460. And what is a reasonable
time in such a case is a question for the
jury. Baker v. Drake, 66 N. Y, 518 (1876);
Stevens v. Hurlbut Bank, 31 Conn., 146
(1862); Stewart v. Cauty, 8 Mees. & W.,
160 (1841); Field v. Lelean, 6 Hurl. & N.,
617 (1861). Cf. Allen v. Dykers, 3 Hill,
593 (1842); 6 N. Y. Supp., 187.

1Colt v, Owens, 90 N. ¥., 868 (1882);
Douglas v. Merceles, 25 N. J. Eq., 144
(1874); Brewster v. Van Liew, 8 North-
east. Rep., 842 (Ill., 1886); Budd v. Mult-
nomah St. R’y Co., 15 Pac. Rep., 65
(Oreg., 1887). Upon what is reasonable
time herein in transactions on the stock
exchanges, see Stewart v. Cauty, 8 Mees.
& W., 160 (1841); Field v. Lelean, 6
Hurl. & N., 617, and supra. Where the
pledgee of stock wrongfully sells it the
injured party may recover the highest
market price between the time of notice
of sale and a reasonable time within
which he might have bought the stock
elsewhere. Wright v. B’k of Metropolis,
110 N. Y., 237:(1888); Galigher v. Jones,
129 U. S., 193 (1889). ,

2 By the “market value of stock” is
meant the actual price at which it is
commonly sold. That price may be
fixed by sales of the stock in market at
or about a given time. If no sales can
be shown on the precise day, recourse

may be had to sales before or after the
day, and for that inquiry a reasonable
range in point of time is allowable.
Douglas v. Merceles, 25 N. J. Eq.; 144
(1874), Cf. Stewart v. Cauty, 8 Mees.
& W., 160 (1841); Sturges v. Keith, 57
Ill. 451 (1870);°Seymour v. Ives, 46
Conn., 109 (1878). The measure of dam-
ages for non-delivery of stock at a cer-
tain date is presumptively the par value.
The defendant is obliged to prove differ-
ently if this price is incorrect. Appeal
of Harris, 12 Atl. Rep., 743 (Pa., 1888).

3 In actions for conversion of per-
sonal property, such as these shares are,
the damages are not limited to the mar-
ket value of thestock. Its actual value
to be determined under all the circum-
stances, such as the dividend-making
capacity, the good-will, etc., etc., is the
measure of damages.” Freon v. Car-
riage Co., 42 O. St., 30, 38 (1884). In
Hitcheock v. McElrath, 14 Pac. Rep.,
305 (Cal., 1887), the court allowed evi-
dence to be given showing the market
value of all the property of the corpora-
tion, there being no other method of
ascertaining the value of the stock.
See, also, McGuffey v. Humes, 18. W.
Rep., 506 (Tenn., 1886). Not the nom-
inal but the true value of the shares is
what the plaintiff is entitled to recover.
Bull v, Douglas, 4 Munf, (Va.), 3038
(1814); Enders’ v. Board of Public
Works, 1 Gratt., 364 (1845), Where a
railroad is sold to be paid for in bonds, a
failure to deliver the bonds enables the
vendor to recover their par value from
the vendee. Texas, etc., R’y v. Gentry,
85S. W. Rep., 98 (Texas, 1888).

41 Sedgwick on Damages, 7th ed.,
585, and cases cited; Dos Passos on

648
CH. XXXvV.] ACTIONS AND MEASURE OF DAMAGES. [§ 581.
of prices current published in the newspapers or otherwise at the
time of the conversion, and these may be read in evidence.!
Again, it is not always entirely clear at what time the conversion
was consummated, particularly when the question arises between
pledgor and: pledgee, vendor and vendee, or shareholder and the
corporation.

In general, however, a conversion for which the owner of the
stock may have an action arises at the time when the stockholder,
being entitled to the immediate possession or delivery of the stock
or the certificate, makes a demand for it which is refused. Accord-
ingly, in this class of cases the measure of damages is the value of
stock on the day of the demand and refusal.?

Stock-brokers, 801. See Cameron v. v. American Powder Co., 8 Cush., 168

Durkheim, 55 N. Y., 425 (1874); Fowler
v. New York Gold Exchange Bank, 67
id., 188 (1876); Harris v. Tumbridge, 88
id., 92 (1880), and notes supra.

LCliquot’s Champagne, 8 Wall., 114

(1865); S. P., Whelan v. Lynch, 60
N. Y., 469 (1875).
2So when stock held as collateral is

improperly sold by the pledgee, the’

value on the day when the pledgor pays
his debt and demands his stock is to be
taken, Fisher v. Brown, 104 Mass., 259
‘(1870), In Freeman v. Harwood, 49 Me.,
195 (1859), shares of stock standing in
the name of the defendant as collateral
security for a debt which had been paid
were sold for non-payment of an assess-
ment and bought by defendant. It was
held that the defendant was liable in
trover for the value of the shares at the
time of the sale, with interest, and all
dividends received thereon, deducting
the amount of the assessment and the
expenses of the sale. In Sturges v.
Keith, 57 Il, 451 (1870), it is held that
where the demand and refusal consti-
tute the conversion, or afford presump-
tive evidence of it, the date of such de-
mand and refusal is the proper time for
estimating the value. Again, where the
corporation wrongfully refuses to regis-
ter a transfer and to issue a certificate
the measure of damages is the value of
the stock on the day when the transfer
was demanded and refused. Wyman

(1851); Eastern R. R. Co. v. Benedict,
10 Gray, 212 (1857); West Branch, etc.,
Canal Company’s Appeal, 81* Penn. St.,
19.(1870) ; Baltimore City, etc., R. R. Co,
v. Sewell, 35 Md., 288 (1871); McMur-
rich v. Bond Head Harbour Co., 9 Up.

‘Can. (Q. B.), 333 (1852), where it is. said
, that while the rule as announced above

is the proper one, yet, when the jury
allows a larger sum, the question of the
measure of damages not having been
pressed at the argument, the court will
not reduce the verdict. So, also, where
there is a failure to return borrowed
stock on demand, or according to the
terms of the bailment, the value on the
day of demand, or on the day when the
stock ought by contract to have been
returned, is the measure of damages.
McKenney v. Haines, 63 Me., 74 (1878);
Fosdick v. Greene, 27 O. St., 484 (1875):
S. C., 22 Am. Rep., 328; McArthur
v. Seaforth, 2 Taunt., 257; Day v. Per-
kins, 2 Sandf. Chan., 359. Cf. Cortel-
you v. Lansing, 2 Caines’ Cas. in Error,
200 (1805); West v. Wentworth, 3 Cowen,
82; Clark'v. Pinney, 7 id., 681; Wilson
v. Matthews, 24 Barb., 295; 2 Sedgwick
on Damages (7th ed.), 141, 865, n, In
an old case where borrowed stock was
not returned the plaintiff was allowed
to recover the value at the time of the
transfer to the borrower, no account
being taken of an increase in value,
Forrest v. Elwes, 4 Ves., 492 (1799). See,

649
§§ 582, 588.] ACTIONS AND MEASURE OF DAMAGES. [CH. XXxv.

§ 582: (b) The second rule—In another line of cases the true.
measure of damages in these actions is said to be the value of the
stock on the day of the trial." In an English case it is said that
this is a sound rule in the ordinary cases of conversion of stock,
but that in cases of failure to deliver stock the true measure of
damages is the value when the demand is made and refused.? This
rule has, however, found little favor, and there is believed to be no
sound reason for its adoption.

§ 583. (c) The third rule—It has been held in still another
class of decisions that the measure of damages for the conversion
of stock is the highest market value of the stock between the date
of the conversion and the day of the trial. This is the rule in Cali-
fornia in some cases.’ So, also, in South Carolina,* Georgia;® and

also, McKenney v. Haines, 63 Me., 74
(1873). Upon a failure to deliver stock
according to contract or on demand, the
value at the time of the demand is the
value to be taken. Noonan v. Ilsley, 17
Wis., 314 (1863); Pinkerton v. Manches-
ter, etc., R. R. Co., 42 N. H., 424 (1861);
North v. Phillips, 89:Penn. St., 250
(1879); Huntington, etc., Coal Co. v.
English, 86 id., 247 (1878). Cf. Pott v.
Flather, 5 Rail. & Canal Cas., 85 (1847);
Barned v. Hamilton, 2 id., 624 (1841);
Shaw v. Holland, 4 id., 150 (1846); 8. C.,
15 Mees, & W., 186; Tempest v. Kilner,
2C. B., 300; §.C.,3 id., 249; Gainsford
v. Carroll, 2 Barn. & C., 624. Williams
v. Peel, etc., Co., 55 L. T. Rep., 689 (1886),
holds that suit for damages for wrongful
detention lies against a party who has
wrongfully obtained possession of stock,
and that the measure of damages, where
the defendant afterwards abandons his
claim, is the intervening fall in the value
of the stock. Bankers of trustees wrong-
fully sold out stock, and applied the
proceeds to their own purposes, The
measure of their liability is the amount
paid in replacing the stock. Sadler v.
Lee, 6 Beav., 324 (1848). As to damages
in cases of trust, see Story’s Eq. (13 oe );
8S 1263, 1264.

10wen v, Routh, 14 C. B., 327 (1854);
Shepherd v. Johnson, 2: East, 211; Ber-
cich v. Marye, 9 Nev., 812 (1874). Cf.
Williams v. Archer, 5 C. B., 318 (1847);

S. C., 5 Rail. & Canal Cas., 289; 17 L,
J. (C. P.), 82; and see Wilson v. Little,
2N. Y., 448, 450 (1849), wherein there is
a quere as to whether this may not be
the better rule, In Fowle v, Ward, 113
Mass., 548; S. C., 18 Am, Rep., 584
(1873), it is held that the measure of
damagesiis the value of the stock upon
the day when the bill in equity is filed,
it being an equitable action by a pledgor
against a pledgee.

2Shaw v. Holland, 15 Mees. & W.,
186, 145 (1846); 8. C., 4 Rail. & Canal:
Cas., 150; 15 L. J., Exch., 87.

3 Code of California, § 3386, is as fol-
lows: ‘‘The detriment caused by the
wrongful conversion of personal prop-
erty is presumed to be: 1. ‘The value of
the property at the time of the conver-
sion, with interest from that time; or,
where the action has been prosecuted
with reasonable diligence, the highest
market value of the property at any
time between the conversion and the
verdict, without interest, at the option
of the injured party.” This is held to
apply to the conversion of the shares of
‘stock. Fromm v. Sierra Nevada Silver
Mining Co., 61 Cal., 629 (1882); Dent v.
Holbrook, 54 id., 145 (1880). Cf. Thomp-
son v. Toland, 48 Cal., 99 (1874),

4Kid v. Mitchell, 1 Nott & McCord,
334 (1818).

5 Central R. R. & Banking Co. v. At-
lantic, etc., R. R. Co., 50 Ga., 444 (1878).

650
:
CH. XXXV.] ACTIONS AND MEASURE OF DAMAGES. [§ 584.

#

it was formerly the rule in New York! and Pennsylvania.? The
courts of the two latter states have, however, in later cases whoily
receded from this position; and in both the rule is now established
in such actions that the measure of damages is not the highest price
of. the stock, but the value at the date of the conversion.’

§ 584. Interests, dividends and special damages.— It is settled
law that, in addition to the value of the stock at the date of con-
version, the plaintiff may recover legal interest upon such valu-
ation from the date of the conversion to the day of the trial. It
follows as of course that, if the plaintiff has been damaged in an
ascertained sum, he may, in an action for damages, recover not only
that sum, but interest thereon for the time during which he has
been wrongfully deprived of his stock.* In addition to interest
the plaintiff may recover also all accretions to the property made
during the time when, he was deprived of it. ,He is, therefore, en-
titled to judgment for all dividends paid upon the stock between

the date of the conversion and the day of the trial.’

1Markham v. Jaudon, 41 N. x, 235
(1869): Romaine v. “Van Allen, 26 id.,
309 (1863).

2Bank of Montgomery v Reese, 26
Penn. St.,.143 (1856); Musgrave v. Beck-
endorff, 53 id., 310 (1866); Reitenbaugh
v, Ludwick, 3t id., 181, 141 (1858).

3North v. Phillips, 89 Penn. St., 250
(1879); Huntington, etc., Coal Co. v.
English, 86 id., 247 (1878); Work v. Ben-
nett, 70 id., 484 (1872); Neiler v. Kelley,
69 id,, 408 (1871). Cf. Wilson v. Whit-
taker, 49 id., 114(1865). So, also, in the
later New York cases. Baker v. Drake,
53 N. Y., 211 (1878); S. C., 66 N. Y.,
518 (1876); White .v. Smith,-54'id., 522
(1874); Harris v. Tumbridge, 83 id., 92
(1880}; Colt v. Owens, 90 id., 368 (1882);
Randall v. Albany City Nat?l Bank, 1
N. Y. State Rep., 592 (Sept., 1886). Cf.
Suydam v. Jenkins, 8 Sandf., Super.
Ct., 614 (1850); Matthews v. Coe, 49 N.
Y., 57 (1872); Bryan v. Baldwin, 52 id.,
236 (1873). See, also, Seymour v. Ives,
46 Conn., 109 (1878); McGuffey »v.
Humes, 1S. W. Rep., 506.

40Q’Meara v. North American Mining
Co., 2 Nev., 112 (1866); Boylan v.
Huguet, 8 id., 345 (1873); Fisher v.
Brown, 104 Mass., 259 (1870); Sargent
v. Franklin Ins. Co., 8 Pick., 90 (1829);

. Keith, 57 Dl,

The reason

Seymour v. Ives, 46 Conn., 109 (1878);
McKenney v. Haines, 63 Me., 74 (1878);
Freeman v. Harwood, 49 id., 195 (1859);
Ormsby v. Vermont Copper Mining
Co., 56 N. Y., 628 (1874); White »v.
Smith, 54 id., 522 (1874); Sturges v.
451 (1870); Baltimore
City, etc., R’y Co. v. Sewell, 35 Md.,
288, 257 (1871); Pinkerton v. Manches-
ter, etc., R. R. Co., 42 N. H., 424 (1861);
North v. Phillips, 89 Penn. St., 250
(1879); Huntington, etc., Coal Co. v.
English, 86 id., 247 (1878); North Amer-
ican Building Assoc. v. Sutton, 35 id.,
463 (1860); Noonan v. Ilsley, 17 Wis.,
314 (1868); Forrest v. Elwes, 4 Ves., 492
(1799); In re Bahia & San Francisco
R’y Co., 8 Q. B., 584 (1868); Blyth v.
Carpenter, L. R., 2 Eq., 501 (1866);
McMurrich v. Bond Head Harbour Co.,
9 Upp. Can. (Q. B.), 888 (1852). In the
civil code of California, § 3336, interest
in these cases is expressly provided for.
Fromm v. Sierra Nevada Silver Mining
Co,, 61 Cal., 629 (1882); 2 Sedgwick on
Damages (7th ed.), 391.

5Bull v. Douglas, 4 Munf. (Va.), 303
(1814); Baltimore City, etc., R’y Co. uv
Sewell, 35 Md., 288 (1871); Bercich v, ©
Marye, 9 Nev., 312 (1874); Bank of Mont-
gomery v. Reese, 26 Penn. St., 148

651
§ 586.] [CH. XXxXV.

ACTIONS AND MEASURE OF DAMAGES.
why the plaintiff recovers dividends in addition to the value of the
stock and interest is that often the dividends involved were earned,
wholly or in part, before the conversion, but that such net earn-
ings were distributed by dividends declared after the conversion,
and that the market value does not always represent fully the un-
distributed profits. The plaintiff may also recover any special
damages which legitimately arise out of matters in existence at the
date of the conversion, and which he has sustained by reason of
the detention of his stock.

Where one has been induced by fraudulent misrepresentations
to buy or subscribe for shares of stock the measure of damages in
an action against the vendor is the difference between the value of
the stock as represented and the actual value.2 And where one
with intent to cheat and defraud induces another, by. false and
fraudulent representations, to purchase shares for value which
he knows to be worthless, he is liable for the damages sustained,
whether the purchase was made from him or from another at his
instance.’

Where a vendee refuses to carry out an executory contract for
the sale of shares, the measure of damages is the difference between
the price as fixed by the contract and the value of the stock at the
time of tender and refusal of-the vendee to fulfill.4

§ 586. Nominal damages.— In certain cases, where the plaintiff
has been guilty of laches, or where the stock is of no actual value,
or where the stock could, for a reasonable time after the conver-
sion, have been purchased in the market for the same or a lower
price, or in any other case where the plaintiff has suffered only a
technical conversion without any actual pecuniary loss, only nomi-

ag

admissible,

(1856). Cf. ‘Boston, etc., R. R. Co. v.
Richardson, 135 Mass,, 478, 477 (1888).

1Boylan v. Huguet, 8 Nev., 345 (1878) ;
2 Sedgwick on Damages (7th ed.), 391;
Bodley. v. Reynolds, 8 Ad, & El. (N. 8.),
779 (1846); Davis v. Oswell, 7 Car. & P.,
804 (1837), Cf. Seymour v. Ives, 46
Conn., 109 (1878).

2 Miller v, Barber, 66 N. Y., 558, 568
(1876) ; Hubbell v. Meigs, 50:id., 480, 491
(1872). The measure of damages in an
action for deceit against directors who
issued a false prospectus inducing sub-
scription is the difference between the
_ subscription price and the real value of

the stock; and evidence that the stock
‘subsequently proved to be worthless is

Peek v. Derry, 59 L. T.
Rep., 78 (1888).

3 Hubbell v. Meigs, supra.

4See § 335, supra. Cf. Barned v.
Hamilton, 2 Rail. & Canal Cas., 624
(1841); Tempest v. Kilner, 3 C. B., 249.
(1846), and Stewart v. Cauty, 8 Mees.
& W., 160 (1841). In Shaw v. Holland,
15 Mees. & W., 186 (1846), the proper
measure of damages is said to be the
difference between the contract price
and the market price on the day when
the contract was broken. If a person
sells and conveys property to a com-
pany to be paid for in stock, and the
vendee refuses to deliver, he may re-
cover the value of the stock. Humes-
ton v. Tel. Co., 20 Wall., 20 (1873).

652
c

on, Xxxv.] |

nal damages can be recovered.!

/
ACTIONS AND MEASURE OF DAMAGES.

[§ 587.

Thus, the measure of damages for

the conversion of a mere certificate of stock cannot be placed at
the value of the shares themselves which the certificate represents
if the ownership of the shares is not affected?

'§ 587. Damages in actions between .stock-brokers and their cus-
tomers.— This subject is treated of elsewhere.’

1Thus, where a borrower of shares
fails to return them until after the cor-
poration is dissolved, the lender having
made no demand during the existence
of the company, the measure of dam-
ages in an action to recover the shares

will be the market value of them at the

time the cause of action accrued; that
is, at the time of demand. And if at
that time the stock is worthless, only
nominal damages are recoverable. Fos-
dick v, Greene, 27 O. St., 484 (1875); 8.
C., 22 Am. Rep., 328. See Cameron v.
Durkheim, 55 N. Y., 425 (1874); Hope
v, Lawrence, '50 Barb., 258 (1867). In

an action by a vendee on a contract for
the sale of specific stock, which, with-
out the knowledge of the vendor, had
already been sold to another by his
agent, the plaintiff can recover only
nominal damages. Wilson v. Whita-
ker, 49 Penn. St., 114 (1865); Skinner v.
City of London, etc., Ins. Corporation,
L. B., 14 Q. B. Div., 882 (1885). See
Fowler v. New York Gold Exchange
Bank, 67 N. Y., 138 (1878).

2 Daggett v. Davies, 58 Mich., 35 (1884),
by Cooley, C. J.

3 See §§ 460, 461, supra.

653
CHAPTER XXXVI.

STOCKHOLDERS’ AND DIRECTORS’ MEETINGS— CALLS, TIME, PLACE
AND CLASSES OF MEETINGS.

§ 589. Introductory. § 595. The essential elements of a no-

591. The place of meeting of sea tice of a meeting are time,
holders must be within the , place and business.
state creating the corporation. | 596. Service of the notice,

592. Meetings of directors — Place—}| 597. Notice must be served a reason-
Notice—Action without meet- able time before the meeting.
ing — Quorum. 598. The division of meetings into

593. By whom and when meetings ordinary and extraordinary.
are to be called. 599. “Waiver of notice.

594. When the stockholders are en-| 600. Notice is presumed to have been
titled to notice of corporate | regularly given.
meetings. 601. Adjourned meetings.

§ 589. Introductory.— The stockholders of a corporation consti-
tute the origin, existence and continuance of the corporation it-
self. They elect its officers, control its general policy, and within
.the charter limits may prolong or dissolve its existence at their
pleasure. All these vital powers of the stockholders can’ be exer-
cised by them only in corporate meetings, duly convened and _prop-
erly organized for the transaction of business, Accordingly, the
method « of calling together a corporate meeting, the time and place
of that meeting, the notice to be given to the stockholders and the
various incidents relative to a proper convening of the members of
tke corporation, are of great importance. They constitute the sub-
ject of this chapter.

$591. The place of meeting of stockholders must be within the
state creating the corporation.— The first and most general rule as
to the place where stockholders may hold corporate meetings is
that the place of meeting must be within the boundaries of the
state which created the corporation.! Through its agents, of

1Miller v. Ewer, 27 Me., 509 (1847);
Smith v. Silver Valley Mining Co., 64
Md., 85 (1885); S. C., 10 Am. & Eng.
Corp. Cas.,1; 54 Am. Rep., 760; Franco-
Texan Land Co. v. Laigle, 59 Texas, 339
(1883); Ormsby v, Vermont Copper Min-

ing Co., 56 N. Y., 623 (1874); Mitchell v.
' Same, 40 Super. Ct., 406 (1876); 67 N. Y.,
280; Hilles v. Parrish, 14 N. J. Eq., 380
(1862). See, also, Reichwald v. Com-
mercial Hotel Co., 106 IIl., 489 (1888);

Freeman v. Machias Water Power, etc.,
Co., 38 Me., 343 (1854); Camp v. Byrne,
41 Mo., 525 (1867). But see Heath v. Sil-
verthorn Lead Mining, etc, Co., 39
Wis., 146 (1875), holding that the cor-
poration may be estopped to deny the
validity of acts done outside the state
when the rights of third parties inter-
vene. And see Copp v. Lamb, 12 Me.,
312 (1835). ‘

654
‘

CH. XXXVI. | STOCKHOLDERS’ MEETINGS — CALLS.

[§ 591.
course, the corporation may make contracts, carry on eine sue
and be sued and buy and sell property in another state.!

There is a difference of opinion as to the effect of business trans-
acted at a corporate meeting held beyond the borders of the state
creating the corporation. Upon the one hand, it is held that all
the acts and proceedings of such a meeting are wholly invalid and,
void; that the corporation is not bound thereby, and that the meet-
ing is as though it had never been? But it is perhaps the sounder
view to regard the votes and proceedings at such a meeting as void-
able rather than void, and as capable of subsequent r ratification by
the corporation at a regular meeting.’ The corporation itself can-
not allege that such proceedings are void. It is estopped from so
doing.’ So, also, is any stockholder who takes part in such a meet-
ing. Ifthe corporation has been incorporated in two or more
states, it is lawful to hold meetings of the stockholders in either
state.6 And proceedings at a meeting in any one of the states are
valid in respect to the property of the corporation in all of them

1See chapters XLI and XIII.

4 Aspinwall v.. Ohio, etc., R. R. Co.,
20 Ind., 492, 497 (1863), where an Indi-
ana cérporation received subscriptions
to its stock in that state, and then mi-
grated to Ohio, when it made calls upon
the subscriptions. It was held that
such subscriptions could not be col-
lected, because the corporate acts in
Ohio were inoperative and void. Mil-
ler v. Ewer, 27 Me., 509 (1847), where a
mortgage executed by the authority of
directors who were elected at a meet-
ing of corporators held outside of the
state which granted the charter was
declared void. Cited and followed in
Freeman v. Machias Water, etc., 38
Me., 348 (1854); Ormsby v. Vermont
Copper, etc., 56 N. Y., 623 (1874), where
it was held that a forfeiture of stuck by
authority of a by-law adopted by stock-
holders of a Vermont corporation at a
meeting held in New York was not
valid.

3 Ohio, etc., R. R. Co. v. MePhenon,
85 Mo., 18 (1864); Freeman v. Machias
Water Power, etc., Co., 388 Me, 343
(1854). The legislature may also validate
the acts passed at such a meeting in
case it could have authorized the meet-
ing in the first instance. Graham v.

Boston, Hartford & Erie R. R. Co., 118
U. §&., 161, 178 (1886); affirming S. C.,
14 Fed. Rep., 753 (1883). Cf. Grenada
Co. v. Brogden, 112 U. §., 261 (1884),
and the various cases of municipal sub-
scriptions, chapter VI, § 94, n.

‘Heath v. Silverthorn Lead Mining,
etc., Co., 839 Wis., 146 (1875), where the
officers who made the contracts in

‘question had been elected by a meeting

of stockholders held out of the state.

5Camp v. Byrne, 41 Mo., 525 (1867);
Ohio, etc., R. R. Co. v. McPherson, 35
Mo., 18 (1864). But mere neglect on the
part of a shareholder who did not at-
tend a meeting of this kind, or a mere
failure to take affirmative action for a
period of time short of that prescribed
by the statute of limitations, will not
deprive that shareholder of his right to
attack the proceedings as irregular and
in fraud of his rights. Ormsby v. Ver-
mont Copper Mining Co., 56 N. Y., 628
(1874).

6Graham v. Boston, Hartford & Erie
R. R. Co., 118 U. S., 161 (1886); Coving-
ton, etc., Bridge Co. v. Mayer, 31 O.
St., 817 (1877). See, also, Ohio, etce.,
R’y v. People, 14 N. E. Rep., 874 (IL,
1888). Contra, Aspinwall v. Ohio, etc.,
R. R. Co., 20 Ind., 492 (1868).

655
i ‘i \

§ 592.) STOCKHOLDERS’ MEETINGS — CALLS. [CH. XXXVI.

without the necessity of the repetition of the meeting in any other
of those states. <

$592. Meetings of directors — Place — Notice — Action without
meeting — Quorum.— A meeting of the directors of a corporation
may be held outside of the state creating the corporation, unless
the charter or a statute expressly forbids such a meeting. The
acts, proceedings and contracts of a meeting of the board of di-
rectors held outside of the state are valid and enforceable.’

There has been some controversy and doubt as to the necessity
of giving notice of directors’ meetings. Many cases apply to di-
rectors’ meetings the same rules that apply to stockholders’ meet-
ings. Other cases hold that less formality and strictness is required
in calling a directors’ meeting. Probably the former rule is safer,

although the latter rule will ultimately prevail.*

1Graham v. Boston, Hartford & Erie
R. R. Co., supra.

2Wright v. Bundy, 11 Ind., 398, 404
(1858), where a mortgage of a railway
incorporated by Indiana was held valid
though executed in Ohio; Bassett v.
Monte Christo, etc., 15 Nev., 293, where
power to issue bonds and mortgage real
property in Nevada was conferred at a
meeting of directors held in New York,
the corporation having been chartered
by Pennsylvania — but here the charter
authorized the corporation to meet and
acét at any place in. the United States;
Ohio, etc., R. R. Co. v. McPherson, 35
Mo., 18 (1864), where calls for payment
of subscriptions to stock made by a
board of dizectors at meetings held out-
side of the state creating the. corpora-
tion were held to be valid; Wood Hy-
draulic, etc., v. King, 45 Ga., 34 (1872), in
which the minutes of a meeting of di-
rectors held out of the state chartering
their company were held to be evidence
of the acts of the board in making con-
tracts in other states. Directors’ meet-
ing out of the state may authorize a
mortgage on real estate. Saltmarsh v.
Spaulding, 17 N. E. Rep., 316 (Mass.,
1888); Richwald v. Com., etc., Co., 106
Til, 489 (1888); Galveston R, v. Cow-
drey, 11 Wall., 459, 476 (1870), in which
it was held that bona fide holders of
railroad bonds could not be prejudiced
by the fact that the mortgage by which

they were secured was executed by
virtue of a resolution of directors at.a
meeting held out of the state which
chartered the road; Bellows v. "Todd, .
39 Iowa, 209, 217 (1874), where a con-
veyance of real estate was authorized;
Armes v. Conant, 36 Vt., 744 (1864);
McCall v. Bryam Mfg. Co., 6 Conn.,
428 (1827); Smith ‘vy. Alvord, 63 Barb.,
415 (1866). Cf. Ormsby v. Vermont,
etc., Co., 56 N. Y., 623 (1874). Corpora-
tions incorporated in New Jersey are
required by statute to hold their di-
rectors’ meeting within that state.
Hilles v. Parrish, 14 N. J. Eq., 880 (1862).
President may call meeting of directors
at place other than chief place, of busi-
ness, Corbett v. Woodward, 5 Sawyer,
403 (1879).

3The following decisions will throw
light upon this subject: A director is
entitled to notice of a meeting to elect a
president. Undue haste and failure to
give notice will suffice to set the elec-
tion aside. A subsequent Se of
the board cannot ratify it. The election
must be held over again. State v. Smith,
14 Pac. Rep., 814 (Oreg.,.1887), Leaving”
notice of directors’ meeting at business
place suffices, even though he is known
to be ill. Corbett v. Woodward, 5 Saw-
yer, 403 (1879). A notice of a school
trustees’ meeting need not be given to
trustees out of state who could not
have attended anyway. Porter p. Rob-

656
OH. XXXVI]

STOCKHOLDERS’ MEETINGS — CALLS.

[8 592.

There has also been a question whether directors could vote and
act as a board without coming together. Many attempts have been

inson, 30 Hun, 209 (1883). Notice by
postal card of directors’ meeting suffices
where it is customary and all received
it. People v. Albany, etc, Coll., 26
Hun, 848(1882); aff’d, 89 N. Y., 685. See,
also, Harding v. Vandewater, 40 Cal.,
77 (1870), where a note given for an
assessment upon a subscription which
was called at a special meeting of the
board of trustees of a mining company,
of which two of the trustees had no no-
tice, was held to be void; Farwell v.
Houghton Copper, etc., 8 Fed. Rep., 66
(1881), in which it was further held that
one who had been a shareholder and
purchased all the property of the com-
pany at a meeting of the directors held
without notice, at which he was present
and knew that one director was absent,
was bound to know that notice to such
absent director was necessary, and that
he was not a bona fide purchaser with-
out notice; Savings Bank v. Davis, 8
Conn., 192 (1830), holding that a meet-
ing of bank directors was legal for or-
dinary transaction although the notice
did not specify its object, and that
mortgaging its real estate to secure a
debt was proper at such meeting; Lane
v, Brainerd, 80 Conn., 565 (1862), hold-
ing that the corporate record of a meet-
ing at which a quorum was present was
presumptive proof that all the directors
had been duly notified, whether living
in the state or elsewhere. So, where the
deed of settlement provided for special
meetings, the time and place of which
were to be fixed by notices counter-
signed by.the secretary, it was held that
a meeting of the requisite number of di-
rectors without previous agreement to
meet on any fixed day or hour was not

@ meeting duly convened within the.

charter provision. Moore v. Hammond,

6 Barn. & C., 456 (1827). To same effect

in municipal corporation cases, Smyth

v. Darley, 2 H. of L. Cas., 789 (1849);

King v. Mayo,, etc, 1 Stra., 385.
(42)

An adjourned meeting of directors
may act to the same extent that the
original meeting might lave acted.
Smith v, Law, 2i N. Y., 296; Wills wv,
Murray, 4 Exch., 843 (1850). A mort-
gage authorized by a quorum of direct-
ors is valid, though the other directors
were not present and were not notified..
Bank v. Flour.Co., 41 O. St., 352 (1885).
A by-law enacted by the directors in
reference to the calling of a directors’
meeting, even if not complied with,
does not invalidate the meeting. Sam-
uel v. Holloday, 1 Woolw.,. 400 (1869).
Notice to directors, sent by mail, is suf-
ficient if sent in time so that the di-
rector after receiving it would have
time to reach the place of meeting. -
Covert v. Rogers, 88 Mich., 363 (1878).
A quorum of directors may bind the
corporation, although the other direct-
ors are not notified, there being no:
by-law or charter provision requiring.
notice. Edgerly v. Emerson, 23 N. H.,
555 (1851). Contra, Dispatch, etc., v.
Bellamy, etc., Co., 12 N. H., 205 (1841).
An assessment made at an irregularly-
called directors’ meeting is void.
Thompson v. Williams, 18 Pac. Rep.,.
153 (Cal., 1888). Two out of three di-
rectors cannot authorize a chattel mort-
gage, the third not having been notified
of the meeting. Mortgagee was one of
the directors. Doyle v. Mizner, 42
Mich., 332 (1879). A corporate receiver
cannot object to a contract on the
ground that the directors’ meeting au-
thorizing it was not properly convened;
but the receiver may avoid corporate
notes issued contrary to express statute.

‘Leavitt v. Yates, 4 Edw. Ch., 184 (1848).

Telegraphic notice to two directors out
of the state of a meeting to make an
assignment is sufficient, though not re-
ceived by them, a majority having met
and ordered the assignment. Chase v.
Tuttle, 12 Atl. Rep., 874 (Conn., 1888),
Bonds issued under authority of a meet-

2 657
8 592.]

STOCKHOLDERS’ MEETINGS — CALLS.

A

. (CH. XXXVI.

made to sustain a vote of the directors which they had separately

and singly agreed to.

The law, however, is now clear that such

separate assent is void. Directors are elected to meet and confer,
and to act after an opportunity for an interchange of ideas. They
cannot vote or act in any other manner.!

ing of two commissioners of a town
without notice to a third commissioner
are not valid. Pike County v. Rowland,
94 Pa. St., 288 (1880). Notice to all the
directors is presumed. Ross v. Crockett,
14 La. Ann., 811 (1859); Chouteau Ins,
‘Co. v. Holmes, 68 Mo., 601 (1878). In
Kersey. etc., Co. v. Oil, etc., R. R., 12
‘Phil., 374 (1877), a lease was declared
‘void because it was authorized only by
:a meeting of directors of which part of
‘the directors had no notice, and were
not present. A special meeting of an
executive committee is irregular unless
notice is given to each member. Met-
ropolitan, etc., Co. v. Domestic, etc.,
Co., 14 Atl Rep., 907 (N. J., 1888).
Where a subsequent meeting of direct-
‘ors éxpressly ratifies the acts of a pre-
‘ceding meeting, any defect in the notice
given of the latter meeting is cured.
County Court v. Baltimore & O. BR. R.,
35 Fed. Rep., 161 (1888), A meeting of
directors called in the morning for
2 o'clock that day is invalid where one
director could not come until 8 o’clock
and another received the notice next
morning. A quorum was present. Re
Hamer, etc, Co., 60 L. T. Rep., 97
(1888). Acts of a board of directors, no
notice having been given to absent di-
rectors, may be valid by acquiescence,
Reed v. Hoyt, 4 R’y & Corp. L. J., 185
(N. Y., 1888); aff’d, 109 N, Y., 659.

1 Directors can act as such in meet-
ings only. Their individual assent is
not sufficient. State v. People’s, etc.,
Assoc., 42 ©. St., 579 (1885); Junction
R, R. v, Reeve, 15 Ind., 286 (1860);
Stoystown, ete, Co., v. Craver, 45 Pa,
St., 386 (1868), A bargain and sale deed
of corporate property, authorized and
executed separately and singly by all
the directors without a board meeting,
is void. Baldwin v. Canfield, 26 Minn.,

658

43 (1879); Gashwiler v. Willis, 33 Cal.,
11 (1867). Separate and single consent
of a quorum of directors to the secre-
tary’s execution of a bond is void.
D'Arcy v. Tamar, ete, R’y, L. R., 2
Ex., 158 (1867). The assent of a mere
majority of the board given singly and

‘separately gives no authority to a cash-

ier to do an act outside of his customary
duties. Elliot v. Abbot, 12 N. H., 549
(1842). Where a mortgage is executed
by. order of directors assenting apart
and not in a meeting, and is executed
by a president and secretary who were
elected by the stockholders at a meet-
ing not properly called, the stockhold-
ers having no power to elect such offi-
cers in any case, the mortgage is not
good. In re St. Helen Mill Co., 3Sawy.,
88 (1874). A pledge of corporate secu-
rities to raise money is legal where six
of the eight directors consented, even
though no meeting was ‘held. Hub-
bard v, Camperwawn Mills, 18. E. Rep.,
576 (S. C., 1887). Directors may bind
the corporation by their separate ap-
proval of claims when they have been
accustomed so todo. Longmont, etc.,
Co. v. Coffman, 19 Pac. Rep., 508 (Colo.,
1888). The separate assent of the board
of trustees of a religious corporation
to the execution of a note is void. They
must meet. People’s B’k v. St, An-
thony’s, etc., Church, 109 N. Y., 512
(1888).

Where an officer is sued for malfea-
sance in office, it is no defense that hie -
acts were authorized by directors wha
did not meet as a board, but separately
and singly assented to acts, Directors
bind the corporation by their votes only
when they meet asa board, ‘‘ The law
proceeds upon the theory that the di-
rectors shall meet and counsel with
each other, and that any determination
CH. XXXVI.]

STOCKHOLDERS’ MEETINGS — CALLS.:

[§ 592.

Possibly these differences of opinion may be reconciled by the
principle of law that the acts of a board of directors may be vali-
dated by acquiescence, even though the board was summoned
irregularly or proceeded irregularly.

Directors, of course, cannot act or vote by proxy.!

A majority of the whole board of directors constitute a quorum.
When the meeting is properly called and a majority attend, that

majority may proceed to transact business.

If a majority are pres-

ent, a majority of that majority bind the board and the corpora-
tion, although they are a minority of the whole board?

affecting the ¢orporation shall only be
arrived at and expressed after a consul-
tation at a meeting of the board at-
tended by at least a majority of its
members.” Nat'l B’k v. Drake, 35 Kan.,
576 (1886). A tax which is assessed by
two trustees in meeting assembled, who
then obtain the separate and private as-
sent, of the third trustee, is void. Keeler
v. Frost, 22 Barb.,.400 (1856); Schumm
v. Seymour, 24 N: J. Eq., 148 (1878).
The members of a board of highway
commissioners cannot authorize or rat-
ify a contract by separate approval. A
meeting is necessary. Taymouth wv.
Koehler, 35 Mich., 22 (1873). Majority
of a school board cannot act separately
and singly, no meeting being held.
Harrington v. District, etc., 47 Iowa, 11
(1877). The separate consent of three
directors was held not good in Bosan-
quet v. Shortridge, 4 Ex., 699 (1850).
A due-bill running from the corpora-
tion to a person and signed by the di-
rectors cannot be defeated by showing
that the: directors did not meet, but
signed it separately and singly. Samp-
son v. Bowdoinham, etc., Corp., 36 Me.,,
78 (1858); Collins’ Claim, L. R., 12 Eq.,
246 (1871). The execution of a replevin
bond by the president for the corpora-
tion is legal, a majority of the directors
singly and separately assenting thereto.
B’k of Middlebury v. Rutland, etc., R.
R,, 30 Vt., 159 (1858), where Redfield,
Ch. J,, said: ‘The cases are numerous
where the consent of a majority of the
directors given separately has been
held ‘binding upon the company.” Prob-

ably in’these last cases the contract
would have been binding even if the
directors had not acted at all. See, .
also, -Cammeyer v. United, etc,
Churches, 2~Sand. Ch., 186, 229 (1844),
holding that the trustees must meet in
order to act, and that their affirmative
vote in a stockholders’ or general as-
semblagé is not sufficient.

1 Attorney-General v. Scott, 1 Vesey,
413 (1749), where the election of a min,
ister was committed to trustees. It was
held that they could not delegate to
proxies their right to vote. A vote by
letter on a particular question would,
of course, be the same as voting sepa-
rately and singly.

_ 2 Wells v. Rahway, etc., Co., 19 N. J.
Eq., 402 (1869); Cram v. Bangor, etc.,
12 Me., 354 (1835); Cahill v. Kalamazoo,
etc., Ins, Co., 2 Doug. (Mich.), 124
(1845); Ha parte Willcocks, 7, Cowen,
402 (1827); People v. Walker, 2 Abb.
Pr., 421; Sargent v. Webster, 54 Mass.,
497 (1847). If only a minority of the.
board are present the acts are not valid.
Lockwood v. Mechanics’ Nat'l B’k, 9 R.
I., 808 (1869); Ernest v. Nicholls, 6 H.
L. C., 401, 417 (1857); Price v. Grand,
etc., R. R., 18 Ind., 58 (1859); Ridley v.
Plymouth, etc., Co., 2 Ex., 711 (1848),
A director who is present but does not
vote is counted in the negative. Com-
monwealth v. Wickersham, 66 Pa. St.,
134 (1870), The majority of a board of
directors constitute a quorum, and a
majority of the quorum decide the ac-
tion of the board. Leavitt v. Oxford,
etc., Co.,3 Utah, 265 (1883)., A major-

659
§ 592.]

STOCKHOLDERS’ MEETINGS --— CALLS.

a

[CH. XXXVI.

The question of whether the directors may delegate their authority
to an executive committee has given rise to much controversy.

ity of a quorum of directors binds the
corporation. Buell v. Buckingham, 16
Iowa, 284 (1864). Where the charter

says five shall constitute a quorum of °

directors, a mortgage executed under

the authority of a directors’ meeting:

when only four are present is void.
Holcomb v. Managers, etc., Bridge Co.,
9N. J. Eq., 457 (1858). Quorum of di-

rectors are presumed to have been pres- '

ent. Sargent v. Webster, 54 Mass., 497
(1847), Majority of trustees are neces-
sary to constitute a quorum. State v.
Porter, 14 N. E. Rep., 874 (Ill, 1888).
A by-law cannot authorize less than a
majority to act when the charter re-
quires a majority. State v. Curtis, 9
Nev., 825 (1874), A by-law of the cor-
poration authorizing a quorum of five
directors, with the president, to trans-
act ordinary business is valid, though
there are twenty-three directors. Hoyt
v. Thompson, 19 N. Y., 207 (1859).
Where by resolution of the board four
constitute a quorum, an act at a board
of three is not binding. Ducarry v,
Gill, 4 C. & P., 121 (1830). Where there
are eight vestrymen and the statute re-
quires five to constitute a quorum, four
cannot act, although there are three
vacancies in the board. Moore v. Rec-
tor, ete., 4 Abb. N. C., 51 (1873), When
the presence of the president is by law
necessary to the meeting of an execu-
‘tive committee, a meeting without him
_ cannot bind the corporation. Corn Ex.
B’k v. Cumberland Coal Co., 1 Bosw.,
486 (1857).

Where two out of six directors have
been accustomed to act as a quorum a
forfeiture of stock by two is legal. Lys-
ter’s Case, L, R , 4 Eq., 238 (1867). The
acts of less than a quorum are valid
if they are subsequently ratified by a
quorum, Austin’s Case, 24 L. T. Rep.
(N. &.), 982 (1871), A lease taken by
a meeting of board of directors at which
oo quorum was present is ratified by

‘of nine directors,

Ross, 69 L, T. Rep., 291 (1888).

acquiescence of two boards elected in
subsequent years, with knowledge and
no objection. Oregon R’y Co. v. Oregon
Ry & Nav. Co., 28 Fed. Rep., 505
(1886). ‘‘ Where there is a definite body
in a corporation a majority of that defi-
nite body must not only exist at the
time when any act is to be done by
them, but a majority of that body must
attend the assembly where such act ia
to be done.” Rex v. Miller, 6 T.R.,
268, per Lord Kenyon. It is held, in
Faure, etc., Co. v. Phillapart, 58 L. T.
Rep., 525 (1888), that where the board
of directors was to consist of from three
to seven, but the quorum to consist of
two, and where-by resignation the
whole board is reduced to two, these
two cannot act; nor can they elect one
or more to fill the vacancies. The
quorum can act only when the board
consists of the requisite number. This
objection, however, cannot be raised by
one who takes part as adirector. Where
by charter the board of directors is to
be from five to seven, and three may
act, three cannot act when there are
but four directors. The act is not bind-
ing on the corporation. Kirk v. Bell,
16 Q. B., 290 (1851). See, also, Bottom-
ley’s Case, L, R., 16 Ch. D., 681 (1880).
A company whose directors are to be
twelve may act, although by resigna-
tion or death the number is less than
twelve. Thames, etc., R’y. v. Rose, 4
Man. & G., 552 (1842). Where a major-
ity of directors may fill vacancies, and
of seven directors only two remain, they
cannot fill the vacancies. Moses v
Tompkins, 4 South. Rep., 763 (Ala,
1888). A custom is legal which allows
three to constitute a quorum of a board
In re Regents’, etc.,
Co., W. N., 1867, p. 79 (1867). An allot-
ment of shares by a board of two when
the statute requires three is void, Sub-
scription not collectible. Ew parte
Where

660
CH. XXXv1] STOCKHOLDERS MEETINGS — CALLS. [§ 593.
Such a delegation of authority has become very common, and will
be sustained by the courts. This question is discussed elsewhere.’

§ 593. By whom meetings are to be called.— Where the time and
place of a meeting and the business to be transacted at that meet-
ing are not fixed by charter or otherwise, so that the stockholders
are bound to take notice of them, it is necessary that the meeting
be called by a properly-authorized corporate authority?

In the absence of any special authority to any particular person
to call meetings, the general agent of the corporation may make
the call,’ but the secretary cannot.‘ Statutory provisions as to who
shall call the meetings are generally held to be merely directory.
Accordingly, although the statute prescribes who shall call the
meeting, yet other corporate officers than those prescribed in the ‘
statute may issue a valid call.’ Such, also, is the rule where

the charter provided that two directors
might act, although vacancies existed
in the board, it is immaterial that the
number of directors is less than the
minimum charter number. In re Scot-
tish, etc., Co., L. R., 238 Ch. D., 413
(1883). Where the charter makes a ma-
jority of directors a quorum, a minority
cannot fill a vacancy in the board.
State v. Curtis, 9 Nev., 325 (1874). An
attaching creditor of a corporation can-
not claim that a certain vote of the di-
rectors to pay another debt was void
because there were less directors than
the charter required. Castle v. Lewis,
78 N. Y., 131 (1879). Managing com-
mittee of eight cannot act'at meeting
of six only. Brown v. Andrew, 13 Jur.,
988 (1849).

1See § 715, infra.

?Evans v. Osgood, 18 Me., 218 (1841),
holding that, where a proprietors’ meét-
ing could be called “by a petition
signed by twelve of them at least,” it
was not a legal call if eleven signed, al-
though they owned twelve shares; Con-
gregational Soc. of Bethany v. Sperry,
10 Conn., 200 (1834); State of Nevada v.
Pettineli, 10 Nev., 141 (1875), where the
by-laws of a corporation provided that
meetings of the stockholders should be
called by the trustees, and it was held
‘that any other mode of calling, such
as by the president, was insufficient.

Angell & Ames on Corp.,§ 491, to effect .

that ‘‘ want of authority may be waived
by the presence and consent of all who
have a right to vote.” Johnston vw.

- Jones, 23 N. J. Eq, 216 (1872). Here

the charter provided for annual elec-
tions, but no by-laws had been made
fixing the time. The authority to call
an election being in the directors, it
was held not sufficient where a majority
of these signed the notice without.stat-
ing that it was given by order of the
board, and without designating them-
selves as directors. Stevens v. Eden
Meeting-house Soc., 12 Vt., 688 (1839),
holding that notices and proceedings of
meetings could not be proved by parol
where there was a clerk required by
the by-laws.to post written notice.

3Stebbing v. Merritt, 10 Cush., .27
(1852).

4The secretary and a person holding

roxies on stock owned by the state
cannot calla meeting to elect officers;
nor can a statute order an election in a
brief time. Cassell v. Lexington, etc,
Co., 98. W. Rep., 502 (Ky., 1888); id.,
701,

5Judah v. American Live-stock Ins:
Co., 4 Ind., 333 (1853), holding that cer-
tain provisions in the charter for the.
issuing of stock and bringing about the
first election of directors were directory
and merely for convenience ; and where,
as here, not strictly adhered to, were
not essential to the validity of the cor-

661
§ 593.] STOCKHOLDERS’ MEETINGS — CALLS. [CH. XXXVI.
the provision as to who shall call the meeting is made by a by-law.!
The officers or agents of a corporation whose duty it is to call
meetings may, in case they neglect or refuse to issue the call, be
compelled by mandamus to call a meeting at the instance of a
shareholder who is injured by reason of their failure?

If, upon the organization of a corporation, a majority of the sub-
scribers refuse to proceed in calling a meeting, the minority may

call it, and bind the corporation.’

Although the time of a meeting is fixed by charter, nevertheless
the meeting may be held at a subsequent time and be valid.

porate organization, Chamberlain v.
Painesville, etc., R. R. Co., 15 O. St,
225 (1864), where the statute provided
that, as soon as ten per centum on the
capital stock should be subscribed, the
spersons named in the certificate of in-
corporation, or any three of them,
might give notice of an election of di-
rectors. It was held simply directory,
and not indispensable to an election
that the notice beso given. In New-
‘comb v. Reed, 12 Allen, 362 (1866), the
court declared the purpose of such stat-
utes to be to avoid such difficulty as
would arise where two parties should
attempt to organize separately under
the same charter. It was there held
that persons elected officers at a meet-
ing held in variance with such statu-
tory direction nevertheless incurred
the statute liability for corporate debts,
Where three persons are appointed to
make a call, and one of them calls the
meeting of incorporation, the other two
making no. objection, the organization
of the company at the meeting so called
is valid. Walworth v. Brackett, 98
Mass., 98 (1867); Hardenburgh v. Farm-
ers’, etc., 3 N. J. Eq.. 68, holding that
iz the call for the meeting to elecs the
first directors be signed by the commis-
sioners authorized to make the call

“ individually, and not by virtue of a
formal order of the commissioners, or
if their names be signed to such a call
by the secretary without objection by
them, these irregularities will not affect
the validity of the proceedings at the
meeting.

1Chamberlain v. Painesville, etc., R.
R. Co., 15 O. St., 225 (1864). Where a
by-law provides that special: meetings
may be called by the president, or in
his absence by the secretary, on appli-
cation made by ten members in writing,
the directors may calla special meeting
without such an application. Citizens’
Mutual Fire Ins, Co. v. Sortwell, 8
Allen, 217 (1864), But where a by-law
authorizes the trustees to call a meet-
ing, a meeting called by the president
is irregular. State of Nevada v. Petti- ’
neli, 10 Nev., 141 (1875). “When the by-
laws require a call in writing, a call by
parol is insufficient. Stevens v. Eden
Meeting-house Society, 12 Vt. ,688 (1839).

2People v. Cummings; 72 N. Y., 433
(1878); State of Nevada'v. Wright, 10
Nev., 167 (1875); People v. Board of
Governors of Albany Hospital, 61
Barb., 397 (1871); McNeely v. Woodruff,
18 N. J. Law, 852 (1833). The court will
not order the directors to call a meeting
when they or a certain proportion of
the stockholders may call it. MacDou-
gall v. Gardiner, L. R., 10 Ch. App.,
606 (1875). Cf. Regina v. Aldman, etc.,
Insurance Society, 6 Eng. L, & Eq., 365
(1851), In Goulding v. Clark, 84 N. H.,
148 (1856), it is held that, where there is
no officer competent to calla meetizg,
there is no way of convening except by
a re-organization of the company. This,
however, can hardly be considered good
law.

3 Busey v. Hooper, 85 Md., 15 (1871).

4 People v. Cummings, supra; Hughes
v. Parker, 20 N. H., 58, Failure to

662
 

“CH. XXXv1.] STOCKHOLDERS’ MEETINGS — CALLS. [§ 594.

§ 594. When the stockholders are entitled to notice of corporate
meetings.— If the time and: place at which a corporate meeting is
to be held and the business to be transacted are distinctly fixed in
the charter or by a by-law or by usage, this is of itself sufficient
notice to all the stockholders, and no further call or notice of that
meeting is necessary.’ But a by-law which fixes the day of meet-
ing without also fixing the hour is insufficient as a notice of the
meeting.’ It is a general and settled rule of law that notice, in
some way or other, must be given to every person entitled to be-
present at a corporate meeting.? When, therefore, no sufficient
notice is given by charter or statute or by-law, each stockholder
is outiled to an express personal notice of every corporate meet-
ing. No usage can operate to excuse a failure to give such a

hold an election at the prescribed
statutory time does not prevent an elec-
tion at any later time. Beardsley v.
Johnson, 1 N. Y. Supp., 608 (1888).

1 Warner v. Mower, 11 Vt., 385, 393
(1839); State v. Bonnell, 35 O. St., 10,
15 (1878). ‘‘The evidence that a day
was fixed by common consent is suffi-
cient to show notice to all of the meet-
ings on that day.” ‘*It was wholly im-

material in what way the day of the.

regular meetings was fixed.” Atlantic,
etc., Ins. Co. v. Sanders, 36 N. H., 252,
269 (1858). See People v. Batchelor, 22
N. Y., 128 (1860).

2 The fact that one of the by-laws of
the corporation fixes the day upon
which the annual meeting of the corpo-
ration shall be held is not of itself a
sufficient notice of the hour and place
at which the meeting is to be held.

‘ There must be an express notice of the
hour and place of meeting. Other wise,
unless all the stockholders are present
and consent, either in person ar by
‘proxy, the meeting cannot legally be
‘held. ‘San Buenaventura Commercial,
‘ete., Co, v, Vassault, 50 Cal,, 584 (1875),
Though the by-laws of a corporation fix
the date of the annual meeting, that of
itself will not be notice of the meeting.
Notice must be given of the place of the
meeting, and a provision of the charter
for the calling of, all meetings is a man-
datory provision, applicable, alike to

general and special meetings. United
States v. McKelder, 8 Rep., 778 (Sup.
Ct. Dist. of Col., 1879).

3**To support the validity of corpo-
rate acts, each member must be actually
summoned.” Angell & Ames on Corp.,
§ 492. ‘Due notice of the time and
place of a corporate meeting is, by the
English law, essential to its validity, or
its power to do any act which shall
bind the corporation.” Dillon on Munic.
Corp., § 200. A pledgee. is not entitled
to notice. Baker v. Woolston, 27 Kan.,
185 (1882).

4 Wiggin v. Freewill Baptist Church,
8 Mete., 301 (1844); Commonwealth v.
Cullen, 13 Penn. St., 133 (1850); Jack-
son v. Hampden, 20 Me., 87 (1841); Rex
v. Langhorn, 4 Ad. & EL, 588 (1836): 5
C., 6 Nev. & M,, 203; Smyth v. Darley,
2H. of L. Cas., 789 (1849); The King v,
Mayor of Carlisle, 1 Stra., 385; Steb-
bins v. Merritt, 10 Cush., 27 (1852),
where a meeting called by a general
agent in the absence of a statute or by-
law was upheld, though no notice was
given to a member mentally incapable
of receiving notice ; People v. Batchelor,
22. N, Y.,- 128, 134 (1860), holding that,
where a statute provided that a major-
ity of a board of aldermen should exex-
cise certain powers, all its members
were presumed to know the timie of its
stated meetings, but not of an adjourned.
meeting; notice to all members should

663
§ 595.] STOCKHOLDERS’ “MEETINGS — CALLS. [cH. XXXvI.
notice.! These rules are based on the necessity of protecting the
rights of stockholders, and especially of the minority.

§ 595. Te essential elements of a notice of a meeting are time,
place and business— The contents of the notice depend upon the
character of the meeting. There are three matters concerning
every corporate meeting of which the members are entitled to no-
tice, namely: the time, the place and the business proposed to be
transacted. Soime or all of these may be known to him by virtue
of a charter provision or a by-law or a statute. But if any one of
them is not known in that way, the stockholders are entitled to an
actual notice thereof. Accordingly, it is the rule that, in the ab-
sence of other valid. notice, the call must specify the time and
place of meeting and the business to be considered.? The precise
hour at which the meeting is to be held must be stated in the no-.
' tice?

In general, the notice need not specify the business to be consid-
ered where the meeting is one prescribed by charter, or where the
business is prescribed by charter or statute or by-law; and no un-
usual business 1s to be transacted.‘ But if the meeting is to be held
at a time not provided by the charter, or if unusual business is to
be transacted at a meeting which is a customary one, the call must

specify particularly such unusual business.

in such case be given; Shortz v. Un-
ganst, 8 Watts &S., 45 (1841), where
it was held that privately procuring the
signatures of the members of a church
society to an acceptance of a charter is
not sufficient: they should be notified,
and ata meeting act upon it in their
associated capacity. Cf. People v. Peck,
11 Wend., 604 (1834). See, also, § 596,
infra.

1 Wiggin v. Freewill Baptist Church,

49 Mass., 301 (1844), note 2, sub.

“The King v. Hill, 4 Barn. & C., 426
-(1825), where an ancient “custom of
-calling a mecting for an election of

burgesses by ringing a bell was held to
be no sufficient notice; In re Bridport
Old Brewery Co., L. R., 2 Chan., 191
(1866); In re Silkstone Fall Colliery Co.,
L. R., 1 Chan. Div., 38 (1875).
-3San Buenaventura Commercial, etc.,
Co. v. Vassault, 50 Cal., 584 (1875).
4Sampson v. Bowdoinham Steam-mill
Co., 86 Me., 78 (1854); Warner v. Mower,
11 Vt., 885 (1839), where a provision

Thus, at a meeting

of the by-laws relating to notices was
considered as not affecting those for
stated meetings, and holding that a no:
tice of a stated annual meeting need
not specify the business to be trans-
acted; Merritt v. Farris, 22 Ill, 30a
(1859). The, notice need not describe the
special business in detail. Wills v,
Murray, 4 Exch., 843 (1850); 8. C., 19
L. J.,Exch., 209; South School District
v. Blakeslee, 18 Conn., 227 (1889). Cf.
In re Bridport, etc., Co., L. R., 2 Ch.,
i191 (1866).

5In re Bridport Old Brewery Co., L.
R., 2 Chan., 191 (1866); In ve Silkstone
Fall Colliery Co., L. R., 1 Chan. Div.,
88 (1875); Atlantic Delaine Co. v. Ma-
son, 5 R. I., 463(1858); Wright’s Case, L.
R., 12 Eq., 835, n., 845, n. (1868); Tuttle
v. Michigan Air Line, etc., 35 Mich.,
247 (187%)... “* At common law all no-
tices of meetings for special or extra-
ordinary purposes were required to state
the object of the call.” Per Campbell,
J., citing Ang. & A., § 492, A meeting

664
ou. XXXv1.] STOCKHOLDERS’ MEETINGS — CALLS. [§ 596.
called to alter the by-laws and transact other business, an election
cannot lawfully be held.!| Nor can an assessment be levied ata
special meeting when the stockholders were not duly notified that
that matter would come up for consideration.? At a special meet-
ing which has been called for a particular purpose, only the business
specified in the call can lawfully be transacted.’ The transaction,

however, of business other than that for which the meeting was
called will not invalidate the entire proceedings a that meeting.

There is only an invalidity pro tanto.!

§ 596. Service of the notice—If the particular form of the no-
tice or the manner in which it shall be served is prescribed by
charter or by-law or by statute, the notice must be given in that
manner; otherwise, all the proceedings of the meeting are invalid.®

of stockholders to elect directors is in-
valid where no notice of the business is
given. The meeting was not a regular
one, and cannot commence business,
In re London, etc., Co., L. R., 81 Ch.
D., 228 (1885); Shelby R. R., etc., v.
Louisville, etc., 12 Bush (Ky.), 62 (1876),
in which a sale of a railroad was set
aside because authorized at a meeting
of stockholders called by a notice not
sufficient in point of time and defective
in not stating the object of the meeting;
Merritt v. Farris, 22 Ill., 303 (1859). Cf.
London, etc., Fire Co., L. R., 24 Ch. D.,
149 (1883); Imperial Hotel v. Hampson,
L. R., 23 Ch. D., 1 (1882), in reference
to the notice required by the English
statute; Zabriskie v: Cleyeland, etc.,
R. R. Co., 23 How., 881 (1859). A no-
tice of a meeting of a benevolent soci-
ety called to dissolve must state the ob-
ject of the meeting. St. Mary’s, etc.,
Ass’n v. Lynch, 9 Atl. Rep., 98 (N. H.,
1887),

1 People’s Insurance Co. v. Westcott,
14 Gray, 440 (1860). Nor an amotion
made. Rex v. Town of Liverpool, 2
Burr., 723 (1759); Rex v. Doncaster, id.,
738. .

2 Atlantic Delaine Co. v. Mason, 5
R. I, 463 (1858).

3 Warner v. Mower, 11 Vt., 385 (1839).

4In re British Sugar Refining Co., 3
Kay & J., 408, 413 (1857); Graham v.
Van Dieman’s Land Co., 1 Hurl. & N.,

541 (1856). Cf. In re Irrigation Co. of
France, L. R., 6 Chan., 176.1871). But
it is held that at a special meeting, all
the members being present and consent-
ing, business other than that specified
in the call may lawfully be transacted.
The King v. Theodorick, 8 East, 548
(1807); In re The Joint-stock Co.’s Act,
1856, 3 Kay & J., 408 (1857); San Buena-
ventura Commercial Mining, etc., Co. v.
Vassault, 50 Cal., 354 (1875). Cf. Peo-
ple’s Mutual Ins. Co. v. Westcott, 14
Gray, 440 (1860). All acts done by a
portion of the stockholders at a meet-
ing so called or convened as to have the
appearance of trickery, secrecy or fraud
are invalid; and surprise and fraud, in
respect to any part of the stockholders
with regard to the meeting will inval-

“idate all proceedings at that meeting.

People v. Albany, etc., R. R. Co., 55
Barb., 344 (1869); MacDougall uv. Gar-
diner, L. R., 1 Ch. D., 13 (1875).

5 Stockholders of Shelby R. R. Co. v.
Louisville, etc., R. R. Co., 12 Bush, 62
(1876); Reilly v. Oglebay, 25 W. Va., 36
(1884), where a notice by the setretary,
when the statute required it to be given
by the board of directors or by stockhold-
ers holding one-tenth of the capital, was
held insufficient although it was shown

‘that he had the authority from stock-

holders holding the required amount of
stock; Johnston v. Jones, 23 N. J. Eq.,
216 (1872), that if the notice is to be given

. 665
§ 596.] STOCKHOLDERS’ MEETINGS — CALLS. [OH. XXXVI.

In the absence of an express provision as to the manner of making
a call it is the common-law rule that each member of the corpora:
tion is entitled to a personal service of the notice But a written
or verbal notice left at a place of business, in charge of a member
of the stockholder’s family, has been held sufficient.2 The physical
or mental incapacity of one of the stockholders will not excuse a
failure to give him notice of a mecting, but it is very clear that
the meeting may lawfully convene and transact business, although
one of the members is incapable, by reason of imbecility, of receiv-
ing the notice.’ The absence of a stockholder from -home does
not excuse a failure to leave the notice* And where one of the
stockholders dies after notice of a meeting but before the meeting
convenes, and no administrator is appointed in time to act at that
meeting, there is on this account no ground to impeach the regu-
larity of the meeting.? A pledgee of shares is not entitled to a
‘notice of corporate meetings,’ since the pledgor is entitled to vote

by the directors it is not sufficient if
signed by a majority of them as indi-
viduals without stating it was by order
of the board or stating that the persons
signing were directors; Stevens v. Eden
Meeting-house Society, 12 Vt., 688 (1839),
where parol proof of a notice required
to be in writing, and of posting, without
proof of the loss of the writing, was ex-
cluded; Swansea Dock Co. v. Levien, 20
L. J., Exch,, 447 (1851), where a notice
was held bad because the statute de-
clared it should be printed in a news-
paper circulating in the district of the
principal place of business, while in
this case there was no proof that the
paper selected ever circulated there.
Thus, directors who were ostensibly
discharged at such meeting were in fact
unaffected thereby, and a call made by
them in due form after such time was
-good, The manner of making the call
“may be prescribed by by-law; and when
so prescribed, provided the by-law is
reasonable, calls made in that way are
valid. Taylor v. Griswold, 14.N. J. L.,
222 (1834),
1Tuttle v. Michigan Air Line R. R.
Co., 35 Mich., 247 (1877); Wiggin v. Free-
will Baptist Church, 8 Metc., 801 (1844):
Stow v. Wyse, 7 Conn., 214 (1828); 8. C.,
18 Am. Dec., 99, in which a mortgage

deed executed by an agent appointed
at a meeting, notice of which was not
given to ali the corporators, was held to
be void; Harding v. Vandewater, 40
Cal., 77. Cf. Porter v. Robinson, 30
Hun, 209 (1883); Rex v. Doncaster, 2
Burr., 738; Rex v. Town of Liverpool,
id., 723 (1759). See, also, § 594, supra.

2 Williams v. German Mutual Fire Ins.
Co., 68 Ill, 387 (1878). See, however,
Stevens v. Eden Meeting-house Society,
12 Vt., 688 (1839), holding that notice by
posting cannot be proved by parol.

3 Stebbins v. Merritt, 64 Mass. , 27 (1852).

4Jackson v. Hampden, 20 Me., 37
(1841). In Porter v. Robinson, 80 Hun,
209 (1883), it is held that notice need not
be given to a member of a board of
school trustees, the board being a body
corporate, who is absent from the state
and cannot attend the meeting, and
that a failure to notify such a member:
will not render the proceedings at the
meeting irregular orinvalid. Members
of English joint-stock companies resid-
ing abroad are not entitled to any notice
of corporate meetings. Ea'parte Union
Hill Company, 22 L. T. Rep., 460 (1870).

5Freeman’s National Bank v. Smith,
18 Blatch., 220 (1875). :

6 McDaniels v. Flower Brook Mfg. Co.,
22 Vt., 274 (1850), and n. 8, p. 663.

668 ,
OH, XXXVI]

STOOKHOLDERS’ MEETINGS — CALLS. [$§ 597-599.

upon the stock’ until his interest has been closed out by a foreclos-
ure or sale.

§ 597. Notice must be served a reasonable time before the meet-
ing.— The notice must be served upon the stockholders a reasonable
or customary. time before the day of the meeting.2 Where by stat-
ute it is provided that thirty days’ notice shall be given of certain
corporate meetings, that length of time suffices for notices of other
meetings of the same corporation.’

§ 598. The division of meetings into ordinary and extraordi-
nary.—- Corporate meetings of stockholders are frequently divided,
both by the judges and the text-writers, into two classes — the first
being special or extraordinary, and the second being ordinary, reg-
ular, "stated or.general. By reason of this attempt at classification
much confusion has been introduced into the law without any cor-
responding advantage. The terms employed to distinguish the
various kinds of meetings are used in different senses by different
writers, so that it is difficult to define them in such a way as to
avoid confusion. It seems, however, to be a genetally-accepted
‘principle that if the time or the place or the business of a meeting
is unusual, that meeting is special or extraordinary, at least to the
extent that any one or more of these three matiers are unusual.
Accordingly, when neither the time nor place nor business of -a
meeting is unusual, that meeting is a general, ordinary or regular
meeting.*

§ 599. Waiver of ‘notice-— The stockholder may, in general,
waive his right to havea notice of a corporate meeting duly served

1New York, etc., R. R. Co. v. Schuy-
ler, 38 Barb., 534, 542 (1860), per Ingra-
ham, J., arguendo. See § 468.

2In the Matter of the Long Island R.
R. Co., 19 Wend., 37 (1837); Wiggin wv.
Freewill Baptist Church, 8 Metc., 301
(1844). Of. Covert v. Rogers, 38 Mich.,
_ 368, where a similar rule is declared as
to notice to directors of their meetings.
The legislature cannot unreasonably
shorten the time of the next meeting.
Cassell vy. Lexington, etc., Co., 9 S. W.
Rep., 502 (Ky., 1888); id., 701.

3Shelby R. R. Co. v. Louisville, etc.,
R. R. Co., 12 Bush, 62 (1876).

4Green’s Brice’s Ultra Vires, p. 441; Za-
briskie v. Cleveland, etc., R. R. Co., 23
How., 881 (1859); Sampson v. Bowdoin-
ham Steam-mill Co., 86 Me., 78 (1854);

Mason v. Atlantic Delaine Co., 5 R. 1,
463 (1858). In Vermont, however, the dis-
tinctions made above would hardly pre-
vail. The following decisions have been
made in that state: Ata regular an-
nual meeting — that is, where the meet-
ing is stated and general — any and all
proper corporate business may be trans-
acted. Warner v. Mower, 11 Vt., 385,
892 (1839). At an annual town meeting
any business may be transacted, pro-
vided it be within the scope of the cor-

porate enterprise. Schoff v. Bloomfield,

8 Vt., 472 (1836). It is believed, how-
ever, that the rights of stockholders
will be best preserved by requiring no-

‘tice to be given of any extraordinary

business that may come before an an-
nual meeting.

667
§ 599.] STOCKHOLDERS’ MEETINGS — CALLS. (cH. Xxxv1.
upon him! <A notice required by statute or charter may also be
waived by the stockholders.?

It has been held that, where the giving of the notice is prescribed
by statute, the notice cannot be ‘waived. This is not, however, a
sound rule, except, possibly, in municipal corporation cases. The
presence and consent of all who have a right to the notice is a
waiver of it. So participation as an officer in issuing the call is
a waiver by him of informalities as to that call;* and recognition
of an agent appointed ata certain meeting, by dealing and offer-
ing to deal with him as the agent of the company, is a waiver of
the right to notice of that meeting.* One stockholder cannot avail
himself of the neglect of the corporate officers to give due notice

1Richardson v, Vermont, etc., 44 Vt.,
618 (1872), holding that objections to the
‘proceedings of a meeting called by a
notice which did not state what its ob-
ject was had been waived by a ratifica-
tion at a later meeting; Jones v. Milton
& Rushville Turnpike, 7 Ind., 547 (1856),
where the stockholders not notified ap-
peared and voted by proxy; Ex parte
Faris, 26 L. J., Ch., 369 (1856); Kenton
Furnace v. McAlpine, 5 Fed. Rep., 737
(1880). See, also, Porter v. Robinson, 30
Hun, 209, and § 621, infra.

? Kenton Furnace v. McAlpine, 5 Fed.
Rep., 737 (1880), where no notice was
given, although prescribed by thecharter
and by-laws. It was held to have been
waived by the presence of all the stock-
holders at the meeting and their partici-
pation in its action; In re British Sugar
Ref. Co., Ex parte Faris, 26 L. J., Ch.,
369, where it was adjudged that ashare-
holder who had received a circular no-
tice of the meeting and was present
could not question the legality of the
meeting on the ground that the charter
required, in addition to the circular,
publication in a newspaper, which was
not made; The King v. Chetwynd, 7
Barn. & C.,, 695 (1828), where the elec-
tion of a burgess at a meeting of which
no notice was given was held valid, be-

cause it appeared that all the members:

of the electing body were present;
People v. Peck, 11 Wend., 604 (1884),
holding that a failure to comply strictly

with astatutory requirement regarding
notice will not affect the proceedings
of a meeting of a religious corporation
where there is no claim that every voter
was not present, or that evil resulted
from the omission, and no fraud was
involved. If all parties attended they
thereby admitted notice. See, also, In
re Joint-stock Cas. Act, 3 Kay & J.,
408 (1857); Stebbins v. Merritt, 10 Cush.,
27 (1852); In re British, ete., Co., 3
Kay & J., 408 (1857). Cf. United States
v. McKelden, 8 Rep., 778 (1879), where

_ it was held that, although the date for

the annual meeting be fixed by a by-
law, notice by publication provided for
by the charter will not be rendered un-
necessary; In the Matter of Long
Island R. R. Co., 19 Wend., 37 (1837), in
which it was said in a dictum that a
notice regulated by statute ‘‘of course
cannot be modified or dispensed with;”
The King v. Theodorick, 8 East, 543
(1807), dictum, where Lord Ellenbor-
ough said, ‘if a summons of any kind
had been specially required by the
charter, a compliance therewith would
have been strictly necessary in order to
have rendered the election valid.” And
see p. 258, n. 4.

3 Bucksport, etc., R. R. Co. v. Buck,
68 Me., 81 (1878); Schenectady, etc.,
Plank-road Co, v. Thatcher, 11 N. Y.,
102 (1854).

4Bryant v. Goodnow, 22 Mass., 228
(182%).

668
 

CH, XXXVI] STOCKHOLDERS’ MEETINGS — OALLS. | [$$ 600, 601.
-to another stockholder who does not himself complain.' But the
waiver of all the stockholders is essential in order to validate an
election held at a meeting not properly called.?

§ 600. Notice is presumed to have been regularly given.—It is a
presumption of law that proper and valid notice of a corporate
meeting has been duly given to every stockholder, and that the
meeting itself was regularly and lawfully held. The burden of
proof is, therefore, upon him who alleges want of notice or insuf-
ficiency of notice, or attacks the regularity and validity of the pro-
ceedings.’

§ 601. Adjourned meetings.— An adjourned meeting is but a con-
tinuation of the meeting which has been adjourned; and when that
meeting was regularly called and convened and duly adjourned,
the suareholders may, at the adjourned meeting, consider and de-
termine any corporate business that might lawfully have been

transacted at the original meeting.‘

1 Schenectady, etc., Plank-road Co, v.
Thatcher, 11 N. Y., 102 (1854). In this
case the courtsaid: ‘* The court rejected
the offer of the defendant to prove that
no notice had been given of the first
election of directors, I think this was
properly rejected, on the ground that
the defendant could not avail himself
of a neglect to give notice to any other
stockholder. The defendant himself
was present at that meeting and voted,
and was elected a director. He has not
suffered by an omission to serve notice,
and he is not in a situation to object as
to others,” See, also, In the Matter of
the Election of Directors of the Mo-
hawk & Hudson R. R. Co., 19 Wend.,
185 (1835); and ef. Samuel v. Holliday,
1 Woolw., 400 (1869). .

2State of Nevada v. Pettineli, 10
Nev., 141 (1875).

3McDaniels v. Flower Brook Manuf. .

Co., 22 Vt., 274 (1850); Porter v. Robin-
son, 80 Hun, 209 (1883); Sargent v.
Webster, 18 Metc., 497 (1847); Medical
& Surgical Society v. Weatherly, 75
Ala,, 248; South School, etc., v. Blakes-
lie, 18 Conn., 227, 235 (1839); Lane v.
Brainerd, 80 Conn., 565 (1862); Pitts
v. Temple, 2 Mass., 638 (1807); Copp ».
Lamb, 12 Me., 812 (1835); Tuttle v.
Michigan, etc., R. R. Co., 85. Mich., 247

(1877); Wells v. Rodgers, 27 N. W. Rep.,
671 (Mich., 1886), holding that notice is

- presumed, and the burden of proof in.

attacking the legality of the meeting is
on the plaintiff, citing Mutual Fire Ins.
Co. v. Sortwell, 8 Allen, 217; Com. v.
Woelperr, 3 Serg. & R., 29; Edgarly v.
Emerson, 23 N. H., 555; State v. Smith,
48 Vt., 266. See, also, § 621, infra.
4Granger v. Grubb, 7 Phila, 350
(1870); Farrar v. Perley, 7 Me., 404 (1831);
Schoff v. Bloomfield, 8 Vt., 472 (1836);
Warner v. Mower, 11 id., 385 (1839), Cf.
The Queen v. Grimshaw, 10 Q. B., 747
(1847). Of. People v. Batchelor, 22 N. YY:
128 (1860), where the New York city
board of aldermen appointed a day for
the election of a city officer, Atasubse-
quent stated meeting this resolution was
rescinded, and then an election was
thereupon held. Held, that the election
was void, assome members were absent
from the former meeting and had no
notice of the election. A board of alder-
men cannot elect an assessor and then
at an adjourned meeting reconsider and
elect some one else. State v. Phillips,
10 Atl. Rep., 447 (Me., 1887), See, also,
Hardenburgh v. Farmers’, etc., Bk, 3 N,
J. Eq., 68 (1834), where the stockholders
proceeded to an election in spite of an
adjournment by the commissioners of

669
§ 601.]

STOCKHOLDERS’ MEETIN' GS — CALLS,

[OH. XXXVI.

But where there is an absence of good faith, and an adjourned
meeting is held in such a way as to prevent certain of the stock-
holders from knowing of it, the proceedings are invalid. Where
the original meeting was duly called and convened, the stockholders
are not entitled to any other notice of the adjourned meeting than
that which is implied in the adjournment.’

election, and the election was upheld.
A meeting adjourned for want of a
quorum may at the adjourned meet-
ing proceed to business, if a quorum is
present; and no notice of the adjourned
meeting is necessary where the charter
or by-laws provided for such adjourn-
ment. Smith v. Law, 21 N. Y., 296
(1860), involving a meeting of the board
of directors.

1 State v. Bonnell, 35 O. St., 10 (1878).
Where an election is held, after many
adjournments, and a minority are pres-
ent and elect directors who repudiate a
contract which exists with the holder
of a majority of the stock, the latter
being ignorant of the intent to elect of-
ficers, equity will enjoin the repudiation

of the contract. New York, etc., Co. v.
Parrott, 36 Fed. Rep., 462 (1888).

2Smith v. Law, supra; Warner v.
Mower, 11 Vt., 385 (1839); Schoff wv,
Bloomfield, 8 id., 472 (1886); Farrar v,
Perley, 7 Me., 404 (1831); The Queen ».
Grimshaw, 10 Q. B., 747 (1847); Rex v.
Carmarthen, 1 Maul. & Sel., 702. See,
also, Gowen’s Appeal, 10 Weekly Notes
of Cas., 85 (1880); Scadding v. Lorant,
83H. of L. Cas., 418 (1851). Cf. United
States v. McKelden, 8 Rep., 778 (1879),
where it was held that the proceedings
of an original meeting being invalid
by reason of insufficient notice, the ad-
journed meetings were invalid also,
they being merely continuations of the
original,

670
CHAPTER XXXVI.

CORPORATE MEETINGS — ELECTIONS AND OTHER BUSINESS.

A. ELECTIONS,

§ 602. Scope of the subject.

603. Elections are to be by the stock-
holders, and may be compelled
by mandamus,

605. Conducting, opening and clos-

ing elections.

607. The majority of votes cast shall
elect. -

608. Is every share of stock entitled

O one vote.

609. Cumulative voting.

610. Proxies,

611. The transfer book as evidence of
aright to vote.

612. The right of trustees, pledgees,
married women, administra-
tors, etc., to vote. :

618. The corporation cannot vote
upon shares of ‘its own stock.

614, Injunction against voting par-

~ ticular stock,

 

§ 615-16. Illegal or fraudulent elec-
tions — Shareholders’ rem-
edies herein,

618. Combinations and contracts as
to elections and restrictions on
voting.

619. Who may be a director or cor-
porate officer. i

620. Acceptance and resignation of
office, and failure to elect offi-
cers— Removal of directors.

B. IRREGULARITIES AND INFORMALITIES
IN CONDUCTING A MEETING.

§ 621. The general method of transact-
ing business,
622. The meeting must be held at the

prescribed hour, which must
be reasonable,

623. The quorum — A majority of the
stockholders attending a meet-
ing may transact business,

624, Stockholders can act only at
corporate meetings,

ft
A. ELEOTIONS.

§ 602. Scope of the subject.— The business which the stockholders
of a corporation in meeting assembled have the power to transact
is not extensive, but it is of great importance. It elects the
directors, passes upon amendments to the charter, checks any wltra
vires acts, determines whether any increase of the capital stock
shall be made, makes the by-laws and dissolves or continues the
corporation. These constitute the chief functions of a stockholders’
meeting. They are extraordinary in their character, and although
they are exercised at long intervals are of vital importance. This
chapter treats of the business which may be transacted at stock-
holders’ meetings and of the methods of its transaction.

§ 603. Zlections are to be by the stockholders and may be com-
pelled by mandamus.— At common law the directors of a corpora-
vion are to be elected by the stockholders, in corporate meeting
assembled.! Generally this is declared to be the law by charter or

’ 18tockholders cannot fill vacanciesin nual meetings. Moses v. Tompkins, 4
the board of directors at a special meet- South. Rep., 763 (Ala., 1888),

ing, when elections can only be at an-
671
4
t

§§ 605-607. ] ELECTIONS OF DIRECTORS. [onu. Xxxvir,

statutory provisions. The president, vice-president, secretary, treas-
urer and agents of the corporation are usually elected or appointed,
not by the “stockholders, but by the directors. All these matters,
however, are generally regulated by the charter or a statute. At
common law mandamus lies to compel an election of corporate
ofticers.!

All Compptaons for profit have power to elect a board of di-
rectors.”

§ 605. Conducting, opening and closing aeiitns — The form or.
mode of conducting an election is in general not material, pro-
vided it violates no positive provision of the charter or of a statute
regulating it, is orderly and in good faith, and is conducted by
authorized or proper persons.’

Ordinarily, a chairman and inspectors of election are elected or
appointed by the stockholders. If inspectors are provided for by
the charter, and they do not act or are enjoined from acting,the
stockholders may appoint others to take their place.‘

Where no time is specified by law during which the polls must
be kept open it rests within the sound discretion of the inspectors
to say when the polls shall close.’ So also it is held that holding
the polls open after the hour specified in the notice for them to
close will not, where the inspectors exercise a reasonable discre-
tion, invalidate an election.6 And as a general rule of law, where,
in the election of corporate officers, no particular mode of proceed-
ing is prescribed by law,if the wishes of the corporators have been
fairly expressed, and the election was conducted in good faith, it
will not be set aside on account of any informality in the manner
of conducting it.7

§ 607. The majority of votes cast shall elect.— It is the well-set-
tled rule in corporations having a capital stock divided into shares

1 See § 593, supra. Re Chenango, etc., Ins. Co., -id., 635

2A bank inay have directors though
the statute does not provide for them.
All private corporations may Rave di-
rectors. Hurlbut v. Marshall, 62 Wis.,
590 (1885).

3Fox v. Allensville, etc., Turnpike
Co., 46 Ind., 31 (1874).

4 People v. Albany, etc., R. R. Co., 55
Barb., 844 (1869), See, also, People v.
Twaddell, 18 Hun, 427 (1879); Matter of
Wheeler, 2 Abb. Prac. (N. 8.), 361 (1866).
The failure of the inspectors so ap-
pointed to take the prescribed oath will
not invalidate the election. Re Mo-
hawk, etc., R. R., 19 Wend., 185 (1838);

(1839). Where by statute,an election is
to have ‘‘inspectors” one inspector is
insufficient. Matter of Lighthal], etc.,
Co., 47 Hun, 258 (1888); but see N. Y.
L. J., June 29, 1889.

5In the Matter of the Chenango
County Ins, Co., 19 Wend., 634 (1839).

6 In the Matter, etc., of the Mohawk &
Hudson R. R. Co., 19 Wend., 185 (1838).

7Philips v«. Wickharh, 1 Paige, 590
(1829). In England, by statute, any five
stockholders may demand a poll, Phoe-
nix, etce., Co, 48 L. T. Rep., 260 (1888);
Hurrell & Hyde on Directors and Offi-
cers, 78,

672
4

OH. XXXVIL. |

ELECTIONS OF DIRECTORS.

a

[§ 607.

that a majority of the votes cast at any election-shall elect.1 And
this majority, moreover, need not be an actual numerical majority
of all the votes which all the stockholders have, but only a major-
ity of the votes cast.2 Accordingly, a majority of the votes cast
will elect, even though a majority ‘of the shares of stock are not
voted at all, and even though the owners are present at the meet-.

ing and refuse to vote.!

1 People v. Albany, etc., R. R. Co., 55
Barb., 344 (1869); East Tennessee, etc.,
R. R. Co. v.Gammon, 5 Sneed, 567
(1858); Dudley v. Kentucky High
School, 9 Bush, 576 (1873); Gifford v.
New Jersey, etc., R. R, Co, 10 N. J.
Eq., 171 (1854) ; New Orleans, etc., R. R.
Co. v. Harris, 27 Miss., 517, 587 (1854);
Treadwell v. Salisbury Mfg. Co., 7
‘Gray, 398 (1856); 42 Conn., 32. On the
general principle the majority bind the
minority in a vote on miscellaneous
questions. See § 623, infra. This rule
is subject to the qualification that the
majority cannot authorize an ultra
vires act as against the minority, even
though that minority consist of but one
person. See Part IV, infra.

2 See § 623, infra.

3 Appeal of Gowen, 10 Weekly Notes
of Cases, 84 (1881), where the supreme
court held that ‘‘ those who voluntarily
absent themselves from a meeting duly
called for an election must recognize
the validity of the election regularly
made by those who do attend.” The
‘question was whether an election held
by a meeting of railroad stockholders at
which a majority of all votes was not
cast could be considered valid. State
v. Green, 37 O. St., 227 (1881). This
was a case of election of clerk by a city
council; and it, was held that, all being
present and engaged in holding the
election, half the members may not de-
feat an election by refusing to vote and
then objecting because a quorum had
not voted. Commonwealih v. Wicker-
sham, 66 Penn. St., 184 (1870), was-the
election of a county school superintend-
ent, which was required to be “viva

(48)

voce by a majority of the whole num-
ber of directors present.” A person re-
ceiving exactly half that number could
not be declared elected although one
director refused to vote on the last bal-
lot. ‘‘ He remained, and being present
was entitled to be counted.” ‘The,
legal intendment [of his action] was
that he voted for neither or for the mi-
nority candidate.” But, under a by-
law requiring. a majority of the stock
to be present, it has been held that the
majority must be a majority of the
whole stock, and not merely of the stock
subscribed for. Ellsworth, etc., Co. v.
France, 10 Atl. Rep., 250 (Me., 1887).
If the statute requires a majority to
elect, one who is present but does not
vote must be counted. People v. Conk-
lin, 7 Hun, 188. Stockholders may vote
for less than the whole number of di-
rectors to be elected. Vandenburgh v.
Broadway R’y Co., 29 Hun, 349 (1883).
But where a meeting was called to elect
three directors and a majority of the
stockholders voted for five directors,
only a small minority voting for three,
the latter votes were held the only valid
ones, ‘and the three voted for were de-
clared elected. State v. Thompson, 27
Mo., 365, 369 (1858). Where twenty-
three directors are to be elected, a vote
electing twenty-two is effectual to elect
those twenty-two. In re Union Ins.
Co., 22 Wend., 591 (1840). A new elec-
tion may be held to elect the remaining
one. Id. Buta ballot cast for more
persons than are to be elected is void.
Commonwealth v. Woelper, 3 ‘Serg. &
R., 29.

673 ‘
o

§$ 608, 609.] ELECTIONS OF DIRECTORS. ‘(CH. XXXVII

§ 608. Is every share of stock entitled to one vote— At common
law, in public or municipal corporations, each qualified elector
has one vote, and only one. This was a natural rule; since each
duly-qualified citizen voted as a citizen and not as the holder of
stock. But the same rule should not apply to private corporations.
Stockholders are interested not equally, but in proportion to the
number of shares held by them. Naturally and reasonably each
share should be entitled to one vote. It must be conceded, how-
ever, that the decisions are otherwise; and it seems that at common
law each stockholder had but one vote, irrespective of the number
of shares held by him.! Such a conclusion, however, must be con-
sidered as a hardship of the law.

Generally the charter or statutes prescribe that each share of
stock shall be éntitled to one vote? And a statutory or charter
provision to this effect applies not only to elections, but also to all |
other questions that may come before the stockholders’ meetings? |

§ 609. Cumulative voting. —In the constitutions of several of the
states there are provisions for enabling a minority in interest of the
stockholders to elect a minority of the directors. This is effected
by what is known asa system of cumulative voting. By it each
shareholder is entitled to as many votes for directors as equal the
number of sharés he owns multiplied by the number of directors to
be elected. Thus, if there are six directors to be elected, a stock-
holder who owns one hundred shares may poll six hundred votes;
and these votes he may give entirely to one or two or more of the
six candidatés, as he may see fit. In this way any minority of the
stockholders exceeding one-sixth part, acting together, may elect
one member of a board of. six directors, and thus secure a repre-
sentation in that body. A larger minority might secure the elec-

1Taylor v. Griswold, 14 N. J. Law,
222 (1834), declaring that a by-law
to the contrary is void. At common
law stockholders voted by show of
hands, anda large stockholder has no
greater vote than a small one. In re
Horbury, etc., Co., L. R., 11 Ch. D., 109
(1879). Stockholders each have one vote;
not even a special provision in the ar-
ticles filed under a general act can
change this rule). Commonwealth v.
Nickerson, 10 Phil., 55 (1878). For an
interesting statement of the origin of
the practice of giving each stockholder
one vote only, and of the gradual
changes made in me tule, see Har-

vard Law Review, Nov., 1888, p. 156.
The by-laws cannot give the president
a casting vote. State v. Curtis, 9 Nev.,
825 (1874). ,

2Hays v. Commonwealth, 82 Penn.
St., 518 (1876). Where by statute two-
thirds of the stockholders are authorized .
to do an act, this is construed to mean
two-thirds of the stock — at least long
acquiescence therein has that effect.
Fredericks v. Penn, Canal Co., 109 Pa.
St., 50 (1885),

3 Re Rochester, etc., Co., 40 Hun, 172
(1886), construing a statute which is
applicable to all New York corpora-
tions,

674
CH. XXXvu. | ELECTIONS OF DIRECTORS.

[$ 609.

tion of two members of such a board, the possibility of increasing
the minority representation increasing as the minority increases,
without it ever becoming possible for a minority upon a full vote
to secure more than its equitable proportion of the representation.
The larger the number of directors the smaller would be the mi-
nority which would be able to elect one member of the board; and
the larger the minority the greater the representation possible to
be secured.! Constitutional provisions which are designed to secure
such a minority representation are found in California, Pennsylva-
nia, Illinois, West Virginia, Missouri and Nebraska.? These pro-
visions, if designed to be retroactive, have been held unconstitu-
tional and void. They can only apply to corporations chartered
after their enactment. So far as they concern corporations char-
tered before the adoption of such a constitutional provision they "|
impair the obligation of the contract between the corporation, the
stockholders and the state, and infringe the vested rights of the

stockholders.’

The plan of cumulative voting is growing in popularity, and is

1Cumulative voting given by the con-
stitution is an absolute right, and does
not require any by-laws to give it effi-
cacy. By this provision, ‘if there are
six directors to be elected, the single
shareholder has six votes; and, contrary
to the old rule, he may cast these six
votes for a single one of the candidates,

or he may distribute them to two or

more of such eandidates as he may
think proper. He may cast two ballots
for each of three of the proposed direct-
ors — three for two or two for one, and
one each for four others; or finally he
may cast one vote for each of the six
candidates.” Pierce v. Commonwealth,
104 Pa. St., 150 (1883).

2A statutory provision to the same
effect prevails in Michigan. The Cali-
fornia provision is construed in Wright
v, Central Cal., etc., Co., 67 Cal., 532
(1885), holding that this constitutional
right as to voting could not be changed
by a resolution of the directors: The
Pennsylvania provision is construed in
Wright v. Commonwealth, 109 Pa. St.,
“560 (1885), holding that part of the di-
rectors may be so elected by a plurality
and declared elected, and may act al-

“though the remaining directors are not

elected. ©

3State v. Greer, 78 Mo., 188 (1883);
Hays v. Commonwealth, 82 Penn. ‘St.,
518 (1876); Baker’s Appeal, 109 Pa. St.,
461 (1885). Upon the question of the
constitutionality of statutes providing.
for minority representation or cumula-
tive voting in the election of public offi-
cers, a matter germane to the present.
subject, see People v. Kenney, 96 N. Y.,
294 (1884); People v. Crissey, 91 id., 616i
(1883); State'v. Constantine, 42 O. St.,.
437. The Ohio statute prescribing that
‘each share shall entitle the owner to
as many votes as there are directors to
be elected” does not authorize cumula-
tive voting. State v. Baumgardner, 13
N. E. Rep., 279. (Ohio, 1887), It has
been suggested, and with reason, that
where old corporations are compelled
by a new constitution to accept that
constitution, whenever they accept the
benefits of a statute passed subsequently
to the new constitution, then that the
provision of cumulative voting con-
tained in the new constitution will apply
to those corporations which accept the
new constitution in this manner,

675
§ 610.]

ELECTIONS OF DIRECTORS.

[CH. XXXVIL.

fitted to protect the minority from the frauds of directors who are

elected wholly by the majority.'

§ 610. Prozies.— At common law a stockholder has no right to
cast his vote by proxy.’ This rule was probably evolved from the
analogous rule governing municipal corporations, which requires

all votes to be given in person.

This right is, however, usually se-

cured to stockholders in corporations by statute. The right to vote

1Mr. Simon Sterns, in the Cyclope-
dia of Political Science, Political Econ-
omy and United States History (vol.
III, p. 526), says: ‘‘ The severest blow,
however, which could be dealt to cor-
porate mismanagement would be the
rigorous introduction of minority repre-
sentation in boards of direction, which
would make secrecy of management as
against the interest of shareholders sub-
stantially impossible, and would’ pre-
vent the possibility of the recurrence of
some of the worst abuses which charac-
terize their administration. Suppose
twenty directors were to be elected, the:
reform would consist in allowing each

section of one-twentieth of the stock- |

holding-interest to elect one director by
accumulating their votes upon a single
name, or by distributing their votes for
one or more, as they may see fit, This is
the cumulative plan. Another is the
preferential or list plan, in allowing
each twentieth part of the constituency
to elect one director by preferences indi-
cated on a ballot in the order of the
names as printed. When the first name
has a quota sufficient to elect him — i. e.,
one-twentieth of the votes cast—the bal-
lot is counted for the second name, and
so forth. The result of this system of
minority representation would be to
make of the board of directors a reduced
photograph of the whole constituent
body, and make it impossible to capture
an organization. like a railway from
the actual owners thereof. Any one of
the numercus plans suggested for se-
curing minority representation, if ap-
plied to corporate management, would
successfully accomplish that result. The
objection which has been urged to

'

minority representation in public rep-

resentative bodies has no validity to
corporate elections, as in corporations
neither localities nor persons are sup-
posed to be represented, but pecuniary
interests only. It would better secure
fair representation than does the Eng-
lish system of diminished value of votes.
in proportion to stockholders’ interest —
t, @., one vote for every share up to ten,
an additional vote for every five others
beyond the first ten, and one vote for
every ten beyond one hundred shares;
or the classification plan, by which'only
a few directors of the whole retire each
year. Minority representation would
give permanency in management, and
prevent the swamping of the interest of
the smaller shareholders.”

2Taylor v. Griswold, 14 N. J. Law,
228 (1834); Philips 1. Wickham, 1 Paige,
590 (1829); Brown v. Commonwealth, 3
Grant (Penn.), 209 (1856); Craig v. First .
Presbyterian Church, 88 ‘Penn. St., 42
(1878); Commonwealth v. Bringhurst,
108 id., 134 (1883); People v. Twaddell,
18 Hun, 427, 480 (1879); Case of the
Dean and Chapter of Fernes, Davies,
116, 129 (1608); Attorney-General v.
Scott, 1 Vesey, 413 (1749). Where the
statute allows citizens to vote by proxy,
an alien is not within its terms, and can-
not doso. In re Barker, 6 Wend., 509
(1830).

3N. Y. Session Laws, 1850, ch. 40,
§ 5. In New York a statute forbids the
buying or selling of proxies for the pur-
pose of voting railroad stock. New
York Session Laws, 1880, ch. 6510.
Where the statute gives a right to vote
by proxy a by-law to the effect that
only a stockholder can act as proxy is

676
CH. XXXVI] ELECTIONS OF DIRECTORS. [§$ 610.
shares of stock by proxy may be given to the stockholders by a
by-law of the corporation.! A proxy should be in writing, but it
need not be in any particular form; it need not be acknowledged
or proved, but it must be in such a shape as reasonably to satisfy the
inspectors of election of its genuineness and validity.2 And to this
end the corporate officers may insist upon reasonable evidence of
the regularity and genuineness of the proxy before allowing it to
be voted.’

Where certificates of proxies are destroyed after use, parol evi-
dence is admissible to prove their former existence and sufficiency.
An ordinary proxy authorizes the person holding it to vote for di-
rectors. It does not authorize him to represent the stockholder
on all questions. A proxy to vote will not authorize a vote to dis-
solve the corporation or to sell the entire corporate property and

business.®

illegal and void. Matter of Lighthall,
etc., Co., 47 Hun, 258 (1888). A corpo-
ration as a stockholder may of course
give a proxy. Jn re Indian, etc., Co.,
L. R., 26 Ch. D., 70 (1884). Directors
may be enjoined from using the funds of
the company to obtain proxies for them-
selves or their nominees, Studdert v.
Grosvenor, 55 L. T. Rep., 171 (1886).

‘1 People v. Crossley, 69 Ill., 195 (1878);
Philips v. Wickham, 1 Paige, 598 (18293;
State v. Tudor, 5 Day (Conn.), 329 (1812);
2 Kent’s Commentaries, 294, 295. This
is denied in New Jersey. Taylor v. Gris-
wold, 14. N. J. Law, 222 (1834),

2In the Matter of Election of St. Law-
rence Steamboat Co., 44 N. J. Law, 529
(1882). See the form of proxy in Marie
v. Garrison, 138 Abb. N. C., 210, 234
(1883).

31d. But the inspectors have no right
to refuse a vote by proxy or to assume
a judicial power to try its genuineness

‘if ibis apparently executed by the stock-
holder and is regular in form. Matter
of Cecil, 36 How. Pr., 477 (1869). Neither
the stockholder nor his proxy can be
compelled by a by-law to take an oath
that the former is the owner of the
stock. .People v. Tibbits, 4 Cowen, 358
(1825); People v. Kip, 4 Cowen, 382
(1822). The by-laws may require the
proxies to be witnessed. Harben v.

Phillips, L. R., 23 Ch. D., 14, 22 (1882).
As to whether a blank proxy may be
filled in by the agent, see queere in Re
White v. N. Y., ete., Soc., 45 Hun, 580
(1887), citing cases.

4Haywood & Pittsborough Plank-
road Co. v. Bryan, 6 Jones (N. C.), 82
(1858). Where one gave a proxy to vote
at an annual election, it was held prima
facie evidence that he was a stock-.
holder just before such election. Har-
ger v. McCullough, 2 Denio, 119, 122
(1846).
. 5 Abbot v. American Hard Rubber
Co., 33 Barb., 578, 584 (1861). See, also,
21 How. Pr., 193; 11 Abb. Pr., 204;
Cumberland Coal Co. v. Sherman, 30
Barb. ,553, 577 (1859) ; Matter of Wheeler,
2 Abb. Pr. (N. 8.), 361; Marie v, Garri-
son, 138 Abb. Pr. (N. C.), 210, 2385
(1888); Reg. v. Gov. Stock Co, L. R.,
3 Q. B. D., 442 (1878). Where direct-
ors are authorized by charter to vote
by proxy, the proxy cannot author-
ize a borrowing of money —an ultra
vires and void act in England. Brown
v. Byers, 16 M. & W., 252 (1847).
A proxy to vote is not a proxy to de-
manda poll. In re Haven, etc., Co.,
L. R., 20 Ch. D., 151 (1881); Reg. v. ,
Gov., etc., Co., supra. A proxy for an
election does not extend to an election
four months later, the first election not

677
§ 611.] ELECTIONS OF DIRECTORS. [cH. XXXVII.

The question of the revocability of a proxy, even in cases where
an “irrevocable” proxy is given, is considered elsewhere.!

§ 611. The transfer book as evidence of a right to vote— The
. question who is entitled to vote upon a particular share of stock is,
as a, general rule, answered by a reference to the corporate transfer
book. He who is there registered as the owner of the stock is en-
titled to vote upon it.? It is not necessary that the owner of stock
produce his certificate or even have a certificate in order to vote.’
Neither will indebtedness for the subscription price prevent the
stockholder from voting.‘ So, also, it is immaterial that the per-
son in whose name the stock is registered is merely the nominal
holder, and that another person really owns the stock.’ A sub-
scriber upon a condition not yet performed may vote upon the
question whether that condition shall or shall not be performed.
And stock issued for construction, the work not having been per-
formed, may nevertheless be voted.?’ In New York, by statute, the
corporate transfer book is made conclusive upon the question who

may vote.’

having been held. Howard v. Hull, 5
R’y & Corp. L. J., 255 (Eng., 1888),

1See § 503b, supra. .A written con-»

tract not to vote by proxy, entered
into by certain shareholders mutually
for the purpose of preventing the board
of directors from consummating a pro-
posed sale of the franchises of the cor-
poration, has been held a pernicious and
unlawful compact. Fisher v. Bush, 35
Hun, 641 (1885).

2In the Matter of the Long Island R.
R. Co., 19 Wend., 37, 44 (1887); Hex
parte Willcocks, 7 Cowen, 402 (182),
stating, however, that in certain cases,
like that of stock held for the corpora-
tion itself, a different rule prevails;
State v. Ferris, 42 Conn., 560, 568 (1875),
sustaining a vote by a bankrupt.

3 Beckett v. Houston, 82 Ind., 393(1869).

,4 Birmingham, etc., R’y Co. v. Locke,
1Q. B., 256 (1841); Saves v. Ball, 17
N. J. Eq., 142 (1864); Downing v. Potts,
23 N. J. Law, 66 (1851). So held in this
case, even though the subscriber had
paid nothing on his stock.

5State of Nevada v. Leete, 16 Nev.,
242 (1881).

®Greenville, etc., R. R. Co. v. Cole-
man, 5 Rich. Law, 118 (1851).

i Savage v. Ball, 17.N.J. Eg., 142 (1864).

81 Rev. Stat. of New York, chapter
XVIII, title IV, § 5; Vandenburgh ».
Broadway Railway Co., 29 Hun, 348,
355 (1883); In the Matter of the Long
Island R. R. Co., 19 Wend., 387 (1887);
In the Matter of the Mohawk & Hud-
son R. R. Co., id., 185 (1838). But’ see
Strong v. Smith, 15 Hun, 222 (1878),
holding that the transfer book is con-
clusive upon the inspectors, but that
the court has power to go sback of the
entries therein and inquire whether,
as for instance in this case, a transfer
of shares was an absolute sale or a
pledge, and thus whether the trans-
ferrer or transferee has the right to
vote them, citing Ex parte Holmes, &
Cow., 426; Matter of Long Island R.
R, Co., supra; and see N. Y. L. J,
June 29, 1889. If the stock-book is
lost the directors may substitute a new
one, filled out as accurately as is possi-
ble. Re Schoharie, etc., R. R., 12 Abb.
Pr. (N. 8,), 894. But no person is al-
lowed to vote upon railroad stock which
he has sold, whether the transfer has
been registered or not. New York
Sess. Laws, 1880, ch. 510, And in
moneyed and railway corporations only

678
fe

CH. XXXVI. ] ELECTIONS OF DIRECTORS. {§ 611.
Substantially similar provisions are to be found in the statutes
of other states.' In the absence of statutory provisions to the con-
trary, the weight of authority favors the rule that, although a stock-
holder has sold his stock and transferred the certificate, yet until
such transfer has been duly recorded on the corporate books, the
corporation cannot prevent his voting upon the stock.? The cor-
poration may be compelled to register transfers made merely for
the purpose of voting.? A by-law authorizing the administration
of an oath to examine the stockholders as to their title is illegal and
yoid.! The holders of stock issued by a stock dividend are entitled
to vote;* but the rule is otherwise as regards the holders of a scrip °

-Lans., 317 (1878).

dividend.®

those stockholders are entitled to vote
who have been duly recorded as stock-
holders for thirty days previous to the
election. Rev. Stat. of New York,
chapter XVIII, title II, art. 2, $8 38, 45.
Also, as to railway corporations, New
York Laws of 1850, ch. 140, § 5.

1 Downing v. Potts, 23 N. J. Law, 66
(1851); In the Matter of the Election of
St. Lawrence Steamboat Co., 44 id., 529
(1882); Hoppin v. Buffum, 9 R. 1, 513
(1870). See, for the English rule, Pender
v, Lushington, L. R., 6 Chan. Div., 70
(1877). .

2People v. Robinson, 64 Cal., 373
(1888); S. C., 1 Pac. Rep., 156 (1883);
Monsseaux v. Urquhart, 19 La, Ann.,

482 (1867); State v. Ferris, 42 Conn., 560.

(1875); State v. Pettineli, 10 Nev., 141
(1875); Johnston v. Jones, 23 N. J. Eq.,
216, 228 (1872), holding that persons
who were not stockholders on the day
an election is held cannot vote though

they were stockholders on the day the-

election should have been held; Down-
ing v. Potts, 23 N. J. Law, 66 (1851);
Hoppin v. Buffum, 9 R. I., 518 (1870).
Cf. In the Matter of the North Shore
Staten Island Ferry Co., 63 Barb., 556
(1872); Smith v. American Coal Co., 7
“As a general rule
stock dividends, even when they repre-
sent net earnings, become at once a
part of the capital of the company, and
of course entitle the holder to vote,
unless it is otherwise provided in the
eharter or by-laws,” Bailey v. Railroad

Co., 22 Wall., 604, 687 (1874). In New
York, when for any reason the corpo-
ration fails to hold an election at the
stated time as provided in the charter
or by-laws, and the election is held sub- ,
sequently, only those stockholders are
entitled to vote who were qualified elect-
ors at the time when the election ought
to have been held. 1 R. 8S, of New
York, chapter XVIII, title IV, §8. See
People v. Cummings, 72 N. Y., 433
(1878); Vandenburgh v. Broadway R. R.
Co., 29 Hun, 348 (1883). But in Illinois
it is held that the corporation must al-
low the real owner of the stock to vote,
whether he be the registered owner or
not, where the corporation has no by-
law requiring a registry of transfers.
People v. Devin, 17 Ill, 84 (1855). See,
also, Allen v. Hill, 16 Cal., 118 (1860).

3 In re Stranton Iron & Steel Co., L.
R., 16 Eq., 559 (1878); Moffatt v. Far-
quhar, L. R., 7 Ch. D., 591 (1878). But
where waliabls privileges other than
voting attach to stock, a nominal trans-_
fer to obtain these privileges will not be
sustained as regards them. Appeal of
the Academy of Music, 108 Penn. St.,
510 (1885), where free admission was
given to stockholders.

4People v. Kip, 4 Cowen, 382, note
(1822).

5 Bailey v. R. R. Co., 22 Wall., 604,
687 (1874).

6Id., where the scrip was redeemable
by the company in cash or convertible

into stock,

679
§ 612. ] ELECTIONS OF DIRECTORS. [on, Xxxvin.

§ 612. The right of trustees, pledgees, married women, adminis.
trators, etc. to vote.—It is the general rule that a person holding
stock as trustee, not only where he is duly registered as a stock-
holder in that capacity, but also where the trust relationship is not
declared upon the books of the corporation, is entitled to vote upon
the stock.'

In New York a statute enables a married woman to vote in per-
son or by proxy on any shares of stock she may own.” So, also, a
duly-qualified executor or administrator may vote on stock of his
testator or intestate, even though such stock has not been trans-
ferred on the books.’ Although a person pledges stock as collateral
security for the payment of a debt or for any other purpose, he is
nevertheless entitled to vote upon it at all corporate meetings so
long as it is not transferred into the name of the pledgee And
where the stock has been transferred on the corporate books into
the name of the pledgee, it is held that even then it cannot be
voted contrary to the wishes and interests of the pledgor® A

1Widow Conant v. Millaudon, 5 La.
Ann., 542 (1850); Wilson v. Proprietors
of Central Bridge, 9 R. I., 590 (1870);
Hoppin v. Buffum, 9 id., 513 (1870);
Crease: v, Babcock, 10 Mete., 525, 545
(1846); In re Barker, 6 Wend., 509
(1831); In the Matter of the Mohawk &
Hudson R. R. Co., 19 id., 185 (1838); In
the Matter of the North Shore Staten
Island Ferry Co., 63 Barb., 556 (1872);
Pender v. Lushington, L. R., 6 Chan.
Div., 70 (1877). It seems, however, that
where a trust is not coupled with an
interest, and where the cestui que trust
could by bill in equity compel a con-
veyance of the property to himself, he
might compel the trustee to vote as he
directed. Hoppin v. Buffum, 9 R. L,
513 (1870); Wilson v. Proprietors of
Central Bridge, id., 590 (1870); 88 Fed.
Rep., 383.

2 New York Session Laws 1851, ch. 321.

3In the Matter of the North Shore
Staten Island Ferry Co., 63 Barb., 556
(1872); Middlebrook v, Merchants’ Bank;
3 Keyes (N. Y.), 185 (1866). The provis-
ion of the New York Manufacturing
Co.’s Act of 1848 is, viz.: ‘‘ Every such
executor, administrator, guardian or
trustee shall represent the share of stock
in his hands at all meetings of the com-

pany, and may vote accordingly as a
stockholder.” New York Laws of 1848,
ch. 40,§ 17. A foreign executor may
vote stock belonging to the estate even
though the stock stands in the name of
the deceased stockholder. In re Cape,
etc., Co., 16 Atl. Rep., 191 (N. J., 1889),

4In re Barker, 6 Wend., 509 (1881);
Ex parte Willcocks, 7 Cowen, 402 (1827);
Matter of Cecil, 86 How. Prac., 477
(1869); Smith v. American Coal Co., 7
Lans., 317 (1873); Scholfield v: Union
Bank, 2 Cr. C. C, 115 (1815); McDaniel
v. Flower Brook Mfg. Co., 22 Vt., 274
(1850): Hoppin v. Buffum, 9 R. L, 513
(1870); Brewster v. Hartley, 37 Cal., 15
(1869). The provision of the New York

“Manufacturing Co.’s Act of 1848 is, viz. :

‘‘Every person who shall pledge his
stock as aforesaid may nevertheless rep-
resent the same at all such meetings,
and may vote accordingly as a stock-
holder.” New York Laws of 1848, ch.
40, § 1%.

5 Vowell v. Thompson, 8 Cranch, C.
C., 428.(1829): Scholfield v. Union Bank,
2id., 115 (1815). State v. Smith, 14 Pac.
Rep., 814 (Oreg., 1887), holds that the
pledgor is entitled to vote the stock
even though the pledgee has had it
transferred into his own name. Aff'd

680
CH. XXXVIL. | ELECTIONS OF DIRECTORS. [3 618.
court of equity will compel the pledgee, under some circumstances,
when the stock has been transferred, to give the pledgor a proxy ;!

but will not, upon the application of the pledgor, enjoin the pledgee

from voting, unless it appears that irreparable injury is threatened, ’

and that the pledgor is in danger of loss without an adequate
remedy at law.? A partner may properly vote upon stock belong-
ing to the firm and registered .in the partnership name,’ and also, it
seems, where the grok belongs to the firm but is registered i in the
name of the other partner who isdead.! But it has been held that
where joint owners of stock disagree as to its vote, the vote is to
be rejected.® When a municipal corporation is a stockholder in a
private corporation it is entitled to vote upon its stock in the same
way as any other stockholder.®

§ 613. The corporation cannot vote upon shares of its own stock.—
Shares of stock owned by the corporation itself cannot be voted
either directly by the corporate officers or indirectly by a trustee
of the corporation.. This is the established rule, whether the stock
is registered in the name of the corporation or not.’ The inspect-

on rehearing in 15 Pac. Rep., 386-1887);
Strong v. Smith, 15 Hun, 222 (1878).

Cf. McDaniel v. Flower Brook Mfg..

Co., 22 Vt., 274 (1850). It is not a con-
version for one who holds stock as
pledgee to attend corporate meetings
and vote upon the stock. Heath »v
Silverthorn Lead Mining, etc., Co., 39
Wis., 146 (1875).

1 Vowell v. Thompson, 3 Cranch,C. C.,
428 (1829); Hoppin v. Buffum, 9 R. L,
613 (1870).

2McHenry v. Jewett, 90 N. Y., 58
(1882). In order to settle a contest
growing out of a disputed election the
court may go behind the entry in the
transfer book to determine whether a
transfer appearing thereon was a sale
or only a pledge of the shares, and
whether the pledgor or pledgee was en-
titled to vote thereon. Strong v. Smith,
15 Hun, 222 (1878).

3’Kenton Furnace Railroad and Mfg.
Co. v. McAlpin, 5 Fed. Rep., 737 (1880).

4Allen v. Hill, 16 Cal., 113 (1860). It
has been held that the word ‘‘ cashier”
attached toa stockholder’s name does
not authorize a succeeding cashier to
vote the stock. In the Matter of the

Mohawk & Hudson RB. R. Co., 19 Wend.,
135, 146 (1838). But a contrary rule is
more reasonable and just. See Farmers’,
etc., Co. v. Chicago, etc., R’y Co., 27
Fed. Rep., 146, 156 (1886).

5 Re Pioneer Paper Co., 36 How., 111
(1865).

5 See § 99, supra.

7 Monsseaux v. Urquhart, 19 La. Ann.,
482 (1867); Vail v. Hamilton, 85 N. Y.,
458 (1881); Ew parte Holmes, 5 Cowen,
426 (1826); McNeely v. Woodruff, 18
N. J. Law, 352 (1838); American Rail-
way Frog Co. v. Haven, 101 Mass., 398
(1869); State v. Smith, 48 Vt., 266 (1876) ;
United States v. Co u nbian Ins. Co., 2
Cranch, C. C., 266 (1821); New England
Mutual, etc., Ins. Co. v.'Phillips (Mass.,
1886), 18 Am. & Eng. Corp.:Cas., 104;
Brewster v. Hartley, 37 Cal., 15 (1869);
Stewart v. Mahoney, etc., Co., 54 Cal.,

149 (1880). Cf. Taylor v, Miami Export-'

ing Co., 6 Ohio, 176 (1838); Fraser v.
Whalley, 2 Hem. & M., 10 (1864). If
all the stockholders consent the stock
owned by the corporation may be voted.
Farwell v. Houghton, etc., Works, 8
Fed. Rep., 66 (1881).

681

!
“a

§ 614.] _[oH. XXXVIL:

ELECTIONS OF DIRECTORS.

ors of election may lawfully inquire into the ownership of stock

registered in the names of the directors of the corporation, if there .

be any reason to suspect that the corporation owns it.’ Directors
elected by votes upon stock owned by the corporation are illegally
elected,? and mandamus lies at the instance of a corporation to
compel illegally-elected: directors to turn over the books to, the
legally-elected directors.’

§ 614. Injunction against voting particular stook and against
elections.— Under certain circumstances a court of equity may en-
join a stockholder from voting on particular stock. Such an injunc-
tion can only issue when the complainant shows a plain purpose of
parties to vote the stock, and to vote it in a particular way; that
the effect of the vote will be to control the election; that mischief
will result to the corporation; and that irreparable or permanent
injury will come either to the corporation itself or to the other
stockholders. So, also, where a combination or ,conspiracy, can
be shown for the purpose of controlling an élection in fraud of
the rights of those shareholders who are not in the combination, such

an injunction will issue.®

1 Eee parte Holmes, 5 Cowen, 426 (1826).

2 Ex parte Desdoity, 1 Wend., 98 (1828).

3American Railway Frog Co. v.
Haven, 101 Mass., 398 (1869).

4Reed v. Jones, 6 Wis., 680 (1858);

McHenry v. Jewett, 90 N. Y., 58 (1882), .

where the preliminary injunction was
denied, inasmuch as the complaint
showed no equitable cause of action.
5 N. Y. Supp., 650.

5 Webb v. Ridgely, 38 Md., 364 (1878),
where stock had been colorably. trans-
ferred without consideration for the
purpose of controlling an election, there
being a provision in the charter prohib-
iting a single stockholder from voting
on more than twenty shares; Brown v.
Pacific Mail, etc., 5 Blatch., 525 (1867), in
which the allegation was that the defend-
ants contemplated, through improper
means, to obtain an injunction prevent-
ing plaintiffs, who were large stockhold-
ers in a corporation, from voting at an
approaching election, and that defend-
ants were improperly obtaining proxies
from other stockholders in order to con-
trol the election for their private pur-
poses. The court enjoined defendants
from participating in any election un-

This ‘injunction will not prevent an elec-

less plaintiffs’ votes were received
thereat, and from restraining plaintiffs
in their right to vote. A stockholder
may enjoin directors from interfering
with an annual election which comes in
February, but which the directors by
by-law have changed to October, thereby
endeavoring to extend their'term, El-
kins v. Camden, etc., R. R., 36 N. J. Egq.,
467 (1883). See, also, Camden, etc., R.
R. v. Elkins, 87 id., 274 (1883); People v.
Albany, etc., 55 Barb., 344 (1869), holding
that while an injunction forbidding in-
spectors to hold an election at all or to
receive and count the votes thereof is
entirely void, since a court of. equity
has no power to restrain permanently
an officer of a corporation from per-

forming the ordinary duties of his

office, yet they may be enjoined from
holding an election until the further
order of the court or from receiv-
ing the votes of certain stockholders
until the votes of others are deposited.
Hafer v. New York, etc., R. R. Co.
(Ohio); 14 Week. Law Bul., 68 (Cincin-
nati Sup. Ct., 1885). See Griffith v.
Jewett (Ohio), 15 Week. Law Bul., 419
(Cincinnati Sup. Ct., 1886), A court of

682
CH. XXXVI. |

ELECTIONS OF DIRECTORS. [§ 615.

tion from taking place. On the contrary, the election goes on and
is valid, even though it happen that what would have “een a mi-
nority of the votes, had not the injunction issued, becomes, by rea-
son thereof, a majority, and elects.! The general tule, however,
unquestionably is that one stockholder has nothing to do with the
motive.of another stockholder, and can do nothing to abridge the
right of another to vote, much less control or direct the casting of
the vote of any other member of the corporation? Accordingly,
an injunction will not be granted upon the ground that the stock-
holders against whom the injunction’is sought are likely to obtain
control of the affairs of the ¢éompany, and that then they will prob-
ably misuse their power. ® Often an injunction will not be allowed
where the application is made for it at such a time that, according
to the rules of practice, the defendants cannot be heard in opposi-
tion to it until after the day of election, so that the operation of
the injunction would be the same, whether the court at the hear-
ing granted it or denied it. In some cases such an application will
be summarily dismissed.*

It has been held that an injunction permanently forbidding the
holding of any election whatever is an interference with the man-
agement of corporate affairs, to which the courts will decline to be
a party; and such an injunction would, if granted, be void.’ But
an injunction may be granted staying an election.®

§ 615. Illegal or fraudulent elections — Shareholders’ remedies
-herein.— There are various ways in which an illegal or fraudulent
election of directors or managers of an incorporated company can

equity, at the instance of a stockholder
in a railroad, will enjoin another rail-
road from voting stock which by an
ultra vires act it has mequired in the
former railroad company. A request to
the company to bring the action was
first made by the stockholder who
brought the suit. Woods v. Memphis,
ete, R. R. Co., 5 Ry & Corp. L. J.,
872 (Ala., 1889); also, Mill Bank v. N.
Y., etc., 64 How. Pr., 20 (1882).

1 Brown v. Pacific Mail Steamship Co.
(186%), supra.

2Ryder v. Alton, etc., R. R.Co., 13
IIL, 516 (1851), where a subscriber de-
fended against a subscription by attack-
ing the policy of the majority in control.

3Camden, etc., R. R. Co. v. Elkins, 37
N. J. Eq., 273 (1883). Cf. Woods v. Mem-
phis, etc., Co.,'and other cases, supra.

4Where a bill was filed to restrain

certain shareholders from selling or as-
signing their stock, or from voting upon
it.at an ensuing election, which was to
be held within three days from the
date of the filing of the bill, the court
held that inasmuch as the probable
effect of the injunction would be to
change the result of the election, and
the consequent control of the affairs
of the company, without allowing the
shareholders sought to be restrained to
be heard in their own defense, the in-
junction ought to be denied. Hilles v.
Parish, 14 N. J. Eq., 380 (1862); but see
Woods v. Memphis, etc., Co., supra.

5 People v. Albany, etc., R. R. Co., 58
Barb., 344 (1869).

6Scholfield v. Union B., 2 Cr, (C. C.),
115 (1815), where the inspectors denied
the right of pledgors to vote.

683
§ 615.] ELECTIONS OF DIREOTORS. [CH. XXXVII..

be investigated, the fraud unearthed and the illegality set aside.
At common law the action of guo warranto in the name of the
state, upon the relation of the parties aggrieved, will lie, when
probable cause is shown, to try the title of the candidate who
claims an election.'

A court of equity has no jurisdiction or power to try or deter-
mine the validity of a corporate election. 2°

Nevertheless, whenever the question arises incidentally in con-
nection with a suit in which a court of equity has jurisdiction, the
legality or validity of an eléction may be passed upon.’ And
where the process of a court has been unlawfully or unjustly used

1People v. Albany, etc., R. R. Co., donot belong to the original jurisdic-
supra. For a clear statement of the tion of chancery; and that the right to
nature of an information in the nature- be such officer cannot, in general, andin
of a quo warranto filed by a claimant the absence of special legislation allow-
for an office in the name of the attorney- ing this remedy, be tested by means of
general, see State v. Mayor, etc., 10 Atl. an injunction.” Citing Pom. Eq,, I,
Rep., 377 (N. J., 1887). See, also, § 713, § 171; id., ITI, § 1845. See, also, to same
infra, concerning de facto officers. In effect, Owen v, Whitaker, 20N. J. Eq.,
England quo warranto does not lie to 122 (1869); Mickles v. Rochester City
test the legality of the election of offi- Bank, 11 Paige, 118 (1844); Mechanics’
cers of a private corporation, butinthis National Bank of Newark v. Burnet
country a contrary rule prevails. Com- Mfg. Co., 82 N. J. Eq., 2386 (1880);
monwealth v. Arrison, 15 8. & R., 127 Johnston v. Jones, 28 id,, 216 (1872).
(1827), a case of church trustees; Com- It has been held that fraud will give a
monwealth v. Graham, 64 Pa. St., 889 court of equity jurisdiction to set aside
(1870), the same; People v. Tibbits, 4 an election of officers. Davidson v.
Cow., 358 (1825), an insurance company; Grange, 4 Grani’s Chan. (Up. Can.), 377
State v. Farris, 45 Mo., 183 (1869), col- (1854), where the election was actually
lege trustees; Creek v. State, 77 Ind., set asideon account of fraudulent voting
180 (1881), church trustees; State v. of shares subscribed for by«‘‘ dummies”
Kupersforte, 44 Mo., 154 (1869), an in- to get control of the election on promise
surance company ; State v. McDaniel, 22 that subscriptions would afterwards be
O. St., 354 (1872), directors of a rail- canceled. A court of equity cannot
road; Commonwealth v. Smith, 45 Pa. oust officers. Fadness v. Braunborg,
St., 59 (1868); Hullman v. Honcomp, 5 41 'N. W. Rep., 84 (Wis., 1889); Wands-
O. St., 287 (1855), holding that a bill worth, etc., Gas Light & Coke Co. v.
in equity does not lie; High on Extraor- Wright, 18 W. R., 728 (1870).
dinary Remedies, § 658, ete.; Shortt on 3 Mechanics’ National Bank, ete, w
Informations, etc,, 129 (Eng., 1887); Burnet Mfg. Co., 82N. J. Eq., 236 (1880);
Commonwealth v, Gill, 3 Whart. (Pa.), Johnston v. Jones, 28 id., 216 (1872), but
228 (1887), giving the pleadings herein. _ holding that its decision will not operate

2\New England, etc., Co. v. Phillips, to remove or oust the incumbent of a
141 Mass., 585 (1886), where an injunc- corporate office, Equity has no juris-
tion was sought to restrain persons from diction to try the validity of a corporate
acting as directors who were legally de- election, but. may do so when a stock-
clared elected. Allen, J.; ‘‘This cause holder seeks to enjoin the acts of the
is open to the objection that suits to re- de facto directors. Moses v. Tompkins,
move or to institute corporation officers 4 South. Rep., 768 (Ala., 1888).

684
CH. XXXVII.] ELECTIONS OF DIRECTORS. [§ 616.
to control a particular election, the proceedings in court being
dropped immediately after the election, all the acts done by virtue
of such control, being in fraud of the rights of the shareholders,
.will be summarily vacated and set aside.!

In consequence of the delays and difficulties attending the
remedy of guo warranio, statutes have been enacted in many of
the states which give courts of equity the power to review corpo-
rate elections at the instance of the parties aggrieved? In New
York the supreme court, sitting as a court of chancery, is empow-
ered to review corporate elections, and to grant such relief as the
particular circumstances and justice of the case seem to require.’
Under these statutes an election may be declared void by reason
of the conspiracy, frauds or trickery of a part of the stockholders.‘

§ 616. But only a shareholder whose rights have been infringed
-and who is equitable entitled to complain may institute the pro-
ceedings. Accordingly, a transferee of one of the shareholders who
participated i in the fraud will not be heard to impeach the result
of that fraud.? And in general the plaintiff, a relator seeking to
set aside a corporate election, is barred of relief if he himself was
guilty of misconduct or neglect, or if it appears that he has subse-
quently acquiesced with knowledge of the facts. It is a principle
of law also that the legality of an election will not be inquired into
upon the ground that illegal votes were cast, unless those votes
_ were challenged at the election at the time when they were cast."
Neither can an election be successfully contested if it be shown that
after throwing out the invalid votes the officers declared elected

1Putnam v. Sweet, 1 Chandler (Wis.),
286 (1849); People v. Albany & Susque-
hanna R. R. Co., 55 Barb., 344 (1869).

2Statutes of California, 1876, § 5315;
Brewster v. Hartley, 37 Cal., 15 (1869);
Wright v. Central California Colony
Water Co., 67 Cal., 532 (1885); In the
Matter, etc., St. Lawrence, etc., Co.,
44.N. J. L., 529 (1882).

31 Rev. Stat., ch. XVIII, title IV,
§ 5 (page 603); title II, art. second,
§§ 47-50 (page 598); The Schoharie Val-
ley R. R. Case, 12 Abb. Prac. (N. S.),
394 (1872); Re Desdoity, 1 Wend., 98;
Vandenburgh v. Broadway R. R. Co.,
29 Hun, 348; Strong v. Smith, 15 Hun,
222 (1878); Ex parte Willcocks, 7 Cow.,
402 (1827); Mickles v. Rochester City
B’k, 11 Paige, 118; In the Matter of
thé Long Island R.&. Co., 19 Wend., 37.
In this case an election was set aside

because the directors had illegaliy de-
clared certain shares forfeited for non-
payment of instalments, and refused
to record an assignment thereof so as
to entitle the assignee to vote.

4People v, Albany, etc., R. R. Co., 55
Barb., 344 (1869). ‘

5Matter of the Applicatiom-of the
Syracuse, etc., R. R. Co., 91 N. Y., 1
(1888).

6 Wiltz v. Peters, 4 La, Ann., 339
(1849).

7In the Matter of the Chenango, etc.,
Ins. Co., 19 Wend., 635 (1839), wherein
the court said: ‘‘It is quite clear, gen-
erally speaking, that an illegal vote
not challenged will not invalidate an
election, nor will even be inquired
into.” Cf. The Schoharie Valley R. R.
Case, 12 Abb. Prac. (N. 8.), 394 (1872).

685
§ 618.] ELECTIONS OF DIRKOTORS. [CH. XXXVII.
would still have a valid majority of the votes cast according to the
return.| And a new election will not be ordered where the person
declared elected had a majority of legal votes, though not a ma-
jority of all the votes, legal and illegal, that were cast at the election?
But if the person declared elected did not have a clear majority
of all the legal votes cast he will be ousted.2 The court may also,
in the exercise of its equity powers, declare a candidate elected
who received only a minority of the votes actually cast, when such
candidate plainly received a majority of all the legal votes cast.!

A late case holds that, if the illegally-rejected votes would give
a candidate a majority of all the stock, the court will declare him
elected; but, if such votes would give him only a majority of all
the votes cast, the court will order a new election.’

§ 618. Combinations and contracts as to elections, and restric-
tions on voting.— Stockholders owning a majority of the stock

have a right to combine and secure the election of the board of

\

1People v. Tuthill, 31 N. Y., 550
(1864); Ex parte Murphy, 7 Cowen, 153
(1827); In the Matter of the Chenango,
etc., Ins. Co., 19. Wend., 635 (1839);
State v. Lehre, 7 Rich. (Law), 234, 825
(1854); McNeeley v. Woodruff, 13 N. J.
Law, 352 (1838); First Parish in Sud-
bury v. Stearns, 21 Pick., 148 (1838);
Trustees of the School District v. Gibbs,
2 Cush., 39 (1848); Wardens of Christ
Church v. Pope, 8 Gray, 140 (1857); 21
Pac. Rep., 894.

2McNeeley v. Woodruff, 13 N. J. L.,
352 (1833); Ea parte Desdoity, 1 Wend.,
98 (1828).

3 People v: Devin, 17 Tll., 84 (1855).

4In the Matter of Election of St.
Lawrence Steamboat Company, 44 N.
J. Law, 529 (1882); Monsseaux v. Urqu-
hart, 19 La, Ann., 482 (1867); Ea parte
Desdoity, 1 Wend., 98 (1828); Vanden-
burgh v. Broadway R’y Co., 29 Hun,
348 (1883); Downing v. Potts, 23 N. J.
Law, 66, 84 (1851), where an election
was set aside and a new one ordered

_ because votes were illegally rejected

on one side and illegally accepted on
the other, which changed the result, but
two directors who were on both tickets
and received all the votes cast were
held elected; State v. McDaniel, 22 O.
St., 354 (1872), where a number of legal

votes were rejected which would have
sufficed to elect certain, directors who
without such votes had only a minority
of the votes cast. The court held that
persons cannot be declared elected and
inducted into office upon a quo war-
ranto information; People v. Phillips,
1 Denio, 388 (1845), making the same
ruling as to a church corporation;
In the Matter of the Long Island R. R.
Co., 19 Wend., 37 (1837), where a large
block of stock was not cast at all at the
illegal election. Where the presiding
officer illegally rejects ‘certain votes,
declares certain persons elected and ad-
journs the meeting, and the dissatisfied
party continue the meeting and. hold
another election, the court will con-
sider merely the question as to who
received a majority of the votes which
were legally offered to be cast. State
v. Smith, 14 Pac. Rep., 814 (Oreg.,
1887). A court will not force upon the
company directors who were elected by
a technicality. Harben v. Phillips, L.
R., 23 Ch. D,, 14. A. statute repealing.
the statutory remedy in chancery to
review elections operates retrospect-
ively as well as prospectively. In re
N. Y. ete., Co., 23 Hun, 615 (1881).

5In re ‘Gass, etc., Co., 16 Atl. Rep.,
191(N. J., 1889).

686
CH. XXXVI. |

ELECTIONS OF DIRECTORS.

[§ 618.

directors,! provided it be done without fraud in forming the combi-

nation.” 2

A’ by-law restricting the right of stockholders to vote is void,
and is to be disregarded. The corporation cannot by a resolution
limit the right to vote. Such a restriction is contrary to public
policy.* Statutes sometimes restrict the right to vote, but such

statutes are strictly construed.® Nor can the right to vote upon

1Havemeyer v. Havemeyer, 48 N. Y.
Super. Ct., 506, 513 (1878); S. C.,, af-
firmed, 86 N. Y., 618 (1881); Faulds v.
Yates, 57 TIL, 416 (1870), where it was
held that persons holding the majority

of stock in a corporation could lawfully’

agree among themselves to vote as a
unit to control an election; and that
their agreement that their votes should
be cast as should be decided by the ma-
jority of their own votes was hot void
as being against public policy.

2 People v. Albany, etc., R. R. Co., 55
Barb., 344 (1569). See Fisher v. Bush,
35 Hun, 641 (1885). <A contract to sell
one’s stock in a corporation, and to re-
sign a directorship and the presidency,
and having done so to endeavor to in-
duce other directors to resign, in order
that the purchasers of the stock may

come in ‘and take their places and -

so control the management of the
company, there being no evidence of
fraud, has been held a contract not
void as against public policy. Barnes
v. Brown, 80 N. Y., 527 (1880). An
agreement by a vendor of stock, which
is to be delivered after an election, that
he will vote as the vendee desires is
legal, Mobley v. Morgan, 6 Atl. Rep.,
694 (Pa., 1886). One corporation con-
tracting with another may agree that
the latter shall hold and vote the stock
of and in the former. Tonawanda,
etc., R. R. Co. v. N. Y., etc., RB. R. Co.,
42 Hun, 496 (1886). Cf. Fremont v.
Stone,, 42 Barb., 169 (1864).

with an outsider that he shall, for a
consideration, be made a director in the
company. Seymour v. Detroit Copper,

But the’
directors have no power to contract’

etc., Mills, 56 Mich., 117 (1885). Anda
contract made by a stockholder fora
consideration, to vote for a particular
person for manager of the company,
and in the event of his election to vote
for an increase of the salary attaching
to that position, is illegal and cannot be
enforced. Woodruff v. Wentworth,
183 Mass., 309 (1882),

3A by-law restricting the right of
members of a church to vote as author-
ized by statute is void. People v.
Phillips, 1 Denio, 388 (1845). By-law re-
stricting the right of electors in a town
to vote is not good. Rex v. Spencer, 3
Burr., 1827 (1766); Rex v. Head, 4 Burr.,
2515, 2521 (1770). See, also, § 700a,
infra; People v. Kip, 4 Cowen, 382,
note (1822), holding that a corporation
has no power, by a by-law, to demand
an oath of a stockholder in order to test
his qualifications as a voter.

4 Brewster v. Hartley, 37 Cal., 15 (1869), -
‘holding that the company cannot au-

thorize its pledgee of its stock to vote,
It is on grounds of public policy that
irrevocable proxies to vote stock are
held to be revocable. See § 610, supra.

5A statute prohibiting a stockholder

‘from voting ‘whose liability is past

due and unpaid” refers to a subscrip-
tion liability and not to a commercial
liability. U.S. v. Berry, 36 Fed. Rep.,
246 (1888). Where the charter author-
izes the original incorporators to elect
new members, the directors cannot ex-
clude part from elections and give a
vote to stockholders only. Common-
wealth v. Gill, 3 Whart. (Pa.), 228 (1837),
a case involving a controversy between
the stockholders and depositors.

687

\
-[CH. XXXVII.'

§ 619.) ELECTIONS OF DIRECTORS.

stock be denied or abridged because of alleged wrongful motives
influencing the holder in buying and holding the stock."

A statute which confines the right to vote to stockholders who
are citizens of the state by which the corporation is chartered is
constitutional, and it cannot be evaded by colorable transfers of
shares to residents of the state merely for the purpose of having
them voted upon.

A combination of stock for the purpose of controlling one or
many corporations is effected usually by what has come to be
known as a “trust.” This species of contract and combination is
fully considered elsewhere.’

§ 619. Who may be a director or corporate officer.— In general,
any one who may be an agent may be elected a director of a pri-
vate corporation; and at common law it is not necessary that a di-
rector be a stockholder,‘ or even a citizen ot the state by which

the corporation is created. ?

Frequently, however, the charter or statutes prescribe that the
directors shall be stockholders, and sometimes that they shall be

citizens.®

1Thus, votes cannot be rejected be-
cause it appears that the stockholder of-
fering them bought bis stock for the
purpose of obtaining control of the cor-
poration. Pender v. Lushington, L. R.,
6 Ch. D., 70 (1877). Where transfers
were made to avoid the charter limita-
tion of one hundred votes to one per-
son, the corporation cannot refuse to
register transfers made merely to in-
crease the voting capacity of the stock.
In re Stranton Iron & Steel Co., L. R.,
16 Eq., 559 (1878). See, also, People v.
Kip, 4 Cowen, 372, note (1822); State v.
Smith, 48 Vt., 266 (1876); Moffatt v.
Farquhar, L. R., 7 Ch. D., 591 (1878), and
& 882.
 28tate v. Hunton, 28 Vt., 594 (1856).

Where there is arestriction on the num-.

ber of votes which one person may cast,
equity will enjoin the voting of stock
which is transferred to others in order
that it may be voted. Campbell v.
Poultney, 6 Gill & J. (Md.), 94 (1834),
Cf. preceding note.

’See chapter XXIX.

4State v. McDaniel, 22 O. St., 354,
367 (1872); Wight v. Springfield, etc., R.

R. Co., 117 Mass, 226 (1875); In the
Matter of Election of St. Lawrence
Steamboat Co., 44 N. J. Law, 529 (1882); °
Hoyt v. Bridgwater, etc., Co., 6 N. J.
Eq., 258, 274 (1847); Ha parte Stock, 33
L. J. Chan., 731 (1864). Cf. Dispatch
Line of Packets v. Bellamy Mfg. Co.,
12 N. H., 205 (1841); Bartholomew ».
Bentley, 1 O. St., 37 (1852); People wv.
Northern R. R. Co., 42 N. Y., 217 (1870);
Cammeyer v. United, etc., Churches, 2
Sand. Ch., 186, 249 (1844); Hurrell &
Hyde on Directors and Officers, 2; State
v. Swearingen, 12 Ga., 23 (1852) — a mu-
nicipal corporation case.

5Kerchner v. Gettys, 18 S. C., 521
(1882).

6 A constitutional provision requiring ».
directors to be stockholders does not
apply to a consolidated railroad com-
pany operating as one corporation in
two states. Ohic, etc., R’y Co. v. People,
14 .N. E. Rep.. 874 (IIl., 1888). A mar--
ried woman may, in New York, bea di-
rector in an incorporated company.
People v. Webster, 10 Wend., 554 (1883).
So, also, may one who holds stock trans-
+ ferred to him in trust for the sc ee

688
ON, XXXVI]

ELECTIONS OF DIRECTORS.

[8 619.

It seems that if an unqualified person is elected his title may be

contested and a new election obtained!

Where the qualification

of one to act as director of a company consists in his being the
proprietor of a certain number of shares, the qualification will not

be lost by a pledge of the shares.

A divecion who sells his ‘stock

and hence becomes disqualified is not thereby ousted, zpso facto.
He may be removed.’ A disqualified person, however, who acts as
a director is subject to the liabilities of such.!
The secretary, treasurer or other officer of a corporation need
not be a resident or citizen unless the statute requires it.> _

purpose of qualifying him for the posi-
tion. Budd v. Monroe, 18 Hun, 316 (1879).
Contra, Bartholemew v. Bentley, 1 O.
St., 37 (1852). As may also an executor.

" In re Santa Clara, etc., Co., N. Y. Daily

Reg., June 19, 1888. And where a person
has the right to vote on stock as a stock-
holder, even though that right rest only
upon a power of attorney, he is eligible
to any corporate office 1o which any
stockholder is eligible, and accordingly
may beelected a director. State v. Fer-
ris, 42 Conn., 560 (1875). It has been
held that the election.of one not a share-
holder as a director -in a corporation in
which it is required that the directors
be owners of a certain amount of stock,
is valid ; and such a person, upon accept-
ance of the directorship, is bound to
take and pay for the required number of
shares, But see § 52, supra, Where one
accepts the office of director without
owning the required number of shares
of stock and is in consequence under
obligation to qualify himself by taking
stock, he is not obliged to take the stock
from the company, but may purchase
or procure the shares as he is able in
the open market or at private sale.
Brown’s Case, L. R., 9 Chan., 102 (1878);
Karuth’s Case, L. R., 20 Egq., 506.
The fact that a contract of a Penn-
sylvania company is made by its
president and managers, who are non-
residents and not residents as required
by statute, does not enable the other
party to the contract to raise that ob-
jection. Delaware, etc., Canal Co. v
Penn: Coal Co., 21 Pa. St., 181 (1858).

Electing a person as director who is
not a stockholder as required by the by-
laws nevertheless binds the corpora-_
tion as regards his acts. Dispatch, etc.,
v. Bellamy, etc., Co., 12 N. H., 205
(1841). See, also, § 718, infra. And the
disqualified director is also bound; he is
liable as a director for breach of trust,
Western B’k v, Baird, 11 Cases in Ct. of
Sess., 3d series, 96, 121.

1 Hamley’s Case, L. R., 5 Ch. Div.,
705, where one who never held shares

“was declared not properly elected as a

director; Barber’s Case, L. R., 5 Ch.
Div., 968. To same. effect, In re St.
Lawrence, etc., Co., 44 N. J. L., 529
(1882). The election of an, unqualified
person to a corporate office is merely.
voidable and not void. Craw v.
Easterly, 54 N. Y., 679 (1878); Easterly
v. Barber, 65 id., 252 (1875). A de facto
officer’s acts are valid, though he was
ineligible to the office. Farrier v.
Dugan, 7 Atl, Rep., 881 (N. J., 1886),
And see § 713. See, also, Karuth’s Case,
L. R., 20 Eq., 506, holding that one who
has been elected to.the office of director
has the right to a reasonable time in
which to acquire the shares necessary
to qualify him. An unregistered stock-
holder is eligible. State v. Smith, 14
Pac. Rep., 814 (Oreg., 1887).

2Cumming v. Prescott, 2 Y. & C.,
Exch,, 488 (1837).

8 Nathan v. Tompkins, 2 South. Rep.,
747 (Ala., 1887).

4 Easterly v. Barber, 65N. Y., 252(1875),
Cf. Craw v. Hasterly, 54 .N, Y., 679 (1873),

5Kerchner vu. Gettys, 18 S. C., 521

(44) 689
§ 620.] ELECTIONS OF DIRECTORS. [CH. XXXVIL

}

§ 620. Acceptance and resignation of office and failure to elect
officers — Removal of directors.— An acceptance of. the office by
one who is elected director is necessary to constitute him a di-
rector. Some direct and positive act of acceptance is necessary.'

A director may resign and no formal acceptance or entry thereof
on the minute-book of the corporation is necessary to effect the
resignation.” The fact of the resignation need not be published or
made known to corporate creditors.

A failure to elect officers at the stated time does not work a dis-
solution of the corporation. The old directors continue in office
until their successors are duly elected.‘ And even when the failure
to elect has extended over a period of several years, and there are

by reason thereof no directors in office, the old directors having
wholly abandoned their trust, the stockholders may at any time in
a lawful manner proceed to the election of a new board of direct-

(1882); McCall v. Byram Mfg. Co., 6
Conn., 428 (1827). Butin Matthews v.
Trustees, 2 Brews., 541 (1868), the court
enjoined the company from compelling
its resident treasurer to turn over funds
‘to a newly-elected’ non-resident treas-
urer. =

1 Osborne, etc., Co. v. Croome, 14 Hun,
164 (1878); aff’d, 77 N. Y., 629; Cameron
.v. Seaman, 69 N. Y., 396 (1877). Contra,
Onslow’s Case, 53 L. T. Rep., 612 (1886),
_An “‘honorary director” who sits with
‘the board, makes up a quorum and ac-
‘cepts pay is subject to all disabilities
and liabilities of a director. No such
thing in law as an ‘‘ honorary director.”
Ex parte Stears, 29 L. J. (Ch.), 43 (1859).
Holding over may also arise from act-
ing as a director. Sanborn v, Lefferts,
58 N, X., 179 (1874). It is a question
for the jury whether a person accepted
a directorship. The mere fact that as
an advisor he met with the directors,
but declined to accept, is not conclusive,
Blake v. Bayley, 82 Mass., 531 (1860).
Acceptance is presumed. Lockwood v,
Mechanics’, etc., B’k, 9 R. I., 308 (1869).
But may be disproved even though the
person attended directors’ meetings.
Blake v. Bayley, 2 Mass., 531 (1860).

2Movins v. Lee, 80 Fed. Rep,, 801;
Smith v. Danzig, 64 How. Pr., 820
(1883); Chandler v. Hoag, 2 Hun, 618

(1874); aff'd, 63 N. Y., 624; Blake »,
Wheeler, 18 Hun, 496 (1879); aff’d, 80 N.
Y., 128. A resignation to take effect on
the termination of the term for which
a director is elected is effectual, and he

-does not hold over though no successor

is elected. Van Amburgh v. Baker, 81
N. Y., 46 (1880). A resignation releases
a director if laid before the board of di-
rectors, and it seems is effective though
not accepted when it has been duly
presented. Maitland’s Case, 4 De G.,
M. & G., 769 (1858),

3 Bruce v. Platt, 80 N. Y., 879 (1880),
Insolvency of director does not vacate
his office. Atlas Nat'l B’k v, Gardner,
8 Biss., 5387 (1879). Director does not
lose seat.by absence. Phelps v. Lyle,
10 A. & E., 118 (1889). But the by-laws
may provifle other'wise., Wilson v. Wil-
son, 6 Scott, 540 (1838), holding that an
absconding director becomes ‘unable
to act.” Sturges v. Vanderbilt, 73 N.
Y., 884; 11 Hun, 136,

4State v. Bonnell, 85 O. St., 10, 4"
(1878), in which an election of directors

‘being held invalid, those previously in

office were restored to office as being en-
titled to hold until their successors were
qualified, Huguenot B’k v, Studwell,
6 Daly, 18; rev’d on other grounds, 74
N. Y., 621; and see § 631. See New
York Laws of 1848, ch, 40, § 4.

690
 

CH. XXXVI] ELECTIONS OF DIRECTORS. [§ 621.
ors.' But if the majority fail or refuse to hold an election and the
corporate property is thereby endangered, a court of equity may
appoint a receiver to take charge of it,? and will in a proper case
authorize a winding up.* The stockholders have no power to re-
move directors before the expiration of their term of office unless
the charter expressly gives that power.

B. IRREGULARITIES AND INFORMALITIES IN CONDUCTING A MEETING. | °

§ 621. The general method of transacting business.— It is a gen-
eral rule that, in the transaction of the ordinary business of a cor.
poration, no particular formalities are necessarily to be observed.
Mere irregularities in the manner of conducting the business are
immaterial if the sense of the meeting has been fairly expressed.®
The right to object to an informality may be waived, and a failure
upon the part of those members not present to protest promptly,

upon learning of the informality, is a waiver.'

The presumption

is that all proceedings were regular and lawful.’

1People v. Twaddell, 18 Hun, 427
(1879). In Reilly v. Oglebay, 25 West
Va., 36, 43 (1884), it is held that where
there is no board of directors the share-
holders: themselves may lawfully as-
sume and perform, pending a regular
election, the duties which ordinarily
belong to a board of directors. But see
Smith v. Silver Valley Mining Co., 64
Md., 85 (1885). See chapter XXXVI.

2Lawrence v. Greenwich Fire Ins.
Co., 1 Paige, 587 (1829).

3 Brown v. Union Ins. Co,, 3 La, Ann.,

177, 182 (1848), in which the neglect to
-appoint officers being to the injury of
creditors the court appointed a man-
ager to wind up the affairs of the com-
pany.

4See § 711, infra.

5 Philips v. Wickham, 1 Paige, 590
(1829); Downing v. Potts, 23 N. J. Law,
66 (1851), in which it was held that non-
compliance with a statute requiring a
list of stockholders entitled to vote to be
made out ten days before an election
will not of itself make void an election,
such provision being only directory. A
motion may be put by the chairman,
although it bas neither been made nor
seconded. In re Horbury, etc., Co., L.

R., 11 Ch. D., 109 (1879). The president
is not entitled to a casting vote, in case
of a tie, where he has already voted
once, A by-law cannot give him this
right. State v. Curtis, 9 Nev., 825 (1874);
See, also, in general, Matter of Whee-
ler, 2 Abb. Pr. (N. S.), 361 (1866); Gor-
ham v, Campbell, 2 Cal., 185 (1852);
Hughes v. Parker, 20 N. H., 58 (1849);
Hardenburgh v. Farmers,’ etc., Bank, 3

N. J. Eq., 68 (1834); People v. Peck, 11

‘Wend., 604 (1834). See, also, § 605, supra.

‘But if any fraud, surprise or deceit has

been practiced, a different rule prevails.
Johnston v. Jones, 23 N. J. Eq.. 216
(1872); People v. Albany, etc., R. R. Co.,
55 Barb., 344 (1869); State of Nevada v.
Pettineli, 10 Nev., 141 (1875); Common-
wealth v. Woelper, 3 Serg. & R., 29
(181%).

6 State v. Lehre, 7 Rich. Law, 234, 325
(1854); In re Mohawk, etc., R. R., 19
Wend., 185 (1888); The King v. Tre-
venen, 2 Barn. & Ald., 339 (1819),

7 Blanchard v. Dow, 32 Me., 557 (1851),

where it was presumed that the election

was by ballot; Ashtabula, etc., R. R.
Co, v. Smith, 15 O. St., 328 (1864), where
it was presumed that the requisite
amount of stock was subscribed before

691
§ 622.] ELECTIONS OF DIRECTORS. {CH. XXXVII

§ 622. The meeting must be held at the prescribed hour, which
must be reasonable.— The particular time at which corporate meet-
ings shall be held is often prescribed in the charter or a statute or
in the by-laws of the corporation. When not so prescribed it is
fixed by the officers who call together the corporate meeting. But,
in whatever way it is decided upon, the meeting must be convened
at the time decided upon or within a reasonable time thereafter.!
Accordingly, if the meeting is convened before the hour at which
it is called and business is transacted, the proceedings will be in-
valid? In general, a court of equity will restrain the directors
from fixing the time for an annual meeting at a date when many
members are in the country, the purpose being to prevent them

from exercising their right to vote:
Frequently the particular office or place for meeting within the

state is specified in the charter or by-laws of the corporation.

In

that event a meeting held at a different place will be irregular, and
the proceedings at such a meeting void and ineffectual.*

the election took place. See, also,
§§ 599, 600, supra. The corporate min-
utes may be signed after the meeting
has been held, Miles v. Baugh, 8 Q. B.,
845 (1842); Southampton, etc., Co. v
Richards, 1 M. & Gr., 448 (1840); Lindley
on Partn., 551.

1 Where a meeting was held by a mi-
nority of the stockholders several hours
after the time fixed in the notice, and
an adjournment made until the follow-
ing day, at which adjourned meeting,
without the knowledge of the other
members, an election was held, the
election was unfair and invalid. State
of Ohio v. Bonnell, 85 O. St, 10
(1878). But a delay of an hour and
five minutes after the time specified in
the notice is not, as a matter of law, an
unreasonable delay which will vitiate’
the proceedings. South School District
v. Blakeslee, 18 Conn., 227, 285 (1839).

2So, where a meeting was called for
12 o’clock, but was called to order and
organized fifteen minutes before 12, it
was held to be a surprise and a fraud
upon such of the shareholders as were
not actually present at that hour, and
that in consequence the proceedings
were irregular and void. People wv.
Albany, etc., R. R. Co., 55 Barb,, 844

(1869). Where commissioners, | after
calling a meeting of subscribers, ordered
the election postponed, but the subs
scribers nevertheless refuse to postpone
and proceed with the election, the elec-
tion is not void, unless, in the opinion
of the court, a postponement was clearly
necessary. Hardenburgh v. Farmers’
& Merchants’ Bank, 3 N. J. Eq., 68
(1834). Quere, in this case, whether
the election might not have been
avoided if any considerable number of
the shareholders were deprived of their
election franchise by the failure to post-
pone. See, also, § 605.

3Cantnon wv, Trask, L. R., 20 Eqg., 669
(1875). ‘*A majority of the board of
directors cannot extend their term of
office by merely changing the time of
the annual meeting of thestockholders.”
Nathan v, Tompkins, 2 South. Rep.,
747 (Ala., 1887), '

4'Where the customary place of meet-
ing of a corporation is abandoned and
a new place fixed upon in a regular and
lawful manner, a meeting at the old
place is irregular, and the proceedings
at such a meeting are invalid. Miller
v. English, 21 N. J. Law, 817 (1848).
The meeting must be held at the usual
place. American Primitive Society v

692
OH. XXXVI] ELECTIONS OF DIRECTORS. » [§ 623. .

§ 623. The quorum — A majority of the stockholders attending a
meeting may transact business.— The right of the majority to rule
in the management of the affairs of a private corporation is fully
established.!. They may control the company’s business, prescribe
its general policy, make themselves its agents, and take reasonable
compensation for their services.? The minority, however, have a
right to be heard; and it is the duty of the majority to give a due
consideration to their arguments and wishes concerning the man-
agement of the corporate business.

The question has arisen whether a meeting can be held and busi-
ness transacted when a majority in interest of the stockholders are
not present. But the law is clear that those stockholders who at-
tend a duly-called stockholders’ meeting may transact the business
of that meeting, although a majority in interest or in number of
the stockholders are not present,’

Of those who attend the stockholders’ meeting, a majority rule.

Pilling, 24 N. J. Law, 653 (1855). Cf.
McDaniels v. Flower Brook Mfg. Co.,
22 Vt., 274 (1850).

1Durfee v. Old Colony, etc., R. R.
Co., 5 Allen, 280 (1862); City of Coving-
ton v. Covington, etc., Bridge Co., 10
Bush, 69, 76 (1878); East Tennessee,
ete., R. R. Co. v. Gammon, 5 Sneed
(Tenn.), 567 (1859), applying the rule to
the making of the by-laws; McBride v.
Porter, 17 Iowa, 203 (1864); Faulds v.
Yates, 57 Ill., 416 (1870); Leo v. Union
Pacific R. R. Co., 19 Fed. Rep., 283
(1884); S. C., 17 id., 273 (1888); Barnes
v. Brown, 80 N. Y., 527 (1880); Gifford
v. New Jersey R. R. Co., 10 N. J. Eq.,
171 (1854); Dudley v. Kentucky High
School, 9 Bush (Ky.), 578. See, also,
Livingstone v. Lynch, 4 Johns. Ch., 573
(1820), in which Chancellor Kent clearly
states that the right of the majority to
tule is one of the chief differences be-
tween a corporation and a partnership.
See, also, § 607, supra.

2Meeker v. Winthrop Iron Co., 17
Fed. Rep., 48 (1883); 8. C., sub nom.
Winthrop Iron Co. v. Meeker, 109 U.S.,
180 (1883). See, also, § 662, infra.

3 Granger v. Grubb, 7 Phil., 350 (1870);
Craig v. First, etc., Church, 88 Pa. St.,
42 (1878), where the principle is laid
down that this is the rule for a meeting

composed of an indefinite number of
persons, but that where a definite num-
ber is involved, then a majority must be-
present; Brown v. Pacific Mail, ete., 5
Blatch., 525 (1867); People v. Albany,
etc., 55 N. Y., 344, 885; Field v. Field,
9 Wend., 394 (1882); Gowen’s Appeal,
10 Week. Notes of Cas., 85 (Pa., 1880);
Madison Ave., etc., Church v. Baptist
Ch., etc., 5 Rob. (N. Y.), 649 (1867); Ev-
erett v. Smith, 22 Minn., 53. Cf. dictum
in Sargent v. Webster, 18 Metc., 497
(1847), As to the rule concerning di-
rectors, see § 592, supra. It has been
held that one person cannot constitute
a quorum; that at least two members
are necessary to make a corporate meet-
ing. Sharpe v. Dawes, 46 L. J. (Q. B.),
104 (1876). In-+his case one stockholder
“met,” did all necessary business and
then voted himself a vote of thanks, In
the case of In're Sanitary, etc, Co.,
W. N., 1877, p. 223, where one stdck-
holder having also the proxies of the
remaining three stockholders held a
meeting, ‘‘ voted himself into the chair,
proposed a resolution to wind up volun-
tarily, declared the resolution passed
and appointed a liquidator,” the court
reluctantly followed the preceding cas2
and declared the “* meeting ” invalid.

693
§ 624.] ELECTIONS OF DIRECTORS. [CH. XXXVII.
Their acts are as valid as though they constituted a majority of all
the stockholders, or constituted a majority at a meeting in which a
majority of the stockholders were present.!

The presumption always is that a legal majority voted. for any
act or proceeding that appears to have “been passed.?

Two important limitations and exceptions to these principles are
to be borne carefully in mind.

First, the majority cannot bind the minority to submit to an act
by the corporation where such act is beyond ‘the express and’ im-
plied powers of the corporation as given to it by its charter. Such
an act is wétra vires. A large amount of litigation has arisen from
the attempt of the majority to carry out ultra vires acts. The
minority may object, and even a single stockholder may have the
ultra vires act enjoined or set aside.*

The second exception arises where the legislature amends the
charter of the corporation, and the majority of the stockholders at-
tempt to accept that amendment and act upon it.

In such a case, if the amendment materially changes the scope
and purpose of the enterprise, the minority may object and may
prevent the acceptance of the amendment.!

§ 624. Stockholders can act .only at corporate meetings.— Stock-
holders can hold elections and transact the other ‘business which
they as a body are qualified to transact only at a corporate meet-
ing duly called and convened. Consequently, all votes taken else-
where than at such a meeting, and all separate consents, either oral
or in writing, whereby the stockholders assume to bind the com-
pany, are invalid and void.

1 Columbia, etc., Co. v. Meier, 39 Mo.,
558 (1866), and same cases as in the pre-
- ceding note; 8. P.,Gowen’s Appeal, 10
Weekly Notes Cas., 85 (1881).

2Citizens’ Mutual, etc., Ins. Co. v
Sortwell, 90 Mass., 217 (1864).

3This subject is fully treated in part
IV, infra.

4See chapter XXVIII, supra.

5 Commonwealth v. Cullen, 18 Penn.
St., 183 (1850); Finley Shoe, etc., Co. v.
Kurtz, 34 Mich., 89 (1876); Peirce v.

New Orleans Building Co., 9 La., 397,
404 (1886); Livingston % Lynch, 4
Johns, Ch., 578, 597 (1820); Torrey v.
Baker, 83 Mass., 120 (1861); Ew parte
Johnson, 31 Eng. Is. & Eq., 430 (1854);
Short v. Unangst, 3 Watts & S. (Pa.),
45 (1841). Cf. Graham wv. Boston, Hart-
ford & Erie R. R. Co., 118 U. S., 161
(1886); Granger v. Grubb, 7 Phila., 350
(1870). For the rule relative to direct-
ors’ meetings, see § 592, supra,

694
CHAPTER XXXVIII.

DISSOLUTION, FORFEITURE AND IRREGULAR INCORPORATION.

§ 628. Methods of dissolution.
629-380. Dissolution by ,the stock-

holders,

631. Acts which do not constitute |

, dissolution.

632. Only the attorney-general can
institute a suit to forfeit a
charter.

633. Forfeiture for'misuser.

634. Forfeiture for non-user.

635. Forfeiture for ultra vires acts

§ 636. State may waive forfeiture.

637. Who may set up forfeiture, dis-
solution or non-legal i incorpo-
ration.

688. Lapse of charter by failure to
comply with conditions. i

639. Stockholders may prevent a re-

peal of the charter unless
the right is reserved by the
state,

640. Acceptance of charter.

641-42. The assets upon dissolution.

and for usurpation of fran-
643. The liabilities upon dissolution.

chises.

§ 628. Methods of dissolution.— The dissolution of a corporation
may be brought about by reason of (1) the forfeiture of its fran-
chises by the adjudication of a court;} (2) the loss of its charter by
a charter provision to that effect, in case the corporation fails to
do certain things within a certain time;? (8) the repeal of its char-
ter under the reserved power of the state;* (4) the voluntary sur-
render of the franchises by the stockholders; or (5) the expiration
of the time limited for its existence in the charter. Upon dissolu-
tion by any one of these methods, the stockholders have certain
rights in the corporate assets. :

§ 629. Dissolution by the stockholders.— It is an unquestioned
rule that all the stockholders, by unanimous consent, may effect a
dissolution of the corporation by the surrender of the corporate
franchises.‘

Greater difficulty is found in determining whether a majority of
the stockholders may dissolve a corporation. It has been held that
the majority in interest of the stockholders of a corporation may

121 (1882); McIntyre Poor School v.
Zanesville Canal, etc., Co., 9. Ohio, 208
(1839); La Grange, etc, R. R. Co. w.
Rainey, 7 Coldw. (Tenn.), 420 (1870);
Slee v. Bloom, 19 Jobns., 456 (182:);
Webster v. Turner, 12 Hun, 264 (1877);
Houston v. Jefferson College, 63 Pa,
St., 428 (1869); Denike v. New York,
etc., Co., 80 N. Y., 599, 606 (1880), +

1 See §§ 632-637, infra.

2 See § 688, infra.

3 This subject is eonsidared in § 639,
infra.

4 Mobile & Ohio R. R Co. v. State, 29
Ala., 578, 586 (1857); Savage v. Walshe,
26 id., 619 (1855); Attorney-General v.
Clergy Society, 10 Rich. Eq., 604 (1859);

. Chesapeake & Ohio Canal Co. v. Balti-

more & Ohio R. R. Co,, 4 Gill & J., 1,
695
§ 629.] (ou. xxxvm.

DISSOLUTION, FORFEITURE, ETC.

dissolve it by a voluntary surrender of its franchises, even though a
minority of the stockholders are opposed to the dissolution,

Such, undoubtedly, is the case where the corporation is insolvent
or is doing a failing business, and is manifestly unable to accom-
plish the purposes of its organization. But where such is not the
case, and where the term during which the corporation was to
exist has not expired;* or where the dissolution is desired in order
to obtain a new charter for a different object;* or where the disso-
lution is merely a device to effect a consolidation which otherwise
would be uléra vires,’ —it has been held that the majority cannot
dissolve the corporation in opposition to the wishes of the minority.®

Stockholders owning only a minority of the stock cannot, at com-
mon law, compel a dissolution before the expiration of the time
limited in the charter for the existence of the corporation.®

A court of equity has, in the absence of statutory power, no
jurisdiction over corporations for the purpose of decreeing their
dissolution and the distribution of their assets among the indi-
vidual corporators at the suit of one or more of the stockholders.’

1 Treadwell v, Salisbury Mfg. Co., 7
Gray, 398 (1856); Hancock v. Holbrook, 9
Fed. Rep., 353 (1881) (rev’d on another
point, 112 U.8., 229); Wilson v. Proprie-
tors of Central Bridge, 9 R. I., 590 (1870).
Compare, however, dictum in Denike

v. N. Y., etc., Co., 80.N. Y., 599, 606 -
(1880), citing cases, and in Mobile, etc., -

Co. v. State, 29 Ala., 573, 586 (1857),
citing New Orleans, etc., Co. v. Har-
ris, 27 Miss., 577 (1854); Ward v. So-
ciety, etc., 28 Eng. Ch. (1 Collier), 370
(1844); Angell & Ames on Corp., § 772;
Barry v. Broach, 4 South. Rep., 117
(Miss., 1888), where the business was a
losing one. That the majority may not
dissolve, see Zabraskie v. Hackensack,
etc., R. R. Co., 18 N. Y- Eq., 178 (1867);
Mowrey v. Indianapolis, etc., R. R.
Co., 4 Biss., 78 (1866); Lauman v. Leb-
anon, ete., 30 Pa. St., 42 (1858), and
cases in following notes.

? Kean v. Johnson, 9 N. J. Eq.. 401
(1858). See, also, Van Schmidt v. Hun-
tington, 1 Cal., 25 (1850). Dissolution of
a solvent corporation before its charter
time has elapsed cannot be had except
by unanimous consent of the stockhold-
ers. Barton v. Enterprise, etc., Aso” a;
16 N, E Rep., 486 (Ind., 1688).

8 Ward v. Society of Attornies, 1 Coll.,
870 (1844). '

4Black v. Delaware, etc., Canal Co.,,
22, N. J. Eq., 403 (1871). See, also,
§ 667, infra.

5 Polar Star Lodge ‘» Polar Star
Lodge, 16 La. Ann., 58 (1861); Currien v.
Santini, id., 27. See, also, dictum in
Mobile, etc., R. R. Co. v. State, 29 Ala.,
578 (1857), and n. 1, supra.

®Denike v. New York, etc., Co., 80
N. Y., 599 (1880) (citing cases); Folger
v. Columbian Ins. Co., 99 Mass., 267
(1868); Pratt v. Jewett, 9 Gray, 84 (1857),
where dissolution was denied, although
the business was a losing one and the
single person holding a majority of the

. stock was mismanaging the business;

Croft v. Lumpkin, etc.,° Min. Co., 61
Ga., 465 (1878), where the corporation
was solvent, but made no effort to trans-
‘act business or proceed; Waterbury v.
Merchants’, etc, Co., 50 Barb., 157
(1867), holding that misconduct of the
corporate officers is no cause for disso-
lution at the suit of the minority. To
same effect, Belmont v. Erie R’y Co., 52
id., 637 (1869). *

*United States T, Co. v. N. Y., ete. :
R. R., 101 N. Y., 478 (1886); Verplanck

696
 

CH. XXXVI]

The directors of a corporation

DISSOLUTION, FORFEITURE, ETO.

[§ 629.

cannot dissolve it.) But a corpo-

rate creditor may file 4 bill in the nature of a judgment creditor’s

bill to reach the corporate assets.?

statutes regulating the dissolution of a corporation.

In many of the states there are
These statutes

generally specify “what parties may bring suit for dissolution, on
what grounds dissolution will be decreed, and what proceedings

must be taken to obtain the decree.

Such a statutory dissolution

is hardly a voluntary dissolution, and yet it approaches that kind
of dissolution more nearly than any other.

v. Mercantile, etc., Co., 1 Edw. Ch.,
84 (1831); Hardon v. Newton, 14 Blatch.,
876 (1878); Fountain Ferry, etc., Co. v.
Jewell, 8B. Monr., 140 (1848); Ferris v.
Strong, 3 Edw. Ch., 127 (1887). See,
also, Strong v. McCagg, 55 Wis., 624
(1882); Latimer v, Eddy, 46 Barb., 61
(1864). But the court will appoint a re-
ceiver to preserve the corporate assets
where the majority do not elect officers.
Lawrence v. Greenwich Fire Ins. Co., 1
Paige, 587 (1829). Any person may be
appointed receiver. See § 4, supra.
Where, upon voluntary dissolution, the
stockholders appoint two of their num-
ber to administer the assets, the court
will not displace them and appoint.a re-
ceiver. Follett v. Field, 30 La. Ann.,
161 (1878), A single stockholder in an
insolvent corporation cannot have it

dissolved in a court of equity. Merry-

man v. Carroll, etc., Co., 4 R’y & Corp.
L. J., 12 (1888).

1 Lake Ontario, etc., B’k v. Onondaga
Bk, 7 Hun, 549 (1876); Jones v. B’E of
Leadville, 17 Pac. Rep., 272 (Col., 1888);
Ward v. Sea Insurance Co., 7 Paige,
294 (1888); Abbot v. American Hard
Rubber Co., 23 Barb., 578 (1861). Cf.
Bank of Switzerland v. B’k of Turkey,
5 L. T. (N. 8.), 549 (1862), where the di-
rectors repaid sums advanced to an
abortive company.

2 A bill by a bank depositor — the bank
having long been insolvent and discon-
tinued business—to have a receiver
and distribute the assets will lie as a
“ creditor’s bill.” Finney v. Bennett, 27
Gratt., 365 (1876).

3 Thus, in New York, elaborate provis-

ion is made. The majority of the di-
rectors may apply for dissolution. See
§§ 2419, etc., Code of C. P. As alsomay
a creditor or stockholder. §§ 1784, etc,
id. Under the old statute, part of the

stockholders might comipel a dissolution »

where there had been a failure to elect
officers,
294 (1838). Where a majority of the di-
vectors and stockholders apply for dis-
solution the court will presume that it
should be granted. In re Niagara Ins.
Co., 1 Paige, 258 (1828). In general
see, also, In're Pyrolusite, etc., Co., 29
Han, 429 (1883); In re Boynton, etc.,
Co., 84 Hun, 369 (1884). In West Vir-
ginia one-third in interest of the stock-
holders may apply to the court for a
dissolution. See Hurst v. Coe, 3 8. E.
Rep., 564 (1887). Corporate creditors
cannot, before judgment, apply for dis-
solution of corporation. Cole v. Knick-
erbocker, -etc., Ins, Co., 23: Hun, 255
(1880); aff'd, 91 N. Y., 641. Statutes
usually contain a provision that the
corporate existence shall be continued
for a fixed time, pending the proceed-
ings@for dissolution, so that suits may
be brought by and against the corpora-
tion for the purpose of closing the busi-
ness and disposing of the assets. Stetson
». City Bank of New Orleans, 12 O. St.,

577 (1861); McGoon v. Scales, 9 Wall.,

28 (1869); Mariners’ Bank v. Sewall, 50
Me., 220 (1861); Muscatine Turn Verein
». Funck, 18 Iowa, 469 (1865); Thornton
v. Marginal Freight R’y Co., 123 Mass.,
32 (1877); Folger v. Chase, 18 Pick., 63

(1886); Crease v. Babcock, 10 Metc., 525,

567 (1846); Re Independent Ins, Co., 1

697

Ward v. Sea Ins, Co., 7? Paige,
§ 629.]

DISSOLUTION, FORFEITURE, ETC,
\

fom. xxxvm.

The courts of one state cannot dissolve a corporation created by

Holmes, 103; Franklin Bank v. Cooper,
386 Me., 179 (1853); Nevitt v. Bank of
Port Gibson, 14 Miss., 513 (1846). The
life of the corporation is frequently ex-
tended by these statutes for three years.
Herron v. Vance, 17 Ind., 595 (1861);
Foster v. Essex Bank, 16 Mass., 245
(1819); Blake v. Portsmouth, etc.. R, R.
Co., 89 N. H., 435 (1859); Van Glahn v.
De Rosset, 81 N. C., 467 (1879); Michi-
gan State B’k v. Gardner, 15 Gray, 362
(1860). Sometimes five years. Tuska-
loosa, etc., Association v. Green, 48
Ala,, 346 (1872). Cf. Lincoln, etc., Bank
v. Richardson, 1 Me., 79 (1820). Under
statutes in some of the states an in-
formation in the nature of guo warranto
may be filed at the relation of a share-
holder against an illegally-existing cor-
poration to compel a dissolution. Al-
bert v. State, 65 Ind., 413 (1879).
Under the National Banking Act, seo
Kennedy v. Gibson, 8 Wall., 498 (1869);
Bank of Bethel v. Pahquique Bank, 14
Wall., 383 (1870); Bank v. Kennedy, 17
Wall., 19 (1872); In re Platt, Receiver,
1 Ben., 534 (1867).

Under the English act it has been
held that the majority cannot insist
upon dissolution, though the business
is alosing one. In re Suburban Hotel
Co., L. R., 2 Ch., 787 (1867). But the
court may grant it under such circum-
stances even to a few stockholders. ’ Re
Factage Parisien, 34 L. J., Ch., 140
(1865). In determining whether to order
a winding up the court will not consider
possible future profits. In re European,
etc., Society, L. R., 9 Eq., 122 (1869).
For an application to have a winding
up because business had not been com-
menced within a year, see In re Tumac-
acori, L. R., 1% Eq., 534 (1874). If the
corporation has sold its property and
ceased business the court will order a
distribution of the assets. Cramer v,
Bird, L. R., 6 Eq., 143 (1868). The mere
fact that the company is losing money
is not sufficient to have a winding up.

In re Joint-stock Coal Co., L. R., 8 Eq.,
146 (1869). The court has a judicial dis-
cretion, and will not ordinarily order a
winding up at the instance of one stock-
holder in opposition to all the others.
In re London Suburban B’k, L. R., 6
Ch., 641 (1871). But if, the company is
insolvent or is doing a ruinous business
with no prospect of a change the court
will order a winding up on the petition
of a minority. Re Great Northern, etc.,
Min. Co., 17 W. R., 462 (1869). See,
also, in general, under this winding-up
act, Re Factage Parisien, 34 L. J., Ch.,
140 (1865); In re Exmouth Docks Co.,
L. R., 17 Eq., 181 (1873); In re Sander-
son’s Patents Association, L. R., 12 Eq.,
188 (1871); In re Bradford Navigation
Co., L. R., 10 Eg., 881 (1870); Princess
of Reuss v. Bos, L. R., 5 H. of L., 176
(1871); In re Commercial B’k of India,
L. R., 6 Eq., 517 (1868); Im ve London
India Rubber Co,, L. R., 1 Chan., 329

(1866); In re Pen-y-Van Colliery Co.,

L. R., 6 Chan. Div., 477 (1877); «In re
United Service Co., L. R., 7 Eq., 76
(1868); Re German Date Cor., Ltd., 46
L. T. Rep. (N. §.), 827 (Ct. of App., 1882),
holding that where a company was or-
ganized and chartered to engage “in
manufacture and sale of goods under a
certain patent, when in fact there was
no patent such as was referred to, and
an application for such a patent was re-
fused, held, that the substratum upon
which the company was based or main
object for which it was formed not be-
ing in existence, the company must be
dissolved on petition of a shareholder,
notwithstanding it was profitably en-
gaged in the manufacture and sale of
the commodity without any patent, and
notwithstanding a very large majority
of the company desired: to have the
company continue in business. To
same effect, under somewhat similar
circumstances, Re The Havana Gold
Mining Co., 46 L. T. Rep., 822 (Ct. of
App., 1882). Lender of money to ben-

698
CH. XXXVIII.] DISSOLUTION, FORFEITURE, ETO. [§ 680.
another state,! but may appoint a receiver of the corporate assets
within the jurisdiction. .

Where a dissolution is being obtained or has been obtained by
fraud and an inequitable overbearing of the rights of an innocent |
stockholder,’ a court of equity will, at the instance of the latter,
enjoin or set aside the dissolution.

§ 630. There has been some doubt whether a voluntary dissolu-
tion by all or a majority of the stockholders is completed by a mere
vote of the stockholders, or whether a decree of a court is needed
and is sufficient; or whether a legislative acceptance and confirma-
tion of the dissolution is essential. The better opinion is that the
resolution of the stockholders to dissolve will effect a dissolution
only after the legislature has accepted it and ordained it, or a court
duly authorized by statute to accept a voluntary dissolution has

entered a decree to that effect.®

efit building society cannot petition to
wind it up. Ea parte Williamson, L,
R., 5 Ch., 309 (1869). Mortgage bond-
holders cannot institute winding-up
proceedings under the English act. In
re Uruguay, etc., Ry Co, L. R., 11
Ch. D., 372 (1879). For many cases
relative to where a court will order a
winding up and when not under the
English statute, see Healey’s Compa-
nies Law and Practice, pp. 446, etc.

1Backer v. Backus, 32 Ill, “79, 110
(1863). :

2Murray v. Vanderbilt, 39 Barb., 140
(1863); Phoonix Foundry v. Nosth River
Con. Co., 33 Hun, 156 (1884), where the
court also enjoined pending actions
against the corporation; Redmond v.
Enfield Mfg. Co., 3 Hun, 191 (1872);
Beach on Receivers, §§ 422, 427; Re
- Commercial B’k, etc., 55 L. T. Rep., 609
(1887), Cf. Taylor v. Life Ass’n, 13 Fed.
Rep., 493 (1882).

3People v. Hektograph Co., 10 Abb.
N. C. (N. Y.), 358 (1882).

4In re Beaujolais Wine Co., L. R., 3
Chan., 15 (1876); In re London & Mer-
cantile Discount Co., L. R., 1 Eq., 277
(1865). In Stupart v. Arrowsmith, 3 Sm.
& G., 176 (1855), a bill filed by a share-
holder on behalf of himself and others
to set aside a dissolution, after three
years’ acquiescence, no fraud or imposi-

tion being alleged, was dismissed with
costs. Of. Kent v. Jackson, 2 DeG., M.
& G., 49 (1852); Bailey’s Appeal, 96 Penn.
St., 253 (1880), where certain stock-
holders procured the dissolution of a cor-

_poration by fraud. They were held to

be trustees ea matleficio for the bona fide
stockholders, and as such liable to ac-
count to them for the assets of the com-
pany.

5 Portland Dry Dock, etc., Co. v.
Trustees of Portland, 12 B, Mon., 77
(1851); La Grange & Memphis R. R.
Co. v. Rainey, 7 Coldw. (Tenn.), 420

_ (1870); Harris v. Muskingum Mfg. Co., 4

Blackf. (Ind,), 267 (1836);.Town v. B’k,
etc., Raisin, 2 Doug. (Mich.), 580 (1847);
Currier v. Santim, 16 La. Ann., 27 (1861);
Norris v. Mayor of Smithville, 1 Swan
(Tenn.), 164 (1851); Bradt v Benedict, 17
N. Y. N. Y., 93,99 ( (1858) ; Boston Glass Co, v.

Langdon, 24 Pick., 49 (1884); Wilson v.

Proprietors of Central Bridge, 9 R. L,

590 (1870); Penobscot Boom Corp. v,
Lamson, 16 Me., 224 (1889); Enfield Toll
Bridge Co. v. Conn. River Co., 7 Conn.,
28, 45 (1828); Mumuna v. Potomac, etc.,
8 Peters, 281, 287. A mere resolution
of the stockholders is ineffectual. New
York, etc., Works v. Smith, 4 Duer, 362.
(1855) ; Bone a, Oreouad R’y Co., 38
Fed. Rep., 187 (1889). A notice of the.
resolution sent to the governor is inef-

699
g 681.]

DISSOLUTION, FORFEITURE, ETO.

{cH. XXXVIII.

$631. Acts which do not constitute dissolution.— There are cer-
tain acts and facts which do not in themselves constitute a disso-
lution. A dissolution is not effected by a failure to elect officers;}
nor by a sale or assignment of all the corporate property ;? nor by
the fact that one person owns all the shares of stock;* nor by a
cessation of all corporate business and acts;‘ nor by the death of

fectual. Merchants’ B’k v. Heard, 37 Ga.,
401 (1867); Revere v. Boston, ete., Co., 15
Pick., 351 (1834). By a statute the ac-
ceptance may be made by a proclama-
tion. Campbell v. Miss. Union B’k, 7
Miss., 625, 681 (1842). The judgment of a
court of law in such a. case is ineffectual.
Chesapeake, etc., Co. v. Baltimore, etc.,
R. R. Co., 4 Gill & J., 1, 107 (1882). In
England the surrender at common law
was to the king, and had to be accepted
by him in order to work a dissolution.
The King v. Amery, 2 Term Rep., 515,
531 (1788); The King v. Gray, 8 Mod.
Rep., 358 (1825). Cf. Bruce v. Platt, 80
N. Y., 379 (1880). Voluntary ‘dissolu-
tion need not be accepted by the state.
Merchants’, etc., Line », Wagoner, 71
Ala., 581 (1882). The case of Webster v.
Turner, 12 Hun, 264 (1877), can be up-
held only in connection with § 681,
infra. See, also, cases in notes supra,
to effect that a court cannot decree a
dissolution at the instance of stockhold-
ers. Many states now have statutes
expressly giving to courts such author-
ity.

1Rose v. Turnpike Co., 3 Watts
(Penn.), 46 (1834); Lehigh Bridge Co. v.
Lehigh Coal & Navigation Co., 4 Rawle
(Penn.), 8, 23 (1832); Commonwealth v.
Cullen, 13 Penn. St., 133 (1850); Hoboken
Building, etc., Association v. Martin, 13
N. J. Eq., 427 (1861); Evarts v. Killing-
worth Mfg. Co., 20 Conn., 447 (1850);
Nashville. Bank v. Petway, 8 Humph,
(Tenn.), 522 (1842); Boston Glass Mfg.
Co. v, Langdon, 24 Pick., 49 (1884); Rus-
sell v. McLellan, 14 id., 63 (1888); Cahill
v. Kalamazoo, ete., Ins. Co., 2 Doug.
(Mich.), 124, 140 (1845); Harris v. Missis-
sippi Valley, etc., R. R. Co., 51 Mich.,
602 (1875); People v. Runkle, 9 Johns,

147 (1812); Philips v. Wickham, 1 Paige
590 (1829); Slee v. Bloom, 5_Jobns,
Chan., 366 (1821); S. C., 19 Johns., 456
(1822); St. Louis, etc., Loan Association
v. Augustin, 2 Mo. App., 123 (1876);
Knowlton v. Ackley, 8 Cush., 93 (1851);
President & Trustees, etc., v. Thompson,
20 id., 197 (1858); People v. Wren, 5 IIL,
269 (1843). Nor will a resignation of all
the officers dissolve the corporation.
Muscatine Turn Verein v. Funck, 18
Iowa, 469 (1865); Evarts v. Killing-
worth Mfg. Co., 20 Conn., 447 (1850).
The corporate rights and franchises are,
in such a case, merely dormant until
other officers are elected. Philips wv,
Wickham, 1 Paige, 590 (1829). Of. Lea
v. American Atlantic, etc., Canal Co., 3
Abb, Prac. (N. S.), 1 (1867).

2Barclay v. Talman, Bas, Chat
128 (1842); De Camp v. Aylward,
at as (1876); Richwald v. Commer-'
cial Hotel Co., 106 Ill., 489 (1888); Rol- °
lins v. Clay, 83 Me., 132 (1851); Kansas
City Hotel v. Sauer, 65 Mo;; 279 (1877);
Troy, etc., R. R.-Co. v. Kerr, 17 Barb.,
581 (1854), where a railroad corpora-
tion had leased the entire property to
another corporation ; State v. Merchant,
87 O. St., 251 (1881); Smith v. Gower, 2
Duyall, 17 (1865). To same effect, State
v. Rives, 5 Tred. Law (N. C.), 297 (1844);
Bruffett v. Great Western R, R. Co., 28
Ill, 353 (1861).

3See § 709,

4 Attorney-General v. Bank of Niag-
ara, Hopkins’ Chan. (N. Y.), 403 (1825);
Baptist Meeting-house v. Webb, 66 Me.,
898 (1877); Rollins , Clay, 33 Me., 182
(1851); Harris v. Nesbit, 24 Ala., 398
(1854); Kansas City Hotel Co. v. Sauer,
65 Mo., 279, 288 (1877); Nimmons »v.
Tappan, 2 Sweeney (N. Y.), 652 (1870);

 

700
 

CH. XXXVIII.]

DISSOLUTION, FORFEITURE, ETC.

[§ 631.

its stockholders;* nor by insolvency;? nor, in all cases, by a con-
solidationAvith another corporation under statutory authotity,? For

Mickles v. Rochester City Bank, 11
Paige, 118 (1844); State v. Barron, 58
N. H., 870 (1878); Re Jackson Marine
Ins. Co., 4 Sandf. Chan. (N. Y.), 559
(1847); West v. Carolina, etc., Co., 81
Ark., 476 (1876); Bache v. Horticultural
Soc, 10 La (Tenn,), 486 (1882); Bran-
don Iron Co. v. Gleason, 24 Vt., 228
(1852); Atlanta v. Gate, etc., Co, 71
Ga., 106 (1883). Dissolution may exist
by cessation, etc., so far as the rever-
sion of property given to the corpora-
tion is concerned. Stone v. Framing-
ton, 109 Mass., 303 (1872), A foreclosure
sale of all the property and franchises
of a corporation will close out and fore-
close the whole interest of the stock-
holders therein. Vatable v. New York,
ete., R. R. Co., 96 N. Y¥., 49 (1884);
Thornton v. Wabash R’y Co., 81 id.,
462, 467 (1880). See, also, Sullivan v,
Portland & Kennebec R. R.'Co., 94
U. S., 806 (1876), As to re-organiza-
tions, see §§ 654-6, infra.

1Boston Glass Mfg, Co. v. Langdon,
24 Pick., 49, 52 (1834); Russell v, McLel-
lan, 14 Pick., 63, 69 (1838).

2Moseby v. Burrow, 52 Texas, 896
(1880); Valley Bank & Savings Institu-
tion v. Sewing Society, 28 Kan., 423
(1882), Such is the case though a re-
ceiver has been appointed. State wv.
Merchant, 87 O. St., 251 (1881); Nat'l
B’k uv. Ins. Co., 104 U.8., 54 (1881); Kin-
caid v, Dwinelle, 59 N. Y., 548 (1875).

3In Ohio the consolidation of two or
more railway companies, pursuant to
the statute of April 10, 1856 (4 Curwen,
2791), works their dissolution. Shields
v. Ohio, 95 U. &., 819 (1877). This is
also the case in Georgia. Railroad Co.
v. Georgia, 98 U. S., 359 (1878); Atlanta,
etc., R. BR. Co. v. State, 63 Ga., 483 (1879).
Where an Indiana and Ohio railway
corporation were consolidated it was
held in Indiana that the Indiana corpo-
ration was dissolved, but that, for the
purpose of enforcing the payment of a

701

debt, the Ohio corporation would be as-
sumed to be still in existence. Eaton &
Hamilton R. R. Co. vu. Hunt, 20 Ind.,
457 (1863). Generally, a consolidation
works the dissolution of the old corpo-
rations. Clearwater v. Meredith, 1
Wall., 25, 40 (1868); McMahon v. Morri-
son, 16 Ind., 172 (1861); State v. Bailey,
16 id., 46 (1861); Powell v. North Mis-
souri R. R. Co., 42 Mo., 63, etc. (1867);
Racine, etc., R. R. Co. v. Farmers’ Loan
& Trust Co., 49 Ill., 831, 849 (1868). But
each case depends upon its own peculiar
circumstances, and the rule is by no
means a universal one. Wabash, etc.,
R. R. Co. v. Ham, 114 U. S., 587,
595 (1884). See, also, State v. Merchant,
87 O. St., 251 (1881); Prouty v. Lake
Shore, etc., R. R. Co., 52 N. Y,, 368
(1873). Consolidation of gas companies
dissolves the old companies and forms
one new one. Charity Hospital v. New
Orleans, etc., Co., 4 South. Rep., 433
(La., 1888); Ohio, etc., R’y Co. v. People,
14.N. E. Rep., 874 (Ill., 1888); New Or-
leans, etc., Co. v. Louisiana, etc., Co.,
11 Fed. Rep., 277 (1882). Cf. Meyer wv
Johnston, 64 Ala., 603 (1879); Central
R. BR. Co. v. Georgia, 92 U. 8., 665
(1875). The question whether, on con-
solidation, the two former corporations
are dissolved is a question of construc-
tion of the act authorizing the consoli-
dation. Itisimportant when the charter
of a new corporation may be amended
or repealed, but old charters cannot be.
Henderson v. Central Pass. R’y Co., 21
Fed. Rep., 858 (1884); but see State of
Ohio v. Sherman, 22 O. St., 411; Pull-
man Car Co. v. Missouri P. R. R. Co.,
115 U. S., 587 (1885). Consolidation of
a railroad with another under power
given in charter does not render the
railroad subject to constitutional pro-
visions existing dt time of consolidation.
Zimmer v. State, 80 Ark,, 680 (1875),
Consolidation of two roads is different
from a sale; the franchises are all
~

§ 6382.

DISSOLUTION, FORFEITURE, ETC.

[CH. XXXVIII.

certain purposes, however, such as rendering stockholders liable on
their statutory liability,! or relieving directors from a penal lia-
bility,? dissolution is held to arise by some of these acts.

§ 632. Only the attorney-general can institute a suit to forfeit a
corporate charter— Such unquestionably is the law. It is for the

_ state alone to withdraw the charter which the state has given. A
” stockholder cannot institute the suit; * nora corporate creditor ;* nor

can the municipal authorities by reason of a change of route by a
railroad; nor can a person who is overcharged ona turnpike bring

suit to forfeit the company’s charter.’

merged in the new corporation, Green
County v. Conness, 109 U. S., 104 (1883).
In Boardman v, Lake Shore, etc., R’y

_ Co., 84 N. Y., 157, 181 (1881), the court

said: ‘‘It is held that where two rail-
roads are consolidated, as far as one of
the creditors of one of the original com-
panies is concerned, the consolidated
company is the successor of the old com-
pany ; but in respect to the properties of
the other companies it is a new and in-
dependent company, and such creditor
has no claim against it upon their orig-
inal contract, but only by virtue of its
assumption of the obligations of the
old companies.” In Dongan’s Case,
28 L. T., N. S., 60 (1878), the court
said: ‘‘Two companies may be united,
either bv fusion into a third or by one
absorbing the other. The former pro-
cess seems to correspond most nearly
with the popular sense of the word
amalgamation, and I believe nobody
really knows what amalgamation
means. Whatever be the process, no
shareholder in the company which it
destroys, or of which it suspends the
life, can become a shareholder in the
other company without his personal as-
sent.” For definition of ‘‘ amalgama-
tion” as used in England, see In re
Empire Assurance Corp’n, L. R., 4 Eq.,
841 (1867). In the case of Fee v. Gas Com-
pany, 86 La. Ann., 413 (1883), the court
said: ‘‘The articles of consolidation
and the legislative act by authority of

which they were executed evidently -

present a case of complete and perfect
amalgamation, the effect of which was

The state cannot even au-

under American authorities to termi-
nate the existence of the original corpo-
rations, to create a new corporation, to
transmute the members of the former
into members of the latter, and to oper-
ate a transfer of the property, rights
and liabilities of each old company to
the new one.”. ;

1See Slee v. Bloom, 19 Johns., 456
(1822), and § 219, supra. Cf. Bradt
Benedict, 17 N. Y., 93 (1858).

2 Losee v. Bullard, 79 N. Y., 404 (1880),

3North v. State, 8 N. E. Rep., 159
(Ind., 1886); Baker v. Backus, 22 IIL,
79 (1868); Commonwealth v. Union Ins,
Co., 5 Mass., 230 (1809); State v. Pater-
son & T, Co., 21 N. J. L., 9 (1847); Mur-
phy v. Farmers’ B’k, etc., 20 Pa. St,
415 (1853); Rice v. National B’k, etc., 126
Mass., 800 (1879); Folger v. Columbian,
etc., Ins. Co., 99 Mass., 267 (1868), where
the court refused to recognize a dissolu-
tion decreed by a New York court at
the instance of a stockholder; Raisbeck
v, Oesterricher, 4 Abb, N. C., 444 (Com.
Pl., 1878), where the plaintiff claimed
that the incorporation was irregular.

4Gaylord v. Fort Wayne, etc., R. RB.
Co., 6 Biss., 286 (1875).

5 Moore v. Brooklyn, etc., R. R., 108
N. Y., 98 (1888).

6 Commonwealth v. Allegheny Bridge
Co., 20 Pa. St., 185 (1852); State v.
White's, etc., Co., 3 Tenn. Ch., 164 (1876),
where the bill purported to be in the at
torney-general’s name, A shipper of
freight cannot by bill in equity compel
a canal company to repair and render
its canal navigable. Only the state can

702
 

OH. XXXVIII. |

DISSOLUTION, FORFEITURE, ETO.

[§ 633.

thorize the secretary of state to forfeit a charter.’ The corpora-

tion is entitled to its day in court.

§ 633. Forfeiture for misuser — Acts which constitute a mis-

User .—

The law is clear that, if a corporation misuses its powers,

the state may by a suit withdraw the charter which it has given.
Great difficulty, however, arises in determining what constitutes a

misuser.
themselves.”

complain. Buck, etc., Co. v. Lehigh,
etc., Co., 50 Pa. St., 91 (1865). The
statutes of a state, however, sometimes
change these rules of law,

1The statute of West Virginia author-
izing the secretary of state to declare
corporate charters forfeited if its taxes
are not paid is ineffectual for that pur-
pose, Forfeiture can be made only after
a suit by the state brought for that pur-
pose. Greenbrier, etc., Co. v. Ward, 2
S. E. Rep., 227 (W. Va., 1887). |

2 It has been held to be a misuser to file
a false certificate that the capital stock
has been paid up. Eastern, etc., Co. v.
Regina, 22 Eng. L. & Eq., 328 (1853);
or to establish a branch bank where
the charter authorizes only a princi-
pal banking place, People v. Oakland
Co. B’k, 1 Doug. (Mich.), 282 (1844); or
to keep its bobks and place of business
out of the state, State v, Milwaukee,
etc., R’y Co,, 45 Wis., 590 (1878); or for
an insurance company to take risks
which it cannot pay if required, Ward v.
Farwell, 97 Ill., 593 (1881); or for taking
‘“‘ grave-yard” insurance, State v. Cen-
tral, etc., Assoc., 29 Q, St., 399 (1876),
the person receiving the insurance hav-
ing no insurable interest in the per-
son insured; of for not keeping tracks
in a condition required by the ‘char-
ter, State v. Madison, ete., R’y Co.,
40 N. W. Rep., 487 (Wis., 1888); or for
a canal company.to allow the canal
to become out of repair, State v. Penn.,
ete., Co., 28 O. St., 121 (1872); or for a
ferry company to be guilty of the same
neglect, State v. Council Bluffs, ete.,
Co., 11 Neb., 354 (1881); or for filing
false and fraudulent articles of associa-

A clear idea can be obtained only by a study of the cases

tion, State v. Bailey,.16 Ind., 46 (1861),
holding, also, that mere insolvency is
no cause for forfeiture; or for accepting
subscriptions by persons who are noto-
riously insolvent, Holman v. State, 105
Ind., 569 (1885); Jersey City Gas Co, v.
Dwight, 29 N. J. Eq., 242 (1878); or for
a failure of a river improvement com-
pany to make an improvement as com-
manded by a statute, People v, Im-
provement Co,, 103 Ill., 491 (1882); or
for a bank to loan to its directors in
violation of a statute, B’k Com’rs v, B’k
of Buffalo, 6 Paige, 497 (1887); or for a
charitable corporation to divide with
a lobbyist an appropriation obtained
from the legislature, People v. Dispen-
sary, etc., Soc., 7 Lans., 804 (1873); or
for an insurance company to insure in
a manner contrary tu statute and to
delay payments of losses, State v. Stand-
ard, etc., Assoc., 388 O. St., 281 (1882);
for a bank to contract debts beyond the
charter limits, and to make dividends
before resuming specie payments, State
B’k v. State, 1 Blackf, (Ind.), 267 (1828);
or for persistently taking usurious in-
terest, Commonwealth v. Commercial
Bank, 28 Pa. St., 883 (1857); State v,
Saime, 33 Miss., 474 (1857); or for a mut-
ual relief association to be rr for the
benefit of its officers only, State v. Peo-
ple’s, ete., Assoc., 42 O, St., 679 (1885);
or for a bank to suspend specie pay-
ments, State v. B’k of 8. C., 1 Spears,
L. (S. C.), 488 (1841); Com. B’k v, State,’
6 Sm. & M. (Miss.), 599 (1846); but see
State v. New Orleans, etc,, Co., 2 Rob,
(La.), 529 (1842); or for a turnpike com- -
pany to allow its road to be out of re-
pair, Washington, etc., T. Co. v. State,

703
$634]

§ 634. Non-user as a cause for forfeiture.—

DISSOLUTION, FORFEITURE, ETC.

‘
[CH. XXXVIIT,

Non-user of its fran-

chises is a cause for forfeiture where a corporation is possessed. not

19 Md., 239 (1862); Coon v. Plymouth,
etc., Co., 32 Mich., 248 (1875); Darnell v.
State, 3 S. W. Rep., 365 (Ark., 1887);
State v. Pawtucket, etc., Corp’n, 8 R. 1.,
182 (1865), where the company neglected
a part of its road which it had sold to a
municipality. Not every neglect is fatal.
The question is for the jury. People v.
‘Woodstock T. Co., 11 Vt., 431 (1839).
And it is no defense to forfeiture for
neglect that the road has been sold on
an execution sale. Commonwealth v.,
Tenth, etc., Co., 59 Mass., 509 (1850).
Nor is it a defense that the state has au-
thorized a competing line. Turnpike Co.
v. State, 3 Wall., 210 (1865). In the case
of State v. Essex B’k, 8 Vt., 489 (1836),
the court refused to decree a forfeit-
ure, since the public were not injured,
though the corporation was clearly
guilty of misuser. Ifa gas company is
_ ordered by a municipality under a stat-
' utory power to reduce the price of gas,
it may defend against forfeiture for
non-compliance by asserting that the
municipality was fraudulently induced
to act. State v. Cincinnati, etc., Co., 18
O. St., 262 (1868). If a company has
incorporated under a general act, but
for a purpose not authorized by it, a
suit for forfeiture lies. State v. Beck,
81 Ind., 501 (1882), where a turnpike
company incorporated to purchase turn-
pikes, a purpose not authorized by the
statute. The state may create causes
for the forfeiture of insurance compa-
nies’ charters. Chicago, etc., Ins. Co.
v. Needles, 113 U. S., 574 (1885). Where
the state sues to forfeit the charter of a
railroad company which has leased its
road, the latter cannot institute a suit to
test the validity of that lease. Ogdens-
burgh, etc., R. R. Co, v. Vermont, etc.,
R. R. Co., 4 Hun, 712 (1875). If quo
warranto is brought for not making re-
ports the corporation may offer to make
the reports. State v. Barron, 57 N. H.,
498 (1876), By statute, fotfeitnre may

be decreed where the court decides that
-a continuance of business by an insur-
ance company will be hazardous to the
community. Ward v. Farwell, 97 Ill:, 593
(1881). The legislature cannot amend
a charter by forfeiting the charter if
specie payments are not made within a
specified time. State v. Tombeckbee
B’k, 2 Stew. (Ala.), 30 (1829). It cannot
provide that charters shall be forfeited
for non-payment of corporate ‘obliga-
tions, so far as corporations existing be-
fore the statute are concerned. Aurora,
etc., Co. v. Holthouse, 7 Ind., 59 (1855).
But it may prescribe that the charter be
repealed unless within certain time the
company do certaip thi ngs — here make
.good its capital. Lothrop v. Stedman,
42 Conn., 583 (1875). And may force
the dissolution of insolvent insurance
corporations or corporations whose con-
tinuance of business will be dangerous
to public. Ward v, Farwell,-97 IIl., 593
(1881); Chicago Life Ins. Co. v. ‘KOGIGR,
101 Til., 82 (1881). So ‘also as to banks,
The remedy “for a violation of duty
may be altered and changed by legisla-
tive provisions if the power of accom-
plishing the same objects by any means
is within the legitimate scgpe of legis-
lative authority.” Commonwealth v.
Farmers’, etc., B’k, 21 Pick., 542 (1839).
Quo warranto does not lie against a cor-
poration for ultra vires acts, such as is-
suing watered stock or purchasing its
own stock, ‘Acts ‘in excess of power
may undoubtedly be carried so far as to
amount to a misuser of the franchise to
be a corporation and a ground for its
forfeiture.” The courts refuse to define
what ultra vires acts will and what will
not sustain a quo warranto proceeding.
They must be acts which ‘so derange
or destroy the business of the corpora-
tion that it no longer fulfills the end for
which it was created.” State v. Minn..,
etc.,Co.,41N. W. Rep., 1020(Minn., 1889).
The following acts and facts do not

704 \
 

OH. XXXVIII. |

DISSOLUTION, FORFEITURE, ETC.

[$ 634,

only of its franchise to be a corporation, but also other franchises,
such as a right of way, which the publics are interested in having

kept in active use.!

constitute a misuser. There is no mis-
user of franchises by a corporation
where the objectionable act was by a
cashier in direct violation of orders
given to him by the directors. State v.
Commercial B’k, 6 Sm. & M. (Miss.),
218 (1846); or where a railroad or turn-
pike company has constructed its road
over land without obtaining the right
of way, State v. Kile, etc., Co., 38 Ind.,
71 (1871); People v. Hillsdale, etc., T.
Co., 2 Johns., 190 (1807); or where the
company deviates slightly from its
route, fails to filea map of the route,
and neglects to elect new directors,
Harris v. Mississippi, etc., R. R. Co., 51
Miss., 602 (1875); or fails to file a state-
ment of its condition as required by
statute, the object of such filing having
ceased, People v. Improvement Co.,
supra; or where the public are com-
pelled to open a draw-bridge for them-
selves, Commonwealth v. Bried, 21
Mass., 460 (1827); or where a bank has
assigned its assets to trustees to pay its
debts, State v. Commercial B’k, 13 Sm.
& M., 569 (1850); or for the insolvency
of a bank, it having since then become
solvent, People v. Bk of Niagara, 6
Cow., 1961826); People v, Washington,
etc., B’k, 6 Cow., 212 (1826) (but the con-
trary has been held as regards a suspen-
sion of specie payments and a subse-
quent resumption, Commercial B’k v.
State, 6 Sm. & M. (Miss.), 599 (1846);
Planters’ B’k v. State, 7 id., 163—1846); or
where a bridge company gives reduced
rates to constant patrons, and gives free
passage in payment for land and fails
to file required statements, Common-
wealth v. Alleghany, etc., Co., 20 Pa.
St., 185 (1852); or that the corporation
has incorporated also in another state,
Commonwealth v. Pittsburg, etc., R. R.
Co., 58 Pa. St., 26 (1868); or that re-
quired statements are not filed, State
v. Barron, 58 N. H., 370 (£878). Though

(45)

705

a corporation take more interest than
allowed by charter it may recover. The
only penalty is such as the usury law '
prescribes. Grand G. B’k v. Archer, 16
Miss., 151 (1847). No quo warranto lies
for using an abbreviated corporate
name. People v. Bogart, 45 Cal., 7%
(1872). The averments of misuser must
be definite and certain. Danville, etc.,
P. Co. v. State, 16 Ind., 456 (1861). And
the misuser must be wilful. State v. Co-
lumbia, etc., Co., 2 Sneed (Tenn.), 254
(1854); Baltimore v. Connellsville, etc.,
R’y Co., 6 Phil., 190 (1866). Concern-
ing the pleadings in guo warranto, see

. People 'v. Stanford, 19 Pac. Rep., 693

(Cal., 1888).

1 Thus, a suit for forfeiture lies where
a railroad company takes up part of its
track. State v. West., etc., R’y Co., 34
Wis., 197 (1879); S. C., 86 id., 166 (1874).
Or where a railroad company constructs
but part of its road, has no station
or freight-houses and no passenger
coaches, but engages only in getting
out coal from beds owned by those in-
terested in the company. State v, R’y
Co., 40 O. St., 504 (1884). But the suit
does not lie on the ground that the com-
pany does not intend to complete its
road. State v Kingan, 51 Ind., 142
(1875); State v. Beck, 81 id., 501 (1882).
No forfeiture is decreed because a rail-
road company discontinues passenger
trains over a branch line which is run
at a loss by reason of horse-car compe-
tition. Commonwealth .v. Fitchburg
R. BR. Co., 78 Mass., 180 (1858). The
lessee of a railroad is a proper party to
a suit to forfeit franchises for’ non-user.
People v. Albany, etc., R. R. Co., 7%
N. Y., 232 (1879); State v. Minn., etc.,
R’y Co., 80 N. W. Rep., 816 (Minn,
1886). An assignment of all corporate
assets to others, thereby rendering the
corporation incapable of continuing
business, is cause for forfeiture, State
§ 635.) . DISSOLUTION, FORFEITURE, ETC. [cH. XXXVIII.

But a more difficult question arises where a corporation, exercis-
ing no franchise except that of being a corporation, is guilty of a
non-user. The cases are in conflict on the question."

§ 635. Forfeiture for ultra vires acts and usurpation of fran-
chises.— Frequently a corporation does acts which its charter does
not authorize it to do, or which its charter or a statute expressly
prohibits it from doing. The question then arises, What is the rem-
edy of the state? The right of a stockholder, or the corporation
itself, or a person contracting with the corporation, to object to
such acts is discussed elsewhere.? But may the state object? Un-
doubtedly it may. It seems that the state has four remedies. Its.
legislature may repeal the charter of the corporation under the re-
served right of the state to repeal;* or the state may institute a suit
at law to forfeit the charter for misuser of powers; or such suit may
be only to oust the corporation from the exercise of the usurped
powers; or, according to some authorities, the suit may be in equity
for an injunction restraining the corporation from committing the
ultra vires acts. It seems that the judgment in an ordinary quo
warranto suit herein may be either a forfeiture of all the corporate

franchises and of its charter, or

v. Real Estate B’k, 5 Ark., 595 (1848).
A bank which ceases to do business
and to file statements, and which makes
improper loans to its directors, is liable
to forfeiture of charter. State v. Sen-
eca Co. B’k, 5 O. St., 171 (1856). A rail-
road which is leased to another com-
pany without statutory provisions to
do so is subject to forfeiture at the in-
stance of the state. State v. Atchison,
etc., R. R. Co., 388 N. W. Rep., 43 (Neb.,
1888). A railroad may construct its
line Jong subsequently to the date of
its charter, there being no limit in its
charter as to time of construction.
Western, etc., R. R.’s Appeal, 104 Pa.
St., 399 (1883); Union Canal Co. ».
Young, 1 Whart. (Pa.), 410 (1836). The
abandonment of the right of way by
the railroad is no ground for an action
of trespass by the former owner to re-
cover it. Logan v, Vernon, etc, R. R.,
90 Ind., 552 (1883).

1See Att’y-Gen. v. Simonton, 78 N.
C., 57 (1878), holding that the suit will
not lie, although only five shares of
stock were subscribed for and no other
act done by the corporation. State v.

may be a forfeiture only of the

Societe, etc., 9 Mo. App., 114 (1880),
holding the same, though the com-
pany was dormant. But the case of
State v. Pipher, 28 Kan., 128 (1882), for-
feited the charter of an agricultural
college for non-user for nineteen years.
And see dicta in Terrell v. Taylor, 4
Cranch, 48, 51 (1815); State v. Commer-
cial B’k, 13 Sm. & M., 569 (1850). In
New York by statute such a suit will
lie. Code of C. P., § 1798. See, also,
In re Jackson, etc., Ins. Co., 4 Sand.
Ch., 559 (1847). An abandonment by a.
corporation of part of the purposes of
its incorporation is no cause for dissolu-
tion. Norwegian Titanic Iron Co., 35:
Beav., 223 (1865), where, its purpose be-
ing to purchase English and Norway
mines, it sold the English mines, By
the terms of a new constitution all cor-
porations which, have failed to organize
before its adoption may be deemed to
have forfeited their franchises thereby.
Chincleclamanch, etc., Co. v. Common-
wealth, 100 Pa. St., 438 (1882).
2See Part IV.
3 See § 689, infra.

706 ; '
CH. XXXVIII.|

DISSOLUTION, FORFEITURE, ETC.

[§ 635.

right to continue to do the illegal acts, and that it is in the discre-
tion of the court to say which decree shall be made.!
The remedy by a billin equity for an injunction is of very doubt-

ful validity. In England it has
road corporation from engaging

1 State v. People’s, etc., Assoc., 42 O.
St., 579 (1885), where only a discontinu-
ance of the acts complained of was or-
dered; People v. Improvement Co., 103
Tl, 491 (1882), where a complete for-

' feiture of charter, etc., was decreed.
See, also, People v. Utica Ins. Co., 15
Johns., 357 (1818), where an insurance
company had engaged in banking con-
trary to statute. In State‘v. Building
Assoc., 85 O. St., 258 (1879), the court
said, that where the corporation is guilty
of an offense which by statute is cause
for'forfeiture of its franchise as a cor-
poration, the court will decree that for:
feiture; but where the cause of forfeit-
ure is outside of those prescribed in the
statutes, then the court may decree
either a forfeiture of the franchise to be
a corporation or an ouster from the
powers and acts illegally assumed or
done, Inthe case of State v. Merchants’,
etc., Trust Co., 8 Humph.»>(Tenn.), 285
(1847), the court said: ‘‘ By the com-
mon law the forfeiture of a charter can
be enforced in a court of law only; and
the proceeding to repeal it is by a scire
facias or an information in the nature
of a writ of quo warranto. A scire
facias is the proper remedy where
there is a legal existing body capable of
acting, but which had been guilty of
an abuse of the power intrusted to it;
a quo warranto where there is a body
corporate de facto, which takes upon
itself to act as a body corporate, but
from some defect in. its constitution it
cannot legally exercise the power it
affects to use.” Citing 8 Wheat., 483-4,
In Pennsylvania, where the state filed
an information to declare ulira vires a
contract between a canal company and
a coal company, whereby one-half of
the canal facilities were monopolized
Ly the latter, the court held that the in-

107

been sustained to restrain a rail-
in the coal business.’ It clearly

formation was a proper remedy, and
that the court in its judgment in favor
of the state might order the corpora-
tion to discontinue the unauthorized
act, and that the judgment need not
oust the corporation from its charter
and franchises. Commonwealth v. Dela-
ware, etc,, Canal Co., 48 Pa. St., 295
(1862). For the ancient learning as to
the nature of the scire facias in forfeit-
ing charters, see State v. Moore, 19 Ala.,
514 (1851). When the information has
for its object to oust the defendants
from acting as a corporation, and to
test the fact of their incorporation, .it
must be filed against individuals. When
the object is to effect a dissolution of a
corporation which has had an actual
existence, or to oust such corporation
of some franchise which it has unlaw-
fully exercised, the information must
be filed against the corporation. People
v. Rensselaer, etc., R. R., 15 Wend., 113
(1836). Although the state proves the
case, yet the court will not adjudge a
forfeiture unless justice requires it.
State v. Essex B’k, 8 Vt., 489 (1836).
Pleadings in quo warranto.. People v..
Stanford, 19 Pac. Rep., 693 (Cal., 1888).
2 Attorney-General v. Great Northern
R’y Co., 1 Dr. & Sm., 154 (1860). But
the attorney-general cannot enjoin a
corporate act merely because it is ultra
wvtres, Some injury to the public must
be involved. Attorney-general’s suit at
instance of a manufacturer to enjoin-
one railroad from leasing rolling-stock
to another failed. Attorney-General v.
Great Eastern R’y Co., L. R., 11 Ch. D.,
449 (1879). A court of equity cannot
compel a corporation to cease collecting
tolls, although it has not improved the
stream as required by its charter, Pix-
ley v. Roanoke, etc., Co., 75 Va., 820
(1881). In Attorney-General v. Mid,
DISSOLUTION, FORFEITURE, ETC. [CH. XXXVIII.

§ 635.]

exists to restrain municipal corporations from committing ultra
vires acts.!| The attorney-general may enjoin a corporation, as he
may an individual, from creating a public nuisance.’

In Wisconsin it is held that the attorney-general may enjoin rail-
road companies from taking greater rates than are prescribed by
statute;* and in many of the states such a bill will lie by statute.‘
But in general the decided weight of authority is that the remedy
of the state is by a guo warranto at law, and never by a bill in

equity for an injunction.’

Kent R’y Co., L. R., 3 Ch., 100 (1867),
a mandatory injunction requiring the
defendant to construct a bridge was
granted. _

1 Attorney-General v. Detroit, 26
Mich., 268 (1872), per Cooley, J., where
money was about to be misused; State
v, Saline, etc., Court, 51 Mo., 350 (1878),
where the issue of municipal bonds was
enjoined.

2 Attorney-General v. Jamaica, etc.,
Corp., 183 Mass., 361 (1882).

3 Attorney-General v. R. R. Cos., 85.

Wis., 528, 553 (1874), reviewing many

eases; but cf. Strong v. McCagg, 55.

Wis., 624.

4State v. Merchants’, etc., Co., 8
Humph. (Tenn.), 254 (1847), where an
insurance company was restrained from
banking. So, also, in New York B’k
Com’rs v. B’k of Buffalo, 6 Paige, 496
(1837); Brinckerhoff v. Bostwick, 88 N.
Y., 52 (1882), explaining the difference
between this class of cases and cases
where other parties are complainants.

5 Attorney-General v. Utica Ins. Co.,
2 John. Ch., 371 (1817); Attorney-Gen-
eral v. B’k of Niagara, Hopk. Ch., 354
(1825); Attorney-General v. Tudor Ice
Co., 104 Mass., 239 (1870), where an
injunction restraining an ice company
from importing teas was denied. Where

a railroad leases its line in violation of |

a constitutional provision prohibiting
the consolidation of parallel lines it is
subject to forfeiture. So, also, where
it issues ‘‘ watered stock” in violation
of the constitution, State v. Atchison,
etc., R. R., 88 N. W. Rep., 48 (Neb.,
1888). A state creating a corporation has

Quo warranto lies against a foreign cor-

no visitorial power over it — 7. e., power
to correct corporate abuses—except ‘ (ly
where municipal, charitable, religious
or eleemosynary corporations, public in
their nature, had abused their fran-
chises, perverted the purpose of their
organization or misappropriated their
funds; and as they, from the nature of
their corporate functions, were more
or less under government supervision,
the attorney-general proceeded against
them to obtain correction of the abuse;
or (2) where private corporations, char-
tered for private and limited purposes,
had .exceeded their powers and were
restrained or enjoined in the same man-
ner from the further violation of the _
limitation to which their powers were
subject.” Hence the United States as
the creator of the Union Pacific Rail-
road cannot exercise visitorial power
over it in respect to frauds‘in its man-
agement. United States v. Union Pa-
cific R. R..Co., 98 U. S., 569, 617
(1878). Cf. Attorney-General v. Wilson,
1°Cr. & Ph., 1 (1840), holding that the
court had jurisdiction over charitable
corporations, and that when the trustees
of them abused their trust the court
would take notice of such abuse by rea-
son of its visitorial powers, Also, on
this point Attorney-General v. Found-
ling Hospital, 4 Bro. Ch. Rep., 165 (1798).
For pleadings in quo warranto pro-
ceedings by the state to oust a corpora-
tion from usurped franchises and to
forfeit a railroad charter, see People v.
Standford, 18 Pac. Rep., 85 (Cal., 1888),
holding also that the statute of limita-
tions is no bar.

708
‘

CH, XXXVI. ]

DISSOLUTION, FORFEITURE, ETC.

[$ 636.

poration doing business in the state contrary to the statutes of that

state.!

§ 636. The state may waive its right to forfeit a charter— Vari-
ous acts have been held to constitute such a waiver?

State v. Fidelity, etc., Co., 41 N. W.
Rep., 108 (Minn., 1888), .

2 A waiver may be express or by stat-,
utes recognizing its continued exist-
ence. In re New York, El. R. R. Co.,
70 N, Y., 327, 838 (1877); People v. Man-
hattan Co., 9 Wend., 352, 380 (1832); or
requiring it to make alterations on its
road, Att’y-Gen’l v. Petersburg, etc.,
R. RB. Co., 6 Ired. L. (N. C.), 470 (1846);
or authorizing a transfer of its property
and franchises to another corporation,
Chesapeake, etc., Canal Co. v. Balti-
more, etc., R. R. Co., 4 G. & J. (Md.),
1, 127 (1832); or requiring a bank to
resume specie payments by a certain
date, Commercial B’k v. State, 6 Sm.
& M. (Miss.), 599, 622 (1846). But waiver
as to terminus is not a waiver of an
abandonment of part of the road, nor
of a defect as to the width of the turn-
pike. People v. Fishkill, etc,, Co., 27
Barb., 445 (1857). Waiver may arise by a
statute extending the corporate powers.
People v. Ottawa, etc., Co., 115 Ill., 281
(1885); Central, ete, R. R. Co. v.
Twenty, etc., R. R. Co:, 54 How. Pr.,
168, 186 (1877); or by authorizing a
change of route, State v. Fourth, etc.,
Co., 15 N. H., 162 (1844); or by expressly
waiving the cause for forfeiture, Lump-
kin v. Jones, 1 Ga., 27 (1846). Legisla-
ture may expressly waive forfeiture
arising by suspension of specie pay-
ments. Atchafalaya B’k v. Dawson, 13
La., 497 (1829). May waive by extend-
ing the time for completion. La Grange,
etc., R. R. Co. v. Rainey, 7 Coldw.
(Tenn.), 420 (1870). Amending charter,
etc., is a waiver. White's, etc., Co. v.
Davidson County, 8 Tenn. Ch., 396
(1877). An act reviving a corporation
is a waiver, even though the act was
fraudulently passed. In re Mechanics’
Soc, $1 La, Ann., 627 (1879). The
waiver protects the turnpike corpora-

tion from an indictment for obstructing
the road. State v. Godwinsville, ete,
Co., 44 N. J. L., 496 (1882). But the
waiver must have been clearly intended.
People v. Kingston, etc., Co., 28 Wend.,
193 (1840). The appointment of a cor-
porate officer by the governor and sen-
ate is not a waiver. People v. Phoenix
B’k, 24 Wend., 431 (1840). Long delay
in bringing the quo warranto may be a
waiver. Peoplev. Williamsburgh, etc.,
Co., 47 N. Y., 586 (1872); People v.
Oakland, etc., B’k, 1 Doug. (Mich.), 282.
Dictum, that the state may waive.
Briggs v. Cape Cod, etc., Co., 137 Mass.,
71 (1884), citing cases. Special act
amending charter waives defects in the
articles of association as filed. Basshor
v. Dressel, 34 Md., 503 (1871). Amend-
ment to charter waives right of forfeit-
ure for fraud, non-user and misuser.
People v. Ottawa, etc., Co., 115 Ill, 281
(1886). An amendment of the charter
isa waiver. Att’y-Gen’l v. Petersburg,
etc., R. R. Co., 6 Ired. L., 456 (1846);
Charles River Bridge Co. v. Warren
Bridge, 24 Mass., 844 (1829). The waiver
may be express. State v. Bk of
Charleston, 2 McMullan, 439 (1848); En-
field Bridge Co, v. Conn., etc., Co., 7
Conn., 28 (1828); Kanawha, etc., Co. v.
Kanawha, etc., Co., 7 Blatch., 391
(1870). Where the incorporation had
been irregular, the recognition of a cor-
poration by the legislature is equiva-
lent to a charter. McAuley v. Colum-
bus, ete., R’y, 88 Ill., 348 (1876); Cowell
v. Colorado, etc., Co., 3 Col., 82 (1876);
Mead v. N. Y., etc.,,R. R., 45 Conn.,
199 (1877); Kanawha, etc., Co, v. Kana-
wha, etc., Co., 7 Blatch., 391 (1870); St.
Louis: R. R. v. N. W., etc., R’y, 2 Mo.,
App., 69 (1876); Atlantic, etc., R. R. vw
St. Louis, 66 Mo., 228 (1877); 11 8. W.
Rep., 392 (Texas, 1889). Contra, where
charters must be granted by general

709
DISSOLUTION, FORFEITURE, ETC. [cH. XXXVITI.

§ 687.)

-§ 637. Who may allege that forfeiture or non-incorporation or
dissolution exists.— It has already been shown that no one but the
state can institute a suit to declare a forfeiture.t Also, that-no one
can institute a suit in equity to dissolve a corporation.? The ques-
tion now arises whether the state or any person, either as plaintiff
or defendant, may allege forfeiture or dissolution or non-incorpo-
ration where there have been no quo warranto proceedings instituted
and prosecuted by the state to judgment. With a few exceptions
such an allegation is not allowed. As already shown, a creditor
of a supposed corporation may hold the stockholders liable as part-
ners where they did not legally incorporate.’ It is also true that
in certain cases where a stockholder is made liable to corporate
creditors upon the dissolution of the corporation, a dissolution‘is
held to exist where the corporation is hopelessly insolvent. Again,
where a railroad corporation attempts to acquire a right of way,
the persons whose property will be affected thereby may oppose
the acquisition of the right of way by showing that the company
is not legally incorporated.’ But aside from these exceptions no
one is allowed to assert that the corporation is dissolved, or its
franchise forfeited, or its incorporation illegal, until after such a
result has been decreed by a court in a suit instituted for that pur-
pose by the state. Thus, a stockholder sued on his subscription
cannot, unless his subscription was made previous to the incorpora-
tion, set up that the company was not legally incorporated.®

The corporation is called a de facto corporation, and only the
state is allowed to question its existence. There are many instances
where attempts have been made to avoid this rule of Ms but. they
have uniformly failed.” :

laws. Oroville, etc., R. R. v. Super- dered required statementss and hence

its charter is forfeitable.

visors, 87 Cal., 854 (1869); but see Brent
v. State, 43 Ala., 297 (1869).
~ 18 682, supra.

28 629, supra.

3See chapter XIII, supra; 6 S. Rep.,
362.

4See § 631, supra.

5Inre Brooklyn, etc., R’y Co., 72 N.
Y., 245 (1878); In re N. Y. Cable Co. v.
Mayor, etc., 104 N. Y., 1 (1887). In
condemnation proceedings the incorpo-
ration may be attacked as not being de
facto. Its de jure existence cannot be
so attacked. Brown v. Calumet, etc.,
P’y, 18 N. E. Rep., 283 (Ill, 1888).

6 8S 183-186, supra.

7 Thus, a person sued for tolls cannot
set up that the corporation has not ren-

Kellogg v.
Union Co., 12 Conn., 7 (1837), Nor that
the charter was never legally vested or
has been violated. Dyer v. Walker, 40
Pa. St., 157 (1861). Where two railroad
companies claim a right of way, one

cannot allege that the other’s charter is-

forfeitable. ° Central, etc, R. R. Co. v.
Twenty-third, etc., R. R. Co., 54 How.
Pr., 168, 185 (1877). A religious cor-
poration suing for its real estate cannot
be met’ by a plea of dissolution, there
having been no decree. Baptist House
v. Webb, 66 Me., 398 (1877). A corpora-
tion suing for personal property is not
defeated by a plea that it was not legally
organized or is dissolved by non-user.
Penobscot, etc., Corp. v. Lamson, 16

710
CH. XXXVIII. |

DISSOLUTION, FORFEITURE, ETC.

[$ 637.

So, also, a party contracting with a corporation cannot defeat

Me., 224 (1839) A grantee of a corpora-
tion’s right to overflow land is not de-
prived of his right by dormancy and
non-user of its franchises by the cor-
poration. Heard v. Talbot, 73 Mass.,
118 (1856). Attachment lies against the
land of a foreign corporation though a
receiver of it exists,in the state creat-
ing it. Moseby v. Burrow, 52 Texas, 396
(1880). A county cannot seize a turnpike,

‘ although the company is guilty of mis-

user or non-user. A judgment of for-
feiture is first necessary. Moore v.
Schoppert, 22 W. Va., 282 (1883). A
city seeking to lay out a road on a right
of way cannot claim that the railroad
company’s right is forfeited by non-
user. New Jersey R. R. Co. v. Long
Branch Com’rs, 39 N, J. L., 28 (1876).
The corporation cannot avoid a tax on
the ground that it has ceased business.
Bank of U.S. v. Com., 17 Pa. St., 400
(1851). A grantor of land to a corpora-
‘tion cannot reclaim it on the ground of
a dissolution, there having been no de-
cree of dissolution. Bohannan v. Binns,
81 Miss., 355 (1856), Service on a cor-
poration cannot be made by service on
a stockholder on the ground that it has
forfeited its charter by non-user. Bache
wv. Nashville, etc., Soc., 10 Lea (Tenn.),
436 (1882). A suit by the corporation
on a bond is not to be met by a plea of
forfeiture for non-user. West v. Caro-
lina, etc., Ins. Co., 81 Ark., 476 (1876).
Nor its suit on a note by the plea that it
has abandoned its franchises. John v.
Farmers’, etc., B’k, 2.Blackf., 367 (1830) ;
East Tenn., etc., Co. v. Gaskell, 2 Lea
(Tenn.), 742 (1879); President, etc., v.
Hamilton, 34 Ind., 506 (1870). The for-
feiture can exist only after a decree to
that effect. Chesapeake, etc., Co. v. Bal-
timore, etc., R. R. Co., 4 Gill & J. (Md.),
1 (1832). An agent sued for conversion
of funds cannot allege that the corpora-
tion is guilty of a non-user of its fran-
chises. Elizabeth, ‘etc., Acad. v. Lind-
sey, 6 Ired. L. (N. C.), 476 (1846). A
railroad suing on a note cannot be de-

feated by the defense that it has for-
feited its charter, there being no adju-
dication to that effect. Toledo, etc., R.
R. v. Johnson, 49 Mich., 148 (1882). A
squatter on corporate land cannot dis-
pute the corporate title by alleging that
it was not legally incorporated or organ-
ized, Only the state can object. East,
etc., Church v. Froislie, 35 N. W. Rep.,
260 (Minn., 1887). A corporation may
hold and sell land, though in its incor-
poration the incorporators did not attach
a seal to their signatures as required by.
statute. Stoker v. Schwab, 1 N. Y.
Supp., 425 (1888). But a turnpike com-
pany cannot recover fares for the part
of its road which is constructed beyond
its chartered limits. Pontiac, etc., Co. v.
Hilton, 86 N. W. Rep., 739 (Mich., 1888).
Statutory provisions as to notice of the
first meeting are directory. They need
not be observed if the stockholders ac-
quiesce. Braintree, etc., v. Braintree,
16 N. E. Rep., 420 (Mass., 1881), But
the failure of a railroad to cause to be
paid in a certain amount of its capital
stock before incorporation may defeat
municipal bonds which are given to it.
Farnham v. Benedict, 107 N. Y., 159
(1887). Indorser sued by the corpora-
tion cannot claim that it has rendered
its charter liable to forfeiture by suspen-
sion of specie payments. Atchafalaya
B’k v. Dawson, 18 La., 497 (1889). Cor-
poration cannot defeat its taxes by al-
leging failure to comply with conditions
subsequent in its charter. Baltimore,
etc., R. R. v. Marshall Co., 3 W. Va., 319
(1869). When a man transfers all his
property toan alleged corporation in pay-
ment for its stock, and the corporation
incurs a large debt to his wife, his credit-
ors may levy on such property, and may
prove that the corporation is not in ex-
istence, inasmuch as it filed its articles of
association, but did not publish them
as required by statute. Heinig v. Ad-
ams, etc., Co., 81 Ky., 300 (1883). Run-
ning a blockade is not a forfeiture per
se. Importing, etc., Co. v. Locke, 50

11

\
§ 687.)

DISSOLUTION, FORFEITURE, ETC.

[CH. XXXVIII.

his obligation by showing that the corporation was never legally’

incorporated.

So, also, a person who gives a bond to a corporation is not al-
lewed to defeat the bond by alleging that the corporation was not

Ala, 882 (1878). A corporation cannot
be defeated in an action on a contract
by the fact that twenty-four instead of
twenty-five persons signed the articles
of incorporation. Buffalo, etc., R’y Co.
v. N. Y., ete., R. R. Co., 22 Alb, L. J.,
' 184(N. Y., 1886).

1Commercial B’k v. Pfeiffer, t08 N.
Y., 242 (1888). Thus, the defendant can-
not allege that the corporation was for
an illegal purpose—that of running
blockades— the charter not showing
that fact. Importing, etc., Co. v. Lock,
50 Ala., 332 (1873). Where the suit is
on a bond a stockholder cannot sue to
have the corporation declared a copart-
nership by reason of irregular incorpo-
ration. Baker v. Backus, 82 Ill, 79
(1863). Nor can the maker of a note to
a corporation defeat it by showing that
the corporation was not duly incorpo-
rated. Butchers’, etc., B’k v. McDon-
ald, 180 Mass., 264 (1881); Jones v. B’k
of Tenn., 8 B. Monr. (Ky.),.122 (1847);
Leonardsville B’k v. Willard, 25 N. Y.,
574 (1862); Nutting v. Hill, 71 Ga., 557
(1883); Irvine v. Luamberman’s B’k, 2
W. & S. (Pa.), 204 (1841); Congrega-
tional Soc. v. Perry, 6 N. H., 164 (1838);
Massey v. Bldg. Ass’n, 22 Kan., 624
(1879); Vater v. Lewis, 36 Ind., 288
(1871); Smith v. Miss., etc., R. R. Co.,
14 Miss., 179 (1846), where the maker
of the note claimed that the corpora-
tion was fraudulently and illegally or-
ganized ; Studebaker, etc., Co. v. Mont-
gomery, 74 Mo., 101 (1881); Stoutimore
v. Clark, 70 Mo., 471 (1879); Blake v,
Holley, 14 Ind., 383 (1860); Jones v,
Cincinnati, etc., Co., 14 Ind., 89 (1860),
holding also that the corporation need
not prove even a de facto existence.
To same effect Montgomery R. R. Co.
v. Hurst, 9 Ala., 513 (1846). Cf. White
v. Campbell, 5 Humph. (Tenn.), 38 (1844),
where the remarkable decision was

made that, if the corporation had been
dissolved at the time the note was
given, the maker was not liable and
could have a mortgage which he gave
as security set aside. A de facto cor-
poration, as indorsee of a note, may en-
force it. Wilcox v. Toledo, etc., R. R.

Co., 48 Mich., 584 (1880). Proof of or-
ganization in fact and user meets a plea
of nul tiel corporation by the maker of
a note to the corporation. Mitchell v,

Deeds, 49 Ill., 416 (1867); Smelser v.

Wayne, etc., T. Co., 82 Ind., 417 (1882);
but see Williams v. B’k of Michigan, 7
Wend., 540 (1831). The corporation it-
self, when sued upon notes which it has

made, cannot set up any informality in

its incorporation. Kelley v. Newbury-

port, ete., R. R. Co., 141 Mass., 496

(1886); Empire Mfg. Co. v. Stuart, 46
Mich., 482'(1881), where the corporation

re-incorporated in order to cure the

irregularity. Estoppel as to corporate

existence seems to mean that the cor-

poration is obliged. to prove only a de

facto existence, and need not prove the
details of incorporation. Leonardsville

Bk v, Willard, 25 N. Y., 574 (1862). A
person taking water from an irrigation

company under contract cannot defend
against an action thereon by alleging

that the company was not incorporated.

Fresno, etc., Co. v. Warner, 14 Pac.

Rep., 37 (Cal., 1887). In a suit by acor-

poration on a note the execution of the
note to the corporation is prima facie
proof of its incorporation. <A de facto
corporation may enforce a note given to
it. Hudson v. Green, etc., 118 ILL, 618
(1885); 5 S. Rep., 247 (Fla., 1888); 21 N.
E. Rep., 12 (Ill, 1889). That the corpo-.,
ration may ratify and enforce contracts
entered into in its behalf by its promot-
ers before incorporation, see § 705, etc.,
infra.

712
 

CH. XXXVUI. |

DISSQLUTION, FORFEITURE, ETC.

1

[$ 687.

duly incorporated ;' nor can the corporation defeat its bonds by
alleging its want of lawful incorporation.? A person who mort-
gages land to a supposed corporation cannot defeat a foreclosure
of the mortgage by alleging that the mortgagee is not a corpora-
tion;* nor can the corporation itself, having given a mortgage,
defeat a foreclosure by such a plea.*

A grantor of land to a supposed corporation cannot deny the
legality of his grant on the ground that the corporation was not
duly incorporated. And, in géneral, the courts do not allow par-

1McFarlan v. Triton oe Co., 4 Denio,
892 (1847); City of St. Louis v. Shields,
62 Mo., 247 (1876); Loaners’ B’k »v.
Jacoby, 10 Hun, 148 (1877); Commis-
sioners, etc., v. Bolles, 94 U. S., 104
(1876); Henriques v. Dutch West India
Co., 2 Ld. Raym., 1532 (1729), where a
foreign corporation sued, and the gen-
eral issue was not pleaded. ~

2Independent, etc., Aid v. Paine, 14
N. BE. Rep., 42 (Ill, 1887); Blackburn
v. Selma, etc., R. RB. Co., 2 Flipp,, 525
(1879); Racine, etc., R. R. v. Farmers’,
etc., Co., 49 TIL, 331, 346 (1868); Aller
v. Town of Cameron, 3 Dill., 198 (1874),
where a municipality set up this de-
fense; Empire, etc., Mfg. Co. v. Stuart, ,
46 Mich., 482 (1882), a promissory note
case. A corporation cannot defend
against its contracts by ‘alleging that it
never published its articles of associa-
tion as required by statute. Wood v.
Wiley, etc., Co, 13 Atl. Rep., 137
(Conn,, 1888). A corporation is liable
for a tax even though it failed to file
its articles of association with the sec-
retary of state as required by statute.
Walton v. Riley, 3S. W. Rep., 605(Ky.,
1887).

3People’s Sav. B’k v. Collins, 27
Conn,, 142 (1858); West, etc., Sav. Bk
v. Ford, id., 282 (1858); and Hasenrit-
ter v. Kirchhoffer, 79 Mo., 239 (1883),
where the mortgagor’s grantee was held
to be estopped; Franklin v. Twogood,
18 Iowa, 515 (1865); Hackensack Water
Co. v,. De Kay, 36 N. J. Eq., 548 (1883);
Hubbard v. Chappel, 14 Ind., 601 (1860),
where it was held that the mortgagee
need not even prove itself to be a de

facto corporation. Jones v. Kokomo,
etc., Assoc., 77 Ind., 340 (1881). But
the mortgagor may deny the corporate
existence of the assignee of the mort-
gagee. Dundee, etc., Co. v. Cooper, 26
Fed. Rep., 665 (1886). A second mort-
gagee cannot question the incorporation
of the first mortgagee. Williamson v,
Kokomo, etc., Ass’n, 89 Ind., 389 (1883).
In a mortgage foreclosure case brought
by a corporation, the mortgagee cannot,
claim that the corporation took the
mortgage before stock was subscribed
to the amount required by its charter.
Johnston v, Eljzabeth, etc., Ass’n, 104
Pa. St., 394 (1888).

4Wallace v. Loomis, 97 U. 8., 146
(1877); Racine, etc., R. R. Co. v. Farm-
ers’, etc,, Co., 49 Ill., 381, 346 (1868)...
Where the mortgagor was a consoli-
dated company, the grantee of the cor-
poration cannot deny the validity of its
mortgage to another person by alleging
its want of legal incorporation, Has-
selman v. U. S., étc., Co., 97 Ind., 365
(1884). The lessee of the road of a rail-
road corporation cannot defeat the
foreclosure of a mortgage given by the
latter by alleging that the latter was
never duly incorporated. Beckman v.
Henderson, etc., R’y, 35 Fed. Rep., 3
(1888). A mortgagee of a de facto cor-
poration is not defeated by an attach-
ment against the company. Defects in
incorporation are immaterial herein.
Duggan v. Colorado, etc., Co., 17 Pac.
Rep., 105 (Col., 1888).

5Smith v. Sheeley, 12 Wall, 358
(1870); Lessee of Frost v. Frossburg
Coal Co,, 24 How., 278 (1860). See, also,

713
8 637.1

DISSOLUTION ,» FORFEITURE, ETC.

1

[CH. XXXVIII.

ties to suits on contracts to question the due incorporation of a
company which it was possible to incorporate, which has attempted
to incorporate, and which has acted as'a corporation.’

Cahall v. Citizens’, etc., Assoc., 61 Ala.,
282 (1878), where the corporation
brought ejectment; Thompson v. Can-
dor, 60 Ill., 244 (1871), where the
grantor sued to recover possession ;
Sword v. Wickersham, 29 Kan., 746
(1883), where the grantee was a munic-
ipality ; Cowell v. Colorado Springs Co.,
3Col., 82(1876); aff'd, 100 U. 8.5 55 (1879),
where the corporation sued for breach
of covenant; Alexander v. Tolleston
Club, 110 IIL, 65 (1884), where the
grantor claimed a right of way; Bakers-
field, etc., Assoc. v. Chester, 55 Cal., 98
(1880); Keene v. Van Reuth, 48 Md.,
184 (1877); Baker v. Neff, 73 Ind., 68
(1880); Snyder v, Studebaker, 19 Ind.,
462 (1862)— cases where a grantee of
the grantor was held estopped. The
grantee of the corporation cannot de-
feat an attachment against it and levied
on the land by setting up this defense.
Dooley v. Walcott, 86 Mass., 406 (1862).
But Carey v. Cincinnati, etc., R. R. Co.,
5 Iowa, 357 (1857), allowed a grantor to
a foreign corporation to allege this de-
fense to its suit for’ possession, A
grantor to a corporation who aids the
corporation in conveying to others is
certainly not allowed this defense.
Close v. Glenwood Cemetery, 107 U. S.,
466 (1882).

1A junior mortgagee cannot question
the incorporation: of a senior mortgagee,
the latter being a de facto corporation.
Williamson v. Kokomo, etc., Assoc., 89
Ind., 389 (1883). A director cannot
escape his statutory liability by reason
of the failure of the company to file its
certificate of incorporation with the
secretary of state. Meriden Tool Co. v.
Morgan, 1 Abb. N. C., 125, n. (Super.
Ct., 1875). A de facto corporation suf-
fices where it seeks to enjoin a city
from disturbing its property. City of
Denver v. Mullen, 7 Col., 345 (1884). Or
where an assignment by the corporation

was illegal and the assignee is sued by
creditors. Rafferty v. B’k of Jersey
City, 83 N. J. L., 368 (1869). Or where
the president is sued by the company to
recover its assets from him. B’k of
Circleville v. Renick, 15 O., 322 (1846).
Or where an execution purchaser of the
corporate property sues the mortgagee
of the corporation. Morgan v. Donovan,
58 Ala., 241 (1877). Or where the corpo-
ration sues the sheriff for an illegal
levy on its property. Dunnebroge Min.
Co. v. Allment, 26 Cal., 286 (1864). Or
where the suit grows out of contracts
with the corporation. Imboden: v,
Etowah, etc., Min. Co., 70 Ga., 86 (1883);
Platte Valley B’k v. Harding, 1 Neb.,
461 (1870). Or where a bank sues its cor-
respondent bank. B’k of Toledo wv.
International B’k, 21 N. Y., 542 (1860).
Or where the corporation sues for rent
due on a lease made by it. Oregonian
R’y Co. v. Oregon, etc., Nav. Co., 22
Fed. Rep., 245 (1884); S. C., 23 id., 232
(1885), Or where a foreign corporation
sues for a stipulated part of the oil
taken from its land, and the defendant
alleges that it is doing all its business
outside of the state incorporating it.
Newburg, et¢c., Co. v. Weare, 27 0. St,
348 (1875). See, also, §§ 237-239, supra.
Or where a foreign corporation sues the
sheriff for trespass. Persse, etc., Works
». Willett, 1 Rob. (N. Y.), 131 (1863),
Or where the company sues for tolls.
Sinclair v. Wayne, etc., T. Co., 82 Ind.,
417 (1882). A de facto corporation exists
where the company might have incor-
porated under the statutes and has
acted as a corporation. Methodist, etc.,
Church v. Pickett, 19 N. Y., 482 (1859).
But a person who agreed to and did
convey property to a company to be in-
corporated may subsequently repudiate
the corporation and his conveyance as
against his associates who shared in
the stock received therefor. Doyle v

714
CH. XXXVII.] DISSOLUTION, FORFEITURE, ETO. [§ 638,

In like manner the corporation itself is not allowed to defeat its
contracts by such a plea.'' But in suits where the party is not
estopped from denying the mor yoration of the other party, such
a denial may of course be made.?

The mere fact that a person contracts with a party and desig-
nates the latter as a “company ” will not estop the former from
denying the incorporation of the latter. This is the law, and is
reasonable, since many copartnerships do business and make con-
tracts under the name of “ company. *8 Such, also, is the rule where
a supposed incorporation is not even a de ‘facto corporation. But
where the party contracted with is a de facto corporation, then the
rules given above apply. It is true, also, that a company which is
supposed to be incorporated, but is not, may after incorporation
ratify and enforce contracts made in its behalf. 5

-§ 638. Lapse of charter by failure to comply with ponainns: —
Frequently a charter of a railroad corporation requires it to com-
plete a certain number of miles of road within a certain time, and
the charter expressly declares that for failure to comply with this
requisite the charter of the corporation shall lapse. The effect of
such a provision is to forfeit the charter absolutely upon non-com-
pliance, and no decree of a court is necessary to effectuate that for-

feiture.®

Mizner, 42 Mich., 332 (1879). The case
of Boyce v. Trustees, etc., 46 Md., 359
(1876), allowed a corporation to deny its
existence as against a director who
sued it for moneys advanced to it.
Welland Canal Co. v. Hathaway, 8
‘Wend., 480 (1832), allowed a contractor
to.deny the existence of a corporation

which sued to recover back money’

which had been overpaid to him.

1Dooley v. Cheshire Glass Co., 81
Mass., 494 (1860); Callender v. Paines-
ville, etc., R. R., 10 O. St., 516 (1860).
See, also, Bommer v. American, etc.,
Co., 81 N. Y., 46& (1880), where the cor-
poration sought to escape royalties by
alleging that it incorporated after the
contract by it to pay them was made.
A corporation sued for work done can-
not set up that it was not regularly in-
corporated. Merrick v. Reynolds, etc.,
Co., 101 Mass,, 381 (1869).

2Carey v. Cincinnati, etc, R. R., 5
Jowa, 357 (1857), and the principles and
cases supra. See, also, § 638, infra.

1

3 See §§ 233, 234, supra.

41d.

5See § 705, etc., infra.

6See Brooklyn, etc., Co. v. City, 78
N. Y., 529; In re Brooklyn, etc., R. RB.
Co., 72 N. Y., 245; id., 75 N. Y., 385;
Commonwealth v. Lykens, etc., Co., 110
Pa, St., 391 (1885); Farnham v. Bene-
dict, 107 N. Y., 159 (1887) Of. Re
Kings County El. R’y Co., 105 N. Y., 97
(1887), rev’g 41 Hun, 415; People v.
Nat’l Sav. B’k, 11 N. E. Rep., 170 (I,
1887). A new state constitution may
forfeit all charters previously éxisting,
but which have not been used by the
incorporators. Chincleclamonche Lum-
ber, etc., Co. v. Commonwealth, 100
Penn. St., 488 (1882). Failure to com
mence work Within a time specified in
the charter, and a penalty that therefor
the company should be dissolved, does
not effect dissolution, A judgment is
necessary. Day v. Ogdensburg, etc., R.
R. Co., 107 N. Y., 129 (1887). Constitu-
tional provision that charters under

715
§ 638.]

\
DISSOLUTION, FORFEITURE, ETO.

[CH. XXXVIIL

But the courts do not favor such a summary remedy. Usually
a failure of the corporation to complete its enterprise as required
by charter is held to be cause for forfeiture by suit only. There
have been many cases in which such a forfeiture has been ad-

_ judged.

which no organization has been made
and business has been commenced shall
lapse forthwith is constitutional and
self-enforcing. Chincleclamonche, etc.,
v. Com., supra; 11 8. W. Rep., 856
(Texas, 1889).

1 People v. Kingston, ete., T. Co., 23
‘Wend., 193 (1840), where the road was
not constructed as required; Thompson
v, People, 23 Wend., 587 (1840), revers-
ing 21 id., 235, holding that an imma-
terial omission is not fatal; People v.
National Sav. B’k, 11 N. E. Rep., 170
(Ill., 1887), forfeiting for failure to
complete subscriptions as required by
charter; Eastern, etc., Co. v. Regina,
22 Eng. L. & Eq., 328 (1858), for failure
to pay in capital stock as' required by
charter; People v. City B’k, 7 Col., 226
(1883), to same effect. See People. v.
Jackson, etc., P. Co, 9 Mich., 285
(1861), for a case of the construction of
a road in sections. And where the
charter prescribes that a certain num-
ber of miles shall be completed within
a certain time, but does not prescribe
that the effect of non-compliance shall
be a forfeiture, then the only way of
forfeiting the charter is by a suit and a
decree of a court. Hughes v. Northern
Pac. R’y Co., 18 Fed. Rep., 106 (1883);
Arthur v. Commercial B’k,'17 Miss.,
394, 430 (1848),
poration commences business in another
state within a year suffices for a char-
ter provision that it must commence
business within a year.. Re Capital,
etc., Ins. Co., 47 L.-T. Rep., 123 (1882);
The People v. Kankakee Improvement
Co., 103 Tll., 491 (1882). In this case
the charter required the proposed im-
provements to be completed within
eight years as far east as the state line.
The company completed as far east as
Kankakee City and claimed the right

The fact that a cor-.

i
to exercise the option of making or not
making further improvements between
that point and the state line. The
court say: ‘The non-compliance with
the requirements was per se a misuser,
and a cause of forfeiture of the fran-
chise as for condition broken;” and
‘‘wecan see here but one entire fran-
chise for the improvement of these
streams, and that this obligation to
make the improvements above Kanka-
kee City was a condition annexed to
this entire -franchise. We
think the non-compliance with the re-
quirement in question was a cause of
forfeiture of the entire franchise.”
Briggs v. Cape Cod Land Co., 187
Mass., '71 (1884). In this case the char-
ter of a corporation required it to de-
posit with the state treasurer within
four months from its date the sum of
$200,000 as security. for certain pur-
poses, among others for the payment of
damages for taking land, and the cor-
poration did not deposit the $200,000 in
cash but in bonds of the United States
of the par value of $200,000, and of the
market value of $230,000. Held a suf-
ficient compliance, as the object of the
provision was to provide security to
various interests. Also held that the
question whether a corporation has
ceased to exist for non-compliance with
charter provisions could only be judi-
cially determined in a suit to which
the commonwealth was a party. Com-
monwealth v. Lykens Water Co., 110
Penn. St., 391 (1885). Here a corpora-
tion was organized May 6, 1880, under
the act of 1876, which provided that, if
it should not proceed to carry on its
work and construct all necessary build-
ings, etc., within two years from date
of its letters patent, all the rights and
‘privileges thereby granted should revert

716
 

i
CH. XXXVIIL. |

DISSOLUTION, FORFEITURE, ETO.

[$ 639.

§ 639. Stockholders may prevent a repeal of the charter unless the

right is reserved by the state—

The repeal by the state of a charter

before the expiration of the time it was to exist, or the repeal at
any time where the charter is perpetual, is an unconstitutional
breach of the contract between the state and the corporation and

tothe commonwealth. The corporation
wholly failed to comply with this pro-
vision for the period of three years.

On June 18, 1883, an act of legislature
was passed, section 5 declaring “‘ that
any corporation now in existence shall
have two years from the date of this
act to do and perform the things by
this section required.” Section 4 de-
clares ‘‘nothing in this act contained
shall be construed to repeal or authorize
the repeal of any of the requirements
or restrictions of said act of April 29,
1824, and its supplements, nor to dis-
pense with any of the provisions of said
act.” The defendant corporation re-
ceived a charter issued by the governor
on the 20th of July, 1883, under the
same name as that of the corporation
organized May 6, 1880, and granting the
same exclusive rights and privileges, to
be enjoyed in the same territory. Held,
that the original company ceased to ex-
ist, after two years from the date of its
charter, by the law under which it was
created; that the act of June 13, 1883,

could not revive or infuse new life into:

a corporation already defunct; that the
facts in this case relieve it from the
general rule that a corporation is not
dissolved by reason of non-user of its
franchises, nor its rights and privileges
forfeited until default has been judi-
cially ascertained and declared by a
judgment of forfeiture, and that the
provisions of an act under which a cor-
poration is created form a part of its
charter. The corporation itself, when

sued for taxes, cannot set up this de- |

fense. Baltimore, etc., R. R. v. Mar-

shall Co., 3 W. Va., 319 (1869). Where a,

charter, by its terms, is to be void un-
less the capital stock is subscribed
within two years and business com-

menced, a failure to secure the whole
subscription within that time renders
the charter void though business was
commenced. Quo warranto lies. Peo-
ple v. Nat’l Sav. B’k, 11 N. E. Rep., 170
(Tll., 1887). . An owner of land which a
railroad has taken cannot reclaim pos-
session by reason of the failure of the
company to complete its road within
the time limited by charter. Cincin-
nati, etc., R. R. v. Clifford, 15 N. E.
Rep., 524 (Ind., 1888); Bravard v. Cin-
cinnati, etc., R. R., 17 N. E. Rep., 183
(Ind., 1888). The bondholders of the
company take the risk of this forfeiture
of the charter for non-compliance with
conditions. Silliman v. Fredericksburg,
etc., R, R., 27 Gratt (Va.), 119 (1876),
where, however, the corporate officers
were endeavoring to enforce fraudulent
bonds. Some of the English railway
acts are plainly not obligatory but only
enabling; and it is held that the evident
intention of parliament was to permit
the companies to complete their lines as
far as possible or desirable before the
limit of time-set, and to abandon the re-
maining portion. York & North Midl.
R’y Co. v. Queen, 1 Ellis & B., 858 (1853),
reversing same case, id., p. 178; Great
Western R’y Co. v. Queen, id., 874, re-
versing same case, id., 253; Edinburgh,
etc., R’y Co. v. Philip, 2 Macq. (Scot.
App. in H. of L.), 514, 526 (1857); Scot-
tish N. E. R’y Co. v. Stewart, 3 id., 382,
414 (1859). See, also, Rex v. Birming-
ham Canal, 2 W. B!., 708 (1780), by Lord
Mansfield; Bakemore v. Glamorgan-
shire Canal, 1 Myl. & K., 162 (1832), by
Lord Eldon; Queen v. Eastern Counties
R’y Co., 10 Ad. & El., 531 (1839); Queen
v. Lancashire, etc., R’y Co., 1 El. & BL,
228 (1852).

717
§ 640.] DISSOLUTION, FO

the stockholders.! Where, howev

RFEITURE, ETC. [CH. XXXVIII.

er, the right of repeal is resérved

by the legislature, then such reservation becomes a part of the con-
tract, and the repeal of the charter rests in the discretion of the
legislature? Upon a repeal the corporate property. becomes a
trust fund, to be applied first to the payment of the debts of the
corporation, and the balance to be distributed among the stock-

holders.’
§ 640. Acceptance of a charter

by the corporation arises from

merely acting under it, and a want of formal acceptance is no de-
fense to actions on its contracts.— It is an old principle of law that

1Greenwood v. Freight Co., 105 U. S.,
18 (1881). ‘* A grant of corporate privi-
leges for a specified period cannot be
resumed by the state within such period.
If the charter be without limitation as
to time it is forever irrepealable.” Erie
& Northeast. R. R. v. Casey, 26 Pa. St.,
287 (1856). The legislature cannot for-
feit a charter. Forfeiture can be de-
creed only by the courts. Itis not a leg-
islative function unless reserved. Allen
v. Buchanan, 9 Phil. (Pa.), 283 (1878).

2 Under a reserved power to repeal at
the pleasure of the legislature the courts
cannot question the necessity nor the
legislative motives leading to a repeal.
Greenwood v. Freight Co., 105 U. 8., 13
(1881); Lothrop v. Stedman, 13 Blatch.,
184 (1875). ‘See Sinking Fund Cases, 99
U.8., 700, 720 (1878); Northern R. R.
Co. v. Miller, 10 Barb., 260 (1851); Erie,
etc., R. R. Co. v. Casey, 26 Pa. St., 287,
302; Miners’ B’k v. U. 8, 1 Greene
(Iowa), 553; Lothrop v. Stedman, 42
Conn., 588; McLaren v. Pennington, 1
Paige, 102; Crease v. Babcock, 23 Pick.,
334, 344, Ifthe power of repeal arises
only upon an abuse of franchise the
court may review the question whether
there was an abuse. Erie & Northeast.
R. RB. v. Casey, supra; Mayor, ete., of
Baltimore v. Pittsburgh & Connellsville
R. RB. Co., 1 Abb. U. S. Rep., 9 (1865).
Hence the legislature cannot forfeit a
charter merely because the corporation
has been incorporated elsewhere and -
has brought suits in the federal courts.
Com. v. Pittsburgh, etc., R. R., 58 Pa.
St., 26(1868). See, in general, Flint, etc.,

71

Plank-road Co. v. Woodhull, 25 Mich.,
99 (1872); Montgomery v. Merrill, 18
Mich., 888 (1869); State v. Noyes, 47 Me.,
189; Canal Co. v. R. R. Co., 4 Gill & J.,
122; Regents v. Williams, 9 Gill & J.,
365; Cooley, Con. Lim., 106; Mayor,
ete., v. Twenty, etc., 118 N. Y., 311,
Under this reserved power the state may
authorize one corporation to build its
road on a route which a prior corpora-

‘tion has designated but not acquired.

Re Cable R’y, 40 Hun, 1 (1886). A gen-
eral statute or constitutional provision
reserving the right to repeal, alter or
amend charters enters into all charters
granted subsequent thereto as much as
if actually inserted in such charters.
Ré Lee’s Bank of Buffalo, 21 N. Y., 9
(1860); Commissioners, etc., v. Holyoke
Water-power Co., 104 Mass., 446 (1870);
Delaware R. R, Co, v. Tharp, 5 Harr.
(Del.), 454.

3 Lothrop v. Stedman, 13 Blatch., 184
(1875); McLaren v, Pennington, 1 Paige,
102 (1828), by statute; Detroit v. Detroit
& Howell Plank-road Co., 48 Mich., 140
(1880); County of San Mateo v. Southern
Pacific R. R. Co., 8 Sawyer, 288, per
Field, J., holding that ‘‘ the property of
the corporation acquired in the exercise
of its functions is held independently of
such reserved power, and the state can
only exercise over it the control which
it exercises over the property of indi-
viduals engaged in similar business”
(p. 279). 111 N. Y., 1. The legislature
cannot repeal a charter granted by-the
constitution of the state. New Orleans
v. Houston, 119 U. §., 265 (1886).

8
CH. XXXVIIL. | DISSOLUTION, FORFEITURE, ETC. f§ 640.
individuals cannot be compelled by the state to accept a charter
to act as a private corporation. Accordingly an acceptance of the
charter by them is necessary to the actual existence of the corpo-
ration. But there is no rigid rule of law requiring them to indi-
cate such acceptance in a formal manner. Any acts which prove
an intent on the part of the corporators to proceed under the
charter is a sufficient acceptance of it. It has been frequently held

that an acceptance may be shown by proof that corporate meetings:

and elections have been held and other corporate acts entered into.

 

Mere user of the right to act as a corporation is sufficient.!

1 Androscoggin Bridge v. Bragg, 11
_N. HL, 102 (1840); B’k of Manchester v.
Allen, 11 Vt., 302 (1839); Tallediga Ins.
Co. v. Landers, 43 Ala., 115, 186 (1869);
Trustees, etc., v. Gibbs, 56 Mass., 39
(1843); Gleaves v. Brick, etc., Co, 1
Sneed (Tenn.), 491 (1853) ; Perkins v. San-
ders, 56 Miss., 733 (1879); Mutual, etc.,
Ins. Co. v. Stokes, 9 Phil., 80 (1872);
Penobscot Boom Corp. v. Lamson, 16
Me., 224 (1889); Sampson v. Bowdoin-
ham, etc., Corp., 36 Me., 78 (1853); Lin-
coln, etc., v. Richardson, 1 id., 79 (1820);
Bow v. Allenstown, 34 N. H., 351, 872
(1857); Jameson v. People, 16 Il., 257
(1855); City of Covington v. Covington,
etc., Co., 10 Bush (Ky.), 69 (1878); Peo-

ple v. Farnham, 35 IIl., 562 (1864); Mid-*

dlesex, etc., v. Davis, 44 Mass., 133
(1841); Commonwealth v. Bakeman, 105
Mass., 53 (1870); Palfrey v. Paulding, 7
La. Ann,, 868 (1852); Trott ». Warren,
11 Me., 227 (1884); and see. cases in
§§ 188-6, supra, holding that a sub-
scriber cannot defeat an action to col-
lect his subscription by alleging infor.
malities in organization, Formerly. it
was customary at the first meeting of
the corporation to pass a formal vote
accepting the charter. This, however,
is not necessary. ‘The. fact of holding
the meeting is a sufficient acceptance.
See same cases; also City of Atlanta v.
Gate City, etc., Gas Co., 71 Ga., 106
(1883), where a charter granted in 1868
was not acted on until 1877. It was
held that the application for a charter
constituted an acceptance in advance;
McKay v. Beard, 20 8. C., 156 (1883),

holding that an acceptance existed
though no meeting at all for organiza-
tion was held, but the corporation pro-
ceeded to business; Logan v. McAllis-
ter, 2 Del. Ch., 176 (1858), holding that
irregularities in organization are imma-
terial; Russell v. McLellan, 31 Mass.,
63 (1833), where no notice was given of
the first meeting, and a stockholder
sued for a dissolution of the company
as a copartnership. The best evidence
possible of the acceptance should be
given. Hudson v. Carman, 41 Me., 84
(1856). Where subscription books are
opened and then abandoned, and ten
years later are secretly re-opened and
subscriptions taken without giving the
statutory notice to the public that they
may subscribe, the charter is forfeitable.

State v. Bull, 16 Conn., 179 (1844). So, .

also, where a new charter is granted to
an existing corporation, and it contin-
ues to act, the jury are to say whether
the corporation continued under the old
charter or accepted the new one. Ham-
mond v. Straus, 53 Md., 1 (1879). As
regards the acceptance of a ‘charter
amendment by simply acting under it,
see State v. Sibley, 25 Minn., 387 (1879);
Sumrall v. Sun, etc., Ins. Co., 40 Mo.,
27 (1867); King v. Hughes, 7 B. & C.,
708 (1828), a municipal corporation case;
Bangor, etc., R. R. Co. v. Smith, 47 Me.,
84 (1859); Lyons v. Orange, etc., R. RB.
Co., 82 Md., 18 (1869); Wetumpka, etc.,
R. R. Co. v. Bingham, 5 Ala., 657 (1843),

-and many cases in chapter XXVIII,

supra, Failure to organize under a
special charter until after a constitu-

719

‘
i

S64l.]

DISSOLUTION, FORFEITURE, ETC.:

4

[CH. XXXVIIL

8 641. The assets upon dissolution.— Upon the dissolution of a
’ corporation all its property, both personal and real, is to be used
to pay the debts of the corporation, and after the debts are paid
the remainder is to be distributed among the stockholders.'! Form-
erly it was held that the real estate of the corporation upon disso-
lution reverted to the grantor, its personal property to the state or
sovereign, and the debts due to it and from it were forgiven and
extinguished.? But a contrary rule now prevails.’

tional amendment prohibiting special
charters, is fatal to it. State v. Dawson,
16 Ind., 40 (1861). Acceptance must be
in toto or not atall. Rex v. Westwood,
4 Barn. & C., 781 (1825). A person can-
not be compelled to act as a corporator
in a private corporation, Ellis v. Mar-
shall, 2 Mass., 269 (1807). Hence his ac-
ceptance must be proved by user at
least. Coffin v. Collins, 17 Me., 440
(1840). Organizing out of the state
may ‘not be legal, yet it suffices for an
acceptance of tke charter. Heath v.
Silverthorn, etc., Co,, 39 Wis., 146
_(1875). Acceptance of a new charter is
“not necessarily an abandonment of the
old one. Johnston v. Crawley, 25 Ga., 316
(1858); Woodfork v. Union B’k, 3 Cold.
(Tenn.), 488 (1866), A corporation can-
not accept part of a special charter and
reject the rest. Matter of Metropolitan,
etc., T. Co., 111 N. Y., 588 (1888).
1Krebs v. Carlisle Bank; 2 Wall. (C.
C.), 83 (1850); Heath v. Barmore, 50 N.
-Y., 802 (1872); Burrall v. Bushwick R.
R. Co., 75 N. Y¥., 211 (1878); James v.
Woodruff, 10 Paige, 541 (1844); Froth-
jngham v. Barney, 6 Hun, 866 (1876);
Wood v. Dummer, 3 Mason, 308, 322
(1824). Cf. In re Hodges Distillery Co.,
L. R., 6 Chan., 51 (1870); Nathan v.
Whitlock, 9 Paige, 152 (1841); Curran
v. State of Arkansas, 15 How., 304, 307
(1853); Hastings v. Drew, 76 N. Y., 9
(1879); affirming S. C., 50 How. Prac.,
254 (1874), Where the corporation does
business by organizing branch corpora-
tions, and the stockholders in the latter
are disregarded, and the main corpora-
tion pays up the stock and manages it
without regard to its corporate charac-

ter, the property of the branch corpora-
tion is subject to the debts of the parent
company. Day v. Postal Tel. Co, 7
Atl. Rep., 608 (Md., 1887). If the di-
rectors reserve an insufficient sum to
pay a litigated debt, and distribute the
remainder among policy-holders, the
remedy of the owner of the debt is not
an action for negligence against the di-
rectors where they acted in good faith.
Lyman v. Bonney, 118 Mass., 222 (1876).

2Hightower v. Thornton, 8 Ga., 486
(1850); Life Association of America v.
Fassett, 102 Ill., 315 (1883); Commercial
Bank v. Lockwood, 2 Harr. (Del.), 8
(1835); State v. Rives, 5 Ired.. Law (N.
C.), 297 (1844); White v. Campbell, 5
Humph. (Tenn.), 88 (1844); Fox
Horah, 1 Ired, Eq. (N. C.), 358 (1841);

‘Malloy v. Mallett, 6 Jones’ Eq. (N. C.),,

$45 (1868), holding also that the stock-
holder’s liability was extinguished ;
President, etc., of Port Gibson v. Moore,
21 Miss., 157 (1849); Bingham v. Weid-
erwax, 1 N. Y., 509 (1848); Owen v.
Smith, 31 Barb., 641 (1860); State B’k
v. State, 1 Blackf, (Ind.), 267, 282 (1823);
Acklin v. Paschal, 48 Texas, 147 (1877);
St. Philipps Church wv. Zion, etc,
Church, 23 8. C., 207 (1885); Coulter v.
Robertson, 24 Miss., 278 (1852); B’k of
Miss, v. Duncan, 56 Miss.; 166 (1878);
Hamilton v. Accessory, etc., Co., 26
Barb., 46 (1857). :

3 Bacon v. Robertson, 18 How. (U.8.),
480 (1855); Heath v. Barmore, 50 N. Y.,
302 (1872); Lum v. Robertson, 6 Wall.,
277 (1867); Robinson v. Lane, 19 Ga.,
387 (1856); Lothrop v. Stedman, . 13
Blatch., 134 (1875); Blake v, Ports-
mouth, etc., R, R. Co., 89 N. H., 485

720 1
\
CH. XXXVIII. |

DISSOLUTION, FORFEITURE, ETc..

[g 641.

When the corporation owns merely the right of way or other
franchise obtained by the exercise of the state’s power of eminent
domain, there is more difficulty in determining the disposition of
this valuable franchise upon a dissolution of the corporation. The

latest authority holds that it does not revert to the state.!

(1859); Matter of Woven Tape Skirt
Co., 8 Hun, 508 (1876); Mumma v, Poto-
mac Co., 8 Peters, 281 (1884); Fox v.
Horah, 1 Ired. Eq. (N. C.), 358 (1841);
Bingham v. Weiderwax, 1 N. Y., 509
(1848); Curry v. Woodward, 58 Ala.,.
371 (1875); 2 Kent’s Com., 307, n.;
Powell v. North Mo. R. R. Co., 42 Mo.,
63 (1867); Wood v. Dummer, 3 Mason,
* 308 (1824). Statutes are frequently en-
acted to this effect. Nevitt v. B’k, etc.,
14 Miss., 513 (1846); McCoy v. Farmer,

5, Mo., 244 (1877); Owen v. Smith, 31

Barb., 641 (1860). At common law upon
dissolution of a corporation all suits by
or against it abate. McCulloch v. Nor-
wood, 58 N. Y., 562; In re Norwood,
32 Hun, 196 (1884); Greeley v. Smith, 3
Story, C. C., 657 (1845); Saltmarsh v.
Planters’, etc., B’k, 17 Ala., 761 (1850);
Merrill v. Suffolk B’k, 31 Me., 57 (1849);
Ingraham v. Terry, 11 Humph. (Tenn.),
572 (1851); Life Association v. Fassett,
102 Ill., 315 (1882); Platt v. Ashman, 32
Hun, 230. (1884). Judgment declaring
a corporation illegal, void and the asso-
ciation dissolved puts an end to a con-
tract by it to pay certain parties its
bonds and stock if they would build its
road. Vinal v. Continental, etc., Co., 82
Fed. Rep., 845 (1887). Suit does not lie
against a corporation which has been
dissolved. Dobson v. Simonton, 86N. C.,
492 (1882). The legislature may provide
for suits against corporations after dis-
solution, thus changing the common-
law rule. Stetson v. City B’k, etc., 2
O. St., 167 (1853); Foster v. Essex B’k,
16 Mass., 244 (1819). A corporation may
be sued as such for a tort committed by
it after its charter has expired. Miller
v. Newberg, etc., Co., 8 8. E. Rep., 600
(W. Va., 1888). A deed duly authorized
is good though executed after the cor-
poration is consolidated with another.
(46)

And a

Edison, etc., Co. v. New Haven, etc.,
Co., 4 Ry & Corp. L. J., 4 (1888). :
1 Where a legislature, under its re-
served right of repeal, repeals a railroad
charter, the right of way and right to
use the same do not revert to the state,
but pass as property to the receiver
for the benefit of the creditors and
stockholders of the corporation. People
v, O’Brien, 111 N. Y., 1 (1888). In Penn-
sylvania the franchise of the right of
way of a railroad vests, upon its disso-
lution, in the state, and the state may
grant it to another railroad. Erie, etc.,
R. RB. Co, v. Casey, 26 Pa. St., 287 (1856).
See, also, Plitt v. Cox, 48 Pa. St., 486
(1862). In Ohio it seems that the right
of way reverts to the owner of the fee.
New York, etc., R. R. Co. v. Parmalee,
1 Ohio C. C. Rep., 239 (1885).. See, also, as.
tothe rule in New York, Heard v. City
of Brooklyn, 60 N. Y., 242 (1875); People
v. White, 11 Barb., 26 (1851); Hooker v,
Utica & M. I. R. Co., 12 Wend., 371
(1834), There-is no reversion of the
right of way on the dissolution of the
company after fifty years. Davis v.
Memphis, etc., R. R. Co., 6 S. Rep.,
140 (Ala., 1889). Lottery grant can-
not be repealed, when: mortgaged by
the corporation, until the mortgage is
paid. Gregory’s Ex. v. Trustees, 2
Metc. (Ky.), 589 (1859). Of., in gen-
eral, Turnpike Co. v. Illinois, 96 U. &.,
63 (1877). Unused right of way does
not revert to original owner. McConi-
hay v. Wright, 121 U. S., 201 (1887).
The state may grant an unused street
railway franchise to another company.
Henderson v, Central, etc., R’y, 21 Fed,
Rep., 358 (1884)... No reverter where the
railroad takes a fee. Yates v. Van De
Bogert, 56 N. Y., 526 (1874). See, also, |
in general, Norton v, Wallkill, etc,, R. R.
Co., 42 How. Pr., 228 (1871); State v.

21
[oH. XXXVIIL

§ 642.] DISSOLUTION, FORFEITURE, ETC.

similar difficulty has arisen on the dissolution of a corporation hav-
ing no stockholders. Upon dissolution the stockholders are en-
titled to an immediate settlement of the corporate debts and a
distribution of the residue.?- They are not obliged to accept the
stock of another corporation as payment upon a final distribution,
but may demand that the distribution be in cash.

§ 642. Where corporate assets are placed in the hands of a cor-
porate officer or other person for distribution, a stockholder may
file a bill in equity for his part, but in such a suit the corporation
is a necessary party.! The remedy in such a case is not at law}
The stockholders may insist on the statute of limitations as a bar
to the claim of corporate creditors upon the assets.6 The rights of
the stockholders in the assets upon a dissolution depend upon the
law of the country creating the corporation.?’ And these rights
cannot be taken from the stockholders by an act repealing the
charter. It has been held that assets ought to be distributed in

proportion as the subscriptions to the stock have been paid.°

Rives, 5 Ired. (N. C.), 297 (1844); Hop-
kins v. Whitesides, 1 Head, 31 (1858).
In California on the dissolution of a cor-
poration for literary purposes, its*land
goes to the state. People v. Pres., etc.,
38 Cal., 166 (1869). Where a turnpike
company is authorized to collect tolls
only for fifteen years, the road is free
after that date. People v. Anderson,
etc., Co., 18 Pac. Rep., 308 (Cal., 1888).

1 Upon dissolution of a mutual insur-
ance company having no stockholders,
its assets, after the payment of its lia-
bilities, belong to the state. Titcombv.
Kennebec, ete., Co., 9 Atl Rep., 732
(Me., 1887). But where an insurance
company is organized both on the stock
and mutual plan, upon a dissolution of
the stock part of the organization the
guaranty accumulations belong to the
stockholders. Traders’, etc., Ins. Co. v.
Brown, 8 Northeast. Rep., 184 (Mass.,
1886). The property of a branch corpo-
ration, whose stock was paid up by the
parent corporation, and which has been
run by the latter, belongs to the cred-
itors of the latter. Day v. Postal Tel.
Co., 7 Atl. Rep., 608 (Md., 1887). Land
reverts to the former owner. Mott v.
Danville Sem., 21 N. E, Rep., 927 (IIL,
1889).

And

2 Frothingham v. Barney, 6 Hun, 366
(1876).

3 See § 667, infra.

4Young v. Moses, 58 Ga., 628 (1875).
For the remedies and procedures when
the directors on dissolution have di-
vided the assets fraudulently, see Hor-
ner v. Carter, 11 Fed. Rep., 362 (1882).
Ifthe directors are by statute author-
ized to administer the assets upon dis-
solution, but fail to do so, the court will
appoint a receiver. Re Pontius, 26
Hun, 232.

5 Brown v, Adams, 5 Biss., 181 (1870).
Cf. Pacific R. R. Co. v. Cutting, 37 Fed.
Rep., 638 (1886); Hodsdon v. Copeland,
16 Me., 314 (1839).

6 Johnston v, Talley, 60 Ga., 540 (1878).
On a bill to wind up an insolvent cor-
poration the stockholder may prove
that some claims against the company
were not legally contracted. Crutch-
field 7. Mutual, ete., Co., 2, 8. W. Rep.,
658 (Tenn., 1886),

7 Hamilton v. Accessory Transit Co.,
26 Barb., 46 (1857).

8Lothrop v. Stedman, 18 Blatch., 184
(1875).

»*Krebs 7. Carlisle Bank, 2 Wall. (C.
C.), 83 (1850); Sheppard v. Scinde, etc.,
R’y Co., 56 L. T. Rep,, 180 (1887); In re

G22
ae

*:

cH. XXXvitt. |

DISSOLUTION, FORFEITURE, ETC.

[§ 643.

this is the rule by statute in New York upon the voluntary disso-

lution of a corporation.!

Debts due from the stockholder to the

(corporation are in any event to be deducted from his interest in
the assets.” And an assignment or transfer of stock by a stock-
holder after the dissolution of the corporation is merely an equitable
assignment of his interest in the assets of the concern as it may

appear upon the settlement.’

A person who conveys property to the corporation in payment
for stock may contract that upon dissolution he shall receive back

that property.*

§ 648. The liabilities upon dissolution. As already seen, the old
rule that upon dissolution all debts by or to the corporation are
rendered unenforceable is no longer the law.5

There has been difficulty in determining whether a new, corpora-
tion which takes all the assets of an old corporation does not also

assume all the liabilities of the latter.

In certain cases, and on the

general principle that the assets so conveyed are a trust fund, it
has been held that the new corporation is liable for the debts of:

the old one.®

Hodges, etc., Co., L. R.,6Ch., 51 (1870).
On winding up, stockholders who have
advanced on the subscription price more
than the calls required, under an agree-
ment of repayment with interest, are
entitled to repayment before a general
dividend is made. So held where full-
paid stock was issued for property, but
other stock for cash was not fully paid
up. Exchange, etc., Co., 58 L. T. Rep.,
544 (1888). .

13 Rev. Stat., ch. XVIII, art. 3, § 83.

2James v. Woodruff, 10 Paige, 541
(1844); Nathan v. Whitlock, 9 Paige,
152 (1841); Purton v. New Orleans, etc.,
R. R. Co., 3 La. Ann., 1932 (1848).

3James v. Woodruff, 10 Paige, 541
(1844); S. C. affirmed, 2 Denio, 574
(1845); Sewall v. Chamberlain, 16 Gray,
581 (1860).

4Fish v. Nebraska, etc., Co., 25 Fed.
Rep., 795 (1885).

5See § 641, supra. Dissolution does
not terminate a lease to a corporation.
People v. Nat’l Trust Co., 82 N. Y., 284
(1880). As to the effect of dissolution
upon suits pending at that time, see
S641.

6Slatterly v. St. Louis, etc., Co, 4

S. W. Rep., 79 (Mo., 1887). A new cor-
poration taking assets of an old corpora-
tion is liable to creditors of the latter to -
the extent of property so taken. Brum
v. Merchants’, etc., Ins. Co., 16 Fed..
Rep., 140 (1883); Hibernia Ins. Co. wv.
New Orleans, etc., Co., 13 Fed. Rep.,.
516 (1882); Same v. St. Louis, etc., Co.,.
10 Fed. Rep., 596 (1881). For a case
where the stockholders of the new cor-
poration give a bond to pay the debts of
the old one, see Planters’ Ins. Co. a
Wicks, 48. W. Rep., 172 (Tenn., 1887).
Where the corporation sells all its assets,
and the purchasing corporation gives its
bonds to the stockholders of the former,
such bonds belong to the corporate
creditors. Peters v. Fort Madison, etc., |
Co., 34 N. W. Rep., 190 (owa, 1887).
Where an insolvent corporation trans-
fers its assets to a new corporation,
which agrees to pay the debts of the
former, the liability of the latter may
be enforced by creditors of the former
corporation. Island, etc., B’k v. Sacht-
leben, 3 S. W. Rep., 733 (Tex., 1887).
A mere device by which corporate
property is sold under an execution, is
purchased by a person interested in the

723
§ 643.]

DISSOLUTION, FORFEITURE, ETC.
: : :

[cH. XXXVIII.

But, in general, a corporation which purchases all the property
of another corporation is not liable for the debts of the latter.!

corporation and then transferred to a
new corporation having the same stock-
holders as the old one, is void as against
creditors of the first corporation, They
may hold the new corporation liable to
the extent of the value of the property
so conveyed. Hancock v. Holbrook, 3
S. Rep., 351 (La., 1888). An unsecured
creditor of an old corporation is prior in
lien to one who with knowledge takes a
lien on property after it has been con-
veyéd to a new corporation., Blair v.
St. Louis, etc., R. R. Co., 24 Fed. Rep.,
148 (1885). A creditor of an old corpo-
ration may follow its property into the
hands of a,consolidated company to
which it was transferred and stock
' therefor issued to the old stockholders.
Martin v. Zellerbach, 38 Cal., 300 (1869).
See, also, § 206; 6 N. Y. Supp., 459; 21
N. E. Rep., 364.

\Gray v. National St. Co., 115 U. &.,
116 (1855). This rule of law is too well
established to need many citations. A
railroad corporation which ‘purchases
the property of another railroad cor-
poration is not liable, upon the dissolu-
tion of the latter, for a tort committed
by it. Chesapeake, etc., R. R. Co. v,
Griest, 4 8. W. Rep., 228 (Ky., 1887).
Cf. Batterson v. Cincinnati, etc., R’y,
53 Mich., 125 (1884). Informalities in a
receiver's sale do not render the pur-
chasing corporation liable to return to
the old corporation the property to-
gether with improvements. Mining
Co. v. Mining Co., 116 IIl., 170 (1886).
The incorporation of a re-organized com-
pany, giving it all the rights, etc., of
the old company, does not give it title
to a judgment obtained by the old com-
pany. Wilmington, etc., R. R. v. Down-
ward, 14 Atl. Rep., 720 (Del., 1888). A
railroad corporation purchasing prop-
erty of another railroad corporation at
foreclosure sale is not liable for debts
of latter. Hoard v. Chesapeake, etc.,
R’y, 123 U. S., 222(1887). And, in gen-

¢

\

eral, that the new corporation is not
liable for the debts of the old, see
President, etc., v. Moore, 21 Miss., 157
(1849); Shaw v. Norfolk, etc., R. R., 82
Mass., 407 (1860); Pennsylvania, etc.,
Co.’s Appeal, 101 Pa. St., 576 (1882);
Smith v. Chicago, etc., R. R., 18 Wis.,
17 (1864); Neff v. Wolf, etc., Co., 50
Wis. 585 (1880); Houston, ete., R. R, v.
Shirley, 54 Tex., 125 (1880); Commercial
Bk v. Lockwood, 2 Harr. (Del.), 8 (1835);
Menasha v. Milwaukee, etc., R. R., 52
Wis., 414 (1881); Lake Erie, etc., R. R.
v. Griffin, 92 Ind., 487 (1883); Gilman v.
Sheboygan, ete, R. R., 37 Wis., 317
(1875) ; Sappington v. Little Rock, etc.,
R. R., 37 Ark., 28 (1881); Cook v. De-
troit, etc., R. R., 43 Mich., 349 (1880),
Sometimes, however, under the terms
of a consolidation of companies, the
new consolidated company is liable for
the debts of the old. Indianola R. R. v.
Fryer, 56 Texas. 609 (1882); Louisville,
etc.,.R. R. Co. v. Boney, 20 N. E.Rep.,
432 (Ind., 1889); Indianapolis R. R. v.
Jones, 24 Ind., 465 (1868); Columbus,
etc., R. R. v. Powell, 40 id., 37 (1872);
Montgomery, etc., R. R. v. Boring, 51
Ga., 582 (1874); Thompson v. Abbott, 61
Mo., 176 (1875), where the “property of
the old was given by the legislature to
the new corporation —a municipal
case. See, also, Rome, etc., R. R. v.
Ontario, etc., R. R., 16 Hun, 445 (1879).
In some cases the creditors of the old
company may follow its property into
the hands of a new company to which

the property is sold by an ordinary

sale. Marshall v. Western, etc., R. R.,
92'N, C., 322 (1885); Railroad v. Rollins,
82 id., 528 (1880); Young v. Rollins, 85
id., 485 (1881), involving a receiver. The
new company may enforce the right of
theiold one to indemnity. Miller v.
Lancaster, 5 Coldw. (Tenn.), 514 (1868).
Or may settle a suit against the old one.
Paine v. Lake Erie, etc., R. R., 81 Ind.,
283 (1869).

724
PART IV.

FRAUDS — ULTRA VIRES ACTS— INTRA VIRES AOTS —
NEGLIGENCE AND IRREGULAR CONTRAOTS OF
DIRECTORS, STOCKHOLDERS, PROMOTERS AND

AGENTS.

CHAPTER XXXIX.

FRAUDULENT ACTS OF DIRECTORS, MAJORITY OF STOCKHOLDERS
AND THIRD PERSONS.

A. THE OCCASION, SCOPE AND PURPOSE

OF THE SUBJECT HEREIN.

§ 644. The cause and occasion of this
subject. j

644a. The three classes of stockhold-
ers’ wrongs herein.

644.6 The corporation is ordinarily
the party to remedy these
wrongs.

645. But the corporation failing to
do so, a stockholder may
bring the action. :

646. The facts and conditions which
allow and sustain a stock-
holder’s suit herein.

B, FRAUDS OF CORPORATE DIRECTORS,

OF A MAJORITY OF THE STOCKHOLD-
ERS OR OF THIRD PERSONS, TO REM-
EDY WHICH A STOCKHOLDER MAY
BRING SUIT. —

§ 647. Different methods of perpetrat-
ing these frauds.

648, Directors as trustees.

649. Director or other corporate offi-
cer interested in construction
company,

650. Secret gifts to directors from
persons contracting with the
corporation.

651. Frauds by promoters on the
corporation.

652. Sales of property by corporate
officers to the corporation.

653. Purchases by directors from the

corporation, and purchases at
foreclosure sales, ;
654-56. Re-organizations and pur-
chases of corporate pro
erty by a majority of the
stockholders.

 

§ 657. Voting salaries or compensation |
to corporate officers.
658, Contracts between corporations
having one or more directors
in common.

Foreclosure of mortgage on
corporate property, and col-
lusion with directors, where-
by no defense is made to the
foreclosure. :

Directors’ purchases of property
needed by the corporation —
Buying up the debts of the
corporation. 2a

Loans by the directors to the
corporation, mortgages by.
the corporation to directors,
and the right of a corpora-
tion — solvent or insolvent —
to give a mortgage or assign-
ment of its property to a di-
rector in order to prefer the
payment of his debt,

Frauds by a majority of the
stockholders upon the minor-

659.

660.

661.

662.

ity.

Stockholders’ actions against
third _ persons for frauds
against the corporation.

663a. Liability of directors, officers

and agents of a corporation
to third persons for frauds,
trespasses, contracts and
ultra vires acts.

663b. The use of a corporation as a

‘‘cloak” for defrauding the

Buble or particular individ-

uals,

663.

725
2

1 PA
§ 644.] FRAUDS OF DIRECTORS, PROMOTERS, ETO. [CH. XXXIX.

A. THE OCCASION, SCOPE AND PURPOSE OF THE SUBJECT HEREIN.

§ 644. The cause and occasion of this subject.— Perhaps the most
striking feature of the modern era of industrial development is the
growth, wealth and power of corporations. They have built the
railways, dug the canals, established the factories, carried the ocean
commerce, and assumed control of the industries of Europe as well
as of America. They have absorbed a large part of the surplus
wealth of the world, and have accumulated or distributed enormous
gains and profits. But these gains and profits have not always
been honestly preserved and administered for the benefit of - those
who are entitled thereto — the stockholders of the company. Cor-
porations, with their vast capital stock, their great income, their
rapidly-changing personal property, and their large purchases and
sales, have proved to be a temptation which corporate officers are
too often unable to withstand. These companies have been found
to be efficient instruments of fraud, speculation, plunder and illegal
gain. In these latter days the robbery and spoliation of corpora-
tions and stockholders by the corporate directors and managers
have been systematized into well-known methods of proceeding,
and the carrying out of such plans,has become a profession and an
accomplishment. The skill, audacity, experience and talent of the
highest order of administrative ability have reduced to a certainty
the methods of diverting the profits, capital, and even the existence,
of the corporation itself to the enrichment of the corporate man-
agers and their co-conspirators. Corporations become insolvent
and stockholders lose their investment, while individuals become
millionaires. Illegitimate gains are secured and enormous fortunes
are amassed by the few at the expense of the defrauded but gen-
erally helpless stockholders. i

The expense, difficulty and delays of litigation; the power, wealth
and unscrupulousness of the guilty parties; the secrecy, skill and
evasive nature of their methods; and the fact that the results of
even a successful suit belong to the corporation, and not to the
stockholders who sue, all combine to baffle investigation and expos-
ure, to discourage the stockholders and-to encourage and protect
the parties guilty of the wrong.

In England, ever since the year 1720, when the “South Sea
Bubble” exploded and unsettled the finances of the kingdom,
there has been a constant recurrence of “bubble companies” and
dishonest promoters. The English reports are filled with cases of
frauds of corporate directors, corporate agents and corporate or-
ganizers. A system of jurisprudence | has grown up from these
cases. This system, however, is as yet in a formative state; and

there is no branch of the law more complicated, difficult and full of
726
|
OH, XXXIX. | FRAUDS OF DIRECTORS, PROMOTERS, ETC. i$ 6444.

pitfalls for the court, practitioner and client than that growing out
‘of the frauds of corporate directors. |

In America the cases involving a breach of trust by the di-
rectors arise generally out of the management of corporations
and not in their formation. These cases frequently involve colos-
sal transactions, and exhibit a scope, grasp and ability for railway
management and manipulation that excite the stockholder’s ad-
miration fully as much as his indignation.

It isa curious fact that the American talent for organization,
executive management and the invention and adoption of means
to ends —a characteristic talent that formerly was engrossed in the
political affairs of the nation — is now very largely engaged in the
development and management of the American railroads. With

commendable energy, enterprise, daring and sagacity the Ameri-

can'railway has been built, improved, consolidated and perfected,
frequently far in advance of even the remarkable growth of the
country itself.- For the most part this work has ‘been done hon-
estly, efficiently and creditably. But not always has this been the

case. The ingenuity and fruitful cunning of adroit, experienced,

and unscrupulous talent have plundered and ‘robbed the corpora-
tions and the stockholders, and ‘have brought reproach on the
management of the American railway. Great fortunes have been
accumulated by “ wrecking ” great corporations. Railroads which
were capable of earning a fair return upon the capital invested
have been rendered insolvent by the fraudulent management and
‘jllegal gains of the corporate officers. The plans, devices and
methods of accomplishing this result have been systematized and
elaborated to a degree equal to the great resources and fertility of
mind employed in their execution. It is the purpose of this part
of the present work to explain, so far as is possible, the methods of
those frauds, and to point out the remedy for the wrong.

8 644a. The three classes of stockholders’ wrongs herein.— Stock-
holders’ wrongs, arising from a breach of trust by directors, a ma-
jority of the stockholders or third persons, are clearly divisible
into three classes. They are, first, fraudulent acts;! second, wltra
vires acts; third, negligence of corporate directors.’

- There is another class of grievances — that of internal dissensions
in the corporation and dissatisfaction with its policy and acts.
These, however, are intra vires of the directors or majority of the
stockholders. The law gives no remedy for such dissensions, since
the stockholder has the corporate elections as a remedy, and since

\
1 The latter part of this chapter isde-  ?See chapter XL.

voted to this subject. 3 See chapter XLII.
927

’
§§ 6440, 645.]. FRAUDS OF DIRECTORS, PROMOTERS, ETC, (CH. XXXIX.

the majority are to rule so long as they do so without fraud and
within the powers of the corporation.!

§ 6445. The corporation is ordinarily the party to remedy these
wrongs.— These frauds, ultra vires acts and acts of negligence are
injuries to the corporation; and the corporation is ordinarily the
party to bring suit to rectify them. The frauds, ultra vires acts
and negligence of directors do not affect the stockholder directly;
but they affect the stockholders indirectly by decreasing the cor-
porate assets, and thereby affecting the value and privileges of the
stock. Accordingly, it is the duty and right of the corporation to
bring suit to remedy these wrongs, just as it is the duty and right
of the corporation to bring suit to remedy an ordinary trespass,
conversion or fraud, whereby third parties injure the corporate
property and interests. That a corporation may bring suit to rem-
edy the frauds, ultra vires acts or negligence of its trustees or di-
rectors was the decision of Lord Chancellor Hardwicke, in 1749, in
the case of The Charitable Corporation against Sutton?

§ 645. But the corporation failing to do so, a stockholder may
bring the action.— During the next hundred years, however, corpo-
rations having a capital stock and stockholders came into existence
and rose into prominence. The large capital and great profits of
many of these corporations led to frequent frauds, breaches of trust
and illegal acts on the part of the directors. It was the duty of

the corporation to bring suit to remedy these wrongs. But it grad-.

ually became apparent that frequently the corporation was help-
less and unable to institute the suit. It was found, where the
guilty parties themselves controlled the directors and also a major-
ity of the stock, that the corporation was in their power, was un-
able to institute suit, and that the minority of the stockholders

were being defrauded of their rights and were without remedy;.

and.it became apparent that there was a wrong which had no rem-
edy. ‘The time had come when the minority of the stockholders of
a defrauded corporation, the corporation itself being controlled by,
the guilty parties, must be given a standing in court for the pur-
pose of taking up the cause of the corporation, and in its name and
stead bringing the guilty parties to an account. Accordingly, in
1843, in the leading case of Foss v. Harbottle,} a stockholder brought
suit in the name of himself and other defrauded stockholders, and
for the benefit of the corporation, against the directors, for a breach

18ee chapter XLI. either in a private or public capacity.”
22 Atk., 400, the court saying: ‘Nor As to the power of the state to remedy
will I ever determine that a court of such abuses, see § 685, supra.
equity cannot lay hold of every breach 32 Hare, 461.
of trust, let the person be guilty of it
128
CH, XXxI1x.] FRAUDS OF DIRECTORS, PROMOTERS, ETC. ‘[§ 645.
of their duty to the corporation. This case was decided agains the
complaining stockholders on the ground that the complainant did
not prove that the corporation itself was under the control of the
guilty parties, and that it was unable to institute the suit. The
court, however, broadly intimated that a case might arise when a
suit instituted by the defrauded stockholders would be entertained
by the court and redress given. Acting upon this suggestion, and
impelled by the utter inadequacy of suits instituted by the corpo-
ration, defrauded stockholders continued to institute these suits and
to urge the courts of equity to grant relief! These efforts were
unsuccessful in clearly establishing the rights of stockholders
herein until the great cases of Atwool against Merry weather, in
England, in 18672 and of Dodge v. Woolsey, in this country, in
1855.2 These two great and leading cases have firmly established
. the law for both England and America that where corporate
directors have committed a breach of trust either by their frauds,
ultra vires acts or negligence, and the corporation is unable or un-
willing to institute suit to remedy the wrong, a single stockholder
may institute that suit, suing on behalf of himself and other stock-
holders and for the benefit of the corporation, to bring about a re-
dress of the wrong done directly to the corporation and indirectly
to all the stockholders.‘

_ The rule as formulated and enounced therein has been repeated,
applied, explained and extended by subsequent cases and. by text-
‘books until a system of jurisprudence may be said to be based.

thereon.
this work.’

1Mozley v. Alston, 1 Phil. Ch.,.790
(1847), where the court said there is ‘‘ no
reason assigned why the corporation
does not put itself in motion to seek a
remedy;” Lord v. Governor, etc., of
Copper Mines, 11 Phil. Ch., 745 (1848),
where the court refused relief *‘ because
the acts were capable of confirmation”
by the majority; Gray v. Lewis, L. R.,
8 Ch., 1085, 1050 (1873). See, also,
MacDougall v. Gardiner, L. R., 1 Ch.
D,, 13 (1875), in regard to the principle
of law decided by these cases.

21, R., 5 Eq., 464.

318 How., 381. The case of Hawes v.
Oakland, 104 U. S., 450 (1881), is per-
haps of greater importance than even
Dodge v, Woolsey, and may take the
place of the latter.

4I¢ is to be noticed that long prior to

That system is the subject of the present fourth part of
Stockholders are not liable for libel and slander by

these cases it had been held by the
courts in various cases that a stock-
holder’s action herein would lie, but the
principle was not clearly established
until the foregoing decisions were made.
Thus, in New York, as early as 1832, in
the case of Robinson v. Smith, 3 Paige,
222 (1832), the remedy was declared to
exist. In the early case of Preston v.
Grand Collier Dock Co., 11 Sim., 327
(1840), a bill by a stockholder in behalf
of himself and others to render certain
persons liable as stockholders, they hav-
ing subscribed in order to get a charter
and then declared that they subscribed
as trustees for the cormoratien, was sus-
tained.

5 See, also, Mason v, Harris, L. R., 11
Ch. D., 97 (1879).

729
§$ 646, 647.] FRAUDS OF DIRECTORS, PROMOTERS, ETO. [CH. XXXIX.

reason of allegations in their suit against directors for fraud. Not
even a director who was not a party can sue them for libel.!

§ 646. The facts and conditions which allow and sustain a stock-
holder’s suit herein.— Before a stockholder can sustain a suit to
remedy the frauds, ultra vires acts or negligence of directors, he
should be certain that three distinct facts or conditions exist in his
favor. These are, first, that the acts complained of are such as
athount to a breach of trust, and such as neither a majority of the
directors nor of the stockholders can ratify or condone;? second,
that the complaining stockholder himself is free from laches, ac-
quiescence or ratification of the acts to remedy which the suit is
brought;* third, that the corporation has been requested and has
neglected or refused to institute the suit; that the suit is instituted
by bona fide stockholders as complainants, and that the corporation
and the guilty parties and other proper parties have been made de-
fendants.‘

‘
B. FRAUDS OF CORPORATE DIRECTORS, OF A MAJORITY OF THE STOOK-
HOLDERS OR OF THIRD PERSONS, TO REMEDY WHICH A STOOK-
HOLDER MAY BRING sUIT.

§ 647. Different methods of perpetrating these frauds.— The
various ways in which stockholders are generally defrauded out of
their legal rights in a corporation are described in subsequent sec-
tions of this chapter. These, however, are the older and more
easily-remedied wrongs. The principles of law governing them
are known to those who contemplate such frauds. Consequently,
new plans and methods of circumventing the law are being con-
stantly devised. There isa continual contest between the courts
in branding certain acts as frauds and the unscrupulous corporate
officers in forming new and unknown methods of defrauding the
corporation and stockholders. Some of these devices vary little
from the older ones, but others are new and are evolved by the fer-
tile resources of the misdirected talent of modern times.

‘Thus, a frequent fraud is perpetrated by withholding or improp-
erly increasing dividends in order that the corporate managers
may cause fluctuations in the price of the stock, and by specula-
‘tion in the market enrich themselves thereby.’ They exist also

1 Runge v, Franklin, 10 8. W. Rep., 5It probably was by reason of such
721 (Tex., 1889). frauds that the New York legislature in
2This subject is treated in the re- 1884 passed the act (ch. 228) prohibit-
mainder of this chapter and in chapter ing directors from selling stock “ short.”

XL. For various instances of frauds herein,
3See chapter XLIV, see, also, Lindley on Partnership, 588,
{See chapter XLV. etc.

730
CH. XXXIX. | FRAUDS OF DIRECTORS, PROMOTERS, ETO.

[§ 648.
‘when the corporate statements of its condition and business are
garbled and arranged so.as to mislead the investing public. A favor-
ite modern device is the purchase, by corporate officers, of the stock
and bonds of another corporation, and then by a consolidation of
the two corporations, to the ruin of the former and the enrichment
of the holders of the stock and bonds of the latter. Still another
taethod is the diversion of traffic from a corporation, or a use-of its
income for improvements, whereby its dividends are cut off, until
the managers have purchased the stock and bonds at a price far
below the real value. These various frauds, and many others
which might be enumerated, are discovered and exposed with
great. difficulty, and generally at great expense and delay.! The
courts of equity are ready and reliable in remedying the wrong
whenever the fraud can be proved. But in the fact that the proof
is concealed or destroyed, and generally beyond the reach of the
defrauded stockholder, lies the safety of the guilty parties.
'§.648. Directors as trustees— It is frequently said, both in the
cases and in the text-books,'that the directors of a corporation are
practically trustées, with the whole body of the stockholders as ces-
tui que trust. This principle of law has been useful as a method
of ascertaining what acts of directors constitute a fraud, and what
remedies may be applied. These fraudulent acts and remedies
have been quite accurately defined and ascertained. New methods
and devices, however, are constantly being devised by unscrupulous
directors and managers. There will be much doubt, confusion, in-
consistency and difficulty in working out the questions which will
arise; but‘there can be no doubt of the result if courts of equity
are allowed the same freedom, fearlessness and power of searching
and circumventing all frauds that characterized the origin of the
courts themselves.”

son, L. R., 23 Ch. D., 12; Angell &
Ames on Corp., § 312, etc.; Pierce on

1For a vivid description of a num-
ber of these devices to defraud stock-

holders and the public generally, see
* An Investor’s Notes on American
Railroads,” by Swann, p. 29 (1886).
2That directors occupy the position
of trustees towards the stockholders, see
European, etc., R’y Co. v. Poor, 59 Me.,
277 (1871); Hoyle v. Plattsburgh, etc.,
R. RB. Co., 54.N. Y., 314 (1878); Koehler
v. Black, etc., Co., 2 Black, 715 (1862).
See, also, Green’s Brice’s Ultra Vires
(2d ed.),.p, 478, citing many cases. Cf.
Smith v. Anderson, L. R., 12 Ch. D.,
247 (1880); Imperial Hotel Co. v. Hamp-

R. R., 86-44. In Wasatch Min. Co. »v.
Jennings, 15 Pac. Rep., 65 (Utah, 1887),
the court well said in reference to cor-
porate directors: ‘‘Courts of equity
have carefully refrained from defining
the particular instances of fiduciary re-
lations in such a manner that other and
perhaps new cases might be excluded.”
The corporation, however, stands in no
fiduciary relation towards its stock-
holders. Karnes v. Rochester, etc., R.
R, Co., 4 Abb. Pr. (N. 8.), 107.

731
[CH. XXXIX.

§ 649.] FRAUDS OF DIRECTORS, PROMOTERS, ETC.

§ 649. Director or other corporate officer interested in construc-
tion company.— The law is well settled that a director cannot be-
come a contractor with the corporation, nor can he have any per-
sonal and pecuniary interest in a contract between a third person
and the company of which he is a director.! The director cannot
be interested in the construction company at the time the contract
is made, nor subsequently; and it is immaterial that the contract
was fair, or even to the advantage ofthe corporation. The cor-
poration upon discovering the fact that the director is interested
in the construction company may compel him to pay over to the
corporation all profits that he has derived from the construction

contract.?

1 Port v. Russell, 86 Ind., 60 (1871),
where an injunction was granted
against the payment by a plank-road
company of money to a construction
company of which a director of the
former was a member. The court said
that the three leading American cases
on the subject of frauds by directors
are Michaud v. Girod, 4 How., 503
(1845); Cumberland Coal Co. v. Sher:
man, 30 Barb., 553 (1863), and id., 20

‘Md., 117; and Hoffman Steam Coal Co.
v. Cumberland Coal Co., 16 Md., 456
(1860); and in England the case of Aber-
deen R’y Co. v. Blaikie, 1 Macq., 461
(1853). Where two contractors cause a
railroad corporation to be formed, in
which one contractor became a director
and the other directors are clerks of the
second contractor, and the construction
contract is made with these two by
means of “‘ dummy ” intermediaries, at
an improvident price, one of the con-
tractors cannot compel the other to di-
vide the profits. Jackson v. McLean,
86 Fed. Rep., 213 (1888). A president is
personally liable on loans by his bank to
an insolvent person with whom he has
other interests. First Nat?l B’k v: Reed,
86 Mich., 268 (1877),

2Gilman, C. & S. R. R. Co. v, Kelly,
77 Tll., 426 (1875). See, also, Bayliss v.
Lafayette, M. & BR. R. Co., 8 Biss.,
193 (1878); Paine v. Lake Erie, etc., R.
R. Co., 81 Ind., 288 (1869); Flint, etc.,
Ry i, vw Denei: 14 Mich., 477 (1866),

If the company contracting with the corporation se-

where a director had become interested
in the construction work after the con-
tract had been given. To same effect,
see Thomas v. Brownville, etc, R. R.
Co., 109 U.'S., 522 (1883), rev’g-2 Fed.
Reps, "877, where, however, it is held
that bonds issued to a construction com-
pany in which a director is interested
cannot be altogether repudiated, but are
valid to the extent of the actual value
of work done. See, also, Ryan v. Lea-
venworth, ete, R’y Co., 21 Kan., 365
(1879), holding also that a stockholder
in a corporation which is a stockholder
in the defrauded corporation may sue
to remedy the wrong to the latter;
European, etc., R’y Co. v. Poor, 59 Me.,
277 (1871). See, also, Risley v. Indian-
apolis, etc., R. R. Co., 62 N. Y., 240,
248 (1875); Whitman v. Bowden, 2 8,
E. Rep., 680 (S. C., 1887), where a build-
ing committee of a joint-stock com-
pany secretly contracted with them-
selves. In Lewis v. Meier, 14 Fed. Rep.,
811 (1882), the remarkable decision is
made that the corporation cannot have
such a contract set aside, since the corpo-
ration is responsible for the frauds of its
directors, and hence both parties are in
pari delicto. The president of a packet
company may take a contract for carry-
ing mails and may have the service per-
formed by the packet company, he pay-
ing it therefor. He is not Jiable to it
for his profits, he having endeavored
first to get the contract for the com-

732

‘
CH. XXXI1X. | FRAUDS OF DIRECTORS, PROMOTERS, ETO. [§ 649.
cretly gives to the contracting agent of the latter a subcontract
for the construction work, the corporation may rescind the whole
contract and recover back the money it has paid out thereon.’ Nor
is a contract valid and enforceable against the corporation where
the parties contracting with the corporation have given to'the di-
rectors of the corporation a secret interest in the profits of the
contract.2 The circumstances may be such, however, as will vary
this rule. Thus, where the director was a surety for the contractor
and the.latter failed, the former, who finished the construction
work under compulsion by the company, may set up its acquies-
cence as a bar to its suit to recover from him the profits of the trans-

action.®

pany. Clubb v, Davidson, 8S. W. Rep.,
545 (Mo., 1888).

1°T take it, according to my view of
the law of this court, to be clear that
any surreptitious dealing between one
principal and the agent of the other
principal is a fraud on such other prin-
cipal cognizable in this court.” Pan-
ama, etc., Tel. Co. v. India Rubber,
etc., Tel. Works Co., 32 L. T., N. S&.,
517 (1875). In this case the secret sub-
contractor was the agent and engineer
of the corporation. He received a com-
mission for his work, and the work was
to be accepted subject to his approval.
The case of Currier v. N. Y., West
Shore, etc., R. R. Co,, 35 Hun, 355 (1885),
goes still further, and holds that a stock-
holder may compel the contractors to
disgorge when they obtain the contract
with the corporation through their as-
sociates or hirelings being’ made direct-
ors, An agreement ‘of an attorney to
share his fees with a director who votes
and aids him in getting the company’s
business is void. The courts will net
compel the attorney to carry out the
agreement. All parties are left as they
are found by the law. Attaway v. Third
Nat'l B’k, 5S. W. Rep., 16 (Mo., 1887).
See, also, Lindley on Partn., 590, Where
the managing director of the Union Pa-
cific Railroad caused a contract for its
construction to be given to a person
who acted as his agent, and the director
then formed the Credit Mobilier com-
pany, a Pennsylvania corporation, and

So, also, where a director purchased. an interest in the

had the construction contract assigned ,
to it and all the stockholders of the
railroad were invited to become stock-
holders in the latter company, and all
the facts herein were more or less
known to all parties, a court of equity
refused to enjoin the Credit Mobilier
from collecting the contract price of
the construction work. Union P. R. R.
Co. v. Credit Mobilier, 185 Mass., 367
(1883). But a stockholder may be in-
terested in the construction company
and bonds be issued to him, even though
he owns a majority of the stock and
thereby has control. Porter v. Pitts-
burgh, etc., Co,, 120 U. S., 649, 670.
Although.an assistant engineer of the
company is secretly interested with the
contractor in the profits of the con-
struction, yet where the former had
nothing to do with the letting the con-
tracts or accepting the work, and merely
testified in an arbitration in the settle-
ment, but did not testify falsely, the
parties need not give up their profits.
Union R..R. Co. v. Dull, 124 U. S., 178
(1888).

2 Wardell v. R. R. Co., 108 U. S., 651,
(1880). A person who brings about a
contract whereby the president obtains
a secret profit in'a corporate contract
cannot recover for his services. Van
Valkenburgh v, Thomasville, etc., R. R.
Co., 4.N. Y. Supp., 782 (1889).

8Kelley v. Newburyport, etc,, R. R.
Co., 141 Mass., 496 (1886), :

933
\

FRAUDS OF DIRECTORS, PROMOTERS, ETC. [CH. XXXIX,

§ 650.]
construction contract after it had been entered into, but sold that
interest before any work was done thereunder, the illegality of his
connection with the construction company cannot affect the legality
of his sale of that! interest.

§ 650. Secret gifts to directors from persons contracting with the
corporation.—It is a well-established principle of law that a di-
rector commits a breach of trust in accepting a secret gift or secret
pay from a person who is contracting or has contracted with the
corporation, and that the corporation may compel the director to
turn over to it all the money or property so received by him. Thus,
an agreement of a third person to pay a certain sum to a director
if a certain location of a railroad is adopted, or an agreement to
allow him to participate in the profits derived from such location,
is not an enforceable contract.?. So, also, where a director receives
a commission from one who obtains a loan from the corporation
through the director’s influence, the latter may be compelled to pay
over the commission to the corporation.®

A similar rule was applied where a director of an insolvent insur-
ance company accepted a secret gift for re-insuring the company’s
risks in a certain other insurapce company.* And, in general; when-
ever an agent of the corporation accepts a secret gift or participates
in the profits of a contract with the corporation, the corporation is
entitled to the gifts or profits, and a stockholder may bring the sait

to compel the agent to pay over.’

1 Barnes v. Brown, 80 N, Y., 527 (1880).

2 Bestor v. Wathen, 60 IIl., 138 (1871);
Linder v. Carpenter, 62 Ill, 309 (1872);
Fuller v. Dame, 18 Pick., 478 (1836), hold-
ing that a promissory note given there-
for is void. See, also, Union Pac. R. R.
Co. v. Durant, 1 Cent. L. J., 582 (U.S.
C. C., 1874, per Dillon, J.), holding that
where the president uses his power op-
pressively and by threats to compel citi-
zens to convey lands to him for the com-
pany, the court will decree a reconvey-
ance to the grantors; Holloday v. Pat-
terson, 5 Oreg., 177 (1874), where an
agreement to pay money to a director
and president of a railway if a depot
was located in a certain place was held
unenforceable. A subscription, however,
conditioned upon the location of a depot
is valid. See § 83. Cf. § 682, infra.
In the case of Cook v. Sherman, 20 Fed.
Rep., 167 (1882), the court refused to en-
force specifically a contract whereby

s

corporate officers agreed to purchase
lands, the purpose of all the parties
being to influence thereby the the loca-
tion of the railroad. 129 U.S., 642 (1889).

3 Farmers’ & M. B’k v. Downey, 53
Cal., 466 (1879); Imperial, etc., Ass’n v.
Coleman, L. R., 6 H. L., 189 (1878).

4 Bent v. Priest, 86 Mo., 475 (1885);
Gaskell v. Chambers, 26 Beav., 360
(1858), where the director received. a
secret gift for bringing about a consoli-
dation. Contra, if all assented. South-
all v, British, etc., cia L. R., 6 App.,
614 (1871).

6 Tyrrell v. B’k of London, 10 H.. L.,
26 (1862), where a solicitor was com-
pelled to repay with interest a secret
gift; General Ex. B’k v. Horner, 39 L.
J. (Ch.), 893 (1870), where the manager
was paid a large sum in order to obtain
his aid toa consolidation scheme. Where
the company pays to its solicitor a com-
mission for shares which he induces the

934
CH. XXXIX. |

!
FRAUDS OF DIRECTORS, PROMOTERS, ETO. [§ 650.

There is another large class of cases, particularly in England,
wherein persons’ who desire to form a company for the purpose of
purchasing and working certain property, such as patents and
mines, cause their friends to accept the position of directors or
agents, and then give them:money or stock in compensation
therefor. This is still a common practice in business; ‘but the
courts have uniformly held that a stockholder or the corporation
or a receiver on the winding up’ may compel such directors or
agents to pay over to the corporation the money received, or, if
stock was received, then to pay to it the highest price reached by
such stock between the time when the gift was made and the time

when it was discovered.!

president to take, he must repay the
commission on the winding up. In re
Stapleford, etc., Co., 49 L. J. (Ch.), 258
(1880)., A manager who takes secret
gifts from parties with whom he con-
tracts for his company must disgorge
the same. He also may be dismissed
and his contract salary stopped. Bos-
ton, etc., Co. v. Ansell, 59 L. T. Rep.,
845 (1888). Where corporate agents or-
ganize local branch companies on a
basis prescribed by the parent company,
and the agents demand and obtain from
the local company more than the parent
company prescribed, the excess belongs
to the parent company. Sheridan v.
Sheridan Electric L. Co., 88 Hun, 396
(1886). Directors borrowing money from
corporation and giving notes therefor
cannot defend against notes on ground
that a discount thereon was to ‘be al-
lowed to them. Alford v. Miller, 32
Conn., 548 (1865). See Western, etc.,
Tel. Co. v. Union, etc., Roy Co., 3 Fed.
Rep., 721 (1880); and qucere, as to the
effect of a contract between the cor-
plainant and defendant where one of
the minor provisions was that the rail-
way officers were to have free telegraph
service for themselves and families.

1 Pearson’s Case, 25 W. R., 618 (1877),
aff'g L. R.,4 Ch. D., 222;5.0., LR,
5 Ch. D., 836 (187%), the court saying:
‘‘ Whether the purchase was or was not
an advantageous one for the company

is a question wholly immate-
rial for us to consider; he cannot, in

the fiduciary position he occupied, re-
tain for himself any benefit or advan-
tage that he obtained under such cir-
cumstances ;” Leeke’s Case, L. R., 10
Ch. App., 469 (1871); “De Ruvianets
Case, L. R., 5 Ch. D., 316 (1876); Orme-
rod’s Case, 25 W. R., 765 (1875), where
the director was elected and the gift re-
ceived even after the contract was
made. Thecourtsaid: ‘If it is lawful
that a man may be bought as a director,
it must be decided by some one else. I
never will decide it;” Weston’s Case,
L. R., 10 Ch. D., 579 (1879),\where the
director was held liable for the full price
of the stock less what he paid therefor;
Clarke’s Case, 37 L. T., N. S., 222 (1877),
where the articles of association allowed
the gift, but were held to be fraudulent;
McKay’s Case, L. R., 2 Ch. D., 1 (1875),
where the secretary of the corporation
was compelled to pay over; Hay’s
Case, L. R., 10 Ch., 5938 (1875), where
the court said: ‘‘No agent can in the
course of his agency derive any bene-
fit whatever without the sanction or
knowledge of his principal ;” Re Engle-,

field Colliery Co., L. R., 8 Ch. D., 888

(1877); Emma Silver M. Co. v. Lewis,
L. R., 4 C. P. D., 396 (1879), where the
mining experts of the corporation were
compelled to disgorge; In re Carriage,
etc., Assoc., L. R., 27 Ch. D., 822 (1884) ;
Re Drum Slate, etc., Co., 53 L. T., 250
(1885), where the party gave money to.
the directors. See, also, 55 L. J., Ch,
36 (1886); Madrid B’k v. Pelly, L, BR, 7%

735
8 650.

ERAUDS OF DIRECTORS, PROMOTERS, ETC.

[CH. XXXIX:

In a somewhat similar class of cases the person selling to the
corporation acts himself as a director and a promoter of the enter-

Eq., 442 (1869), where the directors
' were held to be liable for the money re-
ceived by them, but for no more; Nant-
y-Glo, etc., Co. v. Grave, L. R., 12 Ch.
D., 738 (1878), holding that the corpora-
tion may sue herein the same as a
liquidator; Metcalf’s Case, L. R., 13
Ch. D., 169 (1879), where a director was
held liable for the market value of
stock given to him by the person to
whom the stock was issued,as full paid
in consideration of property. There
was no evidence that the director acted
unfairly or acted as a promoter. He
was held liable, although he had sold
part of the stock. Where the directors
vote money to a promoter and he in-
vests it in the company’s debentures
and divides them among the directors,
the latter must refund the money so
voted, and cannot offset a debt due to
them from the company. Ex parte
Pelly, L. R., 21 Ch. D., 492 (1882).
Money paid to directors by the person
selling to the company, in order to in-
duce them to become directors, cannot
be retained. Hunt’s Case, 37 L. J. (Ch.),
278 (1868). Where the company’s agent
in negotiating a contract procures a
larger sum for the company than it
demands, on a secret agreement that it
should pay him the increase, he cannot
collect it. In re Owens, Irish Rep., 7
Eq., 235 (1878); aff’d, id., 424. In acase
where the owners of property, the pro-
moters, the directors and the solicitor
sold to the company property the title
‘to which was bad, and divided the pro-
ceeds, each was made to repay the
amount received by him. Phosphate
Sewage Co. v, Hartmout, L. R., 5 Ch.
D., 394 (1877). And see many English
cases in Company Law and Practice, by
Healey, pp. 543, 544,

The same rule has been clearly sus-
tained in America, Chandler v. Bacon,
30 Fed. Rep., 588 (1887), where the presi-
dent and secretary were held liable for

stock received by them secretly from a
patentee to whom all the capital stock
had been issued for his patent. Re
The Drum Slate Quarry Co., Ltd., 53
L. T. Rep., N. S., 256 (Ch. Div., 1885),
Here a director of a company received
from the promoters a present of £1,000
to buy one hundred shares in the com-
pany, which was the qualification of a
director, the present being expressly
stated to be a commission for certain
contracts which he was about to en-
ter into at the request of the promot-
ers in relation to the proposed com-
pany. The director afterwards took
part in making an agreement for the
purchase by the company of a quarry
of which the promoters were part own-
ers, the carrying out of which was
stated in the memorandum and articles
of association of the company to be the
first object of the company. The com-
pany was subsequently wound up.
Held, that the director was liable to ac-
count to the liquidator for the value of
the shares at the value at which they
stood at the date he received the pres-
ent, together with interest at five per
cent. from the date of such gift. Re
The Carriage Co., 51 L. T. Rep., N. 8.,
286 (Ch. Div., 1884). Here the articles of
association of a company provided that

‘each of the first directors (of whom R.

was one) must take or hold at least
twenty £5-shares within three months
of his appointment, which shares might
be shares originally issued as fully paid
shares or otherwise. It was also pro-
vided by a contemporaneous agreement
for the payment to the promoters of
the company, for preliminary expenses
and promotion, of £3,000 in cash and
three hundred fully paid shares. To-
wards the end of the three months the
five original directors, in order to qual-
ify for their office, accepted from the
promoters, at a board meeting, trans-,
fers without consideration of the requi-

736
OH. XXxXIX.]

* &
FRAUDS OF DIRECTORS, PROMOTERS, ETC.

[§ 650.

prise, and by the aid of other friendly directors controls the corpo-
ration; or the guilty party may be merely a promoter and also a

director.

In any case, unless all persons interested are fully

informed of the facts and assent thereto, the promoter, director or
vendor may be brought to account.!

site number of fully paid shares, part
of the promotion shares. The company
was afterwards ordered to be wound
up. It was not disputed that each di-
rector was liable to the extent of the
par value of his own shares if unpaid
for; but all of the directors except R.
being unable to pay, it was sought to
make R, liable for the whole amount —~
£500. R. contended that he was not,
liable for anything, having, since the
date of the transfer, advanced £520 to
the company, and having since ac-
knowledging his liability paid £100 more
to the company, intending it to be as and
‘for satisfaction of the amount due upon
his twenty shares. He also urged that
in any case there was no joint and sev-
eral liability under the circumstances.
Held, that there was no right of set-off
in his favor; that the £100, however it
had been intended, had been accepted
asa further advance, and not in pay-
ment for his shares; and that he must
be declared liable for the whole £500.

1 As regards the duties and liabilities
of a promoter, pure and simple, see the
next section. That a director is dis-
qualified to buy for the corporation
from himself, see §652. The cases now
under consideration involve a combina-*
tion of frauds. Thus, where the owner
of property agrees with two persons
that if they form a company to pur-
chase the property he will secretly pay
them a certain amount, and they form
a company and act as a minority of the
directors, and it purchases the property
even at a fair valuation, the court, upon
corporate insolvency, willrefuse to allow
the two persons their salaries and will
declare their agreement to be a fraud.
In re Hereford & Co., L. R., 2 Ch. D.,

property before the company was

‘formed and then sold to the company
.atan advance, and induced the public

to subscribe by representations that the
price paid was the original price paid
by them to the original vendors, they
must pay the secret profit to the com-
pany. Simons v. Vulcan, etc., Co., 61
Pa. St., 202 (1869). Where the direct-
ors had purchased property before the
company was formed, and then as di-
rectors bought it for the company at
an advance, the title passing direct.
from the first vendor to the company,.
and the directors’ interest being con-
cealed, the court held the directors.
liable to the company for their profit,
the suit being brought by stockholders.
Hichens v. Congreve, 1 Russ. & M., 150)
(1829). Under similar facts and to same.
effect, Benson v. Heathorn, 1 Younge-
& C., 326 (1842). A stockholder cannot
* rescind a subscription for fraud where:
a person purchased a patent outright
on condition that he could resell it, and
then proceeded to promote and organ-.
ize a company and to sell to it the pat-
ent at an advanced price, even though.
he was a director, it being clearly
known to all that he owned and sold.
the patent as his own. Gover’s Case,
L. R., 1.Ch. D., 182 (1875). Where,
however, parties purchase property and
agree absolutely to pay therefor them-
selves, and not by the issue of the
stock of a corporation to be formed, or
by the money of that corporation, the
fact that they intend to and do then
form a company to buy the property
from themselves at an advance does not
render them liable to the company for
the profit. If they had formed the
company partially or completely before

621 (1876), Where the directors, who they purchased, the case might be dif-
were also promoters, had purchased ferent. The court referred to the word
(4%) 737 -
§ 651.) FRAUDS OF DIRECTORS, PROMOTERS, ETC. .{CH. XXXIX,
§ 651. Frauds by promoters on the corporation. A promoter is
a person who brings about the incorporation and organization of a
corporation. He brings together the persons who become inter-
ested in the enterprise, aids in procuring subscriptions and sets in
motion the machinery which leads to the formation of the corpora-
tion itself
A promoter is considered in law as occupying a fiduciary rela-
tion towards the corporation. He is an agent of the corporation,
and is subject to the disabilities of such. There are two classes of
cases in which he may be guilty of a breach of his duties to the

company.

First, where he sells property to the corporation. If he pur-
chased the property before he began promoting the company he

“ promoters,” but only to refuse to use
-it on account of its indefiniteness, The
party purchasing the mine and after-
wards selling to the company was a
director in the latter atthe time of pur-
chase. The right to rescind, however,
was barred by the fact that the com-
pany had lost the property, a leasehold,

by non-payment of rent. Ladywell.etc., ©

Co. v. Brooks, 56 L, T. Rep., 677 (1887).
.For a valuable explanation of this case,
‘see, also, 2 R’y & Corp. L. J., 481.
1Great difficulty is experienced in de-
termining who is and who is not a pro-
anoter, An old English statute defined
a promoter as ‘‘every person acting, by
-whatever name, in the forming and es-
tablishing of a company at any period
prior to the company” being fully in-
corporated (7 and 8 Vict., ch. 110, § 8).
Other definitions are, ‘‘one who under-
takes to form a company with reference
to a given project and to set it going,
and who takes the necessary steps to ac-
complish the purpose.” Twyncross v.
Grant, L. R., 20. P. Div., 469, 541 (1877);
Bagnall v. Carlton, L. R., 6 Ch. D.,
- 881, 382, 407 (1877). See, also, New
Sombrero Co. v. Erlander, L. R., 5 Ch.
D., 118 (1877); Erlanger v, New Som-
brero Co, L. R., 3 App. Cas., 1268;
Whaley Bridge, etc., Co. v. Green, L.
R., 5 Q..B. Div., 111; Emma Silver Min.
Co. v. Lewis, L. R., 4 C. P. D., 396, 407
(1879), where Lindley, J., says: ‘The
term promoter involves the idea of ex-

ertion for the purpose of getting up and
starting a company (or what is called
‘floating’ it), and also the idea of
some duty towards the company im-
posed by or arising from the position
which the so-called promoter assumes
towards it.” See, also, Im re Great
Wheal Polgroath, 32 W. R., 107 (1888),
holding that the solicitor was not a pro-
moter; but see B’k of London vw. Ter-
rell, 10 H. L. C., 26. An agent of a
person selling property to the corpora-
tion may be also a promoter of the lat-
ter and liable as such.. Lydney, ete.,
Co. v. Bird, 55 L. T. Rep., 558 (1886), re-
versing L. R., 31 Ch. D., 828, For other
definitions, see Ladywell, etc., Co. v.
Brooks, supra; Healey’s Company's Law
and Practice, p. 88, and articles in 1 R’y
& Corp. L. J., 27; 2id., 1. In Emma,
ete., Co. v. Grant, L. R., 11 Ch. D., 918
(1878), a promoter is defined as “a
trustee, agent or person in a fiduciary

‘position as regards the company — one

who has undertaken a duty towards the
company of such a character as inca-
pacitates him from making a secret
profit at the expense of the company.”
Lyduey, etc., Co. v. Bird, supra, says:
‘*No doubt a very little will make peo-
ple promoters of a company, if it can
be seen that they were really doing
something in the way of speculation for
their own interest and not acting merely
as agents for others.” 60 L. T, Rep.,
591 (1889).

733
 

CH. XXXIX.]

FRAUDS OF DIRECTORS, PROMOTERS, ETC.
; :

[§ 651.

may sell to the company at an advance without disclosing his profit.
But if he purchased after he began promoting and then sold to the
company, the sale is valid only ‘when he informs the directors that
the property belongs to him, and when, also, the directors are com-
petent and impartial judges as to whether'the purchase ought or

ought not to be made}

‘If the promoter conceals the fact that he is selling his own prop-
erty to the company, the latter may rescind the sales? or, if the

lErlanger v. New Sombrero Ca,
supra, and L. R., 5 Ch. D., 78; In re
Coal, etc., Co., Givens’ Case, L. R., 20
Kq., 114; L. R., 1 Ch. D., 152; Lindsay,
etc., Co. v. Hurd, L. B., 5 P. C., 221;
Emma Silver, etc., Co. v. Grant, L. R.,

moter was compelled to disgorge a gift
given to him by the vendors of a mine
to the corporation, but he was allowed
to retain therefrom his disbursements,
It is immaterial that the sale was a fair
one, The court said: ‘‘ He must let his
company know what profit he has
taken, and deal with them, so to say,
‘at arm’s length; ” Souths etc., Iron Co.
v. Shaw, W. N., 1879, p. 159; Beck wv.
Kantorowick, 3. K. & J., 230; Whaley

Bridge, etc., Co. v. Green, L. R., 5 Q.'

B. D., 109 (1879), holding, also, that if
the vendor has not yet paid the moncy
to the promoter the corporation may
recover it from the former; Whaley,
etc., Co. v. Green, supra; Twycross v.
Grant, supra, disapproving Craig v.
Phillips, L. R., 3 Ch. D., 722; Kent v.
Freehold; etc., Co., L. R., 4 Eq., 588.
In Densmore Oil Co. v. Densmore, 64
Pa. St., 43 (1870), the court refused to
hold the defendants liable who owned
property and formed a company, and
sold the property to the company at a
profit, without disclosing the original
price, but without misrepresenting that
price. The court said, however, ‘‘ that
where persons form such an association,
or begin or start the project of one, from
that time they do stand in a confiden-
tial relation to each other, and to all
others who may subsequently become
members or subscribers; and it is not

_8 App. Cas.,

competent for any of them to purchase
property for the purpose of such a com-
pany and then sell it at an advance
without a full disclosure of the facts.
They must account to the company for

,_ the profit, because it legitimately is
11 Ch. D., 918 (1878), where the pro-

theirs.” Where a promoter, after the
company is formed, buys land for $6,000
and sells it to the company at $12,000,
and represents to a subscriber for stock
that the land cost $12,000 originally,
the stockholder may recover from the
promoter the amount paid for his stock.
Short v. Stevenson, 63 Pa, St., 95 (1869).
In Rice’s Case, 79 Pa. St., 168 (1875),
where a promoter elected the directors
and sold property to the corporation at

an exorbitant price, taking payment,in

money, stock and bonds, the court re-
fused to allow the bonds upon the
winding up. In McElhenny’s Appeal,
61 Pa. St., 188 (1869), where a person
bought land for $2,000, and then in-
duced others to join him in organizing
a company to purchase it for $40,000
after he had sold it to them for $12,000,
is liable to account to the company for
his part of the $28,000 profit, but not for
his $10,000 profit, A person may pur-
chase property and then proceed to
form a corporation arid sell the prop-
erty to it at an advanced price. He is
not bound to disclose his profit, noris he
liable therefor unless he makes misrep-
resentations. Lungren v. Pennell, 10
Weekly N. of Cas., 297 (Pa., 1881).
2Lindsay, etc., Co. v. Hurd, supra;
Erlanger v. New Sombrero Co., L. RB,
1218; affg L. R., 5 Ch. D.,
78 (1877); Ew parte Taylor, L. R., 14

_Ch, D., 890; In re Cape Breton Co,, L
739
§ 651.] FRAUDS OF DIRECTORS, PROMOTERS, ETC. = [Cl. XXXIX.
promoter was such at the time he purchased the property, the com-
pany may recover from the promoter the profit made by him. If
the promoter owns the property at the time of forming the com-
pany and sells it to the company at an advance over its cost tohim,
and then induces persons to subscribe by stating that he made no
profit thereby, he is liable in equity to account to them for the
injury they have sustained.

Second, a promoter may commit a breach of trust by accepting
a commission or bonus froma person who sells property to the cor-
poration, The company may compel him to turn it into the corpo-
rate treasury,’ or the company may rescind its purchase of the

R., 29 Ch. D., 795. But not if the com-
pany is unable to restore the property,
where the disability to restore it is due
to the company and not the promoter.
Addie v. Western B’k, etc., L. R., 1H.
L.,, Sc., 145; Phosphate, etc., Co. wv.
Hartmout, L. R., 5 Ch. D., 394; Head
v. Tattersell, L. R., 7 Ex., 7; In re Cape
Breton Co., supra, The company may
rescind as to’ part if the transaction is
severable. Maturin v. Tredinnick, 2 N.
R., 514; 4id., 15. Where a mine was
sold to a company for $30,000, the pro-
moters representing that they did not
have any interest therein, and it after-
wards was discovered that they received
$20,000 of the price, the corporation suc-
ceeded in having the whole purchase
set aside and the $30,000 and interest
and expenditures refunded. _ St. Louis,
etc., Co. v. Jackson, 5 Cent. L. J., 817
(1877, St. Louis Cr.)

1In re Cape Breton Co., supra, L. R.,
26 Ch. D,, 221; Lydney, etc., Co. v.
Bird, 55 L, T. Rep., 558 (1886), reversing
L. R., 81 Ch. D., 828; Tyrrell v. B’k of
London, 10 H. L. C., 26; Benson vw.
Heathorn, 1 Y. & C. (Ch.), 826; Emma
Min. Co. v. Grant, supra; In re Am-
brose, etc., Co., L. R., 14 Ch. D., 390.

2Getty v. Devlin, 54 N. Y., 408 (1873);
id., 70; id., 504 (1877); id., 9 Hun, 603
(1877); Brewster v. Hatch, 10 Abb. N,
C., 400 (1881), The Solicitors’ Journal
thus summarizes the law on this sub-
ject as it now stands: ‘‘ Where the pro-
moter had originally bought, not for
himself, but for a company to be after-

ward formed, in such a case it was an
ordinary instance of purchase by an
agent, and the company would be en-
titled both to keep the property and to
call upon the promoter to repay the
profit he had made. But it is for the
company to prove this relationship of
principal and agent, and also that it ex-
isted at the time of the ‘original pur-
chase. Hence, where this is not shown,
the above rule does not apply, not even
although the promoter subsequently be-
comes a director of the company. In
this case it is his duty to inform the
company of the profit he is making; and
in default they are entitled, if they sa
choose, to a rescission of the contract.
But they cannot affirm thecontract and
also claim the profits; and if rescission
of the contract had become impossible,
they seem to have no remedy at all.”
8 R’y & Corp. L. J., 148, citing cases,

3 Hichens v. Congreve, 4 Russ., 562;
Beck v, Kantorowicz, 8 K. & J., 280;
Phosphate Sewage Co. v. Hartmout,
L. R., 5Ch. D., 394; Bagnall v. Carlton,
L. R., 6 Ch. D., 871; Emma Mining
Co. v. Grant, supra; Whaley Bridge

‘Co. v. Green, L. R., 5 Q. B. D., 109,

holding also that if the bonus has not
yet, been paid to the promoter tho
company may claim it from the person
contracting with it. Cf, Arkwright v,
Newbold, L. R., 17 Ch. D., 801, 819;
Sydney, etc., Co. v. Bird, 55 L. T. Rep.,
558 (1886), reversing L. R., 81 Ch. D.,.
828; Albion Steel Co, v. Martin, L, R.,
1 Ch, D., 580. The promoter is allowed

740 :
CH. XXXIX.] FRAUDS OF DIRECTORS, PROMOTERS, ETO. [§ 651.

property! The law is rigid in its protection of the corporation
and stockholders.

If the commission or bribe paid to the promoter consisted of
shares of stock, then the company may recover from him the
amount received by him upon a sale of the shares and all dividends
previously received, together with interest;? or, if he still holds the
shares, the company may recover the highest price which the shares
of the company have touched in the interval between the gift and
the action, together with interest.2 The subscriber for stock may
sue the directors for fraudulent representations if they knew that

the promoter was secretly receiving large illegal profits.‘

a reasonable sum for disbursements.
Lydney, etc., Co. v. Bird, supra. Cf.
Emma Mining Co. v. Grant, supra;
Bagnall v. Carlton, supra; South, etc.,
Co. v. Shaw, W. N., 1879, p. 159. The
promoter must disgorge, though by his
efforts the company paid for the prop-
erty less than it was worth. Emma,
etc., Co. v. Grant, supra. The statute
of limitations bars the suit. Metropol-
itan B’k v. Heiron, 5 Ex. Div., 819,
325. But only from the time when the
facts are known to the directors, or, if
the directors are also implicated, to the
stockholders. In re Fitzroy, etc., Co.,
50 L, T., 144. Where promoters, in col-
lusion with the owner of a mine, pay
him $20,000 therefor, and cause him to
transfer it to a corporation for $100,000
of the capital stock, and then induce
third persons to buy such stock at par
on representations that the mine cost
the promoters $90,000, and then receive
from the owner of the mine the proceeds
from the sale of the stock, less the
$20,000, the corporation may compel
them to pay over the profits to it.
Pittsburg Min. Co. v. Spooner, 42 N. W.
Rep., 259 (Wis., 1889).

1 Munson v. Syracuse, etc., R. R. Co.,
108 N. Y., 58 (1886); Erlanger v. New
Sombrero Co., supra; Lindsay, etc.,
Co. v. Hurd, supra; Bagnall v. Carlton,

e Gravi,

‘Bond-

Case, L. R., 2 Ch. D., 1 (1875); id., 24
W. R., 49; Pearson’s Case, L. R., 4 Ch.
D., 222; 5id., 336; In re Fitzroy, etc.,
Co., 50 L. T., 144; Nant-y-glo, ete., Co.,
L. R.; 12 Ch. D., 788; and
see § 650, supra; Chandler v. Bacon, 30
Fed. Rep., 588 (1887), where promoters
were compelled, at the option of the
corporation, to transfer stock back to
it or pay over the amount received by
them for stock sold, or to pay to it the
market value of stock which they as
promoters had received from him to
whom all the capital stock had been is-
sued in payment for a patent. The
agent of the person who deals with the
corporation may recover his compensa-
tion from that person, but he cannot
recover compensation for improperly
influencing the agents of the corpora-
tion to make the contract. Lydney,
etc., Co. v. Bird, L. R., 31 Ch. D., 328
(1885); Arkwright v. Newbold, L. R., 17
Ch. D., 301 (1881); Davidson v. Sey-
mour, 1 Bosw. (N. Y.), 88 (1857), where
the court say: ‘‘ There was secrecy, ap-
plications to individuals, a concealed
promise of compensation, and utter
ignorance and recklessness as to the
competency of the party whose cause
he was promoting and whose reward he
was to receive.”

4Persons induced to subscribe by a

supra. Cf. Smith v. Sorby, L. R., 3 ~ prospectus stating thata certain price

Q. B. D., 552, n.

2Emma Min, Co. v. Lewis, L. B., 4C.
P. D., 396.

3In Re Norvah, etc., Co., McKay’s

was paid for a business, when in fact a
large part of that price went as a bonus
to promoters, may sue the directors for
fraudulent misrepresentations. Capel

741

/
§ 652.] FRAUDS OF DIRECTORS, PROMOTERS, ETO. [cH. XXXIx.

holders cannot complain of promoters in the same way that the cor-
poration may."

§ 652. Sales of property by corporate officers to the corporation.—.
It is well said in the case of Michaud v. Girod?® that a person can-
not legaily purchase on his own account that which his duty or
trust requires him to sell on account of another, nor purchase on
account of another that which he sells on his own account. He is
not allowed to unite the two opposite characters of buyer and
seller. Especially is this the rule with corporate directors. If
they make sales to the corporation they may be compelled to pay
over to the corporation the profit realized by such sales,’ or the
corporation may refuse altogether to complete the contract. Gen-

v. Sinis, etc., Co., 58 L. T. Rep., 807
(1888). Where a promoter induces a
person to subscribe and pay for stock
by representing that property conveyed
by the promoter to the company cost
the promoter $20,000, when in fact it
cost him $14,000, the subscriber may
sue the promoter for damages for false
representations. Teachout v. Van Hoe-
sen, 40'N. W. Rep., 96 (Iowa, 1888). See
chapter XX, supra; 60 L. T. Rep., 591
(1889). *

1 Banque, etc., v. Brown, 34 Fed. Rep.,
145, 196 (1888). Cf. §§ 42, 44, 735.

24 How., 508 (1846).

“3 Albion Steel, etc., Co. v, Martin, L.
R., 1 Ch. D., 580 (1875), holding the di-
rector liable to refund profits on con-
tracts made subsequent to incorporation,
but not on those made previous to incor-
poration; Dunne v. English, L. R., 18
qg., 524 (1874), where two brokers hav-
ing agreed to divide the profits on a
mine to be bought by one and sold by
the other, the former compelled the
latter to divide a secret profit! which
‘the latter had obtained; Benson v.

‘Heathorn, supra, § 650, and other cases
therein.
4Coleman v. Second Ave. R, R. Co.,

38 N. Y., 201 (1868). Cf. In re Cape
Breton Co., 19 W. N., 54 (1884), where
the court declined to hold a director
responsible for profits make by a sale
of property from himself to the com-
pany, and declined to rescind the sale,
since the corporation could not restore

the property. Where the corporation
is insolvent, a director cannot turn in
his property in payment of his debt
due to the corporation. White, ete.,
Co. v, Pettes, etc., Co., 830 Fed. Reps,
864 (1887). A purchaser of corporate
assets at a receiver’s sale cannot claim
a leasehold which the president holds
to premises which were used by the
corporation. Crooked, etc.. Co. wv
Kenka Nav. Co., 87 Hun, 9 (1885). Di-
rectors cannot purchase machinery and
then sell it to the company at an ad-
vance. Redmond v.-Dickerson, 9 N. J.
Eq., 507 (1853). In the case of Great
Luxembourg R’y Co. v. Magnay, 25
Beav., 586 (1856), where the director
purchased for the corporation property
secretly owned by himself, the court
refused to interfere after the corporation
had resold the property without loss,
Under the above principle of law the
court refused to enforce a contract by

‘a director to furnish railway chairs to

his corporation. Aberdeen R’y Co, v.
Blakie, 1 Macq., 461 (1853). And in the
case of Flanagan v. Great Western R’y
Co., L. R., 7 Eq., 116 (1868), the court
refused to enforce a corporate agree-
ment to lease property to a director.
Stockholder’s bill does not lie to enjoin
an execution sale of the corporate fran-
chise and property on a judgment ob-
tained against the corporation by a
director for property sold to it by him,
there being no actual fraud, nor proof
of directorship at time of sale. Ward

742
OH. XXXIX.] FRAUDS OF DIRECTORS, PROMOTERS, ETC.
erally the director has purchased the property for the express pur-
pose of selling it to the corporation. When such is the case the
company may ratify and confirm the transaction, or it may keep
the property and recover from the director the profit realized by
him, or the company may repudiate the whole transaction, return
the property and recover back the purchase money.!

Where, however, the directors sell to the corporation at a profit
to themselves, but with a full and fair disclosure thereof, and with-
out participating in the acceptance of the property by the corpora-
tion, the tratisaction cannot be impeached afterwards?

Moreover, it is within the power of the majority of the stock-
holders to ratify and confirm such a transaction where there is no
actual fraud involved. The fraud is not an actwal one if the di-
rector sold at a fair price and did not use his position to induce the
corporation to purchase. Such a sale, however, is always a con-

v Salem St. R’y, 108 Mass., 382 (1871). to a newly-formed corporation in which

School directors may be enjoined from
selling their property to the district.
Appeal of Witmer, 15 Atl. Rep., 428
Pa., 1888), ;

1 Parker v. Nickerson, 112 Mass., 195
(1873), where the directors were held
liable for a price paid by the corporation
for a boat purchased from another cor-
poration, in which the directors were
also the directors and sole stockholders.
Heid liable to refund all profit above
cost of the boat to the vendor corpora-
tion.. If the corporation has made im-
provements on land purchased from the
director, it cannot compel him to take
the land and pay it the price paid him
and also the cost of the improvements.
Paine v. Irwin, 16 Hun, 390 (1878).
Where the corporation secretly agrees
to give a subscriber extra stock if he
will subscribe for a certain amount, and
he subscribes and intends that his sub-
scription shall be used to induce others
to subscribe without knowledge of the
secret gift, and they do subscribe, he
cannot receive from the corporation
such extra stock. The contract is void
as against public policy. Nickerson v,
English, § Northeast. Rep., 45 (Mass.,
1886). A sale of mortgaged property
under a power to sell by the mortgagee

he holds stock does not invalidate the
sale, though he could not sell to him-
self. Farrar v. Farrar’s Limited, 59 L.
T. Rep., 619 (1888).

2 Chesterfield Colliery Co. v. Black, 37
L. T., 740 (1878), where the court re-
fused to hold liable for profits a director
and a promoter where they had pur-
chased a mine before incorporation and
had sold it to the company at a profit,
it being clearly stated to the company
that a profit was being made, but the '
‘amount of that profit not being di-
vulged. Battelle v. Northwestern, etc.,
Co., 88 N. W. Rep., 327 (Minn., 1887).
In St. Louis, etc., R. R. Co. v. Tiernan,
15 Pac. Rep., 544 (Kan., 1887), it is held
that a sale by the directors of a road-
bed to the corporation is legal where all
the facts are known to all except a few
nominal holders of stock. Buta partial
disclosure is insufficient. Imperial, etc.,
Co. v. Coleman, L. Rj 6 H. L., 189
(1873), reversing L. R., 6 Ch., 568.
Where, upon foreclosure of corporate
property, the president and manager of
‘the corporation purchases the property
at its full value, other judgment cred-
itors of the corporation cannot attack
his purchase. Inglehart v. Thousand,
etc., Co., 109 N. Y., 454 (1888).

143
§ 653.] FRAUDS OF DIRECTORS, PROMOTERS, ETC. {oH. XXXIX.

structive fraud, and is voidable at the option of a majority of the
directors or a majority of the stockholders.

There is some difficulty in determining what will constitute a
confirmation of such a transaction. If a majority of the directors
and of the stockholders, without counting the votes controlled by
the director who is interested, favor a confirmation of the transac-
tion, a dissenting stockholder cannot bring suit to set it aside un-
less he can show the existence of some fraud other than the mere
fact that the vendor was a director when he made the sale: If,
however, a majority of the stockholders, excluding the votes owned
directly or indirectly by the guilty parties, are.in favor of bring-
ing the directors to an accounting, greater difficulty arises. The
weight of authority holds that the votes of the director as a stock-
holder are to be counted. If, however, actwad fraud is involved,
this question is immaterial, since no majority, however large, can
ratify actual fraud.! ~

§ 653. Purchases by directors from the corporation and purchases
at forecloswre sales.— One of the most frequent frauds perpetrated
upon a corporation and its stockholders is where one or more of
the directors purchase property from the corporation directly or

1Beatty v. Northwest, etc., Co., 5
Canadian Law Times, 277 (1885), rewg
8.C.,5C. L. T., 85, holding that a pur-
chase by the directors of a vessel from
one of the directors could not be set
aside by a dissenting stockholder where
a wajority of the stock had ratified the
purchase, even though the director him-
self held and voted that majority; Foss
v. Harbottle, 2 Hare, 461 (1848), where
the directors sold their property to the
corporation. Inasmuch as the majority
of stockholders could ratify the pur-
chase, the court refused to entertain a
stockholders’ suit until they had voted.
A purchase of a steamboat from one
who is a director and owns a majority
of the stock is valid where ratified by
a majority vote at a stockholders’ meet-
ing. The director may vote his stock.
Northwest, etc., Co. v. Beatty, 57 L. T.
Rep., 426 (1887). Where a person fraud-
ulently misrepresented a mine in its
sale to the company for shares of stock,
a suit by the company against him does
not lie where a majority of the stock

votes against the spit, although the
shares obtained by the vendee were
voted by him and were necessary to
make the majority, and although he.
was a director of the company at the
time. East, etc., Co. v. Merry weather,

2 Hen. & M., 254 (1864), This case goes

much further than the modern rule.
woulduphold. See Mason v. Harris, L.

R., 11 Ch. D., 97 (1879),'hofding explice

itly that where a director is guilty of

fraud as a promoter a dissenting stock-

holder may bring him to an accounting,

although the director controls the di-
rectorate and a majority of the shares
of stock. Atwool v. Merryweather, L.

R.; 5 Eq., 464, note (1867), where a dis-
senting stockholder sued to set aside a
sale of property to the company by the
defendant, who divided the profits with
one cf the directors. Although a ma-

jority of the stockholders had voted

not to bring the action, yet this major:

‘ity was made up by counting the stock

of the guilty parties, aud hence was not
binding.

44
CH. XXXIX.]

FRAULS OF DIRECTORS, PROMOTERS, ETC.
7 {

[3 653.

indirectly or participate in the profits of such a purchase. The law
is well settled that a director’s purchase of property from the cor-

poration is voidable at the option of the corporation, even though
the directors paid fully as much, as or more than the property is
worth. This principle of law was fully established by the cases
of Cumberland Coal Company against Sherman! and Hoffman
Steam Coal Company against Cumberland Coal and Iron Com-

pany.”

Similar rules prevail in regard to a director’s purchases of cor-
porate property at a foreclosure sale thereof. He cannot be a pur-
chaser, either directly or indirectly, at the foreclosure sale. This

130 Barb., 533 (1859). The court also
held that the purchase by the directors
could be ratified only by the unanimous
vote of all the stockholders, and that a
ratification by proxy would not bind the
stockholder himself. 8S. C., 20 Md., 117.

216 Md., 456 (1860), where a minority
of the directors purchased part of the
corporate property at an undervaluation
and then sold it to the Hoffman Com-
pany, in which they were large stocks
holders. The court held that the latter
was chargeable with notice of the void-
able act. This case and the preceding
one grew out of the same transactions.
See, also, Buell v. Buckingham, 16
Iowa, 284 (1864), holding that the pur-
chase is voidable but not void. It may
be avoided, however, without proving
any actual fraud on the part of the di-
rector or injury to the corporation. It
is fraudulent per se. ‘See, also, Jones
e. Arkansas M. & A. Co., 88 Ark., 17
(1881), involving a scheme where a di-
rector purchased at a foreclosure sale
and re-organized. A stockhelder who
did not come in caused the purchase to be
set aside, Dennis v. Kennedy, 19 Barb.,
517 (1854). Where the directors had
purchased corporate property after its
sale on alien, and the purchase by them

‘was held to be fraudulent, the passive

connivance of a director renders him
liable the same as though he partici-

‘pated. Weetjen v. Vibbard, 5 Hun, 265

(1875). A sale of corporate bonds to a
syndicate of which three of the direct-
ors are members is valid, the price

being adequate. Du Pont v. Northern
Pac. R. R. Co., 18 Fed. Rep., 467 (1888),
per Wallace, J. Where a director takes
for himself the right of the corporation
to subscribe for new stock he is liable in
damages. Greenfield, etc., B’k v. Si-
mons, 133 Mass., 415 (1882). But cor-
porate creditors cannot have set aside
an old sale of land by the corporation to
the directors through ‘‘ dummies,” even
though the sale was at a totally inade-
quate price. Graham v. R. R, Co., 102
U. S., 148 (1880). Where the president
and a director purchase the corporate
property at an execution sale, and agree
to convey it to the corporation upon re-
payment of the amount paid, the cor-
poration may redeem it long subse-
quently upon payment and reimburse-
ment for improvements made. Wasatch
Min. Co. v. Jennings, 16 Pac. Rep., 399
(Utah, 1888), Where in a joint-stock
company one member buys all the com-
pany’s property at an execution sale,
though he owes the company more than
the price paid, the company is entitled
to the property and an accounting lies.
Bradbury v. Barnes, 19 Cal., 120 (1861).
But a sale of an insolvent corporation’s
property to a director for its full value
is upheld when bone fide and advanta-
geous to all. Ashhurst’s Appeal, 60 Pa.
St., 291 (1869), Director may be trustee
in a trust deed executed by his corpora-
tion. Bassett v. Moote, etc., Co., 15
Nev., 293 (1880). Issue of stock at a
discount. Gamble v. Queens, etc., Co.,
5.N, Y. Supp., 124 (1889).

745
§ 653. ] FRAUDS OF DIRECTORS, PROMOTERS, ETO. | CH. XXXEX,
is the rule whether the foreclosure is instituted by those interested
in the corporation or by third parties. If the director purchases at
such a foreclosure sale he holds the property as trustee for the
benefit of the corporation and the stockholders. Upon being re-
paid the price he gave therefor, he must make over the property
to the corporation.’ Thus, where a director who practically con-
trolled the board of directors caused all the earnings of the railroad
to be used in improving the property, thereby preventing a pay-
ment of interest on the corporate indebtedness and bringing about
a foreclosure of the mortgage, the director himself having pur-
chased the bonds secured by the mortgage and having purchased
the railroad at the foreclosure sale, the court in an able opinion
held that the purchase at the foreclosure sale by the director was
voidable. Upon repayment to him of the purchase price he may
be compelled to retransfer the property to the corporation, even

though another foreclosure will be the result.

1 Harts v. Brown, 77 Ill, 226 (1875).
To same effect, Hope v. Salt Co., 25 W.
Va., 789 (1885), where the director resold
the property at three times its cost to
himself. See, also, Jackson v. Lude-
ling, 21 Wall., 616, 625 (1874), where
the directors were part of those who
purchased at a foreclosure sale of the
corporate property; also, Munson v.
Syracuse, etc., R: R. Co., 29 Hun, 76
(1883), where the directors purchased
for the purpose of re-organizing the cor-
poration; 8. C.,.103 N. Y., 58 (1886),
where Munson was a director in an in-
solvent railroad corporation and also a
director in a corporation that wished to
purchase said railroad, and in behalf of
the latter company contracted to pur-
chase the said railroad from the bond-
holders after the latter should purchase
the same at a foreclosure sale. The court
refused to enforce the contract; Ra-
leigh v. Fitzpatrick, 11 Atl. Rep., 1(N.
J., 1887), where the directors of a cor-
poration owning land subject to a mort-
gage allowed a foreclosure to be made
and then purchased at the sale. See
Foster v. Oxford R. B., 18 C. B., 200.
See Allen v. Jackson, 138 N. E. Rep.,
840 (Ill., 1887), holding a dircctor who
had purchased corporate property at a

Third persons who

foreclosure sale liable to former pur.
chasers of that property from the cor-
poration, subject to the mortgage.
Where a director purchases property

from an insolvent corporation ‘“ it de-

volves on the directors to show that the
transaction was made in good faith,
and that the sale produced the full
value of the, property. If they fail to
show these facts, creditors are entitled
to compel them to account for the full
value of the property.” Wilkinson v.
Bouerle, 7 Atl. Rep., 814 (N..J., 1886).
Sale of property to a syndicate of which
a director is a member will not-be set
aside when the full value was received
by the corporation, and the sale was
made in order:to protect the parties
who were sureties for the price to be
paid by the corporation for the prop:
erty. Hill v. Nisbit, 100 Ind., 341 (1884),
A purchase by a stockholder, however,
is legal. Mickles v, Rochester City B’k,
11 Paige, 118 (1844). In Twin Lick Oil
Co. v. Marbury, 91 U. S., 587 (1875),
a director loaned money to the corpc-

ration, took bonds therefor, and had:

the bonds secured by a mortgage run-
ning to a third person as trustee, and
upon asale by the trustee the director

purchased for himself.

746

dd
4
CH. XXXIX.] | FRAUDS OF DIRECTORS, PROMOTERS, FTO. [§ 653.
have purchased the road from him with notice stand in no other
position than the director himself.

A director cannot purchase corporate property sold under execu-
tion,? nor purchase, either in his own name or the name of an-
other, corporate property sold for the payment of faxes.’ The
corporation may reclaim the property upon payment to the di-
rector of the amount he paid therefor. A similar rule applies where
a director allows or brings about a forfeiture of a lease which the
company holds as lessee, and then takes a new lease of the same
property in hisown name.‘ The disability of.directors to purchase
property from the corporation does not restrict their right to sub-
scribe for unissued stock of the corporations There is some diffi-
culty in determining whether this disqualification of a corporate
officer to purchase property from the corporation extends to officers
other than the president and directors. It has been held to affect
the treasurer of ‘the corporation® and also the cashier of a bank.?
It has also been intimated that a superintendent of the corporation

is under the same disability.®

Covington & Lex. R. R. Co. v. Bow-
ler’s Ex’rs, 9 Bush (Ky.), 570 (1872). In
the case of Kitchen v. St. Louis, etc., R’y
Co., 69 Mo., 224 (1878), the court says:
‘* Whatever is sufficient to put a person
on inquiry is notice; that is, where a
man has sufficient information to lead
him to a fact he shall be deemed cogni-
zant of it.” So, also, where a director
agrees to redeem from an execution sale
certain corporate property, on an under+
standing that he does it for the corpora-
tion and his payment is to be a preferred
corporate debt, the corporation may re-
deem long subsequently, even though
the director had, after a time, treated
the property as his own. Wasatch
Min. Co. v. Jennings, 15 Pac. Rep., 65
(Utah, 1887). Where a corporation is
liable to an officer on a debt, the officer
may purchase at a foreclosure sale prop-
erty upon which the corporation has a
subsequent lien; may pay the prior lien
out of the corporate funds; and may
hold the title to secure the debt due
him, Smith v. Lansing, 22 N.’Y., 520
(1860).

2Hoyle v, Plattsburg, etc., R. R. Co.,
64.N. Y., 314 (1878).

3Smith v. Fagan, 17 Cal., 178 (1860).

4Bengley v. Wheeler, 45 Mich., 493
(1881); Smith v. Bank of ‘Victoria, 41 L.
J. (P. C.), 84 (1872). -In the latter case
the ‘director re-organized and allowed
part of the old stockholders to come in.:
A dissenting stockholder caused the
whole transaction to be set aside.

5Sims v. Street R. R. Co., 37 O. St.,
556 (1882). See, also, § 64. Cf. Charles-
ton Ins. & Trust Co. v. Sebring, 4 Rich.
Eq. (8. C.), 342 (1853), where the direct-
ors purchased from the corporation
stock which the corporation: had pre-
viously issued and had purchased for
itself. See, also, Parker v. McKenna,
L. R., 10 Ch., 96 (1870), and York, etc.,
R’y Co, v. Hudson, 16 Beav., 485 (1853),
holding that upon an increase of the
capital stock the directors have no right
to make a secret profit in its disposal.

6McAllen v. Woodcock, 60 Mo., 174
(1875), holding that the treasurer’s pur-
chase of the corporate property at an
execution sale thereof is a purchase for
the benefit of the corporation. See, also,
Parker v. Nickerson, 112 Mass., 195 (1878),

7First Nat’l B’k v. Drake, 29 Kan., 311
(1883); Torrey v. B’k of Orleans, 9 Paige,
648 (1842); aff'd, 7 Hill, 260.

‘8Cook uv. Berlin Woolen M. Co., 48

747
(CH. XXXIx,

§ 654.] FRAUDS OF DIRECTORS, PROMOTERS, BTC.

§ 654. Reorganization’ and purchases of corporate property by a
majority of the stockholders.— The term re-organization, as applied
to corporations, may be said to be a business arrangement whereby
a new corporation is formed and the property of an old corporation
is transferred to the new corporation. There are in’ general three
methods in which a re-organization may be effected.

The first method is by a foreclosure of a mortgage on the cor-
porate property? Ordinarily a foreclosure proceeding proceeds
quietly to a sale of the property. But the large interests involved
in a railway foreclosure lead to strenuous opposition thereto. Ac-
cordingly it is found to be expedient, during or previous to a rail-
way foreclosure suit, for the parties interested in the property,
whether they be the stockholders or bondholders or mere outsiders,
to formulate and propose to the bondholders and stockholders a
plan of re-organization whereby, after a foreclosure sale, the pur-
chaser of the property will allow the said bondholders, and: often
also the stockholders, to come into a new company which shall own
the property so purchased. It has been found necessary, in most
cases, to re-organize on some such plan, in order to quiet the defense
to the for edlosure, or to raise the funds required in the re-organiza-
tion, or to obtain a charter from the state for the re-organized en-
terprise, or to preserve intact the system of railways, branches,
leases and connections which give value to the property foreclosed.
This method of effecting a re-organization is legal and valid, since
it involves an ordinary foreclosure of a mortgage and an agreement
of interested parties to purchase at the foreclosure sale. The fore-
closure cuts off all rights of the old corporation and stockholders to
the property foreclosed, and also the rights of the bondholders
whose mortgage is foreclosed.? The only rights which any of these

Wis., 433 (1877). In this case the super- °

intendent’s purchase was illegal, inas-
much as one of the directors was a
secret partner in the purchase. A cor-
poration may set aside an execution sale
fraudulently concealed by its agent, who
was interested in the judgment, which
fact the purchasr knew. Lang, etc., Co.
v. Ross, 18 Pac, Rep., 858 (Nev., 1888).

1The word “re-organization” is a
term peculiar to corporation law. For
an explanation of its meaning and the
various uses to which it is applied, see
an article written by the author in 1 Ry
& Corp. L. J., 97 (1887).

? Re-organization can be effected only
by unanimous consent of the bond-

holders and stockholders or by a fore-
closure. Otherwise any bondholder
may object and enforce the mortgage.
Hollister v. Stewart, 111 N. Y., 644
(1889),

’ Thus where, in order to quiet oppo-
sition to a foreclosure, the bondholders

‘offer to.the stockholders a plan of re-or-

ganization whereby the foreclosure is to
proceed, a sale be made, a new corpora-
tion formed to take the property, and
the old stockholders to be allowed to
come in if they apply within a certain
time, and this plan is carried out, a
stockholder who had no knowledge of
the plan until after the limited time
had expired cannot compel the new

748
CH. XXXIx. ]

FRAUDS OF DIRECTORS, PROMOTERS, ETO. [

G5 L.

COO _

parties have, after. the foreclosure, are such rights as the plan or
contract of re-organization gives them. By this plan generally the
old stockholders. are allowed to come into the new corporation
upon the payment of a fixed sum for each share of stock held by
them. The bondholders are generally allowed to exchange the old
bonds for new ones in the new corporation on different terms of

interest and times of payment.
this are favored by the courts.!

corporation toadmit him. His remedy,
if he has any, is to inpeach the fore-
closure. Thornton v. Wabash R’y Co.,
81 N. Y., 462 (1880). Where part of

bondholders purchase at foreclosure:

sale, the other bondholders cannot claim
the right to participate in the purchase.
Vose v. Cowdrey, 49 N. Y., 336 (1872).
As an instance of a re-organization
where the decree of foreclosure pro-
vides for allowing the old stockholders,
etc., to come in, see Wood v. Dubuque,
etc., R. R. Co., 28 Fed. Rep., 910 (1886).
In a re-organization scheme, a bond-
holder who goes into it may hold the
trustees personally responsible for his
agreed interest in the new company,
Riker v, Alsop, 27 Fed. Rep., 251 (1886).
Cf. Stanton v. Missouri, etc., R’y Co., 4
R’y & Corp. L. J., 870 (N. Y., 1888), If
the trustee who forecloses is under con-
tract obligation to purchase for the
bondholders, and does purchase, but
sells to another company, any bond-
holder may sue him for the breach of
trust. James v. Cowing, 82 N. Y., 449
(1880). Where the stockholders enter
into an agreement whereby a person
is to purchase at foreclosure sale and
allow them to participate, such agree-
ment may be enforced. Marie v. Gar-
rison, 83 N. Y., 14 (1880). After fore-
closure and sale: quo warranto lies at
the instance of the state to dissolve the
old corporation. People v. Northern R,
R. Co., 42 N. ¥., 217. The purchasers
at a foreclosure sale do not thereby be-
come stockholders in the old corpora-
tion. Metz v. Buffalo, etc., R. R. Co.,
58 N. Y., 61; Wellsborough, etc, P. R.
Co. v, Griffin, 57 Pa. St, 417. The re-

‘Yates v. Boston, etc., R. B.,

Plans.of re-organization such as
There must, however; have been

organized company is not bound by
the route of tho old company, and a
subscriber to the former is not released
by a change in such route. Chartier’s
R’y Co, v. Hodgens, 85 Pa. St., 501. The
purchasers at the foreclosure sale are
liable for damages done by the rail-
road, the same as common carriers are.
Rogers v. Wheeler, 43 N. Y., 598 (1871).

1“ Without such previous organiza-
tions and arrangements great sacrifice
and loss must attend all such sales.

‘They are, therefore, to be promoted

rather than discouraged by unnecessary
and improper exposure of their mem-
bership.” Robinson v, Philadelphia,
etc., R. R. Co., 28 Fed. Rep., 840 (1886);
58 Conn.,
833 (1885). Re-organization agreements
are legal. Mackintosh v. Flint, etc.,
R. R., 84 Fed. Rep., 682 (1888). An
action by a stockholder to set aside a
foreclosure sale, which he alleges was
collusive and fraudulent in that the
bondholders and part of the stockhold-
ers had arranged to have the foreclosure
made for the purpose of re-organization,
is demurrable unless the consenting
stockholders and the trustees in the
mortgages are made par ties defendant.
Ribon v. R. R. Companies, 16 Wall.,

446 (1872). See, also, Harpending wv.
Munson, 91 N. Y., 650, with reference
to the corporation as a party to the suit.
In a suit by a receiver and general man-
ager of a railroad against the purchasers
of it at a foreclosure sale to allow him
to have an interest, as had been agreed
upon before the sale, the only way to
raise the question of the legality of the
agreement is by demurrer, Farley v,

749
~

§ 654.]

i

FRAUDS OF DIRECTORS, PROMOTERS, ETC.
\

\
\

[ou. xxxrx.

-no fraud or collusion exerted whereby the property at the sale

brings less than its real value. The courts uphold purchases by the
re-organization company for the reason that thereby a better price
is obtained for the property than could probably be obtained other-

wise.

Thus it has been held that a purchase of corporate property

by a majority of the stockholders at a foreclosure sale, if made in

good faith and without oppression or undue advantage being taken |

of the minority, is legal and valid. It is not constructive fraud.!

Kittson, 120 U. S., 303 (1887). A bond-
holder who signs the re-organization
agreement but does not deposit his
bonds is not entitled to come in. Car-

penter v Catlin, 44 Barb., 75 (1865);

112 N. Y., 486 (1889). Gates v. Boston,
etc., R. R. Co., 53 Conn., 833 (1885),
holds that a purchase of the foreclosed
road by a portion of the bondholders
and.a re-organization by them is legal.
A. bondholder who had no notice can-
not set the transaction aside.

A bondholder seeking to remedy a
conspiracy whereby a syndicate of the
bondholders foreclosed and bought the
property at a small valuation cannot
claim a lien on the property. His
remedy is a bill to set aside the fore-
closure. Richter v. Jerome, 123 U.S,
233 (1887); St. Louis, etce., Co. v. San-
doval, etc,, Co., 116 Tll., 1'70 (1886), hold-

ing that where the foreclosure or disso-

lution sale was irregular and void, but
the re-organized company in good faith
had expended large sums on the prop-
erty, the court will protect the latter
as far as possible. In Sanxey uv. Iowa,
etc., Glass Co., 63 Iowa, 707 (1888), a

‘bondholder objected to a provision in.
‘the foreclosure decree allowing the .

trustee to bid in the property for the

‘bondholder, on the ground that he was

a guarantied bondholder, and the court
sustained him. In Hazard v, Vermont,
etc., R. R. Co., 17 Fed. Rep., 758 (1888),
the court refused to restrain the consoli-
dated company from issuing its bonds
in compromise to persons entitled to
moneys due from one of the consolidat-
ing companies to the other, See, also,
Child vu. N. Y., etc, R. R, Co, 129

Mass., 170 (1880), where a strict foreclos-
ure and re-organization was provided for
in the deed of trust. But where the re-
organization agreement allows all un-
secured creditors to come in and partici-
pate in the purchaseand re-organization,
the scheme is legal. Hancock v. Toledo,
etc., R. R. Co., 14 Chic. L. News, 153
(U. 8. C, C., 1882). See, also, Shaw w.
R. R. Co., 100 U. S., 605 (1879), where
the legality of the ordinary method of
re-organization was fully discussed and
sustained and a bill of certain bond-
holders attacking it was dismissed.
See, also, Matthews v. Murchison, 18
Fed. Rep., 691 (1883); S. C., 17 Fed.
Rep., 760 (1883); Bliss v. Matteson, 45
N. Y., 22 (1871), holding that a special
agyveement with an influential bond-
holder, giving him an advantage over
other similar bondholders, is void.
Railroad Co. v. Howard, 7 Wall., 393
(1868), holding that an agreement
whereby the stockholders receive com-
pensation and allow the foreclosure is
void, since the corporate creditors are
entitled to the whole value of the prop-
erty which necessarily included the
compensation paid to the stockholders.
Cf. Marie v. Garrison, supra. Equity
will protect and enforce an agreement
of the purchaser at the foreclosure sale
to allow other holders of securities to
participate with him in the purchase.
Cornell vu Utica, etc., R. R. Co., 61
How. Pr., 184 (1881), See, also, Penn.
Trans. Co.’s Appeal, 101 Pa, St., 576
(1882); Sage v, Central R, R. Co., 99 U.
8., 384 (1878); Wetmore v. St. Paul, ete.,
R. R. Co,, 5 Dill., 581 (1880),
1 Same cases.

750
72

CH. | FRAUDS OF DIRECTORS, PROMOTERS, ETO. .[§ 655.
The purchases by a majority of the stockholders may be objected
to and set aside only when they are actwally fraudulent.! The rule,
however, is different where the purchaser at the foreclosure sale
was a director of the old corporation! Such a purchase is fraudu-
lent as a matter of law, even though made in good faith and a full
price paid for the property.’ The corporation or a dissenting stock-
holder may cause the sale to be set aside; or may claim for the cor-
poration the property itself, upon repayment to the director of the
price he paid therefor. It is a rule of law, also, that the trustee of
the mortgage itself cannot purchase at the foreclosure, even for
the benefit of the bondholders and stockholders.’ It is importatit
to mention, in this connection, that a collusive foreclosure, whereby
the corporate directors who might make a valid defense do not do
so, but allow judgment to be taken by default, may be impeached
and set aside by a stockholder on the ground of fraud.‘

- There may be a valid agreement between a railway corporation,
the mortgagees in trust of its road and the bondholders that after
a sale under the mortgage the company should be so re-organized
. that the stockholders and unsecured creditors of the old company
should become stockholders in the new company. Such an agree-
ment would modify to that extent the effect of the mortgage sale.’

In Canada the statutes provide that upon corporate insolvency
a certain proportion of the security-holders may agree upon a plan, é
subject to the approval of the court, whereby the interests of all
the security-holders may be arbitrarily reduced in value. This
is legal and binds all parties.’

In England there is no such thing as the foreclosure of a railroad
mortgqgge. A plan of re-organization is submitted to the court upon
the application of a certain part of the interested persons, and if
the court approves of the plan it is binding upon all stockholders
and creditors.’

§ 655. The second method of re-organization may be said to be a

! See Carter v. Ford Plate Glass Co.,
85 Ind/ 180 (1882), where the offer
was made to all the stockholders to
come into the re-organization on equal
terms, And see § 662.

2See § 653, supra.

8Kitchen v, St. Louis, etc., R’y Co.,
69 Mo., 224 (1878), holding, however,
that delay, will bar the right of other
parties to ‘object. In Racine, etc., R.
R. Co. v. Farmers’ Loan, etc., Co., 49
Jil., 831 (1868), it was held that sebete a
person takes charge of a railroad for

the benefit of the mortgagee he cannot
be a purchaser at the foreclosure sale.
4See § 659, infra.

§ Smith v. Chicago, etc., R. R. Co., 18
Wis., 17 (1864).

6Canada Southern R’y Co. v. Geb-
hard, 109 U. 8., 527 (1883).

TAs to the rights of creditors, see
Stevens v. Mid-Hants R’y, L. R., 8 Ch.,
1064 (1878); Re Cambrian R’y, L. R., 8
Ch., 278 (1868); Re Devon, etc., R’y,
L. R., 6 Eq., 610 (1868); London, ete.,
Assoc. v. Wrexham, etc., R’y, L. R., 18
Eq., 566 (1874),

751
§ 656.] FRAUDS OF DIRECTORS, PROMOTERS, ETC. [CH. XXXIX,
re-organization under a mortgage foreclosure sale as in the preced-
ing method, but under a plan prescribed by statute for letting in
the old bondholders and stockholders. It is generally necessary
for the purchasers at the foreclosure sale to re-organize under a stat.
ute where such a statute exists, since usually under that statute
only will the state grant a charter of incorporation to the purchas-
ers.' Such re-organization statutes exist in several of the states,?
Generally the statute prescribes the procedure to be followed in al-
lowing the stockholders of the old corporation to become members
of the new corporation. Where such a procedure is prescribed and
a newspaper advertisement is made as required by statute, limiting
the time within which the old stockholders must apply for admis-
sion into the new corporation, a stockholder of the old corporation
who fails to apply within the prescribed time is barred of all right
to come into the new corporation, and a court of equity cannot
give him any relief. ; ;
§ 656. That which may be called a third method of re-organizing
a corporation is where the directors or the stockholders turn over
the assets of the corporation to a new corporation. This is done
in various ways. It may be by a consolidation with another com-
pany, or by a sale or lease of the whole corporate property to that
other corporation. The validity of such acts as against the dissent

after a foreclosure sale of a railroad any
or all of the old stockholders might

1 It is clearly established that the pur-
chasers at the foreclosure sale do not

succeed to the corporate capacity and
franchise of the old corporation, Metz
v. Buffalo, etc., R. R. Co., 58 N. Y., 61
(1874); Wellsborough, etc., P. R. Co. v.
Griffin, 57 Penn. St., 417 (1868). See,
also, an able article on Foreclosure of
Railway Mortgages by R. Mason Lisle,
in American Law Review, Dec., 1886.
Cf. Commonwealth v. Central Passen-
ger R’y Co., 52 Penn. St., 506 — under
a statute. This corporate franchise is
to be distinguished from the eminent
domain franchises which were exer-
cised by the old corporation. The lat-
ter franchises generally pass under the
mortgage as authorized by statute. A
re-organization under the usual statute
has the effect of creating ‘a new -corpo-
ration. It is not a mere amendment of
thé old charter. Marshall v. Western
N.C. R. R. Co., 92 N. C., 822 (1885).
2The New York statute of 1858 (ch.
502, § 2), whereby within six months

come into the new corporation by pay-
ing their proportion of the execution
sale price, was repealed by Laws of
1854, ch, 282, and Laws of 1874, ch, 480,
the latter being the act ‘‘to.facilitate
the re-organization of railroads sold un-
der mortgages,” etc. See Pratt v,
Munson, 84 N. Y., 582 (1881), The act
of 1874, ch. 430, now regulates re-organ-
ization incorporations in New York.‘
For Ohio, see R. 8. 1880, § 3393 et seg.

3Vatable v. N. Y., etc., R. R. Co., 96
N. Y., 49 (1884), the court saying: ‘It
would lead to intolerable inconvenience,
confusion and difficulty if the stock-
holders of the old company could, in
such a case take their own time to as-
sent to the plan of re-organization, and
to assert their right to become members
of the new company upon such facts as
they would be able to establish in a court
of equity.” Reversing 11 Abb, N. G,
183, :

752
CH. XXX1x.] ~ FRAUDS OF DIRECTORS, PROMOTERS, ETC.
5 )
of a stockholder has been treated elsewhere.! The validity of such
sales of the corporate property is generally determined by ascer-
taining whether the sale is wlfra vires or not. Sometimes, how-
ever, an element of fraud is involved and will suffice to set aside
the transaction. \ Thus it is illegal and fraudulent for the majority
of the stockholders to purchase the property of the corporation at
a sale authorized by themselves.? Such a purchase by the majority
may be set aside in the same way and to the same extent that a
purchase of corporate property by a director may be set aside.’
This' is the rule even though the majority purchase and proceed
to a re-organization of the corporation, and offer to allow all the
stockholders to become members of the new.corporation.* That a
purchase by a corporation director at such a sale is voidable is well
established.’ It is also fraudulent and illegal for the majority to
dissolve the old corporation, form a new one, and sell the property

[$ 656.

of the old one to the new ‘corporation at a ‘valuation placed upon.

the property by the majority themseélves.*

A recapitalization of a corporation differs from a re-organization.
The former occurs where‘new capital is added to the existing cor-
poration, or old securities and liabilities are voluntarily reduced in

amount. No foreclosure takes place.’
_ 1 See chapter XL. be a fraud on the creditors of the old
2See § 662, infra. See, also, Reilly v. corporation. San F., etc., R. R. v. Bee,

Oglesby, 25 W.. Va., 36 (1884), where the
court said: ‘‘It is a well-settled prin-
ciple of equity jurisprudence that a
party holding a fiduciary relation to
trust property cannot become the pur-
chaser of such property, either directly
or indirectly; and if he does the sale is
voidable, and will be set aside at the
mere pleasure of the beneficiaries, al-
though such fiduciary may have paid a
full price and gained no advantage.
. A purchase by or for them at
a sale ordered by them, acting in the
capacity of directors, would be
voidable and would be set aside at the
mere pleasure of any stockholder.”
3 Id.
4Banks v. Judah, 8 Conn., 145 (1830),
holding, however, that long delay of a
dissenting stockholder in bringing suit
will bar his remedy. This, perhaps, is
_the first re-organization case that is to be
found in the books, The formation of

48 Cal., 398 (1874). A secession of the
majority, carrying corporate funds to a
new corporation, is a fraud on the old
corporation. Tomlinson v. Bricklayers,
etc., 87 Ind., 308 (1882).

5 See § 653, supra.

6 Mason v. Pewabic Min. Co., 25 Fed.
Rep., 882 (1885), holding also that the
court will set the transaction aside,
order a public sale of the property, and
will confirm the first and illegal sale
only in case the price then paid exceeds
the price offered at the public auction.

7 For instances, see Park v. Grant Lo-
comotive Works, 3 Atl. Rep., 162 (N. J.,
1885); Gilfillan v. Union Canal Co., 109
U. S., 401 (1883); Canada, ete, R. R,
Co, v. Gebhard, id., 527. The legislature
may by statute allow stockholders to
vote on a plan to relieve the corporation
from its embarrassments, and may pre-
scribe that votes not cast within three
months shall be counted in the affirma-

a new corporation and a transfer to it tive. Union Canal Co. v. Gilfillan, 93
of all the assets of the old one may also Pa. St., 95.
(48) 158

\
1
|

§ 657.] FRAUDS OF DIRECTORS, PROMOTERS, ETC. [CH. XXXIX.

§ 657. Voting salaries or compensation to corporate officers — A
frequent fraud upon corporations and stockholders is perpetrated
by the corporate funds being used to pay salaries and compensa-
tion to corporate officers and assistants. It is well-established law
that a director is not entitled to any pay for his services to the cor-
poration as a director where there has been no agreement in ad-
vance that he shall have a salary.) Not even the president can

claim a salary for his services where none was voted to him before

the services were rendered.”

i

There is strong authority to the effect that directors cannot vote
a salary to themselves even in advance of their services as direct-

ors.’

American, etc., R’y Co. v. Miles, 52
Tll., 174 (1869); Illinois Co. v. Hough,
91 id.; 68 (1878); Citizens’ Nat’l B’k v.
Elliott, 55 Iowa, 104 (1880); Smith v. Put-
nam, 61 N. H., 682 (1882). A director
who receives a salary for certain serv-
ices cannot recover a further sum for
other services, where he was not ex-
pressly employed to render the latter
services and there was no promise to
pay. Acceptance of the service is im-
material. Gill v. N. Y. Cab Co., 48
Hun, 524 (1888). A vice-president can-
not recover for extra services where
there was no agreement to pay him.
Id.

2Merrick v. Peru Coal Co., 61 ITIL,

. 472 (1871); Holland v. Lewiston, etc.,
B’k, 52 Me., 564 (1864), Burrill v. Calen-
dar, etc., Co., 50 Hun, 257 (1888); Com-
monwealth Ice Co. v. Crane, 47 Mass.,
64 (1848), where it was even proved that
the former president had a salary; Kil-
patrick v. Penrose, etc., Co., 49 Pa. St.,
118 (1865), where the president was also
the treasurer. Salary of president
ceases upon a discontinuance of corpo-
rate business by a sale of all its prop-
erty. Long I. T. Co. v. Terbell, 48 N.
Y., 427 (1872). The president is not en-
titled to a preference in payment under
a statute giving to ‘‘laborers” of an
insolvent corporation such a preference.
England’s Ex’rs v, Beatty, etc., Co., 41
N. J. Eq., 470 (1886). Note is not col-
lectible by a principal whose agent
made the note as president of a corpo-

Certain it is that a resolution to pay a director for his serv-

ration, where the consideration there-
for was unpaid salary of the president,
and the note was ratified by the corpo-
ration only by the casting vote of the
president. Chamberlain v. Pacific, etc.,
Co., 54 Cal., 103 (1880). Under a pecul-
iar charter provision it was held in
Grundy v. Pine, etc., Co., 9S. W. Rep.,
414 (Ky., 1888), that there was an im-
plied obligation of the corporation to
pay its president a salary. A’ salary as
fixed for a preceding year gives no right
to a salary for prior years. Smith v.
Woodville, etc., Co., 66 Cal., 398 (1885).
Where directors buy the stock owned
by the president and pay for it by
checks on the company, and a part of
the sum so drawn they by resolution
cause to be charged to the: president’s
salary for past services, they are liable to
the receiver for such salary. The presi-
dent, who did not claim any salary nor
know that it entered into. the amount
paid to him, is not liable. Ellis ». Ward,
20 N. E. Rep., 671 (Ill, 1889). Stock
may be issued to the president in pay-
ment of past salary and debts. Reed
v. Hayt, 4 R’y & Corp. L. J., 135 (N. Y.,
1888), holding, also, that though the
president himself was one of the three
directors voting for the same, yet that
long acquiescence cures any right to
object. Aff’'d,109N. Y., 659

3 A resolution that directors shall re-
ceive pay for attendance in the future
doesnot sustain action therefor. It is
a promise to give a gratuity, and is not

754
OU. XXXIX.]

FRAUDS OF DIRECTORS, PROMOTERS, ETC.

ices is not enforceable, even when made before the services are
rendered, if the vote of the director who is interested is necessary

to carry that resolution.

Where the board of directors vote large pay to themselves, evi-
dently in bad faith, and with a view to depriving the. corporation
of more than a reasonable proportion of its net earnings, a dissent-
ing stockholder may file a bill in equity to have the amount recov-

ered back.?

And where the chief stockholder, who is president,

induces the directors, his “ dummies,” to vote a large salary to him,
the corporation may defeat the officer’s action at law to recover it.

enforceable compulsorily. Dunston v.
Imperial Gas Light Co., 3 B. & Ad.,
125 (1882). Directors voting stock to
themselves in compensation for selling
corporate stock are liable for value of
the stock upon corporate insolvency.
Freeman’s Assignee v. Stine, 15 Phil.,
87 (1881). Stock issued to directors, on
a vote of themselves, in payment for
extra services, will be ordered canceled
by the court. Jones v. Johnson, 6 8.
W. Rep., 582 (Ky., 1888). Collins v.
Godfrey, 1 B. & Ad., 956, where a di-
rector was not allowed to receive a re-
ward offered for the recovery of stolen
property. MacNaughton v. Osgood, 41
Hun, 109 (1886), holds that a stock-
holder cannot cause the vote of salary
to be set aside and repayment made
merely by proving that the officers
voted it to themselves. He must prove
actual fraud. This decision, however,
may well be doubted. ‘Wilson v. Met-
ropolitan El, R. R. Co., N. Y. Superior
Ct. (Daily Reg., Feb. 8, 1887), holding
that notes given in payment of such
salary are enforceable by bona fide pur-
chasers.. But see Kelsey v. Sargent, 40
Hun, 150 (1886), denying this right of
the directors to vote salaries to them-
selves; and see cases in following note.
A salary voted to the president by a
quorum of three directors, two being
absent, and the president being one of
the three, is not enforceable. Copeland
v, Johnson, etc., Co., 47 Hun, 235 (1888).
Where directors are allowed a salary
by the charter it may be paid out of the
capital if no profits are made. Lewis’

Case, 26 L. T., 673 (1872). Lambert v.
Northern, etc., R’y Co., 18 W. R., 180
(1869), holds that a promise by directors
to perform their duties gratuitously is
nudum pactum, and does not prevent
them from recovering upon a previous
binding agreement for salaries.

1Butts v. Wood, 37 N. Y., 317 (1867),
where the vote was set aside, although
the salary was for services by the di-
rector as secretary and treasurer; Ward
v, Davidson, 89 Mo., 445 (1886), where
increased pay was voted to the presi-
dent of the corporation; Gardner v.
Butler, 30 N. J. Eq., 702 (1879); Jones.
v. Morrison, 31 Minn., 140 (1888); Kel-
sey v. Sargent, 40 Hun, 150 (1886).

2 Blatchford v. Ross, 54 Barb., 42
(1869); 5 N. Y¥. Supp., 305. In the case
of Hodges v. Paquett, 3 Oreg., 77 (1869),
the court refused to interfere though
fraud was charged, in that the direct-
ors credited large bills to themselves,
and paid,themselves large sums for serv-
ices, had destroyed the business, and
had wasted the funds and property.
This case, however, has met with uni-
versal disapproval, and must be consid-
ered as contrary to law.

3 Davis v. Memphis City R. R. Co., 22
Fed. Rep., 883 (1885). In the late case of
Hubbard v. New York,.etc., Co., 14 Fed,
Rep., 675 (1882), wherein a person con-
tracted in advance to become a director
and superintendent at a remuneration
of one-third of the profits of the busi-
ness, the court refused to uphold the
agreement, and said the contract is to
be ‘‘construed in the same manner as

755

[8 657,
§ 657.] FRAUDS OF DIRECTORS, PROMOTERS, ETC. [CH. XXXIX.

‘Tt has been held also, where the majority of the stock of a corpo-
ration was held by one family, who voted away the corporate prof-
its for salaries, that the minority might call upon a court of equity

to remedy the fraud.'. The stockholders would seem to be the

proper parties to vote the salary. A salary or back pay voted toa
director after the services have been rendered cannot be enforced.
It is invalid and void. It is the same as giving away the assets of
the corporation.’

There is no rule, however, which forbids a director from receiy-
ing pay which the board of directors agree in advance to give him,
for acting as general manager.’

Greater difficulty arises where the director performs extra serv-

if he was actually a director at the time lature. A vote by the stockholders of
of its inception, and as if ij was made free passes over the road to a director

with him while he was a director.” in consideration of his efforts as a pro-
1Sellers v. Phoenix Iron Co., 13 Fed. moter before incorporation may be re-
Rep., 20 (1881). pudiated at any time by the corporation,

2Bennett v. St. Louis, etc., Co.,19 New York, etc., R. R. Co. v. Ketchum,
Mo. App., 349; 8. C., 1 West. Rep., 786 27 Conn., 170 (1858). But see St. Louis,
(1885); Ogden v. Murray, 39 N. Y., 202 etc, R. R. Co. v. Tiernan, 15 Pac. Rep.,
(1868); Blatchford v. Ross, 5 Abb. Pr., 544 (Kan., 1887), where back pay to di-
N. 8., 484 (1869); Jones v. Morrison, rectors for services in promoting and
supra; Maux, etc., Co. v. Branegan, 40 launching the enterprise was voted and
Ind., 361 (1872); Loan Assoc. v. Stone-: upheld. A director cannot collect pay
metz, 29 Pa. St., 534 (1857); Holder v. from the company for his services on
Lafayette, etc., R’y Co., 71 Tll., 106 the executive committee and for his ex-
(1873), where the director even acted as penses in travel where there has been no
treasurer; Gridley v. Same, 71 Ill, 200 resolution passed previous to.ttheservices
(1878), where the director was a mem- entitling him to the pay. Lafayette
ber of the executive committee. Direct- etc., R’y v. Cheeney, 87 IIl., 446 (1877).
ors are not liable to account for extra 3 Eales v. Cumberland, etc. Co., 6 H.
pay voted to a director for his service & M., 481 (1861). A salary voted to a
as an agent. Godbold v. Branch B’k, director by the directors for services as
11 Ala., 191 (1847). Majority of stock- manager is not legal where the charter
holders cannot, on the winding up, vote requires a vote of the stockholders on
back pay to directors. Hutton v. West., contracts in which a director is inter-
etc., R’y Co, L. R., 28 Ch. D., 654 ested. In re State Fire Ins. Co., 36
(1888); Northeastern R’y Co. v. Jackson, L. J. (Ch.), 684 (1867), In Benson v.,
19 W. R., 198 (1870), holding a director Heathorn, 1 Younge & C., 326 (1842),
liable for back salary paid him by vote the court compelled a director to pay
of the directors, when the statute re- back a salary which he had received for
quired such vote to be by the stock- acting as ‘‘ship’s husband” for the com-
holders. In Hall v. Vermont, etc., R. pany, whose business was the working
R. Co., 28 Vt., 401 (1856), compensation of vessels. The president cannot bind
for taking subscriptions had been voted the corporation by an agreement to pay
by the stockholders. After therescind- a director extra compensation. Bailey
ing of that vote no compensation was v. Buffalo, etc., R. R. Co., 14 Hun, 483
allowed, and none was allowed for (1878); Hodges v. Rutland, etc, R. R.
lobbying the charter through the legis- Co., 29 Vt., 220 (1857). j

756
CH. XXXIX.] FRAUDS OF DIRECTORS, PROMOTERS, ETC. [§ 658.
ices without any agreement as to his compensation. It has been
held that he may recover reasonable compensation for his services
as superintendent,! or attorney in a suit;? or secretary and agent;
or agent;‘ or cashier;* but not for services as a promoter;® nor
for acting as president and master-builder.’

A person who is appointed and acts as secretary, and is neither
a director nor a stockholder, is entitled to pay although the corpo-
ration never agreed to pay him. But the rule may be otherwise
as to a treasurer, where he is also a large stockholder.®

§ 658. Contracts between corporations having one or more direct:
ors in common.— It has been difficult to determine whether a stock-
holder in one corporation could cause to be set aside a contract or
agreement between two corporations having one or more directors
in common. The ¢ases differ in regard to the rule of law herein.
In New York an inferior but able court decided that such a con-
tract may be set aside as fraudulent, if, at the time of contracting,

the two corporations had one or more directors in common.” Such,

1A director who, at the request of the
president, superintends the construc-
tion of the road, may recover pay there-
for. Henry v. Rutland, etc., R. R. Co.,
27 Vt., 485 (1855); Chandler v. Mon-
mouth B’k, 13 N. J. L., 255 (1882), where
there was even a charter prohibition.

2 Jackson v. N. Y., etc, R. R. Co., 2
T. & C. (N. Y.), 653 (1874); Santa, etc.,
Min, Assoc. v. Meredith, 49 Md., 389
(1878); 41 N, W. Rep., 905 (1889).

8 Rogers v. Hastings, etc., R’y Co., 22
Minn., 25 (1875). As to secretary, Tal-
cott v. Olcott, etc., Co., 11 Week. Dig.,
141 (1880). Contra, Fraylor v. Sonora
Min. Co., 17 Cal., 594 (1861).

4Cheeney v. Lafayette, etc., R’y Co.,68

Ill, 570 (1878); Shackleford v. New Or-

leans, etc., R. R. Co., 37 Miss., 202 (1859) ;
Santa, etc., Assoc. v. Meredith, 49 Md.,
889 (1878), where he obtained patents
and negotiated their sale.

5 National B’k v. Drake, 29 Kan., 311
(1883).

6 Rockfort, etc., R. R. Co. v. Sage, 65
Tll., 328 (1872). See 42 N. W. Rep., 982.

TLevisee v. Shreveport, etc., R. R. Co.,
27 La. Ann., 641 (1875).

8 Smith v. Long I. R. R. Co., 102 N. Y¥.,
190 (1886); Edwards v. Fargo, etc., R’y,

33 N. W. Rep., 100 (Dak., 1887); Green-
leaf v. R. R., 91 N. C., 83 (1884); Mis-
souri, etc., R. R. v. Richards, 8 Kan.,
101 (1871).

9 Mather v. Eureka, etc., Co., 44 Hun,
333 (1887). The question may be one
for the jury. Pendleton v. Empire, etc.,
Co., 19 N. Y., 13 (1859). For the serv-
ices of ordinary clerks, etc., the corpo-
ration “is of course liable. ‘Legrand v,
Manhattan, etc., Assoc., 80 N. Y., 6388
(1880); Pollock v. Shulize, 1 Hun, 820
(1874); 89 Fed. Rep., 18 (1889); 73 TI1., 608,

10Metropolitan R’y Co. v. Manhattan
R’y Co., 15 Am. & Eng. R. R. Cases, 1
(1884). A contrary conclusion was
reached by the federal court on the
same facts. Flagg v. Manhattan R’y
Co., 20 Blatch., 142 (1881); 8. C., 10 Fed.
Rep., 418. For other cases connected
with this litigation, see N. Y. El. R. R.
Co. v. Manhattan R’y Co., 14 Abb. N. C.,
152, note (1884); Manhattan R’y Co. v.
N. Y. El. Co., 29 Hun, 309 (1883), rev’g
N. Y. Daily Reg., Dec. 2, 1882; People
ex rel. Content v. Metropolitan R’y Co.,
26 Hun, 82 (1881); Harkness v. Manhat-
tan R’y Co., N. Y. Daily Reg., Oct. 8,
1886. See, also, Wardens, etc., v. Rec-
tor, etc., 45 Barb., 356 (1865), where one

757

ee
§ 658.)

FRAUDS OF DIRECTORS, PROMOTERS, ETO.

[CH. XXXIX,

also, is the rule as laid down in New Hampshire.' But the contract
is merely voidable, and if it is fair the courts will sustain it.?

religious corporation gratuitously con-
veyed property to another, the direct-
ors being common. A consolidation of
two religious corporations having a di-
rector in common is illegal and may be
set aside. Stokes v. Phelps Mission, 47
Hun, 570 (1888). See 5 N. Y. Supp., 623.
1Pearson v. Concord R. R. Co., 18
Am. & Eng. R. R. Cas., 102 (N. H.,
1883), where the court, in setting aside
a contract made by corporations having
common directors, said: ‘‘ Stockholders
and creditors are entitled not only to
the vote of a director in the board, but
to his influence and argument in dis-
cussion.” ‘
2 Where a rolling-stock company by its
board of five directors makes a contract
with a railroad company having thir-
teen directors, five of whom are the
same as the directors of the rolling-
stock company, and the railroad com-
' pany makes the contract at a meeting
of eight directors, two of whom are
of the five, and for two years the rail-
road company lives up to the contract,
it cannot then repudiate. The majority
of its directors were not in common and
it should have objected before. United
8. R. Stock Co. v. Atlantic, etc., R. R. Co.,
34 O. St.,”450 (1878). Cf. Bill v. Boston
Union Telegraph Co., 16 Fed. Rep., 14
(1883), where the illegality was clear,
since the directors common to both cor-
porations constituted a majority of the

directors of one of them. Where a.

town board of three are authorized to
make a grant to a railroad, and two of
them, one being a director of the rail-
road, made the grant, the court will set
it aside. San Diego v. San Diego, etc.,
R. RB. Co., 44 Cal., 106 (1872).

The fact that two directors out of
eight of one packet company are also
directors out of six directors of a com-
peting packet company does not render
them liable for fraud, although the

former company loans the latter com-
pany.much money and takes a chattel
mortgage and closes out its property.
Booth v. Robinson, 55 Md., 419(1880). In
England contracts between companies
having directors in common are void by
statute, unless they are ratified by vote
of the stockholders. 60 L. T. R., 526;
Ernest v. Nicholls, 6 H. of L., 401 (1857).
See, also, Mayor, etc., v. Inman, 57 Ga.,
370(1876), where the town officers merely
executed bonds to a railroad company
of which they were directors. The
bonds were held to be valid. In Wallace
v. Long Island R. R. Co., 12 Hun, 460
(1877), held, that a dissenting stock-
holder could not sue to set aside.a lease
made between two railroads having di-
rectors in common, but that a majority
of the stockholders might have ob-
jected. A conveyance of all the prop-
erty of an insolvent corporation to one
of its creditors, a corporation having
two directors in common with the in-
solvent corporation, such conveyance
being to secure the latter corporation’s
debt, is prima facie fraudulent and void-
able. If free from actual fraud, and if
reasonable, it is sustained. Sweeney v.
Grape Sugar Co, 4 S. E. Rep., 481
(W. Va., 1887). The fact of having
stockholders in common is immaterial.
Warfield v. Marshall, etc., Co., 34 N. W.
Rep., 467 (Iowa, 1887). The fact that a
construction contract is assigned by the
contractor to a corporation having di-
rectors in common with the railroad
does not render the contract fraudulent
per se. Union Pac. R. R. v, Credit
Mobilier, 185 Mass., 867 (1883). A con-
tract between two corporations having
directors in common is void, but equity
will cause such payments to be made
for work done as are just, irrespective
of the written contract. Thomas v.
Peoria, etc., R’y, 86 Fed. Rep., 808
(1888). Where one director is a director

758
CH. XXXIx.] FRAUDS OF DIRECTORS, PROMOTERS, ETC. [§ 659.

§ 659. Foreclosure of mortgage on corporate property, and col-
lusion with directors, whereby no defense is made to the foreclos-
ure.— A frequent fraud on stockholders, and one which it is difficult
to detect and prove, is where the directors collusively neglett to
defend against a suit brought to foreclose a mortgage on the
corporate property, in consequence of which a default is taken and
the corporation speedily deprived of all its assets. It is .a fraud
difficult to detect, since ordinarily there is no defense to foreclos-
ure suits, and the defenses which should have been set up by the’
corporation are difficult of proof themselves. At an early day the
leading case of Koehler against Black River Falls Iron Company !

_also in another company with which a
contract is being made, he cannot be
counted in making up a quorum. Met-
sropolitan, etc., Co., v. Domestic, etc.,
Co., 14:Atl. Rep., 907(N. J., 1888). A con-
tract between corporations having com-
mon directors is voidable, not void. If
it is fair it will not be disturbed. Manu-
facturers’, etc., B’k v. O'Reilly, 10 8S.
W. Rep., 865 (Mo., 1889). A lease of
one railroad to another by directors who
are directors in both companies is in-
valid. Thouron v. East, etc., R’y Co.,
5 R’y & Corp. L. J., 77 (Tenn., 1888). If
the contract is a just one the courts
will not disturb it. Alexander v. Will-
iams, 14 Mo, App.,. 13 (1888).

12 Black, 715 (1862), where the di-
rectors took a mortgage to themselves
to secure debts due to them from the
‘corporation, and then foreclosed. The
foreclosure was defeated. So, also, in

it aside for fraud in the foreclosure pro-
ceedings, although on the sale only one-
fifth of the value of the property was
realized. And in Forbes v. Memphis,
etc., R’y Co., 2 Woods, 323 (1872), the
court said: ‘It is questionable whether,

‘in any case where a suit is properly in-

stituted against a corporation, a stock-
holder of that corporation can, even on
a suggestion of fraud on the part of its
officers, come in by way'of intervention
as party to that suit, and seek to defend
or control the proceedings. An original
bill would rather seem to be the proper
mode of proceeding. It is in
the discretion of the court whether or
not to permit a stockholder to become a
party defendant in any case where he
is not made such by the bill.” In Drury
v. Cross, 7 Wall., 299 (1868), and James
v. R. R. Co., 6 Wall., 752 (1867), fore-
closures and sales were set aside where

Bayliss v. Lafayette, etc., R. R. Co., 8 they were obtained by a fraudulent

Biss., 193 (1878), where the directors
_were silent partners with the construc-
tion company mortgagees. The court,
on the application of a stockholder, di-
rected that the mortgagees be allowed
only the amount honestly due ‘them.
And see Mussina v. Goldthwaite, 34
Texas, 125 (1870), where, there having
been a fraudulent foreclosure suit insti-
tuted, the court allowed an intervenor
to come in. In the case, however, of
Samuel v. Halladay, 1 Woolw., 600
(1869), where a sale under foreclosure
had been made after an advertisement
of five weeks, the court refused to set

issue of bonds in pledge, and the pur-
chase of them by the directors at the
pledgee’s sale. See, also, Bronson v,
La Crosse R. R. Co., 2 Wall., 288, 302
(1863), clearly sustaining the stock-
holder’s right. That at common law a
stockholder cannot defend, even though
the corporation isin no position to do
so, see the discussion in Kelley v. Miss.,
etc., R. R. Co., 1 Fed. Rep., 564 (1880),
A stockholder’s remedy during the
pendency of the foreclosure suit is in
that suit and not by an independent ac-
tion. Graham v. Boston, etc., R. R.
Co., 118 U. 8., 161 (1886). In Blackman

759
§ 659.] FRAUDS OF DIRECTORS, PROMOTERS, ETC. [CH. XxxIx.

established the principle that a stockholder in such a case may bé

allowed to come in as a defendant, and set up the defenses which
the corporation ought to have set up. Another remedy of the
stockholder is to redeem the property before the foreclosure sale,
and then give the corporation a reasonable time to redeem the
property from him or be forever barred from its rights therein.!
In Pennsylvania? and New Jersey,* however, it has been doubted
whether the stockholder would be allowed to intervene in a fraud-
ulent foreclosure suit, the court saying that his remedy is to have
the judgment set aside for fraud. In New York, by statute, the
courts have power to allow the stockholder to come in as a party
defendant. A stockholder cannot cause a foreclosure sale to be
set aside on the ground of corrupt motives of the directors who
allowed the default to be taken, unless he can show collusion be-
tween them and the purchaser at the foreclosure sale.> Where the
corporation brings a suit to redeem its property from a foreclosure

sale a stockholder has no right to

v. Central R. R., etc., Co., 58 Ga., 189
(1877), the court said: ‘‘ That the action
is groundless and collusive, and that,
from motives of fraud or favor on the
part of the officers, the corporation fails
or refuses to defend, will make no dif-
ference. The stockholders may pro-
tect all their rights by instituting a
proper action of their own.” In Cen-
tral Trust Co. v. Wabash, etc., R. R.
Co., 23 Fed. Rep., 858 (1885), the appli-
cation of a stockholder to have the re-
ceiver institute certain suits was denied.
In the case of Union Trust Company v.
Rochester & Pittsburgh R. R. Co., 29
Fed. Rep., 609 (1886), it was held that
the defense of a collusive foreclosure
judgment herein, in a state court, can-
not be set up to defeat an action thereon
in a federal court, See Pittsburgh, etc.,
R. R. Co. v. Rothschild, 4 Central Rep.
(Penn., 1886). The corporation itself,
after a change of directors by a new
election, may file a bill to set aside the
foreclosure, Where the foreclosure was
in the United States court, the suit to
set aside may be in that court on that
ground. Pac. R, R. Co. v. Mo. Pac.
R’y, 111 U. &., 505 (1884), revw’g 12 Fed.
Rep., 641; Northern, etc., Co. v. Young,
12 Fed. Rep., 809 (1882). The trustee of

come in as a party complainant.®

the trust deed is a necessary party to a

suit to set aside the foreclosure as fraud- -

ulent. Harwood v. R. R. Co., 17 Wall.,
78. Also other parties to the fraud.
Ribon v. R. R. Cos., 16 Wall., 446 (1872).
As to the right of a bondholder to be-
come a party herein, see § 687, infra.
The United States court which granted
foreclosure has jurisdiction on bill to
set aside that foreclosure as fraudulent
irrespective of citizenship in latter case.
Pacific R. R., etc., v. Missouri Pac. R’y
Co., 111 U. S., 505 (1884); rev’g 12 Fed.
Rep., 641.

VWright v. Oroville M. Co., 40 Cal.,
20 (1870), where the court, on the stock-
holder’s application, fixed the time
within which the corporation must re-
deem, if at all.

2Gavenstine’s Appeal, 49 Penn. St.,
310 (1865); County of Tazewell v. Farm-
ers’, etc., Trust Co., 12 Fed. Rep., 752
(1882).

3 Brown v. Vandyke, 8 N. J. Eq., 795
(1853).

4Code of Civil Procedure, § 452. See
Ithaca Gas Light Co. v. Treman, 93
N. Y., 660 (1883),

5 Harpending v. Munson, 91 N, Y., 650 -

(1888).
6 Kennebec, etc., R. R. Co. vw. Port-

760

-“
CH. XXXIX. ] FRAUDS OF DIREOLORs, PROMOTERS, ETO. [§ 660.
§ 660. Directors’ purchases of property needed by the corporation,
and purchases of outstanding debts or claims against the corpora-
_ tion.— It is an abuse of trust for a corporate director to purchase
property which he knows the corporation will need and then to sell
the same to the corporation at an advanced price. This generally
occurs where the director purchases in his own name land which
the corporation must purchase for its enterprise, or over which it
will need a right of way.'' Where, however, the director offers the
land to the corporation at the price which he paid for it, and the
corporation refuses it, he cannot long subsequently be compelled
to accept that price.?

It is a fraud on the corporation and on corporate creditors for
the directors to buy up at’a discount the outstanding debts of the
corporation, and compel it to pay them the full face value thereof.
In such a case the directors may be compelled to turn over to the
corporation the evidences of indebtedness upon being paid the

money which they gave for the same.’

land, etc., R. R. Co., 54 Me., 178 (1866).
If a collusive judgment for an ordinary
cause of action has been entered against
the corporation it may be set aside.
Whittlesey v. Delaney, 73 N. Y., 571
(1878).

1Blake v. Buffalo Créek R. R. Co.,.

56 N. Y., 485 (1874). See Buffalo, etc.,
R. R. Co. v. Lampson, 47 Barb., 533
(1867); Blair, etc., Co. v. Walker, 50
Iowa, 376 (1879); Taylor v. Solomon, 4
Mylne & C., 134 (1838), where the cor-
porate agent took in his own name a
lease which the company desired, and
had instructed him to obtain for itself.
See, also, Mitchell v. Reed, 61 N. Y.,
128 (1874). Corporate treasurer cannot
‘purchase stock at discount and sell to
corporation at par, though such stock
is needed by the corporation to fulfill its
contracts. East N. Y., etc., R. R. Coe
v. Elmore, 5 Hun, 214 (1875). Where
the president is directed to buy the boats
of a rival company and does so by buy-
ing them for another corporation which
he controls, and credits himself with an
advance, he may be made to refund,
Ward v. Davidson, 1 S. W. Rep., 846
-(Mo., 1886). A treasurer is not liable for
profits in coal sold by himself to the
corporation where he purchased the

A director cannot take a

coal with no intent of selling to the
company. Parker v. Nickerson, 187
Mass., 487 (1884).

? Sandy River R. R. Co. v. Stubbs, 77
Me., 595 (1885). A president and treas-
urer who purchase land as agents fora
railroad company and allow it to pay
part of the purchase price, and obey its
direction to sell part, whereby the pur-
chase price is repaid, are liable to con-
vey to the company the remainder, the
title to which is in their names. Church
v. Sterling, 16 Conn., 388 (1844).

3 Duncomb v. N. Y., etc., R. R. Co., 84
N. Y., 190, 202 (1881); Ea parte Larkin,
46 L. J. (Ch.), 285 (1877). See, also,
Davis v. Rock, etc., Co., 55 Cal., 359
(1880), where a mortgage given to a di-
rector to secure debts purchased by him
at a discount was defeated in foreclos-
ure. The fact that a director buys up
the securities of an insolvent corporation
for the purpose of using them in a re-
organization is not fraudulent or a
breach of his duty, he having paid all
that the securities were worth. Powell
v. Willamette Val. R. R. Co., 15 Pac. |
Rep., 663 (Oreg., 1887). If the corpo-
rate managers buy up corporate debts
with corporate funds, a corporate cred-
itor may compel them to give up the

761
§ 661.] FRAUDS OF DIRECTORS, PROMOTERS, ETC. [CH. XXXIX.

contract in his own name for himself where such contract really
should belong to the corporation.'

§ 661. Loans by directors to the corporation; mortgages by the
corporation to the directors, and the right of an insolvent corpora-
tion to give a mortgage or assignment of its property to a director
in order to prefer the payment of his debt There is no question
that a corporation, while solvent, may borrow money of a di-
rector, and may give a mortgage to secure its payment. The giv-
ing of the mortgage is viewed with suspicion; but it is legal when

it is perfectly free from actual fraud.?

claims so purchased. Thomas v. Sweet,
14 Pac. Rep., 545 (Kan., 1887). Direct-
ors who authorize acts by the corpora-
tion infringing on a patent cannot after-
wards buy the patent and enforce the
right to damages. N. Y., etc., Co. v.
Buffalo, etc., Co., 24 Fed. Rep., 604
(1885). A corporate creditor cannot
complain that a director has purchased
property needed by the corporation.
Cornell v. Clark, 104 N. Y., 451 (1887).
The case of St. Louis, etc., R. R. Co. v.
Chenault, 12 Pac. Rep., 303 (Kan., 1886),
clearly holds that a corporate treasurer
may buy up outstanding notes. against
the corporation and may then pay such
notes out of the corporate funds in his
possession. Payment by a director of
corporate debts may entitle him to a
preference in the distribution of the
assets. Appeal of Atkinson, 11 Atl.
Rep., 239 (Pa., 1887). Cf. Inglehart v.
‘Thousand, etc.,'Hotel Co., 109 N. Y.,
454; 82 Hun, 377 (1884), where the as-
signee of a judgment from a director
who purchased it at a discount was al-
lowed to enforce it for the full amount.
Where the directors issue bonds as col-
lateral to the company’s note, and, upon
the sale of the bond by the pledgee for
non-payment of the note, purchased the
bonds at five cents on the dollar, a fore-
closure based chiefly on such bonds will
beset aside. James v. R. R. Co., 6 Wall.,
752 (1867). English debentures may be
issued to directors at adiscount. Camp-
bell’s Case, L. R., 4,Ch. D., 470 (1876).
Where a corporation is without funds,
its president may purchase for himself

its overdue bond, and may agree with
the corporation that the rate of interest
of the bond shall be increased. There
was no proof that he purchased at a
discount, Bradley v. Marine, etc., Co.,
3 Hughes, 26 (1879). The law is clear,
however, that any device by which a
director or officer of an insolvent corpo-
ration obtains a preference in the pay-
ment of his debt is illegal.. See sub. Also
Lingle v. Nat’l Ins. Co., 45 Mo., 109
(1869); Holland v. Heyman, 60 Ga., 174
(1878), holding that the purchased
claims are good only for the amount
paid. After the corporation has as-
signed for the benefit of creditors and
all its property has been sold, a director
may buy up claims against it and par-
ticipate in the distribution of assets.
Hammond’s Appeal, 16 Atl. Rep., 419
(Pa., 1889), 4

1 Where the president of a coal com-
pany contracts in his own name to
supply coal to parties, and the board
of directors, a majority of whom are
his relatives, contract to furnish the
company’s coal to him on a royalty, a
stockholder may compel him to turn
into the corporation the profits of his
contract, An assignee of his interest
who took with notice is not protected. —
Davis v. Gemmell, 17 Atl. .Rep., 259
(Md., 1889). See, also, Ward v. David-
son, 18. W. Rep., 846 (Mo., 1886). Cf.
8S. W. Rep., 545. .

2Twin Lick Oil Co. v. Marbury, 91 U.
S., 587 (1875); Duncomb v. N, Y., etc.,
R. R. Co., 88 N. Y., 1 (1882); 84 id., 190;
Hotel Co. v. Wade, 97 U. S., 18 (1877);

762
CH. XXXIX. ]

FRAUDS OF PIRECTORS, PROMOTERS, ETC.

[§ 661.

But where the corporation is insolvent an entirely different ques-
tion arises. There has been difference of opinion in the courts, but
the weight of authority clearly and wisely holds that an insolvent
corporation cannot pay a debt due to a director in preference to
debts due others, either by turning out property to him or by giv-

ing him a mortgage on corporate

Hope v. Salt Co., 25 W. Va., 789 (1885) ;
Warfield v. Marshall, etc., Co., 34 N. W.
Rep., 467 (1877), And see the principles
and cases in § 653, supra. See, also,
Harpending v. Munson, 91 N. Y., 650
(1888); Hallam v. Indianola Hotel Co.,
56 Iowa, 178 (1881), where, however, the
purchase of the property by the di-
rector at the foreclosure sale for a
small price was set aside; Claflin v.
South C. R. R. Co., 8 Fed. Rep., 118
(1880). Cf. Wilbur v. Lynde, 49: Cal.,
290 (1832), invalidating a note given to
a director. In the important case of
Koehler v. Black, etc., Iron Co., 2
Black, 715 (1862), the court held void a
mortgage given by the directors to
themselves, where there were other un-
secured claims, and where the giving of
the mortgage was inequitable. In Cum-
berland, etc., Co. v. Paresle, 42 Md., 598
(1875), a mortgage to a director was de-
feated, there being no clear proof that
the debt was actually incurred. Di-
rectors who guaranty a corporate debt
may take a mortgage from it as se-
curity, and may foreclose it. Hopson
v, Aitna, etc., Co., 50 Conn., 597 (18838).
A company indebted to its president
may, to secure such debt, give a: mort-
gage to secure a debt ‘due from him to
a third party. B’k v. Flour Co., 41 O.
St., 552 (1885), Where two out of four
directors of an insolvent corporation
are liable as indorsers on a corporate
debt, a mortgage given to secure that
debt will be set aside as an illegal pref-
erence, even though the mortgage has
been foreclosed. Lippincott v. Shaw,
etc., Co., 84 Fed. Rep., 570 (1888).

1 Directors of an insolvent corporation
cannot turn in its assets to themselves
to pay a debt due them from the corpo-
ration. Beach v. Miller, 14 N. E. Rep.,

763.

assets.!

698 (IIL, 1888). Directors knowing that
the company is insolvent cannot assign
its property in trust to pay debts due to
themselves. Gaslight, etc., Co. v. Ter-
rell, L. R., 10 Eq., 168 (1870); Haywood
v. Lincoln Lumber Co., 64 Wis., 689
(1885). Where an insolvent corporation
prefers a director it is unlawful, and
the directors who cause the preference
are personally liable for property so ap-
plied. A director who took no part is
not liable. Adams v. Kehlor, etc., Co.,
36 Fed. Rep., 212 (1888). The law ‘ pro-
hibits directors, when a corporation is:
insolvent and about to go into liquida-
tion, from preferring debts due to them-
selves from the corporation, or from
preferring debts in the payment of
which they have a personal interest.”
So held in a case where a deceased di-
rector was preferred by the other direct-
ors, his brothers and agents. Adams
v. Kehlor M. Co., 385 ‘Fed. Rep., 4383
(1888). A director of an insolvent cor-
poration cannot have his own debt due
from the corporation paid to the exclu-
sion of other creditors. Adams v. Cross,
etc., Co., 5 Ry & Corp. L. J., 18 (IL,
1888), holding void a mortgage upon
which this suit for foreclosure was
brought, it having been given by an in-
solvent corporation to its directors to
secure debts due from it to them. A
confession of judgment by an insolvent
corporation to one of its directors isa
fraudulent preference, and the prefer-
ence will be cut off. The director will
be allowed to come in the same as other
creditors. Stratton v. Allen, 16 N. J.
Eq., 229 (1863). A mortgage by an in-
solvent corporation preferring its pres-
ident and director was canceled in

Lippincott v. Shaw Carriage Co., 25

Fed. Rep., 577 (1885). In Bradley wv

1
8 661.]

A director cannot vote on a renewal of a note to himself.

Farwell, 1 Holmes, 433 (1874), a trans-
fer by an insolvent corporation of allits
assets to a partnership in payment of a
debt was set aside, where one member
of the partnership was also a director
in the corporation. The fact that nine
months elapsed before the corporation
passed into a receiver’s hands was im-
material. A mortgage by an insolvent
corporation to a director will be upheld
to the extent that the director at the
time of the mortgage advanced funds
to pay its debts, but not as regards an-
tecedent debts due the director. Cor-
bett v. Woodward, 5 Sawyer, 403 (1879).
See, also, Williams v. Patrons of Hus-
bandry, 5 West. Rep., 105 (Mo., 1886);
White, etc., Co. v. Pettes, etc., Co., 30
Fed. Rep., 864 (1887); Lippincott v.
Shaw, etc., Co., supra; Stout v. Yaeger,
etc., Co., 13 id., 802 (1882). Sale of cor-
porate property toa director in payment
of debt due him from the insolvent com-
pany cannot be objected to in a suit at
law by him for the conversion of the
property. The objection must be made
by billin equity. Little Rock, etc., R’y
Co. v. Page, 35 Ark., 304 (1880). <A sale
of all the property of an insolvent cor-
poration to a director, who is also presi-
dent, in payment of his debt cannot be
set aside by other corporate creditors.
Bush v. Buckingham, 16 Iowa, 284 (1864).

Where a corporation owes money to
the directors, and to pay the same bor-
rows money and gives a mortgage, and
subsequently the property is sold for less
than the mortgage, a creditor whose debt
was not due when the mortgage was
given cannot complain. Holtv. Bennett,
16N. E. Rep., 5 (Mass., 1888). Butsee St.
Louis v. Alexander, 23 Mo., 483, 528, 531
(1856), where it was attempted to over-
turn a deed of trust on the ground that
it was executed by a bare quorum of
the directors and one or more of them
were legally incapacitated by being
directly interested. The language of
the court was, ‘“‘I can see no reason

FRAUDS OF DIRECTORS, PROMOTERS, ETC.

t

(CH. XXXIX,
The

why a member of the board of directors
might not sit in the board, and, without
fraud, in conjunction with others, con-
sent to an order for securing a debt
actually due to him from the corpora-
tion.” A mortgage given by an insolv-
ent corporation is valid, although
given to secure debts due to the wife
of a director, the administrator of
another deceased director, and the
payee of a note indorsed by still another
director. Garrett v. Burlington Plow
Co., 70 Iowa, 697 (1886). As to stock-
holders, see Cochran v. Ocean, etc., 30
La. Ann., 13865, holding that stockholders
cannot appropriate assets to pay their
salaries as officers, or to pay money due
them ono ther accounts, until all credit-
ors who are not stockholders have been
paid. The:payment and securing of a
corporate debt is not fraudulent merely
because some of the directors had guar-
antied the debt. County Court v. Balti-
more, etc., R. R., 35 Fed. Rep., 161 (1888);
Whitwell v. Warner, 20 Vt., 425, holding
that stockholders who avail themselves
of their superior advantages to obtain
security from the corporation for debts
due them, whether by attachment or
assignment, are not guilty of fraud so
as to render themselves personally
liable for corporate debts; Swepson v.
The Bank, etc., 9 Lea, 713, holding
that a conveyance of land by the presi-
dent of a bank after its insolvency to
its sole stockholder would be set aside at
the suit of a judgment creditor of the
bank who had levied upon and sold it.
Directors may loan money to the corpo-
ration and have it repaid. Ulster R’y
v. Banbridge R’y, L. R., Irish, 2 Ey,.,
190 (1868); Borland v. Haven, 37 Fed.
Rep., 394 (1888). In general, see, also,
Planters’ B’k v. Whittle, 78 Va., 737
(1884), dictum, that directors may make
preferences in favor of themselves if
they are creditors; but in so doing they
must act in perfect good faith. In New
York there is a statute against all such

764
CH. XXXIX.] [8 662.

FRAUDS OF DIRECTORS, PROMOTERS, ETC.
purchaser of such a note is not-protected.! A stockholder’s action
lies where the directors owe large sums to the corporation and re-
fuse to pay or charge themselves with the same, and are about. to
sell the corporate property at a sacrifice?

§ 662. Frauds by a majority of the stockholders upon the minor-
ity— In addition to frauds arising by the illegal purchase of the
corporate property by a majority of the stockholders there may
arise other fraudulent acts by the majority. The law requires of
them the utmost good faith in their control and management of
the corporation as regards the minority, and in this respect the
majority stand in much the same attitude towards the minority
that the directors sustain towards all the stockholders. Thus,
where the majority are interested in another corporation, and the
two corporations have contracts between them, it is fraudulent for
that majority to manage the affairs of the first corporation for the
benefit of the second. A court, of equity will intervene and protect
tbe minority upon an application by the latter.? So, also, where
the officers of another corporation, which has leased the property
of the first corporation, control a majority of the stock of the lat-
ter, and conspire to compel the minority to sell their stock by re-
fusing to pay the rent due on the lease, a court of equity, on the

‘application of the minority, will compel a payment of the rent.

A late and very satisfactory case involving frauds by a majority
of the stockholders upon the minority is Erwin against The Ore-
gon Railway and Navigation Company,’ which clearly enounces

preferences. See Paulding v. Jerome, 4Barr v. N. Y., etc., R. R. Co., 96 N.

etc,, Co., 94 N, Y., 334 (1884), and § 691,
infra. ‘So also in Pennsylvania. Under
the Pennsylvania statute, directors can-
not obtain a preference by taking judg-
ment by default and issuing execution.
Hopkins’ Appeal, 90 Pa. St., 69 (1879).

1§mith v. Los Angeles, etc., Assoc.,.

20 Pac. Rep., 677 (Cal., 1889).

2Sears v. Hotchkiss, 25 Conn., 171
(1856). See, also, Hardon v. Newton, 14
Blatch., 376 (1878), involving somewhat
similar facts. _

’Menier v. Hooper’s Tel. Works, L.
R., 9 Ch., 350 (1874). See, also, Peabody
v. Flint, 88 Mass., 52 (1863), where, how-
ever, laches barred the remedy; Gor-
ham v. Gilson, 28 Cal., 479 (1865), where,
however, the action failed because the
stockholders sued to compel a convey-

Y., 444 (1884).

527 Fed. Rep., 625 (1886); 8. C., 20 id.,
577, and 28 id., 833. So, also, where the
majority of the stockholders vote to
make a lease of the whole corporate
property to themselves, a dissenting
stockholder may have the lease set
aside. Meeker v. Winthrop Iron Co.,
17 Fed. Rep., 48 (1883); and Rice’s Ap-
peal, 79 Penn. St., 168, 204 (1875).
Where, however, corporate property
has been sold and the proceeds retained
by one stockholder, another stockholder
cannot sue him for money had and re-

ceived. The action must be in equity

and for the benefit of the corporation.
Hodsdon v. Copeland, 16 Me., 314 (1839).
Equity will set aside a lease which the
directors make of a mine to the minor-

ance to each of his proportionate part. ity stockholders in order to take it from
765 :
FRAUDS OF DIRECTORS, PROMOTERS, ETC. (cH. XXXIX.

i?

8 663.]

and sustains the doctrine that, “when a number of stockholders
combine to constitute themselves a majority in order to control the
corporation as they see fit, they become for all practical purposes
the corporation itself, and assume the trust relation occupied by
the corporation towards its stockholders.”

Where a director has sold his property to the corporation or has
committed some other act which is voidable and not void, and
where ordinarily a majority of the stock can ratify and validate
that act, it being not actually fraudulent, but being fraudulent by

public policy, the important question arises whether in taking the
vote of the stockholders on such a question the stock held by the
director himself is to be counted. The well-settled rule is that his -
stock is to be counted even though the vote would have failed if
his stock had not been voted.! Sales of property by a corporation
are valid, although made at the instigation of stockholders whose
stock really belongs to others.2 If one person owns all of the stock
of a corporation he may do many acts of which the corporation
cannot afterwards complain.’

§ 663. Stockholders’ actions against third persons for frauds
against the corporation.— Ordinarily, where third persons have de-
frauded a corporation, and have defrauded it by collusion with the
corporate officers, the stockholder’s action is against both the
officers and the third persons, all being joined as parties defend-
ant. When such is the case the cause of action comes under some
one of the preceding sections of this chapter. Another class of

the control of incoming directors who
were elected by the majority. Mahony
Min. Co. v. Bennett, 5 ‘Sawyer, 141
(1878). The mere fact that a person
owns a majority of the stock does not
raise a legal inference that he domi-
nates the board of directors. Porter v.
Pittsburg, etc., Co., 120 U. S., 649, 670
(1887). The sale of all corporate assets
to the majority, where others offer a
higher price, is fraudulent. Wilson v.
Prop. Central Bridge, 9 R. I., 590 (1870);
Gregory v. Patchett, 33 Beav., 595
(1864), where a sale of all the corporate

assets to two of the stockholders on the

purchase of their stock by the company
was set aside as a fraud on the remain-
ing stockholders. ;

1See § 652, supra.

2Gottfried v. Miller, 104 U. S., 521
(1881).

3 Where the owner of all the stock of

three railroad corporations and one coal
corporation forms a new corporation
and takes its stock in exchange for his
stock in the three railroad,corporations,
and subsequently exchanges his stock
in the coal corporation worth less than
$1,500,000 for $8,000,000 of bonds of the
new corporation, he being the sole stock-
holder in all these transactions, except
a holder of seven shares who does not
object, the new corporation cannot hold
him liable for breach of trust in regard
thereto. Columbus, etc., R’y Co. v.
Burke, opinion of the arbitrators (Sept.,
1888), MSS. See, also, Swift v, Smith,
3 Central Rep., 899 (Md., 1886).

4Thus, where a railroad has been leased
to another railroad company under a
certain agreement of the latter guaran-
tying a fixed sum to the former, and
the lessee railroad company refuses to
fulfill its contract and has control of

766
‘

CH. XXXIx. | FRAUDS OF DIRECTORS, PROMOTERS, ETC.

[$ 663a.
cases arises when third persons commit frauds against the corpo-
ration without the collusion of the corporate officers, but the latter
neglect or refuse to/institute a suit to rectify the wrong. The right
of the stockholder then is not so clear. It is ordinarily within the
discretion of the corporate officers to enforce, compromise or aban-
don claims which the corporation may have against third persons.
Generally this exercise of discretion cannot be questioned or rem-
edied by the stockholders, except by electing at a subsequent elec-
tion directors more in accord with the stockholders’ views: It is
possible, however, that cases may occur where the judgment of
the directors is so palpably and injuriously wrong that the courts
will sustain a stockholder’s action herein. This subject, however, is
treated elsewhere.!

§ 6630. Liability of directors, officers and agents of a corporation
to third persons for frauds, trespasses, contracts and ultra vires
acts.— The law is clear that, if corporate officers or agents misrep-
resent to subscribers or purchasers of stock’ any material facts rel-
ative thereto, such officers or agents may be held liable therefor in
an action for damages.? Where a director or other corporate
agent has committed a fraudulent or wltra vires act it is clear
that the corporation or any stockholder may complain; but it is
not so clear whether a corporate creditor may complain in his own
behalf or in behalf of the corporation. When a contract is made
for the corporation, and this fact appears in the contract, but the
officer or agent signs the contract not in the corporate name but.
in his own name, he is generally not liable,on such contract; but.

the lessor railroad, a stockholder of the
latter may bring suit against the former
to remedy the wrong. March v. East-
ern R. R. Co., 40 N. H.,.548 (1860), And
the case of Lewis v. St. Albans, etc.,
Works, 50 Vt., 477 (1878), very properly
says ‘that whenever the trustee has
been guilty of a breach of trust, and has
transferred the trust property by sale or
otherwise to any third party, the cestui
que trust has a full right to follow such
property into the hands of such third
party, unless he stands in the situation of
a bona fide purchaser for value without
notice.” See, also, Imperial, etc., Co. v.
Coleman, 6 H. L., 189 (1873). A person
receiving corporate money in compro-
mise of his suit against guilty directors
may be compelled to pay it back to the
corporation. Erie R’y Co, v. Vanderbilt,

5 Hun, 123 (1875), A person sued on a.
contract by a corporation cannot claim
that the contract is unenforceable be-
cause another of the parties thereto was.
a director of the corporation. Stewart
v. Lehigh V. R. R. Co., 38 N. J. L., 505.
(1875). In Beach v. Cooper, 72 Cal., 99
(1887), in a stockholder’s suit to hold
officers liable for paying $315,000 for a
few months’ loan of $140,000 the court
held that the act was not a fraud per se,
and that it was possible that the direct-
ors might explain it. See § 738.

1See chapter XLV, “ B.”

2See chapter IX and chapter XX,
supra. ‘

3See §8 48, 685-688, 735; also Lindley
on Partnership, pp. 367, 868 (Callaghan
& Co., 1881); Green's Brice’s Ultra —
Vires, p. 755, etc,

“167
§ 663a.]  *

in some instances he has been held liable.

FRAUDS OF DIRECTORS, PROMOTERS, ETC.

(CH. XXXIX.

Where an officer or

agent of a corporation has been instrumental in causing the corpo-
ration to commit a trespass or any other tort, then such director or
officer is personally liable therefor.’

Where the corporation has power to do a certain act, but does.
not authorize a person or officer to do that act, then the person or
officer doing such act is liable personally therefor. He is liable as

an unauthorized agent.’

If the corporation had no charter power to do the act in ques-
tion, a more difficult question arises. In England it seems that the
officer or agent is not liable to the third person.* In America he

1 See chapter XLII, § 724, infra.

2 This subject belongs more properly
to treatises on agency and on torts. An
agent is liable for aiding the corpora-
tion in perpetrating a breach of trust.
Att’y-Gen. v. Corporation, 7 Beav., 176
(1844). President of insurance company
which has not complied with the law
authorizing its organization is liable to
policy-holders for false representations
to them by the insurance agents that
the company had so complied. Belding
v. Floyd, 17 Hun, 208 (1879), The pres-
ident of a corporation obtaining credit
for the corporation by false representa-
tions is liable personally therefor and is
liable to arrest. Phillips v. Worten-
dyke, 31 Hun, 192 (1883). A  stock-

holder who is also general manager of.

a newspaper corporation is not liable
criminally for its criminal advertise-
ment of an illegal lottery, unless he
had actual knowledge or notice thereof.
People v. England, 27 Hun, 189 (1882).
See, also, Green’s Brice’s Ultra Vires,
p. 765. An officer is liable who directs
a negro to be excluded from the com-
pany’s omnibus. Peck v. Cooper, 112
Iil., 192 (1884); 54 Am. Rep., 231. Or
who takes part in an assault. Brokaw
vw. N. J., etce., Co, 82 N. J. L., 328
(1867); Hewitt v. Swift, 85 Mass., 420
(1862); Moore v. Fitchburg R, R. Co., 70
Mass., 465 (1855). Or who carries on
a malicious prosecution. Hussey w,'
King, 3 8 E. Rep., 923 (N. C., 1887).
Or causes the company to infringe on a
patent. St. Louis, etc., Co. v. Quinby,

5 Bann. & A. Pat. Cas., 275 (1880); Good- _
year v. Phelps, 3 Blatch., 91 (1858); ‘
Smith v. Standard, etc., Co., 19 Fed.
Rep., 826 (1883); Nichols v. Pearce, 7
Blatch., 5 (1869).

3If two directors without authority
order a bank to honor the checks of the
manager of their corporation and he
overdraws, they are personally liable
for the overdrafts, Cherry v. Colonial
Bk, L. R., 3 P. C., 24 (1869). But see
Beattie v. Lord Ebury, L. R., 7 H. L.,
102 (1874); aff’g L. R., 7 Ch., 777, and
reve L. R., 7 Ch., 788, n. When the
president of the bank without authority
from the directors sells $6,000 of the
bank’s paper for $5,500, he is liable to
the bank for $500 — the real loss, First
Nat'l B’k v. Lucas, 31 N. W. Rep., 805
(Neb., 1887). But a corporate agent
executing a security in the corporate
name without authority is not guilty
of forgery under the New York statute.
Mann v. People, 15 Hun, 155 (1878);
aff’d, 75 N. Y., 484. But he is liable in
a civil action. See, also, Underhill v.
Gibson, 2 N. H., 352 (1821); Weare v.
Gove, 44 N. H., 196 (1862). As to the
liability of officers for trespass, etc., see,
also, Thompson on The Liability of Of-
ficers, etc., p. 489.

4Eaglesfield v. Londonderry, L. R.,
4 Ch. D., 698 (1875). But see West, etc.,
Bk v. Kitson, L. R., 18 Q. B. D., 360
(1884}, where a note was issued; Nich-
olls v. Diamond, 23 L. J., N. S. (Bx.), 1
(1853), where an acceptance was made.
The secretary is not liable for a repre-

768
CH, XXXIx.] FRAUDS ‘OF DIRECTORS, PROMOTERS, ETC. [§ 6638.
is liable to the company for money so lost.’ Although the certif-
icate of incorporation fixes the amount of debts which the corpora-
tion may incur, yet the directors are not liable for an excess of
that amount.

§ 663b. The use of a corporation as a “cloak” for defrauding
the public or particular individuals — The courts will sometimes
ignore the corporate existence.— A corporation is in law a person or
entity entirely distinct from its stockholders and officers. It may
become insolvent and yet not make them insolvent. It may com-

‘mit fraudulent or ultra vires acts and yet they be not liable there-
for. It may do acts which its stockholders as individuals may be
under contract not to do, and the stockholders may do acts which
the corporation cannot do. The disabilities of the corporation are
not disabilities of the stockholders, nor are the disabilities of the
stockholders the disabilities of the corporation. Hence it is that a.
corporation is often organized to act as a “cloak” for frauds. Such.
cases as these are becoming common, and the courts are becoming:
more and more inclined to ignore the corporate existence and
thereby circumvent the fraud. Hence it has been held that, where
a person has contracted that he will not do a certain act, he cannot.
form and control a corporation and have the corporation do that:
act.2 The mere fact, however, that a person has contracted to sell.
a patent-right does not affect the title of 'a corporation to whom he-
transfers such patent.! Where it would be illegal for two or more-
corporations to unite in regulating the production and price of an
article, it is illegal to accomplish that result by placing all the-
shares of stock of those corporations in the hands of trustees and

. thereby securing co-operating boards of directors.’

sentation as to the power of the company
to issue debentures which had been is-
sued. Rashdall v. Ford, L. R., 2 Hq. ,°"754
(1866). Directors issuing debentures in
excess of the amount allowed by stat-
ute are personally liable thereon. Weeks
v. Propert, L. R., 8 C. P., 427 (1873). As
to liability of directors to the com-
pany for losses due to their ultra vires’
acts, see Re Faure, etc., Co., 59 L. T.
Rep., 919 (1888). See 6 R’y & Corp.
L. J., 78.

lAustin' v. Daniels, 4 Denio, 299
(1847), where stock was purchased by
the company. See, also, Franklin, etc.,
Ins. Co, v. Jenkins, 3 Wend., 180 (1829),
and cases in chapters XXXIX, XL and
XLII,

(49)

2¥rost, etc., Co. v. Foster, 41 N. W.
Rep., 212 (Iowa, 1889). Cf. 8§ 685-688,
infra.

3 Moore. etc., Co. v. Towers, etc., Co.,
6 S. W. Rep., 41 (Ala., 1889); Beal wv.
Chase, 81 Mich., 490 (1875).

4 Davis, etc., Co. v. Davis, etc., Co.,

- 20 Fed. Rep., 699 (1884); Averill v. Bar-

ber, 6 N. Y. Supp., 255 (1889). See,
also, chapter XLIII, infra, on Notice.
5State v. North, etce., Co, 5 N. Y.
Supp., 401 (1889); S. C., 5 R’y & Corp.
L. J., 56. This case is also decided on
the principle of law that the acts of the
boards of directors are the ‘acts of the
corporations, and that such acts of the
boards of directors may be proven not
only by written contracts and resolu-

769
§ 6630.) FRAUDS OF DIRECTORS, PROMOTERS, ETC. (CH. XXXIX,

There are many other instances in which the corporate existence
will not suffice to evade liabilities, disabilities and frauds. A part-
nership cannot transfer all its property to a corporation for shares
of stock and thereby defraud the creditors of the partnership.’ The
officers and agents of a corporation who cause the corporation to
defraud its creditors or subscribers to its stock by means of fraudu-
lent misrepresentations are liable to the persons so defrauded.
The stockholders and officers of’a corporation which was not prop-
erly organized may be liable as partners for all of its debts,’ but
this Miability is not based on fraud. A few cases hold that a cor-
poration incorporated in one state for the purpose of doing all its
business in another state is a fraud on the law, and is only a partner-
ship; but the weight of authority holds otherwise.‘ If the pro-
moters or officers or a majority of stockholders defraud the corpora-
tion itself or the minority stockholders, a court of equity will give
full and ready relief.’ Where persons in control of a corporation
use that control to defraud persons with whom they have con-
tracted, a court of equity will aid the persons so defrauded.6 The
stockholders of a corporation are distinct from the corporation
itself,” and may transact business irrespective of their contracts or
obligations; but an injunction against their doing a specified act is
violated if they cause or aid the corporation to do that act.®

tions adopted by such boards, but also 4 See §§ 287-239, supra.

by the undeclared and unwritten acts 5See the previous sections of this
of such boards in their management of chapter for many species of such
their respective companies. See chap- frauds,

iter XLITI. 6 See § 850, etc., and the notes thereto.
1 See § 20b, supra. 7See chapter XLIII.
2 See § 48; also, chapters IX and XX, See King v. Barnes, 118 N, Y., 476
and § 248, supra. (1889). =

3See chapter XIII, supra,
710
CHAPTER Xt.

ULTRA VIRES ACTS AND CONTRACTS — IN OTHER WORDS, ACTS AND
CONTRACTS WHICH ARE IN EXQGESS OF THE CHARTER POWERS
OF THE CORPORATION, DIRECTORS OR STOCKHOLDERS.

§ 664. Meaning of the term wléra vires.

665.
666.
667.

668.

669,

670.

671.

672.

g 664. Meaning of the term ultra vires.—

Method of treatment of the sub- |

ject.

A rocuaider may object to an
ultra vires act.

Neither the directors nor a ma-
jority of the stockholders
have power to sell all the cor-
porate property as against the
dissent of a single stock-
holder.

Consolidations, absorptions,
mergers, amalgamations,
leases and sales oi railroads
without authority of charter,
statute, or amendment of
charter — Execution cannot
be levied on a franchise.

Consolidation, lease or sale un-
der express provision in the
charter itself.

Consolidation, sale or lease un-
der authority of a general
statute existing at the time
of incorporation.

Consolidation, lease or sale un-
der an amendment to the
charter or under a general
statute passed subsequent to
the charter.

Pooling contracts and traffic
arrangements — Contract of
railroad to carry beyond its
line — Liability for negligence
in such cases — Express lim-
itation of such liability —
Contracts with connecting
lines of steamboats — Liabil-
ity of railroads in case of a
lease.

 

§ 673.

675,

676,
677.

678.

679.

680.
681,

682.

A railroad must operate its line,
‘and for refusal to do so is lia-.
ble to indictment, manda-
mus, injunction or forfeiture
of franchises.

Public duties of railroads, gas
companies, and telegraph and
telephone companies — Dis-
criminations —Contracts
against liability.

The legislature may reduce rail-
road rates, require fences to
be built and compel corpora-
tions to accommodate the
public and provide for the
safety of life and property.

Monopolies and. exclusive priv-
ileges.

A corporation cannot be a part-
ner in a copartnership.

Can one corporation guaranty
the bonds or dividends of
another corporation — Giv-
ing away assets-of a corpora-
tion in aid of another cor-
poration or enterprise.

A corporation cannot be an
accommodation indorser or
maker of commercial paper.

A corporation cannot ‘be an ex-
ecutor or trustee.

Stockholder’s right to prevent
the corporation from under-
taking a new business.

Miscellaneous ultra vires acts —
Gifts and presents by the cor-
poration — Lobbying — Con-
tracts contrary to public pol-

_icy — Various instances of
ultra vires and intra vires
contracts and the right of
various parties to raise that
objection.

The term witra vires,

as used in this treatise, means any act of a corporation which the
corporation is not authorized to do, either by its express or implied
powers. This term has been objected to as having no fixed and
clear meaning, and to some extent the objection is reasonable.

There is no other term, however, that has acquired the significance,
1
§ 665.]

ULTRA VIRES ACIS AND CONTRAOY?S.

(CH. XL.

general use and peculiar meaning tbat are attached to the words
ultra vires; and consequently the term probably has acquired a
permanent place in the vocabulary of corporation law."

§ 665. Method of treatment of the subject.— There has been ex-
treme difficulty and confusion in ascertaining the dangers, effect,
rights and remedies when an witra vires act has been committed.
The attempt to formulate -general rules on this subject has only
added to the confusion.2 Accordingly, the plan of explanation pur-

1“*The contracts of corporations are
said to be ultra vires when they involve
some adventure or undertaking not
within the scope of their charter, which
is the rule of corporate action.” Leslie
v. Lorillard, 110 N. Y., 519 (1888), For
various definitions of the words ultra
vires, see Pierce on Railroads (2d ed.),
p. 516; Taylor v. Chichester, etc., Ry
Co, L. R., 2 Ex., 856, 378 (1867); Bis-
sell v. R, R. Cos., 22 N. Y., 258, 298
* (1860); Nat’l Pemberton B’k v. Porter,
125 Mass., 8833; Whitney Arms Co. v.
Barlow, 63 N. -¥., 62 (1875); Earl of
Shrewsbury v. North Staffordshire R’y
Co., 85 L. J. (Ch.), 166; Nassau B’k v.
Jones, 95 N. Y., 115 (1884); Green’s
Brice’s Ultra Vires (2d ed.), 85; Miners’
Ditch Co. v. Zellerbach, 87 Cal., 643,
579; McPherson v. Foster, 48 Iowa, 48,
64, 65; Ashbury R. C., etc, Co. v
Rich, L. R., 7 H. L., 653, 672 (1875); 2
Kent’s Com., *800 (12th ed.), note. Two
difficulties’ have arisen in agreeing upon
a definition of this term. First, the
term ultra vires was often used to des-
ignate not only acts beyond the express
and implied powers of the corporation,
but also acts which are contrary to
. public policy, and are void whether
done by corporations or individuals.
Such acts when done by corporations
are now termed ‘‘illegal” acts, and the

term ultra vires is not used so as to in- °

clude them. Second, the term ulira
vires has been applied to acts which are
beyond the powers of the directors,
but within the powers of the majority
of the stockholders. This use of the
term, however, is now discarded, and
it is used to designate acts which are

beyond the powers of a majority of the

‘stockholders as against a minority; or

are beyond the powers of the stock-
holders acting unanimously as against
the state, ‘

2 For instance, the general rule that
“any ambiguity in the terms of the
grant, must operate against the corpora-
tion and in favor of the public, and the
corporation can claim nothing that is
not clearly given by the law,” etc. (Per-
rine v, Chesapeake, etc., Co., 9 How.,
172— 1849), is sound law, and has been
enounced in many cases; but, as a mat-
ter of fact, this principle gives little
light or satisfaction to the bench, bar or
layman. Each case turns largely on
its own facts. Moreover, the decision
turns largely on who sues, who is sued,
what relief is sought, and whether the
act has been performed by one side or
not. General rules cannot clearly make
the distinctions. The old,ideas have
been changed. Indeed, it is refreshing
to hear from that great judge, Mr, Jus-
tice Miller, such sound sense as this:
“The truth is that, with the great in-
crease in corporations in very recent
times, and in their extension to nearly
all the business transactions of life, it
has been found necessary to hold them
responsible for acts not strictly within
their corporate powers, but done in
their corporate name, and by corpora-
tion officers who were competent to ex-
ercise all the corporate powers.” Salt
Lake City v. Hollister, 118 U. 8., 256
(1885). See, also, Pcnn., ete., R’y Co. v
Keokuk, etc., Co., 181 U. 8, :871, 884,
889 (1889).

2%
OH. XL] ULTRA VIRES ACTS AND CONTRACTS. [§ 666.

sued in this work is to state those atts which have been adjudged
ultra vires, and also those acts which have been’ adjudged to be
intra vires? Moreover, since an ultra vires act may be objected to
by the state, a stockholder, the corporation or the person contract-
ing with the corporation, and since often one of these parties may
sustain the objection where the others would not be allowed so to
do; it is necessary to consider always the four questions, who
brings the suit; who issued; what act is complained of; and what
conclusion was reached.

It rarely happens that the state objects to an wltra vires act.
That it hus a right to object by guo warranto is undoubted.

§ 666. A stockholder may object to an ultra vires act.— That a
charter constitutes a contract between the corporation and its
stockholders is a principle of law that has become firmly imbedded
in the jurisprudence of modern times. Upon this principle of law
rests the stability, petfmanence and honesty of management of
many corporations, particularly those of railroads, and from it
arises mach of the confidence, safety and protection of the stock-
holder hinself. It was first promulgated in America, in 1820, in
Livingston v. Lynch,‘ and was applied to corporations in The Hart-
ford & New Haven Railroad Company against Croswell,® and in
England, in 1824, in Natusch v. Irving. These cases have been
followed by a long list of supporting decisions. They were the
first to establish clearly the doctrine that any act or proposed act
of the corporation or of the directors or of a majority of the

stockholders which is not within the express or implied powers of.

the charter of incorporation or of association —in other words, any

! This is the subject of this chapter-

2This is the subject of the following .

’ chapter, XL

8 The cases of Att’y-Gen’l v. Utica Ins.
Co., 2 Johns. Ch., 389 (1817); Att’y-
Gen’l v. Bank of Niagara, Hopk. Ch.,
354 (1825), clearly hold that ultra vires
or illegal acts of a joint-stock corpora-
tion cannot be enjoined in a court of
chancery at the instance of the state.
The remedy open to the state is a writ
of quo warranto or an information in
the nature thereof. See, also, § 635,
supra.

44 Johns, Ch., 373,

55 Hill, 383 (1843).

82 Cooper’s Ch., 358, by Lord Eldon;
also reported in Gow on Partnership,
898. Thus, Lord Chancellor Campbell

said, in Simpson v. Westminster Palace
Hotel Co.,8 H. of L. Cases, 712 (1860):
‘*I bow to the authority of Natusch v.
Irving. The funds of a joint-
stock company established for one un-
dertaking cannot be applied to another.
If an attempt to do so is made, this act
is ultra vires, and, although sanctioned

by all the directors and by a large ma- °

jority of the shareholders, any single
shareholder has a right to resist it, and
a court of equity will interfere on his
behalf by injunction.” In Pickering v.
Stephenson, L. R., 14 Eq., 322 (1872), the
court said: ‘‘It is difficult to conceive
any system of jurisprudence in which
Natusch v. Irving would-have been
differently decided,”

773
[cH. XL.

§ 667.] ULTRA VIRES ACTS AND CONTRACTS.

ultra vires act —is a breach of the contract between the corpora-
tion and each one of its stockholders, and that consequently any one
or more of the stockholders may object thereto and compel the cor-
poration to observe the terms of the contract as set forth in the
charter.

§ 667, Neither the directors nor a majority of the stockholders
have power to sell all the corporate property as against the dissent
of a@ single stockholder— The case of Abbot v. American Hard
Rubber Company ! clearly established the rule in this country that
a dissenting stockholder may prevent the sale by the directors or
by a majority of the stockholders of corporate property which
is essential to the continuance of the business of the corporation,
_unless such sale is made with a view to the dissolution of the cor-
poration or the payment of the corporate debts:? And even where
a dissolution is the purpose in view, yet, if the corporation is a
prosperous one, it is extremely doubtful: whether such a sale can
be made. The old common-law doctrine that a majority of the
stockholders may at any time effect a voluntary dissolution of the
corporation is still sustained. But if the purpose of such dissolu-
tion is not the bona side discontinuance of the business, but is the
continuance of that business by another new corporation, then the ,
better and later rule is that a dissenting stockholder may prevent
the sale, even though it is made with a view to dissolution of the
corporation. This is the law as laid down by the well-considered
case of Kean v. Johnson.* Such a dissolution is practically a fraud

133 Barb., 578 (1861). See, also, id., v. Eickemeyer, etc., Co., 90 N. Y., 607

4 Blatch., 489. A corporation may con-

vey away its property with the consent’

of stockholders. State v. Western, etc.,
Co., 19 Pac. Rep., 349 (Kan., 1888),
2See, also, Smith v. New York, etc.,
Co., 18 Abb. Pr., 419 and 485 (1865);
Robbins v. Clay, 33 Me., 182 (1867); Hat
B. Co. v. Eickmeyer, etc., 56 How. Pr.,
78 (1878); Barclay v. Quicksilver M. Co.,
9 Abb. Pr., N. 8,, 284 (1870); Copeland
v. C. Gas Co., 61 Barb., 60 (1871); Conro
v. Port Henry I. Co., 12 Barb., 127 (1851);
Bird v. Bird’s, etc., Co., L. R., 9 Ch., 358
(1874); Adriance v. Roome, 52 Barb., 899
(1868); Brady v. Mayor, etc., 16 How.
Pr., 482 (1857); Middlesex R. R. Co. v.
Boston, etc., R. R. Co., 115 Mass., 347
(1874), Cf. Dana v. Bk of U. S., 5
Watts & S. (Pa.), 247 (1848); Union
Bank, etc., v. Ellicott, 6 G. & J, (Md.),
363 (1834). See, also, Sheldon, etc., Co.

(1882); Balliet v. Brown, 103 Penn. St.,
546 (1883); Gray v. N. Y., etc., Steam-
ship Co., 5 T. & C. (N. Yu, 224 (1875).
But see Hutchinson v. Green, 1 R’y &
Corp. Law Journal, 18 (Mo., 1866), and
Mills v. Hurd, 29 Fed. Rep., 410 (1887),
relative to unincorporated associations,
A sale of all the corporate property to
an individual who purchases in good
faith cannot be set aside by the corpo-
ration as ultra vires. Miners’ Ditch Co.
v. Zellerbach, 87 Cal., 548 (1869). Where
the business was a losing one, a lease
of all the property by the stockholders,
having wide powers by the charter, was
upheld. Feather v, Lee, etc., Co, L
R., 1 Eq., 318 (1865).

39N. J. Eq., 401 (1853); Ervin v. Ore-
gon R’y & Nav. Co., 27 Fed. Rep., 635
(1886).

U14
ULTRA VIRES ACTS AND CONTRAOTS.
,

on the law and on dissenting stockholders. It seeks to do indi-
rectly what cannot legally be done directly.! If, however, the
corporation is an unprofitable and failing enterprise, then a sale of
all the corporate property with a view to dissolution may be made
by a majority of the stockholders. But although the sale may be
made even to another corporation, yet the stock of the latter cor-
poration received in payment for the property cannot be forced
upon dissenting stockholders. They are entitled to money. Such
of them as do not voluntarily j join the new corporation are entitled
to the value of their shares in the old'corporation in cash, and may
have an injunction until they are secured.? To compel the stock-
holders of the old corporation to accept the stock of the new cor-
poration in payment for their interest in the old would be in effect
to compel them to join the new corporation, or, what is the same
thing, to compel them to consent to a consolidation. The old
corporation may, however, lawfully accept payment for its assets
in shares of stock in the new corporation, and may then distribute
that stock ratably among such of the old stockholders as are will-
ing to accept it, selling the rest of the shares, and paying to the re-
mainder of the old stockholders cash, to the extent of their interest
in the assets of the old corporation.’

§ 668. Consolidations, absorptions, mergers, amalgamations,
leases and sales of railroads without authority of charter, statute
or amendment of charter.— By far the greater number of cases in-
volving wltra vires acts which affect the rights of a stockholder are
cases growing out of the attempted consolidation, absorption, lease
or sale of the property of one railroad corporation by or with an-
other railroad corporation. The rapid tendency of the railway
system towards the creation and unification of trunk lines and the
annihilation of smaller companies has led to many of these cases.

bin XL.] [§ 668.

1Boston, etc., R. R. Co. v. N.Y. &
N. E. B.R. Co., 13 R. L., 260 (1881). See

etc., R. R. Co., 30 Pa. St, 42 (1858). By
unanimous consent it is legal for two

§ 629, 680.

2Lauman v, Lebanon Valley R. R.
Co., 30 Penn. St., 42 (1858). :

3State v. Bailey, 16 Ind., 46 (1861);
Kelley v. Mariposa Land & Mining Co.,
4 Hun, 632 (1875). Cf. New Jersey Zinc
Co. v. New Jersey Franklinite Co., 13
N, J. Eq., 822 (1861); 8. C., 15 id., 418
(1862). Contra, Sawyer v. Dubuque,
etc., Co., 42 N. W. Rep., 300 (Iowa, 1889),

4 Ex parte Bagshaw, L. R., 4 Eq., 341
(1867); McCurdy v. Meyers, 44 Penn. St.,
585 (1863); Frothingham v, Barney, 6
Hun, 366 (1876); Lauman v. Lebanon,

‘companies to sell all their property to a

third company, take its stock in pay-
ment and divide the stock among the
stockholders, all creditors being paid.
Kohl v. Lilenthal, 20 Pac.’ Rep., 401
(Cal., 1889).

5Treadwell v. Salisbury Mfg. Co., 7
Gray, 392 (1856). See, also, Buford v.
Keokuk Northern Line' Packet Co., 2
Mo. App., 159 (1876); Black v. Delaware.
etc., Canal Co., 22 NJ, Eq., 130, 415
(1871); S..C., 24 id., 455 (1873); Laumian
v. Lebanon Valley BR, R. Co., 80 Penn.
St., 42 (1858),

vats)
§ 668.1 ULTRA VIRES ACTS AND CONTRACTS. [CH. XL.
The interests in such movements frequently involve vast amounts
of property. In Europe this stage of railway development has
been passed through, and it is there generally found that in each
country a few great systems control all the railways. In Amer-
ica the past twenty years have brought about the creation of
semi-transcontinental lines, and the consolidation, absorption and
disappearance of large numbers of local or branch lines. But the
American movement towards systems of railways which will trav-
erse the entire continent is already clearly outlined and at hand,
The changes which are impending will lead to the disappearance
of existing short lines and even systems of railways. Large inter-
ests will require and in some way will obtain a removal of the
legal right of stockholders to object to the changes towards which
the times are rapidly approaching. The principles of law protect-
ing the rights of stockholders in these attempted consolidations or
leases are to be of vital importance both to the railroads and to

the stockholders themselves.!

These consolidations, absorptions, leases or sales of railroads have
occurred or have been attempted under five different claims of legal

right or authority.

1Mr. Charles Francis Adams, presi-~

dent of the Union Pacific Railroad, and
one of the most profound thinkers on
railway problems, said on December 15,
1888, in an address at Boston: ‘‘ The
railroads of this country are moving
rapidly toward some great system of
consolidation. Ido not know when or
how it will come about; nor is it neces-
sary now to consider this. Neither do
I believe it will become an evil when it
does come. Nevertheless, it is a matter

of common notoriety that such a result ”
is viewed with grave popular appre-

hension. We have seen what the prog-
ress of the last twenty years has been
in this respect. Crystallization has gone
on during those years, so that, while
then a railroad of two hundred or three
hundred miles was considered large, one
of five thousand or six thousand miles is
now far from being the largest. As I
have pointed out, the movementisto-day
going forward more rapidly, much more
rapidly, under the artificial impetus
given to it by the interstate commerce

These are, first, under the claim that there is
an implied power of the corporation to make the change;

second,

act than ever before. The next move
will be in the direction of railroad sys-
tems of twenty thousand miles, each
under one common management, The

interstate commerce act, acting on the-

tendency of natural forces, is at this
moment rapidly driving us forward to-
ward some grand railroad trust scheme.
Even this, from my point of view, I
cannot regard as a thing to be dreaded.
Iam very sure now, as I have been for
the last twenty years, and as I long ago
expressed myself, that a great consoli-
dated corporation or even trust can be
held to a' far stricter responsibility to
the law than numerous smaller and con-
flicting corporations. Under the exist-
ing system no one can be held ta
account. Evasion is always possible;
and invariably it is the other man who
is responsible for the wickedness. With
one large corporation or trust it would
be otherwise. Both law and’ popular
opinion could, and certainly would, by
directed against it.”

16

ay
OH. XL. | ULTRA VIRES ACTS AND CONTRACTS. [§ 668,
that the charter expressly confers this right; third, that a general
statute, existing at the time of incorporation, expressly authorized
the act; fourth, that an amendment to the charter, or a general
statute passed subsequently to the incorporation, expressly author-
ized the consolidation, absorption, sale or lease; fifth, that the cor-
poration may dissolve and sell its road and franchises to another
corporation.!

It is a principle of law, clearly established and now unques-
tioned, that neither the directors of a railroad corporation nor a
majority of the stockholders can, as against one or more dissenting
stockholders, authorize a sale or ‘lease of the road to another cor-
poration, unless express authority for the sale is conferred by the
charter or a constitutional amendment thereto, or a statute consti-

tutionally applicable to that charter.

to make such a sale.
‘the parties to the lease or sale.’

1See,§ 667, supra.

2A lease of one railroad to another
without statutory authority is invalid.
At any time the lessee may repudiate
the lease and refuse to continue the
‘payment of rent. Oregon Railway,
etc., Co. v. Oregonian Railway Co.,
130 U. 8S., 1 (18989); Pennsylvania R.
R. Co. v. St. Louis, etc., R. R. Co., 118
U. S., 290 (1885), holding void a lease
which the lessor was authorized to
make, but the lessee not; also holding
void a guaranty of the rent, but not
passing upon a judgment for rent which
the lessor obtained in the court below;
Thomas v. R. R. Co; 101 U. S, 71
(1879), holding a lease to be void, and
refusing to give damages to the lessee
for an arbitrary termination of the lease
by the lessor; holding, also, ‘that a
statute authorizing transportation con-
tracts does not authorize leases, and a
statute referring to the lease is no rati-
fication of it; Troy, etc., R. R. Co. v.
Boston, etc., R. R. Co., 86 N. Y., 107
(1881), holding that a lease made for the
purpose of tearing up a track is not au-
thorized by the New York statute, and
the lessee cannot enjoin another road
from using the right of way; Abbott v.
Johnstown, etc., R. R. Co., 80 N. Y¥., 27
(1880), holding the lessor liable for an

There is no implied power

This question has frequently arisen between

injury; Gulf, etc., R’y Co. v. Morris, 4
S. W. Rep., 156 (Texas, 1887), holding
that a creditor of the lessor or vendor
road may treat the lease or sale as void
and levy execution accordingly ; Wood-
ruff v, Erie R’y Co., 93 N. Y., 609 (1883),
holding that the lessee cannot refuse to
pay past rent by alleging that the lease
was ultra vires. To same effect, Farm-
ers’ L. & T. Co. v. St. Joseph, ete, R.
R. Co., 1 McCrary, 247 (1880); Raritan,
etc., R. R. Co. v. Delaware, etc., Canal
Co., 18 N. J. Eq., 546 (1867), where a
competing road enjoined an illegal lease
whereby two other roads were com-
bined. Where the lease is unauthorized
by statute the leased rolling stock is lia-
ble for taxes levied on the lessor rail-
road. Archer v. Terre H., etc., R. R.,
102 Ill, 493 (1882). The consolidation
of parallel railroads cannot be made
under a statute authorizing the consoli-
dation of connecting lines. State v.
Vanderbilt, 37 O. St., 590 (1882). In
general see, also, Peoria, etc., Ry v
Cvual Valley Co., €8 Ill., 489 (1878). A
lessee railroad cannot repudiate the
lease and refuse to pay rent where the
lessor railroad constructed the road on
the agreement of lease and. on the les-
see’s guaranty of the lessor’s bonds.
The plea of ultra vires is not allowed to

TU
§ 668.]

ULTRA VIRES ACTS AND CONTRACTS.

[eH. XL.

So, also, a lease or sale of one railroad to another, without ex-
press authority from the legislature, is beyond the power of the
directors or a majority of the stockholders as against a dissenting

these parties. Camden, etc, R. R. w.
Mays, etc., R. R., 7 Atl. Rep., 523(N. J.,
1486). A contract between railroads
whereby one is to run the other and pay
it a proportion of the receipts for nine
hundred and ninety-nine years is not a
consolidation, lease or sale, but a con-
tract of “‘ connection.” Archer v. Terre
Haute, etc., R. R., 102 Ill, 493 (1882).
_A lease of rolling stock to a railroad
company is not subject to the same ob-
jections as a lease of one railroad to an-
other. Humphreys v. St. Louis, etc.,
R’y, 37 Fed. Rep., 307 (1889).

Suit by lessee of street railroad
against lessor, the lease being unau-
thorized, for cost of repairs, fails. Mid-
dlesex R. R. Co. v. Boston, etc., R. R.
Co., 115 Mass., 347 (1874). In East Ang-
lian R’y Co. v. Eastern, etc., R’y Co., 11
Cc. B., 775 (1851), an action by the
plaintiff to recover of the defendant the
expenses of bills introduced into parlia-
ment to authorize a lease of the plaint-
iff to defendant, failed, although defend-
ant had agreed to pay such expenses.
In Great Northern R’y Co. v. Eastern,
etc., R’y €o., 9 Hare, 306 (1851), the
court refused to enjoin the defendant
from obstructing a crossing which it
made with the lessor of the complain-
ant. The lease was ultra vires. Where
one of two companies which are, using
a third road jointly leases still another
voad without express power to do so,
the other company may enjoin it from
carrying the new traffic over the line
used jointly by them. London, ete,
R’y Co. v. London, etc., R’y Ca., 4 De G.
& J., 362 (1859). The power to lease a
completed railroad does not authorize
the lease of an uncompleted one. Wceod
v. Bedford, ete., R. BR. Co., 8 Phil., 94
(1871). Power to lease, sell or rent
does not authorize sale of the iron only.
Upson, etc., R. R. Co. v. Sharman, 37
Ga., 644 (1868); Pearce v. Madison, etc.,

R. R. Co., 21 How., 441 (1858), holding
that notes given by a consolidated com-
pany, the consolidation being unauthor-
ized, do not bind the original roads, A
joint use of a depot construed to be an
ultra vires lease, and not enforceable.
Ohio & M. R. R. Co. v, Indianapolis,
etc., R. R. Co.,5 Am. L. Reg., N.S., 783
(Cincinnati Court, 1866); Shaw v. Nor-
folk, etc., 5 Gray, 162, where the con-
tention that a franchise could not be
lawfully conveyed away was considered
immaterial because the conveyance had
been subsequently confirmed by statute. :
Competing railroads cannot be united
under the New York statute. See
Wallace v. Long I. R. R. Co., 12 Hun,
460 (1877). A railroad which has given
an ultra vires lease of its telegraph line
cannot retake forcible possession. It
must have the lease canceled by a’
court of equity. Atlantic, etc., Tel. Co. .
v. Union, etc., Tel. Co., 1 Fed. Rep.,
745 (1880). A lease whereby a railroad
is extended beyond its charter limits is
ultra vires and may be.set aside. Union
Bridge Co. v. Troy, etc., R. R. Co., 7
Lans. ‘N. Y.), 240 (1872). Power to con-
solidate stock gives power.to purchase
or sell; and power to construct gives
power to purchase. Branch v. Jesup,
106 U. S., 468 (1882), In Oregon the
statutes are held not to authorize leases.
Oregon Railway Co. v. Oregonian Rail-
way, etc., Co., 1830 U. S, 1 (1889).
Power to sell to a company does not
authorize a sale to an individual.
Bird v. Bird’s, etc., Sewage Co., L. B.,'
9 Ch,, 358 (1874). A railroad using a
depot jointly with another cannot ex-
clude the lessee of that other. Midland
R’y v. Great Western R’y, L. R., 8 Ch.,
841 (1873). The state may forfeit the
charter of a railroad company which
has leased its road without authority.
See § 635, supra. . A stockholder may
enjoin an ultra vires lease of teompeting

7178.
OH. XL.]

ULTRA VIRES ACTS AND CONTRACTS. [§ 668.

stockholder. It is a violation of the implied contract between the
corporation and each stockholder that the business prescribed in
the charter will be pursued until the dissolution of the corporation.
Generally the lease of a railroad is made under an agreement
whereby the stockholders of the old corporation are guarantied a
certain income. The effect, in any case, however, is not a contin-
uation of the business of the old corporation, but an abandonment
of it. Itis an act ultra vires of the corporation, and ixf violation
of the contract between the corporation and its stockholders. A
single stockholder may obtain an injunction against the lease, or,
if it is already made, may go into a court of equity and have it set

aside.!

lines which would render the charter
liable to forfeiture. Thouron v, East,
etc., Ry Co., 5 Ry & Corp. L, J., 77%
(Tenn., 1888). A railroad company may
be given power to sell, lease, etc., and yet
not have power to sell all lands, except
the easement of aright of way. Southern
Pac. R’y Co. v, Esquibel, 20 Pac. Rep.,
109 (N. M., 1889). As to consolidations
of insurance companiesin England and
the liability of the old company and
its stockholders on old policies, see
Hort’s Case, L. R., 1 Ch. D., 307 (1875);
Harman’s Case, L. R., 1 Ch. D., 326
(1875); Cocker’s Case, L. R., 3 Ch. D., 1
(1876); Rivington’s Case, L. R., 3 Ch.
D., 10 (1876); Doman’s Case, L. R., 3 Ch’
D., 21 (1876); Wynne’s Case, L. R., 8
Ch,, 1002 (1873); Hamilton, etc., Ins,
Co. v. Hobart, 68 Mass., 543 (1854);
Smith v. St. Louis, etc., Ins, Co., 2
Tenn. Ch., 727 (1877); Gardner v. Ham-
ilton, etc., Ins. Co,, 84 N. Y., 420 (1865).
In Currier v. Concord R. R. Co., 48 N.
H., 321 (1869), the court overruled the
defendant’s demurrer to a bill in equity
filed bythe complainants, private citi-
zens, to prevent the defendant making,
contrary to statute, a consolidation con-
tract with a competing line. A lessee
of a canal from the canal company, the
latter having no statutory power to
lease, takes nothing, and cannot collect
tolls. Hinckley v. Gildersleeve, 19
-Grant’s Ch. (U. C.), 212 (1872).

1 Winch v, Birkenhead, etc., R’y Co.,
5 De G. & Sm., 562 (1852), where the

lease was for ninety-nine years; Cass v.
Manchester, etc., Co., 9 Fed. Rep., 640
(1881), where the lease was for five
years; Stevens v. Davison, 18 Gratt.
(Va.), 819 (1868), where the lease was
for ten years; McDonnell v. Grand
Canal Co., 3 Ir. Chan., N. S., 578 (1853),
where the purchase of a canal was en-
joined; South Georgia, etc., R. R. Co.
uw. Ayres, 56 Ga., 230 (1876), where the
stockholder deféated an action for calls
on the ground of an iilegal consolida-
tion; Tippecanoe County v. Lafayette,
etc., R. R. Co., 50 Ind., 85 (1875), where
a lease for ninety-nine years was en-
joined; Black v. Delaware, etc., Canal
Co., 24 N. J. Eq., 455 (1878), reversing
22 N. J. Eq., 180, where a lease was en-
joined; Simpson v. Denison, 10 Hare, 51
(1852), where a stockholder enjoined his
company from operating another road
and guarantying a fixed dividend to it;
Clinch uv, Financial Corporation, L, R.,
5 Eq., 450 (1868), where a consolidation
was set aside at the instance of a stock-
holder; Kean v. Johnson, 9 N. J. Eq.,
401 (1853). In this case a statute au-
thorized the consolidating sale if it
could be made legally. The court held
that. it. could not be. See, also, Charl-

ton v. Newcastle, etc., R’y Co., 5 Jur.,

N. S., 1096 (1859); Tuttle v, Midhizan,
ete., R. R. Co., 35 Mich., 247 (1877),
where an action on a subscription was
defeated; International, etc., R. R. Co,
v. Bremond, 53 Texas, 96- (1880), hold-
ing, however, that.the directors are not

719
§ 668.]

ULTRA VIRES’ ACTS AND CONTRACTS.

oH. XL.

Frequently the constitution or statutes of a state prohibit the
consolidation of parallel lines of railroad." Indeed to such an ex-
tent does the law forbid the transfer of the franchise to be a cor-
poration and the franchise to use a right of way that an execution
issued against the corporation cannot be levied -on its franchises
unless a statute expressly allows it.’

personally qliable therefor ; Blatchford
v. Ross, 54 Barb., 42 (1869); Dongan’s
Case, 28 L. T., N. §., 60 (1873); Boston,
etc., R. R. Co. v. New Eng. R. R, Co.,
13 RB. I., 260 (1881), where the sale was
declared to be illegal, though the stock-
holder’s road was in the hands of mort-
gagees for default in the payment of
interest, the old stockholders being of-
fered stock in a new corporation, or a

fixed sum for their shares of stock.

Laches, however, in complaining was
held to be fatal; Atlantic, etc., R. R.
Co.’s Case, 8 Hughes, 820; 8 C, 4
Hughes (U. §.), 15! (1878), holding that
where the consolidating sale ‘is unau-
thorized, a stockholder of the old corpo-
ration is not affected by a foreclosure
sale of all the property of the new cor-
‘poration. This case is valuable as con-
taining approved forms for pleadings
and decrees in the procedure, appoint-
ment of receiver and sale and distribu-

tion of assets upon the foreclosure of a.

railroad mortgage. In the case of Bry-
son v. Warwick, etc., Co., 1 Sm. & G.,
447 (1853), it was held that a stock-
holder in a corporation might sue in
equity to recover back for the corpora-
tion forfeit money paid by it to another
corporation on an wléra vires contract to
purchase the latter; Nathan v. Tomp-
kins, 2 South. Rep., 747 (Ala., 1887),
where a stockholder enjoined an ultra
vires consolidation of two railroads;
City of Knoxville v. Knoxville, etc., R.
R. Co., 22 Fed. Rep., 758 (1884), where
a dissenting stockholder caused a sale
of a road to be set aside, even though a
mortgage was thereby invalidated. If
the lease has been made by unanimous
consent, a single stockholder may en-
join a material modification of it by a
majority vote. March v. Eastern R.

R.’ Co., 48 N. H., 515 (1862); 8. C., 40
id., 548 (1860), where a stuckholder com-
pelled the lessor railroad to pay sums
due to the lessee.

1See § 315, supra, and article in 1
R’y & Corp. L. J., 74; also Missouri,
etc., R’y v. Texas, etc., R’y, 30 Fed.
Rep., 1 (1887). A legislative prohibition
of the consolidation of parallel lines of
road does not prevent contracts for the
union of parts which are not parallel.
People v. O’Brien, 111 N. Y., 1 (1888).

2 Stewart v. Jones, 40 Mo., 140 (1867),
where a sale on execution of a fran-
chise to be a college was held void;
Randolph v. Larned, 27 N. J. Eq., 557
(1876), involving a railroad franchise;
Ammont v. Pittsburg T. Co., 13 8. & R.
(Penn.), 210(1825), aturnpike franchise;
Gue v. Tide, etc., Canal Co., 24 How.,
257 (1860), holding that the locks,
wharves, etc., of a canal company
could not be reached by execution. But
a canal basin owned by a railroad and
not needed by it may be reached. Ply-
mouth R. R. Co, v. Colwell, 39 Pa. St.,
887 (1861). See, also, Evangelical, etc.,
Home v. Buffalo, etc., Assoc., 64 N. Y.,
561 (1876), allowing a dam to be taken
under execution. The case of State v.
Rives, 5 Ired. L. (N. C.), 297 (1844), sus-
tained a sale under execution of a rail-
road, and held that the purchaser was
not criminally liable for tearing up the
track. In Louisiana railroad franchises
may be sold under execution, though
no statute authorizes it. Lawrence v. -
Morgan’s, etc., 8. S. Co., 2 South. Rep.,
69 (1887). The rule that execution can-
not reach the right to operate a railway
is based on the wise policy that any
other rule would result in the breaking
of roads into many pieces. See Red-
field v. Wickham, 58 L. T. Rep., 455

780
CH. XL.] ULTRA VIRES ACTS AND CONTRAOTS, [8§ 669, 670.
§ 669. Consolidation, lease or sale under express power in the
charter itself— If the charter of a corporation expressly authorizes
a lease or sale of the corporate property, such a lease or sale may
be made by a majority of the directors in meeting assembled,
and the minority are bound thereby.! I is immaterial what the
terms of the sale or lease may be, or whether they be advantageous
or disadvantageous to the stockholders. The dissenting minority
have no remedy unless actual fraud can be shown. Thus, a lease
made under such a charter provision has been upheld, although the
rental from the lease will pay dividends only on the preferred
stock, leaving nothing whatsoever for the common stockholders.

8 670, Consolidation, s sale or lease under authority of a general
statute existing at the time of incorporation.— There seems to be
little doubt that if, at the time of an incorporation of a company,
there is.a general statute on the statute book authorizing the con-
solidation, "sale or lease of one railroad to another, then seach con-
solidation, sale or lease may be made even against the dissent of a
minority of the stockholders. Sometimes the statute which au-
thorizes the sale, lease or consolidation of railways provides for the
payment of money to a dissenting stockholder who prefers to close
out his interest in the matter rather than take part in the new,

enterprise.*

(1888), distinguishing County of Drum-
mond v. §. E. Ry, 24 L, C. Jurist,
276.

1Wallace v. Long Island R. R. Co.,

“ 12 Hun, 460 (1877), where the assent of -
the majority was 1 Cf. § 671, ,

infra.

2Middletown v. Boston, etc, R. R.
Co., 58 Conn., 351 (1885), where the
charter allowed leases on a three-fourths
vote of the stockholders. It may be
remarked that when such acts can be
done under the sanction of the law
there is occasion for protection of the
minority’s rights by legislative enact-
ment.

3 Wilson v. Salamanca, 99 U. S., 499
(1878); Sparrow v. Evansville, etc., R.
R. Co., 7 Ind., 369 (1856), where a stock-
holder was defeated upon setting up the
defense of illegal consolidation; Mans-
field, etc., R. R. Co. v. Brown, 26 O. St.,

223 (1875), where the court say ‘‘ their,

contract of subscription must be con-
strued as having been made with ref-

!

erence to the consolidation act, by
which they are bound as fully as if its
provisions had been copied into their
contract of subscription ; ;” Chicago, etc.,
R. R. Co. v. Putnam, 12 Pac. Rep., 593
(Kan., 1887); Bish v. Johnson, 21 Ind.,
299 (1863), where the subscriber to stock
subscribed after the amendment au-
thorizing the consolidation was passed.
A stockholder in the old company may
sue the consolidated company for the
stock to which he is entitled in exchange.
Fee v,' Gas Co,, 85 La, Ann., 413 (1888).
For a case of lease of a railroad under
the Pennsylvania statute, the lessee pay-
ing rent by turning over a part of the
gross receipts, etc., see Gratz v. Penn.
R, R., 41 Pa, St., 447 (1862), where a
stockholder’s action for an injunction
failed.

4See First Nat. B'k v. Breneman, 7
Atl, Rep., 910 (1886), a national bank
case; Trask v. Peekskill, etc., Co:, 6

‘Hun, 236 (1875), under the New York

Manufacturing Company’s act;, Ea

781
' Co, v. Manhattan, etc,

—

§ 671.] ULTRA VIRES ACTS AND CONTRACTS. [CH. XL.

There has been a difference of ‘opinion among the authorities as
to whether a lease which is authorized by statute may be made by
‘the directors or by the stockholders in meeting assembled. It is
now settled that the directors alone are to exercise the power.'

§ 671. Consolidation, lease or sale under an amendment to the
charter or under a general statute passed subsequent to the charter.

It has already been shown in a preceding chapter that an amend-

‘ment to a charter whereby a consolidation of the corporation with

another corporation is authorized can be accepted and acted upon

‘by the corporation only by the unanimous consent of the stock-

holders? A single dissenting stockholder may enjoin a consolida-
tion made under such circumstances. The better opinion also is
that this rule prevails even though the legislature has reserved the

right to alter or amend the charter.

parte Fox, L. R., 6 Ch., 176 (1871), un-
der the English act.

1 Where a lease of a railroad may
legally be made, the directors and not
the stockholders make the lease. The
directors, subsequently, may modify it
and reduce the rental, and they may
do so though the stock recites the
amount of the original rental. Bever-
idge v. N. Y. El. R. BR. Co., 112 N. Y,,
1 (1889). Cf. Metropolitan, etc., R. -R,
R. R. Co., 11
Daly (N. Y. Com. Pl.), 378, 468 (1884),
setting aside a modification of a lease
where the modification was made by
the directors only. In this same famous
elevated road litigation the above rule
was laid down in Flagg v. Manhattan

R’y Co., 10 Fed. Rep., 418 (1881); People .

v. Metropolitan R’y Co., 26 Hun, 82
(1881). Subsequently the cancellation
of the lease was duly made by a mo-
jority of the stockholders, See Hark-
ness v. Manhattan R’y Co., 22 J. &S,
(N. Y. Super. Ct.), 174 (1886). The fact
that directors own a majority of the
stock does not obviate the necessity for
meeting of stockholders, when lease
can be authorized by them only. Martin
v. Continental, etc., R. R. Co., 14 Phil.,
1 (1880).

2 See §§ 499, 500, supra. The consoli-
dation of two turnpike corporations,
even under astatute authorizing it, may

injunction,

‘The reserved right is to make

be enjoined by astockholder. Botts v.
Simpsonville, etc., Co., 10 5S. W. Rep.,
134 (Ky., 1888); Mansfield, ete., R. BR
Co, v. Brown, 26 O. St., 223 (1875), holds
that the stockhoider who is sued on
calls may attack the regularity of the
consolidation. Buta municipality giv-
ing bonds to one of the old companies
cannot attack such regularity. Chicago,
etc., R. R. Co. v. Putnam, 12 Pac, Rep.,
593 (Kan., 1887), In Illinois it is very
properly held that a stockholder cannot
defend against calls by alleging an ultra
vires consolidation. His remedy is by
Ottawa, etc., R. R. Co. wv.
Black, 79 Ill, 262 (1875). .Cf. § 111,
supra, A stockholder cannot enjoin a
consolidation on the ground that one of
the consolidating companies was ille-
gally organized. Bell v, Peru, etc, R.
R. Co., 10 Atl. Rep., 741 (N. J., 1887).
Sometimes the statute expressly, re-
quires the consent of a certain propor-
tion of the stockholders to a lease. As
to the Michigan statute authorizing a
sale, etc., of a railroad, see Farwell v.
Houghton, etc., Works, 8 Fed. Rep., 66
(1881). Under the Nebraska statute au-
thorizing a lease’of a railroad on a two-
thirds vote of the stockholders, see
Peters v. Lincoln, etce,, R. R. Co., 14
Fed. Rep., 819 (1882); 12 id., 518; Farm-
ers’, etc., Co. v. St. J., ete, R, BR. Co.,
2id., 117 (1880).

782
,

CH. XL. | ULTRA VIRES ACTS AND CONTRACTS. [§ b72
amendments for the benefit of the public, and not for the benefit

_of the majority as opposed to the minority of the stockholders.!
The legislature, corporation and majority, however, are not en-
tirely subject to the will of dissenting stockholders. Under the
power of eminent domain the legislature: may, in a statute author-
izing consolidations, leases or sales of railroads, provide therein
that a dissenting stockholder’s stock shall be appraised and con-
demned, thereby 1 removing all obstacles to the proposed act. Such
a condemnation proceeding is legal and constitutional.? But a stat-
ute giving authority to condemn stock for the purpose of effecting a
consolidation of corporations is no authority for the condemnation
where only a lease is being effected; nor have the courts any power
to award damages to the dissenting stockholder, and then take from
him his stock.’

In England there is no restriction ‘on the power of parliament
to amend a charter; and the courts will not enjoin an application
to parliament for an amendment,‘ but will enjoin any use of cor-
porate funds to aid and further that application.

§ 672. “ Pooling” contracts and traffic arrangements of corpora-
tions.— There are various legal principles which must be consid-
ered in determining the legality of combinations, “ pools,” traffic
arrangements and copartnerships among corporations, Certain ones
of these contracts are valid, while others are invalid. A combina-
tion or “trust” in restraint of trade is invalid on the ground of
public policy, whether it is formed by corporations or private in-
dividuals.®

A “pooling” contract gives rise to questions of more difficulty.
and doubt. These contracts are of two kinds: first, where two con-
necting railroads divide such earnings as arise from traffic which
passes over both lines; second, where two or more competing lines
divide all their earnings in excess of a certain proportion which
goes to pay operating expenses. The first class of pooling contracts
has been uniformly upheld.’

1See § 601. Also Buffalo, etc., R. R. McDonnell v. Grand Canal Co., 3 Ir. Ch.

Co. v. Dudley, 14 N. Y¥., 836, 854 (1856);
Mowry v. Indiana, etc., R. R., 4 Biss.,
79(1866). Contra, Durfee v. Old Colony,
etc., R. R., 87 Mass., 280 (1862).

2Black v, Delaware, etc.,, Canal Co.,
24 N, J. Eq., 455 (1878); rev’g 22 N. J.
Eq., 180. See, also, Lauman v, Leba-
non, etc., R. R. Co., 80 Pa. St., 42 (1858).

3Mills v. Central R. R. Co, 41 N. J.
Eq., 1 (1886).

4Heathcote v. North Staffordshire

R’y Co., 2 McN. & G., 100. See, also,
%8

Rep., N. S., 578 (1853).
5Simpson v. Denison, 10 Hare, 51

(1852); Maunsell v. Midland, etc., Ry

Co., 6 Hem. & M., 130 (1863); Great
Western R’y Co, v. Rushout, 5 De G. &
Sm., 290 (1852).

6 See chapter XXIX, where “trusts v
are fully considered.

7 Hartford, etc., R. R. Co. v. New
York, etc., R. R. Co., 3 Rob. (N. Y.),
411 (1865); Columbus, etc., R. R. Co. vw.
Indianapolis, etc,; R. R. Co., 5 Ind., 450
3
672]

ULTRA VIRES ACTS AND CONTRACTS,

[CH. XL,

So, also, as regards the second class of pooling contracts, the law

(1858); Sussex R. R. Co. v. Morris, etc.,
R. R. Co., 19 N. J. Eq., 18 (1868); 8. C.
20 id., 542 (1869), holding that the con-
tract did not apply to newly-constructed
branches. Thz case of Shrewsbury,
etc., R’y Co. v. London, etc., R’y Co.,
was before the different courts seven
times. 14 Jur., 921; 2M. & G., 324
(1850); 17 Q. B. D., 652 (1851); 3 M. &
G., 70 (1850); 16 Beav., 441 (1852); 4
DeG., M. & G., 115:6 H. L. C., 118. It
was an attempt to enforce an agree-
ment of two railways to divide arbi-
trarily such part of their earnings as
arose from connecting parts of their
lines. The contract was not enforced
because inequitable, but its legality
seems to have been conceded. In Mid-
land R’y Co. v. London, ete., R’y Co.,
L. R., 2 Eq., 524 (1866), it was held that
a pooling contract between two com-
peting roads did not include a new
route acquired subsequently by one of
the roads.

An agreement between a coal com-
pany and a canal company whereby
the rate of tollsis to fluctuate according
to the price of coal is legal. Common-

' wealth v. Delaware, etc., Canal Co., 43
Pa. St., 295 (1862). Or to fluctuate ac-
cording to the price of coal and the
amount of the shipments. Penn. Coal
Co. v. Delaware, etc., Canal Co., 1
Keyes (N. Y.), 72 (1863). In Bartlett v.
Norwich, etc., R. -R. Co., 83 Conn., 560

(1866), a contract whereby several roads_

jointly constructed a line to connect
them was assumed .to be legal. Under
the English statute one railroad may
make a traffic arrangement to run over
another, and pay a sum which will pay
dividends on the stock of the latter.
South Yorkshire, etc., Co. v. Great
Northern R’y Co., 9 Ex., 55 (1853), This
case illustrates how closely allied a traf-
fic contract is with a consolidation and
guaranty contract. See, also, Charlton
v. Newcastle, etc., R’y Co.,5 Jur., N. S.,
1096.(1859), where a contract for the di-

vision of earnings which was practically
a consolidation of the two companies
was declared void at the suit of a stock-
holder. See, also, cases in § 668, supra;
Stanley v. Cleveland, C. & C. R. R. Co.,
18 O. St., 552 (1869), involving an
agreement to run sleeping-cars on
through express trains over two rail-
roads. In Olcott v. Tioga R. R. Co., 27
N. Y., 546 (1863), a contract for the joint
purchase and use of engines by connect-
ing railroads was held Jawful. In Co-
luinbus, Piqua & I. RB. R. Co. v. Indian-
apolis & B. R. R. Co., 5 McLean, 450°
(1853), an injunction was granted to
prevent a railroad, which had con-
tracted with another to build a connect-
ing line and to carry through freight
and passengers, from changing its
gauge, A combination of two railroads
under one management, and a division
of joint proceeds upon fixed percent-
ages, and the making of improvements
at a common expense, has been held
legal and binding on stockholders,
though the contract was made by the
directors only. Nashua, etc.; R. R. Co.
v, Boston, ete., R. R. Co., 27 Fed: Rep.,
821 (1886). A contract of two railroads
to keep out of each other’s territory has
been held not to be void. Ives v,
Smith, 3 N. Y. Supp., 645 (1888), Under
the Texas constitution prohibiting rail-
road corporations from controlling com-
peting lines a pooling arrangement is
void. Gulf, etc, R’y Co. v. State, 10
S. W. Rep., 81 (Tex., 1888). A railroad
may make a traffic contract with one
out of several connecting lines, and need
not give the same terms to the other
lines. Atchison, etc., R. R. Co. v, Den-
ver, etc., R. R. Co., 110 U. 8., 667 (1884);
rev’g Denver, etc., R. BR. Co. v. Atchi-
son, etc., R. R. Co., 15 Fed. Rep., 650;
Tonawanda R. R. Co. v. New York, ete..
R. R. Co., 42 Hun, 496 (1886). But see
Missouri Pacific R’y Co, v. Texas, etc.,
R’y Co., 80 Fed. Rep., 2(1887), and § 674,
infra; Eclipse, etc., Co. u Pontchar-

184.
CH. XL.]

ULTRA VIRES ACTS AND CONTRACTS.

[§ 672,

upholds them in England;! and in America there seems to be no

case which invalidates them.?

A railroad may contract to carry passengers or freight beyond

its own line?

train R. R. Co., 24 La. Ann., 1. A con-
tract between a railroad anda telegraph
company that the former would not
allow other wires to be strung on its
poles is legal and enforceable. Western
U. Tel, Co. v. Chicago, etc., R. R. Co.,
86 Ill., 246 (1877). So, also, of a con-
tract to exclude other telegraph com-
panies from erecting poles on its right
of way. Western U. Tel. Co. v. Atlan-
tic, etc., Tel. Co., 7 Biss., 867 (1877).
Contra, Western U. T. Co. v. Burling-
ton, etc., R’y, 3 McCrary, 130 (1882).
See, also, in general, Pierce on Rail-
roads, 2d ed., 491; Wood on Railroads,
590; Arnot v. Erie R’y Co., 5 Hun, 608
(1875); aff'd, 67 N. Y., 315. <A stock-
holder cannot enjoin his company from
paying a rival company a certain sum
for discontinuing its boats. Leslie v.
Lorillard, 110 N. Y., 519 (1888). Cf.
chapter XXIX, supra. An agreement of
two companies to have the same man-
agement and divide their earnings in a
certain proportion is invalid. Burke v.
Concord, etc., R. R. Co., 61 N. H., 161
(1881); State v. Same, 18 Am. & Eng.
R. R. Cas., 94 (N. H., 1883). Of. 23 Fed.
Rep., 306.

i Hare v. London, etc., R’y Co., 2 J.
& H., 80: 1.id., 252 (1860), where a
stockholder’s action failed; dictum in
Lancaster, etc., R’y Co. v. Northwest-
ern R’y Co., 2 K. & J., 298 (1856). But
a stockholder may enjoin his corpora-
tion. from allowing another corporation
to lay rails and do business over the
former company’s right of way. Beman
v, Rufford, 6 Eng. L. & Eq., 106 (1851).
Railroad pools are not contrary to pub-
lic policy in England; but quere as to
whether a stockholder may not set them
aside, See 8 R’y & Corp. L. J., 144.

2Tn Minnesota it has been held that
-traffic arrangements between two rail-
roads are not ulira vires and illegal as

(50)

785

a matter of law, but that the question
is a mixed one of law and fact, A
stockholder who objects must bring suit
within a reasonable time or he will be
denied relief. Stewart v. Erie, ~ etc.,
Trans. Co., 17 Minn., 372 (1871). In
Morrill v. Boston, etc., R. R. Co., 55
N. H., 531, a stockholder enjoined a
pooling contract which was prohibited
by statute. In Benedict v. Western U.
Tel. Co., 9 Abb. N. C., 214 (N. Y., 1878),
a special term decision held that a
pooling contract was allowed by a stat-
ute applicable to telegraph companies.
For the construction of the terms of an

agreement of two railroads to divide the

receipts, one road furnishing the track,
etc., and the other the rolling stock,
see Blossburg, etc., R. R. Co. uv. Tioga
R. R. Co., 1 Abb. Ct. of App., 149 (1864).
3 Wheeler 7, San Francisco & A. R.
R., 81 Cal., 46 (1866); Perkins v. Port-
land, Saco & P. RB. R., 47 Me., 573 (1859);
Railway Co. v. McCarthy, 96 U. S., 258
(1877); Atchison, Topeka’& St. F. R. R.
v. Denver & N. O. R. R., 110 U, 8., 667
(1888); Hill Manufacturing Co. v. Bos-
ton & B. R. R. Co., 104 Mass., 122 (1870);
Noyes v. Rutland & Bur. R. R., 7 Vt.,
110 (1854); Kessler v. New York Central
R. BR., 7 Lans., 63 (1872), holding that
selling a ticket with coupons attached
for other roads is a contract for trans-
portation upon such roads. A contract
to carry beyond the line of a railroad
may be inferred from circumstances
and need not be express. Wilby v.
West Cornwall R’y Co., 2 H. & N., 703
(1858); Candee v. Pennsylvania R. R.
Co., 21 Wis., 582 (1867); Baltimore & P. /
8. Co. v. Brown, 54 Pa, St., 77 (1867);
Converse v. Norwich & N. Y. Trans. Co.,
33 Conn., 166 (1865); Perkins v. Port-
land, Saco & P. R. R., 47 Me, 578
(1859), holding that it may be so bound
without any special arrangement if by

,
§ 672.]

ULTRA VIRES ACTS AND CONTRACTS.

Loss XL.

Where a contract to deliver atthe point of destination is sutawed
into, the contracting railroad becomes responsible for the loss or
damages of freight and injuries to passengers occurring upon other
lines to the same extent as if the loss, damage or injury happened

upon its own line."

its agents, it holds itself out to be a
common carrier to a place beyond the
limits of its own road. Nashua Lock
Co. v. Worcester & N. R. R., 48 N. H.,
339 (1869).

1Noyes v. Rutland & Bur. R. R., 7
Vt., 110 (1884); Morse v. Brainerd, 41
vt, 550 (1869); Railway Co. v. Platt,
107 U. S., 123 (1874); Grover & Baker
S. M. Co. v. Missouri Pacific R’y Co., 70
Mo., 672 (1869); Nashua Lock Co. v.
Worcester, etc., R. R., 48 N. H., 339
(1869); Candee v. Pennsylvania R. R.,
21 Wis., 582 (1867); Converse v. Nor-

wich & N. M. Trans. Co., 83 Conn., 166

(1865); Baltimore & P. S. Co. v. Brown,
54 Pa. St., 77 (1867); Stewart v. Erie &
Western Trans. Co., 17 Minn., 372 (1871);
Railway Co. v. McCarthy, 96 U. 8., 258
(1877); Hill Mfg. Co. v. Boston, ete, R.
R., 104 Mass., 122 (1870); Railroad Co.
v. Manufacturing Co.,'16 Wall., 324
(1872); Bissell v. Michigan Southern and
N. I. R. R. Cos., 22 N. Y., 258 (1860),
holding that, where two roads chartered
by different states united in the business
of transporting passengers over a third
line in another state, they were jointly
liable for injuries caused by the latter;
Burtis v. Buffalo & 8. L. RB. B., 24 N
Y., 269 (1862), holding that under the
New York statute a railroad is liable tor
- the delivery of freight upon a connect-
ing line in another state; Buffit v. Troy
& Boston R. R., 40 N. Y., 168 (1869),
holding that, where a railroad hired a
man to run stages from a village to its
station and to sell tickets from the vil-
lage to points on its line, it was lia-
ble for injuries received by a passenger
on the stage. Whether the transaction
was ultra vires or not the road was
‘liable for its negligence in executing its
contract. Upon the last point, see Hood
v. New York & N. H. R. B., 22 Conn.,

\

1, 502 (1858), holding that such a con-
tract was not within the powers of the
corporation, and was not obligatory
upon it; Angle v. Mississippi & Mo. R.
R. Co., 9 Iowa, 488 (1859), where it was
held that a railroad which received
goods marked for a point upon another
road is prima facie bound to carry and
deliver them according to the marks.
To same effect, Kyle v. Laurens R. R.,
10 Rich., 382 (1857). But see Root v.
Great Western R. R., 45 N. Y., 524
(1871), where it was held that merely
receiving goods marked for a place be-
yond its own terminus will not render
a road liable for losses not occurring on
its own line unless there be proof of an
uhdertaking to deliver at the destina-
tion; McCluer v. Manchester & L. R.
R., 18 Gray, 124 (1859), where a railroad
was held liable for freight received for
transportation over a leased line; and
holding, also, that parol evidence that a
foreign corporation has held itself out,
through its agents, as a common carrier
over a road'in Massachusetts, is suffi-
cient to sustain an action for damages.
to freight. The agreement does not
constitute a partnership. Mohawk, etc.,
R. R. v. Niles, 8 Hill, 162 (1842); Illinois
Central R. R. v. Copeland, 24 IIL, 332
(1860), holding that a road which sells
tickets over its own and other roads is
liable for the safety of the passengers
and baggage to the point of destination ;
Najac v. Boston & Lowell R. R., 7 Allen,
829 (1863), holding that a road having
sold a ticket for an excursion over its
own line and others is liable for loss of
baggage upon another road. There may
be a joint liability; Wylde v, Northern
R. R., 53 N. Y., 156 (1878); Milnor v.
New York & N. H. R. R., 53 N. Y., 863
(1873), holding that, if there is no con”
tract to deliver at destination, but only

786
CH. XL. |

ULTRA VIRES ACTS AND CONTRACTS.

[$ 672.

The liability of a road, contracting to deliver beyond its own
line, for losses, damages and injuries happening upon lines other
than its own, may be limited or released by special contract with

the consignor.!

But a mere notice by which the road seeks to

avoid its liability is not sufficient to relieve it from liability.?
It has been held that railroads cannot establish steamboat lines,
nor own steamboats to run in connection with their roads.’

an agency for the sale df tickets, the
road selling a ticket is not liable for a
loss of baggage upon another road.
Where goods are carried by connect-
ing lines an injury to the goods by the
first line will not give a cause of action
against the line which receives the
goods after the injury occurs. Darling
v. Boston, etc., R. R., 93 Mass., 295
(1865); Gass vu. N. Y., ete, R. RK, 99
Mass., 220 (1868). Unless a railroad by
express contract limits its liability it is
liable for loss of freight over a connect-
ing line to which it delivers it. Ala-
bama, etc., R. R. v. Mount, etc., Co., 4
South. Rep., 356 (Ala., 1888). A rail-
road is liable for the delay of a connect-
ing line in delivering goods sent over
both lines. Savannah, eta, Ry wv.
Pritchard, 1 S. E. Rep., 261 (Ga., 1887);
but see Knott v. Raleigh, etc., R. R., 3
'§. E..Rep., 7385 (N. C., 1887); Ortt v.
Minneapolis, etc., Ry, 31 N. W. Rep.,
519 (Minn., 1887). Cf. Independence,
etc., Co. v. Burlington, etc., R. R., 34
N. W. Rep., 320 (Iowa, 1887); Penn.,
etc., Nav. Co. v. Dandridge, 8 G. & J.,
248 (1886), holding that a corporation
chartered to carry between two points
is not liable for property lost in the car-
riage by the corporation to a third
point. St. Louis, etc., R’y v. Weakly,
8 S. W. Rep., 184 (Ark., 1888). Suit
cannot be brought against the last con-
necting line for baggage lost somewhere
or other on one of several connecting
lines. Atchison, etc., R. R. v. Roach,
12 Pac. Rep., 93 (Kan., 1886), An inter-
mediate line is not liable for the negli-
gence of subsequent connecting lines.
Hill v. Burlington, etc., R. R., 60 Iowa,
196 (1882). But the rule may be other-

wise where all the lines are partners in
the fast freight line. Block v. Fitch-
burg R. R., 139 Mass., 808 (1885). The

‘right of a railroad to forward freight

by any one of connecting lines cannot
be limited by an oral agreement. Snow
v. Indiana, etc., R’y, 9 N. E. Rep., 702
(Iind., 1887). A railroad company is
liable for the negligence of train hands
on an excursion train of another line
which is allowed to run on the tracks
of the former company. Washington
v. Raleigh, etc., R. R., 78. E. Rep., 789
(N. C., 1888).

1Mashur v. St. Louis, etc., R. R. Co.,
127 U. S., 390 (1888); Evansville R. R
Co. v. Androscoggin Mills, 22 Wall., 594
(1874). In this case an exemption from
loss by fire was held to apply to the
whole distance, and to release the road.
from liability for such a loss occurring:
upon another road. Railroad v. Manu-
facturing Co., 16 Wall., 324 (1872); Mo-
bile & Ohio R. R. v. Franks, 41 Miss.,
494 (1867), holding that by statute of
Mississippi a railroad is liable as a com-
mon carrier though there be a special
contract limiting its liability. See, also,
§ 674, infra.

2 Cincinnat’, H. & D. R.R. v. Pontius,
19 O. St,, 221 (1869), where it was said
that such a notice is void as being
against public policy; Railroad Co. v.
Manufacturing Co., 16 Wall., 324 (1872),
in which an unsigned general notice on
the back of a receipt was held not to
amount to a contract of release though
accepted by the consignor without dis-
sent.

3 Lyde v. Eastern Bengal R’y Co., 36
Beav., 10 (1866); Pearce v. Madison, 21
How., 441 (1858), holding a note given.

187
§ 672.]

ULTRA VIRES ACTS AND CONTRACTS.

[oH. XL.

A railroad which has been leased is liable in regard to the road
to the same extent as though no lease had been made.!_ The lessee

for a steamboat not collectible: Central
R. R. v. Smith, 76 Ala., 572 (1884);
Gunn v. Central R. R., 74 Ga., 509
(1885), holding that a road cannot enter
into a partnership with an individual to
run a line of boats to carry passengers;
St. Joseph v. Saville, 39 Mo., 460 (1867),
holding that officers and agents of a
railroad cannot use its funds in running
a steamboat in connection with it; a
contract for that purpose is not legal.
To same effect, Hoagland v. Hannibal &
St. J. R. BR. 39 Mo., 451; Rutland &
B. R. R. Co. v. Proctor, 29 Vt., 95 (1856),
holding that, if a railroad has purchased
steamboats without authority, yet if it
did so without objection from its stock-
holders or the state, it may sell them
and hold the purchaser for the price;
Downing v. Mt. Washington, etc., 40 N.
H., 280 (1860), holding that a railroad
corporation has no power to establish a
stage line for transportation purposes,
nor to purchase horses and carriages for
that purpose, and may defeat an action
for not accepting the stages. But where
the railroad has purchased a steamboat
and given a draft therefor and is sued
on the draft it is liable. Parish v.
Wheeler, 22 N. Y., 494 (1860). One who
contracts to run a boat in connection
with a railroad, and furnishes a poor
boat causing a loss of freight, is liable
therefor to the railroad. South Wales
R’y Co. v. Redmond, 10 C. B., N.S,
675 (1861); Wheeler v. San Francisco
& A. R. RB, 31 Cal., 46 (1866), hold-
ing that « railroad may own and con-
trol steamboats for transporting its
freight and passengers over navigable
streams on its line and constituting a
part of its route; Baltimore v. Balti-
more & O, R. R. Co., 21 Md., 50 (1868),
holding that two railroads may be con-
nected by a ferry; Forest v. Manchester
5S. & L. R’y Co., 30 Beav., 40 (1861),
holding that a railroad authorized to
keep steamboats for a ferry may use

788

them when not employed in the ferry
for excursion purposes; Calloway M.
& Mfg. Co. v. Clark, 32 Mo., 305 (1862),
holding that a corporation chartered to
mine and transport coal is empowered
to purchase and use a steamboat for
transporting; Shawmut Bank v. Platts-
burgh & M. R. R. Co., 31 Vt., 491 (1859),
holding that a railroad authorized by
charter to contract for delivery beyond
its line may purchase a steamboat to
transport freight and passengers from
its own line to another; Morgan v.
Donovan, 58 Ala., 241 (187%), holding
that, where a railroad company was
authorized to purchase such steamboats
as the directors might deem necessary
for the use of the road, the purchase of
boats from an opposition line for the
purpose of withdrawing them from
business was not within the charter, and
that « mortgage covering steamboats
used in connection with the road did
not include the boats so purchased.
1York & Maryland L. R. R. Co. v.
‘Winans, 17 How., 30 (1854), a case of in-
fringement of patent; Whitney v. At-
lantic & St. Lawrence R. R., 44 Me, |
862 (1854), involving a loss occasioned
by neglect to erect fences; Interna-
tional, etc., R. R. Co. v. Moody, 95, W.
Rep., 465 (Texas, 1888); Wyman v.
Penobscot & K. R. R., 46 Me., 162 (1858);
Singleton v. Southwestern R. R., 70
Ga., 464 (1888); Nelson v. Vermont &
Canada R. R., 26 Vt., 717 (1854); Cen-
tral, etc., R. R.-v. Morris, 3S. W. Rep.,
457 (Tex., 1887); Longley v. Boston &
Maine R. R., 10 Gray, 103 (1857); Har-
mon v. Columbia, etc., R. R.,5 S. E.
Rep., 835 (8. C., 1888); Ohio & Missis-
sippi, R. R. Co. v. Dunbar, 20 IIl., 6238
(1858); Nugent v. Boston, etc., R. R., 12
Atl. Rep., 797 (Me., 1888); Scott v.
Grand Trunk R’y Co., 51 N. Y., 655
(1878), where the lessor was held for re-
pairs upon a steamboat; Wylde v.
Northern R. R. of N. J..& E. R’y Co.,
CH. XL. ]

ULTRA VIRES ACTS AND CONTRACTS.

[$ 673.

, is also liable.’ A railroad is liable for.torts although it has turned
over the road to mortgage trustees.”

§ 673. A railroad must operate its line, and for refusal to do so
is liable to indictment, mandamus, injunction or forfeiture of Sran-
chises.— The usual remedy of the state to compel a railroad to
operate any portion of its line which the railroad has ceased to
use is a mandamus.’ But a private individual cannot have this

53 N. Y., 156 (1873), where both the
lessor and the lessee were held for in-
juries received by a passenger; Mahoney
v. Atlantic & St. L. R. B., 63 Me., 68
(1878), holding that if the lessee operates
the road the lessor is not liable for in-
juries to a passenger; Pittsburgh, Cin.
& St. L. Ry Co. v. Kain, 35 Ind., 291
(1871), holding that a lessee cannot be
held for the torts of the lessor committed
before the execution of the lease; Ab-
bott v. Johnstown, etc., R. Co., 80 N. Y.,
27 (1880). A lessor railroad is liable for
injuries on its road, even though it has
leased the same'to another railroad
with the consent of the legislature.
Chollette v. Omaha, etc., R, R. Co., 41
N. W. Rep., 1106 (Neb:, 1889).
-1Wasmer v. Delaware, etc., R. R.
Co., 80 N. Y., 212 (1880), where there
were defective rails. Where connecting
roads transfer freight by using cars
owned by one company, the cars being
labeled ‘‘ Green Line,” a cause of action
for loss of freight in one of the cars
while being hauled over. another line
does not. sustain an attachment against
other ‘‘Green Line” property. Irvine
v. Nashville R’y, 92 Il, 103 (1879). The
lessee is also liable for the torts. of
agents which it has in common with
the lessor. Wabash, etc., R. R. v. Pey-
ton, 106 IIL, 534 (1883).

2Naglee v. Alexandria, etc., R’y, 2
S. E. Rep., 369 (Va., 1887).

3A “strike” among the employees is
no defense. People v. N. Y. C. & H.
R. R. R. Co., 28 Hun, 5438, 558, 558
(1888). And where ashipper has been
damaged by a delay caused by a strike
he has an action for such damage.
Blackstock v. N. Y. & E. R. R. Go., 20
N. Y., 48 (1859). But where the delay

is caused not by the inability of the
company to procure men to operate its
road, but by the violence of others who
by striking have severed their connec-
tion therewith, the company can only
be held to the exercise of due care and.
diligence to guard against delay and to
forward the goods to their destination,
Geismer v. L. S. & M. S. R. RB. Co.,
102 N. Y., 563 (1886); Pittsb., Ft. W. &
C. R. R. Co, v. Hazen, 84 Ill, 86 (1876);
Pittsb., Cin. & St. L. R’y Co. v. Hollo-
well, 65 Ind., 188 (1879); Indianap. &
&t. L. R. R. Co. v. Juntgen, 10 Brad-
well, 295 (1881); Lake Shore & M.S. R.
R. Co. v. Bennett, 6 Am. & Eng. R. R.
Cas., 391 (1882). Yet even ‘the fact
that the operation of the road is un-
profitable furnishes no excuse what-
ever for the failure to comply with the
conditions of [a land] grant, and the
state may compel a compliance with
the terms of the contract by mandamus
or other appropriate remedy.” State v,
Sioux City & P. R. R. Co., 7 Neb., 357,
374 (1878). A peremptory mandamus
was granted to compel a railroad com-
pany to operate a terminal bridge as an
integral portion of its ‘‘one continuous
line,” instead of employing a bridge.
transfer device, to the great public in-
convenience. United States v. Union
Pac. R. R. Co., 4 Dillon, 479 (1875); af-
firmed, sub nom. Union Pac. R. RB. Co,
v. Hall, 91 U. 8., 348. The state will
employ a mandamus to compel a rail-
road company to continue the operation
of a part of its line which it is under
illegal contract to discontinue, the con-
sideration of said contract being a mut- *
ual agreement to prevent competition,
State v. Hartford & N. H. BR. R, Co., 29
Conn., 688 (1861). The remedy in case

789
§ 673.]

remedy.!

ULTRA VIRES ACTS AND CONTRACTS.

[CH. XL.

Only the state can complain of the failure of the com-

pany to use the franchises which the state has given to it.
The railroad company cannot build part of its line and abandon

the idea of building the rest.’

The remedy of forfeiture of charter

and franchises for failure to complete the line, or to complete it
within a specified time, or for refusal or neglect to operate a por-

of abandonment of a part of the line
' is by mandamus, indictment, or, by the
state, by proceedings to annul the cor-
poration. People v. Albany & Ver. R.
R. Co., 24 N. Y., 261 (1862). Manda-
mus does not lie to compel a railroad to
operate a line where it accommodates
all the traffic by another line owned by
it. People v: Rome, etc., R. R. Co.,
108 N. Y., 95 (1886). In an old English
case, a tram-road having been put in
operation by an incorporated company,
and subsequently, to benefit special in-
terests, torn up, it was held that, while
the ordinary remedy would be indict-
ment, yet the more perfect remedy of
mandamus would issue to compel the
relaying of the tram-plates. King v,
Severn & Wye R’y, 2 Barn. & Ald., 646
(1819). Mandamus lies to compel a
road to run all its trains to a town speci-
fied in its route, the road having changed
its main line and having resorted to a
branch line for that town. People v.
Louisville, etc., R. R., 120 IIL, 48 (1887).
Where a railroad ceases to stop its trains
at a flourishing town, the county seat
and largest place in the county, but
stops four miles away in order to build
up a speculative town, the court will
order the railroad to stop at the old
station. Northern P. R. R. v, Terri-
tory, 138 Pac. Rep., 604 (Wash. T.,
1887). Mandamus does not lie to com-
pel a railroad to increase the number
of its trains, unless the statute pre-
scribes a larger number — particularly
so where the road is profitless. Ohio
& M. R’y v. People, 120 Ill., 200 (1887).
That at common law a carrier is under
no obligation to provide depots for pas-
sengers and freight, but that such obli-
gation may be imposed by statute, see

People v. N. Y., L. E. & W. R. R., 104
N. Y., 58 (1887), And ef. Caterham R’y
v. London, etc., Co., 1 C. B. (N. S.), 410
(1857); State vu. N. H. & N. RB. R., 87
Conn., 153 (1870). Mandamus lies to
compel a railroad to build a bridge as
required by its charter, People v. Bos-
ton, etc., R. R., 70 N. Y., 569 (1877);
State v. R. R.,9 Rich. L. (8. C.), 247
(1856); to deliver grain at any elevator,
Chicago, etc., R’y'v. People, 56 Tl, 865
(1870); to run daily trains, In re Bruns-
wick, etc., R’y, 1 Pug. & B., 667 (1878);
and to erect stations, Commonwealth
v. Eastern R. R., 103 Mass.,. 254 (1869).
Contra, People v. N. Y., etc, BR. RB,
104 N. Y., 58 (1887).

1 Private individuals cannot complain
that a street railroad has abandoned part
of its line. Kinealy v. St. Louis, etc.,
R. R. Co., 69 Mo., 658 (1879). Under
the English statute an individual can-
not sue out an injunction to compel a
railroad company to run through trains
where public convenience is already
sufficiently served. In re Barret, 1C.
B. (N. 8.), 423 (1857). In a suit by a
tax-payer to compel a non-resident rail-
road lessee of railroad built by munic-
ipal aid to continue the use of an old

track, the lessor domestic! company is a

necessary party. Hence no removal to
United States court. Chicago, etc.,
R’y v. Crane, 1138 U. §., 424 (1885).

2Cohen v. Wilkinson, 12 Beav., 125
(1849). But in State v. Southern Minn.
R. R. Co., 18 Minn., 40 (1871), it has
been held that, upon a proper interpre-
tation of all the acts in question, man-
damus would not issue to compel a
company to finish its road to a certain
point named in such acts. Cf. § 638,
note.

790

\
CH. XL.] ULTRA .VIRES ACTS AND CONTRAOTS. [§ 674.
tion or all of the line, is considered elsewhere.!
dictment is also well recognized?» :

The old theory that a railroad is similar.to a turnpike, in that
any person may run his cars over it, has long since been abandoned?

§ 674. Public duties of railroads, gas companies and telegraph
and telephone companies — Discriminations — Contracts against
liability.— A railroad is bound by old and well-established legal
principles of law to furnish transportation for persons and freight

The remedy by in-

at a reasonable charge.‘

At common law it was legal for a railroad or canal company to
give a special reduced rate to a person, but the same rate must also
be given to all others. Discriminations are illegal.’

1See chapter XXXVIII, supra.

2Commonwealth v. Proprietors, etc.,
2 Gray, 339 (1854); Boston, etc., R. R. v.
State, 32 N. H., 215 (1855).

3 Some of the earliest English railway
acts gave free liberty to all persons
to use the railways with properly-con-
structed carriages upon payment of cer-
tain tolls and subject to the company’s

‘regulations, Queen v. London & 8. W.
Ry, 1 Q. B., 558, 591 (1842); Queen v.
Grand Junction R’y, 4 Q. B., 18, 37
(1844). The idea that railways are pub-
lic highways in that sense has thor-
oughly disappeared in the development
of our modern system. They are public
highways, and while they must serve
the public on the pain of forfeiting do-
main and franchise, yet they are not
open toallsuitable vehicles. See Beek-
man v, Saratoga, etc., R. R., 3 Paige, 45,
74 (1831); Camblos v. Phil. & R. RK. B., 4
Brewster (Pa.), 563, 597 (1873). The old
theory has an advocate in Hudson on the
Railways and the Republic, chapter X.

4Where a shipper has for a number
of years paid the schedule rates without
objecting he will be deemed to have as-
sented to the charge as reasonable, and
cannot recover on the ground of extor-
tion, Killmer v. N. Y.C.& H. RR.
R., 100 N. Y., 395 (1885). A railroad
will not be permitted to wrongfully
send freight by a roundabout way in-
stead of over its direct lines, and thus

increase the cost of transportation.
Burlington, etc., R. R. v. Chicago Lum-
ber Co., 15 Neb., 390 (1884). A court of
chancery may not grant relief which
would in effect be legislative. Thus,
where one company refuses to agree
with another owning a connected road
to form a through line or to do a con-
necting business, it is not competent for
chancery to order that such a business
be done and to fix the terms. Atchison,
T. &S. F.R. RB. v. Denver & N. O. R.,
110 U.S., 667, 682 (1884), reversing S. C.,

"15 Fed. Rep., 650 (1888).

5Root v. Long, etc, R. R. Co, 21
N. E. Rep., 403 (N. Y., 1889). Dis-
criminations in rates based simply on
the amount of freight shipped are held
to be in favor of capital, contrary
to sound public policy aud a wrong to
the disfavored party, for which the
courts are competent to give redress,
Hays v. Penn. Co., 12 Fed. Rep., 309
(Ohio, 1882). -Cf. Concord, etc., R. R. v.
Forsaith, 59 N. H., 122; 47 Am. Rep.,
122; Ransome v. East. Co.’s R’y, 1 C. B.
(N. S.), 487; Menacho v. Ward, 27 Fed.
Rep., 529, 532 (1886) And under the
English statute, 1 Nev. & McN., 63, 155;
id., 121; 16 C. B. (N. 8.), 245; 2 Nev. &
MeN., 319. But in England the mere
giving of better rates is not such a dis-
crimination if the shipper furnishes a
consideration, as by an agreement to
ship a certain amount delivered in a

791
§ 674.)

ULTRA VIRES ACTS AND CONTRACTS.

[oH. XL.

There has been great doubt whether a common carrier could

certain manner at stated intervals.
Nicholson v. G. W. R’y, 4 Jur. (N. S.),
866 (1858). Ina suit by a shipper on a
contract with a railroad, whereby the
former was in every case to receive
cheaper rates for the same transporta-
tion than should be given by this or
any of certain other trunk lines, it was
held that the contract was illegal and
void. Messenger v. Penn. R. R., 86 N.
J. L,, 407 (1878); S. C., 87 id., 581 (1874),
Cf. Stewart v. Lehigh Val. RB. R., 38 N.
J. L,, 505, 520 (1875). A steamship com-
pany may not charge a higher rate
to shippers simply because they re-
fuse to patronize it exclusively. Me-
nacho v. Ward, 27 Fed. Rep., 529 (N.
Y., 1886). It is an unjust discrimina-
tion for a carrier to attempt to compel
a shipper, under penalty of a higher
rate, to ship his freights to a particular
consignee, St. Louis, A..& T. H. RB. R.
v. Hill, 14 Bradw. (IU.), 579 (1884); and
see this case for a discussion of common-
law authorities on discrimination. But
where special wharfage privileges are
customarily allotted to coal shippers it is
held that the carrier has a necessary
discretion in the allotment, and the
motives of its proceedings cannot be re-
viewed by the courts. Andenried v,
Phil, & R. R. R., 68 Penn. St., 870, 380
(1871); Johnson v. Pensacola, etc., R. R.,
16 Fla., 6238, 656 (1878), is an exhaust-
ive opinion reviewing the cases, and
ruling that, in the absence of statute,
variances in rates are only evidence as
to the reasonableness of the compensa-
tion, and not per se unjust discrimina-
tions. But ef. Scofield v. L. S., ete,
R’y, 48 O. St, 571 (1885), which is
even more thoroughly considered, and
holds that a contract to make a rebate
by reason of larger freightage is void,
if others are not to have the rebate,
and a party to whom the rebate is not
given may have an injunction in equity.
A rebate may be recovered, there being

no evidence of discrimination against
others. It is presumed that others get
the same. Christie v. Missouri P. R’y,
7S. W. Rep., 567 (Mo., 1888).

Where a circuit court gave judgment
ousting a railroad company of its fran-
chises for a breach of a law which pro-
hibited all discriminations, the supreme
court of the state reversed the judg-
ment on the ground that the law was
unconstitutional in the arbitrary and
conclusive presumption of guilt and
the severity of the penalty. On the.
merits of the case the court were of the
opinion that discriminations were un-
just which gave smaller rates from:com-
peting points than from intervening
non-competing points. Chicago, etc.,
R. R. v. People, 67 Ill., 11 (1878). Either
of two competing carriers with a view
of increasing its business, may extend.
more favorable terms to all shippers, al-
though the other carrier (in this case a
river steamboat company) may inci-
dentally be injured thereby, so long’as
the public does not in any manner suf-
fer. Munhall v. Penn. R. R., 92 Penn.
St., 150 (1879). Under the tonnage com-
mutation act of 1861, the Pennsylvania
Railroad was held empowered to adopt
one tariff of rates for interstate trade
and another for trade which came from
extra-territorial points, even although.
the shippers of this latter brought it at
their own cost within the state. Shipper
v. Penn. R. R., 47 Penn. St., 338 (1864)..
Different rates on different branches of
a railroad have been held not to consti-
tute an unjust discrimination. Cater-
ham R’y.v. London & Brighton R’y, 40:
Eng. L. & Hq., 259 (1857); 8. C., 1 C. B.
(N. S.), 410; and see Chicage & Alton.
R. R. v. People, 67 Ill, 11, 24 (1878).

A carrier may discriminate at com-
mon law in favor of persons living at a
distance from the end of the route in
order to secure business which would
otherwise take a different course, Other

792
CH. XL. |

ULTRA VIRES ACTS AND CONTRACTS.

[$ 674.

avoid liability for negligence by a contract to that effect made

shippers not in such condition may not
object if the carrier’s charges to them
are reasonable. Ragan v. Aiken, 9 Lea
(Tenn.), 609 (1882). In the following
cases the rule against discriminations
has been qualified, and apparent dis-
criminations have been held allowable
as founded on grounds consistent with
public interest: Ragan v. Aiken, 9 Lea
(Tenn.), 609 (1882); Houston, etc., R. R.
v. Rust, 58 Tex., 98 (1882); Chicago, etc.,
R. R. v. People, 67 Ill. 11 (1873); Hersh
v. Northern, etc., R. R., 74 Penn. St.,
181 (1873); Concord, etc., R. R. v. For-
saith, 59 N. H., 122 (1879); Fitchburg
R. R. v. Gage, 78 Mass., 393 (1859);
Eclipse Tow-boat Co. v. Pontchartrain
R. R., 24 La. Ann., 1, 18 (1872); Garten
v B& BE RR,1 3B. & S., 112, 154,
165 (1861); McDuffee v. Portland, etc., R.
R. R.; 52 N. H., 480 (1873); Evershed v.
London & N. W. Ry, L. R., 3 Q. B.
Div., 184 (1877); London & N. W. R’y
v. Evershed, L. R., 3,App. Cas., 1029
(1878); Munhall v. Penn., 92 Penn. St.,
150 (1879), where several roads com-
bined and lowered rates to all in order
to crush competing roads; Nicholson v.
Great West. R’y,5C. B., N. S., 366 (1858);
Ransome v. East. Co.’s R’y, 1 Nev. &
Mac., 63, 71 (1857); Southern R’y v. In-
ternat. Bridge, L. R., 8 App. Cas., 723
(1883); Camphell v. Marietta, etc., R. R.,
23 O. St., 168 (1872); State v. Mobile,
etc., R. R., 59 Ala., 321 (1877); Mobile,
etc., R. R. v. Steiner, 61 Ala., 559 (1878);
Strick v. Swansea Canal, 16 C. B. (N.
S.), 245 (1864), The famous coal cases
decided, simply that it was legal for a
canal company and coal company to
contract for transportation at a rate
varying according to the quantities
shipped and the price received for the
coal. In Commonwealth ?. Del. & Hud.
Canal, 43 Penn. St., 295 (1862), it was
held that a contract for half the carry-
ing capacity of a canal was not in-
valid where it did not appear that the
public was injured thereby; and the

canal company might commute its tolls,
making them vary with the market
price of the coal. On this last point,
and that the amount of business done
may be a factor in estimating these
fluctuating tolls, see Del. & Hud. Canal
Co. v. Penn. Coal Co., 21 Penn. St., 181
(1853); Penn. Coal Co. v. D. & H. Canal
Co., 1 Keyes (N. Y.), 72 (1863). And cf.
Del. & Hud. Canal Co. v. Penn. Coal
Co., 50 N. Y., 250 (1872). Where a canal
company and acoal company have acon-
tract and the latter claims the former
discriminates against it in the manage-
ment (not inrates or tolls), equity will not
grant specific performance of the con-
tract, but the injured party must go to
law. Penn. Coal Co. v. Del. & I. Canal
Co., 31 N. Y., 91 (1865). The discrim-
ination cases, both in their reasoning
and citation of authority, fail to dis-
tinguish sharply between rulings under
the common 'law and under statutes.
But it would appear that the English
view considers the common-law obliga-
tion to be only to carry for a reasonable.
compensation, and not to prohibit all
discrimination. On the other hand, the
weight of American authority is that
even at common law the carrier’s obli-
gation is to give like rates on like goods
under like circumstances to all ship-
pers. Great West. R’y v. Sutton, L. R.,
4 Eng. & Ir. App., 226, 287; Ex parte
Benson, 18 S. Car., 38 (1882); Baxendale
v. East. Co.’s Ry, 4 C. B. (N.8.), 68;
Branley v. Southeast. R’y, 12 ©. B. (N.
8.), 68; .and see Menacho v. Ward, 27
Fed. Rep., 529 (N. Y., 1886); Johnson v.
R. B., 16 Fla., 623 (1878); Spofford v.
Boston, etc., R. R., 128 Mass., 326 (1880);
McDuffee v. Portland, etc., R. R., 52 N.
H., 480; 18 Am. Rep., 72; St. Louis, etc.,
R. R. v. Hill, 14 Bradw. (IIL), 579 (1884);
Hays v. Penn. Co., 12 Fed. Rep., 309
(Ohio, 1882); Messenger v. Penn. R. R.,
36N. J. L., 407; 8. C., 87 id., 531 (1874);
Scofield v. R’y, 43 O. St., 571 (1885);
State v. R. R., 17 Neb., 647 (1885); New

793 '
§ 674] -

ULTRA VIRES ACTS AND CONTRACTS.

4
[OH. XL.

before the service was performed; and there is still a conflict of

authority on the point.

Eng. Exp. Co. v. Maine Cent. R. R., 57
Me., 188; Sinking Fund Cases, 99 U.S.,
719; Mich., ete., R. R. v. Burrows, 38
Mich., 6; Evershed v. Lond. & N. W. R’y,
.L. R., 3 Q. B. Div., 144 (1877); 8. C., L.
R., 8 App. Cas., 1029; Lancashire R’y v.
Gidlow, L. R., 7 H. L. Cas., 517 (1875);
Parker v. Great West. R’y, 7 Man. &G.,
258 (1844); Great West. R’y v. Sutton, 3
H. & C., 800: 8. C., L. R.,4 H. L. Cas,
, 226 (1869); Pickford v. Grand Junction
R’y, 10M. & W., 399; London & N. W.
R’y v. Evershed, 26 W. R., 863; Baxen-
dale v. London & 8. W. R’y, L, BR, 1
Ex., 187.

Tke whole question is now generally
regulated by statutes which prohibit
unjust discriminations, and the only
difficulty remaining to be determined
under the various acts is what are and
what are not such discriminations.
Johnson v. R. R., 16 Fla., 623 (1878);
McDuffee v. Portland, etc, R. R., 52
N. HL, 480; 110 U. S., 667, 674. Of.
Bond v, Wabash, etc., R’y, 67 Iowa, 712
(1885). Cf. English statutes and cases
collected in Brown & Theobald’s Rail-
ways. Public policy demands reason-
able competition, and it is contrary to
that policy for’ one road to attempt to
secure a controlling interest in a rival
road, and: any contract to that end will
be set aside in equity as illegal, ultra
vires and contrary to public policy.
Central R. R. Co. v. Collins, 40 Ga., 582
(1869). A contract by the projectors of
one road not to complete ‘their line so
as to interfere with the monopoly of a
rival company is void as contravening
public policy. Hartford & N. H. R. R.
Co. v. N. Y. & N. H. R. R. Co., 3 Robert-
son, 411 (1865); Indianapolis, etc., R. RB.
v. Ervin, 118 Ill, 250 (1886). Here .the
plaintiff Ervin made a secret contract
with the general freight agent of de-
fendant company, whereby plaintiff
was to ship grain and other freight over
the company’s lines and pay for the

same at the schedule of rates issued to
the public, which schedule was reason-
able and in conformity with the one
prepared for the company by the' rail-
road and warehouse commissioners of
the state; and it was agreed by said
freight agent that the plaintiff should
receive back, by way of rebate, a por-
tion of the freight so charged and paid.
After plaintiff had shipped a large
quantity of freight under this secret
agreement, when the rebates due
amounted to over $6,500, the company
refused to pay the same, whereupon
plaintiff brought suit to recover. Held,
that the secret agreement was void
as being against public policy at the
common law, and a violation of the
statute against unjust discriminations;
holding, also, that the case of T., W. &
W. R. R. Co. v. Elliott, 76 Tl, 67, hav-
ing been decided under a prior statute
controlling the same, and the case of
E. & P. Dis. v. Cecil, 112 Ill, 185, being
overruled, are not authority in this case,
and that the principles there laid down
are not applicable herein. See, also,
Illinois, etc., R. R. v. People, 12 N. E.
Rep., 670 (1887). For a recent and well-
considered case of discrimination, as af-
fected by the English statute against
such, see Manchester, etc., R’y v. Den-
aby, etc., Co., 54 L. T. Rep., 1 (1886),
reversing in part 52 L. T. Rep., 598
(1885), and 51 L. T. Rep., 698 (1885).

1In the federal courts a common car-
rier’s contract exempting itself from its
own negligence is void. Liverpool, etc.,
Co. v. Phenix, etc., Co., 129 U. 8., 397
(1889). In England the rule seems to be
that the carrier may even shield itself
from the consequences of its own negli-
gence by an actual special contract. Carr
v. Lancashire, ete., R’y, 14 Eng. L. &
Eq., 840 (1852); 8. C., '7 Exch., 707; Me-
Manus v. Lancashire, etc., R’y, 2 H. &
N., 698; Stevens v. Great W. R'y, 52L. T.
Rep., 324 (1885); Austin v. Manchester,

794.
CH. XL.]

ULTRA VIRES ACTS: AND CONTRACTS. .

[§ 674.

Express companies are common carriers, and are generally held
closely to their liabilities as such. _

ete., Ry, 10 C. B., 454; Morville v,
Great North. R’y, 10 Eng. L. & Eq., 366.
In England a statutory duty to carry
dogs prevents the railway from con-
tracting for no liability beyond a cer-
tain sum, unless an extra price is paid.
Dickson v. Great, ete., R’y, 55 L. T.
Rep., 868 (1887). But, contra, Great W.
R’y v.. McCarthy, 56 L. T. Rep., 582
(1887), as to cattle. Cy. Cutler v. North,
ete., R’y, id., 639 (1887), as to baggage;
Goldsmith v. Great E. R’y, id., 181
(1881); and contra, Brown v. M. 8S. &
L. R’y, 48 L. T. Rep., 473 (1883), revers-
ing 46 id., 889 (1882), and holding that a
certain contract against liability was
void.’ In America the authorities are
agreed that carriers may stipulate for a
less degree of responsibility than that
imposed by common law, but they dif-
fer as to the degree. Express Co. v.
Caldwell, 21 Wall., 264 (1874); York Co.
v. Central R..R., 3 id., 107 (1865); Field
v. Chicago, etc., R. R., 71 IL, 458 (1874);
Squire v. N. Y. C. R. R., 98 Mass., 289
(1867); Powell v. Penn. R, R., 82 Pa. St.,
414.(1859). The tendency in the United
States courts is against any further re-
Jaxation of the common-law liability.
Hart v. Chicago, etc., R’y, 69 Towa, 485
(1886); Railroad Co. v. Manufacturing
Co., 16 Wall., 318 (1872); Wabash, etc.,
R. R. v. Jaggerman, 115 Til., 407 (1886),

holding void a contract exemption of |

the road from liability for its own neg-
ligence. In Texas the statute forbids
railroads from limiting their liability at
common law. Gulf, etc., R’y v. Tra+
wick, 4 8. W. Rep., 567 (1887). In In-
diana and Alabama a railroad cannot

- by contract limit its liability to that of.

gross negligence. Alabama, etc., R. R.
v. Thomas, 8 South. Rep., 802 (Ala,
1888); Rosenfield v. Peoria, etc., R’y,
103 Ind., 121 (1885); Bartlett v. P., C.
& St. L. R’y, 94 Ind., 281 (1888). See,
also, § 672, supra. But some of the
states, as New York, are niuch more in-

clined to adopt the liberal view of the
English courts. Kirkland v. Dinsmore,
62 N. Y., 171 (1875); Hinckley v. N. Y.
C. & H.R. R. R., 56 N. Y., 429 (1874);
Magnin v. Dinsmore, id., 168; Collender
v. Dinsmore, 55 N. Y., 200 (1878). An
exemption of a railroad from liability
for accident to a person riding on a free
pass containing such exemption is valid.
Ulrich v. N. Y., etc., R. R., 108 N. Y.,
80 (1888). A railroad may restrict its
liability for freight except in cases of
its own negligence. Hutchinson v.
Chicago, etc., Ry, 85 N. W. Rep., 438
(Minn., 1887). In Pennsylvania a com-
mon carrier may limit its common car-
rier liability. by special contract. Penn.
R. RB. v. Riordan, 13 Atl. Rep., 324 (Pa.,
1888), A limited liability contract,
legal where it is made, is legal on the:

route in another state, although the’

latter state holds such contracts to be
void. Western, etc., R. R. v. Exposi-
tion, etc., 7 S. E. Rep., 916 (Ga., 1888).
Mandamus will not issue to compel an
express company to carry fragile goods
subject to the common-law liabilities of
a common carrier, where the shipper
refuses to accept a receipt containing a
contract limiting the company’s liability
for breakage. People v. Babcock, 16
Hun, 318 (1878). A provision requiring
notice. of damage to live-stock to be
given within five days is legal. Black
v.. Wabash, ete, R. R, 111 DL, 851
(1884). Limitation of common carrier’s
liability for negligence. Central, etc.,
Co. v. Smitha, 4 South. Rep., 708 (Ala.,
1888)..

1 Haslam v, Adams Exp. Co., 6 Bosw.
(N. Y.), 285 (1860); Sherman v. Wells,
28 Barb., 408 (1858); Southern Exp. Co.,
36 Ga., 635 (1867); Buckland v. Adams
Exp. Co., 97 Mass., 124 (1867); Hooper
v. Wells, Fargo & Co., 27 Cal., 1 (1864);
Gulliver v. Adams Exp. Co., 38 IIl., 508
(1865); U. §. Exp. Co. v. Backman,
28 O. St., 144 (1875). An express com-

795
§ 674]

ULTRA VIRES AOTS AND CONTRACTS.

(om. xu.’

It is legal for a railroad to allow to one express company, exclu-
sively, extra facilities for doing business on its line.’
Telegraph and telephone companies are obliged to serve all

alike, the duty being generally

statutory. Injunction or man-

damus will issue to prevent the removal of instruments or to com-

pel their service,

pany’s contract exempting it from lia-
bility for loss of goods is void. Block v.
Merchants’, etc., Co., 6 S. W. Rep., 881
(Tenn., 1888), An express company is
liable for goods lost through its negli-
gence, though its receipt for the goods
provides otherwise. Proof of loss raises
presumption of negligence. Adams Ex.
Co. v. Holmes, 9 Atl. Rep., 166 (Pa.,
1887); 21 N. E. Rep., 340 (Ind., 1889).

1 Under the ruling of the United States
supreme court in the Express Cases, 117
U.S., 1, 29 (1885), it is now settled that
while railroad companies are obliged to
provide the public with reasonable ex-
press accommodation, yet the discretion
remains with them as to the agencies to
be employed. They need not, therefore,
in the absence of statutes, furnish to all
independent express companies equal
facilities for doing a package-carrying
business upon their passenger trains.
Thus, so long as the public service is
satisfactory, a railroad may lawfully
carry on an express business itself, and
refuse to grant similar privileges to an-
other company. Sargent v. Boston &
L, R. B., 115 Mass., 416 (1874). And
the special contracts which are custom-
arily made giving the exclusive right to
do express business on certain lines are
legal. Railroads are common carriers
of goods and passengers, but not com-
mon carriers of common carriers. Ex-
press Cases, supra. Before this question
came under adjudication in the supreme
court it had been almost universally de-
cided the other way. Mr. Justice Mil-
ler reduced the arguments in favor of
this view to propositions which he
stated in his opinion in Express Cases,
10 Fed. Rep., 210 (Mo., 1882), and again
in his dissenting opinion in Express

Cases, 117 U. S., 1, 29 (1885). See Wells
v. Oregon R’y & N. Co., 15 Fed. Rep.,
561 (Oreg., 1883); Wells v. Northern
Pac. R’y, 23 Fed. Rep., 469 (Oreg., 1884);

Southern Exp. Co. v. Memphis, ete., R.

R., 8 Fed. Rep., 799 (Ark., 1881); Fargo
v. Redfield, 22 Fed. Rep., 373 (Vt., 1884); :
Wells v. Oregon, etc., R’y, 18 Fed. Rep.,
667, and cases cited, 673 (Oreg., 1883);
New Eng. Exp. Co. v. Maine Cent. R.
R., 57 Me., 188 (1869); Sanford v. R. R.,
24 Penn. St., 378 (1855). A railroad
may give to a bus and baggage com-
pany the exclusive privilege of solicit-
ing business on its premises. Old Col-
ony R. R. v. Tripp, 17 N. E. Rep., 89
(Mass., 1888).

' 2Thurn 'v. Alta Tel. Co., 15 Cal., 472,
474 (1860); Central, etc., Tel. Co. v.
Bradbury, 106 Ind., 1 (1885); Friedman
v. Gold, etc., Tel. Co., 32 Hun, 4 (1884);
State v. Bell Co., 36 O. St., 296 (1880);
Am. Rapid Tel. Co. v. Conn. Telephone
Co., 49 Conn., 352 (1881); 17 Atl. Rep.,
1071. Statutes sometimes -require im-
partial and prompt service under pen-
alty of a fine to be recovered by the per-
son whose dispatch is neglected or post-
poned. W. U. Tel. Co. v. Ward, 23 Ind.,
877 (1864). And in general damages
may be recovered for delayed service.
Baldwin v. U.S. Tel. Co., 54 Barb., 505
(1867); Bryant v. Tel. Co., 1 Daly (N. Y.),
575 (1866); N. Y., ete., Tel. Co. v. Dry-
burg, 35 Penn. St., 298 (1860). Stipula-
tions in telegraph blank are binding.
Kiley v. Western U. Tel. Co., 109 N. Y¥.,
231 (1888). Cf. 17 Atl. Rep., 766. . They
are under obligation to the public at
common law. Louisville Transfer Co,
v. American District Telephone Co.,.
1 Ky. L. J., 144; & C., 24 Alb L
J., 288; American U. Tel. Co. v. Bell

796 S
‘

' OH. XL.]

ULTRA VIRES AOTS AND CONTRACTS.

[§ 674.

Gas companies also are somewhat public in their nature, and

Telephone Co., 10 Cent. L. J., 488 (1880);
8. C., 11 id., 359; 22 Alb. L. J., 368;
State v. Bell Telephone Co., 28 Fed.

Rep., 589 (1885); State v. Nebraska Tele-

phone €o., 17 Neb., 126 (1885). In
Smith v, W. U. Tel. Co.,-84 Ky., 664
(1887), it was held that a telegraph com-
pany cannot be required to communi-
cate messages which furnish a ‘‘ bucket
shop” with the market quotations. A
contract bas been held valid between a
telegraph company and a news agency
according to which the latter was to
send all its news by the former, and to
receive a rebate of fifty per cent. on the
regular rates. Reuter v. Telegraph Co.,
6 El. & BI, 341 (1856). Mandamus will
issue to compel a telephone company to
give equal privilege in the matter of
connection to all telegraph companies
although the license under which the
telephone company operates its patent
reserves the right of discrimination.
State v. Bell Telephone Co., 23 Fed.
Rep., 539 (Mo., 1885); State v. Bell Tele-
phone Co., 36 O. St., 296 (1880); Chesa-
peake, etc., Tel. Co. v. B. & O. Tel. Co.,
66 Md., 399 (1877); Bell Teleph. Co. v.
Commonwealth, 3 Cent. Rep., 907 (Pa.,
1886); S. C., 35 Alb. L..J., 4. Contra,
Am, Rapid Tel. Co. v. Conn. Telephone
Go., 49 Conn., 352 (1881). That tele-
graph companies may specially limit
their liabilities, see Wann v. W. U. T.
Co., 87 Mo., 472 (1866); Ellis v. Am. Tel.
Co:, 95 Mass., 226 (1866); W. U. Tel.
Co. v. Carew, 15 Mich., 525 (4867);
Breese v. U. S, Tel. Co., 45 Barb., 274
(4866); Camp v. W. U. Tel. Co., 1 Met.
(Ky.), 164 (1858). A board of trade is
not obliged to permit a telegraph com-
pany to collect the news of its exchange
for transmission as market reports; nor,
having undertaken such business, is a
telegraph company bound to continue
it in the absence of express contract,
and equity will not grant an injunction
to prevent the removal of its instru-
ments from the exchange. Met. Grain,

etc., Exchange v.Chicago Board, 15 Fed.
Rep., 847 (Il., 1883). That telegraph
lines in public highways may be pub-
lic nuisances, see Queen v. United, etc. ,—-
Tel. Co., 31 L, J. Mag. Cas., 166 (1862).
Cf. 8. C., 80 Beav., 287 (1861); Common-
wealth v. Boston, 97 Mass., 555 (1867).
And the company will be liable in dam-
ages for injuries resulting from obstruc-
tions. Dickey v. Maine Tel. Co., 46
Me., 483 (1859). As to cables, see Sub-
marine Tel. Co. v. Dickson, 15 C. B.
(N. S), 759 (1864). Under statute in
Massachusetts it is held that no addi-
tional servitude is imposed bv the ap-
propriation of a public highway for a
telegraph line by the erection of poles
and wires for which compensation must
be made to the owner of the fee in the
highway. Pierce v. Drew, 136 Mass.,
75 (1883). For a railroad to grant the
exclusive privilege of doing telegraph- °
ing along its line is against public pol-
icy, and the contract is void. Western
Union Tel. Co. v. B. & O. Tel. Co., 23
Fed. Rep., 12 (1885), citing W. U. Tel.
Co. v. Amer. U. Tel. Co., 9 Biss., 72
(Ind., 1879); W. U. Tel. Co. v. B. & O.
Tel. Co., 19 Fed. Rep., 660 (N. Y., 1884);
W..U. Tel. Co. v. Burlington; etc., R’y,
11 id., 1 (lowa, 1882); S. C., 3 McCrary,
130; W. U. Tel. Co. v. Am. U, Tel. Co.,
65 Ga., 160 (1880). See U. S. Rev. Stat.,
§ 8964, chapter 772, Laws 1887-9; and

‘ef. Pensacola Tel. Co. v. W.. U. Tel.

Co., 96 U.S., 1 (1877), as to whether a
state may grant a territorial monopoly
of the telegraph business. But it is
held that such a contract is not contrary
to public policy as creating monopoly
so far'as it goes to the exclusion of
competitors from the line of poles
erected and occupied by the contract-
ing telegraph company. W. U. Tel.
Co. v. Chicago, etc., R. R., 86 Ill, 246
(1877). And W. U. Tel. Co, v. Atlantic,
etc., Tel. Co., 7 Biss., 8367 (Ind., 187%),
goes still] farther, and holds that a con- .
tract for complete exclusion is not in-

797
§ 675.]

‘ULTRA VIRES ACTS AND CONTRACTS.

[cH. XL.

owe a duty to supply gas to all. Competing gas companies can-
not combine in regulating the price of gas to the public.”

§ 675. The legislature may reduce railroad rates, require fences
to be built, and compel corporations to accommodate the public and
provide for the safety of life and property.— It formerly was be-
lieved that a state legislature could not, by an arbitrary statute,
reduce railroad charges for the transportation of freight and pas-

sengers.

But the famous Granger Cases in the supreme court of

the United States completely overthrew this doctrine, and sustained
the power of a state legislature to regulate railroad rates.*

operative as against public policy, inas-
much as the numerous railroads be-
tween the points in question prevented
the possibility of destroying competition,
or new telegraph lines might be built
near though not on the line of the road;
or, finally, if a monopoly were secured
and a new line necessary, there re-
mained the method of proceedings for
condemnation under the state laws. A
telegraph company having a contract
with a hotel to exclusively do business
on the premises may enjoin the hotel
from breaking the contract. Western,
etc., Co. v. Rogers, 11 Atl. Rep., 13
(N. J., 1886). See, also, § 675.

1The terms upon which and the man-
ner in which such companies may be re-
quired to discharge their public duties
are subject to legislative supervision
and control. State v. Columbus Gas,
etc., Co., 34 O. St., 572 (1878); New Or-
leans Gas Co, v. Louisiana Light Co.,
115 U. S., 650 (1885). Gas companies
possess, by virtue of their charters,
powers and privileges which others can-
not exercise; and the statutory duty is
imposed upon them to furnish gas to
persons entitled to receive it under the
charters, and who offer to comply with
the general conditions on which the
companies supply others. People wv.
Manhattan Gas Co., 45 Barb., 186 (1865).

2Gibbs v, Balt. Gas. Co., 180 U. S., 396.

3 Munn »v, Illinois, 94 U. 8., 118 (1876).
and the various cases in 94 U.S., at
pp. 155, 164, 179, 180, 181; Ruggles wv.
- Hlinois, 108 U. S., 526 (1883); aff’g 91
IL, 256 (1878); Shields v. Ohio, 95 U.5S.,

798

819 (1877); Farmers’ Loan, etc., Co. v,
‘Stone, 20 Fed. Rep., 270 (Miss., 1884);
Louisville & N. R. R. v. Tenn. R. R.
Co., 19 Fed. Rep., 679 (1874); Ill. Cent.
R. R. v. People, 95 Ill, 313 (1880); Chi-
cago & Alton R. R. v. Chicago, V. &
W. Coal Co., 79 Ill., 121 (1875); Chicago
& Alton R. R. v. People, 67 IIL, 11, 16
(1873); Railroad Co. v. Richmond, 19
Wall, 584 (1873); Railroad Commission
Cases, 116 U. S., 307 (1886). Cf. with
the case Killmer v. N. Y.C. & H.R,
R. RB, 100 N. Y., 395 (1885); Georgia
R. R. vw. Smith, 70 Ga., 694 (1883);
Laurel Fork, etc., R. R. Co. v. West
Va., etc., Co., 25 W. Va., 3824 (1884). A
legislative reduction of railroad rates is
constitutional, though thereby the road
will pay but one and one-half per cent.
on its original cost and only two per
cent. on its bonded debt, there being no
evidence as to the ‘‘ water” in the bonds
or of the cost of the road to the present
owner. Rates may be regulated to cor-
respond to gross earnings. Dow wv.
Beidelrhan, 125 U. S., 680 (1888), Rail-
road rates may be reduced by statute
and made to depend upon the length of
the road. Dow v. Beidleman, 5 S. W.
Rep., 298 (Ark., 1887). The following
decisions have been made: Where for a
certain period rates were to be fixed in,
the discretion of corporate authorities,
the legislature cannot regulate before
the expiration of that period. Sloan v,
Pacific R. R., 61 Mo., 24 (1875). But
(dictum) nevertheless the courts have
the right to limit the tolls to reasonable
ones, Att’y-Gen. v. R. R. Cos., 35 Wis.,
i

CH. XL. ]

ULTRA VIRES ACTS AND CONTRACTS.

[§ 675.

The legislature may delegate to a board of railroad commis-
sioners this right to reduce rates.! The legislature may also regulate
the charges of telephone companies,’ of gas companies,’ and of
water-works and other companies.‘

425, 588 (1874). Legislature cannot re-
peal a charter provision allowing a rail-
road to charge certain rates. Hamilton
v. Keith, 5 Bush (Ky.), 458 (1869).
‘Where, by charter, rates are left in the
discretion of corporate officers, the leg-
islature cannot regulate them. Phil.,
etc., R. R. Co. v. Bowers, 4 Houst.
(Del.), 506 (1878). Though a railroad
charter gives directors right to fix rates,
yet the legislature may regulate under
its power to prohibit and punish extor-
tion, Ill, etc., R. R. Co. v. People, 95 II1.,
318 (1880). Though under the decisions
in the ‘‘ Granger Cases” the legislature
may regulate railroad rates and reduce
them to a point where the road does
not pay on its capitalization if the legis-
lature chooses, yet where the state con-
stitution, as in Oregon, reserves this
right with the proviso “‘ but not so as to
impair or destroy any vested corporate
right,” then the regulation must be rea-
sonable, and the courts may pass on its
reasonableness. Ka parte Koehler, 23
Fed. Rep., 529 (1885). An amendment
giving right to take toll to mail coaches
is not revocable. Derby Turnpike Co.
v. Parks, 10 Conn., 522 (1835). The leg-
islature may amend turnpike charter so
that it can charge only proportionate
part for distance between gates, where
whole distance not traveled. Maysville
Turnpike Co. v. How, 14 B, Monr., 426
(1854). A contract between two rail-
roads not to reduce rates below a cer-
tain. figure becomes inoperative and
ceases when the'legislature reduces the
rates below that figure. Buffalo, etc.,
R. R. Co. v. Buffalo, etc., R. R. Co., 111
N. Y., 132 (1888).

1 Georgia, etc., Co. v. Smith, 128 U.
8., 174 (1888); Railroad Commission
Cases, 116 U. S., 307 (1886), rev’g 20 Fed.
Rep., 270. To same effect, State v.
Chicago, etc., Ry, 87 N. W. Rep., 782

(Minn., 1888); State v. Fremont, etc.,
R. R., 35 N, W. Rep., 118 (Neb., 1887);
Railroad Com’rs v. Oregon, etc., Co., 19
Pac. Rep., 702 (Oreg., 1888). State rail-
road commissioners may determine
railroad rates in Nebraska, but where
the railroad denies the reasonableness
of the reduction there arises a question
of fact for the courts. State v. Fremont,
etc., R. R., 86 N. W. Rep., 305 (Neb.,
1888). The legislature may delegate to
commissioners the power to fix railroad
rates, but the courts will restrain the
commissioners from reducing the rates
to a ruinously low figure. Chicago,
‘ete. , R’y v. Dey, 35 Fed. Rep., 866 (1888) ;
Chicago, etc., R’y v. R. R. Com’rs, id.,
888 (1888); 5 S. Rep., 838. Cf. 38 Fed.
Rep., 656.

2 Chesapeake, etc., Tel. Co. v. Balti-
more, etc,, Tel. Co., 7 Atl. Rep., 809
(Md., 1887); Hockett v. State, 105 Ind.,
250, 599; Central, etc., Co. v. State, 19
N. E. Rep., 604 (Ind., 1889).

3 May restrict price which gas com-

panies may charge for meters. State v.
Gas Co., 34 O. St., 572 (1878).
. 4Spring, etc., Works v. Schottler, 110
U.S., 347 (1884). Warehouse and cot-
ton press business is not such a public
business that the public may appeal to
‘the courts for redress against high
charges. The legislature might possibly
regulate. Ladd v. Southern, etc., Co.,
58 Tex., 172 (1880). Until the legisla-
ture imposes public duties on stock-
yard corporations, a court of equity
cannot prevent their giving preferences
in rates, etc. Delaware, etc., R. R. Co,
v. Central, ete., Co., 17 Atl. Rep., 146
(N. J., 1889). A board of trade may
become so public in its nature that the
courts will enjoin a suppression of its
information. N. Y., etc, Exch. wv.
Board of Trade, etc., 19 N. E, Rep., 855
(Il, 1889).

799

'
2

§ 675.}

ULTRA VIRES ACTS AND CONTRACTS.

[CH. XL.

.

A legislature may compel railroad companies to construct bridges, -
build fences, improve crossings, erect danger signals, regulate speed.
and comply with many other police regulations for the convenience

or safety of the public.

This police power of the legislature is

very great, and extends to all classes of corporations.'

1 Kansas Pac. R’y v. Mower, 16 Kan.,
578 (1876), requiring fences and citing
cases. To same effect, Nelson v, Ver-
mont, etc. R. R., 26 Vt., 717 (1854);
Gorman v. Pacific R. R., 26 Mo., 441
(1858). Legislature may compel a rail-
road to ring bell or blow whistle before
reaching cross-roads. Galena, etc, R.
R. Co. v. Loomis, 18 Ill, 548 (1852).
May require cattle-guards. Thorpe v.
Rutland, etc., R. R. Co., 27 Vt., 140
(1854). May require all regular passen-
ger trains to stop at county seats for
passengers. Chicago & A. R. R. Co. v.
People, etc., 105 Ill., 657 (1883). To
same effect, and requiring them to stop
at a particular station, State of Conn:
v. New Haven, etc., Co., 43 Conn., 351
(1876). Under its reserved power the
legislature may require street railways
to pave. Sioux City, etc., R’y v. Sioux
City, 89 N. W. Rep., 498 (Iowa, 1888).
Legislature may require erection of
sign-boards at crossings and may impose
fines for non-conformity. May regu-
late speed through municipalities. Mo-
bile, etc., R. R. Co. v State, 51 Miss.,
137 (1875). Same as to regulation of
speed. When the statute- prescribes
speed the municipality cannot change
it. Horn v. Chicago, etc., R’y Co., 8S
Wis., 468 (1875), May require trains to
stop at stations. Penn. Co. v. Wentz,
37 O. St., 3383 (1881) May compel a
railroad to deliver grain at any elevator
along the road specified by the shipper.
Hoyt v. Chicago, etc., R. R. Co., 93 Ill,
601 (1879), Cannot compel railroads cross-
ing each other to have trains due at the
same hour wait for each other twenty
minutes. State v. Noyes, 47 Me., 189
1859). May authorize railroad commis-
sioners to compel railroads to make a
station and erect depots at such places
as the commissioners deem proper.

-eated by locomotives.

R. R. Com’rs uv. Portland, etc., R. R.
Co., 68 Me., 277 (1874). May inflict
severe penalties on a railroad for charg-
ing rates in excess of its charter rate.
Camden, etc., R. R. v. Briggs, 22 N. J.
L., 6238 (1850). May prohibit railroad
crossing a city street unless city au-
thorities consent and prescribe the
character of, the crossing. Veazie .v.
Mayo, 45 Me., 560 (1858). May make
railroad liable for pay of day-laborers,
whether ‘employed by railroad or con- :
tractors or subcontractors. Bramin v.
Conn., etc., R. R. Co., 31 Vt., 214 (1858);
Peters v. St. Louis, etc., R. R. Co., 23
Mo., 107 (1856). May make railroad
liable for damages by fire communi- .
Lyman v. Bos-
ton, etc., R. R. Co., 4 Cush., 288 (1849).
May impose penalties on railroad -for
violation of charter duties. Mobile,
etc., R’y Co. v. Steiner, 61, Ala., 559
(1878). May make the company liable
for fires ‘caused by its engines. Rode-
macher v. Milwaukee, etc., R. R., 41
Iowa, 801 (1875). May regulate a cross-
ing of one road by another.. Pittsburg,
etc., R. R. v. South, etc, R. R., 77 Pa,
St., 178 (1874). May compel a road to
put in and maintain its crossing with a
street. Portland, etc., R. R. v. Deering,
4 East. Rep., 97 (Me., 1885). May re-
quire a change of grade. Fitchburg R.
R. v, Grand, etc., Co., 86 Mass, 198 (1862).
May order roads to unite in a union
depot. Worcester v. Norwich, etc., R.
R., 109 Mass., 108 (1871). May delegate
to commissioners the power to deter-
mine mutual rights and duties at rail-
road crossings. Portland, etc., R. R. v.
Grand, etc, R, R., 46 Me., 69 (1858).
And may regulate railroad crossings and
provide for the safety of the public.‘
Lake Shore R’y v. Cincinnati, etc., R’y, ,
30 O. St., 604 (1876). And’ in general,

800

 
CH. XL. |

ULTRA VIRES ACTS AND CONTRACTS.

‘[§ 675.

This class of cases is based on the police power of the state, and
is to be clearly separated from cases where the legislature amends

also, see eases in the preceding section.
May compel railroad engineers to be ex-
amined for color blindness. Nashville,
ete., Ry v. State, 3 South. Rep., 702
(Ala., 1888); Smith v, Alabama, 124 U.
S., 465 (1888); McDonald v State, 2
South. Rep., 829 (Ala., 1887), May pre-
seribe penalty if a railroad charges
more than bill of lading calls for. Little
Rock, etc., R’y v. Hanniford, 5 S. W.,
Rep., 294 (Ark., 1887). May empower
railroad commissioners to direct rail-
roads to establish new stations, and to
apply to the courts for the enforcement
of such directions. Railroad Com’rs v.
Portland, etc., R. R. Co., 63 Me., 269
(1874), May regulate the transfer of
goods and freight from one road to an-
other within its own limits. City of
Council Bluffs v. Kansas City, St. J. &
C. B. R. R., 45’ Iowa, 388 (1876). But,
.as stated supra, the legislature cannot
compel passenger trains on roads cross-
ing each other to wait twenty minutes
for passenger trains on the other line so
crossing. State v. Noyes, supra. Nor.
-can it compel a bridge ‘company to en-
large its draws, where they were to
‘build good and sufficient ones and did
so. Washington Bridge Co. v. State, 18
Conn., 53 (1846). Where a charter au-
thorizes a railroad to build a bridge ob-
structing commerce, the river being

entirely in state, a subsequent statute _

making the railroad liable for damages
to those thereby cut off from naviga-
tion was held unconstitutional. Bailey
&. Phil., etc., R. R. Co., 4 Harr. (Del.),
389 (1846). A statute ordering the re-
moval of toll-gates altogether is uncon-
.stitutional where the right to take tolls
was granted. Att’y-Gen. v. German-
town, etc., Road, 55 Pa. St., 466 (1866).
The legislature cannot compel a turn-
‘pike company to remove its road to the
outskirts of a town which has grown up
since the road was constructed. Turn-
‘pike Co. v. Davidson County, 3 Tenn.
(51)

Mulholland, 82 N. Y., 324 (1880).

Ch.,. 896 (1877). But the legislature
may require a railroad to construct a
specified bridge so as to cross another
railroad in a certain way. People v.
Boston, etc., R. R. Co., 70 N. Y., 569
(1877). A state cannot prohibit an inter-
state railroad from delivering intoxicat-

-ing. liquor to a resident. Bowman v,

Chicago, etc., R’y, 125 U. S., 465 (1888).
Legislature cannot insist on change of
draw, etc. Washington Bridge Co. v.
State, 18 Conn., 53 (1846). But may re-
quire telephone companies to receive
dispatches from or for telegraph com-
panies. State v, Telephone Co., 36
O. St., 296 (1880). It may prohibit man-
ufacture and sale of liquor, and thereby

affect a corporation previously incorpo-

rated to manufacture the same, though
there was no reserved right of repeal.
Commonwealth v. Intoxicating Liquors, ©
115 Mass., 153 (1874). May limit hours
of work of women and children, even as
against corporations. Commonwealth
v. Hamilton Mfg. Co., 120 Mass., 383
(1876). But cannot prohibit cemetery
corporation from using its grounds al-
ready purchased for burial purposes.
Lake View v. Rose Hill Cem. Co., 70
Tl, 191 (1873). May repeal. clause in
college charter prohibiting sale of liquor
within mile. Dingham v. People, 51 Il,
277 (1869). Municipality may prohibit
company selling milk unless license
is obtained from the city. People v.
State
may prohibit banks from transferring
by indorsement or otherwise notes, bills
of exchange, etc. Payne v. Baldwin,
11 Miss., 661 (1844), May impose pen-
alties on banks for refusing payment of
its bank-bills. Brown v. President, etc.,
8 Mass., 445 (1812). May require bank
to redeem its notes in gold, though
the charter did not so require. Com.
Bk v. State of Miss., 14 Miss., 599 (1846).
But cannot provide that a bank present-

‘ing notes (money) issued by another
‘801 '
ULTRA VIRES ACTS AND CONTRACTS. [cH. xL.

8 676.]

_a charter at the request of a majority of the stockholders in order
to enlarge, diminish or change the charter itself.

'§ 676. Monopolies and exclusive privileges.— Originally the word
“monopoly” had the following meaning as a legal term: The
kings of England, from an early date down to James IL, were ac-
customed to grant a monopoly or exclusive privilege to some par-
ticular person to manufacture or sell an article of commerce speci-
fied in the grant. The English people and parliament contended
that the king bad no power to grant such a monopoly, and that
parliament alone could legally give these exclusive privileges. The
courts sustained the position of parliament, and the ancient grants
of monopoly by the king were declared to be illegal and void?
In recent times the word “monopoly” has a larger meaning, and

bank for payment can be paid in notes
of former bank. B’k of State v. B’k of
Cape Fear, 18 Ired. L. (N. C.), 75 (1851).
May authorize the use of steam power
in streets. North Chicago R’y v. Lake
View, 105 Til., 207 (1883). A charter
exemption of railroad employees from
doing road-work is beyond the reach of
the legislature. Zimmer v. State, 30
Ark., 680 (1875). The legislature can-
not arbitrarily name and appoint trust-
ees of an educational corporation, the
charter providing that vacancies shall
be filled by the remaining trustees.
Sheriff v. Lowndes, 16 Md., 357 (1860).
It cannot give to the city of Louisville
the power to elect the trustees of Uni-
versity of Louisville, an educational
corporation. City of Louisville v. Pres-
ident, etc., 15 B. Monr., 642 (1855). It
cannot vest the government of an incor-
porated academy in a new board of
trustees. Norris v. Trustees, etc., 7
Gill & J., 7 (1834). But it may enact
stringent regulations of insurance busi-
ness and prescribe a forfeiture of char-
ter for non-compliance. Chicago Life
Ins. Co. v. Needles, 118 U. S., 574 (1885).
A statute rendering railroads liable for
injuries to employees, though such in-
juries are due to fellow-servants, is con-
stitutional. Missouri R’y Co. v. Mackey,
127 U. 8., 205 (1888), And may extend
the statute of limitations as to suits for
compensation for land taken by rail-
road. It may change ‘‘the mode, the

time when and the courts where they
should be enforced ;” 7. e., rights and lia-
bilities of corporations. Gowen v. Pe-
nobscot R. R. Co., 44 Me., 140 (1857).
May order wires under ground. 38 Fed,
Rep., 552.

1See chapter XXVIII, supra.

2 Case of the Monopolies, 11 Coke, 84
(1602); Mitchell v. Reynolds, 1 P. Will-
jams, 181, 187 (1711). Hawkins, in his
Pleas of the Crown, vol. II, p. 293 (7th
ed., 1795), says: ‘‘A monopoly is an
allowance by the king to a particular
person or persons of the sole buying,
selling, making, working or using of
any thing whereby the subject in gen-
eral is restrained from the freedom of
manufacturing or trading which he
had before. Monopoly differs from en-
grossing only in this, that monopoly is
by patent from the king, and engrossing
by the act of the subject between party
and party.” As to monopolies, the
learned author says: ‘It is said that
all grants of this kind relating to any
known trade are made void by the com-
mon law as being against freedom of
trade, and discouraging labor and indus-
try, and restraining persons from get-
ting an honest livelihood by a lawful em-
ployment, and putting it in the power
of’ particular persons to set what prices
they please on a commodity ; all which
are manifest inconveniences to the pub-
lic.” Such a monopoly as this is a nui-
sance. See Wood on Nuisances, § 51.

802
t

cl. XL. | ULTRA VIRES ACTS AND CONTRACTS. [§. C76.
is used to designate all cases where a manufacturer or merchant
or railroad or corporation is free from competition. The law does
not favor these monopolies, as already shown.) The modern
“trusts” are held to be illegal on the ground that they tend to de-
‘stroy competition, restrict production and increase prices —in
other words, tend to establish and bring about the evil results of a
monopoly. Combinations by individuals to establish a monopoly
are discountenanced by the law. |

But another and more difficult class of cases arises where a state
legislature grants a monopoly or éxclusive privilege to a person or
corporation. It is clearly settled that a municipal corporation can-
not legally make such a grant unless its charter expressly author-

izes it to do so.”

A state legislature may grant to a corporation or an individual
a mOnepOLy or exclusive privilege, unless the state constitution

forbids.

1See chapter XXIX, supra.

28tate v. Cincinnati, etc., Co., 18 O.
St., 262 (1868). A municipal corpora-
tion has no power to grant to a water-
works company an exclusive privilege
to furnish water for a term of years.
Only the legislature can create such a
monopoly (reviewing cases). City of
Brenham v. Brenham, etc., Co., 4S. W.
Rep., 143 (Tex., 1887); Davenport v.
Kleinschmidt, 13 Pac. Rep., 249 (Mont.,
1887). A municipal corporation has no
power to grant an exclusive right to an
electric light company unless its charter
expressly confers that power. Grand
Rapids, etc., Co. v. Grand Rapids, etc.,
Co., 33 Fed. Rep., 659 (1888). A munici-
pal corporation has no power to grant
an exclusive privilege to a gas com-
pany. Citizens’, etc., Co. v. Elwood, 16
N. E. Rep., 624 (Mass., 1888). A city
under its power “to authorize or for-
bid” street railways may grant an ex-
clusive right to a company for a period
of years. Such a monopoly is not for-
bidden by a constitutional provision
that ‘‘no exclusive privileges
shall ever be granted.” Des Moines, etc.,
R’y v. Des Moines, etc., R’y, 33 N. W.
Rep., 610 (lowa, 1887). Even though a
city’s grant to a company of an exclu-
sive right to furnish water be ultra

vires, yet equity will protect the com-
pany when it furnishes sufficient water
and reasonably. ‘ Equity will protect
a corporation entitled to the enjoyment
of an exclusive franchise against un-
lawful competition ” (cases). Atlantic
City Water-works v. Atlantic City, 39
N. J. Eq., 867 (1885), <

3Slaughter-house Cases, 16 Wall.,
36, 66 (1872); The Binghamton Bridge,
3 Wall., 51 (1865), holding that an ex--
clusive bridge right for two miles was.
protected by the federal constitution as-
expounded in the Dartmouth College
Case, 4 Wheat., 625 (1819). An exclusive
right to have a railroad between two
points granted by the legislature is a
protected contract, and competitors will
be enjoined. Boston, etc., R. R. Corp.
v. Salem, etc., R. R. Co., 68 Mass., 1
(1854). Quo warranto to oust a gas cor-
poration from its claim to an exclusive
privilege for a certain number of years
fails if such exclusive right legally ex-
ists. State v. Milwaukee, etc., Co., 29
Wis., 454 (1872). A statute granting to
certain corporations a monopoly of the
slaughtering business in a city is con-
stitutional, and cannot be violated by
individuals. Slaughter-house Cases,
supra,, An exclusive legislative grant
to build a bridge will be protected by

803 ve

1 i
§ 676.]

ULTRA VIRES ACTS AND CONTRACTS.

[OH. XL.

But the courts are decidedly hostile to these legislative grants
of monopoly. The grant itself is construed strictly, and the courts
do not hesitate to destroy its effect, if the terms of the grant can
be construed so as not to affect the new competitor which the old

monopoly complains of.’

injunction against a second bridge un-
less the power of eminent domain is
exercised. Piscataqua Bridge v. N. H.
Bridge, 7 N. H., 35, 68 (1834). Legisla-
tive grant to individual of exclusive
right to ferry is protected. McRoberts
v. Washburne, 10 Minn., 23 (1865), The
legislature cannot authorize a railroad
to use for the distance of five miles the
tracks of a railroad whose charter gave
it exclusive right to the use of the track
and there was no reserved right of
amendment. Pennsylvania R. R. Co.
v. Balt. & O. R. BR. Co., 60 Ind., 263
(1883). The legislature may grant to
individuals the exclusive right to a line
of telegraph between two cities. An
assignee of the persons to whom the
grant was made may enjoin a comipet-
ingconcern. California, etc., Co. v. Alta,
etc., Co., 22 Cal., 398 (1863). But the case
‘of Norwich Gas, etc., Co. v. Norwich
City, etc., Co., 25 Conn., 19, 88 (1856),
holds that a legislative grant to a gas
company to the exclusive right to lay
down gas-pipes in a city is unconstitu-
tional and void. A state legislature
cannot grant a monopoly on a subject
which the federal government controls.
Thus, a grant of a monopoly to navigate
certain tide-water arms of the sea is
void as an interference with commerce
between the states. Gibbons v. Ogden,
~9 Wheat., 1 (1824). Where the legisla-
ture agree to discontinue a ferry in con-
sideration ofa bridge company doing
certain things for the public the ferry
cannot afterwards be restored. East
Hartford v. Hartford Bridge Co., 10
How., 511 (1850). A free railroad ferry
is in violation of an existing exclusive
right to an older ferry. Aiken v. West-
ern R. R., 20 N. Y., 370 (1859). The
legislature cannot authorize a new
water-works company to take by emi-

_ (cases).

nent domain the property and water
rights of an old company that has an
exclusive privilege to supply water to
the city. Citizens’, etc., Co. v. Bridg-
port, etc., Co., 10 At]. Rep., 170 (Conn.,
1887). An owner of land may grant to
a street railway the exclusive right to
run a railway over it. Fort Worth, etc.,
Ry v. Queen, etc., R’y, 9 8S. W. Rep.,
94(Tex., 1888). Delayasabar., 21 Pac.
Rep., 711. !

1 Exclusive franchise for “ horse rail-
way” does not prevent subsequent
grant of franchise for cable railway
Omaha Horse R’y Co. v. Cable
Tramway Co., 30 Fed. Rep., 324 (1887),
Exclusive franchis: to company to
light a city by gas does not prevent giv-
ing subsequent franchise to another
company to light by electricity. Sagi-
naw Gas Light Co, v. City of Saginaw,
28 Fed. Rep., 529 (1886). An exclusive
right to supply “light or heat” to a
city does not preventa subsequent grant
to a company to light by electricity.
Appeal of Scranton, ete.,. Co., 15 Atl.
Rep., 446 (Pa., 1888), the court saying
that “ monopolies are favorites neither
with courts nor people.” Toll-bridge
company cannot prevent construction
of railroad bridge authorized by the leg-
islature, the former not being exclusive.
Mowhawk Bridge Co. v. Utica, ete., R.
R. Co., 6 Paige, 554 (1887). Charter
provision that no other bridge shall be
built or ferry allowed does not prevent
legislature authorizing a railroad bridge
(cases reviewed), Thompson v. N. Y¥.,
etc., R. R. Co., 3 Sand. Ch., 625 (1846);
Bridge Proprietors v. Hoboken Co., 1
Wall, 116 (1868), aff'g 2 Beas. Ch. (N.
J.), 81; McKee v, Wilmington, etce., R.
R., 2 Jones (N. C.), 186 (1855). An ex-
clusive right granted.to a corporation
to supply water to a city will be con-

804 i
cH. XL]

ULTRA VIRES ACTS AND CONTRACTS.

[§ 676.

Another important principle of law on this point is that the
grant to a railroad or canal, turnpike, gas, water-works or tele-
graph company of a right of way does not prevent the legislature
from authorizing a parallel or competing enterprise to “be con-

structed.

This principle of law arises and applies where there is no claim

of an exclusive grant.

strued so as to give no greater a mo-
nopoly than its terms clearly indicate.
The right to supply water from a cer-
tain source does not prevent competi-
tion from another source. Stein v.
Bienville, etc., Co., 34 Fed. Rep., 145
(1888). Charter giving exclusive bridge
right for three miles up or down a river
construed to apply to tirst location of
bridge, not to rebuilding. Cayuga B.
Co. v. Magee, 2 Paige, 116 (1830). A
monopoly to a street horse railway does
not prevent a street railway operated
by other power. Teachout v. Des Moines,
etc., R’y, 38 N. W. Rep., 145 (Iowa,
1888). A water-works company and a
city having power to purchase the
works cannot enjoin another company
from putting in rival works, Appeal
of City of Chester, 8 Atl. Rep., 400 (Pa.,
1887). A statute that no court shall au-
thorize a competing ferry does not pre-
vent a city being authorized to license
such other ferry. Fanning v. Gregoire,
16 How., 524 (1858). An exclusive right
to a railroad to transport passengers
between two places is not violated by
another railroad which may be used for
merchandise alone. Richmond, etc., R.
R. Co. v. Louisa R. R., 18 How., 71
(1851). An amendment to charter giv-
ing exclusive right to have a ferry is
without consideration, and not binding
asacontract. Johnson v. Crow, 87 Pa.
St., 184 (1878). Exclusive right to a
bridge is not violated by authorizing a
ferry. Parrott v. City of Lawrence, 2
Dill., 682 (1872). Exclusive right to a
toll-bridge is violated by a railroad
bridge. Enfield Toll B. Co. v. Hart-
ford, etc., R. R. Co., 17 Coun., 40 (1845),
But a railroad may acquire right by

Union R’y Co., 108 Ill.,

power of eminent domain. 8. C., 17
Conn., 458 (1846). A’ corporation hav-
ing an exclusive right to furnish elec-
tric light cannot enjoin a rival company
where all the stock of the former com-
pany has been sold to the president of a
competing gas company. Appeal of
Scranton, etc., Co., 15 Atl Rep., 446
Pa., 1888). Exclusive right to furnish
gas does not prevent statute regulating
price. State v.' Columbus Gas Co.,
8 Cent. L. J., 404 (Ohio, 1878). There
appears to be no rule of construction
better established in the English books
than that ‘‘ public grants are construed
strictly in favor of the king;” and in
this country, in all conflicts between the
sovereign power and grantees enjoying
exclusive privilege conferred upon them
by acts of incorporation, the same rule
of construction prevails (dissolution
case). Miner’s B’k v. U. S., 1 Greene
(Iowa), 558 (1848). See, also, § 693, infra,

1Tn the case of Connecting R’y Co. v.
265 (1884), the
court said: ‘‘The mere grant of the
right to build a railroad between given
termini creates no implied obligation by
the state to not thereafter grant the
right to other. companies to build other
railroads parallel with it between the
same termini; nor that other railroads
with their tracks and switches shall
not thereafter be granted the right to
cross the state in a different direction,
and thus pass over its tracks and
switches.” To the same effect as to a
toll-bridge, Oswego, etc., Bridge Co. v.
Fish, 1 Barb. Ch., 547 (1846), and
Charles River Bridge v. Warren Bridge,
11 Peters, 420 (1837), where a toll-bridge
interfered with a previous ferry; also

805

‘
§ 677.] ULTRA VIRES ACTS AND CONTRACTS. (ou. XL,

§ 677. A corporation cannot be a partner in a partnership.—
This is an old principle of law, but it is subject to exceptions. It
is held to be an wltra vires act, because the stockholders are en-
titled to have their directors conduct the business without sharing
that power with a partner. Ifa partnership has been formed with
an individual, the latter cannot throw the business into: statutory
insolvent proceedings; ! and the corporation cannot avoid the pay-
ment of a liability which the partnership has incurred ;? nor can
an obligation to the corporation be repudiated on that ground.
If the corporation has but one stockholder he may make it a part-
ner ina partnership.’ Sometimes the relationship is held to be that
of principal and agent instead of partnership.’ There have been

Meads v. Wandell, 4 Saratoga Ch. Sen-
tinel (N. Y.), 14 (1844); Dyer v. Tuska-
loosa, etc., Co., 2 Port. (Ala.), 296 (1835) ;
Stourbridge Canal Co. v. Whaley, 2
Barn. & Ad., 792, A public road may be
opened alongside of a toll plank-road.
Auburn, etc., Co. v. Douglass, 9 N. Y.,
444, 453 (1854), citing cases herein and
saying that the cases of Croton T. Co.
v. Ryder, 1 John. Ch., 611 (1815), and
Newburgh T. Co. v. Miller, 5 id., 101
(1821), are overruled; and the case of
Enfield Toll-bridge Co. v. Conn. River
Co., 7 Conn., 28, 48 (1828), although cor-
rect in refusing an injunction against a
competing concern, yet is incorrect in its
dicta approving of the preceding cases.
A mere legislative grant to a company
to mine certain stone, paying the state

a royalty, does not prevent the legisla-.

ture granting similar rights to another
company, there being no exclusive ex-
press grant. Bradley v. South, etc,
Co., 1 Hughes, 72 (1877). So, also, of a
toll-bridge. Shorter v. Smith, 9 Ga., 517
(1851). So legislature may charter a
railroad to run along the line of a canal
previously authorized. Tuckahoe Canal
Co. v. Tuckahoe R. R. Co., 11 Leigh
(Va.), 42 (1840); Ill, ete., Canal v, Chi-
cago, etc., R. R. Co., 14 IIL, 814 (1858).
Though a corporation is given an exclu-
sive right to streets, yet a new corpora-
tion may be authorized to use the
streets on giving compensation to the
old company. It amounts to an exer-
cise of the power of eminent domain.

Philadelphia, etc., Co.’s Appeal, 102
Pa, St., 123 (1888). The legislature may
authorize a railroad to build a bridge,
even though it destroys the value of a
ferry owned by individuals. Young »v
Harrison, 6 Ga., 180 (1849). A charter to
one corporation to take water from a
certain source to supply a town does
not prevent a similar charter to another
later corporation. Rockland, etc., Co.
v, Camden, etc., Co., 15 Atl. Rep., 785
(Me., 1888). A gas company cannot en-
join the city from constructing gas-
works at the public expense. Hamil-
ton, etc., Co. v. Hamilton, 37 Fed, Rep.,
832 (1889). ;

1 Whittenton Mills v. Upton, 76 Mass.,
582 (1858).

2 Catskill B’k v. Gray, 14 Barb., 471
(1851). Contra,Gunn v. Central RB. R. &
B. Co., 74 Ga., 509 (1885), where a rail-
road was held not liable for injuries to
a passenger sustained while traveling
upon a boat operated by the road and an
individual as partners. But see Block
v, Fitchburg R. R., 189 Mass., 808 (1885),
A corporation and a person to whom it
has agreed to sell its property may be
liable as partners to creditors of the for-
mer. Cleveland, etc., Co. v.. Courier
Co., 84 N. W. Rep., 556 (Mich., 1887).

3French v. Donohue, 29 Minn., 111
(1882),

4 Allen v. Woonsocket Co., 11 R. L,
288 (1876).

5 Marine B’k v. Ogden, 29 IIL, 248
(1862). In the case of Holmes v Old

806
OH. XL]

ULTRA VIRES ACTS AND CONTRACTS.

'

i.
[8 678.

many dicta to the effect that a corporation cannot be a partner.
The question has arisen indirectly in many cases involving rail-
road traffic and pooling contracts,’ and in still other cases where
illegal combinations in restraint of trade have been made; ? but
there are very few authorities bearing directly on the question.

| § 678. Guaranty of bonds and dividends of one railroad company
by another railroad company. The power of a railroad corpora-
tion to guaranty or indorse the bonds of another road is upheld,
if the guaranty is founded upon a, valuable consideration, and the
consideration received is such as the corporation has power to re-

ceive or invest in.!

Colony R. R. Co., 71 Mass., 58 (1858),
where the corporation shared in the
profits only, no partnership was held to
’ exist.

1New York, etc., Canal Co. v. Fulton
‘B’k, 7 Wend., 412 (1881). Cf. 1 Lindley
on Partn., p. 86.

2See § 672, supra.

3 Chapter XXIX, supra.

4Zabriskie v. Cleveland, etc., R. R.
Co., 23 How., 381 (1859), where.a stock-
holder’s suit to enjoin the fulfillment of
a guaranty, which had not been made
in accordance with a statute authoriz-
ing it, failed because of the laches of
the stockholder; Harrison v., Union
Pac. R’y Co., 13 Fed. Rep., 522 (1882),
where the guarantor was merely a
stockholder in the corporation whose
bonds were guarantied. The guaranty
was enforced. Low v. Central Pac. R.
R. Co., 52 Cal., 53 (1877), and Opdyke v.
U. P. R. RB. 8 Dill., 55 (1879), where a
guaranty in consideration of a lease of
the road of the corporation whose bonds
were guarantied was upheld, the lease
being valid; Macon, etc., R. R. Co. v.
Georgia R. R. Co., 63 Ga., 103 (1879),
upholding a mortgage given by the
guarantied corporation to the guar-
antor corporation; Madison, etc., R. R.
Co, v. Norwich Sav. Ass’n, 24 Ind., 457
(1865), where the guaranty of bonds in
the hands of a bona fide purchaser was
sustained, the bonds having been issued
to and in the name of the guarantor,
although the latter acted only for ac-
eommodation; Conn., etc., Ins, Co. v.

Cleveland, etc., R. R. Co, 41 Barb., 9
(1862), where an Ohio guaranty was
upheld, though the required assent of
the stockholder had not been obtained.
Though the bonds were void, the guar-
anty was enforced; Arnot v. Erie R’y
Co., 67 N. Y., 315 (1876); aff’g 5 Hun, ©
610, upholding a guaranty which the
defendant had made on bonds sold by
it; R. R. Co. v. Howard, 7 Wall., 392
(1868), where the guaranty by a rail-
road of bondsigiven to it by a city was
upheld; Sheffield Nickel Co. v. Unwin,
L. R., 2 Q. B. D., 214 (1877), where a re-
lease by a corporation of a guaranty of
certain profits made to it by a person
who had sold property to it was upheld.
However, in Madison, etc., Co. v. Wa-
tertown, .etc., Co., % Wis., 59 (1858),
where a plank-road company guarantied
and pdid the debts of another plank-
road company which built and owned
a road over that part of the former’s
route which the former had not con-
structed, the guarantor was defeated
in asuit for repayment from the guar-
antied corporation. In Simpson
Denison, 10 Hare, 51 (1852), the stock-
holder of a railroad company enjoined
the company from guarantying a cer-
tain dividend on all the stock of another
railroad in consideration of the right to
carry on the business of the latter rail-
road, But in De Graff v. American,
etc., Co., 21 N. Y., 123 (1860), a corpo-
ration was held liable on its guaranty
that the patronage of the employees
of the corporation should continue to a

807
Doi
§ 679.]

ULTRA VIRES ACTS AND CONTRACTS.

cH. XL.

But a corporation cannot give away its funds or guaranty cer-
tain receipts to another corporation in a different business.’ A
guaranty by one railroad of the liabilities of another railroad,
where there is no direct consideration therefor, is not enforceable.?

§ 679. A corporation has no right to make or indorse negotiable
or commercial paper for the accommodation of others’ Such an

store which the corporation sold with
such guaranty. A railroad corporation
may guaranty and sell the bonds of
another railroad company which have
been given by the laite: to the former
company'in payment of a debt. Rogers,
etc., Works v. Southern R. R., 34 Fed.
Rep., 278 (1888). Guarantors of bonds
sold to a corporation are liable, though
the corporation had no power to pur-
chase. State of Indiana v, Woram, 6
Hill, 33 (1843). A corporation’s guar-
anty of another corporation’s bonds is
an original undertaking, and may be
enforced without resorting to the latter
\company. Phil., etc., Co. v. Knight,
16 Atl. Rep., 492 (Pa., 1889). A trans-
fer company cannot guaranty credit
of another person. , Lucas v. White,
_etc., Co., 30 N. W. Rep., 771 (Iowa, 1886).
A bank may guaranty the interest on
the debentures of acompany. Ew parte
Booker, L. R., 14 Ch. D., 317 (1880).
1Davis v. Old Colony R. R. Co,, 181
Mass., 258 (1881), where the guaranty
by a corporation of the expenses of a
musical festival was held ultra’ vires,
A railroad subscription to a state fair
was enforced in State B’d of Agriculture
v. Citizens’ Street R’y Co., 47 Ind., 407
(1874). Stockholder may enjoin a rail-
way from donating its funds to an ex-
hibition, even though it is claimed that
thereby the corporate receipts will be in-
creased. Tomkinson v. South, etc., R’y
Co., 56 L. T. Rep., 812 (1887), A stock-
holder who offsets to his statutory lia-
bility the corporate guaranty of bonds
must prove the consideration. Briggs
v. Cornwall, 9 Daly, 4386 (N. Y., 1881).
A railroad cannot guaranty the divi-
dends of an elevator corporation in con-
sideration of the latter company sub-
scribing: for the stock of the former

808

company. Memphis, etc., Co. v. Mem-
phis, etc., Co., 5 S. W. Rep., 52 (Tenn.,
1887). A'‘freight and transfer corpora-
tion has: no power to guaranty the
credit of a third person. Lucas v. White:
Line, etc., Co., 80 N. W. Rep., 771; Atch-
ison, etc, R. R. Co. v. Fletcher, 10
Pac. Rep., 595 (Kan., 1886), under a
statute; Green Bay & M. R. R. Co. v.
Union Steamboat Co., 107 U. 8, 98
(1882), holding that under the charter a
contract of a railroad with a steamboat
company running in connection with
its line by which it guarantied that the
gross earnings of each of its boats should
amount to a certain sum for two years
was valid. See, also, § 682.

2 Penn. R. R. Co. v. St. Louis; etc, RB.
R. Co., 118'U. S., 290 (1885), where a
distant railroad guarantied the rental
of a lessor railroad to another railroad.
Coleman v. Eastern Counties R’y Co.,.
10 Beav., 1 (1846), where a stockholder
enjoined the railroad from establishing
and guarantying profits to a packet line.
Payee of note given by one corporation
in payment of a debt due from another
corporation, there being no connection or
consideration between the two corpora
tions, cannot enforce the note. Ehr-
gott v. Bridge Manufactory, 16 Kan.,
486 (1876); Rahm v. Same, 16 id., 277
(1876); Stark B’k v. U.S. Pottery Co., 34
Vt., 144 (1861), where the debt assumed:
was one upon which the directors were
liable. Corporation cannot be surety
on a note which has nothing to do with
its business — pure accemmodation.
Payee cannot collect. Hall v, Auburn
T. Co., 27 Cal., 255 (1865),

3 Bank of Genesee v. Patchin Bank, 18.
N. Y., 309 (1855); National B’k v, Wells,
79 N. Y., 498 (1880); reversing 8. C., 15
Hun, 51; Central Bank-v. Empire Stone
on. XL].

ULTRA VIRES ACTS AND CONTRACTS.

[$ 680.

indorsement, however, though not enforceable by parties taking it
with notice that it was accommodation, may be enforced by bona

Jide holders.

§. 680. A corporation cannot be an executor or administrator.
The duties of the office are personal and incapable of being dele-
gated to an agent. Since a corporation acts only through agents,
‘it cannot assume the duties of an executor.?”

The former rule that corporations could not take property in
trust for the use of others is now obsolete. They cannot, however,

D. Co., 26 Barb., 23 (1857); Morford v.
Farmers’ Bank, etc. , 26 Barb., 568 (1857);
Bridgeport City Bank v, Empire Stone
D. Co., 80 Barb., 421 (1859); Ex parte
Estabrook, 2 Lowell, 547 (1877); Latay-
ette Savings Bank v. St. Louis Stone-
ware Co., 2 Mo. App., 299 (1876) ; West
St. Louis Bank v. Shawnee Co. Bank,
95'U. S., 557 (187%), holding that a
cashier is not presumed to have power
to bind his bank as indorser of his
personal note. The payee of such a
note, in order to hold the bank, must
prove that he had such power; Attna,
National Bank v. Charter Oak L. I. Co.,
50 Conn., 167 (1882), holding that a
president has no implied power to bind
his corporation as ‘accommodation in-
dorser; Culver v. Reno Real Estate Co.,
91 Pa. St., 367 (1879); Beecher v. Dacey,
45 Mich.,’ 92 (1881); Smead vw Indian-
apolis, P. & C. R. R. Co., 11 Ind., 104
(1858).

1 Bank of Genesee v. Patchin Bank, 19
N. Y., 812 (1859), holding also that a
third party is not\put upon his inquiry
if the paper purports on its face to
be regularly indorsed in the course of
business; Ex parte Estabrook, 2 Low-

ell, 547 (1877). To same effect, Me-, .

chanics’ Banking Ass’n v. New York &
S. White Lead Co., 35 N. Y. 505 (1866),
and cases cited; Central Bank v. Em-
pire Stone D. Co.,'26 Barb., 23 (1857),
holding that a note made by the presi-
dent and indorsed by the corporation is
binding upon the corporation in the
hands of one who had been induced by
its agent to accept it as a transaction of

the corporation and within the scope of
its business; Morford v. Farmers’ Bank,
etc., 26 Barb., 568 (1857); Bridgeport
City Bank v. Empire Stone D. Co., 30
Barb., 421 (1859); Farmers’ & Mech.
Bank v Empire Stone D. Co., 5 Bosw.,
275 (1859); Monument Nat. Bank v.
Globe Works, 101 Mass., 57 (1869); La-
fayette Savings Bank v. St. Louis
Stoneware Co., 2 Mo. App., 299 (1876),
holding also that in a suit on the note
the burden of showing that it was taken
by a third party with notice of the in-
ability of the corporation to indorse
lies upon the defendant. If the notes
are signed by the president without au-
thority, even a bona fide holder cannot
enforce them. McClellan v. Detroit,
etc., Works, 56 Mich., 579 (1885). A
corporation organized for freight trans-
fer business is not bound, and is not lia-
ble on its bond of surety for the debt
of another. Even a co-surety cannot
enforce contribution. Lucas v. White
Line Transfer Co., 70 Iowa, 541 (1886).
A corporation cannot be an accommo-
dation indorser, Yeta bona fide holder
of the paper may hold the corporation
liable. National B’k v. Young, 7 Atl.
Rep., 488 (N. Y., 1886); Credit Cv. »v.
Howe, etc., Co., 8 Atl. Rep., 472 (Conn.,
1886)

2Georgetown College v. Brown, 34
Md., 450 (1871), where it was also held
that a corporation will not be allowed, |
as in England, to designate a person to
administer with the will annexed. See,
also, Matter of Thompson, 31 Barb., 334
(1861).

809
§ 681.] -ULTRA VIRES ACTS AND CONTRACTS. [CH. XL.

take property in trust where they could not take the same property
absolutely.

If a corporation be incompetent to act as trustee, the devise or
grant will not thereby become void; a court of equity will ee
a proper trustee to carry out and exeoute the trust.”

§ 681. Stockholder’s right to prevent the corporation from iden
taking a new business.— It is ultra vires of a corporation to under-
take to carry on a business which is not fairly within the scope of
the business described in its charter. When such an attempt is
made on the part of the directors or a majority of the stockholders,
a dissenting stockholder may insist upon the corporate business
being confined to the limits of the corporate charter; and he may
enjoin or set aside any acts which do not conform to those limits,
Thus, a corporation formed to manufacture iron cannot go into the
flour and mill business,’ and a railroad company cannot improve a
river although it has power to build wharves. A stockholder in
a plank-road company may enjoin his company from running a
stage line and carrying the mails,> and a stockholder in a railroad
company may enjoin it from subscribing for stock in another com-
pany.’ A railroad cannot go into the water transportation busi-
ness,’ nor can a life insurance company extend its business to fire

1 Vidal v. Girard’s Ex’rs, 2 How., 127,
187 (1844), where Mr. Justice Story
said: ‘‘ Where a corporation has legal
capacity to take real and personal
estate, then it may take and hold it
upon trust in the same manner and to
the same extent as a private individual
may do;” Chapin v. School District,
etc., 35 N. H., 445 (1857), holding thata
corporation may be trustee of a charity
if consistent with the object of its crea-
tion. ‘See, also, § 692, infra; Phillips
Academy v. King, 12 Mass., 546 (1815),
holding that a corporation aggregate
may be a trustee; Perry on Trusts,
§ 42 et seg.; Robertson v. Bullions, 11
N. Y., 248 (1854), a religious society.
Matter of Howe, 1 Paige, 214 (1828),
holds that while corporations cannot be
trustees in matters in which they have
no interest, yet if property be devised
or granted to a corporation upon trust,
partly for itself and partly for another,
it may execute the trust. One mission
society corporation may take property
in trust for another mission society cor-

poration, Sheldon v. Chappell, 47 Hun,
59 (1888),

2Vidal v. Girard’s Ex’rs, 2 How., 127,
187 (1844); Chapin-v. School District, 35
N. H., 445 (1857),

3 Cherokee Iron Co, v. Jones, 52 Ga.,
276 (1874),

¢Munt v. Shrewsbury, etc., R’y Co.,
18 Beav., 1 (1850).
‘5 Wiswall v. Greenville, etc., R. R.
Co., 3 Jones’ Eq. (N. C.), 183 (1857).

6 Mannuell v. Midland, etc., R’y Co.,
1 Hem. & M., 130 (1863). Or buying
stocks, Central R. R. Co. v. Collins, 40
Ga., 582 (1869); Salomons v. Laing, 12
Beav., 339 (1849). See chapters IV, XIX,
etc. And there are many other similar
acts which are ultra vires acts, and
which the stockholders may enjoin,
They have been treated and explained
in the various chapters of this work,
under appropriate headings, q. v.

* Hartford & New Haven R. R. Co.
v. Croswell, 5 Hill, 383 (1843), per Nel-
son, C. J.

810
CH. XL. | ULTRA VIRES.ACTS AND CONTRACTS. [§ 682.
and marine insurance.' So also, where a railroad company is about
to extend its line beyond the limits fixed by the charter, a dissent-
ing stockholder may enjoin it from so doing.? But a reasonable. use
of the profits to provide additional facilities for the business cannot
be objected to or enjoined by a minority of the stockholders.’

§$ 682. Miscellaneous ultra vires. acts—It has been a difficult
question whether a change of the location or route of a railroad
company by the directors or the majority of the stockholders is an
ultra vires act which a stockholder may complain of. The prevail-
ing opinion seems to be that it is wléra vires if the change is a ma-
-terial one. And there are many other acts which the stockholders
may remedy as being wltra vires. Any act of the corporation that
will render the charter liable to forfeiture, or heavy fines and penal-
ties, may be enjoined by a stockholder.? Butastockholder cannot
prevent the corporation from applying to one purpose moneys
raised for another purpose. Nor can he compel a cessation of
work by the corporation merely because it has not completed its
line within the time prescribed by the charter.’ Nor can he pre-
vent a reasonable application of the profits of the company to an

‘extension of the business.? But he may enjoin the organization of
the company when it is about to be made by a fraud on the law
and on the state.2 And it has been held that he may enjoin the
company from proceeding to build a part only of the line of rail-
road prescribed by the charter.”

Nor can the directors legally use the funds uf the corporation to
induce promoters to abandon a proposed rival company." A stock-
holder may enjoin the directors from making free of tolls a bridge

1 Ashton v. Burbank, 2 Dill., 485. 5Bliss v. Anderson, 31 Ala., 612

2 Bagshaw v. Eastern Union R’y Co., (1858).

7 Hare, 114 (1849). Even though the 6 Yetts v. Norfolk R’y Co., 3 De G. &

 

extension be authorized by an amend-
ment. See Stevens v. Rutland, etc., R.
R. Co., 29 Vt., 545 (1851).

3 Pratt v. Pratt, 38 Conn., 446 (1866),
the court saying: ‘‘On a question of
this sort much must necessarily be left
to the discretion of the managing direct-
ors; and so long as they keep within
the objects contemplated by the articles
of association, and the expenditure is
not unreasonable in reference to the
amount of their capital, a court of
equity ought very seldom to interfere
with them.” .

48ee §§ 187, 429, 500; Board, etc., of
Tippecanoe Co. v. Lafayette, etc, R. R.
Co., 50 Ind., 85 (1875).

Sm., 293 (1849).

7¥Ffooks v. South, etc., R’y Co., 1 Sm.
& G. (1853).

8 See § 539.

9Cass v. Ottawa, etc., Ins. Co., 22
Grant (U. C.), 512 (1875), the capital
stock not having been paid in as certi-
fied in the certificate.

10Cohen v. Wilkinson, 1 Mac. & G.,
481 (1849).

11 Russell v. Wakefield Water-works
Co., L. R., 20 Eq., 474 (1875), holding
also that the promoters may be made
parties defendant, and be compelled to
refund the money.

811
§ 682.] ULTRA VIRES ACTS AND CONTRACTS. [CH. XL..

from which the corporation derives itsincome.! The directors may
be held liable for allowing the president to use the corporate funds
for lobbying purposes.? An unreasonable use of the corporate
profits of a leased railroad to build up and improve the lessor rail-
road, without reference to the rights of the former, has been held
to be a good cause of complaint on the part of a stockholder in the
leased railroad company.’ And, in general, any misapplication or
waste of the property of a corporation may be remedied by a

member thereof.’

It is illegal for the directors or a majority of the stockholders to
give away the assets of the corporation for the promotion of other

enterprises.°

It has been held that a stockholder in a hotel company cannot
enjoin the managers from leasing a part of the property for other

1East Rome, etc, Co. v. Nagle, 58
Ga., 474 (1877).

2Shea v. Mabry, 1 Lea (Tenn.), 319
(1878). And the case of York, etc., R’y
Co. v. Hudson, 16 Beav., 485 (1853), held
a director liable to the corporation for
money used for ‘‘secret service” pur-
poses. 7

3 March v. Eastern R. R. Co., 43 N. H.,
515 (1862); S. C., 40 N. HL, 548,

4Armstrong v. Church Society, 13
Grant Ch. (U. C.), 552 (1867).

5 A stockholder may enjoin a railway
from donating its funds to an exhibi-
tion, even though it is claimed that
thereby the corporate receipts will be
increased. Tomkinson v. South., etc.,
R’y Co., 56 L. T. Rep., 812 (1887). See,
also, § 678, infra. Back pay cannot he
voted to the directors. It is an illegal
gift. See § 657, supra. But directors
may compromise corporate claims.
Frankfort B’k v. Johnson, 24 Me., 490
(1844), and chapter XLV, infra. Direct-
ors cannot legally pay out money which
is not owned. Salem B’k v. Gloucester
B’k, 17 Mass., 1, 29 (——). Directors
should not use corporate funds to sue
for a libel on themselves as directors, but
where the stockholders were informed
of the payment it will not be disturbed.
Studdert v. Gresvenor, 55 L. T., 171.
Cf. Taunton v. Royal Ins. Co., 2H. &
M., 185 (1864), holding that stockholders

cannot enjoin the company from paying
losses which are expressly excepted from
the policy. May do it to get business,
The money of a city cannot be used to
buy a gold chain for the mayor. Att’y-
Gen’l v. Mayor, ete., 26 L. T. Rep. (N.
S.), 392 (1872). Nor to give extra pay to
a clerk. Ea parte Millish, 8 id., 47
(1863). Nor can lodge funds be given to
outside charitable purposes. Polar Star
Lodge v. Polar Star Lodge, 18 La. Ann.,
53 (1861). Where a stockholders’ meeting
has recommended that a week’s extra
pay as a gratuity to the workmen of a
manufacturing corporation be given,
and the directors give it, a dissenting
stockholder cannot hold the directors
liable therefor. Hampson v. Price’s,
ete., Co., 45 L. J. (Ch.), 4387 (1876). In
Graham v. Railroad Co., 102 U. §., 148
(1880), it was held that where a corpora-
tion solvent at the time, and without
intent to.defraud creditors, disposed of
its property for an inadequate consid-
eration by a voluntary conveyance, its
creditors cannot subsequently question
the transaction. Clarke v. Imperial
Gaslight & C. Co, 4 B. & Ad., 315
(1882), upholding a grant of an annuity °
to a disabled clerk. A bank may make
a gift to the children of a deceased su-
perintendent. Henderson v. Bank, 59:L.
T. Rep., 856 (1888).

812
cm. XL. ] ULTRA VIRES ACTS AND. CONTRACTS. [§$ 682.
purposes, there being sufficient accommodation left for the hotel.!

Buta single stockholder in a railroad corporation may enjoin it

from building another line which it has no charter power to build?

The stockholder may enjoin any act on the part of the state which
is in violation of the charter which it granted to the corporation.
It was to enjoin a tax by the state under such circumstances that
the case of Dodge v. Woolsey* arose. An injunction will also be
granted at the instance of a stockholder to prevent the corporation
from giving a mortgage which would be uléra vires. But it has
‘been held that a.stockholder cannot enjoin his corporation from
paying money to a rival company to induce the latter to discontinue
business.© An agreement of a railroad with a competing line not
to complete. the road is illegal and void. The corporation may

prosecute criminals,” but cannot contract to pay for influencing

Jegislation.®

A corporate contract which is contrary to public policy is void
exactly as it is void when entered into by an individual.

1§impson v. Westminster, Sa: H.
‘Co., 8 H. L. C., 712 (1860).

? Bagshaw v. Eastern Union R’y Co.,
'% Hare, 114 (1849).

318 How., 831 (1855).

4McCalmont v.' Phil., etc.; R. R. Co.,
7 Fed. Rep., 386 (1881).

5Leslie v. Lorillard, 110 N. Y., 519°

(1888).

6 Hartford, etc., R. R. v. N. Y., ete.,
R. R., 3 Rob. (N. Y.), 411 (1865); State
v. Hartford, etc., R. R., 29 Conn., 588
(1861).

TRicord v, Central Pac. R’y Co., 15
Nev., 167 (1880); Kelsey v. National
‘Bank of Crawford Co., 69 Pa. St., 426
(1871), holding that the corporation may
offer a reward for the detection of a
‘eriminal; American Express Co. v. Pat-
terson, 73 Ind., 480 (1881), that corpora-
tion may employ and pay an agent to
detect crime against it.

‘8Marshall v. Baltimore & Ohio R. R.
Co., 16 How., 314 (1858); Caledonian R’y
‘v. Solway R’y, 49 L. T. Rep., 526 (18838);

‘Pingry v. Washburn, 1 Aik. (Vt.), 264°
- dent and directors of a railroad com-

(1826); Reed v. Paper Tobacco Ware-

‘house ‘Co., 2 Mo. App., 82 (1876). In this -

case the agreement of a corporation
which collected the fees of state inspec-
tion officers: whereby it was to retain a

part of such fees in consideration of for-

bearing its efforts to procure a repeal of
the law by which they were appointed
was held void. Low v, Connecticut & P.
R. R., 46 N. H., 284 (1865). But in this
case indemnity given in consideration of
a withdrawal of opposition to the grant-
ing of a charter was enforced, it appear-

ing that the législature was not influ-
-enced by the ‘transaction.

9Such as a contract to obtain a law
from the legislature, Marshall v. Balti-

‘more & O. R. R. Co, 16 How., 314.

(1853); a contract by a railroad com-

a certain distance of a specified place,

-St. Joseph, etc., R. R. Co, v. Ryan, 11

Kan., 602 (1878); a contract to locate
a railroad depot upon the plaintiff's

‘land, and at no other place in the town,

Marsh v. Fairbury, etc:, R.R, Co., 64
Tl, 414 (1872) (ef. §§ 82, 83); a con-
tract not to build any railroad station
within three miles of a specified place,
St. Louis, etc., R. R. Co. v. Mathers, 71
Tll., 592 (1874); a contract by the presi-

pany for the purchase of claims against
the company, McDonald v. Houghton,
70 N. C., 393 (1874); a contract for the

sale and transfer of the property-and

813

“pany not to have or use a depot within |
§ 682.]

ULTRA VIRES ACTS AND CONTRACTS.

[cH. XL.

Many examples and illustrations of wltra vires acts and intra
vires acts are given in the notes hereto.!

franchise of a railroad company before
its road has been completed, Clarke v.
Omaha, etc., R. R. Co., 5 Neb., 314
(1877); an agreement on the part of a
turnpike corporation to grant to indi-
viduals the privilege of passing the
gate free of toll, in consideration that
they would withdraw their opposition
to a legislative act touching the altera-
tion of the road, Pingrey v. Washburn,
1 Aik. (Vt.), 264(1826). Where the parties
to a contract, which is void for this rea-
son are not equally guilty, if the relief
asked for is consistent with public policy
it will be given. Ohio Life, etc., Co. u
Merchants’ Ins. & T. Co., 11 Humph., 1
(1850), holding that a prohibition against
engaging in mercantile business refers
only to making such a business the gen-
eral or principal business of the corpo-
ration, and does not forbid an excep-
“tional or single venture in trade. Gra-
ham v. Hendricks, 72 La. Ann., 523
(1870); Sacketts Harbor Bank v. Lewis
Co., 11 Barb., 218 (1851); Potter wv.
Bank of Ithaca, 5 Hill, 490 (1843). In-
stances and examples of the general
principles herein are found throughout
this book.

1 Where a river packet company pur-
chases grain and pays partly therefor, it
may recover back the money paid but

’ not damages for refusal of vendor to de-
liver. Northwestern, etc., Packet Co. v.
Shaw, 37 Wis., 655 (1875). A corpora-
tion and stockholders agreed to turn
over to defendant and others the con-
trol, but the latter were to account for
rafts built. Held, they could not set up
ultra vires, Each of defendants is liable
for allasto accounting. Rider Life Raft
Co. v. Roach, 97 N. Y., 378 (1884). A lock
‘company sued for price of locks sold to
it by a company incorporated to manu-

- facture fire-arms cannot defeat suit by
setting up that latter corporation had
no power to manufacture such articles.
Whitney Arms Co. v. Barlow, 63 N. Y.,

62 (1875). One director may enjoin
other directors from using corporate
funds to buy liabilities of insolvent com-
peting concern for the purpose of suing
thereon, and from paying money to
prevent the rival concern getting its
work done. Colles v, Iron City, etc.,
Co., 11 Hun, 397 (1877). A land-owner
cannot enforce against a company a
contract made with its promoters
whereby he was to receive an exorbi-
tant price for his land, the real consid-
eration being the withdrawal of his
opposition to the charter. Preston v.
Liverpool, etc., R’y Co, 5 H. of L
Cases, 605 (1856). In Maunsell v. Mid-
land, etce., R’y Co.,1 Hem. & M., 180
(1863), a stockholder enjoined the di-
rectors from contributing towards the
promotion of another railway bill; also
from agreeing to subscribe to stock of
another company, such subscriptions
being legal only on a three-fourths yote
of the stockholders; also from making
traffic arrangements in excess of those
allowed by statute. But he cannot com-
plain that the acts are ultra vires of the
other corporation,

The city government may barter
away its right to purchase gas-works.
City of St. Louis v. St. Louis G. Co., 70
Mo., 69 (1879). A manufacturing corpo-
ration selling a store with a guaranty
of the continued patronage of its em-
ployees, or else a fixed sum as indem-
nity, is liable thereon. De Graff v.
American, etc., Thread Co., 21 N. Y.,
128 (1860). A stockholder’s action to
prévent his company from devoting all
its resources to completing one line in-
stead of all the lines will fail. Hodg-
son v. Earl Powis, 1 De G., M. & G., 6
(1851). A receiver may hold directors lia-
ble for corporate funds used by them to
purchase state bonds — an ultra viresact.
Austin v. Daniels. 4 Denio, 299 (1847), A
smelting corporation may purchase
smelting works. Moss vw Averill, 10

814
‘CH. XL. |

ULTRA VIRES ACTS AND CONTRACTS.

(§ 682.

Out of the various’cases set forth in this chapter a few general
rules may be clearly drawn and stated. First, there is no clearly-

N. Y., 449 (1853). Persons who with a
corporation jointly purchase property
cannot defend against the price by al-
leging that it was ultra vires of the cor-
poration to purchase. State of Indiana
v. Woram, 6 Hill, 33 (1848). Where a
stockholder institutes a suit to remedy
a wrong to the corporation, and while
it is pending new directors are elected
and they proceed to carry on the suit at
- the corporate expense, any dissenting
stockholder may enjoin such use of the
corporate funds. To allow it would be
to prejudge the suit. Kernaghan v.
Williams, L, R., 6 Eq., 228 (1868).
Manufacturing corporation borrowing
bonds in order to use them as collateral
to a loan is liable to the owner for their
return. Beckwith v. Rochester Iron,
etc., Co., 12 Weekly Dig. (N. Y.), 528
(1881). A bank which buys in a manu-
factory on an execution sale, in order
to protect itself, may carry on the busi-
ness and is liable for debts incurred
‘thereby. Reynolds v. Simpson, 74 Ga.,
454 (1885). It is ultra vires for a bank
to allow an overdraft. Market, etc.,
B’k v. Stump, 2 Mo. App., 545 (1876).
Although a life insurance company for
eighteen months engages in marine
insurance and then fails, the marine
policy-holders cannot recover on their
policies but may recover back the pre-
miums. Re Phoenix, etc., Co, 2 J. &
H., 441 (1862). See, also, Burges &
Stock’s Case, 2 J. & H., 441; Hambro
v. Hull, etc., Co., 3H. & N., 789; Van-
dall v. South Francisco Dock Co., 40
Cal., 83 (1870), holding that a corpora-
tion empowered to buy, improte, etc.,
real estate may appropriate a portion of
its funds to a railroad in consideration
of lower rates and more frequent trains.
: A*bank which has bought in property
on a foreclosure sale, with a secret
agreement that it will hold the property
in trust for certain purposes, cannot re-
pudiate the trust on the ground that it

is ultra vires. Whitney v. Leominster
Sav. B’k, 141 Mass., 85 (1886).

Wherea railway supply company con-
tracted to advance funds to a railway
construction company, and the latter
sued the former for non-fulfillment of
its contract, the suit failed, although
the stockholders had expressly ratified
the ultra vires contract. Riche v. Ash-
bury R’y Carriage Co., L. R.,7 H. L.,
653 (1875): revg L. R., 9 Ex., 224. A
suit by a copper trading company for
damages against a person who had re-

‘ fused to accept iron which he had agreed

to purchase of the plaintiff fails. Copper
Miners v. Fox, 16 Q. B., 229 (1851).
Stockholders may enjoin the company
from discounting paper in a manner
contrary to its charter, 7% e., without
the paper being passed on by the di-
rectors. May enjoin on the ground that
the charter is endangered. Manderson
v. Commercial B’k, 28 Pa. St., 379 (1857).
A person who has taken from a corpo-
ration an exclusive right to manufact-
ure under a patent, and has so man-

-ufactured, cannot defeat an action for

the royalties agreed upon for the goods
already manufactured by alleging that
the contract was ultra vires. Hall Mfg.
Co. v. American R’y, etc., Co., 48 Mich.,
331 (1882). In England, by statute, no
water-works company is allowed to
put works in a town which another
company already adequately supplies.
Held, however, that the latter exception
does not apply where one company hav-
ing a supply uses the plant of another
company having the plant and street
franchises. Richmond, etc., Co. wv.
Richmond, L. R., 3 Ch. D., 82 (1876).

A building corporation being sued
for breach of ite contract to keep prop-
erty insured cannot set up that it had
no power to insure. Chicago Bldg.
Soc. v. Crowell, 65 Ill., 453 (1872). A
coaltmining and: transporting corpora-
tion may purchase and use a steamboat

’ 815
§ 682.]

ULTRA VIRES ACTS AND CONTRACTS.

(OH. XL.

defined principle of law that determines whether a particular act is

ultra vires or intra vires.

for transporting coal. Callaway, etc.,
Co. v. Clark, 32 Mo., 305 (1862). A cor-
poration with power to own land and
promote settlement may build saw-
mills and erect a hotel. Watts’ Appeal,
78 Pa. St., 370 (1875). In Dupee v. Bos-:
ton Water-power, Co., 114 Mass., 37
(1878), the sale by the company of sur-
plus land, receiving in payment stock
of the corporation itself, was upheld as
against a dissenting stockholder’s ac-
tion. Ferry company having a surplus
boat may rent it. Brown v. Winnisim-
met Co., 93 Mass., 326 (1865). A com-
pany formed to work a patent may
-purchase it. Leifchild’s Case, L. R., 1
‘Eq., 231 (1865). Brokers employed by
directors to sell property of the corpora-
tion cannot recover damages from the
directors for a failure of sale, due to the
vendee alleging that the directors had
no power to sell, it being proved by the
directors that they did have such
power. Wilson v. Miers, 10 C. B., N.
S., 348 (1861). Notes given by a lumber
manufacturing corporation to pay for
‘stock in a bank cannot be enforced.
Sumner v. Marcy, 3 W. & M., 105 (1847).
A manufacturing company is liable for
goods purchased by a store owned by
it. Dauchy v. Brown, 24 Vt. 197
(1852); Seawright v. Payne, 6 Lea

(Tenn.), 288 (1880), where an iron fur-,

nace company ran astore.’ A corpora-
tion is presumed to have power to
purchase a patent whose use pertains
to the business indicated by the name
of the corporation. Dorsey Harvester
‘Rake Co. v. Marsh, 6 Fisher’s Pat. Cas.,
“887 (1873). Where a railroad completes
another railroad under an agreement
that the former shall run it, there can be
no recovery by the former for the work
done and money expended, the charter
of the former road not authorizing such
acts. As to whether the former road
could continue to run the latter was not
involved in the suit. Great W. R’y v

The decision rests largely in the discre-

Preston, etc., Ry, 17 U. C., Q. B., 477-
(1859).

A company engaged in manufactur-
ing and selling glass may purchase
glass in order to keep up its stock.
Lyndeborough Glass Co. v. Mass, Glass
Co., 111 Mass., 315 (1878); Pacific R.R.
Co. v. Seeley, 45 Mo., 212 (1870), where
a contract to convey land to a company
in consideration of a certain location of
a railroad was held unenforceable as
against public policy. See, also, § 650,
supra. A manufacturing corporation
which runs a store and sells goods may
collect for goods thus sold, though the
sales were made by its undisclosed
agent. Slater Woolen Co. v. Lamb,
143 Mass., 420 (1886); Chester Glass Co.
v. Dewey, 16 Mass., 93 (1819). A rail-
road is bound by its contract. to give its
patronage to a hotel if built. Texas,
etc., R. R. Co. v. Robards, 60 Texas, 545
(1883). An express company cannot
complain that a railroad is doing an ex-
press business ultra vires, Sargent v.
Boston, etc., R. R. Co., 115 Mass,, .416
(1874). Contract by packet company to
pay for harbor improvements is ultra
vires and not enforceable, Abbott v.
Balt., etc., Co., 1 Md. Ch., 542 (1850), In
the early and important case of Robin-
son v. Smith, 3 Paige, Ch., 222 (1832),
Chancellor Walworth sustained a stock-
holder’s action to hold the corporate
directors liable for corporate funds lost
by speculation in the stocks of other
corporations. See, also, Combination
Trust Co. v. Weed, 2 Fed. Rep., 24
(1880); Hardon v. Newton, 14 Blatch.,
276 (1878); Smith v. Rathbun, 22 Hun,
150 (1880); Land Credit Co. v. Lord
Fermoy, 17 W. R., 562 (1869), where the
directors used corporate funds to “rig
the market,” 7. e¢., to purchase and
thereby sustain the market price of the
stock. Stockholders’ bill to enjoin
payment of subscription by the com-
pany to another company, and the pic-

816
CH. XL.]

ULTRA VIRES ACTS: AND CONTRACTS.

r§ 682.

t

tion and sound judgment of the court. Moreover the courts are
becoming more liberal, and many acts which fifty years ago would

chase by the former of a railway owned
by the latter, shows equity in both in-
stances, but is multifarious, since the
parties affected and relief granted in
‘the two cases are different. Solomans
v. Laing, 12 Beav., 839 (1849). A land-
owner who withdraws opposition to an
extension of a railway in consideration
of an agreement of payment to him of
a largesum as daniages cannot enforce
the contract. Gage v. Newmarket R’y
Co., 18 Q. B.,‘457 (1852). Where an oil
transportation company contracted to
deliver all its oil to a railroad, which
was to pay a certain price therefor, the
oil company may collect after it has
delivered, The railroad cannot set up
ultra vires. Oil Creek, etc., R. R. Co.

v. Penn, Trans. Co., 83 Pa. St., 160 (1876). ©

Where a railroad’ company issues
bonds to raise funds for aiding improve-
ment, gas, water and land companies,
the bonds are ultra vires. A stock-
holder may have them canceled so far
as they are in the hands of persons tak-
ing them. with notice. City of Chicago
v. Cameron, 11 N. E. Rep., 899 (TL,
1887), Where the charter of the com-
pany only authorized insurance against
fire, a by-law referred to in the policy
recognizing damages by lightning as
one of the risks assumed imposes no
obligation upon the company to pay for
losses other than by fire. Andrews v.
Union, etc., Ins. Co., 87 Me., 256 (1854).
A bank may establish a savings depart-
ment and may pay interest on the sav-
ings deposits, and may assign in trust
certain securities to secure such depos-
its. Ward v. Johnson, 95 Ill, 215 (1830).
It is within the power of a bank to re-
ceive special deposits of bonds, etc., for
safe-keeping, gratuitously and for mere
accommodation, and the bank is liable
for their loss by gross negligence. Pat-
tison v. Syracuse Nat'l Bk, 80 N. Y.,
82 (1880). A contract of railway pro-
moters to pay a certain price for land,

(52)

1
the main part of the price being'a bribe
for the influence of the land-owner,
cannot be enforced against the com-
pany. Earl of Shrewsbury 7. North .
Staffordshire R’y Co., L. B., 1°Eq., 598
(1865), Stockholder may enjoin a rail-
way from applying funds raised under
an amendment of charter authorizing
same for building a specified branch to
the construction of another branch.
Stockholder here was recorded scrip-
holder, but not registered stockholder.
Bagshaw v. Eastern, etc., R’y Co, 7
Hare, 114 (1849). Stockholder may en--
join a railway company from using its
funds to promote an act of parliament,
for the improvement of a harbor at
public expense. Munt v. Shrewsbury,
etc., R’y Co., 13 Hare, 1 (1850). Cale--
donian, etc., Ry Co. v. Helensburgh,
etc., Trustees, 5 Jur., N. S., 695 (H. of
L., 1856), holds that a promoters’ can-
tract that a railroad will make a loan.
to a harbor improvement and build an:
extension to it is not enforceable, even,
though the railroad received a free-
street privilege thereby. Where a rail--

road erected a pier for a bridge without

license and bought off local opposition
by agreeing to pay a forfeit if the.
bridge was not duly completed, etc., the
forfeit cannot be'collected. Mayor, etc.,
v. Norfolk R’y Co, 4 El. & BL, 3897.
(1855). Land-owners who conveyed to
railroad on contract of latter to con-
struct wharves, etc., may have specific
performance, Wilson v. Furness Ry
Co., L. R., 9 Eq., 27 (1869). A national
bank purchasing bonds and agreeing to
return them for the same price cannot
refuse to return them on the ground
that the purchase was ultra vires. Lo-
gan, etc., Bk v. Townsend, 3 8S. W.
Rep., 122 (Ky., 1887).

A stockholder may enjoin a life and
fire insurance company from engaging
in marine insurance. Natusch »v., Irv-
ing, 2 Cooper’s Ch., 858 (1824), A re-

817

‘
\

A

§ 682.]

ULTRA VIRES ACTS AND CONTRACTS.

[CH. XL.

have been held to be wléra vires would now be held to be intra

vires.

Second, the decision in any particular case turns largely on

the questions of who is complaining; against whom the complaint

is made; and what relief is sought.

The stockholder’s action is

‘looked upon most favorably if he is not guilty of delay. But an
action by the state to enjoin the act or to forfeit franchises is an

favored by the courts.

‘ unusual, extraordinary and semewhat harsh remedy, and is: not
So, also, an action by the corporation itself

or by the party contracted with to repudiate an ultra vires act is

not favored by the courts.

Such an action is an attempt by a party

‘to evade the contract by means of principles of law which both
parties have violated. The court is not swift to grant relief in such

-ceiver of a savings bank may enforce a
bond given to it by an individual agree-
ing to pay to the bank a certain sum,
if it would continue business, which
the bank did. Hurd v. Green, 17 Hun,
827 (1879); Simpson v. Westminster,

-ete., Co., 8 H. L, Cas., 712 (1850), where
.a lease by a hotel company of part of

its building during its completion was
held valid; Lafond v. Deems, 81 N. Y.,
507 (1880), where a voluntary benevo-
lent association having been compelled
.to hire more room than it needed was
held to have power to fit up and let the
_portion not required; Temple Grove
-Seminary v. Cramer, 98 N. Y., 121 (1885),
holding that a seminary of learning
may let its building as a boarding-house
during the summer vacation; Gruber
v, Washington & J. R. R. Co., 92 N. C.,
1 (1885), where it seemed to the court
that a lumber company in providing
transportation for its product could, as
incidental to its own business, carry the
goods of others and also passengers;
City Hotel, etc. v. Dickinson, 6 Gray,
586 (1856), holding that a hotel company
may let a part of its building for shops;
Att’y-Gen. v. Great Eastern R’y Co.,
L. B., 11 Ch. Div., 449, 481 (1879), hold-
ing that renting surplus stock to a con-
necting railroad is intra vires; West-
ern Union Tel. Co. v. Rich, 19 Kan.,
517 (1878), holding that.a railroad may
construct a telegraph line for its own
use; Crawford v, Longstreet, 48 .N. J.
L., 326 (1881), holding that a turnpike

may lease premises for storing imple-
ments used in repairing its road and
for sheltering its employees. A stock-
holder may enjoin his company from
doing acts forbidden by statute, since
charter is endangered. Manderson v.
Commercial B’k, 28 Pa. St., 379 (1857),
where the bank was loaning usuriously
and without the action of the directors,
See, also, Sparhawk v. Union, etc.,
R’y, 54 Pa. St., 401, 452 (1867). . A per-
son having sold and partly delivered an
article to a corporation which the cor-
poration had no right to purchase may
refuse to complete delivery, and may
sue for the part delivered. Day v.
Spiral, etc., Co., 57 Mich., 146 (1885).
Ultra vires may be pleaded by a mutual
insurance company where there is no
proof that the beneficiary did not re-
ceive the benefit of his payments.
Rockhold v. Canton, etc.,, Assoc., 19
N. E. Rep., 710 (Til, 1889). A mining
company is not liable for the price of
goods which it purchases to carry on an
ultra vires mercantile business, Che-
wacla, etc., v. Dismukes, 6 8, Rep., 122
(Ala., 1889). A railroad’s contract to pay
for crossing a bridge is legal. Railway
Companies v. Keokuk, etc., Co., 181 U.
S., 871 (1889), Stockholder cannot en-
join an intra vires act on the ground
that it was promised that the corpora-
tion would not enter into that act.
Converse v. Hood, 21 N. E. Rep., 878
(Mass., 1889),
1 See chapter XXXVIIL.

818
CH. XL.] ULTRA VIRES ACTS AND CONTRAOTS.

[§ 682.
eases. Third, if a contract or act is w¢tra vires, and has not yet
‘been performed, either the corporation or the party contracted:
with may refuse to complete the contract. No damages can be
collected for such refusal. So, also, if the contract has been partly
performed, and the unperformed part is separable from the rest,
either party may refuse to complete. But-where one party has
completely performed and carried out its part of the contract, the
other party cannot retain the benefits of such performance and -

refuse to perform also.!

1Speaking of ultra vires acts, the
New York court of appeals say: ‘‘ As
artificial creations, they have no powers
or faculties except those with which
they were endowed when created; and
when, as is frequently the case, they
act in excess of their powers, the ques-
tion will be, Is the act prohibited as
prejudicial to some public interest? or
is it an act not unlawful in that sense,
but prejudicial to the stockholders, The
rule, however, is well settled that the

!

plea of ultra vires should not prevail
when it would not advance justice, but
on the contrary would accomplish legal
wrong.” Leslie v. Lorillard, 110 N. Y.,
519 (1888). See, also, discussion in Cam-
den, etc., R. R. Co. v. Mays, etc., R. R.
Co., 4 Central Rep., 801 (N. J., 1886);
Oregon, etc., R’y Co. v. Oregonian, etc.,
R’y Co., 180 U. S., 1 (1889); Railway
Companies v. Keokuk, etc., Co., 131 U.
S., 371, 384, 389 (1889).

819
CHAPTER XLI.

i

INTRA VIRES ACTS AND CONTRACTS—IN OTHER WORDS, ACTS AND
CONTRACTS WHICH ARE WITHIN THE CHARTER POWERS OF THE
CORPORATION, DIRECTORS OR STOCKHOLDERS. °

4 z, f
'§ 683. Intra vires acts as distinguished | § 692, Land may be purchased by a
from ultra vires acts. corporation and may be mort-
684. The discretion of the directors ged. :
or the majority of the stock- | 693. Power of eminent domain may
holders as to acts intra vires be delegated by the state to
cannot be questioned by sin- a corporation— When and
gle stockholders unless fraud what property may be taken.
is involved. Taking the property of an-
685. Borrowing money. _ other corporation, =~
686. Bills, notes and acceptances 694-97. Foreign corporations may
may be issued. : make contracts, etc.— Cor-
687, Bonds with coupons may be porations created by two
issued. states. ;
688. Debentures may be issued. 698. Torts committed by the corpo-
689. Mortgages may be given— ration, :
Mortgages of franchises and 699. Name of the corporation,
of rolling stock. 700. Statutes applicable to ‘‘per-
690. Loans generally cannot be made sons” apply to corporations.
by corporations — Statutes — 700a, By-laws.
Mortgages — Usury. 7000. Expulsion of members,
691. Assignments for the benefit of ‘
creditors may be made by | ‘ ;
corporations — Preferences.

 

§ 683. Intra vires acts as distinguished from ultra vires acts—
An ultra vires act, as already explained, is an act beyand the ex
press and implied powers of the corporation. An intra vires act,
on the contrary, is one which is within the express or implied pow-
ers either of the board of directors or of the majority of the stock-
holders in meeting assembled. The intra vires acts are frequently
spoken of as matters concerning the “internal management” of
the corporation. Much confusion has arisen concerning these acts,
owing ta a failure to recognize clearly the fact that an act is intra
vires of a corporation if it can be legally carried out ether by the
directors or by the majority of the stockholders. Thus, a stock-
holder frequently brings suit to enjoin or set aside an act which
the majority have power to do, but which the directors have done
without power. It is clear that a dissenting stockholder has no
right to carry such a matter into the courts unless the majority are
with him, since if the majority approve of the directors’ acts, this
amounts to a ratification of the same.

In short, there are three classes of corporate acts herein. First,
: 820
CH. X11. ] INTRA VIRES ACIS AND CONTRACTS.

[$ 683.
the stockholder may bring suit to remedy an act which is ultra vires,
or beyond the powers of both the majority of the stockholders and
.of the directors. Second, as to acts within the power of the major-
ity, but beyond the power of the directors, a stockholder may sue
to enjoin or set them aside when the directors have performed
them and the majority refuse to confirm their action.! As to such
acts the stockholder cannot sue if the majority confirm the direct-
ors in their performance. Third, as to acts within the powers of
the directors and performed by them, or within the powers of the
majority and performed by the. majority, the stockholders cannot
complain that they are ultra vires. The second and third classes
of acts are éntra vires of the corporation. They are matters of in-
ternal arrangement or management, and cannot be controlled or
objected to by a single stockholder?” The question of what intra

1Exeter & O. R’y Co. v, Buller, 11
Jur., part I, 527, 582 (1847), holding,
also, that where such an action has been
instituted it will not be defeated by the
fact that subsequently the directors ob-
tain control of a majority of the votes.
But there must be clear proof that the
majority refuse to confirm, Thus, in

Bagshaw v. Eastern Union R’y Co., 7-

Hare, 114 (1849), the court says that
Foss v. Harbottle, 2 Hare, 495 (1843), de-
cides ‘‘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 share-
holders, on behalf of themselves and
others, to impeach that act cannot be
sustained, because a general meeting of
the company might immediately con-
firm and give validity to the act of
which the bill complains.” See, also,
McDougall v. Gardiner, L. R., 1 Ch. D.,
18 (1875), and § 662.

2Thus, in Bloxam v. Metropolitan R’y
Co., L. B., 8 Ch., 887 (1868), the court
says: ‘‘ The matters of internal arrange-
ment which are beyond the province of
the court were properiy admitted to be
such as are within the scope'of the com-
pany’s powers.” And in Camblos v.
Phil. & R. BR. R. Co., 4 Brews., 563 (U.
S.C. Ct., 1873), the court said: ‘‘So
long as those who manage the corpora-
tion keep within the limits of their char-

ter, and commit or propose to commit
no breach of their trust, he has no right
to complain.” In the case of Beecher
v. Wells, etc., Co, 1 Fed. Rep., 278
(1880), it was said: ‘‘ A court of equity
will not interfere with the internal pol-

.icy of a corporation unless it is manifest

that the proposed act is ultra vires.” In
Bach v. Pacific, ete., Co., 12 Abb. Pr.
(N. 8.), 373 (1872), the court said: ‘‘ No
case can be found where the general
management of corporate property has
been subject to the restrictions of judi-
cial power, unless, indeed, in the case of.
a clear violation of express law, or a
wide departure from chartered powers,”
In this case the stockholder objected to
the securities in which the corporate
funds were being invested. In Walker
v. Mad River, etc., R’y Co., 8 Ohio, 38
(1887), it was said by the court: ‘* When
acts requiring judgment, science and
professional skill are confided to the dis-
cretion of the officers of a corporation
the exercise of that discretion will not
be lightly disturbed.” See, also, Tusca-
loosa Mfg. Co. v. Cox, 68 Ala., 71 (1880).
In Ramsey v. Erie R’y Co., 7 Abb. Pr.
(N. 8.), 156 (1869); it is said: ‘‘ When di-
rectors are only unwise or merely ex-
travagant or improvident, or slightly
negligent, or merely misjudge in the
performance of their duties, the remedy
of stockholders is to elect other persons
§ 684. INTRA VIRES ACTS AND GONTRAOTS. [cH. XLT.
vires acts are to be performed by the directors, and what ones can be
exercised only by the majority of the stockholders in meeting as-
sembled, has been considered elsewhere.’

§ 684. The discretion of the directors or the majority of the stock-
holders as to acts intra vires cannot be questioned by single stock-
holders unless fraud is involved.— This proposition of law is clearly,
firmly and very properly established beyond any question. Were
the rule otherwise there would be no safety or possibility of carry-
ing on business through corporations. There would be suits insti-
tuted by dissatistied stockholders on slight provocation, and some-
times for the very purpose of embarrassing the tyansaction of
business. A partner in a copartnership may prevent action which
he disapproves, but corporations are formed very largely to avoid
that very danger and disadvantage. The corporate directors, so
long as they act within their powers, may use their own discretion
as to what ought to be done. Such also is the rule with the ma-
jority of the stockholders in meeting assembled. An act cntra vires
and without fraud is an act of internal management, and a minor-
ity of the stockholders are powerless to prevent, control, change or
question that act. Thus, a stockholder has no remedy for the mere
inefficiency of a director, except at the elections of the corpora-
tion. Having once been elected, a director is entitled to retain
his position even though he is grossly inefficient, and he cannot
be removed from his position? But where there are violent in-
ternal dissensions in a corporation, and two sets of officers are
attempting to act, and the corporate property is endangered, a

court. of equity will interfere to the extent of preserving the cor-
porate property by a temporary receiver.’ A court of equity can-
not, however, restrain the corporation from proceeding with busi-
ness and using its funds for that purpose, even though a minority

directors in their places.” In Bailey v. L. R., 16 Eq., 308 (1873); Featherston v.
Birkenhead, etc., R’y Co., 12 Beav., 488 Cooke, id., 298, the court saying: “The

(1849), where a stockholder sought to re-
strain a call as being unnecessary, the
court refused to entertain the suit, and
said that it was not for the court “to
take upon itself to determine a question
which might well and ought to be de-
termined by the shareholders them-
selves at general meetings.” See, also,
Edwards v. Shrewsbury, etc., R’y Co.,
2 De G. & Sm., 537 (1848),

1Sce chapter XLII.

2See Gorman v. Guardian Sav. B’k, 4
Mo. App., 180 (1877); also, $ 620, supra.

3Trade Auxiliary Cv. v. Vickens,

court will not interfere with the inter-
nal affairs of joint-stock companies un-
less they are in a condition in which

‘there is no properly-constituted govern-

ing body, or there are such dissensions
in the governing body that it is impos-
sible to carry on!the business with ad-
vantage to the parties interested. In
such a case the court will interfere, but
only for a limited time, and to as small
an extent as possible,” See, also, Law-
rence v. Greenwich, etc., Co., 1 Paige,
587 (1829),

822
CH. XLI.]

INTRA VIRES ACTS AND CONTRACTS.

[$ 685.

ef the stockholders can show that sound business discretion and
judgment would dictate a different policy.

§ 685. A corporation may borrow money.— This power is implied,
and exists without being expressly granted in the charter.’

1 Fountain Ferry, etc., Co. v. Jewell,
8 B, Monr. (Ky.), 140 (1847), the court
saying: ‘‘The question of expediency,
of practicability, of extravagance, or of
prudent eccnomy, must be left to be
decided by the managers and the cor-
porators.” A stockholder may object
to corporate’ acts and contracts which
are fraudulent or ultra vires or mala
in se. But all other acts he can correct
only by the election of new directors.
Leslie v. Lorillard, 110 N. Y., 519 (1888).

2Memphis & L. R. Co. v. Dow, 19
Fed. Rep., 388 (1884), citing Philadel-
phia, etc., R. RB. Co. v. Stickler, 21 Am.
L, Reg., 713 (Pa.); Barry v. Merchants’
Exch. Co., 1 Sandf. Ch., 280 (1844);
Beers v. Phoenix Glass Co., 14 Barb.,
358 (1852); Mead v. Keeler, 24 Barb., 20
(1857); Partridge v. Badger, 25 Barb.,
146 (1857); Clark v. Titcomb, 42 Barb.,
122 (1864); Curtis v. Leavitt, 15 N. Y.,
9 (1857); Barnes v. Ontario Bank, 19 N.
Y., 152 (1859); Smith v. Law, 21 N. Y¥.,
296 (1860); Nelson v. Eaton, 24 N. Y.,
410 (1863); Kent v. Quicksilver Mining
Co., 78 N. Y., 159, 177 (1879); Coats v.
Donnell, 94 N. Y., 168 (1888); Oxford
Tron Co, v. Spradley, 46 Ala., 98 (1871);
Alabama Gold L. I. Co. v. Central, etc.,
Association, 54 Ala., 73 (1875); Taylor
v, Agricultural & M. Asso., 68 Ala., 229
(1880); Hays v. Galion Gas L. & C, Co.,
29 O. St., 380, 320 (1876); Hope Ins. Co.
‘v, Perkins, 38 N, Y., 404 (1868}; Magee
v. Mokelumne Hill Canal & M. Co., 5
Cal., 258 (1855), where a statute pro-
hibiting corporations from issuing bills,
notes, etc., *‘ upon loans or for circula-
tion as money,” was held to be intended
to prevent their loaning théir credit,
and not to restrict their right to borrow
for business purposes ;- affirmed in Smith
v. Eureka Flour Mills Co., 6 Cal., 1 (1856):
Santa Cruz R. R. Co. v. Spreckles, 65
Cal., 193 (1884), holding that the loan

may be obtained from a director; Union
Gold Mining Co. v. Rocky Mt. Nat. B’k.
2 Col., 248 (1878); Commercial Bank.
etc., vu. Newport Mfg. Co., 1 B. Mon..
14 (1840); Donnell v. Lewis Co. Savings
B’k, 80 Mo., 165 (1883); Lucas v. Pitney,
27.N. J. L., 221 (1858); Hackettstown v.
Swackhamer, 27 N. J. L., 191 (1874);

.

Thompson v. Lambert, 44 Iowa, 239°

(1876); Larwell v. Hanover Svgs. Fund
Soc., 400. St., 274 (1883) ; Bradley v. Bal-
lard, 55 Ill., 418 (1870); Fay v. Noble, 12
Cush., 1 (1852); Commissioners, etc.,
v. Atlantic & N. C. BR.’ Co., 77 N.C.,
289 (1877); Ridgway v. Farmers’ Bank,
etc., 12 S. & R., 256 (1824); Moss v.
Harpath Academy, 7 Heisk., 283 (1872);
Union Bank v. Jacobs, 6 Humph., 515
(1845); Rockwell v. Elkhorn Bank, 13
Wis., 658 (1861); Furniss v. Gilchrist &
Co., 1 Sandf., 53 (1847); Holbrook v. Bas-
set, 5 Bosw., 149 (1859); Life & F. Ins.
Co. v. Mechanics’ F, I. Co., 7 Wend.,
81 (1831); Barnes v. Ontario Bank, 19
N. Y., 152 (1859). If a bank borrows
money, the fact that its officers misap-
propriate the money cannot defeat the
right to recover it from the bank. Don-
nell v, Lewis Co. Svgs. Bank, 80 Mo.
165 (1683); Australian A. 8S. C. Co.'e.
Mounsey, 4 K. & J., 783 (1858); Re
National Patent 8. F. Co., Baker’s Case,
1 Dr. & Sm., 55 (1860); Ulster R’y Co.
v. Banbridge, L. & B. R’y Co., Ir.
Rep., 2 Eq., 190 (1868); Bank of Aus-
tralia v. Breillat, 6 Moore’s P. C., 152
(1847); Laing v. Reed, L. R., 5 Ch., 4
(1869); Re Cork & V. R’y Co., L. R., 4
Ch., 748 (1869); Maclae v. Sutherland. 3
E. & B., 39 (1854); Gibbs’ Case, L. R.,
10 Egq., 312 (1870) —an insurance com-
pany. See, also, Hamtayne v. Bourne,
7M. & W., 595 (1841); Lowndes v. Gar-
nett & Moseley G. M. Co., 33 L. J., Eq.,
418 (1868); Ex parte Pitman, L. R., 12
Ch, D,, 707 (1879); Hill’s Case, L, B., 9

823

\

4

‘
§ 686.]

INTRA VIRES AOTS AND CONTRACTS.

(CH. XLI.

And even if the corporation had no implied power to borrow, it
would be compelled to repay the money actually received.’

Although a statute forbids a corporation from borrowing more
than a- specified amount, yet if the corporation actually does bor-
row in excess of that amount it cannot escape payment to the

lender.”

§.686. Bills, notes and acceptances may be made and issued by

corporations.—
promissory note. Corporations
Eq., 605, 618 (1870); Burmester v. Mor-
ris, 6 Ex., 796 (1851), holding that a
mining company cannot borrow. But

in Manchester, etc., R’y v. Brown, 50°

L. T. Rep., 281 (H. of L., 1884), revers-
ing 47 L. T. Rep., 290, and sustaining
45 L. T. Rep., 747, a railway company
which had exhausted its borrowing
powers sold its unincumbered rolling-
stock and took it back at an annual
rental equal to seven and a half per
cent. of the money received on the sale,
with a privilege of repurchasing for the
sume price after five years. Some of the
direetors guarantied the rental. Held,
that the transaction was in fact a bor-
_ rowing, and as such ultra vires the
railway company, and that the plaint-
iffs could not recover of the company,

but that the directors were liable upon .

their guaranty. Cf. 21 N. E. Rep., 907.

1 Manville v. Belden Mining Co., 17
Fed. Rep., 425 (1883); Memphis & L. R.
R, Co. v. Dow, 19 Fed. Rep., 388 (1884);
Union Gold M. Co. v. Rocky M. Nat.
B’k, 2 Col., 248 (1873); Humphrey v.
Patrons’ Mercantile, etc., 50 Iowa, 607
(1879); Larwell v, Hanover Svgs. F. Soc.,
40 O. St., 374 (1883); | Re Magdalena
Steam Nav. Co. v. Johnson, V. C., 690
(1860); Bradley v. Ballard, 55 Hl., 413,
417 (1870); Darst v. Gale, 83 IIL, 186,
141 (1876); Hays v. Galion Gas L. & C.
Co., 29 O. St., 330, 340 (1876); Hoare’s
Case, 30 Beav., 225 (1861); Troup’s Case,
29 Beav., 353 (1860). Compare White v.
Carmarthen & C, R’y Co., 338 L. J., Eq.,
98 (1864). Contra, Burmester v. Norris,
6 Ex., 796 (1851). A person who loans
money to a corporation cannot petition

A private corporation may make and deliver a

may make or accept bills of ex-

‘to have it wound up under the Eng-
lish act. Ex parte Williamson, L. R.,
5 Ch., 309 (1869).

2 Ossipee H. & W. Mfg. Co. v. Can-
ney, 54 N. H., 295 (1874): DeCamp ».
Dobbins, 29 N. J. Eq., 36 (1878); Hum-
phrey v. Patrons’ Mercantile Asso., 50
lowa, 607 (1879); Garrett v. Burlington
Plow Co., 70 Iowa, 697 (1886); Auerbach *
v. Le Soeur Mill Co., 28 Minn., 291 (1881).
‘In England the rule is contra. Foun-
tains v. Carmarthen R’y Co., L. R., 5
Eq., 316 (1868), where debentures issued
in excess of authority were held void;
Lady Henloch v, River Dee Co., 53 L.
T. Rep., 62 (H. of _L., 1885); Re Pooley
Hall Colliery Co., 21-L. T., N. 8., 690
(1869), where similar debentures were
said to be ‘‘ not -voidable but absolutely
void.” And see two cases turning upon
the construction of ‘‘ rules ” or by-laws,
Davis’ Case, L. R., 12 Eq., 516 (1871), and
Wilson’s Case, id., 521 (1871). But’ see
Gordon v. Sea Fire Life Ins. Co., 1H.
& N., 599 (1857), Municipal bonds issued
in excess of a limit fixed by constitu-
tional provision are void. Bona fide «
holders are not protected. Borough »v.
Frederick, 7 Atl. Rep., 156 (Pa., 1886).
Defense of debt in excess of amount al-
lowed must be pleaded. German, etc..

-Inst. v. Jacoby, 11 S. W. Rep., 256

(Mo., 1889).

3 Moss v. Averell, 10 N. ¥., 449, 437
(1853), and cases cited; Barry v. Mer-
chants’ Ex. Co., 1 Sand. Ch., 280 (1844);
Clark v. Farmers’ Woolen Mfg. Co., etc.,
15 Wend., 256 (1836), holding also that,
a note under seal is not negotiable so as
to authorize a suit by a transferee in his

824
OH. XLI.]

INTRA VIRES ACTS AND CONTRACTS.

‘[$ 686,

change for the purposes of their business.! But corporations have
no power to indorse or guaranty notes for the accommodation of

others.” ‘

:

A note issued by a corporation for purposes which the corpora.
tion is not authorized to engage in cannot be enforced by the
payee;* ‘but a bona fide purchaser is protected as he would be if

the maker were an individual.

own name; Mead v. Keeler, 24 Barb.,.

20 (1857); Kent v. Quicksilver M. Co.,
78 N. Y., 159, 177 (1879); Mott v. Hicks,
1 Cow., 518 (1823); Att’y-Gen. v, Life &
F. Ins. Co., 9 Paige, 470 (1842); Moss v.
Oakley, 2 Hill, 265 (1842); Pusey v. New
Jersey W. H.R. Co., 14 Abb, Pr., N.S.,
434 (1873), holding that a corporation
has power to issue certificates of in-
debtedness to contractors for work done;
Smith v. Law, 21 N. Y., 296 (1860);
Lucas v. Pitney, 27 N. J. L., 221 (1858);
Richmond, F. & P. R. R. Co. v. Snead,
19 Gratt., 354 (1869), a due-bill; Rock-
well v. Elkhorn Bank, 13 Wis., 653
(1861); Union Bank v. Jacobs, 6 Humph.,
515 (1845); Straus v. Eagle Ins. Co., 5
O. St., 59 (1855); Curtis v. Leavitt, 15
N. Y., 9 (1857); Oxford Iron Co. v,
Spradley, 46 Ala., 98 (1871); Smith v.
Eureka Flour Mills Co., 6 Cal., 1 (1856);
Ex parte Estabrook, 2 Lowell, 547 (1887);
Barnes v. Ontario Bank, 19 N. Y., 152
(1859); Mumford v. American L..I. Co.,
4N. Y., 463 (1851); McMasters v. Reed’s
Ex’rs, 1 Grant's Cases, 36 (1854), hold-

ing that they may also issue bonds; |

Pitman v. Kintner, 5 Blackf., 250 (1839);
Commercial Bank v. Newport Mfg. Co.,
1B. Mon., 18 (1840); Leavitt v. Blatch-
' ford, 17 N. Y., 521 (1858); Magee v.

Mokelumne Hill C. & M, Co., 5 Cal., 258 -

(1855); Hamilton v. Newcastle & D. R.
R. Co., 9 Ind., 359 (1857); Randolph
on Com, Paper, §§ 327-385; Millard v.
St. Francis, etc., Academy, 8 Bradw.
(Ill), 841 (1880), where an educational
institution borrowed money and gave a
note therefor.

1¥For instances of sich bills, see
Oleott v. Tioga R. R. Co., 40 Barb., 179
(1862); S. C., affirmed, 27 N. Y., 546
(1863) ; Safford uv Wyckoff, 4 Hill, 442

_ Badger, 25 Barb.,

(1842), holding that a negotiable bill ir-
regularly issued will bind the corpora-
tion in favor of a bona fide indorsee.
For instances of accepting bills, see
Munn v. President, etc., of Commission
Co., 15 Johns., 44 (1818); Partridge v.
146 (1857); Prairie
Lodge v. Smith, 58 Miss., 301 (1880),
where the corporation accepted an order
drawn by its contractor; City Bank of
Columbus v. Beach, 1 Blatch., 425
(1849). In England it is held that a
bill of exchange cannot be accepted by
a mining company., Brown v. Byers,
16 Mees. & W., 252 (1847); Dickinson v.
Valpy, 10B. & C., 128 (1829). Nor by a

‘railroad. Bateman v. Mid-Wales R’y

Co., L. R:, 1 C. P., 499 (1866). Nor asalt
company. Bult v. Morrell, 12 Ad. & E.,
745 (1840); Broughton v.. Manchester,
ete, Works, 3B. & Ald., 1 (1819). Nora
salvage company. ‘Thompson v. Univer-
sal, etc., Co., 1 Ex., 694 (1848), Nor'a

-cemetery. Steele v. Harmer, 14 Mees.

& W., 881 (1845). But the right may be
expressly granted. In ve Peruvian R’ys
Co., L. B., 2 Ch., 617 (1867).

2See § 678, where this question is fully _
discussed.

3Bacon v. Mississippi Ins. Co., 32
Miss., 116 (1856); State Bank v. U. S,
Pottery Co., 34 Vt., 144 (1861); Pearce
v. Madison & LR R. Co., 21, How.,
441 (1858), where a note given by a,
railroad company for the purchase of
a steamboat was held void; Ehrgott v.
Bridge Manufactory, 16 Kan., 486 (1876),
where the payee took the note in pay-
ment of a third person’s debt. Cf. 21N.
E. Rep., 907.

4Daniels on Neg. Instru., §§ 1502-
1504; Stoney v. American, etc., Ins. Co.,
11 Paige, 685 (1845). See Att’y-Gen’l V.

825
'

§ 686.]

‘

INTRA VIRES ACTS AND CONTRACTS.

[cH. Xt.

The negotiable paper of corporate bodies may be in the ordinary

Life, etc., Ins. Co., 9 Paige, 470 (1842),
holding that the burden of proof is on
the holder; Genesee, etc., B’k v. Mich.,
etc., Co., 52 Mich., 488 (1884). Although
an agent duly authorized by the corpo-
ration to make notes for it issues its
notes for accommodation, yet a bona
fide holder cannot hold the agent liable
in tort. He should sue the corporation
on the notes. Bird ». Daggett, 97 Mass.,
494 (1867); Monument National Bank v.

Globe Works, 101 Mass., 57 (1869); La- .

fayette Bank v. St. Louis Stoneware
Co., 2 Mo. App. (1876). In these cases
the agent indorsed paper for accommo-
dation of third parties. Madison & I.
R. R. Co. v. Norwich Savings Soc., 24
Ind., 457 (1865), where an agent repre-
sented a railroad company as being the
owner of certain bonds, when in fact it
was an accommodation guarantor It
was held liable upon the guaranty.
Stoney v. American Life Ins. Co., 11
Paige, 635 (1845). In Merchants’ Bank v.
State Bank, 10 Wall., 604, 644, Mr. Jus-
tice Swayne said: ‘‘ Where a party deals
with a corporation in good faith — the
transaction is not ulira vires — and he
is unaware of any defect of authority
or other irregularity on the part of those
acting for the corporation, and there is
nothing to excite suspicion of such de-

fect or irregularity, the corporation is

bound by the contract, although such
‘ defect or irregularity in fact exists. If
the contract can be valid under any
circumstances, an innocent party in
such a case has a right to presume their
existence, and the corporation is es-
topped to deny them.” This remark
was quoted with approval in Gano v.
Chicago & N. W. R’y Co., 60 Wis., 12
(1884); Claflin v. Farmers’ & Citizens’
Bank, 25 N. Y., 293 (1862), where, how-
ever, the certification of his personal
check by the president of a bank was
considered to constitute such a suspi-
cious circumstance as should put a pur-
chaser upon his guard, and render the

certification invalid even in the hands of.
a bona fide holder for value. See, also,
chapter XLIII. Ridgeway v. Farmers’
Bik, etc., 128. & R., 256 (1825), where a
draft fraudulently drawn by a president
was enforced against the corporation ;,
Philadelphia & S. R. R. v. Lewis, 33 Pa.
St., 33 (1859), holding that bonds were
not void because secured by a mortgage
executed without authority; Rowland~-
vy. Apothecaries’ Co., 47 Conn., 384 (1879),
a note of a corporation ‘given by its
treasurer for money for his personal
use, being held valid against the, corpo-
ration; Mechanics’ Banking, Asso.. v.
New York & S. W. L. Co., 35 N. Y.,
505 (1866), accommodation indorse-
ment by president; In re Estabrook, 2
Lowell, 547 (1877), a note given by a
manager without authority; Thompson
v. Lambert, 44 Iowa, 239 (1876), misap-
propriation by officers of money ob-
tained on mortgage; Stone v. Ameri-
can Life Ins. Co., 11 Paige, 635 (1845);
White v. How, 3 MeLean, 291 (1843),
where the corporate agent improperly
issued notes; Genesee Savings Bank
w. Michigan Barge Co., 52 Mich., 488
(1884), where the treasurer was au-
thorized to issue notes and did so, but
improperly, it was claimed.,’ The rule
was stated to be (p. 446) that ‘‘ where
a corporation has, under any circum-
stances, power to issue negotiable pa-
per, the bona fide holder has the
right to presume that it was issued
under circumstances which gave the
requisite authority; and the negotiable
paper of a corporation which appears on
its face to have been duly issued by such
corporation, and in conformity with the
provisions of its charter, is valid in the
hands of a bona fide holder;” Western
Maryland R’y Co. v. Franklin Bank, 60
Ma., 36 (1882), where a clerk forged
certificates of coupons surrendered for
funding, Certificates of deposit issued
by a bank cashier for the purpose of
raising money for the bank’s use,

826 ‘

-

es
CH, XL1.]°

INTRA VIRES ACTS AND CONTRACTS.

‘

[§ 687.

form. It is not necessary that the corporate seal be attached.!
The authority of the president or cashier or other officer to issue
a note in the name of the corporation is discussed elsewhere.”
Sometimes the charter or a statute forbids a corporation from

issuing a note. In such a case the note would be void.’

The holder,

however, may collect from the corporation the money or value ad-

vanced for the note.!

§ 687. Bonds with coupons may be issued by corporations.— The
power of a corporation to issue bonds for the payment of money is
no longer questioned.* The unissued bonds of a corporation cannot

though not based on an actual deposit,
_have been held binding upon the bank
when held by bona jide purchasers with-
out notice. See chapter XLIII. In
The Floyd Acceptances, 7 Wall., 666
(1868), it was held that acceptances of
drafts due in the future for army sup-
plies not delivered were void as not
being within the authority of the secre-
tary of war. Barnes v. Ontario Bank,
19 N. Y., 152 (1859); Ellsworth v. St.
Louis, A. & T. H. BR. R. Co., 98 N. ¥.,
553 (1885), where bonds were issued in
violation of the charter; In re General
Estates Co., L. R., 8 Ch., 758 (1868). See,
also, In re Land Credit, etc., Co., L. R.,
4 Ch., 460 (1869) ; Beers v. Phoenix Glass
Co., 14 Barb., 358 (1852), secretary bor-
rowing money without authority.

1 Mott v. Hicks, 1 Cow., 513 (1828);
Hamilton v. Newcastle & D. R. RB. Co.,
9 Ind., 859 (1857); Clark v. Farmers’ W.
M.. Co., 15 Wend., 256 (1886), holding
that a note under the seal of the corpo-
ration is a specialty, and cannot be sued
upon in the name of a transferee. See,
also, Buckley v. Briggs, 30 Moi, 452
(1860); also, § 721, infra.

2 See §§ 716, etc., infra.

° Leavitt v. Palmer, 3 N. Y., 19 (1849);
Root v. Wallace, 4 McLean, C. C., 8
(1845); Davis v. Bank of River Basin, 4
McLean, C. C., 387 (1848); Attorney-
General v. Life & Fire Ins. Co., 9 Paige,
470 (1842); New York F. I. Co: v. Ely, 2
Cow., 678 (1824); Weed v. Snow, 3
McLean, 265 (1848); Root v. Goddard,
id., 102 (1842); Hayden v. Davis, id.,
276 (1848), where an acceptance and

bond given to secure it were held void;
Bank of Chillicothe v. Dodge, 8 Barb.,
288 (1848), holding, however, that a for-
eign corporation innocently holding a
draft issued in violation of a statutory
prohibition stands in the same situation
as if it had paid money under a mistake
of material facts and may recover the
money paid for it. See, also, Smead
v. Indianapolis, P. & C. R. R. Co., 11
Ind.,-104 (1842), holding that certificates
of deposit payable to bearer are not
within the New York restraining stat-
utes prohibiting the issue of notes for
circulation as money; Mumford v.
American, Life Ins. & T, Co., 4 N. Y.,
463 (1851). - ‘

4 Oneida B’k v. Ontario B’k, 21 N. Y.,
490 (1860). Cf. Att’y-Gen’l v. Life, etc.,
Ins. Co., supra. Contra, Broughton v,
Manchester, etc., Co., 3 Barn. & C., 1
(1819), where the bill of exchange con-
travened the statute giving the Bank of
England a monopoly. See, also, other
English cases, supra.

5See many cases infra. Phil., etc.,
R. R. Co. v. Lewis, 33 Pa. St., 33 (1859) ;
Commonwealth v. Smith, 92 Mass., 448

(1865), holding also that where a stat-

ute limits the amount and, the duration
of bonds a violation of the statute ren-
ders the bonds and mortgage void. They
may be issued to carry out a re-organ-
ization scheme. Memphis, etc., R. R. v.
Dow, 19 Fed. Rep., 388 (1884); aff'd, 120
U. 8., 287. The purchasers of railroad
bonds-cannot rescind on the ground that
the railroad has used the proceeds for
purposes other than those stated in its

827:
§ 687.] INTRA VIRES ACTS AND CONTRACTS. [CH., XLI.
be attached for corporate debts.! The right of the corporation to
issue its bonds at a price below par is considered elsewhere.”

A corporation may issue an “income bond,” the interest on
which is paid after other charges and interest are paid and before
dividends are declared; * but the power to issue irredeemable bonds,

interest on which is paid after certain dividends have been declared,

 

is a question still in dispute.‘

It is uniformly held that bonds issued by private corporations,
payable to order or bearer, are negotiable.®

prospectus. A bill in equity is proper
to rescind when third parties with no-
tice are to be reached. Banque, etc., v.
Brown, 34 Fed. Rep., 145, 196 (1888).

1Coddington v. Gilbert, 17 N. Y., 489
(1858); Barnes v. Mobile, etc., R. R. Co.,
12 Hun, 126 (1877); Sickles v. Richard-
gon, 23 id., 559 (1881).

2See chapter III, supra. Where one
telegraph corporation holds the bonds of
another and exchanges the bonds for
the stock of the latter corporation, a
subsequent mortgagee of the first corpo-

_ ration cannot attack the validity of the

bonds and mortgage on the property of
the second corporation. Boston, etc,
Co. v. Bankers’, etc., Co., 86 Fed. Rep.,
288 (1888). See 5 N. Y. Supp., 925.

Garrett v. May, 19 Md., 177 (1862),
upholding the giving of a mortgage
which took precedence over prior in-
come bonds.

4The supreme court of Pennsylvania,
by a divided court, about 1882, held that
a railroad company without express
authority might issue irredeemable in-
_terest-bearing bonds at alarge discount,
the interest to be paid only after a cer-
tain dividend had been declared on the
common stock. The bonds were called
“deferred income bonds.” Phil., etc.,
R. RB. Co. v. Stichter, 21 Am. L. Reg.,
718. A contrary conclusion was reached
in Taylor v. Phil. etc, R. R. Co., 7
Fed. Rep., 386 (1881). An ‘‘income
bond” under the New York statute is
secured by a lien in regard to its prin-
cipal only. Its interest is like the in-
terest on unsecured obligations. The
income-bond holder cannot control the

discretion of the directors in paying
such interest or using the funds for
other purposes. Day v. Ogdensburgh, -
ete, R. R. Co., 107 N. Y., 129 (1887).
Where a subscriber to bonds fails to pay
and the corporation then pledges them,
it'can hold him liable only for the value
of the bonds at the time of the pledge,
and not the value at a later date,
Cleveland Iron Co.,v. Ennor, 14 N. E.
Rep., 673 (Il., 1888). An income-bond
holder may enjoin an application of the
company’s funds to other corporate pur-
poses, thereby affecting the payment of
interest due to him. Barry v. Missouri,
etc,, R’y, 86 Fed. Rep., 228 (1888),

5 White v. Vermont & Mass. R. R. Co.,
21 How., 575 (1858); Murray v. Lardner,
2 Wall., 110 (1864); Myers v. York &
Cumberland R. R. Co., 43 Me., 282
(1857); but in this case.a coupon not
payable to order or bearer was held not
negotiable though takeri from a nego-
tiable bond; Morris Canal & Bank. Co.
v. Fisher, 9 N. J. Eq., 699 (1855), where
coupons payable to bearer were held to
be negotiable and the subject of pledge;
Morris Canal & Bank. Co. v. Lewis, 12
N. J. Eq., 323 (1858); Chapin v. Ver-
mont & Mass. R. R. Co., 74 Mass., 575
(1857), In this case railway bonds pay-
able ‘‘to——”* were held negotiable,
the legislature having ratified ‘the
proceedings” whereby the mortgage
was executed. Haven v. Grand Junc-
tion R. R. & D. Co., 109 Mass., 88 (1871),
the coupons being payable to bearer;
Miller v. Rutland & Washington R. R.
Co., 40 Ver., 399 (1867). To same effect
and holding that detached coupons erc-

828
CH. XLI.]

INTRA VIRES ACTS AND CONTRACTS.

‘

[8 687.

Generally coupons are attached to the bonds as representatives
of the interest which is to become due from time to time. These
coupons may be detached from the bond and sold like a promis-
sory note. They are negotiable, and a bona fide purchaser of them is
protected.’ The coupon bears interest from the time when it becomes

ate a distinct obligation, National Ex-
change Bank v, Hartford, Prov. & F.
R. R. Co., 8 R. I, 875 (1866); Carr v.
Le Fevre, 27 Pa. St., 413, 418 (1856);

‘Bunting’s Adv. v. Camden & Atl. R. R.

Co., 81 Pa. St., 254 (1876); Brainerd v.
New York & H. R, BR. Co., 25N. Y.,
496 (1862); Hubbard v. New York & H.
R. R. R. Co., 36 Barb., 286 (1862); Com-
monwealth v. Chesapeake & O. R. R.
Co., 82 Md., 501, 547 (1870); Langston
v. South Carolina R. R, Co,, 28. C., 248
(1870); New Albany, L. & C. P. BR. Co.
v. Smith, 23 Ind., 353 (1864); Junction
R. R. Co, v. Cleneay, 13 Ind., 161 (1859);
American File Co. v, Garrett, 110 U. S.,
288 (1884); Wicks v. Adirondack Co., 2
Hun, 112 (1874); Evertson v. Nat'l B’k,
66 N. Y., 14 (1876); Galveston R, R. Co.
v. Cowdrey, 11 Wall., 459 (1870). See,
also, Arentz uv. Commonwealth, 18
Gratt., 754 (1868). Though the directors
fraudulently issue bonds to another
railroad to build the latter and the lat-
ter uses the proceeds to purchase control
of the former, the bona fide holders of
the bonds are protected. State v.
Brown, 6 Atl. Rep., 172 (Md., 1885).
Bonds issued below par or without con-
sideration are nevertheless valid in bona
fide hands, Ea parte Chorley, L. R., 11
Eq., 157 (1870); Phil., ete., R. R. Co. w,
Lewis, 83 Pa. St., 33 (1859), Fraud in
issuing them to a director does not affect
a bona fide purchaser. Hulett’s Case, 2
J. & H., 806 (1862). Not negotiable it
the place and method of payment are
left in blank, Ledwick v. McKim, 53
N. Y., 307 (1873). If valid on face com-
pliance with charter is presumed, Nich-
ols v. Mase, 94 N, Y., 160 (1883). Pur.
chasers are bound to know contents of
mortgage which secures the bond. Cay-
lus v. N. Y., etc., R. R. Co., 10 Hun,
295 (1877); affirmed, 76 N. Y., 609. As

' “829

to the right of a particular officer to sell
them, see Chew v, Henrietta, etc., Co.,
2 Fed. Rep., 5 (1880). Bonds stolen be-
fore completed are void, Moas v. Mis-
souri, etc., R. R. Co., 11 Hun, 8 (1877),
where forgery completed the bonds.’ In

England the negotiability of foreign

bonds is recognized. Gorgier v, Mil-
ville, 3B. & C., 45 (1824). If a statute
prohibits the issue of bonds below par,
a bona fide holder may enforce them,
but the mortgage. is void and he be-
comes an unsecured creditor. Union
Trust Co. v. N. Y., etc, R. R. Co, 1 ;
R’y & Corp. L. J., 50 (1887, Cleveland,
O., Court). A bona fide purchaser of a
stolen railroad bond is protected. Car-
penter v. Rommel, 5 Phil., 84 (1862).
For an issue of bonds fraudulently by
issuing them in pledge and then pur-
chasing the bonds at a pledgee’s sale,
see James v. R. R. Co., 6 Wall., 752
(1867). Municipal bonds are negotiable.
Hill v. Scotland County, 34 Fed. Rep.,
208 (1888). Railroad bonds are nego-
tiable, and the mortgage securing them
may be enforced in behalf of bona fide
purchasers, even though the bonds were
issued below par in violation of the
statute. Peoria, etc,, R. R. v. Thomp-
son, 108 Ill, 187 (1882), Corporation
bonds are negotiable when they are so
drawn. Buta provision authorizing a
majority of the bondholders to defer
payment may destroy negotiability.
McClelland v, Norfolk, etc, BR. R., 110
N. Y., 469 (1888). The negotiability of
a bond is not destroyed by provisions as
to their registry. Savannah, etc., R, R.
Co. v. Laneaster, 62 Ala., 655 (1878).
The understanding of a bondholder as
to the use of the funds does not bind
the corporation. Ives v. Smith, 3 N.Y,
Supp., 645 (1888),

1Commonwealth of Va. v.’ Chega-

'
§ 687.]

due.!

INTRA VIRES ACTS AND CONTRACTS.

[OH. XLT,

The holder of the coupon may sue on it, although he does not

own the bond.? Demand of payment of the coupon need not be

peake, etc., Co., 32 Md., 501, 547 (1870);
Spooner v. Holmes, 102 Mass., 503
(1869), where the coupons had been
stolen; Evertson v. National B’k, 66
N. Y., 14 (1876); Connecticut, etc., Ins.
Co. v. Cleveland, ete., R. R. Co., 41
Barb., 9 (1863), where a guaranty of
the coupon was enforced. Where rail-
road bond coupons are stolen and are
purchased after they become due, the
bona fide purchaser is not protected.
Wylie 'v. Speyer, 62 How. Pr., 107 (1881).
A purchaser of the coupon after it be-
comes due is not a bona fide purchaser.
Arents v. Commonwealth, 18 Gratt.
(Va.), 750 (1868), holding also that a
guaranty of the coupon passes to any
holder. If the coupon does not run to
any person, or order or bearer, it is not
negotiable. Jackson v. York, etc., R.

-R. Co., 48 Me., 147 (1858); Myers vu,

York, ete., R. R. Co., 43 Me., 282 (1857).
See, also, Clark v. City of Janesville, 1
Biss., 98 (1856), holding that a munici-
pal bond coupon is not negotiable.
Coupons on corporate bonds may be ne-

_ gotiable in form and yet be non-nego-

—~

tiable by reason of the non-negotia-
bility of the bonds. McClelland vw,
Norfolk, etc., R. R., 110 N. Y., 469
(1888). A bondholder may sue at law
on an overdue coupon. Montgomery,
etc., Soc. v. Francis, 103 Pa. St., 878
(1883), See, in general, the preceding
note.

2North Penn. R. R, Co, v, Adams,
54 Pa, St., 94 (1867), holding also that
demand of payment at maturity is ex-
cused if the corporation was unable to
pay; Commonwealth, etc., v, Chesa-
peake, etc., Canal Co., 32~Md., 501, 547
(1870); County of Beaver v, Armstrong,
44 Pa. St., 63 (1862); Conn., etc., Ins.
Co. v, Cleveland, etc., R. BR. Co., supra;
Langston v, South C. R.-R. Co., 28. C.,
248 (1870); Mills v. Town of Jefferson,
20 Wis., 50 (1865); City of San Antonio
v. Lane, 32 Texas, 405 (1869); City of

Jeffersonville v. Patterson, 26 Ind., 15
(1866); Burroughs v, Com’rs, 65 N. C.,
284 (1871); Gelpcke v. City of Dubuque,
1 Wall., 175 (1863); Cromwell v. County
of Sac, 96 U.S., 51 (1877); Aurora City
v. West, 7 Wall., 82 (1868)— the last
seven cases being municipal bond cases.
Cf. Rose v. City of Bridgeport, 17 Conn.,
248 (1845); Jackson v. York, etc., R. R.
Co., supra; Crosby v. New London, etc.,
R. R. Co., 26 Conn., 121 (1857); John-
son v. County of Stark, 24 Ill., 75 (1860).
Bond coupons detached from the bond
bear interest from maturity. Phil.,
etc., Co. v. Knight, 16 Atl, Rep., 492
(Pa., 1889). In Rhode Island the cou-
pons bear interest from the time of de-
mand of payment. Whitaker v, Hart-
ford, etc., R. R. Co., 8 R. 1, 47 (1864);
National Ex. B’k v. Hartford, etc., R.
R. Co., id., 375 (1866),

1 National Ex. B’k v. Hartford, etc.,
R. RB. Co., 8 R. 1, 375 (1866); County of
Beaver v. Armstrong, 44 Pa.’ St., 68
(1862); North Penn. R. R. Co. v. Adams,
54 Pa. St., 94 (1867); Com’rs v. Aspin-
wall, 21 How., 539 (1858); Cromwell v.
County of Sac, 94 U. S., 851, 362 (1876);
Thompson v. Lee County, 8 Wall., 827

(1865); City v. Lamson, 9 Wall., 477
(1869). “Where a person pays corporate

bond coupons as they become due, and
takes a note of the corporation in pay-
ment, the coupons no longer exist as a
corporate liability. The person cannot
claim that he is secured by the mort-
gage which secured tbe coupons, South
Cov., etc., Ry v. Gest, 34 Fed. Rep.,
628 (1888). But where, in order to
maintain the credit of a company, a
director, upon presentation of its cou-
pons for payment, pays out his own
money and takes the coupons, he may
enforce them, there being sufficient as-
sets to pay all other creditors first.
Haven v, Grand, etc,, Co., 109 Mass.,
88 (1871); but see Child v. N. Y., ete,
R. R., 129 Mass., 170 (1880), Persons

830
CH. XLI.] 1 INTRA VIRES ACTS AND CONTRACTS.

[x 687.
made at maturity. The coupon is like a note and ‘not like a bill
The coupon, although detached from the bond, is secured by the
mortgage.” The statute of limitations commences to run against
‘detached coupons from the time when they are due, and not from
the time when the bonds are due.®

Where the bonds are secured by a corporate mortgage or deed
of trust, and the mortgage or deed of trust runs to trustees for the
benefit of the bondholders, it is for the trustees to enforce the
mortgage or deed of trust. But if, after default in the payment of
a bond or coupon, the trustees refuse to proceed, although requested
to do'so, then the bondholder or coupon holder may bring suit in

behalf of himself and others to enforce the security.‘

taking up overdue coupons may enforce
same against the corporation and under
the mortgage. Ketchum v. Duncan, 96
U. §., 659 (1877). Railroad coupons
which are paid and so understood can-
not afterwards be enforced as having
been merely assigned. Hollister v.
Stewart, 111 N. Y., 644 (1889). It is a
question of fact whether a taking up of
overdue coupons was intended as a can-
cellation of them or only a transfer of
interest. Wood v. Guarantee, etc., Co.,
128 U. 8., 416 (1888). ‘

1 Williamsport Gas Co. v, Pinkerton,
95 Pa. St., 62 (1880).

2 Miller v. Rutland, etc., R. R. Co.,
40 Vt., 899 (1867); Sewall v. Brainerd,
88 Vt., 864 (1865); Stevens v. N. Y.,
etc., R..R. Co., 18 Blatch., 412 (1876),
giving a priority in payment to the
coupons,

§Clark v. Iowa City, 20 Wall., 583
(1874), Contra where the coupon is
not detached, City v. Lamson, 9 Wall.,
477 (1869); City v. Butler, 14 Wall., 282
(1871), Statute of limitations on the
coupons of municipal bonds begins to
run from the date when the coupons
became due. Huey v. Macon County,
85 Fed. Rep., 481 (1888.) The statute
of limitations of ten years applies to
detachable interest coupons. Griffin v.
Macon County, 36 Fed. Rep., 885 (1888).

4Mason v, York, etc., R, R. Co., 52
Me., 82 (1861), where a bondholder
sued; Coal Co. v. Blatchford, 11 Wall.,
172 177 (1870), where the trustees sued ;

Galveston R, R, v, Cowdrey, id., 459
(1870), where the trustees were dead
and the bondholders sued; Western R,
R. Co. v. Nolan, 48 N. Y., 613 (1872),
where the suit of the cestui que trust to
set aside a tax failed because no request
to the trustees had been made and the
latter had not been made co-defendants;
Knapp v. BR. R. Co., 20 Wall., 117 (1873),
holding that, after a strict foreclosure,
the trustees still continue to represent
all the bondholders; R. R. Co. v. Orr,
18 Wall., 471 (1878), where, the mort-
gage running to each bondholder per-
sonally, one bondholder was not al-
lowed to foreclose for the benefit of all;

Hotel Co. v. Wade, 97 U, 8., 18 (1877),

where a coupon holder foreclosed, mak-
ing the trustees and other coupon hold-
ers and bondholders co-defendants;
Alexander v. Central R. R. of Iowa, 3
Dill., 487 (1874), to the same effect;
Weetjen v. St. Paul, etc., R. R. Co., 4
Hun, 529 (1875); S. C.,5 Hun, 265 (1875),
where a bondholder’s suit to restrain’
the corporation from selling property -
which was subject to the mortgage
failed because the complaint failed to
allege that all three of the trustees were
derelict in their duties; Skiddy v. At-

_lantic, ete., R. BR, Co., 3 Hughes, 820,

850 (1879), refusing to allow bondhold-
ers to come into a suit which the
trustees were carrying on; Williamson
vw N.J. 8. BR. RB. Co, 25 N. J. Eq., 13
(1874), admitting the bondholders as co-
defendants on their application; Coe v.

831
8 688.]

INTRA VIRES ACTS AND CONTRACTS.

[CH. XI,

§ 688. Debentwres— In England the securities which are issued-
by corporations are generally called “debentures.” An English
debenture is a term which in its widest application includes any
instrument issued by a corporation which creates a debt or acknowl-

Columbus, etc., R. R. Co, 10 O. St.,
372, 410 (1859), holding that the bond-
holders are not proper parties to trustee
suits; Shaw v. Norfolk, etc., R. R. Co.,
71 Mass., 162 (1855); and Kerrison v.
Stewart, 93 U. S., 155 (1876), to same
effect; Richards v. Chesapeake, etc., R.
R. Co., 1 Hughes, 28 (1875), holding
that the trustees contro] the suit where
the bondholders after commencing ad-
mit the trustees as co-plaintiffs; Camp-
bell v. R. R. Co., 1 Woods, 368 (1871),
where a bondholder was allowed to sue
‘to set aside a fraudulent foreclosure
under a prior mortgage which the
trustees under the second mortgage had
not opposed; Ribon v. R. R. Cos., 16
Wall., 446 (1872), where a similar suit
failed because the trustees were not
made co-defendants; New Jersey, etc.,
Co. v. Ames, 12 N. J. Eq., 507 (1859),
where on foreclosure of first mortgage
bondholders under the second mortgage
were not allowed to become parties;
Sturges v. Knapp, 51 Vt., 1 (1858), where
the trustees after strict foreclosure were
sustained in their lease of the property.
Rand v. Wilmington, etc, R. R., 11
Phil., 502, where a bondholder brought
suit. Bondholders objecting to a fore-
closure sale as fraudulent cannot come
in as parties for the purpose of setting
the sale aside. Their remedyis by an
original bill. Wetmore v. St, Paul,
etc., R. R. Co., 1 McCrary, 466 (1880).
Cf. Shaw v. R. R., 100 U. S.,, 605 (1879):
Kropholler v. St. Paul, etc., R. R., 2 Fed.
Rep. , 802 (1880), and § 659. Trustees pur-
chasing for re-organization are liable as
common carriers. Rogers v. Wheeler,
43 N. Y., 598 (1871). Creditors who by
compromise are made directors cannot
be held liable as partners in the run-
ning of the road. Beeson v. Lang, 85
Pa, St., 197 (1877). Bonds issued by a

state, the proceeds being used-to aid a
railroad and the bonds so reciting, can-
not be enforced as a lien on the road.
The state courts had declared the bonds
to be void as against the state. Tha
railroad previous to this suit had been
sold on a mortgage foreclosure sale,
Tompkins v. Fort Smith R’y, 125 U. 8,
109 (1888). Where a mortgagor railroad
and one of the trustees of the mortgage
conspire, and the trustee sues to fore-
close the mortgage and thereby enable
the railroad to pay the bonds before
they are due, the other trustees and
bondholders may prevent it by buying
the bonds represented by the plaintiff.
Tillinghast v. Troy; etc., R. R., 48 Hun,
420 (1888). Where a bondholder sues
on his bonds and gets judgment, and
sells the company’s rights by a levy of
execution, the mortgage securing that
bond and others still exists. Common-
wealth v. Susquehanna, etc., R. R., 15
Atl. Rep., 448 (Pa., 1888). A bondholder’
may sue to foreclose the mortgage se-
curing his bonds, although the trustees
have already commenced an action in
a state court for such foreclosure.
Beekman v. Hudson, etc., R’y, 35 Fed.
Rep., 3 (1888). See, also, Stanton wv,
Embrey, 93 U.S., 548 (1876); Ins. Co.
v. Brum’s Assignee, 96 U. 8,, 588 (1877).
That a bondholder may foreclose after a
request to the trustee, see, also, Wilmer
v, Atlanta, etc., R..R. Co., 2 Woods.
409 (1875). Bondholder is bound by a

‘decree against his trustee. Corcoran 2.

Chesapeake, etc., Co., 94 U. 8S. 741
(1876). Where the pledgees of bonds
join with the trustee in foreclosure the
pledgor must be joined. Ackerson wv,
Lodi, etc., R. R., 28 N. J. Eq., 548
(1877). Pledgee may compel foreclosure.
McCurdy’s Appeal, 65 Pa, St., 290
(1870).

852
CH. X11.

INTRA VIRES ACTS AND CONTRACTS.

[$ 688.

edges it.! But generally it means a bond? secured by a mortgage’
or by a clause inserted in the bond itself.!

\Levy v, Abercorris, etc., Co., 58 L,
T. Rep., 218 (1888). See, also, British,
etc., Co. v. Comm’rs, L. R., 7 Q. B. D.,
165 (1881); Edmonds v. Blaina, etc., Co.,
L. R., 386 Ch. D., 215 (1887). Cf. Top-
ham v. Greenside, etc., Co., 58 L. Ty
Rep., 274 (1882); 2 Rey & Corp. L. J.,,
529. ;
2It is applied to evidences of indebt-

edness such as a deed under seal. Eu
parte Bradshaw, L. R., 15 Ch. Div., 465

(1879), where the form was that of a
bond binding the company ‘‘and their
successors and their real and personal
estate,” which was held to be a charge
upon the real and personal estate of the
company as it existed at the date of
winding-up proceedings, but not in-
cluding unpaid capital; Re City Bank,
L. R., 3 Ch. Div., 758 (1868), where,
however, a deed under seal, payable to
order, but purporting to be a debenture,
was treated as a mere promissory note;
Ex parte Grissell, L. R., 3 Ch. Div., 411
(1875), Also to a simple promise to pay,
with a clause subjecting certain prop-
erty as security. Re Marin Mansions

Co., L. R., 4 Eq., 601 (1867). See, ‘also,

note, infra. A Lloyd bond is a due-bill
or acknowledgment of indebtedness is-
. sued-under geal by a corporation to the
constructors, supply men, etc. Ra-
palje’s Dictionary. And see In re Cork,
etc,, Ry, L. R., 4 Ch. App., 748 (1869).
Cavanagh on Money Securities (2d ed.,
p. 355) defines a debenture as ‘‘an in-
strument in writing, generally under
seal, creating a definite charge on a
definite or indefinite fund or subject of
property in favor of a given person, or
of a given person and his order or bearer,
and constituting a‘member in aseries of
instruments, each entitling the original
holder thereof to similar rights. Hence
.a debenture is distinguished, (1) from a
mortgage, which is an aciual transfer
of property ; (2) from.a bond, which does
not directly affect property; and (8)
(53) ©

from a mere charge on property, which
is individualized and does not form part
in aseries of similar charges. [Citing
cases.] Debentures may be issued by a
single person, by a partnership or by a
corporation.” Debenture stock differs,
from a pure debenture in that the title
of each original holder appears in a reg-
istry instead of being represented by an
instrument complete in itself, and the
stock is capable of being transferred in
any amounts, unless limited by corpo-
rate regulations. See Attree v. Hawe, ,
L. R., 9 Ch. D., 337 (1878). ;

3In re Hamilton’s Windsor Water-
works, L.. R.,.12 Ch. Div., 707 (1879);
Wildey v. Mid-Hants R’y Co., 16 W. R.,
409 (1868).

4 Re Marin Mansions Co., L. R., 4 Eq.,
601 (1867); Re Panama, etc., R’y Co., L.
R., 5 Ch., 318 (1870); Re New Clydach
8. & B. I. Co., L. R., 6 Eq., 514 (1868),
A debenture not making a charge upon

property has been held to be a promis-

sory'note. Ex parte Colborne, L. R., 11
Eq., 478 (1870). But security upon prop-
erty is not anecessary feature. Edmonds
v. Blaina Furnaces Co., L. R., 86 Ch.
Div., 215 (188%), holding, also, that it is
not necessary that they be issued and
numbered seriatim; a single debenture
may beissued toone man. ‘‘ In the ordi-
nary acceptation of the term a debent-
ure means any document, binding on an
incorporated company, by which it ac-
knowledges a debt to be due and under-
takes to pay it.” Romer, Q. C., in Ed-
monds v. Blaina Furnaces Co., supra;
where, also, Chitty, J., said: ‘‘I find
that generally, if not always, the instru-
ment imports an obligation or covenant
to pay.” The same learned judge, in
Levy v. Abercorris, etc., Co., supra, said
that ‘‘ debenture” is not a term of art,
but means a document which acknowl-
edges or creates a debt. In the former
case the instrument was a memoran-:
dum of agreement acknowledging loans

833
§ 688. INTRA VIRES ACTS AND CONTRACTS. [cH. XLI.

The power to issue debentures is generally conferred by the
charter. Where it is not so conferred it is implied from a general
power to borrow money and create debts."

In England statutory provisions regulating the issue of debent-
ures must be carefully observed.?, Debentures in England, cover-
ing all the property, etc., of the corporation, are specifically ex-
cepted from the Bill of Sales Act, requiring registration of bills of
sale? A debenture is to be construed according to the language

used in it.
it alone.!

in various, amounts set opposite the
names of nine persons, covenanting
with each of them to pay the same, with
interest, at a fixed date, and to pay
them ratably in case the whole was not
then paid, and pledging as security the
‘undertaking, property and effects of
every kind,” subject to prior charges,
and with liberty to the company to sell
or pledge the things manufactured by
the company in the ordinary course of
business until default made.

1Inns of Court Hotel Co., L. R., 6 Eq.,
82 (1868); Bank of South Australia v.
Abrahams, L. R., 6 P. C., 265 (1875), hold-
ing that a power to issue debentures
after all calls have been fully paid does
not warrant making them upon future
calls. 5

2 Where the required assent of stock-
holders is not obtained, the debentures
are void. Fountaine v, Carmarthen
R’y Co., L. R., 5 Eq., 3161868). Where
the issue is made before the whole capi-
tal is subscribed, and the statute for-
bids such issue, the debenture is void.
Chambers v. Manchester, ete. ; R’y Co.,
5 B. & S., 588 (1864). Where the issue
is made when the corporate: debts are
greater than the statute allows, then
the debentures are void, and the holders
come in as unsecured creditors, Re
Pooley Hall, etc, Co.,.18 W. R., 201
(1869).

3 Edmonds v. Blaina, etc., Co., 57 L.
T. Rep., 139 (1887). A debenture is a
document which creates or acknowl-
edges a debt. It need not be recorded
in the register’s.office under the Bill of

There are no arbitrary rules of construction peculiar to

Sales Act. Levy v. Abercorris, etc., Co.”
58 L. T. Rep., 218 (1887). Cf. Id., 274.
4Edmonds v. Blaina Furnace Co.,
supra; Ex parte Cox, 13 L. R., Ir, 174
(1884), and Re Panama, etc., R’y Co.,
L. RB. 5 Ch. Div., 318 (1870), holding
that debentures secured by the “ under-
taking and allsums arising therefrom,”
are a charge upon all the property of
the corporation, past and future, and are
entitled to be paid before the general
creditors, The former case gives the
form of the indenture. Re Marin Man-
sions Co, L. R., 4 Eq., 601 (1867), to
same effect, but not a charge on the
capital stock; also, In re Colonial, etc.,
Corporation, L, R., 15 Ch. D., 465 (1879);
‘Re New Clydach 8. & B.1.Co, LR,
6 Eq., 514 (1868), where debentures pur-
porting to be an assignment of the un-
dertaking and charging all the real and
personal property were held valid upon =
all personal property existing at the date
of the debentures, but not upon prop-
erty subsequently acquired; Bloomer
v. Union Coal & I. Co, L. R., 16 Eq,
888 (1878), holding that book debts were

-not charged; Ea parte Grissell, L. R.,

3 Ch. D., 411 (1875), where a charge
upon all the funds, property and effects
which the:company held or possessed
‘or should hold or be’ possessed of, held
valid; Hodson v. Tea Co, L. R., 14
Ch. D., 859 (1880), where debentures
containing an assignment of chattels
with provision that the corporation shall
retain possession until twenty-one days |
after default were held a lien, though
winding-up proceeding had been begun

‘ 884
CH. XLI.]

INTRA VIRES ACTS, AND CONTRACTS. :

[$ 688.

Many of the rules of law applicable to other evidences of corpo-
rate indebtedness apply also to this class of obligations.! The power

before they became due; Re Herne
Bay Water-works Co., L. R., 10 Ch.
Div., 42 (1878), holding that debenture
holders, not being in the position of or-
dinary mortgagees, may have a receiver
appointed, but cannot institute wind-
ing-up proceedings; Wildey vw, Mid-

Hants R’y Co., 16 W. R., 409 (1868),

holding that the holder of a debent-
ure secured by mortgage has a title
prior to that of a subsequent judgment
creditor, and may file a bill to protect
his security though his claim is not due;
Ex parte Pitman, L..R., 12 Ch. D., 707
(1879), holding that the debenture does
not prevent the company from selling
property and dealing with it without
regard to the debenture. ,To same ef-
fect, Wheatley v. Silkstone, etc., Co.,
L. R., 29 Ch. D., 715 (1885), where a,
mortgage given subsequent to the in-
dentures took precedence over them;
In re Florence, etc., Co., L. R., 10 Ch.,
530 (1878); Moor v. Anglo-Italian Bank»
id., 681 (1879); In re Hamilton’s, etc.,
Iron Works, L. R., 12 Ch. D., 707 (1879).
But as soon as winding-up proceedings
_are commenced then the lien of the de-
benture holders attaches, and the unse-
cured holders are paid after the debent-
ure holders. In re Panama, etc., Mail
Co., L. R., 5 Ch., 318 (1870). To same
effect, In re Horne, L. R., 20 Ch. D.,
736 (1885); Hodson. v. Tea Co., L. R., 14
Ch. D., 859 (1880). A purchaser of
land from the company may, before
taking title, require proof of no default
as to the debentures. Re Home & Hol-
land, 58 L. T. Rep., 562 (1885). .A float-
ing debenture does not prevent the
company from paying a debt to a di-
rector just before a winding up is com-
menced. Willmott v. London, etce.,
Co., 55 L. T. Rep., 696 (1887). A pledge
or mortgage of a specific piece of corpo-
rate property takes precedence of a gen-

eral debenture lien, although the debent-’

ure'was prior in- time. .Hg-parte Har-

rison, 58 L. T. Rep. 174 (1887). A
debenture is not,a lien on the proceeds
from superfluous land sold by the com-
pany. Re Hall, etc.; R’y, 59 L. T. Rep.,
302 (1888). In England any loan by a
corporation in excess of the amount ex-
pressly authorized by its charter is void,
but the company may be held liable for
such part of the money as they properly
used to pay other debts. Wenlock v.
River, etc, Co, 59 L. T. Rep., 485
(1888).

1Webb v. Herne Bay Com’rs, L. R.,
5 Q. B., 642 (1870), holding that a de-
fense of illegal issue cannot be made by
a corporation against the suit of an in-
nocent holder of assignable debentures ;
Fountaine v. Carmarthen R’y Co., L. B.,
5 Eq., 316 (1868), holding that when is-
sued for an insufficient consideration
they are still good to the extent of the
value of the consideration ; In re North-
ern Assam Tea Co., L. R., 10 Hq., 458
(1870), to the effect that when held by a.
member of a corporation subject to a
lien: for money due to it the lien is re-
leased by a transfer to which the com-
pany has consented; Agar v. Atheneum
Life, etc., Co., L. R., 3C. B., N. 8., 725:
(1858), holding that dike fet that due
formality was not observed in borrdw-
ing the money for which debentures
are issued is no defense to a suit ‘upon
them; Crouch v. Credit Foncier, etc.,

“LR, 8 Q. B., 874 (1873), holding that

debentures under seal, though payable
to bearer, are not negotiable; Re Brun-
ton’s Claim, L. R., 19 Eq., 302 (1874),
holding that a company cannot set up
equities against a debenture bond after
accepting notice of its assignment; Pot-

teries, etc., R’y Co. v. Minor, L. R., 6

Ch., 621 (1871), holding that obtaining
judgment upon debentures does not
change the status of the holder; he is
still bound by the acts of a majority of
his fellow-holders under the Railway
Company . Act of 1867; Price v. Great

‘835
INTRA VIRES ACTS AND CONTRACTS. [cH. XLI.

§ 688.]
of the corporation to pledge or mortgage uninsured debentures as
collateral security for money advanced has been conceded.’ It has
been held legal to issue them at a discount.’

The English debentures are negotiable or Hanne Roadie accord-
ing to the language used in them.?

In the United States the “debenture” is new and scarcely
known, and has no well-established place among the securities of
corporations. A so-called debenture, however, is rapidly coming
into use in this country. Its character and issue are as follows:
Certain corporate assets, generally real estate mortgages or munic-
ipal bonds,.or railroad or water-works bonds, are deposited . with
trustees to secure the debenture holders. The debenture itself is a
bond or note of the corporation, reciting on its face that it, with
other similar’ debentures, is secured by ‘the property in the hands
of the trustees. The debenture is practically a note secured. by a
chattel mortgage. The trustees are given power to collect, change
and re-invest the property deposited with them. It has been held,
however, that a debenture issued by an American corporation,
giving the holder a priority of payment upon the insolvency of the

corporation, will be upheld and enforced by the courts.

Western R’y Co., 16 M. & W., 244 (1847),
holding that if the principal of debent-
ures remains unpaid after maturity it
bears interest though all coupons have
been promptly paid. A debenture
holder may apply for a receiver when-
ever the company ceases to be a going
concern. Hubbuck v. Helms, 56 L, T.
Rep., 232 (1887). See 60 id., 776 (1889).

1Re Regents’ Canal, etc., Co., L. R.,
3 Ch. D., 43 (1875).

2See chapter III, supra; Campbell’s
Case, L, R., 4 Eq., 470 (1876).

3For instances of negotiable debent-
ures, see In re Imperial Land Co., L. R.,
11 Eq., 476 (1870); In re Blakely, etc.,
Co., L. R., 3 Ch., 154 (1867); Higgs wv,
Northern, etc., Co, L. R., 4 Ex.,’ 387
(1869); In re General Estates Co., L. B.,
3 Ch., 758 (1868). For instances of non-
neotiability, see In re Natal, ete., Co.,
L.R., 3 Ch., 355 (1868); Athenzeum, etc.,
Soc. v. Pooley, 3 De G. & J., 294 (1858);
Crouch v. Credit Foncier, etc., L. R., 8
Q. B., 374 (1873). Debentures may be
négotiable as to the company, but not
as against other debenture holders. So

886

held where debentures were issued after
a winding up was commenced. Mowatt.
v. Castle, etc., Co., 55 L. T. Rep., 645
(1887).

4Such a security was enforced in
White Water, etc., Co. v. Vallette, 21
How., 414 (1858). A subscription for
debenture bonds to be paid for in assess-
ments as the company might require
cannot be enforced for the benefit of
corporate creditors, the bonds not hav-.
ing been delivered. Pettibone v. Toledo,
etc., R. R. Co., 19 N. E. Rep., 337 (Mass.,
1889); Ward v. Johnson ef al, 95 IIL,
215 (1880). Here the M. F. & M. Sav.
Bank was incorporated in Illinois and
doing business in the city of Chicago.
In the course of its business, and out
of moneys received from depositors, it
loaned large sums of money, taking’
promissory notes from the borrowers
secured by first mortgages upon im-
proved and productive real estate situ-
ated in Chicago, of about three times
the value of the face of the respective
notes thereby secured. In pursuance
ofa resolution of the board of directors
CH, XLI. |

INTRA VIRES ‘ACTS AND CONTRACTS.

i

[§ 689.

_ § 689. Mortgages may be executed and given by corporations.—
A corporation may mortgage its real estate and personal property
for the purpose of securing its bonds or other evidences of indebt-
edness, unless there is‘some provision in its charter expressly pro-
hibiting or regulating this right. The right to mortgage is a
natural result of the right to incur an indebtedness.!_ The power to

of the bank creating an ‘ investment
department” of the business, these
notes and collateral mortgages were as-
signed to one Chandler in trust for the
purpose of conducting the business of
said ‘‘investment department.” Said
trustee was authorized to countersign
and issue certificates in sums of $100 or
over to all applicants applying therefor,
but in an amount not exceeding the
face value of the notes held by him as
trustee. Said certificates bore interest
at the rate of seven and three-tenths
per cent., payable quarterly, and were
redeemable by said trustee upon the ap-
plication of the bearer, either in notes
secured by mortgage of equal face value
with such certificates, or in cash, at the
option of the trustee. The certificates
recited that they were secured by bond
and mortgage collaterals held in trust,
secured upon -real estate valued at
about $300 for every $100 of certificates..
The money received by the trustee from
the sale of the certificate was by him
turned over to the officers of the bank,
and by them used to pay depositors and

for all the other purposes for which the |

bank used money. Held, that the trust
fund in hands of the receiver should be
applied to the payment of the invest-
ment certificates; and that the bank,
after receiving large sums of money on
the faith of the security offered under
the trust deed and “investment certifi-
cates,” which money went into its gen-
eral business, and after having had the
full benefit of the contract with the
certificate holders, will not be allowed
to interpose the defense of ultra vires
tu defeat the execution of the trust.

.The questions arising in issuing de-
bentures similar to the English debent-
ures are the validity of a chattel mort-

gage or bill of-sale of shifting and
. changing personalty ; also as to the stat-
ute relative to recording’ chattel mort-
gages when possession of the property
is not taken by the mortgagee. __,

1 Barry v. Merchants’ Exchange Co.,

1 Sandf. Ch., 280 (1844), where mort-
gages designed to secure future ad-
vances expected to be made upon bonds,
such advances being intended for use
in the erection of an exchange building
at a cost of twice the amount of the
capital stock of the company, were
held to be valid; Thompson v. Lam-
bert, 44 Iowa, 239 (1876), where it was
said that corporate powers in this re-
spect are as extensive as those of an
individual; Curtiss v. Leavitt, 15 N.
Y., 9 (1857); White Water, etc., v. Val-
lette, 21 How., 424 (1858); Aurora, etc.,
v. Paddock, 80 IIl., 268 (1875); Union
Water Co. v. Murphy’s P. F. Co., 22
Cal., 620 (1863), holding that if not upon
its face beyond the corporate authority,
a contract will be presumed to be valid.
Dimpfel v. Ohio & M. R’y Co., 9 Biss.,
127 (1879), holding that the laches of
stockholders may render valid a mort-
gage executed by a corporation with-
out due authority when the bonds se-
cured by it are in the hands of bona
fide purchasers; Third Ave. Savings
Bank v. Dimock, 24 N. J. Eq., 26 (1873), '
in which the court said that a defense
to a bill of foreclosure that a corpora-
tion in making the loan was acting
ultra vires was ‘unconscionable; ”
Darst v. Gale, 88 Ill., 186 (1876); Com-
missioners v. Atlantic & N. C. R. R. Co.,
77 N. C., 289 (1877); Pierce v. Emery,
32 N. H., 484 (1856); Shaw v. Norfolk
R. RB. Co., 5 Gray, 162 (1855), a relig-
ious corporation; Burt v. Rattle, 31 0.
St., 116 (1876); Pennock v, Coe, 28

8387
§ 689.]

INTRA VIRES ACTS AND CONTRACTS.

{oH. XLI..

mortgage is also held to arise from the right to purchase and sell
Jand “A corporation may mortgage or pledge personal property

for the payment of loans.’

How., 117 (1859); Richards v. Merri-
mack & C. R. R., 44 N. H., 127 (1862);
Miller v. Chance, 3 Edw. Ch., 899 (1840),
holding also that a mortgage executed
by a majority of a board of trustees ex-
cluding the members ex officio is valid;
Farmers’ Loan & T. Co. v. Hendrick-
gon, 25 Barb., 484 (1857); King v. Mer-
chants’ Exch. Co., 5 N. Y., 547 (1851);
Leavitt v. Blatchford, 17 N. Y., 521
(1858); Parish v. Wheeler, 22 N. Y.,
494 (1860), where a mortgage including
property purchased in excess of the
powers of the corporation was held
binding upon such property; Thomas
v. Citizens’ R’y Co., 104 Tll., 462 (1882),
holding that where a corporation has
power to borrow money (after comply-
ing with certain conditions) and secure
the same by mortgage upon its prop-
erty, such corporation, after having re-
ceived the loan on security of its mort-
gage, will not be allowed to avoid
liability by questioning its own power
to make the mortgage, or by showing an
irregular or defective execution of the
power. Nor will a subsequent judg-
ment creditor or a purchaser at execu-
tion sale on a judgment subsequent to
the mortgage stand in any other or
better position than the company. Nel-
son v. Eaton, 26 N. Y., 410 (1863); Sus-
quehanna, etc., v. General Ins. Co., 8
Md., 305 (1852); Bardstown & L. R. R.
v. Metcalfe, 4 Metc. (Ky.), 199 (1862);
Coe v. Johnson, 18 Ind., 218 (1862);
Jones v. Guaranty & indemnity Co.,
101 U. S., 622 (1879), holding that power
to mortgage to carry on business im-
plies power to mortgage to secure
money to be advanced; Detroit v. Mut-
ual Gaslight Co.,43 Mich., 594 (1880);
Memphis & L. R. R. Co. v. Dow, 19
Fed. Rep., 388 (1884), holding that law-
ful power to purchase a franchise im-
plies the power to mortgage it to secure
the purchase money; Hopson v. Altna

\

Axle, etc., Co., 50 Conn., 597 (1888),
where a mortgage given to directors to
secure them for their guaranty of cor-
poration paper was held valid; Aus-
tralian, etc., Co. v. Mownsey, 4 K. &
T., 783 (1858); Re Patent File Co., L.
R., 6 Ch:, 88 (1870); Scott v. Colburn, |
26 Beav., 276 (1858), holding that power
to borrow on mortgage includes power
to mortgage to secure a bill given for an
existing debt; Talligeda Ins. Co. v,
Peacock, 67 Ala., 253 (1880); Common-
wealth v. Smith, 10 Allen, 448 (1865),
In this case a statute was held to have
taken away the power to mortgage.
To same effect, Richardson v. Sibley, 11,
Allen, 65 (1865). Contra, Steiner’s Ap-
peal, 27 Pa. St., 318 (1856), holding that
special authority from the legislature is
necessary.

1Jackson v. Brown, 6 Wend., 590
(1830); Gordon v. Preston, 1 Watts, 385
(1883); Watts’ Appeal, 78 Pa. St., 370
(1875); Taber v. Cincinnati, L. & C.R. R.,
15 Ind., 459 (1860); McAllister v. Plant,
54 Miss., 106 (1876); West v. Madison
Co, Agric., etc., 82 Ill., 205 (1876). Itis
not for a borrower of money from the
corporation to say that a mortgage
given by the corporation is ultra vires.
Darst v. Gale, 88 Ill., 186 (1876).

2Curtis v. Leavitt, 15 N. Y., 9 (1857);
Garrett v. May, 19 Md., 177 (1862), where
the income of a railroad was pledged
to secure bonds; Clark v. Titcomb, 42
Barb., 122 (1864); Shears v. Jacobs, L,
R.,1C. P., 518 (1866); Leo v. Union Pac.
R’y Co., 17 Fed. Rep., 2783 (1888), hold-
ing that power to pledge securities is
included in the power to sell them;
Combination Trust Co. v. Weed, 2 Fed.
Rep., 24 (1880), where a pledge of unis-
sued stock to secure a loan was held
lawful. See, also, § 465. Duncomb vw
New York, H. & N. B.R. Co., 84.N. Y.,
190 (1881), holding lawful a pledge of
the bonds of the corporation to secure a

838
CH. XLI.]

INTRA VIRES ACTS AND CONTRACTS.

(§ 689.

Frequently by statute mortgages by corporations are prohibited,
except in cases where a part or all of the stockholders assent to

the giving of the mortgage.

The general power of a corporation to mortgage its property is
not abridged or destroyed by a special authority to make a mort-

gage for a particular purpose.

A corporate mortgage is valid

though in excess of the amount allowed by statute? “Trust
deeds ” or “deeds of trust” given for the purpose of securing debts
or obligations are to all intents and purposes mortgages, and are

subject to similar rules.!

corporate debt; Castle v. Lewis, 78 N.
Y., 181 (1879), in which property was
assigned to secure a loan previously ad-
vanced to the-corporation. A railway
mortgage on all real and personal prop-

erty is valid though not in conformity ,

with the general’ chattel mortgage act
in respect to acknowledgment. Cooper
v. Corbin, 105 Ill., 224 (1883) A gas
company may borrow money and give
amortgage. Hays v. Galion, etc., Co.,
29 O, St., 330 (1876).

1Such a provision is regarded as in-
tended for the protection and security
of the stockholders; and in the absence
of fraud and of objection upon their
part, defects in the proceedings by
which the assent is given cannot be
made to invalidate the mortgage unless
they are of such a substantial character
that the giving of the assent cannot be
inferred. Thomas v. Citizens’, etc., R’y
Co.,, 104 Il, 462 (1882); Greenpoint
Sugar Co, v. Whitin, 69 N. Y., 328
(1877); Beecher v. Marquette & Pac. R.
M. Co., 45 Mich,, 108 (1881): The assent
may be given subsequently so as to
validate a mortgage if there are no in-
tervening rights. Rochester Savings
Bank v. Averell, 96 N. Y., 467 (1884).
And a person purchasing from the cor-
poration with actual notice is bound by
the irregular mortgage. Id., 26 Hun,
648 (1882). The corporation cannot raise
the objection. Id. Stock owned by the
corporation is not to be voted. Vail v.
Hamilton, 85 N. Y., 453 (1881), Other
corporate creditors cannot raise this
objection to the mortgage. Hervéy v.

IIL, etc., R’y Co., 28 Fed. Rep., 169
(1884). Cf. in general, Astor v. West-
chester, etc., Co,, 33 Hun, 333 (1884). A
foreign corporation may give a mort-
gage on real estate without the consent
of stockholders as required of domestic
corporations, Saltmarsh v. Spaulding,
17 N. E. Rep., 316 (Mass,, 1888).

2 Allen v. Montgomery R. R. Co., 11
Ala., N. §., 487, 454 (1847), cited with
approval in Mobile & Cedar Point R. R.
Co. v. Talman, 15 Ala., N. S., 491 (1849).
Cf. 21 Pac. Rep., 373.

3 Warfield v. Marshall, etc., Co., 34
N. W. Rep., 467 (Iowa, 1887); 9 S. E.
Rep., 748; also § 685,

4Pullen v. Cincinnati & C. A. L. R.
R., 4 Biss., 85 (1865); Coe v. Johnson, 18
Ind., 218 (1862); Coe v. McBrown, 22
Ind., 252 (1864); Re Bondholders’ York
& C. BR. R. Co., 50 Me., 552 (1861). See,
also, White Water Valley, etc., v. Val-
lette, 21 How., 414 (1858); Galveston
R. Ry, v. Cowdrey, 11 Wall.,-459, 480
(1870); Meyer v. Johnston, 53 Ala., 237
(1875). A bill to declare void a mort-
gage and bonds must be served on the
bondholders as well as trustees. Ap-
peal of Harrisburg, etc., R. R., 15 Atl.
Rep., 459 (Pa., 1888). A railroad mort-
gage trustee may foreclose although
other remedies exist. Mercantile, etc.,
Co. v. Missouri, etc., R’y, 36 Fed. Rep.,
221 (1888). The trustees of a railroad
mortgage have no power to waive or
change the mortgage. Provisions giv-
ing them that power are strictly con-
strued. Hollistér v. Stewart, 111 N.
Y., 644 (1889). Notice to a trustee of a

889
§ 689.]

INTRA VIRES ACTS AND CONTRACTS.

[cu. XLI,

Corporations may include in the property mortgaged , by. them

such property as may be acquired subsequently.’

It has been held that a mortgage covering the property and

mortgage is notice to the bondholders.
The trustee cannot discharge the mort-
gage unless payment is made. Fidelity,
etc., Co. ¥. Shenandoah, etc, R. R.
Co., 9S. E. Rep., 180 (W. Va., 1889).

1 Pennock v. Coe, 23 How., 117 (1859);
Dunham v. Cincinnati, P., etc., R’y Co.,
1 Wall., 254 (1863); Galveston R. R. v.
Cowdrey,. 11 ‘Wall., 459, 480 (1870);
United States v. New Orleans R, R. 12
Wall., 362 (1870); Shaw v. Bill, 95 U. S.,
11, 15 (1877); Parker v. New Orleans,
etc., R. R., 83 Fed. Rep., 693 (1888);
Williamson v, New Albany, etc., R. R.,
1 Biss., 198 (1857); Morrill v. Noyes, 56
Me., 458 (1863); Seymour v. Canandai-
gua, etc., R. R. Co., 25 Barb., 284
(1857); Stevens v. Buffalo & N. Y. R. R.
Co., 31 Barb., 590, 596 (1858); Buffalo, N.
Y. & E. R. R. Co. v. Lampson; 47 Barb.,
533 (1867), where land in the name of a
director being declared in trust for the
corporation was held to be subject to a
mortgage previously placed upon its
property; Benjamin v, Elmira, J. & C.
R. R., 49 Barb., 441 (1867); Fisk v. Pot-
ter, 2 Abb. Ct. of App., 188 (1865),
where an agent of a corporation who
had sold land to it was held to have
waived his vendor’s lien as against prior
mortgagees. But as to personalty, see
91 N. Y., 214; Stevens v. Watson, 4
Abb. Ct. of App. , 302.(1865), holding that
a mortgage of after-acquired property
is valid as against the mortgagors and
those claiming under them except pur-
chasers for value without notice. Cf.
Willink v. Morris Canal & B. Co,, 4.N.
J. Eq., 377 (1848); Williamson v. N. J.
Southern R, R. Co, 25 N. J. Eq., 18
(1874); Williamson v. N. J. Southern R.
R. Co., 29 N. J. Eq., 311 (1878), holding
that after-acquired property is subject
to such liens and incumbrances as are
upon it at the time of its acquisition;
Philadelphia, W. & D. R. R. Co. wv.
Woelpper, 64 Pa. St., 366 (1870); Butler

v. Rahm, 46 Md., 541 (1877); Phillips v.
Winslow, 18 B, Mon., 481: (1857); Myer
v, Johnston, 53 Ala., 324 (1875); Ludlow
v. Hurd, 1 Disney (O.), 552 (1857); Coe
v. McBrown, 22 Ind., 252 (1864); Pierce
v. Milwaukee & St. P. R. R. Co., 24
Wis., 551 (1869), where a vendor’s lien
was lost. See, also, State v. Northern
Central R’y Co., 18 Md., 193 (1861);

‘Pierce v. Emery, 32 N. H., 484 (1856);

Howe v. Freeman, 14 Gray, 566 (1860);
Coe v. Columbus, P. & I. R. RB. Co., 10
O. St., 372 (1847). But see Brainerd v,
Peck, 34 Vt., 496 (1861); and for the
law under the Louisiana code, State
v. Mexican Gulf R. R., 3 Rob. (La.),

518 (1843); Dunham v, Earl (U. 8. Cir.

Dist. of. Mich.), noted in Redfield on
Railways, vol. 2, p. 506; Hodder v.
Kentucky, etc., R’y Co., 7 Fed. Rep.,
793 (1881), holding also that the direct-
ors have the power: to mortgage, and
that the president may acknowledge the
mortgage out of the state; Coopers v.
Wolf, 15 O. St., 524 (1864), where the
mortgage included also wornout ma-
terial. A railway mortgage on after-
acquired property does not attach to
property purchased ultra, vires of an
opposition steamship line, in order to
prevent competition. Morgan v. Dono-
van, 58 Ala., 241 (1877); Farmers’ Loan &
Trust Co, v. Commercial Bank, 15 Wis.,
424 (1862); S. C., 11 id., 207, holding
that courts will not give effect to an in-
tention of the parties which is not ex-
pressed in a railway mortgage so as
to include materials subsequently ac-
quired. The provision is liberally con-
strued. Little Rock, etc., R’y v. Page,
35 Ark., 304 (1880). Does not attach toa
branch line in preference to a mortgage
on it authorized by statute. Rand u
Wilmington, etc., R. R., 11 Phil., 502
(U. S.-C. C., 1876). Future net earnings
may be made subject to mortgage.
Dunham v. Isett, 15 Towa, 284 (1868).

840

i
‘
CH. XLI.] INTRA VIRES ACTS AND CONTRACTS. [§ 689.

' franchises of a corporation includes after-acquired property.' The
mortgage may be given to secure future sums to be paid by the
mortgagee to the corporation.2 The mortgage is generally held to
take precedence of a statutory contractor’s lien and other liens for
work done or material furnished after the mortgage is recorded,
unless the statute expressly prescribes otherwise.?

But a corporation cannot mortgage its franchise to act as a cor-
poration, nor any public franchises which it may be using, such as
a railroad, canal or turnpike right of way. Both of these classes
of franchises are personal trusts confided by the state to the corpo-
ration, and the latter cannot mortgage, sell, lease or transfer them
in any way, except upon the express permission of its charter or a

statute.*

1 Willink v. Morris Canal & B. Co., 4
N. J. Eq., 377 (1848); Shamokin Valley
R. R. v. Livermore, 47 Pa. St., 469
(1864); Pierce v. Emery, 32 N. H., 484
(1856); Phillips wv. Mnnslenrs 18 B. Mon.,
431 (1857). \

2Jones v. Guaranty, etc., Co., 101 U.
S., 622 (1879).

3See Jones on Railroad Securities,
§§ 562-8; Galveston R. R. v. Cowdrey,
11 Wall., 459, 480 (1870); Dunham v.
Cincinnati, etc., R’y, 1 Wall., 254 (1868);
2 Central L. J., 111, 729, 739, 772, 838;
3 Woods, 441; Dillon ,v. Barnard, 21

Wall., 430. A railroad mortgage is not

subject to the claims of contractors
who constructed the road. Hollister v.
Stewart, 111 N. Y., 644 (1889). A con-
tractor cannot claim a lien as against a
mortgage duly made before the con-
tract. Reed’s Appeal, 16 Atl. Rep., 100
(Pa., 1888). Under the re-organization
statutes of Ohio, a judgment lien may
take precedence of a prior mortgage of
the re-organized company. Farmers’,
ete.,, Co. v. Cincinnati, etc., R. R. Co.,
5 Ry & Corp. L. J., 380 (Cin. Sup.
Ct., 1889). A contract has no priority
over a mortgage for construction work.
Wood v. Guarantee, etc., Co., 128 U.S.,
416 (1888). Ci. 22 Wall., 424.

4 As regards sales, leases, consolida-
tions, etc., see § 668, etc., supra. As to
mortgages, see notes throughout this
section; also, Pierce v. Emery, 82 N.
E, 485, 507 (1856); Phillips v. Winslow,

18 B. Mon., 1 (1857), holding also that
power to mortgage the franchise im-
plies the power to pledge everything
that may be necessary to the enjoyment
of it; Uncas National Bank v. Rith, 23
Wis., 339 (1868), holding that power to
mortgage the franchise does not exclude
other forms of security; Pullan v. Cin-
cinnati & C. A. L. R. R., 4 Biss., 35
(1865), holding that power tO mortgage
the franchise is not included in a power
in a railroad to mortgage its ‘‘ road, in-
come and other property;” Shaw v.
Norfolk Co. R. R. Co., 5 Gray, 162 (1855);
Commonwealth v. Smith, 10 Allen, 448
(1865); Richardson v. Sibley, 11 Allen, 65
(1865), where a mortgage of franchises
without authority was declared wholly
void; Daniels v. Hart, 118 Mass., 543
(1875); Black v. Delaware & R. Canal
Co., 22 N. J. Eq., 121, 399 (1871), and
English cases cited. Power to sell gives
power to mortgage. Branch v. Atlantic,
etc., R. R., 83 Woods, 481 (1879). Power
to mortgage gives power to sell at fore-
closure sale the right of way, franchises,
etc. New Orleans, etc., R. R. v. Dela-
more, 114 U. S., 501 (1885). Power to

mortgage real estate gives no power to

mortgage a franchise. Rand v. Wil-
mington, etc., R. R., 11 Phil., 502 (U. 8.
C. C., 1876); Carpenter v. Black Hawk
Gold M. Co., 65 N. Y., 48 (1875), to the
effect that including the franchise
without authority does not invalidate
the mortgage as to other property;

841
§ 689.]

INTRA VIRES ACTS AND CONTRACTS.

[CH. XLI.

Owing to the peculiar nature of railroad property, which re-
quires that it shall at all times be in condition to transport passen-
gers and freight, for which purpose the rolling stock, consisting of
engines and cars, is as necessary as the track itself, the courts in
construing mortgages hold rolling stock to be realty.’

Butler v. Rahm, 46 Md., 547 (1877), to
same effect; Susquehanna, etc., Co. v.
Bonham, 9 W. & S., 27 (1845); Steiner’s
Appeal, 27 Pa. St., 318 (1856); Wood v.
Bedford & B. R. R. Co., 8 Phila, 94
(1871); Winchester & L. T. Co. v. Vi-
mont, 5 B. Mon., 1 (1844); Arthur v.
Commercial & B. R. B’k, 17 Miss., 394
(1848), where it was said that whether
the franchise can be conveyed is a mat-
ter between the state and the corpora-
tion, with which third parties have noth-
ing todo; Coe v. Columbus, P. & I. R.
R. Co., 10 O. St., 372 (1859); Atkinson v.
Marietta & C. R. R. Co., 15 O. St., 21
(1864), holding that a judicial sale under
amortgage which includes the franchise
without authority does not invest pur-
chasers with any corporate capacity
whatever; Stewart v. Jones, 40 Mo.,
140 (1864), holding that a franchise can-
not be levied upon or sold under execu-
tion; State v. Morgan, 28 La, Ann,, 482
(1876). Contra, Shepley v. Atlantic &
St..L. R. R., 55 Me., 395, 407 (1868);
Kennebec & P. R. R. v. Portland & K.
R. R., 59 Me., 23 (1871). Cases discussing
the power when conferred by statute
are East Boston, etc,, v. Eastern R.'R.
Co., 18 Allen, 422 (1866); Dunham v,
Tsett, 15.lowa, 284 (1863); Pollard v. Mad-
dox, 28 Ala., 321 (1856); McAllister v.
Plant, 54 Miss., 106 (1876); Pierce v.
Milwaukee & St. P. R. R. Oo., 24 Wis.,
551 (1869). In an Alabama case the dis-
tinction is observed between such fran-
chises as pertain to the use and enjoy-
met of property and those which the
corporation takes from the public, hold-
ing that the former may be mortgaged
as necessary to the complete enjoyment
of the property, while the latter is such
an investiture of the supreme authority
as cannot be conveyed without its con-
sent. Meyer v. Johnston, 53 Ala., 324

(1875). See, also, Bardstown & L. R. R.
Co. v. Metcalfe, 4 Metc. (Ky.), 199 (1862);
Eldridge v. Smith, 34 Ver., 484 (1861);
Smith v. Gower, 2 Duvall (Ky.) (1865),
holding that where a state purchases
under a mortgage upon the franchises
all the franchises of the corporation are
passed to it; St. Paul & Pac. R. R. Co,
v. Parcher, 14 Minn., 297 (1869). Ina
late case it has been held that, where
the legislature authorizes a corporation
_to sell its franchise, the power to mort-
gage the franchise is:‘implied. Willa-
mette Mfg. Co. v. Bank of British Col.,
119 U. &, 191 (1886). The legislature
may consent.to the mortgage after its ex-
ecution. Howe v. Freeman, 14 Gray, 566.
As to the mortgage of a franchise, see,
also, § 668, supra.

1 Palmer v. Forbes, 23 Ill., 301 (1860);
Hunt v. Bullock, 28 Ill., 320 (1860); Titus
v. Ginheimer, 27 Ill, 462 (1861); Titus
v. Maybee, 25 Ill., 257 (1861), holding,
also, that rolling stock only becomes
personal property when severed from
the road by the owner. Neither the
plaintiff in execution nor the officer can
detach it. Pullam v. Cincinnati & Chi.
Air Line R. B., 4 Biss., 35 (1865), holding
that a mortgage of “all present and
future-to-be-acquired property, includ-
ing the right of way and all rails and
other materials used thereon and pur-
chased therefor,” covers the rolling
stock; Scott v. Clinton & 8S. R. R. Co.,
6 Biss., 529 (1876), holding that the con-
stitutional provision of Illinois that roll-
ing stock shall be deemed personal
property does not change the rule that
a mortgage covering future-acquired
property includes the rolling stock if
obtained before rights of execution
creditors attach; Railroad Co, v. James,
6 Wall., 750 (1867), holding that in Wis-
consin, by statute, rolling stock is con-

842
CH. XLI. |

INTRA VIRES ACTS AND CONTRACTS.

[$ 689.

As a general rule rolling stock, especially when in use, cannot
be taken upon common-law process.' A railroad may mortgage
future net earnings to secure the interest upon its bonds.”

Under “appurtenances,” as used in mortgages of railways, is in-
cluded all such property as is necessary for the use of the,road and

the enjoyment of its franchise.’

Liens already upon property when acquired by a corporation
have priority. over mortgages executed by the corporation! In

sidered fixtures; Miller v. Rutland & W.
R. R,, 36 Vt., 452 (1863), where the stat-
ute makes rolling stock realty; Will-
iamson v. New Jersey 8S. R. R., 28 N. J.
Kq., 279 (1877), holding that as between
mortgagees and execution creditors roll-
ing stock is part ofthe realty. Tosame
effect, Farmers’ Loan & W. Co. v. Hen-
drickson, 25 Barb., 484 (1857); State v.
Northern Central R’y Co,, 18 Md., 193
(1861), holding that a mortgage upon
the entire line with its tolls and rev-

enues covers the rolling stock and fixt--

ures necessary to the production of
tolls and revenues; Phillips v. Win-
slow, 18 B, Mon., 481 (1857), in which
cars, wheels, fire-wood for engines and
coal for machine shops were held to be
included in a mortgage upon a road
“and all other personal property and
interest therein,” as being things inci-
dent to and indispensable to the use and
enjoyment of the property conveyed;
Farmers’ Loan & Tr. Co. v. St. Joseph,
etc., R’y Co., 3 Dill., 412 (1875), holding
that where a mortgage upon a railroad
including rolling stock and property
strictly appurtenant to the road had
been recorded as a mortgage of realty,
it is not necessary to record it as a chat-
tel mortgage. But see, contra, Hoyle v.
Plattsburgh & M. R. RB. Co., 54 N. Y.,
314 (1878), where rolling stock was held
to be personal property and not a part
of the realty. To same effect, Randall
v. Elwell, 52 N. Y., 521 (1878), where it
was held that rolling stock may be
seized and sold for taxes.

1§ 668; Covey wv. Pittsburgh, F. W. &
C.R. R., 3 Phil., 173 (1858), holding that
all rolling stock and other property nec-

essary for the operation of a railroad is
exempt from levy of execution for an
ordinary debt; Pennock v. Coe, 23 |
How., 117 (1859), where an execution
against rolling stock was enjoined at
the instance of the trustees of a mort-
gage; Boston, C. & M. R. R. v. Gilmore,
87 N. H., 410 (1858), holding that loco-
motives and cars when not in use may
be attached; Freeman v. Howe, 24
How., 450 (1860), reversing 14 Gray, 566,
holding that a state sheriff cannot take
property — in this case cars — out of
the lawful possession of a United States
marshal by virtue of a writ of replevin.

2 Jessup v. Bridge, 11 Iowa, 572 (1861);
State v. Northern Central R’y Co., 18
Md., 193 (1861); Dunham v. Isett, 15
Iowa, 284 (1863), holding, also, that at-
tachment or execution upon earnings
so pledged may be restrained by injunc-
tion.

3Seymour v. Canandaigua & N. F. R.
R. Co., 25 Barb., 285 (1857), holding that
land, with the erections thereon, which
was essential to the use and enjoyment
of a railroad was subject to a mortgage
upon the road, but that land not used
by it for railroad purposes was not so
subject; Eldridge v. Smith, 34 Vt., 484
(1861); Calhoun v. Paducah & M, R. R.
Co,, 9 Cent. L. J., 66 (1879 — U. S. Dist.
Ct. W. D. Tenn.); Shamokin Valley, etc.,
R. R. v. Livermore, 47 Pa. St., 465
(1864); Parish v. Wheeler, 22 N. Y., 494
(1860), holding that canal-boats used
and run in connection with a road be-
yond its terminus were not included.

4 United States v. New Orleans R. R.,
12 Wall., 362 (1870), where a lien for
purchase money of land was held to

843
§ 690.] INTRA VIRES ACTS AND CONTRACTS. [CH. XLI.
the distribution of the proceeds arising from the foreclosure of a
railroad mortgage, certain rules peculiar to such mortgages are
followed.! In certain cases a mortgage given by a railroad com-
pany to secure bondholders may be foreclosed by the bondholders?

§ 690. Loans by a corporation, and statutes forbidding loans or
forbidding the taking of notes or mortgages.— A corporation can-
not make loans of money unless its regular business ordinarily in-
volves loaning: In most cases the business of a corporation is to
invest and use its capital, and not to loan it out. Accordingly, it is
well settled that only where the business of the corporation is such
as usually involves loaning does the corporation have the right to
loan its funds.? If not prohibited by statute they may receive and

have priority over a later mortgage;
Willink v. Morris Canal & B, Co., 4 N.
J. Eq., 877% (1843); Branch v./ Atlantic,
etc., R. R., 8 Woods, 481 (1879); Gal-
veston R. R. v. Cowdrey, 11 Wall., 459
(1870); Fox v. Seal, 22 Waill., 424 (1874),
involving a contractor’s lien for con-
struction; Pierce v. Emery, 32 N. H.,
484 (1856), involving a government lien
for duties upon. rails; Williamson v,
New Jersey Southern R. R. Co., 29 N.
J. Eq., 811 (1878), sholding also that a
vendor to a corporation may avoid the
sale for fraud as against the corporation
and purchasers or mortgagees unless
they be such bona fide and for a valu-
able consideration; Vermont, etc., R. R.
Co. v. Vermont Central R. R. Co., 34
Vt., 1 (1861), holding the mortgage to
be subject to the company’s liability for
rent on a railroad leased to it. The
mortgagee cannot object to the validity
of the lease. The bonded debt of aroad
consolidated with another may take
precedence over a mortgage given by
the consolidated road. Compton v. Wa-
bash, etc., R’y, 15 N. E. Rep., 110 (Ohio,
1888).

1 Farmers’, etc., Co. v. Vicksburg, etc.,
R. R., 83 Fed. Rep., 778 (1888). There
are certain exceptions to the rule that
the earnings in a railroad receiver’s
hands cannot be used to pay unsecured
general creditors of the company. Union
Trust Co..v. Morrison, 125 U. S., 591
(1888). Cf. St. Louis, ete, R. R. v
Cleveland, etc., R’y, 125 U. S., 658

844

(1888). As to payment of. employees
in priority to mortgagees, etc, of.
Seventh, etc., B’k v. Shenandoah, etc.,
Co., 85 Fed. Rep., 436 (1888). Applica-
tion of foreclosure proceeds to car ren-
tals. Thomas v. Peoria, etc., R’y, 36 Fed,
Rep., 808 (1888). An unsecured creditor
of a railroad, who, without procuring a
judgment, alleges corporate insolvency
and obtains a receiver, is entitled to the
earnings during the receivership as
against mortgagees who did not com-
mence foreclosure during such receiv-
ership. Sage v. Memphis, etc., R. R.,
125 U. 8., 361 (1888).

2 See § 687, supra.

51 Daniel’s Negotiable Instru., § 384.
It is legal, however, for a loan and trust
company to loan money and take a
mortgage as security. Farmers’ L. &
T. Co. v. Perry, 3 Sand. Ch., 339 (1846);
Farmers’, etc., Co. v. Clowes, 3 N. Y.,
470 (1850). A plank-road company may
loan its funds to a contractor who is
constructing the road. Dictum in
Madison, etc., Co. v. Watertown, etc.,
Co., 5 Wis., 173 (1856). A benevolent
association may loan its funds. West-
ern Boatmen’s Benev. Assoc. ¥. Krib-
ben, 48 Mo., 37 (1871). A national bank
may purchase notes as well as discount
them. WNat’l Pemberton B’k v. Porter,
125 Mass., 333 (1878); Attleborough
Nat'l B’k v. Rogers, 125 Mass., 889 (1878).
A deposit by a bank in a bank renders
the latter liable therefor, though the
deposit is made to enable the presideut
cof the latter to use it,

-», Alabama L. & T. Co.,

CH. XLI.]

INTRA VIRES ACTS AND CONTRACTS.

[§ 690.

sell og assign notes or acceptances in the way of business.) But
unless. specially authorized they cannot make a business of dis-
counting,’ nor engage in a banking business.

A person who borrows money from a corporation cannot defeat
an action for the money by alleging that the corporation had no au-

thority to make the loan.

Eastern, etc.,
Bk v. Vermont Nat’l B’k, 22 Fed. Rep.
186 (1884).

1 White’s Bank v. Toledo Ins. Co., 12
O. St., 601 - (1861); Western Cottage
Organ Co. v. Reddish, 51 Iowa, 55 (1879);
Pratt v. Short, 79 N. Y., 487 (1880);
Clark v. Titcomb, 42 Barb., 122 (1849);
Bulkley v. Briggs, 30 Mo., 452 (1860),
where it was held that'a porporation,
though prohibited from dealing in com-
mercial paper, could receive and sell
notes given for the sale of its lands;
McIntyre v. Preston, 10 Ill., 48 (1848).
And a note received by a corporation
will be presumed to have been taken in
the course of business. Lucas w. Pit-
ney, 27 N. J. L., 221 (1858); Hardy v.

Merriweather, 14 Ind., 208 (1860); Frye

v. Tucker, 24 Il., 180 (1860); Potter v.
Bank of Ithaca, 5 Hill, 490; 7 id., 530
(1844): Suydam v. Morris Canal & B.
Co., 6 Hill, 217 (1843); Talman v. Roch-
ester City Bank, 18 Barb., 123 (1854) ;Gee
13 Ala., 579
(1848); Bates v. Bank of State of Ala., 2
Ala., 462 (1841); Smith v. Mississippi &
Ala. R. R. Co., 6 Sm. & M., 179 (1846);
Portland Bank v. Stone, 7 Mass., 433
(1811); Northampton Bank v. Allen, 10
Mass., 284 (1818); Flackner v. Bank of
United States, 8 Wheat., 388 (1823);
Rees v. Conococheague Bank, 5 Rand.,
329 (1827); Payne v. Baldwin, 3 8. &
M. 661; rev'd in 6 How., 332; Akin v.
Blanchard, 82 Barb., 527 (1860). Insur-
ance company cannot purchase note for,
purposes of set-off. Set-off defeated.
Straus v. Eagle Ins. Co., 5 O. St., 59
(1855).
2New York F. J. Co. wv. Sturges, 2

Cow., 664 (1824). In Mitchell v. Rome R.
R. Co., 17 Ga., 174 (1855), it was held that
where power is given to ‘make con-'

He must pay back the money borrowed.!

tracts” a note taken by a corporation
is prima facie evidence of an author-
ized contract.

3State v. Granville Alexandrian Soc.,
11 Ohio, 1 (1841); State v. Washington
Social Lib. Co., 11 Ohio, 96 (1841); R&
Ohio Life Ins, & T. Co., 9 Ohio, 292
(1889); Blair v. Perpetual Ins. Co., 10
Mo., 559 (1847); Sumner v. Marcy, 3
Woodb. & M., 105 (1847). See, also,
Central R. R. Co. v. Collins, 40 Ga., 582
(1869), and Duncan v. Maryland Svgs.
Inst., 10 Gill & J., 299 (1838),

4Steam Navigation Co. v..Weed, 17
Barb., 382, 884 (1853); Union Water Co.
v. Murphy’s Flat Fluming Co., 22 Cal.,
620 (1863); Mott v. United Statés Trust
Co., 19 Barb., 568 (1854); Poock v. Lafay-
ette Bldg. Assoc., 71 Ind., 357 (1880),
the court saying: ‘‘The. law may have
its reproaches, but this is not one of
them.” In Alabama the borrower of
the money from the corporation may
escape payment. Grand Lodge of Ala.
v, Waddill, 36 Ala., 313 (1860); Cham-
bers v. Falkner, 65 Ala., 448 (1880),
where Masonic lodges had loaned
money. See, also, dictum in Beach v.
Fulton B'k, 8 Wend., 574 (1829), where
an insurance company made a loan;
also the decision in Life, etc., Ins. Co.
v. Mechanic, etc, Ins. Co., 7 Wend., 31
(1831), denying the right of an insurance
company to recover an unsecured loan
where its charter authorized loans on
bond and mortgage. See, also, New
York Firemen Ins. Co. v. Ely, 5 Conn.,
560 (1825), where, however, the loan was
expressly prohibited. In Waddill v.
Alabama, etc., R. R. Co., 35 Ala., 823
(1859), an imanthorized loan by a rail-
road was enforced on the ground that
the railroad president made the loan
without authority from the directors.

845
§ 690.]

INTRA VIRES ACTS AND CONTRACTS.

e

[om XLL

Although a statute or charter forbids a corporation from loaning
more than a certain amount of money, yet if it actually has loaned
more than that amount the borrower cannot avoid payment of any
part of the loan.' Although a statute requires a bank to loan on
bond and mortgage, yet it may recover loans made on drafts or

notes.?

A statute which prohibits corporations from discounting notes or

bills, unless expressly authorized so to do, prevents the corporation _

from collecting the note taken in violation thereof;* but this does

1Gold Mining Co. v. National Bank,
95 U. S., 640 (1877). See, also, Silver
Lake B’k v. North, 4 Johns. Ch., 370
(1820); National Bank v. Matthews, 98
U. S., 621 (1878). One who borrows
from a national bank cannot plead in
defense to a suit for the money that the
bank violated the prohibition against
loaning more than one-tenth of its cap-
ital to any one person. Gold Mining
Co. v. National Bank, supra; Bly v.
Second National Bank, 79 Pa. St., 453
(1875); Allen v. First National Bank, 23
O. St., 97 (1872); Stewart v. National
Bank, 2 Abb. (U. 8.), 424 (1869), holding
that though the loan may be recovered
the franchise. of the bank may be for-
feited. To same effect, Shoemaker v.
Mechanics’ National Bank, 2 Abb. (U.
S.), 416 (1869); and Union Gold, etc.,
Co. v. Rocky Mountain, etc., Bank, 1
Colo., 581 (1872); Elder v. Bank of Ot-
tawa, 12 Kan., 238 (1878), holding that
a borrower cannot restrain a national
bank from negotiating such securities
nor compel their return; O’Hare v. Sec-
ond National Bank, 77 Pa. St., 96 (1874),
holding that an accidental excess does
not make the loan void. Although the
statute forbids loans to directors, yet a
loan so made is collectible and securities
pledged by the director are subject to
the loan, though they were fraudulently
obtained by him from others. Bow-
ditch v. N. E., etc., Ins, Co., 141 Mass.,

_ 292 (1886).

2 Allen v. Freedman’s Sav. Co., 14
Fla., 418 (1874); Mott v. U.S. Trust Co.,
ee 568 (1855); Little v. O’Brien, 9

s., 428 (1812); Mutual Life Ins. Co. v.

Wilcox, 8 Biss., 203 (1878); Davis, etc.,
Co. v. Best, 30 Hun, 638 (1883). A loan
for two years, instead of one as allowed
by statute, is nevertheless enforceable.
Germantown Ins. Co. v. Dhein, 48 Wis.,
420 (1877). A loan is collectible though
for a longer time than allowed, and
without the required security, and in
excess of the amount allowed by stat-
ute. Bond v,. Central B’k, 2 Ga., 92
(1847), A director who loans corporate
funds in violation of the statute is per-
sonally liable for the amount. Dodd

.v, Wilkinson, 9 Atl. Rep., 685 (N. J.,

1887); Williams v. McDonald, 7 id., 866
(N. J., 1886). Treasurer and manager
turning in to the corporation a mort-
gage not worth double the debt owned
by him to the corporation is liable for
any loss. Williams v. Riley, 34 N. J.
Eq., 898 (1881). =

3N, Y., etc.,, Trust Co. v. Helmer, 77
N. Y., 64(1879), applying the New York
act against unauthorized banking;
Tracy v. Talmage, 14 N. Y., 162 (1856);

‘Talmage v. Pell, 7 N. Y., 328 (1852);

Weed v. Snow, 8 McLean, 265 (1843);
Leavitt v. Palmer, 3 N. Y., 19 (1849)
(a certificate of deposit), and Hayden v.
Davis, 3 McLean, 276 (1843) (an accept-
ance); Swift v. Beers, 8 Denio, 70
(1846); Tylee v. Yates, 8 Barb., 222 (1848),
holding also that an assignment of se-
curities for their payment is also void
and transfers no title to the assignees;
White v. Franklin Bank, 22 Pick., 181
(1889), holding that while a time deposit
is within the prohibition the money
may be recovered in an action brought
before the time has expired. See, also,

+ 846

&
4

CH. XLI.]

not prevent the corporation from collecting the amount due.
may disregard the note and sue on the loan itself.!

Slark v. Highgate Archway Co., 5
Taunt., 792 (1814); Wigan v. Fowler, 1
Starkie, 378 (1816); Broughton v. Man-
chester & S. Water-works, 3 B. & Ald.,
1 (1819); Dockery v. Miller, 9 Humph..

71 (1849); Ohio Life Ins. & T. Go. v.
Merchants’ Ins. & T. Co., 11 ‘Humph,, 1
(1850); Root v. Wallace, 4 McLean, 8

(1845), holding that an indorsee may re-
cover from the indorser of a note void
for this illegality the consideration paid
for it; State v. Urbana Mat. Ins. Co., 14
Ohio, 6 (1846), holding that receiving a
deposit of money is not a violation of a
charter restriction upon the exercise of
banking powers; New York Firemen’s
Ins. Co. v. Ely, 5 Conn., 560° (1825),
where a corporation was not allowed to
recover upon a note because its charter
prohibited it from doing a banking
business; Farmers’ Loan & T. Co. v.
Perry, 3 Sandf. Ch., 339 .(1846), and
Green v. Seymour, 3 Sandf. Ch., 285
(1846), where the same principle was ap-
plied to mortgages issued in violation of
statutory prohibition ; Safford v. Wyck-
off, 4 Hill, 442 (1842), holding also that
if the form and appearance of the notes
indicate that they were intended to be
circulated as money, one who takes
them being thereby put upon his in-
quiry is not a bona fide holder and can!
not recover upon them. To same effect,
Att’y-Gen. v. Life &*Fire Ins. Co., 9
Paige, 470 (1842); Mumford v. American
L.I.Co, 4.N. Y., 463 (1851), holding
that a certificate of deposit is not in-
cluded in such a prohibition; Leavitt v.
Yates, 4 Edw. Ch., 184 (1848), holding
also that a trust deed given to secure
such notes was also void; Hazleton
Coal Co. v.. Megarel, 4 Pa. St., 328
(1846), holding that the statute cannot
be avoided by issuing a document which
isin effect though not in form a‘note;
Barry v. Merchants’ Exchange Co., J
Sandf, Ch., 280 (1844); Utica Ins. Co. v,
Scott, 19 Johns., 1 (1821); Branch Bank

INTRA VIRES ACTS AND CONTRACTS.

[§ 690.
It

\

of Montgomery v. Crocheron, 5 Ala.,
250 (1843), holding that the bills of a
corporation which is prohibited from is-
suing them cannot be rendered legal by
being issued by a bank under a contract
with the corporation; Sackett’s Harbor
Bank v. Codd, 18 N. Y., 240 (1858), hold-
ing that a statute prohibiting the circu-
lation of foreign bank notes does not
prevent their sale and delivery for any
other purpose. Payment of a debt by a
draft which is prohibited by statute is:
not payment, the draft not having been
paid. Davis v. B’k of River Raisin, 4
McLean, 387 (1848). Charter provision
that no director or officer should bor-
row from the bank does not apply to
loans to a firm of which the director is
amember, Fisher v. Murdock, 13 Hun,
485 (1878).

1Oneida Bank v. Ontario Bank, 2t
N. Y., 490 (1860); Pratt v. Short, 79 N.
Y., 487 (1880), reviewing N. Y. cases;
Pratt v. Eaton, 79 N. Y., 449 (1880);
Davis, etc., Co. v. Best, 80 Hun, 638
(1883); Mills v. Western Bank, 10 Cush.,
22 (1852). Webb vw. Com’r of Herne
Bay, L. R., 5Q. B., 642 (1870). Compare
Faneuil Hall Bank v. Bank of Brighton,
16 Gray, 534 (1860), and Western Bank
v. Mills, 7 Cush., 539 (1851); Utica Ins,
Co. vu. Kip, 8 ‘Cow., 20 (1827); Same
uv, Caldwell, 3 Wend., 296 (1829), and
Same v. Bloodgood, 4'Wend., 652 (1880);
Planters’ Bank v. Union Bank, 16 Wall.,
488 (1872), ‘holding that when an illegal
contract has been fully executed the
money constituting the price for it may
be looked upon as a legal consideration
for an express or implied promise, To
same effect, Cook.v. Sherman, 20 Fed.
Rep., 167 (1882); Workingman’s Bank-
ing Co. v. Rautenberg, 108 IIl., 460 (1882),
holding that a note given by a director
for a loan in excess of the amount lim-
ited by charter is void so far as to re-
lease a guarantor upon it; Farmington
Savings Bank v, Fall, 71 Me., 49 (1880),

847
,

§ 690.]

INTRA VIRES ACTS AND CONTRACTS.

But where the statute prohibits not only the enforcement of the
note, but also the enforcement of any contract, express or implied,

growing out of the transaction, then the corporation loses the

money loaned.!. Any corporation unless expressly. prohibited. has
power to take a mortgage as security for a debt contracted in the

course of its business.”

holding that prohibition against lending
money on the security of names only is
_ merely directory, and a note so secured
may be collected. To same effect, Na-
tional Pemberton Bank v. Porter, 125
Mass., 838 (1878); United States Trust
Co. v. Brady, 20 Barb., 119 (1855); Va-
natta v. State B’k, 9 O, St., 27 (1858);
Union Mutual F, I. Co. v. Keyser, 32
N. H., 318 (1855), where a note given
for insurance upon property in one class
when by law it was insurable only in
another class was held valid; McFarlan
v. Triton Ins, Co., 4 Denio, 892 (1847),
where a bond owned by an insurance
company was held to have been taken
as an instrument in default of proof of
consideration; Marion Savings Bank v.
Dunkin, 54 Ala., 471 (1875), holding that
an accommodation drawer of a bill who
did not atthe time know it was dis-
counted by a bank in violation of law
may defend by showing that the bank
was not properly organized; Brown wv,
Killan, 11 Ind., 449 (1858), holding that
notes in similitude of bank-notes are
void, even the, issuers not being liable
upon them, but any consideration paid
for them may be recovered back; White
v. Franklin Bank, 22 Pick., 181 (1889),
holding that money deposited in a sav-
ings bank in violation of a statute may
be recovered; Lester v. Howard Bank,
33 Md., 558 (1870), where a director who
borrowed money from a bank in viola-
tion of its charter was held liable for
the money; Philadelphia, etc., Co. v.
Towner, 13 Conn., 249 (1839), where the
original debt was validly incurred, but a

subsequent note taken by the corpora-:

tion was illegal; Pratt v. Eaton, 79 N.
Y., 449 (1880), where notes secured by a
mortgage were held void but the mort-

Ny

‘Wend., 498 (1880), holding that prohibit-
ing the carrying on of a banking busi-
ness does not prevent lending money
upon notes if it is not done as a busi-
ness; Otis v, Harrison, 36 Barb., 210
(1862); Barton v. Port Jackson, eic.,
_Co., 17 Barb., 397 (1854).

1New Hope, etc., Co. v. Poughkeep-
sie, etc., Co., 25 Wend., 648 (1841).

2 State v. Rice, 65 Ala., 83 (1880); Na-
tional Bank v. Insurance Co., 41 O. St.,
1 (1884); Baird v. Bank of Washington,
11S. & R,, 411 (1824), holding that a
power to take mortgages in the course
of business confers the power to com-
mute debts really due for land; Bank
of Michigan v. Niles, 1 Doug., 401 (1844),
holding that power to hold lands and
take mortgages for business purposes
does not confer the right to deal in
lands; National Trust Co. v. Murphy,
80 N. J. Eq., 408 (1879), holding that a
corporation not authorized to take land
as original investment may take a

_mortgage on land in a foreign state as
additional security; Clark v. Farring-
ton, 11 Wis., 806 (1860). Sections 5136
and 5187 of the United States Revised
Statutes do not prevent a national bank
from enforcing the collection of a note

secured by a mortgage of land by a _

foreclosure of the mortgage. National
Bank v. Matthews, 98 U. S., 621 (1878);
Palmer v. Lawrence, 8 Sandf., 161
(1849); Lathrop v. Commercial B’k, 8
Dana (Ky.), 114 (1839); Mapes v. Scott,
94 Ill, 379 (1880), holding that national
banks may take conveyances’ of land
in payment of pre-existing debts. A
national bank may enforce a mortgage

securing future indebtedness, National

Bank vw. Whitney, 103 U. S., 99; Si-
mons v., First National Bank, 93 N. Y.,

gage valid; People v, Brewster, 4 269 (1883). The case of United States
848

 

(oH. xu. «”
OH. XL. ]

INTRA VIRES ACTS AND CONTRACTS.

[8 690.

Although a corporation is prohibited by its charter from taking
a real estate mortgage.as security for a debt, nevertheless the
mortgage after’it has been taken may be enforced by the corpora-
tion. The penalty is that the state may forfeit the corporate char-
ter for misuser.' The laws concerning usury are enforced against
corporations as fully as against individuals,? and where their charters
forbid them from exacting more than a specified rate of interest
they are bound by the restriction.®

Mortgage Co. v. Grass, 98 TIL, 483 (1879),
to the effect that foreign corporations
for loaning on mortgages could not take
mortgages in Illinois, inasmuch as no
domestic corporation could be organ-
ized for that purpose, was overruled by
Stevens v. Pratt, 101 IIl., 206 (1881), and
Commercial, etc., Co. v. Scammon, 102
Tll., 46 (1882). A foreign corporation
may foreclose a mortgage. American,
etc., Ins. Co. v. Owen, 81 Mass., 491 (1860).
1National Bank v. Whitney, 103 U.
8., 99 (1880), reversing Crocker v. Whit-
ney, 71 N. Y., 161 (1878), holding that
where a national bank takes a mort-
gage to secure future advances it can be
objected to only by the government.
National Bank v. Matthews, 98 U.S&.,
621 (1878), reversing Matthews v. Skin-
ker, 62 Mo., 829 (1876), holding that a
bank holding a deed of trust upon real
estate as security for a note contrary to
the act may sell the land in order to col-
lect the note, followed in Winter v. Lit-
tle, 94 Pa. St., 64 (1880); Thornton v.
National Exchange Bank, 71 Mo., 221
(1879), holding that the only penalty for
violations of that act is forfeiture of
charter, to be invoked only by the
United States. To same effect, Graham
vu. National Bank, 32 .N. J. Eq., 804 (1880);
Oldham v. Bank, 85 N. C., 240 (1881),
and Grand Gulf Bank v. Archer, 88m. &
M.,-151 (1847). For a contrary decision,
see Green v. Seymour, 3 Sand. Ch., 285
(1846); Bard wv, Chamberlain, id., 31

(1845).
2McLean v. Lafayette Bank, 3 Me-
Lean, 587 (1845); N. Y. Fireman’s Ins.
Co. v, Sturges, 2 Cowen, 664 (1824);
Grand Gulf Bank v. Archer, 8 Sm. &
(54)

M., 151 (1847); Parkins v,.Watson, 2
Bax. (Tenn.), 173 (1872), holding that a
bank may discount on same terms as an
individual, and should suffer same for-
feit for usury ; Tyng v. Commercial, etc.,
Co., 58 N. Y., 808 (1875), holding that
general usury laws apply to corpora-
tions. Charter privileges. to a building
association to take larger interest than:
is allowed to others under the usury
law are unconstitutional in Kentucky..
There.are no public services rendered by
the association. Gordon v. Winchester,.
ete., Assoc., 12 Bush (Ky.), 110 (1876);
Dunkle v. Renick, 6 O. St., 527 (1856),
holding that a note of a third party given
by a debtor to a bank in good faith for.
an existing debt is not usurious; Morse
on Banking (8d ed.), § 72, etc.

3 Bank of United States v. Owens, 2
Pet., 527 (1829), where notes given for
more than the rate fixed by the charter
of a bank were declared void. Planters’
Bank v. Sharp, 4 Sm. & M., 75 (1844).
But here it was held that taking a
greater amount of interest than that al-
lowed by the charter rendered the corpo-
ration liable under the general ueury
laws, and that the contract was not void.
On this point see Rock River Bank v.
Sherwood, 10 Wis., 174 (1860); Commer-
cial Bank v. Nolan, 8 Miss., 508 (18438);
Grand Gulf Bank v, Archer, 8 Sm. &
M., 151 (1847; Bank of Chillicothe v.
Swayne, 8 Ohio, 257 (18388), where a con-
tract for more than the specified rate was
held void. To same effect, Creed v. Com-
mercial Bank, 11 Ohio, 489 (1842): Spald-
ing v. Bank of Muskinghan, 12 Ohio, 544
(1841), holding also that taking a commis-
sion is only a method of avoiding the

849
§ 691.]

INTRA VIRES ACTS AND CONTRACTS.

[oH. XLT.

§ 691. Corporations may make assignments for the benefit of cor-
porate creditors.— Corporations, unless restricted by their charters
or by general statutes, may make assignments for the benefit of
creditors to the same extent that individuals may.!

_ In making the assignment the corporation may make preferences
for one or more creditors over others, or of one class of creditors

over other classes.”

statute, and Miami Exporting Co. v
Clark, 13 Ohio, 1 (1844), where the same
ruling was made in regard to charging
for exchange; Morse on Banking (3d
ed.), § 52.

1 Wilkinson v. Bauerle, 7 Atl. Rep.,
514 (N. J., 1886); De Ruyter v. St. Pe-
-er’s Ch., 3 N. Y., 238 (1850). holding
‘that a religious as well as a trading cor-
‘poration may make an assignment for

‘the benefit of creditors at common law;

Hutchinson v. Green, 1 8. W. Rep.,
°853 (Mo., 1886); Haxtum v. Bishop, 3
Wend., 13 (1829); Hill v. Reed, 16 Barb.,
281 (1853), by an insurance company:
‘Chamberlain v. Bromberg, 8 South.
Rep., 424 (Ala., 1888); State v. Bank of
Maryland, 6 Gill & J., 205, 219 (1884);
‘Bergen v. Porpoise, etc., Co., 8 Atl.
:Rep., 523 (N. J., 1887); McCallie v,
Walton, 37 Ga., 611 (1868); Lewis v.
Glenn, 6 S. E. Rep., 866 (Va., 1888);
Flint v. Clinton Co., 12 N. H., 480, 485
1(1841); Pope v. Brandon, 2 Stew. (Ala.),
401 (1830). holding also that it was not

necessary that the creditors should sign |

ithe assignment; nor was the deed void
because the trustee was the president
of the assigning bank, who in that ca-
pacity executed the deed as a grantor;
Allen v. Montgomery R. R. Co., 11 Ala.,
487, 451 (1847); Lamb v. Cecil, 25 W.
‘Va., 288 (1884); Lamb v. Pannell, id.,
298 (1884); Ardesco, ete, v. North
American, etc., 66 Pa. St., 875; Covert
v. Rogers, 38 Mich., 868 (1878), holding
that the assignee may be one of the
stockholders, In this case he was a
former treasurer, who had resigned.
Stockholders cannot prevent directors
making an assignment for the benefit
of corporate creditors, though their
term of office expires in four days, the

The question whether directors may prefer

corporation being insolvent. Hutchin-
son v. Green, 1 S. W. Rep., 853 (Mo.,
1886), In, Wisconsin it is held-that a
trust deed executed by an insolvent
corporation, giving the trustee power
to take charge of the business and carry
it on, is void as intended to defeat and
delay corporate creditors. First Nat’l
B’k, etc., v. McDonald, etc., Co., 28
Northwest. Rep., 225 (Wis., 1886), An
assignment by a railroad assigns its
income only. Arthur v. Commercial,
etc., B’k, 17 Miss., 394, 480 (1848), The
assignment may be made by a meeting
of the board of directors, as in any other
corporate business. De Camp »v, Al-
ward, 52 Ind., 463 (1876); State v. Com-
mercial B’k, 21 Miss., 569 (1850); Sar-
gent v, Webster, 54 Mass., 497 (1847),
holding also that the assignment may
be to a steckholder to pay a debt of the
corporation to him, and the remainder
to go to the corporate treasurer for the
benefit of other creditors. See, also,
Graham v. R. R, Co, 102 U. S., 148
(1880); Sheldon, etc., Co, v. Eickemeyer,
etc., Co,, 90 N. Y., 607 (1882); Shockley
v. Fisher, 75 Mo., 498 (1882), construing
a statute authorizing an assignment
‘by a debtor to any person in trust for
his creditors” to include corporations,
and holding that the right exists at
common law, citing 2 Kent, Com., 398,
and note, A deed in trust by a corpo-
ration of all its property, made with
consent of nearly all its creditors, to
trustees to continue the business, is void
as to non-consenting creditors, Water-
man v. Sprague Mfg. Co., 12 Atl. Rep.,
240 (Conn., 1888); De Wolf v. Mfg. Co.,
49 Conn., 282. See 43 N, W. Rep., 60.

2 Bergen v. Porpoisy, etc., Co., 8 Atl.
Rep., 523 (N. J., 1887); Pyles v pane

850
OH. XLI, | INTRA VIRES ACTS AND CONTRAOTS. [§ 691.
themselves is discussed elsewhere.’ A preference by the directors
to themselves is generally held to be fraudulent.

In New York a statute prevents corporations from assigning
property in contemplation of insolvency for the benefit of credit-

ors.’ A similar restriction is imposed by the National Bank Act.’

side, etc., Co., 2 S. E. Rep., 909 (W.
Va., 1887); Arthur v. Commercial, etc.,
17 Miss., 894; Savings B’k v. Bates, 8
Conn., 505; Hopkins v. Gallatin, etc., 4
Humph., 403; Wilkinson v. Bauerle, 7
Atl Rep., 514 (N. J., 1886); Vail v.
Jameson, 7 Atl. Rep., 520 (N. J., 1886);
Coats v. Donnell, 94 N. Y., 168 (1883),
holding also that a statute prohibiting
preferences by corporations does not
apply to foreign corporations; Ringo v.
Biscoe, 13 ‘Ark., 563 (1853); Ex parte
Conway, 4 Ark., 302, 352 (1842); Dana
v. Bank of the United States, 5 Watts &
S., 228 (1848), holding that the board of
directors has the power to make an as-
signment in trust for the benefit of pre-
ferred ‘creditors without the authority
or consent of the stockholders; War-
ner v. Mower, 11 Vt., 385, 890 (1839);
Smith v. Skeary, 47 Conn., 47 (1879);
Reichwald v. Commercial Hotel Co.,
106 Ill, 439 (1888); Planters’ Bank v.
Whittle, 78 Va., 787 (1884). The follow-
ing cases bear’ upon this principle of
law, but do not conflict with it: Rob-
ins v. Embry, Sm. & M. Ch. (Miss.), 207,
258 (1848); Bodley v. Goodrich, 7 How.,
276 (1849); Barings v. Dabney, 19 Wall.,
1(1878); affirming Dabney v. State, etc.,
8 8. C., 124 (1870); Buell v. Bucking-
ham, 16 Iowa, 284 (1864); Catlin v. Eagle
Bank, 6 Conn., 233 (1826); Richards v.
New Hampshire Ins. Co., 43 N. H., 263
(1861); Hightower v. Mustian, 8 Ga.,
506 (1850); Warr v. Bank of West Ten-
nessee, 4 Coldw., 471 (1867); Union

Bank, etc., v. Ellicott, 6 Gill & J.,-

363. Ina prominent case it was held
‘that it could assign all its property in
trust for the benefit of creditors with-
out, the consent of the stockholders.
Dana v. United States Bank, 5 Watts
& S,, 228, 247 (1843). A few courts
have refused to accept this. proposition.

Bank Commissioners v. Bank of Brest,

Harring. Ch., 106 (1840); Rollins v. ee

33 Me., 132 (1851). ‘
1See § 661, supra.

2 Sibell v. Remsen, 33 N. Y., 95 (1865);
National 8. & L. Bank, etc., v. Mechan-
ics’, etc., 89 N. Y., 467 (1882); Harris v.
Thompson, 15 Barb., 62 (1853); Coats v.
Donnell, 94 N. Y., 168 (1883), holding
that this statute does not apply to for-
eign corporations; Paulding v. Chrome
Steel Co., 94 N. Y. 334 (1884), holding
that in order to come within the stat-
ute the act of assignment must have
been done because of existing or in
contemplation of insolvency; Dutcher
v. Importers & Traders, etc., 59 N. Y.,
5 (1874), holding that payment by the
officers of a bank, who knew of its in-
solvency, of a check of a depositor who
has no such knowledge is not within
the meaning of the statute; Smith v.
New York, etc., Co., 18 Abb. Pr., 419
(1860); Smith v. Danzig, 64 How. Pr.,
$20 (1888); Loring v. U. §., etc., Co., 36
Barb., 829 (1862); Heroy v. Kerr, 8
Bosw., 194 (1861); 6 N, Y. Supp., 346.
A New York corporation cannot make
an assignment in Rhode Island. Pierce
v. Crompton, 13 R. I., 312 (1881).

3U. S. Rev. Stat., § 5242, construed
in Irons v. ee Nat. B., ete.,
6 Biss., 801 (1875), where the . phrase
“act of insolvency ” was held to mean
any act which would be an act of in-
solvency by an individual banker; Na-
tional Bank v. Colby, 21 Wall, 609
(1874); Case v. Citizens’ Bank, etc., 2
Woods, 23 (1873); National, etc., B’k v.
Mechanics’, etc., B’k, 89 N. Y., 467
(1882); Casey v. La Societe de Credit
Mobilier, 2 Woods, 77 (1874), holding that
the preference intended by the act is
such as is given to secure or pay a pre-
existing debt, and does not prevent the

851
§ 692.]

INTRA VIRES ACTS AND CONTRACTS.

[CH. XLI.

§ 692. At common law, in America, a corporation may purchase
. . i .
land. The power of aforeign corporation to purchase land is con-

sidered elsewhere.”

The English statutes of mortmain are not in force in this coun-
try. The only limitation upon the right of corporations to hold real
property is that the purchase must be a natural incident of the busi-
ness specified in the charter? A different rule prevails in Pennsyl-

‘

borrowing of money upon security;
Robinson v. National B’k, etc., 81 N.
Y., 385 (1880), holding that the act ap-
plies only to such banks as are insolv-
ent or are about to become so. Ve-
nango Nat. B’k v. Taylor, 56 Pa. St., 14
(1867), holding that the act relates to
legal as well as voluntary transfers of
property by banks.

1 Richardson % Mass., etc., Assoc., 131
Mass., 174 (1881); Kelly v. People’s
Transp. Co., 8 Oreg., 189 (1870); Page v.
Heineberg, 40 Vt., 81 (1868); Central Gold
Mining Co. v, Platt, 8 Daly, 268 (1870), to
the effect that the holding may be upon
special trust. Nicoll v. New York & E.

R. Co., 12 N. Y., 121, 127 (1854); Barry’

v. Merchants’ Exchange Co., 1 Sandf,
Ch., 280 (1844); Sherwood v. American
Bible Soc., 1 Keyes, 561 (1864); Steam-
boat Co. v. McCutcheon 18 Pa. St,, 18
(1850); Riley v. Rochester, 9 N. Y., 64
(1853); Downing v. Marshall, 23 N, Y,,
366 (1861); State v. Commissioners, 23
N. J. L., 512 (1852); State v. Collectors,
25 N. J. L., 815 (1855); First Parish v.
Cole, 3 Pick., 232 1825); Old Colony R,
R. Corporation v, Evans, 72 Mass., 25
(1856), where the company purchased a
gravel pit to transport and sell the
gravel. And see Smith v. Sheeley, 12
Wall., 358 (1870). The ‘usual convey-
ance gives to the corporation the fee.
Asheville, etc., v. Aston, 92 N. C., 578
(1885); Nicoll v. New York & EH. R. Co.,
12 N. Y., 121 (1854); Turnpike Co. v.
Illinois, 96 U. 8., @3 (1877); School Dis-
trict, .etc., v. Everett, 52 Mich., 314
(1883). In a suit by a railroad to quiet
title to its land, the defendants cannot
question the power of the railroad to
hold land.- Russell v, Texas, etc., R’y,

5 §. W. Rep., 686 (Tex., 1887). The
power to hold and transmit a title in
fee is not'affected by a limitation of the
time during which a corporation is to
endure. Nicoll v. New York & E. R.
Co., 12 N. Y., 121 (1854); Rives v. Dud-
ley, 83 Jones’ Eq., 126 (1856); Asheville,
etc., v. Aston, 92 N. C., 578 (1885). Al--
though an alien cannot own real estate,
yet he may own stock in a corporation
which owns real estate. Princeton,
etc., Co, v, First, etc., Bank, 19 Pac.
Rep., 210 (Mont., 1888). A dissolution
after it has conveyed real estate does
not impair the title-of the grantees.
People v. Mauran, 5 Denio, 389 (1848).
2See § 695, infra.

32 Kent's Com. (12th ed.), 3856;
Moore’s Heirs v. Moore, 4 Dana (Ky.),
854 (1836); Lathrop v. Commercial B’k,
8 id., 114, 121 (1839); Potter v. Thorn-
ton, 7 R, I, 252 (1862); Perin v. Carey,
24 How., 465 (1860); McCarter v, Or-
phan, ete., Soc., 9 Cowen, 437, 451
(1827); Page v. Heineberg, 40 Vt., 81
(1868). See, also, Odell v. Odell, 10
Allen, 1; Downing v. Marshall, 23 N.
Y., 366, 392 (1861); First Parish v, Cole,
83 Pick., 232, 239 (1825); Richardson v.
Mass., etc., Assoc., 131 Mass., 1'74 (1881).
One who agrees to Sell land to a corpo-
ration is not bound to see that it is re-
quired for the purposes of the corpora-
tion. Eastern Counties R’y Co. v.
Hawkes, 5 H. of L. Cas., 831 (1855),
And if acting in good faith and with-
out knowledge of an intention to mis-
apply the corporate funds, he may en-
force specific performance of the con-
tract. Frequently the charter places
some limitations or grants some priv- .
ileges herein, A charter power to hold

852
,

OH. XLI.]

INTRA VIRES ACTS AND. CONTRACTS.

[$ 692.

vania.} In that state the mortmain laws are held to still exist, and
the state itself has enacted a statute restricting the right.

. Phe amount of land which a corporation may purchase can only
be questioned by the state in a direct proceeding for that purpose.
The objection cannot be made by others. A stockholder, how-

land for business purposes and to secure
debts does not authorize the purchase
of land for the purpose of selling it
again, Bank of Michigan v. Niles,
Walker (Mich.), 99 (1842); Pacific R. R.
Co. uv, Seely, 45 Mo., 212 (1870), where a
railroad was held to have no power to
acquire land for speculation; Land v.
Coffman, 50 Mo., 243 (1872); Rennselear
& 8. RB. R. Co. v. Davis, 48 N. Y., 187
(1870). Under such an express power
the corporation cannot purchase merely
for the convenience of the corporation,
nor for purposes foreign to its objects.
State v. Commissioners, etc., 23 N. J.
L,, 510 (1852); State v. Collectors, etc.,
25 N. J. L., 315 (1855); First Parish,
etc., v. Cole, 3 Pick., 282 (1825). But
the purchase is presumed to be for pur-
poses mentioned in the charter. Cha-
tauqua County B’k v. Risley, 19 N. Y.,
369 (1859); Ha parte Peru Iron Co., 7
Cowen, 540 (1827); Moss v, Rossie, etc.,
Co., & Hill, 187 (1848); Alward w.
Holmes, 10 Abb. N. C., 96 (1886), where
a foreign bank had purchased. A rail-
road, instead of condemning a right of
way, may purchase the fee. Nicoll v.
N. Y., ete, R. R. Cor, 12 N. Y., 121
(1854).

1This arose from the fact that the
judges of the. supreme court appointed
to examine and report to the legislature
such of the English statutes as were in
force in that state, reported that the stat-
utes of mortmain were ‘‘so far in force
that all conveyances madetoa
body corporate, or for the use of a body
corporate, are void, unless sanctioned
by charter or act of assembly.” The
report may be found in 3 Binney, 595,
626 (1808). See, also, Methodist Church
wv. Remington, 1 Watts, 218; Miller v.
Porter, 53 Pa. St., 292 (1866). The stat-

ute of April 6, 1833, made all purchases’

of land by or for corporations, without
the license of the commonwealth, sub-
ject to forfeiture. Under this act it
has been held that a foreign corporation
may purchase and hold real estate in
Pennsylvania, subject to being divested
by the direct action of the state. Run-
yan v. Lessee of Coster, 14 Pet., 122

(1840). Tosame effect, Leazure v. Hille-

gas, 7 Serg. & R., 313 (1821); Hickory,
etc., Co. v. Buffalo, ete, R. R. Co., 82
Fed. Rep., 22 (1887). A similar statute
passed April 26, 1855, was construed to
the same effect in Hickory Farm Oil
Co. v. Buffalo, N. Y. & P. R. Co., 32
Fed. Rep., 23 (1887), after having been
declared a mortmain‘act in Slate Co. v.
Savings Bank, 8 Weekly Notes Cas.,
430. A person sued in Pennsylvania on
a debt to a foreign corporation cannot
set up that the corporation is illegally
holding land in the state. Grant v.
Henry, etc., Coal Co., 80 Pa. St., 208
(1876). Where a foreign corporation
cannot directly own land in a state, it
cannot own land indirectly by owning
a majority of the stock of:a domestic

_ corporation which owns the land. The

state may escheat the land. Common-
wealth v. N. Y.,L. E. & W. RB. R., 7 Atl.
Rep.,.756 (Pa., 1887). See, also, § 695.
2Land v. Coffman, 50 Mo., 248 (1872), :

holding, also, that a deed voluntarily
made to the corporation of real prop-
erty in excess of the amount allowed
by its charter will pass a good title;
National Water, etc., Co. v. Clarkin, 14
Cal., 544, 552 (1860), Field, C. J., saying:
“Tt would lead to infinite inconven-
iences and embarrassments if, in suits
by corporations to recover possession of
their property, inquiries were permitted
as to the necessity of such property for
the purposes of.their incorporation, and
the title made to rest upon the exist-

853
§ 692.]

INTRA VIRES ACTS AND CONTRACTS.

« (OH. XII.

ever, may object.! Whenever a corporation can take the legal title

ence of that necessity.” There are
many other cases in which it is held
that the state alone can raise this ob-
jection, National Bank v. Matthews,
98 U. S., 621, 628 (1878), and cases
cited; Cornell ». Springs Co., 100 U. S.,
55 (1879); Myers v. Croft, 13 Wall.,
291 (1871); Southern Pacific, etc., v.
Orton, 6 Sawy., 157, 181 (1879), and
‘eases cited; S. C., 82 Fed. Rep., 457;
Shewalter v. Pierron, 55 Mo., 218 (1874);
Chambers v. City of St. Louis, 29 Mo.,
576 (1860); McIndoe v. City of St. Louis,
10 Mo., 576 (1847); Health Com’rs v.
Mauran, 5 Denio, 389 (1848); Silver
Lake Bank v. North, 4 Jobns. Ch., 370
(1820); Leazure v. Hillegas, 7 Serg. &
Rawle, 313 (1821); Goundie v. North-
ampton Water Co., 7 Pa. St., 283 (1847);
Steamboat Co. v. McCutclieon: 17 Pa.
St., 18 (1850); Kelly v. People’s Trans.
Go., 3 Oreg., 189 (1870); Morgan & Ray-
nor v. Donovan, 58 Ala., 241 (1877). But
in this case it was said that in a suit to
enforce a contract of purchase which
remained executory, or to recover for
its breach, the question of ultra vires
would be material. The Banks v. Poi-
tiaux, 3 Rand. (Va.), 136, 147 (1825);
Barrow v. Nashville, etc, T. C., 9
Humph. (Tenn.), 804 (1848), holding
that the fact that a corporation uses
real estate for purposes beyond its
powers furnishes no ground to the
‘vendor for a rescission of the contract
of sale; Runyan v, Carter, 14 Pet., 122,
129 (1840); Chicago, B. & Q. R. Co. v.
Lewis, 53 Iowa, 101 (1880); Mapes v.
Scott, 94 TlL, 379 (1880), in which the
rule was applied to national banks;
Alexander v. Tolleston Club, 110 Il.,
65 (1884); Smith v. Sheeley, 12 Wall,
308 (1870); De Camp v. Dobbins, 29 N. J.
Eq., 36 (1878), which case was affirmed
in 31 .N. J. Eq., 671 (1879), where it was
however held that an heir-at-law may
object that a corporation cannot hold
land in trust in excess of its statutory
powers. See this report for,a well-con-
sidered opinion, citing cases, and notes

by the reporter. Bone v. Canal Co,
(Pa.), 5 Atl. Rep., 751; Railroad Co. v.
Lewis (Iowa), 4 N. W. Rep., 842; Land
Co. v. Bushnell (Neb.), 8 N. W. Rep.,
389; Jones v. Habersham, 107 U. S.,
174; S. C., 2 Sup. Ct.-Rep., 386 (1883);
Barnes v. Stoddard (Ill.), 7 N. E. Rep.,
477, in which the rule was applied: to a
foreign corporation; Hickory Farm Oil
Co. v. Buffalo, N. Y. & P. BR. Co., 32
Fed. Rep., 22 (1887), to the same effect;
Spear v. Crawford, 14 Wend., 20 (1835),
where a stockholder was held liable on
his statutory liability to a corporate
creditor who had sold land to the cor-
poration. If a bank buys land and
then finds it is wlira vires, and sells its
contract to a third person, it may col-
lect from the latter moneys paid on the
purchase. Crutcher’s Adm’r v, Bed-
ford, 8 Humph. (Tenn.), 405 (1847). ° A
railroad company cannot refuse to com-
plete a purchase of lands which, prima
facie, it could use for railroad purposes.
It cannot claim that the purchase was
ultra vires. Eastern Counties R’y Co.
v. Hawkes, 5 H. L. C., 331 (1855)... A

turnpike company may take a lease of

land for storing purposes. Crawford 0.
Longstreet, 43 N. J. L., 325 (1881). An
agreement of a company to buy land if a
certain bill passes is legal and binding.
Taylor v, Chichester, etc., Ry Co,
L. R., 4 H. Li, 628 (1870), reversing
8. C., L. R., 2 Exch., 356 (1867). Con-
tra, Coleman v. San Rafael T. R. Go.,
49 Cal., 517 (1875), holding in an action
to quiet title that a bond to convey
to a corporation for purposes beyond its
requirements is void. Thweatt v. B’k
of Hopkinsville, 81 Ky., 1 (1888), where
an execution sale to a bank was held to
be void at the suit of the execution
debtor; Riley v. City of Rochester, 9
N. Y., 64 (1888), holding in an action of
trespass that a conveyance to a munici-
pal corporation of land beyond its lim-
its for the purposes of a street is void.

1Inre Kent Benefit, 'ete., Soc., 1 Dr.
& Sm., 417 (1861), where stockholders

854.
CH. XLI.]°

INTRA VIRES ACTS AND CONTRACTS.

to land it can take the beneficial interest in it, but if it cannot hold
a legal title it cannot hold as cestui que’ trust. It is well. settled
that corporations may, without special authority, dispose of land
as they may deem expedient,? and may mortgage lands in the

course of legitimate business.

Under the English statute of wills a devise of land to certain

bodies corporate is unlawful.
quite generally in America.*

were not required to refund to directors
moneys paid by the latter ultra vires
for land; Grimes v. Harrison, 26 Beav.,
435 (1859), where. the directors were
compelled to make good the funds of
' the corporation used ultra vires to pur-
chase land.

1 Coleman v. San Rafael T. R. Co., 49
Cal., 517, 522 (1875). In this case a bond
to an individual to convey land in trust
for the stockholders of a corporation
with power to sell under direction of its
board of trustees was held to constitute
the corporation a cestui que trust. Vidal
v. Girard’s Ex’rs, 2 How., 127, 187
(1844), holding also that if the trust be
repugnant to or inconsistent with the
purposes of the corporation a new
trustee may be substituted, but no
ground is furnished to declare the trust
void. See, also, De Camp v. Dobbins,
29 N. J. Eq., 36 (1878); affirmed, 31 N.
J. Eq., 671 (1879); Clemens v. Clemens,
37 N. Y., 59 (1867); Chamberlain 3.
Chamberlain, 43 N. Y., 424 (1871); Har-
ris v. American Bible Soc., 2 Abb. App.
Cas., 316 (1867), but here the corpora-
tion had express power to hold in trust;
Downing v. Marshall, 23 N. Y., 366
(1861).

2 White Water, etc., v. Vallette, 21
How., 414, 424 (1858); Barry v. Mer-
chants’ Exchange Co., 1 Sandf. Ch.,
280 (1844); Dupee v. Boston Water P.
Co., 114 Mass., 37 (1873); Burton’s Ap-
peal, 57 Pa. St., 218 (1868); Miners’
Ditch Co. v. Zellerbach, 37 Cal., 5438
(1869); Widow of Reynolds v. Commis-
sioners, etc., 5 Ohio, 204 (1831); Town of
Newark v. Elliott, 5 O. St., 118 (1855);
De Ruyter v. Trustees, etc., 3 Barb., 119

855

Similar statutes have been enacte|

(1848); aff’d, 3 N. Y., 238; Buell v. Buck-
ingham, 16 Iowa, 284 (1864), holding,
also, that the sale may be by directors
having general powers to make con-
tracts; Aurora, etc., v. Paddock, 80 Iil.,
263 (1875). And see Binney’s Appeal, 2
Bland’s Ch., 99, 142 (1829); Railroad Co.
v. Howard, 7 Wall., 393 (1868), in which,
a sale by a corporation without author-
ity but with the consent of all the par-
ties interested in the subject-matter of
it was held valid; Edward v. Fairbanks,
27 La. Ann., 449 (1875); Rutland & B.
R. Co. v. Proctor, 29 Vt., 93 (1856), hold-
ing, also, that a purchaser from a cor-
poration cannot defeat an action for the
purchase money by the defense that the
corporation had no power to acquire
the property.

3See § 689, supra.

4 McCartee v. Orphan Asylum Soc., 9.
Cow., 487 (1827): Downing v. Marshall,
23 N. Y., 366, 384 (1861), but holding
that a charter provision enabling a cor-
poration to take land ‘‘ by purchase or
otherwise” is an expréss authority
within the meaning of the statute of
wills. See, also, Kerr v. Dougherty, 79
N. Y., 828 (1880), overthrowing a be-
quest by a resident of another state toa
New York corporation which was for-
bidden to take by bequest; State v.
Bates, 2 Harr. (Del.), 18 (1885), where a
devise of money arising from the sale
of land was held to be in effect a devise
of land; but the contrary view ‘of such
a devise was taken in American Bible
Soc. v. Noble, 11 Rich. Eq., 156 (1859),
In Massachusetts it has been held that
a town or parish may take and hold
a devise for the use of / schoo's, Firsz

‘
’

INTRA VIRES ACTS AND CONTRACTS. * [oH. XLI.

§ 693.)

Where the corporation is authorized to take by bequest to a cer-
tain amount, there is difficulty in determining the legality of a gift
in excess of that amount.! A bequest to a corporation to_be here-
after created is valid.

§ 693. Eminent domain — Corporations may be authorized ‘by
the state to exercise the state's power of eminent domain — When and
what property may be taken— Taking the property of another
corporation.— The power to exercise the right of eminent domain
may be delegated by the state through its legislature to private
corporations. Statutes delegating to corporations the power to
exercise the right of eminent domain, being in derogation of the
rights of private owners, are to be strictly construed; they cannot

Parish v. Cole, 3 Pick., 232 (1825). As
to the rule governing bequests to chari-
table corporations in New York, see
Wetmore v. Parker, 52 N. Y., 450 (1873).
A foreign charitable corporation cannot
take New York land by devise unless
the New York statute permits. White
v. Howard, 46 N. Y., 144 (1871). Cf.
Same v. Same, 38 Conn., 342. And con-
cerning the common-law restrictions on
the power of charitable corporations to
sell land, see Madison, etc., Church v.
Baptist Church, etc., 46 N. Y., 181 (1871).
See, also, § 695, infra, as to foreign cor-
porations.

1In Jones v. Habersham, 107 U.6&.,
174 (1882), where the limit was on the
income and the gift increased it beyond
the limit, the court held that only the
state could object. Where the limita-
tion upon the capacity of a corporation
to hold land is based upon a yearly
value the yearly value at the time it is
‘acquired is intended, and the title is not
affected by a subsequent increase in its
value above the amount limited.
gardus v. Trinity Church, 4 Sandf. Ch.,
634 (1847); Humbert v. Trinity Church,
24 Wend., 587, 629 (1840). And see
Harvard College v. Boston, 104 Mass.,
470 (1870). In McGraw v. Cornell Uni-
‘versity, 45 Hun, 354 (1887), a will giving
to the defendant more property than its
charter allowed was overthrown by the
heirs of the testatrix. Affirmed, 111
N. Y., 66 (1888). See, also, Church of

Bo-.

Redemption v. Grace Church, 68 N. Y.,
570 (1877); Bogardus v. Trinity Church,
4 Sandf. Ch., 633 (1847). Cf. Rainey. v.
Laing, 58 Barb., 453 (1871). +

2Russell v. Allen, 107 U. S&., 168
(1882); Burrill v. Boardman, 43 N. Y.,
254 (1870).

3 Wilson v. Blackbird Creek M. Co., 2
Pet., 251 (1829); Beekman v. Saratoga
& SS. R. BR. Co., 3 Paige, 45, 73 (1831);
Rensselaer & S. R. R. Co. v. Davis, 48
N. Y., 187 (1870); N. Y. & H.R. R. Co.
v. Kip, 46 N. Y., 546 (1871); Kramer v.
Cleveland & P. R. R. Co., 5 O. St., 146
(1855); Buffalo & N. Y. C. R. R. Co. uv.
Brainard, 9 N. Y., 100 (1853); Matter of
City of Buffalo, 68 N. Y., 167 (1877).
Power of eminent domain cannot be in-
voked to construct a railroad to run
four months in the year for sight-seers.
Re Niagara Falls, etc., R. R., 108 N. Y.,
375 (1888), The legislature may change’

. charter provisions as.to method of exer-

cising power of eminent domain. Miss.
R’y Co. v. McDonald, 12 Heisk. (Tenn.),
54 (1873); Chdtteroi R’y Co. v. Kinner,
81 Ky., 221 (1833). Where a company
has a charter granted when the state
constitution allowed property to be
taken and compensation made after-
wards, a change in the constitution does
not take away the company’s right
under the first constitution. Lehigh V.
R. R. Co, v. McFarlan, 31 N. J. Eq., 706
(1879). ” =

856
 

cH. XLI.]

INTRA VIRES ACTS AND CONTRACTS.

Bg 693.

be extended by implication unless such extension is necessary to
carry out the intention of the legislature.!

Where one corporation has taken land or property under the
power of eminent domain, or holds such land or property for :pub-
lic use, another corporation cannot take such land or property
under the power of eminent domain unless a statute expressly or
by necessary implication authorizes the latter corporation to do so.

1New York & H. R. R. Co. v. Kip, 46
N. Y., 546 (1871); Rensselaer & 8. R. R.
Co. v. Davis, 43 N. Y., 187 (1870); Bona-
parte v. Camden & H.R. R. Co., Bald.,
205 (1880); Browning v. Camden & W.
R. R. Co., 4 N. J. Eq., 47 (1887); Stevens
v. Erie R’y Co., 21 N. J. Eq., 259 (1871),
holding that power to construct a rail-
road along a river does not authorize
building it in or upon the river; Cleve-
land & P. R.R. Co. v. Speer, 56 Pa. St.,
$25 (1867). Compare Proprietors. of
Locks, etc., v. Nashua & L. BR. R. Co.,
104 Mass., 1 (1870); Van Wickle v. Cam-
den & A. R. R, Co, 14 N. J. L., 162
(1888); Doughty v. Somerville & E. R.
R. Co., 21 N. J. L., 442 (1848); State v.
Jersey City, 25 N. J. L., 809 (1855);
Zack v. Pennsylvania R. R. Co., 25 Pa.
St., 394 (1855); Currier v. Marietta &
Cin. R. R. Co., 11 O. St., 228 (1860);
Lackland v. North Mo. R. R. Co., 31
Mo.. 180 (1860); Commonwealth v. Erie
& N. E.R. R. Co., 27 Pa. St., 389 (1856).
In this case, where a company. built
and was operating its road in a place
where it was not authorized: so to do
by its charter, an injunction was re-
fused, but a decree was given requiring
a relocation and reconstruction; Gil-
mer v. Lime, etc., Co., 19 Cal., 47 (1861);
Lance’s Appeal, 55 Pa. St., 16 (1867).
The defense may be set up that the
company’s time to complete its road has
expired. Atlantic, etc., R. R. Co. v. St.
Louis, 66 Mo., 228 (1877). An uncom-
pleted condemnation proceeding cannot
be assigned by one company to another.
Mahoney v. Spring, etc’, Co., 52 Cal.,
159 (1877). But a lessor railroad may
condemn land for the use of the lessee.
ReN. Y,, etc. By, 99 N. ¥., 12 (1885).

'

A bridge corporation having a special
charter cannot change its approaches
and condenin land under the change.
Re Poughkeepsie, etc., Co., 108 N. Y.,
483 (1888). In Iowaa railroad company
cannot condemn land for an elevator.
Johnston v. Chicago, etc, R. R., 58
Iowa, 587 (1882). See, also, State v.
United, ete, RK. RB, 48 N. J. L, 110
(1881). A railroad succeeding to the
franchises and property of another rail-
road may take up and complete its con-
demnation proceedings. Bradley v.
Northern P. R’y, 36 N. W. Rep., 345
(Minn., 1888).

2Matter of Boston & A. R. R. Co., 53
N. Y., 574 (1878), holding that the im-
plication does not arise if the powers
expressly conferred can be exercised
without appropriating such land;

Springfield v. Connecticut R. Co., 4°

Cush., 63 (1849); State ». Montclair R’y
Co., 85 N. J. L., 328 (1872); Northern
R. R. Co. v. Concord & C. R. R, Co., 27
N. H., 188 (1853); Cleveland & P. R. R.
Co. v. Speer, 56 Pa. St., 325 (1867);
Little Miami, etc., R. R. Co. v. Dayton,
23 O. St., 510 (1872); Re City of Buffalo,

68 N. Y., 167 (1877), where the city at-.

tempted to take railroad switching
grounds. An express statute may au-
thorize a water company to take water
from lakes owned by another water
company. Re Rochester Water Con1’rs,
66 N. Y., 418 (1876). It is constitutional
for the state to so enact. Tlinois, etc.,
Canal v. Chicago, etc., R. R. Co, 14
Ill, 314 (1853). Where one road has
possession of a right of way, equity
will enjoin another road from interfer-
ing until the right has been judicially
passed upon. Montana, etc, Ry wv

857
§ 693.]

INTRA VIRES ACTS AND CONTRACTS.

(cH. XLI.

Subject to this rule the right of eminent domain may be exer-
cised over land already owned by corporations which have acquired
it by the same power. Corporations take their ‘charters and exer-
cise their powers subject to the pre-eminent right of the state in

this respect.!

Helena, etc., R. R., 12 Pac. Rep., 916
(Mont., 1887). A municipal corporation
may condemn a railroad right of way
for the purpose of opening astreet. In
re Grand Rapids, etc., v. Grand, etc.,
R. R., 33 N. W. Rep., 15 (Mich., 1887).
One mining company cannot take under
eminent domain the tunnel of another
mining company. Amador, ete., Co. v.
Dewitt, 15 Pac. Rep., 74 (Cal., 1887).
As to the right of one railroad to obtain
the right to use the tracks of. another
company, see Lake, etc., R. R. Co. v.
Cincinnati, etc., R’y Co., 19 N. E. Rep.,
440 (Ind., 1888).

!West River Bridge Co. v. Dix, 6
How., 507 (1848), affirming S. C., 16

Vt., 446 (1844), holding that this does:

not conflict with the clause in the
United States constitution which for-
bids state legislatures from passing laws
impairing the obligations of contracts;
Richmond, F. & P. R. Co. v. Louisa R.
*R, Co., 13 How., 71 (1851); Arminton v.
Barney, 15 Vt., 745 (1848), where the
franchises of a turnpike were taken for
a public highway; White River T. Co.
v. Vermont Cen. R. R. Co., 21 Vt., 594
(1849), holding that a railroad may take
a turnpike unless its charter gave it an
exclusive right; Boston & L. R. R. Co.
v. Salem & L, R. R. Co., 2 Gray, 1 (1854);
Central Bridge Co. v. Lowell, 4 Gray,
474 (1855); Boston Water-power Co. v.
Boston & W.R. R. Co., 23 Pick., 360
(1839); Enfield Toll B. Co. v. Hartford
& N. H. R. RB. Co., 17 Conn., 454 (1846);
New York, H. & N. R. R. Co. v. Boston,
H. & E. R. R. Co., 36 Conn., 196 (1869);

Matter of Kerr, 42 Barb., 119 (1864),

holding that the legislature’ may grant
power to take tle franchises of a cor-
poration already in existence, and may
give power to one street railway to run
upon and use the tracks of another;

Sixth Avenue R. R. Co. v. Kerr, 72 N.
Y., 380 (1878), holding that a street rail-
way may be taken for the use of others;
Delaware & R. ©. Co. v. Camden, 16 N.
J. Eq., 321 (1863); Shorter v. Smith, 9
Ga., 529 (1851); Alabama & F. R. R. Co.
v. Kenney, 39 Ala. (N. 8.), 807 (1864);

‘Newcastle & R. R. R. Co. v. Peru &

Ind. R. R. Co., 8 Ind., 467 (1852), hold-
ing that one railroad might in this case
condemn land owned by another: Red
River B. Co. v. Clarkesville, 1 Sneed,
176 (1853); Illinois & M. C. Co. wv, Chi-
cago & R. 1. R. R. Co., 14 IIl., 314 (1853);
United States v. Railroad Bridge Co., 6
McLean, 517 (1855), holding that-a state
may make a public road through lands
of the United States; Barber v, Ando-
ver, 8 N. H., 398 (1836), where a turn-
pike was taken for a highway; New-
buryport T. Co. v. Eastern R. R. Co., 28
Pick., 326 (1839), where a railroad was
authorized to raise the grade of a turn-
pike; Springfield v. Connecticut R. Co.,
4 Cush., 68 (1849); Commonwealth v.
Erie & N. E. BR. BR. Co., 27 Pa. St., 339
(1856); Baltimore & H. de G. T. Co. v.
Union R. R. Co., 85 Md., 224 (1871);
Chicago, R. I. & Pac. R. R. Co. v. Town
of Lake, 71 Ili., 883 (1874); Metropolitan
City R’y Co. v. Chicago W. D. R’y.Co.,
87 Tll., 317 (1877); Eastern R. R. Co. v.
Boston & M. RB. 'R. Co., 111 Mass.; 125
(1872), where a statute authorizing a
railroad to take lands of another was
held lawful; Boston & M. R. R. Co. v.
Lowell & L. R. R. Co., 124 Mass., 368
(1878); New York, H. & N. R. R. Co. v.
Boston, H. & E. R. R. Co., 36 Conn.,
196 (1869); Peoria, P. & I. R. R. Co. v.
Peoria & S. R. R. Co., 66 IIL, 174 (1872),
holding that a leasehold of an existing
railroad may be appropriated by an-
other railroad duly authorized; Matter
of New York & H. R. RB. R. Co., 68

858.
t

CH. XLI.] | [§ 693.

INTRA VIRES ACTS ‘AND CONTRACTS.

And one railroad may cross another railroad or hinnneg ata
point where there is no station or special use made of the land.
The right to do so arises from the manifest necessity, and the power
need not be specially conferred.?

The fact that one railroad has laid out its route does not pre-
vent another railroad using the same route, if it proceeds to work
first.? There has been a vast amount of litigation in connection

N. Y., 826 (1875), affirming S. C., 5 Hun,
20, holding that lands of a gas company
not in actual use or indispensable for its
business are subject to the right in
favor of a railroad; In re N. Y. C., etc.,
R. R. Co., 77 N. Y., 248 (1879), where
water fronts, streets and avenues were
taken by arailroad under a special stat-
ute. But a railroad cannot take park
property unless expressly authorized so
_to do. Re Boston, ete, R. R, Co., 53
N. Y., 574 (1873). A town may con-
demn for a highway a turnpike and
such part of an interstate bridge as is
in the state. Crosby v. Hanover, 36 N.
H., 404 (1858). A railroad may take
land owned by a steamboat company.
Re N. Y., etc., R’y, 99 N. Y., 12 (1885).
Under power of eminent domain one
turnpike may be laid out partly over
route of another. Backus v. Lebanon,
11 N. H., 19 (1840).
1Baltimore & H. de G. T. Co. wv.
Union R. R. Co., 85 Md., 224 (1871);
Brooklyn, C. & J. R. R. Co. v. Brooklyn
OC. RB. R. Co., 88 Barb., 420 (1861), in-
volving street railways; New York &
H. R. R. Co. v, Forty-second St. & G.
8. F. R. RB. Co., 50 Barb., 309 (1867);
Matter of Central R. R. Co. of L. 1,1
T. & C., 419 (1873); Starr v. Camden &
Atl R. BR. Co., 24 N. J. L., 592 (1854),
holding that a railroad cannot cross a
‘highway without compensating the
owner of the soil; Morris & E. R. R.
Co. v. Central RB. R., etc., 81 N. J. L,
206 (1865), holding that express power

to cross another track is not necessary ;'

_Greenwich v. Easton & A. R. R. Co., 24
N. J. Eq., 217 (1874), holding that power
to change the grade of a highway can-
not be exercised merely for the conven-

ience of a railroad; a necessity must
exist. Under a state statute a railroad.
may cross another railroad which is
chartered by the federal government.
Union Pac. R’y Co, v. Leavenworth,
etc., R’y Co., 29 Fed. Rep., 728 (1887).
As to the pleadings in an action by one
corporation to condemn property of the
other, see Denver, etc., Co. v. Union,
etc., R’y, 84 Fed. Rep., 386 (1888). In
order to pass through a narrow pass,
one railroad may condemn such parts
of another railroad right of way as the
latter is not using, where its right of
way is broad enough for two tracks.
Armiston, etc., R. R. v. Jacksonville,
etc., R. R.,'2 S. Rep., 710 (1887), A
water-works company may cross a
canal of a canal company. Lehigh, etc.,
R. R. v. Orange, etc., Co., 7 Atl. Rep.,
659 (N. J., 1887). One railroad cannot
condemn.and use a parallel track of an-
other for eleven miles, under a statute
authorizing crossings. Illinois Central
R. R. v. Chicago, etc., R. R., 13 N. E.
Rep., 140 (IIL, 1887). Cy. 6S. Rep., 404.
A stockholder in a road which is in a
receiver's hands may enjoin another
railroad from crossing it. Howlett v.
N.Y., ete., Ry, 14 Abb. N. C., 828 (1882),
2 See § 676, supra. In Chicago, etc.,
R’y v. Loewenthal, 93 Ill, 483 (1879), a
mortgage given by a railroad company
which had done a little grading and
then abandoned the enterprise was not
allowed as a lien upon the road as com-
pleted by a later railroad company that
used the same right of way. Third
Ave. R. RB. Co. v. N. Y. EL. RB. RB. Co.,
Superior Ct., N. Y. Daily Reg., July 14,
1887. See, also, Morris ‘& Essex R. R.
v. Blair, 9 N. J. Eq., 685 (1866), holding

859
§ 698.j

INTRA VIRES ACTS AND CONTRACTS.

with the use of streets by railroads, both as regards the right to
use the streets and as regards the liability therefor.)

A corporation can appropriate by the right of eminent domain
such property only as is necessary for the purpose for which it is

that if neither of the charters of two
railroads prescribe rules for the deter-
mination of the right of way the road
which first actually surveys its line is en-
titled to the prior right. See, also, Troy,
etc., R. R. v. Boston, etc., R. R., 86. N. Y.,
107 (1881). See Pierce on Railroads,
p. 155, for many cases on conflict and
interference of prior and subsequent
grants, etc. A railroad right of way does
not lapse merely because it is not used
for thirteen years. Barlow v. Chicago,
ete., R. R., 29 Iowa, 276 (1870). The
state may convey to another railroad an
abandoned right of way. Long aban-
donment does not destroy the right of
way. Noll v. Dubuque, etc., R. R., 32
Iowa, 66 (1871); Henderson v. Central,
etc., R’y, 21 Fed. Rep., 358 (1884), See,
also, Chicago, etc., R. R. vu. M. & A. R.
Co., 57 lowa, 249 (1881), holding that
where a railroad company built and
conducted its lines over a portion of the
route set forth in its charter, but failed
fora period of five years to build its
road over another portion, or to evince
an intention of building the same,
that, as to the part not taken and
used for the purposes of the company,
there had been an abandonment, and
another company was allowed to con-
demn and take the same for railroad
purposes. Prior in location and survey
held prior in right to another that built
actually. R’y Co. v. Alling, 99 U.S.,
463 (1878). After certain steps are
taken by a railroad as to its location,
another railroad cannot secure the same
land by lease, etc. Rochester, etc., R.
Rv. N. Y., ete, BR. R., 110 N. Y., 128
(1888).

1“ The right to use the public streets
of a city for the purpose of laying gas-
pipes therein is, in my opinion, a fran-
chise which the state alone can confer.”
Jersey City Gas, Co. vu. Dwight, 29 N. J.

Eq., 242 (1878). As to elevated roads,

see the leading case of Story v. N. Y. El.

R. R., 90 N. Y., 122 (1882). A city can-
not authorize a railroad to use the
streets unless the statutes give to the
city that power. Atlantic, etc, R. R.
v. St. Louis, 66 Mo., 228 (1878). <As to
private injury, see Uline v. N.Y. G.,
etc., R. R., 101 N. Y., 98 (1886); Lahr v,
Metropolitan, etc., R’y, 104 id., 268
(1887). A provision in a city’s permit
to agas company that the permit and
the company’s property should be for-
feited in case of a combination with or
sale to another company is not enforce-
able in case such combination is made,
Detroit v. Mutual Gaslight Co., 48
Mich., 594 (1880). '.A stockholder may
sue to enjoin his company from laying
tracks on a city street without author-
ity. Teachout v. Des Moines, etc., St.
R’y, 88 N. W. Rep., 145 (lowa, 1888).
See, also, Wiggins Ferry Co. v. East
St..Louis, etc., R’y, 107 IIL, 450 (1883),
where an extension was held to be au-
thorized by the charter. A grant by a
city to a railroad, under statutory per-
mission of a right to occupy a street, is
irrevocable. Port of Mobile v. Louis-
ville, etc., R. R., 4 South. Rep., 106
(Ala., 1888). Permission given by a
municipality to a railroad to occupy a
street, if done within a certain time,

‘lapses absolutely and ipso facto if not

occupied within that time. Atchison,
etc., R’y v. Nave, 17 Pac. Rep., 587
(Kan., 1888). A railroad occupying a
street with the consent of the munici-
pality is nevertheless liable to adjacent
property owners. Denver, etc., R’y v.
Bourne, 16 Pac. Rep., 839 (Col., 1888).
That a railroad operated in a street may
be a nuisance, see Thompson v. Penn.
R. R., 14 Atl. Rep., 897 (N. J., 1888). In
general see, also, Daly v. Georgia, etc.,
R. B., 7S. E. Rep., 146 (Ga., 1888),

860

. {on.-xXLI.
CH. XL. ]

INTRA VIRES ACTS AND CONTRACTS.

[§ 693.

authorized to take! When land is taken by a corporation for a
specific purpose, its use by the corporation is limited to that par-
ticular purpose.* The statute may confer power upon a corporation
to take possession of land pending proceedings to condemn it?
The legislature is the sole judge of whether it is expedient to
allow corporations to take land and property for a public use;* but
it is for the courts to decide whether or not the contemplated use

is a public one.

1 Hill v, Western Vermont R. R. Co.,
32 Vt., 68 (1859), holding that a railroad
could not take more land than was nec-
essary for its use; Lance’s Appeal, 55
Pa. St., 16 (1867); Giesy v. Cincinnati,

Wil. & Z, RB. RB. Co., 4 O. St., 808 (18545;

‘Oregon Cascade R. R. Co. v Baily, 3
Oreg., 164 (1869) ; Rensselaer &S.R.R.
Co. v. Davis, 48 N, Y., 187 (1870), hold-
ing that the taking land for the purpose
of speculation or sale or to prevent in-
terference by competing lines or in aid
of a collateral ‘line isnot lawful. May
take for necessary use in the immediate
future, Re Staten Island R. T. Co., 1038
N. Y., 251 (1886) A railroad may at
any time condemn Jand for workshops,
Chicago, etc., R. R. Co, v. Wilson, 17
TIL, 128 (1855); Lodge v. Philadelphia &

W. B. Co., 8 Phila., 845 (1871), holding

that ground may be taken for the de-
posit of waste earth. Land may be
taken for terminal: facilities. In re
New York, etc., R. R. Co., 46 N. Y., 646
(1871); In re New York, etc., R. R. Co.,
TUN. Y., 248 (1874); In re New York,
etc., R. R. Co., 63 N. Y., 826 (1875),

* Proprietors, etc., v. Nashua & L, R.
R. Co., 104 Mass., 1 (1870), where land
taken by a railroad for the purposes of
its business wasrented to manufacturers,
it was held that the owner of the fee
might maintain a writ of entry to es-
tablish his right and recover damages;
Imlay v. Union Branch R. R. Co., 26
Conn,, 255 (1857), holding that land
taken for a highway:was not convert-
ible intoacommon, See Binney’s Case,
2 Bland, 99, 142 (1829).

3 Bonaparte vy. Comden & A. RB. R.,
Bald., 205 (1880); Fox v. Western Pa.
R. R, Co., 81 Cal., 588 (1867); Cushman

v. Smith, 84 Me., 247 (1852); Nichols v. °
Somerset & K.-R. R. Co., 43 Me., 356
(1857); Currier v. Marrietta & Cin. R. R.
Co., 11 O. St., 228 (1860), holding that a
general power to take land for a road
does not authorize taking land for tem-
porary use; Hazen'v. Boston’ & M. R. R.
Co., 2 Gray, 574 (1854), holding that
taking land for temporary use without
authority and befdre condemnation is
trespass; Baltimore & S. R.. R. Co, v,..
Compton, 2 Gill, 20 (1844), where a, rail-
road which had relocated its line was
held liable in damages to an owner
upon its former line. The statute au-
thorizing condemnation cannot affect
acts committed before the statute was
passed, In re Townsend, 89 N. Y., 171
(1868). ie

4People v. Smith, 21 N. Y., 595 (1860);
Tidewater Co. v. Coster, 18 N, J. Eq.,
518 (1866), affirming §S. C., id., 55; Tal-
bot v. Hudson, 16 Gray, 417 (1860);
Water-works Co. v. Burkhart, 41 Ind.,
864 (1872), holding that the legislature
may delegate its right of decision upon
this point to the courts or to other
bodies; Tyler v. Beacher, 44 Vt., 648
(1871); Concord R. R. Co. v. Greeley, 17
N. H., 47 (1845); Chicago, ete, R. R.

“Co. v. Town of Lake, 71 Ill., 833 (1874);

Bankhead v. Brown, 25 Iowa, 540 (1868);
Morris & E. R. R. Co, v. Newark, 10 N.
J. Eg., 852 (1855); Matter of New York
& H. R. R. R. Co., 63 N, Y., 826 (1875),
affirming 5 Hun, 20, holding that within
the limits of its charter the corporation
may judge of its wants and fix the loca-
tion of lands to be taken, and the courts
will not interfere if a reasonable neces-
sity is shown.

5 Talbot v. Hudson, 16 Gray, 417 (1860);

861

f
¥ 693.]

INTRA VIRES AOTS AND CONTRACTS.

[cH. XII.

It has been held that a public use is involved, and that land and
property may be taken under the power of eminent domain by
railroads;! by a mining company ;* by manufactories;* by natural-
gas corporations;‘ by gas companies;* by pipe lines;* also for
booms;? for a cemetery;® for an aqueduct;® and for parks.”

In order to constitute a public use it is not necessary that the

Tyler v. Beacher, 44 Vt., 648 (1871);

‘Concord RB. R. Co. v. Greeley, 17 N. H.,

47 (1845); Matter of Deansville Ceme-
tery; 66 N. Y., 569 (1876); Chicago, R. I.
& Pac. R. R. Co. v. Town of Lake, 71
Ill, 888 (1874): Bankhead v. Brown, 25
Towa, 540 (1868); Costa M. R, Co. wv.
Moss, 23 Cal., 324 (1863); Oregon Cas-
cade R. R. Co. v. Bailey, 3 Oreg., 164
(1869), holding that a grant of the power
for any other than a public use is void.

See, also, Re Niagara, etc, R. R., 108

N. Y., 375 (1888). A coal company can-
not take land by eminent domain to use
for a tramway to run coal from the
mine to a railroad. Sholl v. German,
etc., Co., 10 N. E. Rep., 199 (ILl., 1887).
Under the general railroad act of New
York the courts judge of the necessity,
of exercising the right of eminent do-
main by railroads, Rensselaer & S, R.
R. Co. v. Davis, 48 N. Y., 187 (1870);
Matter of New York Central R. R. Co.,
66 N. Y., 407 (1876).

1Olcott v. The Supervisors, 16 Wall.,
678 (1872); Secombe v. Railroad Co., 23
Wall., 108 (1874); Bonaparte v. Camden
& A. R. BR. Co., Bald., 205 (1830); New
York & H. R. R. Co. v, Kip, 46 N. Y.,
546 (1871); Buffalo & N. Y. C. R. R. Oo.
v, Brainard, 9 N. Y., 100 (1853); Bradley
v. New York & N. H. R. R. Co,, 21

Conn., 294 (1851); Davis v. Tuscumbia, |

Cc. & D. BR. BR. Co, 4 8. & P. (Ala.), 421
(1838); Brown v, Beatty, 34 Miss., 227
(1857); Swan v. Williams, 2 Mich., 427
(1852); Weir v. St. Paul, 8. & F. R. R.
Co., 18 Minn., 155 (1872); San Francisco,
A. & 8, R.-R. Co. v. Caldwell, 31 Cal.,
867 (1866); Gibson v. Mason, 5 Nev., 288
(1869); Concord R. R. Co. vu. Greeley, 17
N. H., 47 (1845), holding that ‘public

use” does not mean ‘public owner-
ship.”

2 New Central Coal Co. v. St. George’s
C. & I. Co., 37 Md., 587 (1872), involving
arailroad to transport coal. See, also,
Harvey v. Thomas, 10 Watts, 65 (1840);
Hand Gold Mining Co. v. Parker, 5¢
Ga., 419 (1877), giving right of way for
water to be used in mining. 4

3Great Falls Mfg. Co. uv. Fernald, 47
N. H., 444 (1867), giving. the right to
back water upon land without the con-
sent of the owner; Tyler v. Bacher, 44
Vt., 648 (1871); French v. Braintree
Mfg. Co., 23 Pick., 216 (1839), holding
that the rights conferred may be lost
by not using them for an unreasonable
length of time. Contra, Hay v. The
Coliver Co., 8 Barb., 47 (1848), where it
was said that in New York the right
had nat been granted to mills of any
kind, and that Massachusetts and Maine
were the only exceptions to the general
rule, but that a few states afforded

- facilities in such cases to. a limited ex-

tent; Guernsey v. Burlington, 4 Dill.,
872 (1877), by statute of Kansas,

4Bloomfield & R., etc., Co. v. Rich-
ardson, 63 Barb., 487 (1872), giving right
of way for transporting gas,

5 Johnston’s Appeal, 7 Atl, Rep., 167
(Pa., 1886).

6 West Va. Trans, Co. v. Volcanic Oil,
etc., Co., 5 W. Va,, 882 (1872).

7 Patterson v. Mississippi R. R. B. Co.,
8 Dill, 465 (1875); Attorney-General v.
Evart Booming Co., 84 Mich., 462 (1876),

8 Matter of Deansville Cemetery, 66
N. Y¥., 569 (1876),

§Lumbard v, Stearns, 58 Mass., 60
(1849),

10 Matter of Central Park, 68 Barb.,
282 (1872),

862
{
Cu. XL] INTRA VIRES ACTS AND CONTRACTS.

[x 693.
improvement should directly benefit the people of the whole state,
but the benefit may affect only a particular community.! And the
power of eminent domain may be exercised by individuals as well
as by corporations.” The right of a railroad to property taken by
it by virtue of eminent domain is that of an easement. The fee
remains in the person from whom the right of way is taken.’
When a corporation possesses a right of way or other valuable
easement, and the corporation is dissolved or abandons that ease-
ment, it is a difficult question to. determine whether the easement
reverts to the owners of the fee or belongs to the state, or is an
casset of the corporation.‘ A foreign corporation may be author-
ized by statute to take land by right of eminent domain for public

use.5

1 Bloomfield, etc,, R. Co. v. Richard-
son, 63 Barb., 487 (1872).

2Moran v. Lydecker, 27 Hun, 582
(1882). A railroad may be built by an
individual. Bank of Middlebury v.
Edgerton, 80 Vt., 182 (1858). But see
dictum that railroad built without ex-
press authority from state is a nuisance.
Raritan R, R. Co, v. Delaware, etc.,
Canal Co., 18 N. J. Eq., 546, 570 (1867);
Penn. R. R. Co. v. Nat’l R’y Co., 28 id.,
441 (1873); Evie R’y Co. v. Delaware,
ete, R. R. Co., 21 id., 283 (1871). Con-
tra, dictum, Hughes v. Chester, etc.,
R’y, 1 Dr. & Sm., 524, 546 (1861); S. C.
on appeal, 8 DeG., F. & J., 852 (1861);
Commonwealth v. Erie & N. E. R. R.,
27 Pa. St., 339 (1856), holding that where
a railroad authorized to be built on a
certain line is made upon another it is
a mere nuisance on every highway it
touches in its illegal course. A contract
whereby a street railway turns over
part of its line to a private firm, and
the latter uses it exclusively for ite pri-
vate business and uses freight cars, the
contract is void as against public policy.
A joint property owner may enjoin such

"use. Fanning v. Osborne, 102 N.. Y., 441
(1886).

3 Aldrich v. Drury, 8 R. 1., 554 (1867),
holding, however, that a railroad may
grade and use the earth for filling, etc.,
in other places, but cannot sell the
earth to other parties; Chapin v. Sulli-
van R. R. Co., 89 N. HL, 564 (1859), to

same effect. A deed toa railroad of a
right of way may be so drawn as to
convey a fee. Ballard v. Louisville,
‘ete., R. R., 58. W. Rep., 484 (Ky., 1887).
The fee and.the right to the trees, etc.,
upon it and to the minerals, etc., below
it remain in the owner subject to such
easement. “Blake v. Rich, 34 N. H., 282
(1856); Henry v. Dubuque & Pac. R. R.
Co., 2 Iowa, 288 (1855). The original
proprietor may use the property in any
way consistent with the public right.
Jackson v, Hathaway, 15 John., 447
(1818); Blake v. Rich, 34 N. H., 282
(1856); Adams v. Rivers, 11 Barb., 390
1851); and see Jackson v. Rutland,
etc., B. R. Co., 25 Vt., 151 (1858); Dean
v, Sullivan R. R. Co., 22 N. H., 816, 821
(1851); Quimby v. Vermont Central,
etc., 23 Vt., 387 (1851); Weston v. Fos-
ter, 7 Metc., 297 (1848); Giesy v. Cin-
cinnati, W. & Z. R. Co., 4 O. St., 308
(1854); Henry v. Dubuque, etc, P. R.
Co., 2 Iowa, 288 (1855).

4 This question is discussed in §§ 641,
642, supra. If the time limited for the
completion of the road has expired, this
is a defense to eminent domain pro-
ceedings. Morris, éte., R. R, Co. vu
Central, etc., R. R., 81 N. J. L., 205
(1865). Cf. § 637, supra.

5 Morris Canal & B, Co. v. Townsend,
24 Barb,, 658 (1857); Matter of Town-
send, 3° N, Y., 171 (1868); Union, etc.,
R. R. Co. v. East, etc., R. BR. Co., 14
Ga., 827 (1858); Dodge v. City of Coun-

863
INTRA VIRES ACTS AND CONTRACTS. [oH. XLt.

§ 694.]

A tax levied upon a city or upon certain neoneren owners for -
the purpose of improving highways is constitutional, and is not an
exercise of the power of eminent domain, even though a private
corporation is benefited thereby.’ So, also, a statute “which regu-
lates the limit to which wharves may be built, ? or which regulates
the speed, crossings and management of railroads, is an exercise of
the police power of the state, and not of the power of eminent
domain.’

The constitutions of the various states generally prohibit the
taking of private property for public use without just compensa-
tion to the owner. A similar provision exists in the federal con-
stitution, but it applies only to the federal government and not to
the states. The provision in the federal constitution prohibiting
the passing of statutes which impair the obligation of contracts
does not limit the state’s power of eminent domain;* and even
where the state has contracted with a corporation to give it’exclu-
sive privileges, or exempt it from taxation, or confer upon it any
other valuable rights or property, any or all of these rights may
be taken away from the corporation under the state’s power of
eminent domain.°

§ 694. Foreign corporations.— The corporations of one state may
exercise any or all of their powers in another state, unless the latter
state by its statutes, decisions or policy forbids.. This right of a
corporation to act and contract in any state is due to the spirit of
comity between the states. It is constitutional, however, for a state
to refuse to allow that privilege.’

3 See § 675, supra.
#Barron v Baltimore, 7 Pet., 248

cil Bluffs, 57 Iowa, 560 (1881). Unless
so authorized the former does not ex-

ist. Holbert v. St. Louis, etc., R. R. Co.,
45 id., 28 (1876); Re N. Y,, ete., R’y, 35
Hun, 220 (1885); Abbott v. N. Y., etc.,
R. R., 15 N. E. Rep., 91 (Mass., 1888).
In Nebraska the constitution prohibits
» the exercise of the power of eminent do-
main by a foreign corporation. State
v. Scott, 36 N. W. Rep., 121 (Neb., 1888);
Trester v. Missouri P. R’y, 36 N. W.
’Rep., 502 (Neb., 1888).

1Gilman v. Sheboygan, 2 Black, 510
(1862); People v. Brooklyn, 4 N. Y., 419
(1851); Litchfield v. Vernon, 41 N. Y.,
1283. (1869). This question is involved
also in a more radical way in munici-
pal aid to railroads, See chapter VI,
supra,

2Commonwealth v. Alger, 61 Mass.,
53 (1851),

(1883); Withers v. Buckley, 20 How.,
84 (1857); Pumpelly v. Green Bay Co.,
13 Wall., 166 (1871). As to the right of
the federal government to exercise the
power of eminent domain, see Am. L..

‘Reg., March-April, 1887.

5 West River Bridge Co. v. Dix, 6
How., 507 (1847).

6See Cooley on Constitutional Lim-
itations, 5th ed., p. 841.

‘These principles of law have often
been enunciated by the courts. See
8$ 237-289, supra,’ and notes. See,.
also, Bank of Augusta v. Earle, 13 Pet.,
519 (1889); Western Union Tel. Co. v.
Mazer, 28 O. St., 521 (1876); Newburg
Petroleum Co. v. Weare, 27 O. St., 343
(1875); Paul v. Virginia, 8 Wall., 168
(1868) ; affirmed in Ducat vw Shicace,

‘ 864
OH. XLI.]

INTRA VIRES ACTS AND CONTRACTS.

[§ 694.

Foreign corporations must exercise their powers and franchises
in accordance with the laws of the state where they do business,
and.in consonance with the principle of its general policy. A
state legislature may exclude foreign corporations from doing
business within its borders;? or impose such terms, conditions and

restrictions as it may see fit.®

etc., 10 Wall., 410 (1870); Matthews wv.
Thedlogical Seminary, 2 Brews., 541
(1868); Land Grant R’y & T. Co. v. Cof-
fey County, 6 Kan., 245 (1870);, Ducat
v Chicago, 48 Ill., 172 (1868); Williams
v. Cresswell, 51 Miss., 817 (1876); Had-
ley v. Freedman’s, etc., Bank, 2-Tenn.
Ch., 122 (1874); Liverpool Ins. Co. v.
Massachusetts, 10 Wall., 566 (1870); S.
_ ©, 100 Mass., 581; Kennebec Co. v,
Augusta Ins., etc., Co., 6 Gray, 204
(1856); Day v. Ogdensburg, etc.,.R. R.
Co., 107 N. Y., 129 (1887), where a do-
mestic corporation leased a railroad in
another state; Kerchner v. Gettys, 18
S. C., 521; Mutual, etc., Ins., Co. vu
Davis, 12 N. Y., 569 (1835). See, also,
Cooley, -Con. Law, p. 183; Wharton,
Conflict Laws, § 48. In Diamond Match
Co. v. Powers, 51 Mich., 145 (1883), the
court refused to mandamus the defend-
ant, a register of deeds, to allow the
plaintiff, a foreign corporation, to make
abstracts of all the land in the county,
there béing no evidence of the corpo-
rate powers of the plaintiff.

1 Runyon v. Coster, 14 Pet., 122 (1840);
Re Comstock, 3 Sawyer, 218 (1874);
Pheenix Ins. Co. v. Commonwealth, 5
Bush, 68 (1868); Gill v. Kentucky &
Col. G. & S. M. Co., 7 Bush, 635 (1870);
Martin v, Mobile & O. R. R. Co., 7 Bush,
116 (1870); Milnor v. New York & N.
H. R. R. Co., 58 N. Y., 363 (1873); Fra-
zier v. Wilcox, 4 Rob. (La.), 518 (1848);
Bard v. Poole, 12 N. Y., 495 (1855); Dia-
mond Match Co. v. Powers, 51 Mich.,
145 (1883), holding that a state will not
grant to a foreign corporation privileges
which its charter may not permit it to
exercise; Pierce v. Crompton, 18 R. L,
312 (1881); Stevens v. Pratt, 101 Ill, 206
(1882), holding that the general policy!
of a state restricting foreign corpora-

(55)

tions must be expressed in some affirm-
ative way; Blair v. Perpetual Ins. Co.,
10 Mo., 564 (1847); 2 Kent, Com., 284,
285. Foreign corporations doing busi-
ness in a state which prescribes statu-
tory provisions for that business cannot
in contracts do away with the applica-
tion to it of these provisions. Fletcher
v. New York, etc., Ins. Co., 18 Fed.
Rep., 526 (1882). The same rule applies
to an insurance corporation chartered
by congress. It must conform to state
restrictions, Daly v. National, etc., Ins.
Co., 64 Ind.; 1 (1878),

2Slaughter v. Commonwealth, 18
Gratt., 767 (1856); Doyle v. Continental
Life Ins. Co., 94 U. 8., 535 (1876); Fire
Department v. Noble, 3 E. D. Smith,
440 (1854); People v. Fire Asso, of Phila.,
92 N. Y., 311 (1883); Atterbury v. Knox,
4B. Mon. (Ky.) 91, (1848), where for-
eign corporations were forbidden from

_ banking. ‘

8Paul v. Virginia, 8 Wall., 168 (1868),
affirmed in Ducat v. Chicago, 10 Wall.,
4, 110 (1870); Doyle v. Continental Life
Ins. Co., 94 U. S., 535 (1876); Lafayette
Ins. Co. v.. French, 18 How., 404 (1855),
holding that a corporation doing busi-
ness in such state is presumed to assent
to its rules; State v. Lathrop, 10 La.
Ann., 398 (1855); State v. Fosdick, 21
La. Ann., 434 (1869); State v. American
Express Co., 7 Biss., 280 (1876); Fire

‘Department v. Noble, 3 E. D. Smith,

440 (1854); Smith v. Alvord, 68 Barb.,
415 (1866); Merrick v. Van Santvoord,
34 N. Y., 208 (1866); Lamb v. Lamb, 13
Bank. Reg., 17 (1876); Farmers’, etc.,
Ins, Co. v. Harrah, 47 Ind., 236 (1874);
Cincinnati Mutual, etc., Co. v. Rosen-
thal, 55 Ill., 85 (1879), holding that a
charter power to transact business in
other states does not exempt them from

865
§ 694.]

INTRA VIRES AOTS AND CONTRAOTS.

_ [| CH. 'XLI.

The validity and enforceability of a contract by a foreign corpo-
ration are determined not by its charter, but by the law prevailing

where the contract is made.!
local restrictions; Cooper Mfg. Co. v.
Ferguson, 113 U. §., 727 (1885), holding
that a single act without the purpose of
doing others in a state does not bring
a foreign corporation within the statute
of the state forbidding it to transact
business there without complying with
certain requirements. “Where the stat-
ute requires foreign corporations to file
a statement of their condition before
doing business, a foreign corporation
cannot enforce a contract until it does
so. Wood, etc., Co. v. Coldwell, 54 Ind.,
271 (1876). But it may recover from an
agent money paid to him forit. U.S.
Ex. Co. v. Lucas, 36 Ind., 361 (1871). See
§ 696; Northwestern Mut. L. I. Co...
Overholt, 4 Dill., 288 (1878), where the
requirement not being made a condition
precedent to doing business, a foreign
- corporation which had not complied
with it was held to have power to take
a mortgage upon real estate; People v.
Howard, 50 Mich., 239 (1888); People
v. Fire Asso. of Phila., 92 N. Y., 311
(1883); Goldsmith v. Home Ins. Co., 62
Ga., 879 (1879), where a statute impos-
ing upon foreign corporations the same
license taxes as their own states impose
was held constitutional; Home Ins. Co.
v. Davis, 29 Mich., 288 (1874); Slaughter
v. Commonwealth, 18 Gratt., 767 (1835);
American Union Tel. Co. v. Western

Union! Tel. Co., 67 Ala., 26 (1880);.

Matthews v. Theological Seminary, 2
Brews., 541 (1868); Commonwealth v.
Milton, 12 B. Mon., 212 (1851); Tioga
R. R. Co. v. Blossburg, etc., R. R. Co.,
20 Wall., 187 (1878), prohibiting foreign
corporations from setting up the statute
of limitations. In New York, by stat-
ute, all corporations, foreign and do-
mestic, are forbidden to set up usury
as a defense. A railroad company, by
going into another state and having
and operating a road there, subjects it-
self to the legislation of that state.

%.

Stone v. Ill. Cent. R. R. Co., 116 U.S.,
347 (1885). Foreign corporations may
be compelled to pay a license fee be-
fore doing business. Pembina, etc.,
Co. v. Penn, 124 U. S., 181 (1888). Quo
warranto lies against foreign corpora-
tions doing business in a state contrary
to its statute. State v. Fidelity, etc.,
Co., 41 N. W. Rep., 108 (Minn., 1888), |
1A charter provision prohibiting the
corporation from selling its bonds below
par does not invalidate the bonds when
sold to a bona fide purchaser in another
state. Ellsworth v. St. Louis, etc., R.
R.Co., 98 N. 'Y., 553 (1885). See, also,
Philadelphia Loan Co. v. Towner, 18
Conn., 249 (1839); Nichols v. Mase, 94
N. Y., 160 (1883), holding that the
holder of bonds issued by a foreign cor-
poration valid upon their face is not
bound to show that the provisions of
the statute which authorized their issue
have been complied with; Bard v.
Poole, 12 N. Y., 495 (1855), holding that.
a corporation prohibited by its charter
from contracting for interest over a
certain rate may, ‘however, contract for
a greater rate in another state under
whose laws it is legal. To same effect,
Knox v. Bank of U.S., 26 Miss., 655
(1854), and Bank of U.S. v. Owens, 2
Pet., 528 (1829) ; American Life Ins. Co.
v. Dobbin, Hill & Denio (Lalor’s Supp.),
252 (1848), where, construing the New
York restraining act, it was held that a
foreign corporation could purchase and
sell promissory notes but not bills of
exchange; Bank of Chillicothe v. Dodge,
8 Barb., 233 (1850), holding that money
paid by a foreign corporation in vio-
lation of a local law is recoverable
by it. For cases under a statute of
Missouri, see Bank of Louisville v.
Young, 37 Mo., 398 (1866); Connecticut
Mut. Life Ins. Co, uv, Albert, 39 Mo., 181
(1866); Long v. Long, 79 Mo., 646 (1888).
But corporate creditors and stockbold- —

866
CH. XLI. |

INTRA VIRES ACTS AND CONTRACTS.

[§ 695.

_ § 695. In the exercise of comity between the states and territo-.
ries, corporations created in one of them may acquire, hold and
transfer real property in another the same as individuals.’

This right of foreign corporations to acquire and hold real estate
is, however, subject to the statutory laws of the state where the
land is situated, and also to its public policy and the general policy
of its statutes relating to domestic corporations.”

ers are subject to provisions and regu-
lations contained in the charter. Can-
ada Southern R’y Co, v. Gebhard, 109
U. §8., 536 (1888), where a statutory
recapitalization was held to be valid;
Hitchcock v. U. 8 B’k, 7 Ala, 485
(1845), holding that the corporation can
exercise only the powers given to it by
its charter. A foreign corporation may
take any interest allowed by the place
of the contract, though such interest is
usurious by its charter. Hitchcock v,
U.S. Bk, 7 Ala., 386 (1845).

1 Cowell v. Springs Co., 100 U. S., 55
(1879); Runyan v. Lessee of Coster, 14
Pet., 122, 180 (1840); Christian Union
v. Yount, 101 U. S., 352 (1879): Barnes
vw. Suddard, 117 Ill., 237 (1886); New
Haven Land Co. v. Tilton, 19 Fed. Rep.,
73 (1884); Lathrop v. Commercial Bank,
8 Dana, 114 (1839); American Bible
Soc. v. Marshall, 15 O. St., 537 (1864);
State v. Boston, C. & M. R. Co., 25 Vt.,
433 (1853); Claremont Bridge v. Royal,
42 Vt., 780, '736 (1870); Lumbard v. Al-
drich, 8 N. H., 31 (1885); Cincinnati,
U. & F. W. R. Co., 28 Ind., 502 (1867);
Silver Lake Bank v. North, 4 Johns,
Ch., 370 (1820), holding that a corpora-
tion of another state may file a bill for
the sale of land in New York under

_& mortgage taken to secure a debt;
Columbus Buggy Co. v. Graves, 108
Il., 459 (1884); Black v. Delaware & R.
C. Co., 22 N. J. Eq., 180, 422 (1871), the
chancellor saying ‘‘ that a foreign cor-
poration may own property in this state
and transact business, and make’ con-
tracts in it to be performed here, is too
weil settled to discuss;” Northern
Transportation Co. v. Chicago, 7 Biss.,
45, 52 (1874); Lebanon Savings Bank v.
Hollenback, 29 Minn., 322 (1882); New

York Dry Dock Co, v. Hicks, 5 McLean,
111 (1850); Whitman Gold & S. M.
Co. v. Baker, 3 Nev., 386 (1867); Met-
ropolitan Bank v, Godfrey, 23 IIL,
579 (1860), holding also that foreign
corporations can only acquire and
hold lands upon the terms and condi-
tions and in the way authorized by the
law of their creation, They may loan
money on real estate mortgages. . See
§ 689, supra. Cf. Northwestern Mutual
L. I. Co. v. Overholt, 4 Dill., 287 (1878) 3
Morris Canal & B. Co.'v. Townsend, 24
Barb., 658 (1857), where a statute au-
thorizing a foreign corporation to ap-
propriate land on payment of a just
compensation to its owners was held
valid (affirmed as to this point, Matter
of Townsend, 39 N. Y., 171— 1868);
Stewart v. Lehigh Valley R. R. Co., 38
N. J. L., 505 (1875); National Trust Co.
v. Murphy, 80 N. J. Eq., 408 (1879);
Sherwood v. American Bible Soc., 1
Keyes, 561 (1864); Elston v. Piggott, 94
Ind., 14 (1883), to the effect that it may
hold land purchased at a judicial sale
under a decree it its favor. By statute
of New York passed May 24, 1887 (Gen,
Stat. N. Y., 1887, ch. 458), corporations
organized in any other state of the
United States, doing business in New
York, are empowered to purchase and
hold such real estate in that state as is
necessary for their use and corporate
purposes in the transaction~-of their
business in the state, and to convey the
same in like manner with the corpora-
tions organized in New York. As-to
the recent act of congress prohibiting
foreign corporations from owning land
in the territories, see Potter v. Rio, etc.,
Co., 17 Pac. Rep., 609 (N. M., 1888).

2 Christian Union v. Yount, 101 U. S.,

867
§ 695.]

A state may restrict the right
and hold real property within its

852 (1879); Carroll v..East St. Louis, 67
Tll., 568 (1878), where a corporation
chartered by Connecticut for the sole
purpose of buying and selling land was
held not competent to acquire land in
Illinois, because such business was con-
trary to the general policy of the state
and tended to create perpetuities;
United States Trust Co. v. Lee, 73 IL,
142 (1874), in which the court denied
the right of a foreign corporation to hold
real estate in Illinois beyond what is
necessary to the transaction of its busi-
ness.or the collection of its debts, either
for its own benefit or in trust for others;
United States Mortgage Co. v. Gross, 7
Cent. L. J., 226 (1878), in which the
Illinois rule was explained so as not to
exclude foreign corporations empow-
ered to loan money on real estate secu-
rities; Thompson v. Waters, 25 Mich.,

214 (1872); Holbert v. St. Louis, K. C...

& N. R. Co., 45 Iowa, 28 (1876), holding
that statutes authorizing railroads to
take land for their right of way do not
apply to foreign corporations; Farmers’
Loan & T. Co. v. McKinney, 6 McLean,
1 (1858); Farmers’ Loan & T. Co. v.
Harmony F, & M. T. Co., 51 Barb., 33
(1868); White v, Howard, 46 N. Y., 144
(1871); Hollis v. Drew Theological Sem.,
95 N. Y., 166 (1884), holding that foreign
corporations are subject to the New
York statute which declares invalid a
devise or bequest in a will executed less
than two months before the death of
the testator. For the decisions in Penn-
sylvania on its statutes and policy ex-
cluding foreign corporations from hold-
ing land, see § 692. Where land is
claimed by a foreign corporation the
courts of the state in which the land is
situated will construe its charter and
determine whether it authorizes the
corporation to hold the real estate.
Boyce v. St. Louis, 29 Barb., 650 (1859);
White v. Howard, 38 Conn., 842 (1871);:
Commonwealth v. N. Y., L. E. & W.
R. R. Co, i R’y & Corp. L. J., 108

INTRA VIRES ACTS AND CONTRACTS.

(CH. XLI.

of foreign corporations to take
borders.'

(Penn., 1887), holding that a foreign
corporation not authorized to hold real
estate cannot avoid its disability by
holding stock in a domestic corporation
which owns land. And in construing
such foreign charters the court will con-
sider the decisions of the courts of the
state granting them though it will
not be bound thereby. Thompson v,
Waters, 25 Mich., 214 (1872); Boyce ‘v,
St. Louis, 29 Barb., 650 (1859). The right
of a corporation to’ hold realty is deter-
mined not alone by its charter but by
the statutes of the state where the land
is. A corporate deed in a chain of title
is presumed good. Tarpey v. Deseret
Salt Co., 17 Pac. Rep., 631 (Utah, 1888),
If a foreign corporation is not author
ized to hold real estate it cannot take
land in another state by devise. Boyca
v. St. Louis, 29 Barb., 650 (1859); Stark.
weather v. American Bible Soc., 72 IIL,
50 (1874) See, also, § 692. On the
other hand, if by its charter, either ex-
pressly or impliedly, a corporation may
take lands by devise, a provision of law
in its own state prohibiting corporations
from taking by devise unless expressly
authorized to do so will not prevent
its taking by devise in another state.

American Bible Soc. v. Marshail, | 15

O. St., 587 (1864); Thompson v. Swoope,
24 Pa. St., 474 (1855); Chamberlain v.
Chamberlain, 28 N. Y., 424 (1871), but

-here the bequest was of personal prop-

erty. To same effect, Sherwood v.
American Bible Soc., 4 Abb, App. Cas.,
227 (1864). A devise of land to a foreign
corporation is void unless authorized by
the law of the state where it lies, even
though such foreign corporation is duly

_ authorized by its charter to take it.

White v. Howard, 46 N. Y., 144 (1871),

followed in United States v. Fox, 94

U. &., 815 (1876), declaring void a devise
of land in New York to the government

of the United States.

1 Runyon v, Coster, 14 Pet,, 122 (1840);
Thompson v. Waters, 25 Mich., 214

868
« ’

&
4:

CH. XLI. ] INTRA VIRES ACTS- AND CONTRACTS.

[$ 696.

§ 696. Restrictions by a state on foreign corporations must not
conflict with provisions of the federal constitution. Thus, the re-
striction must not interfere with commerce,! or with the jurisdiction
of the federal courts,’ or with the removal of causes from state to
United States courts.* Corporations are not “citizens” entitled
to the privileges and immunities of citizens in the several states
within the meaning of article 4, section 2, of the constitution of
the United States.‘

A requirement that a foreign corporation shall duly execute a
‘power of attorney appointing an agent upon whom service of pro-
cess may be made, or obtain a certificate from a state officer, is
valid. Before complying with it a corporation has no power to
contract or sue in the state. It was formerly held that contracts
made before complying with the requirement were void;* but the

(1872); United States v. Fox, 94 U.S,
815 (1876).

1 Pensacola Tel. Co. v. Western Union

Tel. Co., 96 U. S., 1 (1877); Telegraph
Co, v. Texas, 105 U. S., 460 (1881); Rae
v. Grand Trunk R. R. Co., 14 Fed. Rep.,
401 (1882). See, also, § 672c.

2Baltimore & O. R. R. Co. v. Cary,
28 O. St., 208 (1876); Moore v. Chicago
& St. P.R. R. Co., 21 Fed. Rep., 817
(1884). See, also, chapter XLV.

3’ Barron v. Burnside, 121 U. S., 186
(1886); Doyle v. Continental Life Ins.
Co., 94 U. S., 585 (1876); Insurance Co.

v. Morse, 20 Wall., 445 (1874); Shelby v..

Hoffman, 7 O. St., 451 (1857); Hartford
Fire Ins. Co. v. Doyle, 6 Biss., 461 (1875).
A statute requiring foreign corporations
to agree not to remove suits in the fed-
eral courts is void. 'Rece v. Newport,
etc., Co., 9S. E. Rep., 212 (W. Va., 1889),

4Paul v. Virginia, 8 Wall., 168 (1868),
holding that a statute requiring foreign
insurance companies to obtain a license
before doing business is not in conflict
with that clause; Western Union Tel.
Co. v. Mayer, 28 O. St., 521 (1876); Tatem
v. Wright, 23 N. J. L., 444 (1852); War-
ren Mfg. Co, v. Aftna Ins. Co., 2 Paine,
C. C., 501 (1832); Fire Department v.
Noble, 3 E. D. Smith, 440 (1854); Ducat
v. Chicago, 48 Ill., 172 (1868); Cincin-
nati Mutual, etc., Co. v. Rosenthal, 55
Ill, 85 (1879); Pierce v. Crompton, 18 R.
I., 312 (1881).

5 Re Comstock, 8 Sawyer, 218 (1874);
Bank of British Col. v. Page, 6 Oreg.,
431 (1877); Semple v. Bank of British
Col., 5 Sawyer, 88 (1878); Oregon & W.
T. & I. Co. v. Rathbun, 5 Sawyer, 82
(1877), but here a note made in Oregon
but payable in Scotland treated was as
if made in Scotland; American Button,
etc., Co. v. Moore, 2 Dak., 280 (1880),
holding under a similar statute that the
foreign corporation could sue in the
courts of the state but could not trans-
act business. To same effect, Utley v.
Clark-Gardner L. M. Co., 4 Col., 369
(1878); Columbus Ins. Co. v. Walsh, 18
Mo., 224 (1853); Union Ceniral L. I. Co,
v. Thomas, 46 Ind., 44 (1874): Farmers’
& Mer. Ins. Co, v. Harrah, 47 Ind., 236
(1874); Smith v. Little, 67 Ind., 549
(1879), holding that the statute referred
only to actions upon contract and not
to suits in replevin; Beard v. Union &
A. Pub, Co., 71 Ala., 60 (1881), holding
that soliciting subscriptions for a for-
eign newspaper is not ‘‘ doing business”
within the meaning of such a statute;
New England F. & M.I. Co. v. Robin-
son, 25 Ind., 536 (1865), holding, how-
ever, that a contract is not void as to a
citizen; Morgan v. White, 101 Ind., 418
(1884), holding that requiring an agent
to file his authority to act does not ap-
ply toa ‘general agent appointing local
agents; American Ins, Co. v. Butler, 70
Ind., 1 (1880), holding that a failure of

869
§ 696. |

INTRA VIRES ACTS AND CONTRACTS.

 

[CH. XL.

later doctrine is that they are not void though not enforceable until
compliance,! and that the corporation cannot defeat its obligations

by such a defense.’

Restrictions upon foreign insurance companies are strictly en-
forced.’ A state may require a foreign corporation to pay a license

the state officer to furnish the proper

certificate after the corporation has sub-

stantially complied with the statute
does not affect its contracts; A‘tna Ins.
Co. v. Harvey, 11 Wis.; 394 (1860).

}Walter A. Wood Mowing Co. wv.
Caldwell, 54 Ind., 270. (1876); - Singer
Mfg. Co. v. Brown, 64 Ind., 548 (1878);
_Elston v. Piggott, 94 Ind., 14 (1888),
holding that advantage of the failure to
comply can only be taken by answer in
abatement, and that a foreclosure and
title under sale cannot be questioned on
that ground; American Ins. Co. v. But-
ler, 70 Ind., 1 (1880); Behler v. German
Mut. F. I. Co,, 68 Ind., 347 (1879); Na-
‘tional Mut. Ins. Co. v. Pursell, 10 Allen,
232 (1865); Hagerman v. Empire Slate
Co,, 97 Pa. St., 584 (1881), holding that
a foreign corporation cannot take ad-
vantage of its own neglect to file the
power of attorney; and that service
upon an acting agent will suffice in such
case; American Ins. Co. v, Wellman, 69
Ind., 418 (1879); American, etc., Co. v.
East, etc., R. R. Co., 37 Fed. Rep., 242
(1889). Stockholders dealing with their
corporations cannot defeat their con-
tracts by alleging that it was a foreign
corporation and had not complied with
the state laws. Kilgore v. Smith, 15
Atl. Rep., 698 (Pa., 1888).

2Swan v. Watertown Ins, Co., 96 Pa,
St., 37 (1880), holding that a foreign cor-
poration doing business in the state
cannot set up its failure to comply with
the provisions of the statute relating to
such companies to defeat an action on
contract.

3Cincinnati Mutual, etc., Co. v. Ros-
enthal, 55 IIl., 85 (1879), holding that a
premium note given to a foreign com-
pany which had not obtained a certifi-
cate from the state auditor as required
was void in its hands. To same effect,

Hoffman v. Banks, 41 Ind., 1 (1872), and
Roche v. Ladd, 1 Allen, 441 (1861);
tna Ins. Co. v. Harvey, 11 Wis., 394
(1860), where filing statement of condi-
tion with secretary of state was re-
quired; Lycoming Fire Ins. Co. w
Wheelock, 55 Vt., 526 (1883); Charter
Oak Ins. Co. v. Sawyer, 44 Wis., 387
(1878), but holding that they may sue
for or secure debts due from residents
;without complying with such statutes;
Williams v. Cheney, 3 Gray, 215 (1855),
but holding that a premium note void
for this reason is valid in the hands of a
bona jide holder for value without no--
tice; Jones v. Smith, 3 Gray, 500 (1855),
holding that the payee of a premium
note must prove compliance by the in-
surance company with the statute; Ehr-
man v. Teutonia Ins. Co., 1 McCrary,
123 (1880), holding that if the statute
merely imposes penalties for non-com-
pliance with such requirements the
contracts of a foreign corporation not
complying are not void. To same effect
as Ehrman, etc., King v. National M. &
E. Co., 4 Mont., 1 (1881); Clark v. Mid-
dieton, 19 Mo., 53 (1853), holding that
the failure of an agency to file a state-
ment was not to make void a prom-
ise to pay premium notes given to the
foreign insurance company; Brooklyn
Life Ins. Co. v. Bledsoe, 52 -Ala., 538
(1875), holding that a foreign corpora-
tion cannot avail itself of its own fail-
ure to comply; Union Mut. L. I. Co. v.
MeMillan, 24 O. St., 67 (1873), holding
that neglect to comply does not make
void a policy issued by a foreign com-
pany nor excuse the holder from pay-
ing premiums; Eureka Ins, Co. wv °
Parks, 1 Cin. Super. Ct., 574 (1871),
holding that a company which issues
a policy on property in another state
from its home office is not subject

870
 

CH. XLI.]

fee before doing business within its borders.)

INTRA VIRES. ACTS AND CONTRACTS.

[$ 697.

And in nearly all

particulars foreign corporations must ‘bend to the will of the state.
§ 697. A corporation which is created by the joint act of two or
more states is considered to consist of as many corporations as
there are states which have joined in creating it. ‘The relation of
these constituent corporations towards each other is the same as
though they were different corporations having the same name.”

to the restricting statute of that state,
though ‘it has paid a commission for ob-
taining the insurance to a resident
thereof; Mutual Ben. Life, etc, v.
Bales, 92 Pa. St., 354 (1879), holding
that it cannot recover from sureties
upon an agent’s bond unless it has
complied with a statute requiring the
agents to be commissioned. To same
effect, Thorne. v. Travelers’ Ins. Co., 80
Pa. St., 15 (1875); but in U. S. Life Ins.
Co. v. Adams, 7 Biss,, 30 (1878), it was
held that compliance with a restraining
act is not essential to the validity of an
agent’s bond. Lamb v. Bowser, 7 Biss.,
315 (1876), holding that a policy of in-
surance is not void because the com-
pany has not complied. with the stat-
ate. Cf. Isle, etc., Co. v. Sec’y of State,
43 N. W. Rep., 14 (Mich., 1889). As a
defense to a note, see Dudley v. Collier,
6 8. Rep., 304 (Ala., 1889). See, also,
§ 694, notes; Charter Oak, etc., Ins. Co.
v.. Sawyer, 44 Wis., 394 (1860), holding
that it may sue or take security for a
debt without complying with the local
act. To same effect, Columbus Ins. Co,
v. Walsh, 18 Me., 229 (1853). See, also,
People v. Howard, 50 Mich., 239 (1883).

1 Walker v. City of Springfield, 94 IIL,
364 (1880); Pembina, etc., Co. v. Penn,
124 U. S., 181 (1888).

2Farnum v. Blackstone Canal Corp.,
1 Sumn., 46 (1830), where it was said
that their corporate existence is not
merged, but that a unity of stock and
interest only is created. To same effect,
Quincy Bridge Co. v. Adams County, 6
Rep., 553 (1878); Covington, etc., Bridge
Co. v, Mayer, 31 O. St., 317 (1877), hold-
ing that it has a legal domicile in each
state and may hold its meetings in

either; but as to meetings, see, contra,
Aspinwall v. O. & M. R. R. Co., 20 Ind.,
492 (1863); Matter of Sage, 70 N. Y., 220
(1877), holding that the consolidation of
foreign and domestic: corporations cre-
ates a domestic corporation. Cf. Chi-
cago, etc., R. R. Co, v. Minn., etc., R..
R, Co., 29 Fed. Rep., 387 (1836); Sprague
v. Hartford & Providence R. R. Co., 5
R. I., 2383 (1858), holding that itis not
so far a foreign corporation as to render
it liable to attachment; State v. North-
ern Central R. R. Co., 18 Md. 198 (1861);
Fisk v. Chicago, R, I. & Pac. R. R. Co.,
4 Abb. Pr., N. S., 378 (1868), holding
that its ulira vires acts are not rendered
valid by, the action of the legislature of
one of the states which created it con-
firming them; Port Royal R. R. Co. v.
Hammond, 58 Ga., 523 (1877), holding
that the courts of one of the states cre-
ating it cannot compel it to go into the
other state and specifically execute a
contract; Muller v. Downs, 94 U.S,
445 (1876), holding that, for the purpose
of the jurisdiction of the federal courts,
a corporation created by one state,
though consolidated with another of
the same name, incorporated by another
state, is considered as existing under
the law of the former state alone. To
similar effect, Clark v. Barnard, 108
U.S., 486 (1883); Blackburn v. Selma
M. & M.R.R. Co., 2 Flip., 525 (1879),
a foreclosure case; Copeland v. Mem-
phis, ete., R. R. Co., 83 Woods, 651
(1878); City of Covington v. Covington,
etc., Co., 10 Bush, 69 (1873), upholding
a charter amendment made by one state
only; but see Canal Co. v. R. R, Co., 2
Bland’s Ch. (Md.), 1, 181 (1832); Railroad
Co. v. Harris, 12 Wall., 65 (1870), where |

871
8 697.]

INTRA VIRRS ACTS AND CONTRACTS.

[cH. XLI.

For the purposes of jurisdiction a distinction is made between
a corporation chartered by two or more states and one that is char-
tered by but one state and merely authorized by the laws of other
states to do business in them. Where it is chartered by two or
more states it is considered a citizen of each of the chartering states."
But where a corporation created in one state is merely authorized

a railroad chartered by two states was
‘held to be a unity as related to its re-
sponsibility for damages for injuries to
apassenger. A foreign railroad corpo-
ration, having complied with the law
of Nebraska as to filing its charter,
etc., was held to be a corporation
of that-state. Stout uv, Sioux City,
etc., R. R. Co., 8 Fed. Rep., 794 (1881).
Contra, Chicago, etc., R. R. Co. v
Minn., etc., R. R. Co., 29 Fed. Rep.,
337 (1886). But a foreign corporation
does not become a Nebraska corpo-
ration by purchasing a railroad in Ne-
braska. Chicago, etc., R’y Co. v. Dakota
Co., 28 Fed. Rep., 219 (1886). A corpo-
-ration of Virginia became a corporation
of West Virginia by the creation of the
latter State, the corporation being in its
jurisdiction. Farmers’ B’k v. Gettinger,
4 W. Va., 305 (1870). See, also, Chi-
cago, etc.,:R. R. Co. v. Auditor-Gen-
eral, 53 Mich., 79 (1884), involving a
question of taxation. Merely author-
izing a foreign corporation to do busi-
ness does not make it a domestic corpo-
ration. County Court v. Baltimore & O.
R. R., 35 Fed. Rep., 161 (1888); Balti-
more & O. R. R. Co, v. Ford, 35 Fed.
Rep., 170 (1888).

1Graham v. Boston, etc., R. BR. Co.;
118 U. S., 161, 168 (1886); Ohio & Miss,
Ry Co, v. Wheeler, 1 Black, 286 (1861);
Nashua & L. R. R. Co. v. Boston & L.
R. R. Co., 8 Fed. Rep., 458 (1881); Horne
v. Boston & M. R. R..Co., 18 Fed. Rep.,
50 (1882); Nashua & L. R. R. Co. wv.
Boston & L. R. R. Co., 19 Fed. Rep.,
804 (1883); Quincy, etc., Bridge Co. v.
County of Adams, 88 IIll:, 615 (1878), a
taxation case; Port Royal R. R. Co. v.
Hammond, 58 Ga., 523 (1877), holding
that the courts of one of the chartering
states cannot compel it to perform spe-'

cifically a contract to be executed in
one of the others; Eaton & H. RB. BR.
Co. v. Hunt, 20 Ind., 457 (18638), a case
of consolidation; Hart v. Boston, H. &
E. R. R. Co., 40 Conn., 539 (1873), hold-
ing that a decree of dissolution in one
of the states affects only its franchise
in that state; State v. Metz, 32 N. J. L.,
199 (1867), a taxation case; Richardson
v. Vermont & M. R’y Co., 44 Vt., 618:
(1872); Memphis, etc., R. R. v. Alabama,
107U. S., 581 (1882) ; Blackburn v. Selma,.
etc., R. R., 2 Flip., 525 (1879); State v.
Northern, etc., R. R., 18 Md., 193 (1861);.
Colglazier v. Louisville, N. A. & C. RB. R.
Co., 22 Fed. Rep., 568 (1884); Pacific
R. R, v. Missouri Pac. R’y Co., 23 Fed.
Rep., 565 (1883); Racine & M. R. R. v,
Farmers’ L. & T. Co., 49 Tl., 349 (1868),
a case of consolidation. Hence, if the
corporation is sued in one of these
states it cannot assert that it is a corpo-
ration of the other state and thus re-
move the case to the federal courts.
Union Trust Co. v. Rochester, etc., R. R.
Co., 29 Fed. Rep., 609 (1886), holding
also that a judgment against it is con-
clusive on it as a corporation in both
states; Re United States Rolling Stock
Co., 57 How. Pr., 16 (1878), passing
upon receiver’s certificates issued in dif-
ferent states; Cleveland, etc., R. R. Co.
v. Spear, 56 Pa. St., 325 (1867), that the
courts of one state follow the courts of
the other in its construction of the
charter; Commonwealth v. Pittsburg,
etc., R. R. Co., 58 Pa. St., 26 (1868), hold-
ing that re-incorporating in another state
is not cause for forfeiture of charter;

‘Ohio & M. R. R. Co. v. Weber, 96 IIL,

443 (1880), a taxation case; Chicago, ete.,
R’y Co. v, Auditor-General, 53 Mich.,
79 (1884), the same; McGregor vw, Erie
Ry Co., 85 N. J. L, 115 (1871).

872
it

OH. XLI. | INTRA VIRES ACTS AND CONTRACTS.

[§ 698.
by statute to transact business in others, it is a citizen only of the
state which chartered it.!’ A foreign corporation may sue or be
sued in the courts of a state whenever jurisdiction is legally obtained.!

§ 698. Torts committed by corporations.— After much discussion
the general rule is now firmly established that corporations cannot
make defense to actions in tort by claiming that the acts by which
the wrongs have been committed are not within: the corporate

powers conferred upon them.

1Penn. R, R. Co. v. St. Louis, ete., R.
R. Co., 118 U. S., 290 (1885); Railroad
Co. v. Koontz, 104 U. S.,5 (1881); Mis-
souri, K. & T. v. Texas & St. L. R’y Co.,
10 Fed. Rep., 497 (1881); Callahan v.
Louisville & N. R. Co., 11 Fed. Rep.,
536 (1882), where the defendant also
operated a leased line in the state;
Moore v. Chicago, ‘St. P., etc., R’y Co.,
21 Fed. Rep., 817 (1884), passing upon
the right to remove a cause to the U. &
court. To same effect is Wilkinson v.
Delaware, L. & W.R. R. Co., 22 Fed.
Rep., 358 (1884), where it operated a
leased line in the state; Baltimore &
O. R. R. Co. v. Gallahue’s Adm’r, 12
Gratt., 658 (1855); Dennistoun v. N. Y.,
etc,, R.'R. Co., 1 Hill (N. Y.), 62 (1856);
Baltimore & O. R. R. Co. v. Wightman,
29 Gratt., 481 (1877), holding that it may
be sued for injuries received on a leased
line in the state where such leased line
is situated. Tosame effect, Baltimore &
O. R. R. Co. v. Noell, 32 Gratt., 394

(1879;; Phillipsburgh Bank v. Lacka-

wanna R. R. Co., 27 N. J. L., 206 (1858),
holding that in New Jersey attachment
will not lie against a foreign corpora-
tion owning property there, and author-
ized by that state to do business there.

To same effect, Martin v. Mobile & O.'
R. BR. Co., 7 Bush, 116 (1870). Neverthe-.

less such a corporation is foreign. “State
v. Delaware, etc., BR. R. Co., 80 N. J.
L., 478 (1864); Milnor v. New York & N.
H. R. RB. Co., 58 N. Y., 363 (1878), but
holding that a foreign railroad corpora-
tion authorized to ext nd its line into
another. state is liable the same as a
domestic corporation.. Cf. Pennsyl-
vania R. R. Co. wv. St. Louis, etc., R.

R. Co., supra; but see Memphis, etc.,
R. R. Co. v. Alabama, 107 U. S., 581
(1882), and Clark v. Barnard, 108 U.
S., 486, 451 (1882). The whole ques-
tion turns upon the wording of the
statute. Goodlett v. Louisville R. R.
Co., 122 U. S., 891 (1887), a case where
the rule stated in the text prevailed.
As contrary to the rule, see Goshorn v.
Supervisors, 1 W. Va., 308 (1865). In
Baltimore, etc., R. R. Co. v. Wight’s
Adm’r, 29 Gratt. (Va.), 481 (1877), a
foreign corporation which had leased a
railroad in the state was held to be a

domestic corporation as regards the
right to remove a case to the federal

court. See, also, Wilbur v. Atlantic,
etc., R’y Co., 2 Woods, 409 (1875), hold-
ing that a federal court sitting in one
state will appoint a receiver over the
property in both; Bishop v. Brainard,
28 Conn., 289 (1859); City of Wheeling
v. Baltimore, 1 Hughes, 90 (1862), hold-
ing that a stockholder in one state may
sue the duplicate corporation in the other
state in the federal courts on astockhold-
er’s cause of action, An Illinois and
Wisconsin corporation is a Wisconsin
corporation only as regards injuries in-
flicted there. R. R. Co. v. Whitton,
138 Wall., 270 (1871). Cf. in general,
County of Alleghany v. Cleveland, etc.,
R. R.; 51 Pa. St., 228 (1865); Ohio & M.
R. R. v. Wheeler, 1 Black, 286 (1861).

2This question is fully discussed in
88 757, 758, infra.

3National Bank v, Graham, 100 U.
S., 609, 702 (1879), where a bank was
held in damages forthe loss, occasioned
by the gross negligence of its agents, of
a special deposit which it had received

. 873 t
§ 698.]

INTRA VIRES ACTS AND CONTRACTS.

[oH. XLL

Where it is necessary to prove a fraudulent or malicious intent,
it is held, by the great weight of modern authority, that the fraud
or malice of the authorized agents of corporations is to be imputed

to the corporations themselves.

with the knowledge and acquiescence of

its officers and directors; Baltimore &.

P. R. Co. v. Fifth Bapt. Ch., 108 U.5S.,
317 (1882), for maintaining a nuisance;
Philadelphia, W. & B. R. Co. v. Quigley,
21 How., 202, 210 (1858), for libel pub-
lished by the board of directors, Camp-
bell, J., saying: ‘‘ For acts done by the
agents of a corporation, either in con-
tractu or in delicto, in the course of its
business and of their employment, the
corporation is responsible as an individ-
ual under similar circumstances.” This
rule was directly affirmed and applied
to amunicipal corporation in Salt'Lake
City v. Hollister, 118 U. 8., 256 (1885).
See New York & New Hampshire R.
Co. v. Schuyler, 84 N. Y., 30 (1865);
State v. Morris & E. R. Co., 23 N. J. L.,
860, 867 (1852), and cases cited; Brokaw
v. New Jersey R. & T. Co,, 32 N. J. L.,
828 (1867), an action for assault and bat-
tery (ejecting a passenger); Ramsden v.
Boston & A. R. R. Co., 104 Mass., 117
(1870), assault and battery (seizing prop-
erty for fare); Peebles v. Patapsco
Guano Co., 77 N. C. 233 (1877), a case of
deceit and fraudulent representations
made by agents; Chicago & I. R. RB
Co. v. Davis, 86 Ill, 20 (1877), trespass,
see sub; Vinas v. Merchants’ M. I. Co.,
27 La, Ann., 367 (1875), slander and libel
sanctioned by a corporation; Western
Union v. Eyser, 2 Col., 141 (1878), in-
jury to person; Goodspeed v. East Had-
dam Bank, 22 Conn., 529 (1853), vexa-
tious suit; South & N. A. R. Co. wv
Chappell, 61 Ala., 527 (1878), injury to
person; Hays v. Houston & G. N. R.
Co., 46 Tex., 272 (1876), expulsion from
train; Fishkill Savings, etc., v. National
Bank, etc., 80 N. Y., 162 (1880), con-
version of bonds by cashier; Ranger v.
Great Western R’y Co., 5 H. L. C., 71,
86 (1854); Lewis v. Meier, 14 Fed. Rep.,
311 (1882); Philadelphia & R. R. R. Co.

v. Derby, 14 How., 468 (1852), injury to
person in a collision caused by the neg-
ligence of employees; Hussey v. King,
8 S. E. Rep., 923 (N. .C., 1887), mali-
cious prosecution and false imprison-
ment, the court saying: ‘‘These arti-
ficial persons have become so numerous
and entered so largely into the every-
day transactions of life that it has be-
come the policy of the law to subject.
them, as far as practicable, to the same
civil liability for wrongful acts as at-
tach to natural persons;” Denver & R.

G. R’y 'v. Harris,'122 U. 8., 597 (1886),
assault and battery; N, J. S. Co. v
Brockett, 121 U. S., 687 (1887), undue
violence by employee; Fishkill Savings
Inst. v. National Bank, 80 N. Y., 162,
168 (1880), involving an action for dam-
‘ages for the conversion of bonds by a
cashier for the benefit of the ' bank;
Baltimore & P. R. R. Co, v. Fifth Bapt.
Ch., 108 U. S., 317, 380 (1882); New
Orleans, J. & G. N. R. Co. v. Bailey,
40 Miss., 395 (1866). <A railroad which
has engaged in transporting passengers
by a steamboat cannot defeat an action
for negligence by asserting that the use
of the steamboat by it,was ultra vires.
Gruber v. Washington, etc., R. R. Co.,
92 N. C., 1 (1885); South Wales R’y Co,
v. Redmond, 10 C. B., N. S., 675 (1861),
Contra, Gunn v. Central R. R., 74 Ga.,
509 (1885), where a railroad was held
not responsible for a tort (an injury to
the person) committed by a firm in
which it had become, though illegally,
a partner.

1 National Ex. Co, v. Drew, 2 Macqueen,
App., 103 (1855); New Brunswick &
Can. R’y v, Conybeare, 9 H. L. Cas., 711,
740 (1862); Barwick v. English Joint-
stock Bank, L. R., 2 Exch., 259 (1867);
Philadelphia, W. & B, R. R. v. Quigley,
21 How., 202 (1858); Whitfield v. South-
eastern R’y, El, B. & E., 115 (1858);

8748
Ci. XLI.]

INTRA VIRES ACTS AND CONTRACTS.

[$ 698.

Although a corporation may not strictly be guilty of deceit, yet
it is held liable for damages resulting from the false and fraudulent

representations of its agents.!

A corporation may be held liable in damages for a libel;? for

Vance v, Erie R’y, 32 N. J. L., 334 (1867);
Copley v. Grover & Baker Co., 2 Woods,
494 (1873); Goodspeed v. East Haddam
Bank, 22 Conn., 580 (1853); Carter v.
Howe Machine Co., 51 Md., 290 (1878);
Wheless v. Second National Bank, 1
Baxter, 469 (1872); Williams v. Planters’
Ins. Co., 57 Miss., '759 (1880); Iron Mount-
ain Bank v. Mercantile Bank, 4 Mo.
App., 505 (1877); Walker v. Southeast-
ern R’y, L. R., 5 C. P., 640 (1870); Ed-
wards v. Midland R’y, L. R., 6 Q. B.
Div., 287 (1880); Jeffersonville R. R. Co.
pv. Rogers, 28 Md., 1, 7 (1867).

: 1Mackay v. Commercial Bank, etc.,
L. R., 5 Privy C., 394 (1874), in which a
bank was held liable in damages for the
act of its cashier in sending a telegram
purporting to be from an individual by
means of which other parties were in-
duced to accept bills of exchange in
which the bank was interested; Ranger
v. Great Western R’y Co.,'5 H. of L,
Cas,,. 72, 86 (1854), Lord Chancellor
Cranworth saying: ‘‘If the agents em-
ployed conductthemselves fraudulently,
so that if they were acting for private
employers the persons for whom they
were acting would have been affected
by their fraud, the same principles must
prevail where the principal under whom
the agent acts is a corporation;” Bar-
wick v. English J. 8. Bank, L. R., 2
Exch., 259 (1867), where a bank was
held liable for false representations of
its manager as to the cyedit of an indi-
vidual; Erie City J. Wks. v. Barber,
106 Pa. St., 125 (1884), where a manu-
facturing company was held in dam-
ages for the deceit of its agent in know-
ingly selling a defective boiler and rep-
resenting it as sound and safe; Peebles
v. Patapsco Guano Co., 77 N. C., 2383
(1877), involving representations of an
agent that a spurious article was gen-
uine; Cragie v. Hadley, 99 N. Y., 131

(1885), where an officer of a bank re-
ceiving a deposit after he knew the
bank was insolvent and its paper pro-—
tested, it was held to be a deceit which
justified a rescission of the contract and
a recovery of the deposit; New York
& N. H. R. Co. v. Schuyler, 34 N, Y., 30
(1865), involving an issue of false certifi-
cates of stock; Butler v. Watkins, 13
‘Wall., 456 (1871), where an agent of a
corporation; by pretending to negotiate
for the purchase of a patent, succeeded
in keeping the patented article: out of
the market. The corporation was held
liable in damages; Candy v. Globe Rub-
ber Co., 87 N. J. Eq., 175 (1883), where
a sale to a corporation made upon false
representations of its officers as to its
solvency and prosperity was rescinded;
Fogg v. Griffin, 2 Allen, 1 (1861), where
in an action upon premium notes a
defense that they had been procured
through false and fraudulent represen-
tations by an agent of the company and
of the amount of capital stock paid in
was held good. ‘See, also, Etting uv
Bank of the U. S., 11 Wheat., 59 (1826) ;
Lamm v. Port Deposit Homestead, etc.,
49 Md., 283 (1878); Carter v. Howe Ma-
chine Co., 51 Md., 290 (1878); Western
B’k, etc., v. Addie, L. R., 1 Sc. App.,
145 (1867), and §$ 1389, 140, 157, supra.
?Philadelphia, W. & B. R, Co. uv.
Quigley, 21 How., 202 (1858), in which
the court held that the publication of a
libelous letter received in evidence by
a committee of investigation in a bound
volume of its transactions, by authority.
of the board of directors of a railroad
company, constituted a sufficient ground
for 4n action for libel against the corpo-
ration; Van Arnam ȴ, Billstein, 102 N.
Y., 855 (1886); Howe Machine Co. v.
Sonder, 58 Ga., 64 (1877), where the
publication of libelous matter was
caused by an agent within the scope of

875
§ 698.]

INTRA VIRES ACTS AND CONTRACTS.

[CH. XLI.'

assault and battery committed by its officers, agents or servants
in executing the rules and regulations or orders of the corporation ;*
for damages for arrest and false imprisonment;? for knowingly

his authority; Maynard v. Fireman’s
Fund I. Co., 34 Cal., 49; 47 Cal., 207
(1867); Johnson v. St. Louis Dispatch
Co., 2 Mo. App., 565 (1876); Fogg v.
Boston, etc., R. R. Co., 20 N. E. Rep., 109

(Mass., 1889); Van Aernam v. McCune,

32 Hun, 316 (1884), holding that a joint-
stock association under the New York
Statute is liable to an action for libel;
Payne v. Western & A. R. R. Co., 18
Lea (Tenn.),' 507 (1884); Evening Jour-
nal Asso. v. McDermott, 44 N. J. L., 480
(1882); Detroit Daily Post Co. v. Me-
Arthur, 16 Mich., 447 (1868); Aldrich v.
Press Printing Co., 9 Minn., 188 (1864);
Hewitt v. Pioneer-Press Co., 23 Minn.,
178 (1876); Vinas v. Merchants’ ‘Mutual
Ins. Co., 27 La, Ann., 867 (1875); Whit-
field v. Southeastern R’y Co., EL, B. &
E., 115 (1858); Tench v. Great Western
R’y Co., 82 U. C., Q. B., 452 (1872). In
Brennan v. Tracy, 2 Mo. App., 540 (1876),
it was said that a corporation may be
subjected to a criminal libel. A rail-
road may be held liable for a libel of its
division agent in reporting causes of
discharge of employees to other agents.
Bacon v. Mich. C. R. R., 38 N. W. Rep.,
181 (Mich., 1887). Corporation is not
liable for a slander by its president as

to the right of a person to sell goods,

Perkins v. Maysville, etc., Assoc., 108.
W. Rep., 659 (Ky., 1889). A corporation
was held liable for a libel in Missouri,
etc., R’y Co. v. Richmond, 11 S. W.
Rep.,.555 (Texas, 1889).

1Brokaw v. New Jersey R. & T. Co.,
32 .N. J. L., 328 (1867), for ejecting a pas-
senger from a train, and in such action
an individual may be joined as a de-

fendant with a corporation; Denver &

R. G. R’y v. Harris, 122 U. 8., 597 (1886);
Hewett v. Swift, 8 Allen, 420 (1862),
for using undue force in removing a
minor from a freight depot under an
order of the president directing em-
ployees to keep boys out of the depot;

payment of fare.
mestic Sewing M. Co., 183 Mass., 563

Denver, etc., R’y v. Harris, 122 U. S.,
597 (1887), where forcible possession
was taken of: a railroad; Ramsden v.
Boston & A. R. R. Co., 104 Mass., 117
(1870), involving an assault by a con-
ductor in seizing property to secure
And see Frost v. Do-

(1882); Jackson v. Second Ave. R. R. Co.,
47 N. Y., 274 (1872), holding that if an .
illegal fare be demanded by a conductor
any force used in ejecting a passenger
renders the railway company liable for ’
an assault and battery; Pennsylvania
R. R. Co. v. Vandiver, 42 Pa. St., 365
(1862), for ejecting a passenger and
thereby causing his death; Moore v.
Fitchburg R. R. Co., 4 Gray, 465 (1855),
where, in an action for assault in eject-
ing from a train, there being a verdict
against the corporation but in favor of
the conductor, the joinder of the de-
fendants was held not to be a ground
of exception by the corporation; Chi,
cago & N. W. R. R. Co. v. Williams, 55
Til, 185 (1870), for preventing a colored’
woman from entering a car set apart for
ladies; Jeffersonville R. R. Co. v. Rog-
ers, 28 Ind., 1 (1867); St. Louis, Alton
& ©. R. BR. Co. vw. Dalby, 19 Ill, 353
(1857), holding that in Illinois the proper
remedy is trespass on the case.

2Owlsley v. Montgomery & W. P. R.
R. Co., 87 Ala., 560 (1861), where a cor-
poration was held liable for false im-
prisonment; Wheeler, etc., Co. v. Boyce,
13 Pac. Rep., 609 (Kan., 1887); American
Exp. Co. v. Patterson, 73 Ind., 430 (1881);
Lynch v. Metropolitan E. R. Co., 90 N.,
Y., 77 (1882); Carter v. Howe Machine
Co., 51 Md., 290 (1878); Hussey v. King,
358. E. Rep., 923(N. C., 1887), holding the
corporation liable for injuries received
in collisions resulting from the negli-
gence or carelessness of the employees;
Philadelphia & R. R. Co. v. Derby, 14
How., 408 (1852),

876
oH. X1I.]

INTRA VIRES ACTS AND CONTRACTS.

[§ 698.

keeping a dangerous animal;1 for a vexatious civil suit;? for tres-
pass guare clausum fregit;* for malicious prosecution;‘ for a nui-
sance;° for conversion;* and for a conspiracy.7

Upon the question whether or not corporations are liable in ex-
emplary or punitive damages for wrongs maliciously committed by
their agents when acting in the line of their duty, the authorities

‘1Stiles v. Cardiff Steam Nav. ‘Co., 33
L. J., Q. B., 310 (1864); but in this case
the action failed for want of proof that
the dangerous character of the animal
was known to any one whose knowl-
edge could, in point of law, be that of
the corporation.

? Goodspeed v. Hast Haddam Bank, 22
Conn., 530 (1853); Wheless v. Second
Nat’l Bank, 1 Bax. (Tenn.), 469 (1872).

3Maund v. Monmouthshire Canal Co.,
4 Man. & G., 452 (1842), where the tres-
pass consisted in breaking and entering
canal locks and carrying away barges
by an agent acting within the scope of
his authority; Chicago, etc., R. R. Co.
v. Davis, 86 Ill., 20 (1876).. :

{Vance v. Erie R’y Co., 32 N. J. L,
334 (1867); Reed v. Home Savings Bank,
180 Mass., 443 (1881); Ricord v. Central
‘Pacific R. R. Co., 15 Nev., 167 (1880),

-holding that prosecution of criminal
offenders is one of the objects and priv-
ileges of railroad corporations, and
therefore they are liable for malicious
prosecutions; Morton v. Metropolitan
Life Ins, Co., 84 Hun, 366 (1884); Jordan
v, Alabama G. 8. R. R. Co., 74 Ala., 85
(1883), overruling Owsley v. Montgom-
ery & W. P. R. Co., 87 Ala., 560 (1861);
Boogher v. Life Asso. of America, 75
Mo., 819 (1882), overruling Gillett v.
Missouri V. R. R. Co., 55 Mo., 315;
Copley v. Grover & Baker Co., 2 Woods,
294 (1878); Carter v. Howe Machine Co.,

51 Md., 290 (1878); Williams v. Planters’

Ins. Co., 57 Miss., 759 (1880); Iron Mount-
ain' Bank v. Mercantile Bank, 4 Mo.
App., 505 (1877). See, also, Brennan v.
Tracy, 2 Mo. App., 540 (1876); Wheless
v, Second Nat’i Bank, 1 Baxt. (Tenn.),
469 (1872); Philadelphia, W. & B. R. R.
Co, v. Quigley, 21 How., 202 (1858). In
-the English case of Stevens v. Midland

C. Ry Co., 10 Exch,, 352 (1854), where
the power to sue a corporation for mali-
cious prosecution was questioned, Lord
Alderson was of opinion that there
was no such power. See Walker v.
Southeastern R’y Co, L. B., 5 C. P.,
640 (1870), where it was held that the
action would not lie because the act out
of which the case originated, was not
within the scope of the authority of the
servant who committed it. And in the
cases of Henderson v, Midland R’y Co.,
20 W. R., 28 (1871), and Abrath »,
Northeastern R’y Co., 55 L. T. R., 63
(1886), Lord Bramwell, in dissenting
opinions, insisted that corporations ag-
gregate cannot be liable for malicious
prosecution, because they are incapable
of malice or motive. Hussey v. King,
8 S. E. Rep., 923 (N. C., 1887). A cor-
poration is liable for a malicious prose-
cution jointly with the officer who
instituted the prosecution. No allega-
tion of his authority to act is necessary.
Hussey v. King, 8 8. E. Rep., 928 (N. C.,
1887).

5 Baltimore, ete., R. R. Co, v, Fifth
Bap. Ch., 108 U. S., 317 (1883); Pennsyl-
vania R. R. v. Angel, 7 Atl. Rep:, 482
(N. J., 1886).

§ Beach v. Fulton B’k, 7 Cowen, 485
(1827); Dater v. Troy, etc., R. R. Co., 2

f

Hill, 629 (1842); Mayor, etc., v. Bailey, '

2 Denio, 433 (1845), holding that an ac-
tion of trespass or trover or an action
on the case for malfeasance lies against
a corporation; Chestnut, etc., Co. v
Rutter, 4 8. & R., 6 (1818), holding that

trespass on the case lies against a corpo-
ration for stopping a water-course. See,

also, chapter KXXV.

7 Buffalo Lubricating Oil Co. v. Stand-
ard Oil Co., 106 N. Y., 669 (1887); 42
Hun, 153. ;

877

1
™

§ 698.] INTRA VIRES ACTS AND CONTRACTS. oH. XLI.

are far from uniform. In one line of cases the courts adhere to the
ordinary rule that a principal cannot be held for more than the
actual damage resulting from the acts of his agent or for those im-
mediately and necessarily growing out of them, and therefore re-
fuse to allow exemplary damages. Y Tn other cases it is held that if
it appears that injury has resulted through the wilful misconduct
of employees, or through such a reckless ‘indifference to the rights
of others as amounts to an intentional violation of them, punitive
or exemplary damages may be awarded.’ In still another class of
cases the liability for exemplary damages is made to depend upon
the authority of the servant or agent who commits the wrong;

the corporation being liable if the agent acted under the express
direction of the corporation or of the officer representing it, or if
the wrongful act was afterwards ratified either expressly or im-

pliedly.*

1 Detroit Daily Post Co. v. McArthur,
16 Mich., 447 (1868); Great Western R’y
Co. v. Miller, 19 Mich., 305 (1869);
Wardrobe v. California Stage Co., 7
Cal., 118 (1857); Mendelsohn v. Ana-
heim Lighter Co., 40 Cal., 657 (1871);
Turner v. North Beach & M. RB. R. Co.,
84 Cal., 594 (1868); Hill v. New Orleans,
O. & G. W. RB. R. Co., 11 La, Ann., 292
(1856); Hays v. Houston & G. N. R. R.
Co., 46 Tex., 272 (1876); Ackerson v.
Erie R’y Co., 32 N. J. L., 254 (1867);
Doss v. Missouri, K. & T. R. R., 59 Mo.,
27 (1875), holding that no exemplary
damages may be awarded unless the act
complained of be wanton or malicious.
.2Denver & R. G. R’y Co. v. Harris,
122 U. S&, 597, 610 (1886); Milwau-
kee & St. P. R’y Co. v. Arms, 91 U.
S., 489, 493 (1875); Philadelphia, W.
& B.R.R. Co. v. Larkin, 47 Md., 155
(1877); Baltimore & Y. T. R. v. Boone,
45 Md., 344 (1876); Philadelphia & W.
B. R. Co. v. Quigley, 21 How., 202,
214 (1858); New Orleans, Jackson &
G. N. R. Co, v. Hurst, 36 Miss., 660
(1859); Beale v. Railway Co., 1 Dill,
568 (1871); Samuels v. Evening Mail,
etc., 75 N. Y., 604 (1878), reversing S.
C., 9 Hun, 288 (1876), where a libel had
been published; New Orleans, St. L. &
C. RB. Co. v, Burke, 53 Miss., 200 (1876),
where the conduct of the conductor of

a train in not properly protecting a pas-
senger from the assault of employees
of the road and the failure of the road
to discharge or punish the assailants
was held to justify a verdict for exem-
plary damages; Jeffersonville R. R. Go,
v, Rogers, 38 Ind., 116 (1871), it being
held that exemplary damages may be
awarded for a wrongful expulsion from
a train without harsh or unnecessary
force, on account’ of the time, place
and circumstances of the act; Goddard
v. Grand Trunk R’y of Can., 57 Me.,
202 (1869), where exemplary damages
were awarded because a railroad com-
pany had retained in service a brake-
man after knowledge of his gross as-
sault upon a passenger; Taylor v. Grand
Trunk R’y, 48 N. H., 804 (1869); Bel-
knap v. Boston & Maine R. R., 49 N.
H., 358 (1870), holding that in estimat-
ing exemplary damages the condition
and circumstances of the defendant may
‘be material and are to be considered;
Caldwell v. New Jersey Steamboat Co. ,
47 N. Y., 282 (1872); Cleghorn v. New
York Central & H. R, R. Co., 56 N. Y.,
44 (1874),

3 Hagan v. Providence & W. R. Co.,
3 R. L, 88 (1854); Nashville & C. R. Co.
v. Starries, 9 Heisk. (Tenn.), 52 (1871),
where exemplary damages were refused
because it did not appear that the com-

878
CH. XLI.]

INTRA VIRES ACTS AND CONTRACTS.

[§ 698.

Since corporations are not in themselves capable of an evil in-
tent, they can be indicted only for such offenses as arise from mis-
feasance —such as a nuisance;! or from non-feasance — such as an
omission to perform a legal duty or obligation.?

pany after knowing the reckless char-
acter of its agent retained him in its
employment; Bass v. Chicago & N. W.
R’y Co., 42 Wis., 654 (1877); Cleghorn
v. N. Y. Central & H. R. R. Co., 56 N.
Y., 44 (1874); Mendelsohn v. Anaheim
Lighter Co., 40 Cal., 657 (1871); Turner
v. North Beach & M. R. Co., 34 Cal.,
594 (1868); Perkins v. Missouri, K. &
T. R. R., 55 Mo., 201 (1874); Malleck v.
Tower Grove & L. R’y Co., 57 Mo., 17
(1874), where the language of the su-
perintendent of a street railway admit-
ting and justifying an assault by a
driver was held to bind the company;
Travers v. Kansas Pac. R’y, 69 Mo., 421
(1876), holding that the authority of the
agent sufficient to warrant exemplary
damages may be inferred from the gen-
eral scope of his duty; Galveston, H.
& S. A. R’y Co. v. Donahoe, 56 Tex.,
162 (1882); Goddard v. Grand Trunk
R’y of Can., 57 Me., 202 (1869). See,
also, Ackerson v. Erie R’y Co., 32 N. J.
L., 254 (1867). In some states the dis-
tinction between corporations and nat-
‘ ural persons as to liability for exem-
plary damages is entirely obliterated,
and corporations are held to be equally
liable with individuals and to the same
extent. New Orleans, J. & G. N. R. Co.
u. Bailey, 40 Miss., 395 (1866); Atlantic
& G. W. R’y Co. v. Dunn, 19 O. St., 162
(1869); Western Union Tel. Co. v. Eyser,
2 Colo., 141 (1873).
1@ommonwealth v. Proprietors of
New Bedford Bridge, 2 Gray, 339 (1854),
erecting a bridge over a navigable
’ stream; Commonwealth v. Vermont &
M. R. R. Co., 4 Gray, 22 (1855), obstruct-
ing a highway by embankment; State
v. Morris & Essex R. R. Co., 28 N. J. L.,
360 (1852), obstructing a highway by a
building and trains; Louisville & N. R.
R. Co. v. The State, 3: Head (Tenn.),
528, obstruction by a cut across a street;

Susquehanna & Bath T. R. Co. v. Peo-
ple, 15 Wend., 267 (1836), suffering a
turnpike to be and remain out of re-
pair; People v. Albany, 11 Wend., 539
(1834), neglecting to excavate and
cleanse a basin, whereby the water be-
came corrupted and a nuisance; Queen
v. Great Northern, etc., R’y Co., 9 Q.
B., 315 (1846), obstruction by a cut
across a highway; Queen v. Bradford
Navigation Co., 6 Best & S., 631 (1865),
permitting water in a canal to become
foul. Contra, State v. Great Works
Milling Co., 20 Me., 41 (1841).
2Commonwealth v, Central Bridge
Co., 12 Cush., 242 (1853), for not keeping
a bridge properly lighted at night, its
charter requiring it to be kept in ‘‘ good,
safe and passable repair;” Louisville &
N. R- R. Co. v. Commonwealth, 18
Bush (Ky.), 888 (1877), involving a fail-
ure to place signals on intersecting
highways; Queen v. Manchester, 7 El.
& B., 453 (1857), where there was a
failure of a city to repair streets; State
v. Murfreesboro, 11 Humph. (Tenn.),
217 (1850), to same effect; People v. N.
Y. C., ete, R. R. Co., 74 N. Y¥., 302
(1878), sustaining an indictment for
failure to repair a highway; President,
etc., v. People, 15 Wend., 267 (1836),
for failure to repair a plank-road. An
indictment lies against a turnpike com-
pany for failure to repair its road.
State v. Godwinsville, etc., Co., 10 Atl.
Rep., 666 (N. J., 1887); Mower v. In-
habitants of Leicester, 9 Gray, 247
(1812), holding that an indictment may
lie when there is no action at common
law for damages sustained through de-
fects in a highway. In Brennan v.
Tracy, 2 Mo. App., 540 (1876), it was
said that a corporation may be sub-
jected to criminal libel. It has been
held that a statute subjecting railroads
to indictment and fine for loss of life

879
‘

INTRA VIRES ACTS AND CONTRACTS. [CH. XLI.

§ 699.]

§ 699. The name of a corporation.— A corporation has an exist-
ence distinct from that of the individuals constituting it. Hence,
for the purposes of identification and perpetuity, it is essential that
the corporation have a name.

The corporate name is usually the choice of the incorporators,
and is specified in the creating instrament. By this name it takes
and grants property, sues and is sued, and does all corporate acts.
The right of a corporation to the exclusive use of its chosen name
is recognized by'statute in many states, but is usually protected in-

dependent of any statute.’

on account of the negligence or careless-
ness of the proprietors or their servants
is constitutional. Boston, C. & M. R.
R. v. The State, 32 N. H., 215 (1855).
A corporation may be indicted for fail-
ing to use revenue stamps. U.S. v. B.
& O. R. R. Co., 7 Am.’ L. Reg., N. S.,
757 (1868). A corporation cannot be in-
dicted fora crime. Anon., 12 Mod., 559
(1701). A corporation may be indicted.
See 4 Am. & Eng. Encyclopedia of
Law, pp. 267, etc.
1Viner’s Abridgment, tit, Corp.; Ba-
con’s Abridgment, id.; 1 Blackst. Com.,
475, 476 ; Glass v. Tipton, etc., Co., 32Ind.,
376 (1869). Statutes relative to corpora-
‘ tions usually prescribe, expressly or by
implication, that the articles of incorpo-
ration shall specify the name assumed
by the corporation. In Wells v. Oregon
R’y, etc., Co., 15 Fed. Rep., 561, 567, it
is said that the statute. might create a
corporation without any special desig-
nation, although some description would
‘be necessary, and then it might ae
quently acquire a name. Corporations
are required both at common law and
by the statutes of all the states to have
names. Glass v. Tipton, etc., Co., 32
Ind., 376 (1869). The corporate name
has been variously spoken of as “ the
very being of the constitution,” ‘‘ the
knot of their combination,” ‘‘as the
name of baptism,” ‘ the substance/and
essence of it.” The form of the name
is sometimes prescribed by statute, as
that it shall begin with ‘‘ The” and end
with ‘‘company,” ‘‘ corporation,” ‘‘as-
sociation” or “society.” Gen. Laws of

616 (1869),

Colo., 1877, pp. 148, 144. Or simply that
the name shall indicate that it is a cor-
poration. Gen. Stat. of Conn., 1888,
§ 1905. School districts erected under
a general law, which does not require
the designation of a name, may acquire
such for the purposes of suits and other
corporate acts by usage. South School
District v. Blakeslee, 13 Conn., 227
(1839). The code of West Virginia, 1887,
p. 492, § 11, prescribes that no joint-
stock company shall adopt the same
name which is being used at the time
by another corporation of this state.
N, Y.\Laws, 1875, ch. 611, § 4, prohibita
even the selection of a name sufficiently:
resembling another as to deceive. Mo,
Rev. St., §§ 762, 926. Of. State wv
McGrath, 5 8S. W. Rep., 29 (Mo., 1887).

2 Thus, it issaid that a corporate name

legally acquired should be protected’

upon the same principle and to the
same extent that individuals are pro-
tected in the use of trade-marks.
Holmes; Booth & Haydens v. The
Holmes, etc., Co., 37 Conn., 278; 293
(1870). The corporate name is a trade-
mark from the necessity of the thing,
and upon every consideration of pri-
vate justice and public policy deserves
the same consideration and protection
from a court of equity. The case of
an encroachment is analogous to if not
stronger than that of a piracy upon an
established trade-mark. Newby v. Ore-
gon, etc., R. R. Co., Deady’s R., 609,
Cf, Goodyear Rubber ‘Co.
v. Goodyear’s, etc., Co., 128 U. S., 598
(1888); Farmers’ Loan & Trust Co. wv.

880
\
CH. XLI.]

INTRA VIRES ACTS AND CONTRACTS. :

[$ 699.

The matter of protecting the use of a corporate name is intrinsic-
ally of equitable cognizance, as the injured party seldom if ever
has an adequate and complete remedy at law. To prevent the
continuance of such a wrong equity will interfere, at the suit of the

injured party, by injunction.!

A corporation has neither the right nor the power to change the
corporate name originally selected unless it is allowed so to do by
the laws under which it has been created, or by the consent of the
authority from which its charter is derived.?

Sanie, N. Y. Daily Reg., May 5, 1888,
A domestic corporation may take the
name that a foreign corporation has,
even though a fraud is worked thereby.
Lehigh Valley Coal Co. v. Hamblen, 28
Fed. Rep., 225 (1885).
10ttoman, etc., Co. v. Dane, 95 Ill.,
208 (1880). Equity will always interfere
where the same name has been wrong-
‘ fully appropriated. Where only a sim-
ilar name is used it is usually held
that’ some actual damage, past, present
or imminent, must be shown. A cor-
poration will be protected in its name
as a trade-mark, Often so by statute.
State v. McGrath, 5 8. W. Rep., 29 (Mo.,
1887). A corporation may enjoin another
corporation from taking and using its
name. Farmers’, etc., Co. v. Farmers’,
etc., Co., 1 N. Y. Supp., 44 (1888). The
use of any particular name by a corpo-
ration will not be enjoined unless it be
clearly proven that the complainant will
suffer injury. Drummond Tobacco Co.
v. Randle, 114 Ill., 412 (1885); London,
etc., Ass. Soc. v. London, etc., Life
Ins. Co., 11 Jurist, 938 (1847); Newby
v. Oregon Cent. R. R. Co., Deady, 609,
616 (1869); Holmes v. Holmes, etc., Co.,
37 Conn., 278, 295 (1870), where the lan-
guage of the court is as follows: ‘‘The
ground on which courts of equity afford
relief in this class of cases is the injury
to the party aggrieved, and the imposi-
tion upon the public by causing them to
believe that the goods of one man or
firm are the production of another. The
existence of these consequences does not
necessarily depend upon the question
whether fraud or an evil intent does or

656)

does not exist. The quo animo, there-
fore, would seem to be am immaterial
inquiry.” A New York corporation,
‘Goodyear Rubber Co.,” cannot enjoin
a Connecticut corporation from using
substantially the same name. Good-
year Rubber Co. v. Goodyear’s, etc.,
Co., 128 U. &., 598 (1888); rev’g 21 Fed.
Rep., 276 (1884). Cf. 21 N. E. Rep,
875.

2Tn the case of voluntary religious so-
cieties constituted under general laws,
without aspecial act of incorporation and
without an established name, names are
purely arbitrary, and changes therein
do not at all affect their identity. War-
dens, etc., Trinity Ch. v. Hall, 22 Conn.,
125 (1852); Cahill v. Bigger, 8 B. Mon.,
211 (1848). So the identity and rights
of a municipal corporation are not af-
fected by a change of its name. Girard
v. Philadelphia, 7 Wall., 1 (1868). The
power is sometimes given by legislature
to the courts of common pleas to change
the name of any corporation within
their jurisdictions upon proper notice
being given to the auditor-general ; and
this applies to religious corporations.
In re First Presby. Ch., 111 Penn St.,
156 (1885). A re-organization, with
change of name, under a statute does
not affect fixed or running obligations.
Hyatt v. McMahon, 25 Barb., 457 (1857);
City Nat] B’k v. Phelps, 16 Hun, 158
(1878). Cf. Bellows v. Hallowell, etc.,
Bank, 2 Mason, 31 (Mass., 1819), and § 643.
In some states it is provided in the gen-
eral laws that the corporate name may
be changed by a resolution of the stock-
holders or of the directors, properly filed

881
§ 699.]

INTRA VIRES ACTS AND CONTRACTS.

f
'

[cH. XLI.

While a corporation cannot change its corporate name, it may
nevertheless become known by another name through usage; and
the courts have frequently treated acts done and contracts entered
into by corporations under another name as having been done or
entered into by it under its true name.!

and recorded. R. S. Maine, 1883, ch.
46, § 6; Code of Tenn., 1884, § 1695;
Shackleford v. Dangerfield; L. R., 3 C.
P., 407 (1868), under the English Compa-
nies Act. Similar provision is some-
times made in special acts. Morris v.
St. Paul, etc., R’y Co., 19 Minn., 528
(1878); Att’y-Gen. v. Joy, 55 Mich., 94,
106 (1884), Or the change may be di-
rectly made by the special act. Wallace
v. Loomis, 97 U. S., 146, 154 (1877); Al-
exander v. Berney, 28 N. J. Eq., 90, 92
(1877). Cf. Pacific Bank v. De Ro, 87
Cal., 538 (1869). Or the original special
act of incorporation may provide for a
change by an order of the directors ap-
proved by the stockholders, Oregon
R’y & Nav. Co,, 15 Fed. Rep., 561 (1888).
If the legislature changes the name of a
corporation without altering its powers
or identity it does not affect a contro-
troversy between the company and
third parties. Rosenthal v. Madison,
etc., Co., 10 Ind., 358 (1858), As to
the right of the corporation to main-
tain an action on a note executed to it
in the old name, Trustees N. W. Col-
lege .v. Schwalger, 37 Iowa, 577 (1878).
A grant to a church in a particular
name is not lost by a subsequent
change of name.
B. Mon., 211 (1848). Where a railroad
‘company was authorized by special
act to change its name or the names
of its branches, and did change the
name of oné branch and of itself in
the management of such branch, held,
that for the purpose of suits its orig-
inal name remained unchanged. Mor-
tis v. St. Paul, etc., R’y Co., 19 Minn.,
528 (1873). The change of a corpora-

tion’s name does not affect its real’

estate contracts. Welfley v. Shenan-
doah, etc., Co., 3 S. E. Rep., 876 (Va.,
1887). .Nor an obligation on a bond.

Cahill v. Bigger, 8°

West v. Carolina, etc., Co., 31 Ark., 476.
(1876).

1'Society for Propagating Gospel v.
Young, 2 N. H., 310 (1820). In McGary
v. People, 45 N. Y., 153 (1871), it is held
(three justices dissenting) that a mis-
nomer of the corporation owner of:the:
property in an indictment for arson is
fatal; and it is implied that, whatever
may have been true of ancient corpora-
tions by prescription, modern charter
corporations can legally have but one
name. Smith ». Central, Plank-road, 30-
Ala., 650, 664 (1857); South School Dis-
trict v. Blakeslee, 13 Conn., 227 (1839);.
Minot v. Curtis, 7 Mass., 441 (1811),
where the court in using the lan-
guage, ‘We know not why. corpora-
tions may not be known by several
names as well as individuals,” evidently
had in mind certain classes of corpo-
rations and societies. They say that.
identity is a question of fact for the
jury. Dutch West India Co, v. Van.
Moses, 1 Strange, 612 (11 Geo.). An ase
signment of a claim against a corpora>
tion need not accurately describe its.
name, Adler v. Kansas, etc., R. R.,
S. W. Rep., 917 (Mo., 1887).° A corpo-
ration is bound by an abbreviated name.
People v. Sierra, etc., Co., 89 Cal., 511,
514 (1870). There is a distinction in.
some of the old cases to the effect that
corporations by prescription may have
several names, while with charter cor-
porations it is otherwise. Anon., 8
Salk., 102; Warden, etc., Shrewsbury
v. Hart, 1 C. & P., 118 (1823); Ham-
mond v. Shepard, 29 How. Pr., 188, 191
(1865); Thomas v. Dakin, 22 Wend., 9,
72 (1839); Melledge v. Boston Iron Co.,
59 Mass., 158, 175 (1849); Medway Cot-
ton W’fry v. Adams, 10 Mass., 360 (1818);.
Alexander v. Berney, 28 N..J. Eq., 90
(1877), holding that a corporation,

882
OH. XLI.]

INTRA VIRES ACTS AND CONTRACTS.

[$ 699.

Modern law has departed from the strict rules of the common
law as to the use of the corporate name. As corporations are
now able to contract almost as freely as natural persons, it is held
that a departure from the strict name of a corporation will not.
avoid its contract if its identity substantially appears; and a
latent ambiguity may, under proper averments, be explained by

parol.

through its retaining the use of its

original name after the passage of an.

amendatory act changing it, regained,
so to speak, its original name, and could
be sued and be proceeded against in
bankruptcy by it. ‘

1 Haag v. Board, etc., 84 Fed. Rep.,
778 (1888); Berks, etc., Road v. Myers,
68. & R,, 12, 17 (1820); Boisgerard v.
New York Banking Co.,,2 Sandf. Ch.,
23 (1844); Hammond v. Shepard, 29
How. Pr., 188 (1865); Gifford v. Rockett,
121 Mass., 431; Melledge v. Boston Iron
Co., 59 Mass., 158, 175 (1849); Medway
Cotton M’f’ry v. Adams, 10 Mass., 360
(1813); Commercial Bank v. French, 38

Mass., 486 (1839); Hascall v. Life Asgoc.,.

5 Hun, 151 (1875); Conro v. Port Henry

Tron Co., 12 Barb., 27, 55 (1851); North,
W. Distilling Co. v. Brant, 69 ILL, 658°

(1873). Cf. N. Y. African Soc. v. Varick,
18 Johns., 38 (1816); Mott v. Hicks, 1
Cowen, 513 (1823); Brockway v. Allen,
17 Wend., 40 (1837). There is a line of
cases where corporations draw or ac-
cept bills or make deeds in another
name merely as a convenient mode of
doing the special act of business, and
they are held liable although the corpo-
rate name is not mentioned. In such
cases they are to be sued in their true
name, Culpeper Agric., etc., Soc. v.
Digges, 6 Rand. (Va.), 165 (1828); Mil-
ford, ete., Turnpike Co,’v. Brush, 10
Ohio, 111 (1840); Ryan v. Martin, 91 N.
C., 464 (1884); Asheville Division v.
Aston, 92 id., 578 (1885); Clement v.
City of Lathrop, 18 Fed. Rep., 885 (Mo.,
1884); Bridgeford v. Hall, 18 La. Ann.,
211, 218 (1866); Brock Dist. Council v.
Bowen, 7 Upp. Can., Q. B., 471 (1850).
A misnomer has- been held material in
the following cases: Where a corpora-

1

tion is required by statute to act for its
own benefit, as in collecting assessments
for benefit to land from proposed road.
Glass v. Tipton, etc., Co., 32 Ind., 376
(1869). In an indictment for arson.
McGary v. People, 45 N. Y., 153 (1871).
‘Where the name in a fi, fa. was differ-
ent from that by which the corporation
was sued and judgment had; Bradford
v. Water Lot Co., 58 Ga., 280, (1877).
Cf. Ga. Code, § 3636. A variation wilk
not in general invalidate a deed, grant.
or lease by or to a corporation when the-
true name can be collected from the
instrument or is shown by proper
averments. Kent’s Com., 92; Bacon’s.
Abridg., tit. Corp.; Kentucky Semi-.
nary v. Wallace, 15 B. Mon., 35, 45:
(1854); Clarke v. Potter County, 1 Penn.
St., 159 (1845); Douglass v. Branch B’k
at Mobile, 19 Ala., 59 (1851); Culpeper
Agric., etc., Soc. v. Digges, 6 Rand.
(Va.), 165 (1828); 1 Kyd, Corp., pp. 286,
288; Com. Dig., tit. Pleader, 2, B., 2;
Mayor and Burgesses, 10 Co., 1250; 11
Co., 19. At common law a substantial
variance between the name of the party
injured as laid in the indictment and.as
given in evidence was fatal ; and it was so
held in New York, in a case involving a
misnomer of the corporate owner of the
property. McGary v. People, 45 N. Y., '
153 (1871), three judges dissenting. But
this rule,is modified in some jurisdic-
tions, as by the Penal Code of Califor-
nia, section 956. See People v. Potter,
85 Cal., 110 (1868). Cf. N. Y. Code of
Crim. Proc., § 281. Cf., also, People v,
Runkel, 9 Johns,, 147, 156 (1812), A
slight variation in documentary evi-
dence of a national bank’s corporate
existence which does not go to raise.a
doubt of the identity is to be disre-

883
.

~ § 700.)

8 700. Statutes which apply to

INTRA VIRES ACTS AND CONTRACTS.

[CH. XLI.’

“persons” are generally construed

to apply to corporations.— Thus, a statute prohibiting “ persons iB
from engaging in banking applies not only to natural persons but

garded. Thatcher v. West River N.
B’k, 19 Mich., 196 (1869). ‘‘ A corpora-
tion may sue or be sued only by its cor-
porate name.” Iowa Revision, § 1151;
Towa Code, § 1059. ‘‘It is immaterial
what name it does its business under.
A corporate name is that which is
adopted in the articles of incorporation.
If the name is changed it must be done
by changing these articles.” Where a
corporation sued on an agreement, and
alleged a due and legal change of name
between the time of the execution and
the suit, it was held such change must
be proved by the articles and not by
testimony of the secretary. Chicago,
etc., R. R. Co. v. Keisel, 43 Iowa, 39
(1876), A suit brought against the
Bell Telephone Company is sustainable
though the corporate name is the Amer-
ican Bell Telephone Company. State
v. Telephone Co., 36 O. St., 296 (1880).
When the corporate name has once cor-
rectly appeared it is generally not nec-
essary that it should be completely
stated at every recurrence in a plead-
ing. Antipaedo Baptist Soc. v. Mulford,
3 Halst., 182; London v. Lynn, 1H. Bl.,
206; Stafford v. Bolton, 1 Bos. & P., 40;
Lynne Regis, 10 Rep., 120; N. Y. Code
) Civ. Proc., § 1777. In an action or spe-
cia] proceeding brought by or against a
corporation the defendant is deemed to
have waived any mistake in the state-
ment of the corporate name, unless the
misnomer is pleaded in the answer or
other pleading in the defendant’s be-
half. So generally a misnomer is not
ground for a nonsuit and must be
pleaded in abatement. Whittlesey v.
Frantz, 74 N. Y., 456 (1878); Bank of
Utica v. Smalley, 2-Cowen, 770 (1824);
Trustees M. E. Church v, Tryon, 1
Denio, 451 (1845); Lake Superior Build.
Assoc. v. Thompson, 32 Mich., 2938
(1875); Northumberland Co. Bank v.
Eyer, 60 Penn. St., 486 (1869); Wilson v.

Baker, 52 Iowa, 423 (1879); Medway
Cotton M’f’ry v. Adams, 10 Mass., 360
(1818); Gilbert v. Nantucket Bank, 5
Mass., 97 (1809); State v. Telephone Co.,,
86 O. St., 296 (1880); Sunapee v. East-
man, 82N. H., 470 1855); Burnham »v.
Savings Bank, 5 id., 446 (1831); School
District v. Griner, 8 Kan., 224 (1871).
Proceedings for perpetuating. testi-
mony are not admissible when only the
letters ““C., B. & Q. R. R. Co.” are
used to designate defendant. Accola v.
c., B. & Q. R. R., 70 Iowa, 185 (1886).
Cf. Martin v. Central, etc., R. R., 59
Iowa, 411 (1882); Stone v. Berkshire
Soc., 14 Vt, 86 (1842); Souhegan Fac-
tory v. McConihe, 7 N. H., 309 (1884);
Metropolis Bank v. Orme, 3 Gill, 448
(1845); Gray v. Monongahela Co., 2 W.
& S. (Pa.), 156 (1841); Mayor of Stafford
v. Bolton, 1, Bos. & P., 40; Beene v.
Cahawha, etc., R. R. Co., 3 Ala., 660
(1842); Lafayette Ins. Co. v. French, 18
How., 405 (1855). Cf. Brittain v. New--
lard, 2 Dev. & Bat. (N. C. Law), 363
(1837); Traver v. Eighth R. R. Co., 4
Abb. Dec., 422, 433 (1867); Mauney v.
High School Mfg. Co., 4 Ired. Eq., 195
(1845). A mistake in setting out the
name of a corporation party in a plead-
ing may be corrected by amendment.
Smith v, Central Plank-road 'Co., 30
Ala., 650, 662 (1857); Bullard v. Nan-
tucket Bank, 5 Mass., 99 (1809); Sher-
man v, Connecticut River Bridge, 11
Mass., 888 (1814); Brittain v. Newland,
2 Dev. & Bat. (N. C. Law), 868 (1887).
Or if maniféstly immaterial no objec-
tion will be allowed. Marine Bank v.
Biays, 4 Harris & J. (Md.), 888 (1818).
And judgment will not be arrested.
Coulter v. Trustees Western, etc., Sem-
inary, 29 Md., 69 (1868). There is little
uniformity in the acts incorporating
towns and villages; but where a corpo-
rate name is established it is usually
held that suits must be brought ‘and

884

 
CH. XLI.] INTRA VIRES ACTS AND CONTRACTS. [§ 700.

also to corporations.! A corporation is subject to a statute which.
prescribes that a “person” shall be subject to a penalty ;* or that.
the United States shall be a preferred creditor;? or that all “inhab-,

itants” or “residents” shall pay taxes;‘ or that testimony shall be

tae

defended in such name. President, etc.,
of Romeo v. Chapman, 2 Mich., 179
(1851). In the case of a misnomer in a
devise the courts are very liberal in
permitting the identity of the corpora-
tion to be otherwise shown. Deaf and
Mute Inst. v. Norwood, Busb, (N. C.)
Kq., 65 (1852); First Parish in Sutton v.
Cole, 20 Mass., 232 (1825); Minot v. Bos-
ton Asylum, 48 Mass., 416 (1844); St.
Louis Hosp, Ass’n v. Williams’ Adm.,
19 Mo., 609 (1854); Preachers’ Aid Soc.
v. Rich, 45 Me,, 552 (1858); Vansant v.
Roberts, 3 Md., 119 (1852); Weisser v,
Denison, 10 N. Y., 68 (1854); Domestic
& Fort. Miss. Society’s Appeal, 30 Pa.

St., 425 (1858); Cresson’s Appeal, id.,

487;, Newell’s Appeal, 24 id., 197 (1855);
Chapin v. School District, 85 N. H., 445
(1857); Button v. Amer. Tract Soc., 23
Vt., 336 (1851); Horneck’s Exec. wv.
Amer. Bible Soc., 2 Sandf. Ch., 138
(1844); Att*’y-Gen’l v. Mayor of Rye, 7
Taunt., 546 (1817); Géneral Lying-in
‘Hosp. v. Knight, 21 L. J., Ch., 587
(1851); In re Kilvert’s Trusts, L. B., 7
Ch, App., 170 (1871); Jarman on Wills,
380. Where a corporation voluntarily
appears under a wrong name it becomes
a party in such name, and may not ob-
ject to a decree for want of process
against it. Virginia, étc., Navigation
Co. v. U. S., Taney’s C. C. Dec., 418
(1840); State -v. Bell Telephone Co., 36
O. St., 296 (1880); School District v.
Griner, 8 Kan., 224 (1871), So, in gen-
eral, whenever, for any purpose, a cor-
poration ‘is described, a slight variance
will not be held material. Burdine
v, Grand Lodge, 37 Ala., .478 (1861);
Souhegan Nail, etc., Factory v. Mc-
Conihe, 7 N. H., 309 (1834). In the case
of a misnomer in a notice required by
statute to be given as condition prece-
dent to an action where there was no
possibility of anybody being misled, Pol-

lock, C. B., said: ‘For the sake of
Westminster Hall we ought to refuse
this rule.” Eastham v. Blackburn R’y
Co., 23 L. J., Exch., 199 (1854); Corp. :
(Provisional) of County of Bruce v. Cro-.
mar, 22 id., 821, 827 (1868); Trent, etc.,
Road Co. v. Marshall, 10 Up. Can., Cc.
P., 329, 836. (1861); Hawkins v. Munic.
Council, etc., Bruce, 2 id., 72, 121 (1852);
Whitly v. Harrison, 18 Up. Can., Q. B.,
608 (1859); Croydon Hospital v. Fairly,
6 Taunt., 467 (1816); Doe Malden v,.
Miller, 1 B. & Ald., 699 (1818); Hager-
storm Road Co..v. Creeger, 5 Harr. &
J. (Md.), 122 (1820); Hoboken, ‘ete.,
Ass’n v. Martin, 18 N. J. Eq., 427 (1861);
Inhabitants, etc., Salem v. String, 10°
N. J. L., 323 (1829); Inhabitants, ete.,
Gloucester v. Forest, 2 id., 115 (1806);
Inhabitants of Middleton v. McCormick,
8 id. [8d ed.], 92 (1809); Charitable Ass’n
in Granville v. Baldwin, 42 Mass., 359
(1840); City of Lowell v. Morse, id., 473;
Shawmut Sugar Co. v. Hampden Mut,
Ins, Co., 78 Mass., 540 (1859); Trustees,
etc., in Lerant v. Parks, 10 Me., 441
(1883); Newport Mechanics’ Mfg. Co. v.
Starbird, 10 N. H., 128 (1839); Soc. Prop-
iagating Gospel v. Young, 2 N. H., 310
(1820); Del. & Atlantic R. R..Co. v. Irick,
23. N. J. L., 321 (1852).

1People v. Utica Ins. Co., 15 John.,
358 (1818).

2 United States vw Amedy, 11 Wheat.,
892 (1826). Contra, Androscoggin, eté.,
Co. v. Bethel, etc., Co., 64 Me., 441
(1874); Cumberland, etc., Corp’n v,
Portland, 56 Me., 78 (1868).

_ 8 Beaston v. Farmers’ B’k, 12 Peters,.
102 (1888). Contra, Commonwealth »v,
Phoenix B’k, 52 Mass., 129 (1846).
4B’k of U.S. v. Deveaux, 5 Cranch,
61 (1809); Rex v. Gardner, Cowper, 79
(1774); Otis Co. v. Inhabitants, etc., 74
‘Mass., 509 (1857); International, etc.,
Soc. v. Com’rs, 28 Barb., 318 (1858);

885
§ 700a.] INTRA VIRES ACTS AND CONTRACTS. (cH. XLT.
admitted as against certain “ persons;”! or that “persons” may do
certain acts in regard to promissory notes;? or that a local court
shall have jurisdiction; or that property may be attached;* or
shall be guilty of a misdemeanor;* or that “persons” shall be
liable for damages for injuries which result in death;® or shall be
injured by a dam;" or a statute which allows “owners” of vessels
to obtain a registry.® A foreign corporation is a “person” outside
of the state as regards the statute of limitations.® But a foreign
corporation is not a “resident” within the chattel-mortgage act;
nor is a domestic. corporation a “resident tax-payer,” so as to. be
counted in voting municipal aid to railroads;™ nor is a state a per-
son, and as such entitled to take by devise.” A corporation is not
a “citizen” within the meaning of the federal constitution ;* but is
a “person” within the meaning of the fourteenth amendment.4

§ 700a. By-laws.— According to Blackstone, one of the impor-
tant features of a corporation is the power to make by-laws. A
by-law is a permanent rule of action, in accordance with which the
corporate affairs are to be conducted. A by-law differs from a
resolution in that a resolution applies to a single act of the corpo-
ration, while a by-law is a permanent and. continuing rule, which is
to be applied on ‘all future occasions. The power to make by-laws
is always stated to be one of the essential incidents and rights of a
corporation. This power exists at common law. Frequently, how-
ever, it is given by the charter or statutes.”

Baldwin v. Trustees, etc., 37 Me., 369
(1854); Cortis v. Kent, etc., Co.,7 B. &
C., 814 (1827).
Ins. Co. v. Inhabitants, 3 Conn., 15 (1819),

‘1 La Farge v. Exchange, etc., Ins, Co.,
22 N. Y., 352 (1860).

2State of Indiana v. Woram, 6 Hill,
33 (1848).

3 Brown v. Mayor, etc., 66 N. Y., 385
(1876); Bristol v. Chicago, etc., R. R.
Co., 15 Ill., 486 (1854); B’k of N. A. v.
Chicago, etce., R. R. Co., 82 IIL, 493
(1876); Eslava v. Ames, etc., Co, 47
Ala., 384 (1872).

4 Knox v. Protection Ins, Co., 9Conn.,
480 (1833); Mineral, etc., R. R. Co. v.
Keefe, 22 Ill, 9 (1859); Trenton B’k v.
Haversteck, 11 N. J. L, 171 (1829) ;
Bushel v. Commonwealth, etc., Ins. Co.,
15 S. & R., 173 (1827); Planters’, etc.,
Bk v, Andrews, 17 Ala., 404 (1858). Or
garnished. Brauser v. New Eng,, etc.,
Ins. Co., 21 Wis., 506 (1867),

Contra, Hartford, etc., :

5 White v. State, 69 Ind., 273 (1879).

6 South, etc., R. R. v. Paulk, 24 Ga.,
356 (1858).

TLehigh v. Lehigh, ete., CBs 4 Rawle
(Pa.), 8 (1838).

8 Regina v. Arnaud, 9-Q. B., 806 (1846).

§ Olcott v. Tioga R. R. Co., 20 N. ¥.,
210 (1859); Blossburg, etc., R. R. Co. v. .
Same, 5 Blatch., 887 (1867). Contra,
Commonwealth, etc., Ins. Co. v. Dunson,
28 Gratt. (Va.), 630 (1877), where it had
an agent in the state to accept service.

10 Cook v, Hager, 3 Col., 886 (1857).

u People v. Schoonmaker, 68 Barb., 44
(1871).

12Tn the Matter of Fox, 52 N. Y., 630
(1878); United States v. Fox, 94 U.S,
815 (1876).

1 See § 696, supra,
21 Pac. Rep., 1019.

14County of San Mateo v. Southern
Pac. R. R. Co., 18 Fed. Rep., 722 (1882).

15 People v, Crossley, 69 IIl., 195 (1873);

Cf, 180 U. 8., 630;

886
.

CH. X11. |

i
INTRA VIRES ACTS AND CONTRACTS.

[§ 700a.

By-laws are to be made by the stockholders in meeting assem-
bled. The stockholders have few functions to perform, and this
right to make by-laws is an essential and important one.. The di-
rectors have no inherent power to make by-laws.! But the stock-
holders may delegate to the directors the power to make by-laws.”
Frequently the charter confers this power upon the directors.?

By-laws must be reasonable; they must not interfere with the
vested and substantial rights of the stockholders; and they must
not be contrary to public policy or the established law of the land.
This general rule, however, can be understood only by a study of
the cases themselves, a collection of which is given in the notes.

Kearney v. Andrews, 10 N. J. Eq., 70
(1854); Commonwealth v. Woelper, 8
Serg. & R., 29 (1817); Juker v. COommon-
wealth, 20 Pa. St., 484 (1853); Newling
v. Francis, 3 Term Rep., 189 (1789), the
last two cases holding that at common
law the corporation may make by-laws
regulating elections. j

1 Morton, etc., Co. v. Wysoug, 51 Ind.,
4 (1875), holding that a by-law made by
the directors is void; Carroll v. Mul-
lanphy Sav. B’k, 8 Mo. App., 249 (1880),
A by-law may arise by custom. Union
B’k v. Ridgely, 1 Har. & G. (Md.), 324
(1827). See, also, In re Regents’ Co.,
W. N. (1867), p. 79. See, also, Rex v.
Head, 4. Burr., 2515 (1770), where Lord
Mansfield said ‘‘ that the body at large
had no power to make by-laws, because
that power is, by the charter, given to
the common council and aldermen; and
the common council could not by a by-
law take away from the body at large
the right of election which the charter
had vested in the whole body.”

*Rex v. Spencer, 3 Burr., 1827, 1837
(1766), where Lord Mansfield said that,
‘“‘where the power of making by-laws
is in a body at large, they may delegate
their rights to a select body.” So, also,
in an association. Heintzelman v.
Druids’, etc., Assoc., 36 N. W. Rep., 100
(Minn., 1888). Although the stockhold-
ers authorize the directors to make by-
laws, yet the directors cannot change
or act contrary to a by-law made by the
stockholders. Stevens v. Davison, 18
Gratt. (Va.), 819 (1868). City officials

‘having power to elect new burgesses

may delegate that:power. Rex v. West-
wood, 7 Birg., 1 (1880), So, also, as to
the election of aldermen. King v. Ash-
well, 10 East., 22 (1810).

3Such is the case in the New York
Manufacturing Companies Act of 1848,
See, also, Cahill v. Kalamazoo Ins. Co.,
2 Doug. (Mich.), 124 (1845); Samuel v.
Holliday, 1 Woolw., 400 (1869); Common_
wealth v. Gill, 8 Wharton, 228 (1887).
A by-law made by the stockholders in-
stead of by the directors‘as prescribed
by charter is nevertheless binding as to
past acts on participating stockholders.
People v. Sterling Manuf’g Co., 82 Ik,
457 (1876). :

4A by-law may authorize stockhold-
ers to vote by proxy. People v. Cross- |
ley, 69 TIL, 195 (1878). See, also, § 610,
supra, A by-law may give the corpora-
tion a lien on stock for debts due to it
from the stockholders. See chapter
XXXI, supra. But cannot give the cor-
poration the right to forfeit stock for
non-payment-of calls. See chapter VIII,
supra. By-laws may regulate the man-
ner of voting. Commonwealth v. Woel-
per, 3S. & R. (Pa.), 29 (1817); Juker v.
Fisher, 20 Pa. St., 484 (1853). May require
bonds to be given by cashiers. B’k of
Wilmington v. Wollaston, 3 Harr. (Del.),
90 (1840); Savings Bank v. Hunt, 72 Mo,,
597(1880). May prescribe qualifications
for admission to membership. Queen
v. Saddlers’ Co., 10 H. L, Cas., 404 (1863),
A by-law is illegal if it disturbs the
vested property rights of the ‘stock-

887
§ 700a.]

INTRA VIRES ACTS AND CONTRACTS.

[OH. XLI.

A by law authorizing the forfeiture of stock for non-payment of

holders. Kent v. Quicksilver, etc., Co.,
"3 N. Y., 154 (1879), where preferred
stock had been issued. So, also, of a by-
law which provides for the administra-
tion of an oath to stockholders who vote.
People v. Kip, 4 Cow., 382, n. (1822).
If the by-law is illegal its effect cannot
be obtained by printing it upon the face
of the certificate of stock. Conklin v.
Second Nat’l B’k, 45 N. Y., 655 (1871),
involving a lien on stock. A by-law by
the directors excluding one of them
from examining the corporate books is
void. People v. Throop, 12 Wend., 183
(1834). A by-law restricting the right
of members of a church to vote as au-
thorized by statute is void. People v.
Phillips, 1 Denio, 388 (1845.) , A by-law
may be good in part. Rogers v. Jones,
1 Wend., 287 (1828). A by-law ‘of a
bank that mistakes in pass-books must
be corrected at once does not bind a de-
positor. Mechanics’, etc., B’k v. Smith,
19 John., 115 (1821). A by-law that any
five of a board of twenty-three directors
should be a quorum for transacting
business is valid, This is equivalent to
an executive committee, except that the
members may shift. Hoyt v. Thomp-
son’s Ex’r, 19 N. Y., 207, 217 (1859). By-
laws may regulate the calling of meet-

ings, Taylor v. Griswold, 14 N. J. L,

222 (1884), A by-law. which limits or
regulates the corporate powers which
the charter confers on the directors may
be disregarded by them. Union, etc.,
Ins. Co. v. Keyser, 82 N. H., 318 (1855),
By-laws imposing fines for non-attend-
ance or for refusal to accept office are
valid, but a by-law making assessments
is invalid. Tobacco Pipe Makers »v.
Woodraffe, 7 Barn. & Cres. , 838 (1828).
A by-law that voluntary contributions
will be refunded is a contract which a
contributor may enforce. Davis v. Pro-
prietors, etc., 49 Mass., 821 (1844). A
by-law imposing penalties for past acts
is void. Pulford v. Fire Dep’t, 31 Mich.,
458 (1875). A by-law that transfers of

stock are subject to the approval of the
directors is void. Farmers’, etc., B’k v.
Wasson, 48 Iowa, 336 (1878). See, also,
§ 832, supra. Or the approval of the pres-
ident. Sargent v. Franklin Ins. Co., 25
Mass., 90 (1829). A by-law restricting
the right of electors in a town to vote is
void. Rex v. Spencer, 3 Burr., 1827

\ (1766); Rex v. Head, 4 Burr., 2515, 2521

(1770). It has been held that the by-laws
of a building association cannot impose
an unreasonable fine for non-payment
of assessments. Lynn v. Freemansburg,
etc., Assoc., 11 Atl Rep., 587 (Pa,
1887).

A by-law authorizing the corporation
to sue a subscriber for the difference be-
tween the subscription and the price for
which the stock sold on forfeiture is
void. Jay’ Bridge Co. v. Woodman, 81
Me., 58 (1850); Kennebec R. R. v. Ken-
dall, id., 470 (1850). See, also, chapter
VIII, supra. The following by-laws
were held to be void: Compelling mem-
bers of an exchange to submit their
controversies to arbitration on pain of
expulsion or suspension, State v. Mer-
chants’ Ex., 2 Mo. App., 96 (1876); pro-
viding that suits to collect insurance
shall be brought in the county where
the company exists, Nute v. Hamilton,
ete., Co., 72 Mass., 174 (4856); enlarging
the liability of stockholders for debts of
the corporation, Trustees’ etc., v. Flint,
54 Mass., 539 (1847); certainly so where
the creditor did not expressly rely on
the by-law, Flint v. Pierce, 99 Mass.,
68 (1868); or where an assignee of the
corporate creditor seeks to enforce the
liability, Gamwell v. Pomeroy, 121
Mass., 207 (1876) (see, also, § 241, supra);
authorizing less than a majority of di-
rectors to act when the statute required
a majority, State v. Curtis, 9 Nev., 325
(1874); compelling stockholders to re-
tire a part of their stock, Bergman v.
St. Paul, etc., Assoc., 29 Minn., 275, 282
(1882); prohibiting the use of the com-
pany’s canal on Sundays, Calder, etc.,

888
OH. XLI.]

INTRA VIRES ACTS AND CONTRACTS.

[$ 700d.

a call is discussed elsewhere;! as is also the right of the corpora-
tion to create a lien on stock by by-law.? There are no particular
rules in regard to the method of enacting, amending or repealing

by-laws.’

§ 7006. The expulsion of members.— In joint-stock companies, or
in any corporation owning property, no power of expulsion can be
exercised unless expressly conferred by the charter or by statute.‘

Nav. Co. v. Pilling, 14 M. & W., 76
(1845); restricting the members as to
their fishing business, Adley v. Whit-
stable Co., 17 Ves., 315; 19 id., 804 (1815);
restricting the number of apprentices
which members may have, Rex v.
Coopers’ Co., 7 T. R., 548 (1798); Rex v.
Tappenden, 3 East, 186 (1802); restrict-
ing the sale of guns, Gunmakers v. Fell,
Willes Rep., 384 (1742); restricting the
transfer of seats in an exchange, Ritter-
band v. Baggett, 42 N. Y. Sup..Ct., 556
(1877). Railroad regulations as to pas-
sengers, etc., are not by-laws. Their
validity, however, depends on their rea-
sonableness. State v. Overton, 24. N. J.
L., 440 (1854). The by-laws of a city
cannot exclude from business all paint-
ers who belong toa union. Clark v. Le
Cren, 9 B. & C., 52 (1829). See, how-
ever, as to city by-laws, Dillon on Munic,
Corporations. If a by-law is divisible
the invalidity of part does not invalidate
the remaining part. Amesbury v. Bow-
ditch, etc., Co., 72 Mass., 596 (1856). For
a valuable statement of the law in rela-
tion to by-laws see, also, In re Long
Island R. R., 19 Wend., 37, 41 (1887); An-
gell & Ames on Corp., 184; Lumley on
By-laws (English, 1875); 2 Am. & Eng.
Cyclo, of Law, 705. By-laws are con-
strued as they are construed by the cor-
poration. if that construction be reason-
able. State v. Conklin, 34 Wis., 21
(1874). By-laws are binding on all
members. Cummings v. Webster, 43
Me., 192 (1857), But strangers are not
bound to know of them. Kingsley v.
New Eng., etc., Co., 62 Mass., 398 (1851),
where the by-law was printed on an in-
surance policy; Wait v. Smith, 92 IIL,
285 (1879); Royal B’k, etc., Co., L. B.,.
4°Ch,, 252 (1869). See, also, § 725,

infra, relative to contracts by agents in
violation of by-laws. A by-law cannot
give the president a casting vote in ad-
dition to his regular vote. State v. Cur-
tis, 9 Nev., 825 (1874). A by-law which
prohibits members from working with
persons who are not members is void.
Thomas v. Mutual, etc., Union, 49 Hun, '
171 (1888),

1 See § 123, supra. “t

2 See §§ 522, 524, supra. 5

3 They need not be written. Union B’k
v. Ridgely, 1 H. & G. (Md.), 324, .412
(1827). The corporation may adopt
Cushing’s Manual. State v. American
Institute, 44 How. Pr., 468 (1878). By-
laws may be modified by usage. Henry
v. Jackson, 37 Vt., 431 (1865).: The
charter may require by-laws to be en-
acted under seal. Dunston v. Imperial,
ete, Co, 8 B. & Ad., 125 (1882). If
amendments to the by-laws are, by the
by-laws, to be made only after notice,
that notice is necessary. French wv,
O’Brien, 52 How. Pr., 394 (1877). Direct-,
ors may disregard their.own by-laws.
Martino. v. Commerce, etc., Co., 47N. Y.
Super. .Ct., 520 (1881). Power to make
by-laws implies power to repeal them.
King v. Ashwell, 12 East, 22 (1810). Al-
though the by-laws provide for changes
therein only on a two-thirds vote, yet.
a majority may make changes. Smith
v. Nelson, 18 Vt., 511 (1846). They may
arise by custom. See note 1, p. 887, supra,.
By-laws of mutual insurance assqcia-
tions may be changed. Supreme Lodge,
etc., v. Knight, 20 N. E. Rep., 479 (Ind.,
1889). A by-law may be repealed by a
resolution inconsistent with it. Royal
Bik, etc., Co., L. R., 4 Ch, 252 (1869).

4 Evans v. Philadelphia Club, 50 Penn.

“St., 107 (1865); State v. Chamber of.

889

é
INTRA VIRES ACTS AND OONTRACTS.

§ 7008.)

(cH. XL
t

The expulsion by virtue of a by-law has been held to be unlawful.
A member who has been unjustly expelled may have mandamus to
compel the corporation to restore him to membership.? Accord-
ingly, where a corporate body strikes off the name of one of its
members without giving him previous notice of their intention so
to do, and affording him opportunity to be heard in his own de-
fense, a mandamus to restore will be granted;* and an injunction
lies to restrain a board of brokers from irregularly expelling one of

 

their members.!

Where the expulsion is regular and authorized by the charter or

statute it is conclusive, and mondaiius will not lie.
pulsion cannot be impeached or attacked collaterally.®

An act of ex-
At common

law there were three causes for expulsion: where the member was
guilty of an infamous, indictable offense; or guilty of an offense

Commerce, 20 Wis., 68 (1865); also State
v. Chamber of Comnierce, 47 Wis., 670
(1879). In Dickinson v. Chamber of
Commerce, 29 Wis., 45 (1871), it is held
that there may be a lawful expulsion
under aavalid by-law. Expulsion of a
member from the New York Stock Ex-
change. Belton v. Hatch, 109 N. Y., 598
(1888), See, also, § 504, supra, note on
Exchanges.

1 People v. Saint Francisco’s Benevo-
lent Society, 24 How. Prac., 216 (1862);
Roehler v. Mechanics! Aid Society, 22
Mich., 86; Green v. African Methodist
Epis. Society, 1 Serg. & R., 254. A reso-
lution spread upon thé corporate rec-
ords unjustly expelling a member is a
libel, and the member offering the reso-
lution is liable to an action thereupon.
Fawcett v. Charles, 18 Wend., 473 (1835).
Cf. Adley v. Whitstable Co., 19 Vesey,
304 (1815); Chase v. East Tennessee,
etc., Railroad Co., 5 Lea (Tenn.), 415
(1880).

2Black & White Smith’s Society v.
Vandyke, 2 Wharton (Penn.), 309 (1836);
Commonwealth v. German Society, 15
Penn, St., 251 (1850); People v. Saint
Francisco’s Benevolent Society, supra;
State v. Carteret, Club, 40 N. J. Law,
295; People v. Medical Society of Erie
Co., 82 N. Y., 187 (1865); People v. New
York Benevolent Soc., 3 Hun, 361 (1875) ;
Medical, etc., Society v. Weatherly, 75
Ala., 248,

Ҥ8Delacy v. Neuse River ,Navigation
Co., 1 Hawks’ Law (N. C.), 274 (1821)
The member must have a fair hearing,
Southern Plank-rogd Co. v. Hixon, 5
Ind., 165 (1854), :

4Leech v. Harris, 2 Brews, (Penn.),
571 (1870); Hutchinson v. Lawrence (N.
Y. Supr. Ct.), N. Y. Daily Reg., Feb. 8,
1887. Cf. Society of Italian Union,
etc., v. Montedonico (Ky., 1884), 4 Am. &
Eng. Corp. Cas., 22. But not as against
a medical society. Gregg v. Mass. Med-
ical Society, 111 Mass., 185 (1872). So,
also, the courts will not grant an in-
junction to restrain a corporation from
initiating new members upon the ap-
plication of a member of the corpora-
tion, when no danger of pecuniary loss
is shown as likely to result to the peti-
tioner from such initiation. Thompson
v. Society of Tammany, 17 Hun, 805
(1879).

5Commonwealth v. Pike Beneficial
Society, 8 Watts & S., 247 (1844); Peo-
ple v. Fire Underwriters, 7 Hun, 248
(1876),

6 Black & White Smith’s Society v.
Vandyke, 2 Wharton (Penn.), 309 (1836);
Commonwealth v, Pike Beneficial Soci-
‘ety, 8 Watts & 8S. (Penn.), 247 (1844);
Society for the Visitation of the Sick v,
Meyer, 52 Penn. St., 125, 181 (1866). Cf.
Commonwealth Oliver, 2 Parson’s Sel,
Cases, 420, 426 (1849),

890
;
CH. XLt.!

INTRA VIRES ACTS AND CONTRACTS.

[8 7008.

against his duty as a corporator; or of an offense compounded of

these two.!

1James Bagg’s Case, 11 Coke, 94, 99
(1618); Rex v. Town of Liverpool, 2
Burr., 728, 782 (1759); State v. Chamber
of Commerce, 20 Wis., 63 (1865); People
v. New York Commercial ASsociation,
18 Abb. Prac,, 271 (1864); People v. Chi-

cago Board of Trade, 45 Ill, 112 (1867).

Of. Smith v. Smith, 8 Desauss. (8. C.),
557 (1818), where an expulsion for mis-
conduct was sustained; Woolsey v.
Independent Order, etc. (Iowa, 1883), 1
Am. & Eng. Corp. Cas., 172; Fisher v.
Keane, L. R., 11 Chan. Div., 358; Hop-
kinson v. Exeter, L. R., 5 Eq., 63; Daw-
kins v. Antrobus, L. R., 17 Chan. Div.,
615; Gardner v. Freemantle, 19 W. R.,
256; People v, New York Cotton Ex-
change, 8 Hun, 216 (1876); Dean v. Ben-
nett, L. R., 6 Chan., 489. In Sturgis v.
Board of Trade, 86 IIL, 441 (1877), it
was held that the remedy of the ex-
pelled member was at law and not in

equity. But see State v. Lusitanian
Portuguese Society, etc., 15 La. Ann.,
73 (1860); Wood v. Woad, L. R., 9
Exch., 190 (1874); Bostwick v. Fire De-
partment of Detroit, 49 Mich., 513;~
Hassler v. Phila. Musical <Ass’n, 14
Phila., 238; Anaconda Tribe v. Mur-
bach, 18 Md., 91; State v. George Med-
ical Soc., 88 Ga., 608; Washington
Benevolent Soc. v. Bacher, 20 Penn..St.,
425; Riddle v. Harmony Fire, etc., Co.,
8 Phila., 810; State v. Adams, 44 Mo.,
570; Harmstead v. Washington Fire,
etc., Co., 8 Phila., 381; Commonwealth
v. Philanthropic Soc, 5 Binn., 486;°
Commonwealth v. St. Patrick Soc., 2
id., 448; People v. Fire Underwriters,
14 N. Y. Super. Ct., 248. Upon the
general question of the power to expel
members, see Angell & Ames on Corp.,
§ 410 et seg.; 2 Kent’s Com., 297.

891
CHAPTER XLII.

d 9
STOCKHOLDER’S ACTIONS TO HOLD THE DIRECTORS LIABLE FOR
NEGLIGENCE IN THE DISCHARGE OF THEIR DUTIES.

§ 701. Remedy of the stockholder
herein.

§'702. Instances of negligence of di-
rectors in the performance of

their duties:

g 703. Directors.must use ordinary care
and diligence in the manage-
‘ment of the corporation and
the transaction of its business,

§ 701. Remedy of the stockholder herein.— Where, by reason of
the negligence of the directors or other officers, the corporate funds,
property or rights have been lost, the injury is practically and ulti-
mately an injury to the stockholders. But, in the eye of the law,
the injury is to the corporation itself. The loss has depleted its
treasury. Moreover, the negligent act was in reference to the
affairs of the corporation, and’ was an injury to the corporation.
Accordingly, it is for the corporation to call the directors to an ac-
count for their negligence. The action is not an action which the
stockholder is to bring. The negligence affects him, not directly,
but indirectly. Hence, the law is well settled that a stockholder
cannot bring the ordinary action at law for damages against the
corporate directors for their negligence in the management of
the corporate affairs! It is clear also that the stockholder cannot
hold the corporation itself liable for the negligence herein of its
directors. To allow such an action would be to make part of the
stockholders liable to other stockholders for the loss, when all are
equally injured, equally innocent and equally in position to com-
plain.2. Ordinarily the remedy for the negligence of corporate di-
rectors in the management of the corporate affairs is an action at
law instituted by the corporation itself. If, however, the corpora-

1The leading case on this point is
Smith v. Hurd, 53 Mass., 371 (1847), the
court saying: ‘‘An injury done to the
stock and capital by negligence or de-
feasance is not an injury to such sepa-
rate interest, but to the whole body of
stockholders in common.” Brincker-
hoff v. Bostwick, 88 N. Y., 52 (1882);
Craig v. Gregg, 83 Penn, St., 19 (1876).
‘To same effect, Allen v. Curtis, 26
Conn., 456 (1857). ‘A fatal defect in

the plaintiff’s petition, both original
and amended, is that it seeks no recov-
ery in behalf of the corporation, but
seeks a direct recovery of damages for
the plaintiff individually, the case
stated not entitling him to such a re-
covery.” Evans v. Brandon, 53 Texas,
56 (1880); Kent v. Jackson, 2 De G., M.
& G., 49 (1852).

2 Oliphant v. Woodburn, etc., Co., 63
Iowa, 332 (1884).

892
OH. XI] SES eRe OF DIRECTORS.

[§ 702.

tion is under the control of the guilty parties, or if it refuses to
sue when requested by-a stockholder to do so, then the stockholder
himself may bring a suit in equity in his own behalf, and in behalf
of all other stockholders who may wish to come in, making the
corporation and the guilty parties the defendants, and “compel ‘them
to make good to the corporation the corporate money or property
lost by their negligence.! The money or property recovered in
such an action belongs to the corporation, and not to the stock-
holder who brings the suit.2 In a stockholder’s suit to hold the
directors liable for negligence, the acts of negligence need not be
set out with great particularity. The suit isin a court of equity, -
and the court decides the questions of fact, since the suit is in the
nature of an accounting.’

§ 702. Instances of negligence of directors in the performance of
their duties.— It is difficult to lay down any rules as to what acts
will constitute negligence on the part of corporate officers. ;Each
case is to be determined largely on its own facts. Thus, where the
directors kept no accounts, paid no calls, collected no subscriptions,
they were quite properly held guilty of negligence and were made
liable therefor. So also the directors of a national bank are liable
when they loan money to irresponsible persons, allow overdrafts,
employ dishonest, unfaithful and incompetent clerks, and neglect to
take security from the cashier, president and other officers, for good
conduct and the performance of duties.? The president is negli-
gent and is liable if he does not require the secretary to give a
bond for his good conduct, as required by the by-laws of the cor-
poration. But it has been held that the directors are not liable
for a failure to have the secretary’s bond renewed, they supposing
that it did not expire at the end of the year.’ The law is well
established that the corporate officers are not liable on the ground
See,

1A stockholder in a national bank poration has become insolvent.

who has been subjected to a statutory
liability may sue the directors, in be-
half of the corporation, to render them
liable for their gross negligence, the re-
ceiver having neglected to sue. Nelson
-v, Burrows, 9 Abb. N. C., 280 (1881),
giving the complaint in full.

2Eivans v. Brandon, supra; Dewing
v. Perdicaris, 96 U. S., 193, 198 (1877);
Smith v. Poor, 40 Me., 415 (1855); Car-
ter v. Ford, etc., Co., 85 Ind., 180 (1882).

3Halsey v, Ackerman, 38 N. J. Eq.,
501 (1884), affirming 10 Stew. Eq., 356.
This case holds also that the stock-
holder’s action lies even after the cor-

also, Smith v. Poor, 3 Ware (U.S. C. C.),

148 (1858); Gardiner v. Pollard, 10 Bosw.
(N. Y.), 674 (1863), and 2 N. Y. Rev.
Stat., 589, § 1, and 591, § 16. ’

4Neall v. Hill, 16 Cal., 145 (1860). .

5 Brinckerhoff v. Bostwick, 88 N. Y.,
52 (1882). See, also, Smith v. Rathbun,
92 Hun, 150 (1880). As to the liability
of a cashier, see-Com. B’k v, Ten Eyck,
48 N. Y., 805.

6 Pontchartrain R. R. Co. v. Paulding,
11 La., 41 (1837).

7Vance v. Phoenix Ins, Co., 4 Lea ,
(Tenn.), 385 (1880).

x

893
§ 703.]

NEGLIGENCE OF DIRECTORS.

[CH. XLII.

of negligence for witra wires acts which they have done or sanc-
tioned, but in good faith and without knowledge of their ultra

vires character.

The act itself may be impeached and set aside,

and property transferred thereunder may be recovered back; but
if the directors have made an honest mistake, and it was a mistake
which a man of usual intelligence might.make, they are not per-

sonally liable therefor.
learned in the law.!

The law does not require them to be
The. directors, however, are liable for allow-

ing the treasurer to use corporate funds for lobbying purposes.’

§ 703. Directors must use ordinary care and diligence in the
management of the corporation and the transaction of its business.
The directors of a corporation are not guarantors that no mistakes
will be made in the management of the corporate business, nor do
they insure the corporation against loss by the frauds or embezzle-

ment of subordinate officers and agents.

They are required to ex-

‘ercise reasonable care and sound business judgment, but nothing

further than this.

They generally serve without pay, and usually

by reason of their own interest in the stock of the company are
directly interested in the welfare of the corporation. But, though
this is the case, they must use ordinary diligence in ascertaining
the condition of things, and ordinary: intelligence in their action as
directors. They are liable for losses if they go tosleep at meetings
of the directors, or if they regularly fail to attend such meetings.’

1 Watt’s Appeal, 78 Pa. St., 370 (1875);
Hodges v. New Eng. Screw Co.,1R.1.,
312, 848 (1850); Spering’s Appeal, 71 Pa.
St., 24; Williams v. McDonald, 37 N. J.
Eq., 409 (1888). Cf. Joint-stock Co. v.
Brown, L. R., 3 Eq., 189; 8 Eq., 381
(1866).

2Shea v. Mabry, 1 Lea (Tenn.), 819
(1878).

3 The leading case on the liability of
directors for negligence is Charitable
Corporation v. Sutton, 2 Atk., 400 (1742).
In Percy v. Millaudon, 6 Mart. (La.), 68
(1829), the court said: ‘If nothing has
come to their knowledge to awaken
suspicion of the fidelity of the president
and cashier, ordinary attention to the
affairs of the institution is sufficient. If
they become acquainted with ‘any fact
calculated to put prudent men on their
guard, a degree of care commensurate
with the evil to be avoided is required,
and a want of that care certainly makes
them responsible.” This case also holds

that directors are not liable for errors
of judgment unless they are grossly
wrong. United Society, ete, v. Un-
derwood, 9 Bush (Ky.), 609 (1878), hold-
ing that the directors must use ordinary
diligence; Williams v. Gregg, 2 Strob.
Eq. (8. C.), 297 (1848). In Richards v.
New Hampshire Ins, Co., 48 N. H., 263
(1861), the court say: ‘The rule is a
just one that_an agent is bound to ap-
ply the same diligence to obtain pay-
ment of debts in his care that he does
to recover his own.” In the case of Land
Credit Co. v. Fermoy, L. R., 5 Ch., 768
(1870), an attempt was made to hold lia-
ble for negligence, directors who inno-
cently approved of a loan which in
reality had not been made, but the
money had been used by other directors
for speculative purposes. See, also, R’y
Light Co., 42 L. T. R., 206; Scholefield’s
Case, 1882, W. N., 22; British, etc., Life
Assurance, L. R., 14 Ch. D., 335. Inthe
case of Dunn’s Adm’r v, Kyle’s Adm’s,

894
CH. XLII. | NEGLIGENCE OF DIRECTORS.

[$ 703.
They must exercise the same diligence and care that men of usuai
prudence and skill would exercise in the management of a similar
business. for themselves.

The directors are not bound to examine the books of the com-
pany, nor to investigate the mode of living of their employees. But
they are required to attend the directors’ meetings with reasonable
regularity; to have statements of the business made to them; to
object to the transaction of important business without the knowl-
edge and consent of the board of directors; to examine with rea-
sonable care the reports and matters of business brought before
them; and not to shut their eyes to obvious objections to the busi-
ness transactions and general condition of the corporation, or to
the character and well-known reputation of the employees.! More-

14 Bush (Ky.), 134 (1878), where a cash-
ier had embezzled the funds of the
bank, the court said: ‘‘ Bad faith or
gross negligence is certainly necessary
to render the director liable to a stock-
holder in a case like this.” The court
also approved of the rule given in Morse
on ‘Banking, p. 117, to the effect that,
‘for excusable mistakes concerning the
‘law, and for many errors strictly of
discretion, they are not liable. Though
in cases in which their action has been
so grossly ill-advised as to warrant the
‘imputation of fraud, or to show a want
of the knowledge absolutely necessary
for the performance of their duties, so
great that they were not justified in as-
suming the office, they may be held
responsible.” The mere fact that loans
by a bank turn out to have been un-
wise and hazardous does not render the
director liable therefor. Witters v.
Sowers, 31 Fed. Rep., 1 (1887). Bank
directors cannot be held liable for neg-
ligence in loans, etc., at the suit of a
stockholder, where they have used or-
dinary care and acted in good faith.
Jones v. Johnson, 6 S,.W. Rep., 582
(Ky., 1888). Director held not liable for
nggligence in failing to sue for debt due
to corporation. In re Forest, etc.,
Min. Co., L. R., 10 Ch. D., 450 (1878).
Directors are not liable for money lost
by an overdrawn account, Turquandv.
Marshall, L. R., 4 Ch., 376 (1869). A di-
rector of a loaning company is not liable

for an unsecured loan which is lost,
merely because it appeared on the
books, etc. Proof is necessary that he
knew of the loan. Caledonian, etc.,
Co. v. Curror, 9 C. of S. Cases (4th series),
1115 (1882), Bank directors are not lia-
ble for negligence merely because the
cashier has for years been embezzling
the funds and making false entries.
Savings B’k, etc., v. Caperton, 8S. W.
Rep., 885 (Ky., 1888). The directors of a
bank are not bound to know of the
cashier’s mismanagement, and are not
liable therefor. Clews v. Bardon, 36
Fed. Rep., 617 (1888).

1The law on this subject is ably and
clearly set forth by Mr. Justice Earl, in
Hun v. Cary, 82 N. Y¥., 65 (1880). Cf.
Van Dyck v. McQuade, 86 N. Y., 38
(1881). See, also, Scott v. De Peyster, 1
Edw. Ch., 518 (1832); Litchfield v.
White, 8 Sandf., 545; Liquidators, etc..
v. Douglas, 32 Scottish Jur., 212 (1860);
Spering’s Appeal, 71 Penn. St., 11 (1872),
an important case, and one which is
frequently spoken of as the leading case
herein. A director who trusts every-
thing to the other directors, or who per-
forms all acts as a mere man of straw,
is liable. Brown’s Case, L. R., 8 Eq.,
404, 405. See, also, Williams v. McKay,
40 N. J. Eq., 189 (1885). See, also, Ack-
erman v. Halsey, 37 N. J. Eq., 856 (1883);
aff’d, 88 id., 501; Trustees, etc., v. Bos:
seiux, 3 Fed. Rep., 817 (1880). That
directors are not liable for the fraud or

895
§ 703. ] NEGLIGENCE

OF DIRECTORS.

4
[CH. XLIL

over, when a director has knowledge that an unauthorized act is
being done he cannot escape liability, however innocent he may be,
unless he prevents ie act by his protest, or files a bill in equity to

remedy the wrong.!

misconduct of co-directors, see Movius
v. Lee, 30 Fed. Rep., 298 (1887). Direct-
ors are not liable for gross negligence in
buying out a business where the corpo-
ration was organized for the express
purpose of buying out that business.
Overend, etc., Co. v. Gibb, L. R., 5 H. L.,
480 (1872). "Where loans without secu-
rities are improperly made, and the
guilty directors are liable therefor, a di-
rector who did not participate is never-
theless liable, if he does not take steps
to remedy the matter as soon as he
learns of it. Jackson v. Munster Bank,
15 L. R., Ir., 356 (1885). Bank directors
who meet but once or twice during the
year, and do not examine the books, and
have no knowledge of affairs, are liable
for losses resulting from long-continued
overdrafts by insolvent parties. Mar-
shall v. Farmers,’ etc., B’k, 8 S. E. Rep.,
586 (Va., 1889). After a director sends
in a letter of resignation he is not liable
for the wrongful acts of the directors,
even though no attention is paid to his
letter. Perry’s Case, 34 L. T. (N.8.),
716 (1876). Managers of a building-loan
corporation are liable for loans made to
a firm in excess of the. amount allowed
by a by-law; but are not liable for a
mistaken estimate of value of the secu-
rity taken, nor for a defect in the ac-
knowledgment of the security — a mort-
gage. Citizens’ Bldg., etc., Assoc. v.
Coriell, 34 N. J. Eq., 888 (1881). In the
case, however, of Movius v. Lee, 30 Fed.

Rep., 298 (1887), the court held, reviewing
the cases, that ‘‘ there is no case which
has been cited or observed in which it
has been decided that a director of a cor-
poration was liable to make good a loss
occasioned by the fraud or misconduct

of a co-director, in which he had no'

part, and which was perpetrated with-
out his connivance or knowledge.

It is nowhere adjudged that all must
always act, or that they must not trust
one another to act, or that they are
liable for the mere omission to watch
and restrain the others, without wrong
intention on their own part. Treasurer
is not liable for losses by deposits made

‘by him, where the corporation acqui-

esced'in the deposits. New York, atc.,
R. R. Co. v. Dixon, 21 N, E. Rep., 110
(N. Y., 1889).

1 Joint-stock Discount Co. v. Brown,
L. R., 8 Eq., 881, 402 (1869); Ashhurst
v. Fowler, L. R., 20 Eq., 225 (1875).
That a director is not in general liable
for misdeeds of subordinate corporate
agents, see Bath v. Caton, 87 Mich., 199
(1877); Bacheller v. Pinkham, 68 Me.,
253 (1878); Nicholson v, Mounsey, 15
East, 384 (1812); Stone v. Cartright, 6
Term Rep., 411 (1795); Hewitt v. Swift,
3 Allen, 420 (1862). Cf. Weir v. Bar-
nett, L. R., 3 Ex. D., 238 (1878). But
knowledge obtained by the director
previous to becoming such does not
compel him to act. Forest, etc., Coal
Co., L. R., 10 Ch. D,, 450. i

896
CHAPTER XLIII.

THE POWER OF VARIOUS OFFICERS AND AGENTS TO CONTRACT
FOR A CORPORATION, AND THE MODE OF DRAWING AND EXE-
CUTING CORPORATE CONTRACTS— ADMISSIONS AND NOTICE.

§ 704. Under what circumstances is a{B. THE FORM OF CORPORATE CON-

corporation bound by a con- ‘TRACTS—CORPORATE SEAL—

tract made in its name. ' DRAFTING, SIGNING AND SEALING —
LIABILITY OF OFFICERS ON CON-

A. POWER OF PROMOTERS, STOCKHOLD- TRACTS IRREGULARLY EXECUTED.

ERS, DIRECTORS, EXECUTIVE coM-
MITTEE, PRESIDENT, SECRETARY, | § 721. Ordinary corporate contracts by’

TREASURER, CASHIER, GENERAL the modern rule need not be
MANAGER AND MISCELLANEOUS under seal,

AGENTS TO CONTRACT FOR A COR-| 722. Method of drafting, signing,
PORATION, sealing and acknowledging a

corporate contract — Proof of
seal and authority to attach it. ,

723. Corporation is liable on irregu-
larly-executed instruments.

724. Liability of officers on irregu-
larly-executed instruments.

725. Charter and by-law -require-
ments as to manner of execut-
ing corporate contracts.

§§ 705-707. Promoters— Their _liabil-
ity and the liability of
a corporation and sub-

ribers,

708-711. Siioct holders Thelr
power to make by-laws
and contracts, expel
members and remove
directors.

712-714. Directors—Their power !
to contract-- De facto|C, ADMISSIONS OF QFFICERS AND NOTICE.

directors — Their min- TO OFFICERS.

ute-book as evidence.
715. Executive committee, § '726. When is the corporation bound.
716. President. by its officers’ or agents’ ad-
717. Secretary and SeeaSHGh: missions.
718. Cashier. 727. Notice to the corporation by no-
‘719. General manager and superin- tice to the officers.

tendent.

 

720. Subordinate agents,

§ 704. Under what circumstances is a corporation bound by a
contract made in its name—The three tests for determining
whether a contract may be enforced against a corporation.— In de-
termining whether a contract may be enforced against a corpora-
tion, three things are to be considered. First, did the corporation
have the power to enter into such a contract? Second, was the
contract entered into by a duly-authorized agent of the corpora-
tion? Third, was the contract drawn, signed and sealed in a form
which binds the corporation ?

The first of these questions has been already treated of in ‘the
preceding chapters of this book.

1See particularly chapters XL and XLI.
' 6% 897
§ 705.)

HOW CORPORATE CONTRACTS ARE MADE.

' (CH. XLII.

There is an infinite variety of contracts which the corporation
may enter into, and the great mass of law on this subject is con-

stantly being increased by new decisions.

A corporation may enter

into any contract which is within its express or implied powers,

and which is not mala in se.

‘And even a contract which is not

within the express or implied powers of the corporation is some-
times enforced against it or for it when one party to the contract
has already performed, or when the parties cannot be restored to

their original positions.!

The second and third tests of whether a contract is enforceable
against a corporation are treated of in this chapter.

-A. POWER OF PROMOTERS, STOCKHOLDERS, DIRECTORS, EXECUTIVE COM-

MITTEE, PRESIDENT,

SECRETARY, TREASURER, CASHIER, GENERAL

MANAGER AND MISCELLANEOUS AGENTS TO CONTRACT FOR A COR-

PORATION,
RATIFICATION.

AND CONTRACTS BINDING ON THE

CORPORATION BY

§ 705. Promoters — Liability to strangers, to the corporation and

‘to subscribers for. stock — Liability of the corporation herein to

strangers and to promoters — Liability of subscribers herein —

’ Contribution— In America the question of the liability of pro-

smoters tq persons who have performed services or entered into

contracts relative to a prospective corporation has rarely arisen.

But in England this question has frequently been passed upon. In

general the promoter of a prospective corporation is liable for serv-

ices rendered by others who are employed as clerks, engineers, or
in a similar capacity in the work of promoting the enterprise.?

1See chapter XL.

“The chairman of the promoters who
signs the prospectus may by the jury
be held to have authorized the expense
of printing, and is liable personally.
Riley v. Packington, L. R., 2C. P., 586
(1867). In Collingwood v. Berkeley, 15
C. B., N. 8., 145 (1868), a director who
allowed his name to be used as such
for a proposed company was held liable
for a passage ticket which was pur-
chased on a representation of the secre-
tary that the company would be organ-
ized. That the interested parties may
be liable to the attorney of the provis-
ional committee of a company which is
abandoned before incorporation, see
Parsons v, Spooner, 6 Hare, 102 (1846).
A promoter who employs a person in
behalf of a proposed company is liable.

Bell v. Francis, 9 Carr. & P., 66 (1839).
A local committee to form a company
are liable to their secretary. They are
not allowed to say that he must look
to the corporation for pay. Kerridge
v. Hesse, 9 Carr. & P., 200 (1889) A
promoter is liable personally on con-
tracts made by him in behalf of the
company with third persons, and his
liability is not released by the subse-
quent adoption of the contract by the
company. Kilner v, Baxter, L. R., 2
C. P., 174 (1866); Scott v. Embury, L. R.,
2C. P., 255 (1867)... Question of whether
a surveyor employed by promoters can
look to them for compensation, the
company. not having been formed, is
for the jury, considering all the facts
of the employment. Higgins v, Hop--
kins, 8 Ex., 163 Bee If he was pres-

898
CH. XLII. |

HOW ‘CORPORATE CONTRACTS ARE MADE.

[$ 705.

_ There has been great difficulty in determining who is to be con-
sidered a promoter and who is not. As regards the liability to

ent when the promoters resolved’ that
they should not be liable he cannot re-
cover from them. Laudman » Ent-
wistle, 7 Ex., 632 (1852). In Lake v.
Argyle, 6 Q. B., 477 (1844), it was left
to the jury to decide whether the presi-
dent of a proposed corporation thereby
held himself out as liable on a contract
made by an agent of the proposed com-
pany. Question for jury whether a
president of a proposed corporation is
liable. Wood v. Argyle, 6 Man. & Gr.,
928 (1844), Allowing one’s name to be
used as a director and suggesting that
advertising be made does not render.a
person liable for the advertising. Bur-
bridge v. Morris, 3 H. & C., 664 (1865),
A promoter is not liable on contract
made before he joined in the enter-
prise, though the contract is performed
afterwards. Newton v. Belcher, 12
Q. B., 921 (1848). Promoter is. not liable
on contracts made in writing before he

‘became such. Beale v. Mouls, 5 Rail. |

Cas., 105 (1847).

Person contracting with a partner-
ship may hold the partners liable, al-
though he knew that their articles pro-
vided for incorporation, and they after-
wards did incorporate. Witmer v.
Schlatter, 2 Rawle (Pa.), 359 (1880). But
the rule is otherwise where the party
allows the account to be transferred to
the corporation and then carries on a
long running account. Whitwell v.
Warner, 20 Vt 425 (1848).. Or where
the party knew that he was contracting
with the other as an agent of an unin-
corporated association. Abbott v. Cobb,
17 Vt., 593 (1845). See, also, § 508, In

England a provisional committee is”

generally appointed by the subscribers.
This committee is generally held not
liable. But a committee of manage-
ment is usually appointed subsequently,
and this committee is generally held
liable. That a provisional committee
is not liable, see Nevins v, Henderson,

5 R’y & Canal Cases, 684 (1848); Daw-
son v. Morrison, id., 62 (1847); Ea parte
Roberts, 2 Mac. & G., 192 (1850); Car-
michael’s Case, 17 Sim., 163 (1850); Bx
parte Clarke, 20 L. J. (Ch.), 14 (1851);
Maitland’s Case, 3 Giff., 28 (1861); Hall’s
Case, 8 De G. & S., 214 (1850); Hx
parte Stocks, 22 L. J.(Ch.), 218 (1853);
Tanner’s Case, 5,De G. & S., 182 (1852);
Forrester v. Bill, 10 Ir. Law Rep., 555
(1847); Ha parte Osborne, 15 Jur., 72
(1851) ; Burnside v. Dayrell, 8 Ex., 224
(1849); McKwan v. Campbell, 2 McQueen
(8. C.), 499 (1857). Contra, Lefray v.
Gore, 1 Jo. & Lat., 571 (1844). It is for
the jury to say whether a provisional
director is liable for advertisements
which he authorized the secretary to
publish at the secretary’s expense. Mad-
dick v. Marshall, 17 C. B., 829 (1864);
aff’g 16 id., 387. As to provisional
committee-man, sce, also, Williams v.
Pigott, 2 Ex., 201 (1848). Merely allow-

ing one’s name to be used as a inember
of a provisional committee does not .

render a person liable on contracts
made. Barker v. Stead, 3C. B., 946
(1847); Patrick v. Reynolds, 1 ©. B., N.
S., 727 (1857). Nor is he liable to an en-
gineer, although the former took part
in meetings. Rennie v. Wynn, 4 Ex.,
691 (1849). Moreover, the person sued
may show that no personal liability was
to be incurred and that the plaintiff
knew it. Rennie v. Clarke, 5 Ex., 292
(1850)... Question for jury whether the
provisional committee authorized and
became liable on contracts made by the
managing committee. Williams v.
Pigott, 5 Rail. Cas., 544 (1848). For a
case where the provisional committee
were held not to have so authorized,
see Dawson v. Morrison, id., 62 (1847).
But Barrett v. Blunt, 2 CG & K. 2
Eng. Com. L, Rep.), 271 (1846), made it

~

a question for the jury. Burker v. Lyn- -

don, id., 651 (1847), held. the committee
not liable. So, also, Giles v. Cornfoot,

899
§ 703.]

HOW CORPORATE CONTRACTS ARE MADE.

(CH. XLII.

strangers, however, it seems that every one is liable herein as a
promoter who induces such stranger to act in expectation of pay-

id., 658 (1847); Griffin v. Beverley, id.,
648 (1847). In Bailey v. McCaulay, 18
Q. B., 815 (1849), the court said that it
was a question for the jury whether a
comuiittee-man, 7. e., a promoter,’ al-
lowed himself to be beld out as liable,
and that if the debt incurred was a nec-
essary and usual one he is liable. In
Ex parte Cottle, 2 Mac. & G., 185 (1850),
aff’d sub nom. Noriis v. Cottle, 2 H. L.
Cas., 647 (1850), it was held that the
mere fact of allowing one’s name to ap-
pear as a member of the provisional
committee does not render a person
liable at law for the debts. To same
effect, Ex parte Roberts, 2 Mac. & G.,
192 (1850).

A person who consents to the use of
his name as a provisional committee
to promote and organize a company is
liable, as a partner, for the debt of the
committee for stationery. Barnett v.
Lambert, 15 Mees. & W., 489 (1846). But
not where a board of managers after-
wards takes charge and incurs the ex-
pense. Bright v. Hutton, 3 H. of L,
Cas., 841 (1852); rev’g 1 Sim, N.S,
602, and substantially overruling Hut-
ton v. Upfield, 2 H. of L. Cas., 694. To
same effect, Reynell v. Lewis, 15 Mees.
& W., 517(1846). As to the matters to
be proved in rendering a promoter
liable, see Carrick’s Case, 1 Sim., N. 8.

505 (1851). Lindley on Partnership (see

Thompson on Liability of Officers,
p. 202) says of Bright v. Hutton, supra,
that it overruled directly or indirectly
the following cases: ‘‘ Upfill’s Case, 2H.
L. Cas., 674; Ex parte Besley. 2 Mac. &
G., 176. This case occurs three times
in the bocks. It was first decided by
Vice-Chancellor Knight Bruce (8, De,G.
& §., 224), who held that Besley was not
a contributory. This decision was ap-
pealed against and reversed by Lord
Cottenhan (2 Mac. & G., 176), But the
appeal was reheard by Lord Truro, who
affirmed the decision of the vice-chan-

cellor (8 Mac. & G., 287). The case as
reported in 3 De G. & S§., 224, and 3 Mac.
&G. , 287, is stilllaw. Bright’s Case, 1
Sim. (N. S.), 602. This was reversed on
appeal (8 H. L. Cas., 341). Ee parte
Brittain, 1 Sim. (N. S.), 284, decided re-
luctantly on the authority of Upfill’s
case. ' Hole’s Case, 3 De G. & S., 241,
‘decided on the authority of Ex parte
Besley, 2 Mac. & G., 176. Markwell’s
Case, 5 De G, & S., 528, decided on the
authority of Upfill’s Case, but after the
decision of Bright v. Hutton. It cannot,
however, be considered law. See Ew
parte Capper, 1 Sim. (N.:S.), 178, and
Carrick’s Case, 1 Sim. (N. 8.), 505; Ha

_parte Morrison, 15 Jur., 346, and 20 L.

J. (Ch.), 206, decided on: the authority
of Upfill’s case, and in effect overruled
by Sharp and Jenner’s Case, 1 De G., M.
& G., 565. Nicholay’s Case, 15 Jur.,
420, decided on the authority of Upfill’s
case. Ex parte Sichell, 1 Sim. (N. 8.),

‘187, decided reluctantly on the authority

of Uphill’s:case. Ex parte Studley, 14 °
Jur., 589, This case is very briefly re-
ported, but it seems inconsistent with
such cases as Hall’s (8 De G. & S., 214);
Stock’s (22 L. J..gCh.), 218), and Carrick’s
(1 Sim. (N. 8.), 505).” A member of the
managing committee is liable where he
attended a meeting and knew of em-
ployment. Norbury’s Case, 5 De G. &
S., 423 (1852); Pearson’s Case, 8 De G.,
M. & G., 241 (1852). Cy. Sharp’s Case,
1 De G., M. & G., 565 (1852). But not if
he was unaware of his being on the
committee. Ex parte Haight, 1 Drew.,
484 (1853). For a case where promoters
were held liable on a contract that the
company would pay certain damages
to a land-owner, see Bland v, Crowley,
6 Ex., 522 (1851). In Webb v, London,
ete., Railway, 1 De G., M. & G.,, 521
(1852); reversing 9 Hare, 129, the com-
pany was held not liable on such a con-
tract.

900

 
decided in the negative.

HOW CORPORATE CONTRACTS ARE MADE.

[§ 706.

OH, XLII. |

ment from the prospective corporation.! Having induced the party
to act, the promoter must see that he is paid.

The liability of promoters to persons who have been induced by
fraudulent prospectuses to subscribe for stock,’ and the liability of
promoters to the corporation itself to account for fraudulent profits
which the promoter has secretly made out of contracts which he
caused the corporation to enter into,’ have already been fully con-
sidered. Where a promoter has been lield liable to SrrenesTs he
may have contribution from his fellow-promoters.!

§ 706. The questions sometimes arise whether a subscriber for
stock in a projected corporation is liable to its creditors in case the
enterprise is abandoned before incorporation; and also whether
the promoters of the abortive corporation are liable to the sub-
scribers for deposits made by the latter. The former question is
“The subscribers to the stock or articles
of association are not. partners with those who assume the risk of
acting for a corporation not yet legally established.”® As to the

\Secretary of prospective company’

ordering advertisements is liable for
same, though he orders as “‘ secretary
pro tem.” Hoperoft v. Parker, 16 L.
T. Rep., 561 (1867). For definitions of
@ promoter, in reference to his liability
to the corporation itself, see § 651, su-
pra.
' 28ee chapters IX and XX, supra.

3See § 651, supra.

4Boulter v. Peplow, 9 C. B., 498
(1850); Batard v. Hawes, 2 E. & B., 287
(1853); Edgar v. Knapp, 7 Jur., 583
(1843); Spottiswood’s Case, 6 De G., M.
& G., 845 (1855); Lefray v. Gore, 1 Jo.
& Lat., 571 (1844). A promoter who
has advanced money may have contri-
bution. Hamilton v. Smith, 5 Jur., N
8., 82 (1859). Action at law lies for con-
tribution between promoters. Batard
v. Hawes, 2 El. & BL, 287 (1853).
Where the secretary was the original
promoter and persuaded the others to
go in, he cannot recover from‘ them for
his services. Parkin v. Fry, 2 Car. &
P., 311 (1826). The promoters are not
partners. Lindley on Partn., 4th ed.,
$1-2, citing cases (Callaghan & Co., 1881).
They are not liable to each other for
services. Holmes v. Higgins, 1 B. &
©., 74. May collect on surveying con-

tract from co-promoters, though plaint-
iff was alsoa promoter. Lucas v. Beach,
1 Man. & Gr., 417 (1840). Bat not for
services as secretary. Wilson v. Curzon,
15 M. & W., 582 (1847). Promoters are
under no contract with each other to
go on, A promoter who was to sell
land to the company cannot sue the
other promoters for damages for fail-
ure to organize, etc. Crow v. Greene,
4 Central Rep., 278 (Pa., 1886).

5 Ward v. Brigham, 117 Mass., 24
(1879), the court saying also: ‘‘ Those
who acted as agents for the inchoate
corporation acted without a principal
behind them, because there was no body
corporate capable of appointing agents,
and so became principals in the trans-
action.” See, also, Duke v. Andrews, 2
Ex., 290 (1848); Hutton v. Thompson, 3
H. L. Cas., 161 (1857); Duke v. Diver, 1
Ex., 36 (1847), where the stockholder
had promised to pay'on a certain day,,
and was held to his promise. To same
effect, Duke v. Forbes, id., 356 (1847);
Aldham v. Brown, 7 E. & B., 164 (1857);
2E. & E., 398, on appeal; Woolmer v.
Toby, 10 Q. B., 691 (1847). However, in
the case of Lake v. Duke of Argyle, 6
Q. B., 477 (1844), the court held that at-
tendance at a meeting, announcement

901
§ 706.]

'

HOW CORPORATE CONTRACTS ARE MADE.

[CH. XLII.

latter question the rule has become well established in England
that a subscriber for stock in a corporation that never comes into
existence, who has paid a part of his subscription, may recover back
from the promoters of the enterprise the amount so paid, and is

not liable even for the preliminary expenses.!

His remedy may be

by bill in equity? If, however, the subscriber expressly or by-im-
plication authorizes expenditures, he cannot recover back his de-

posit.?

of intention of being: president and of
taking stock, and concurrence in meas-
ures for incorporation, may be strong
evidence that defendant ‘‘ held himself
out asa paymaster to all who executed
the orders.” The question, then, is for
the jury. Where a proposed corpora-
tion, never incorporated, contracts to
purchase certain property of a ,sub-
scriber, he cannot bring suit at law
against other subscribers for damage
caused by non-fulfillment of contract.
Crow v. Green, 5 Atl. Rep., 23 (Penn.,
1886). Subscribers are not liable. Bourne
v. Freeth, 9 B. & C., 632 (1829). Unless
they allow themselves to be held out as
partners in the enterprise. Fox v. Clif-
ton, 9 Bing., 115 (1832), rev’g 6 id., 776.
Cf. Herand v. Leaf, 5 C. B., 157 (1847);
Dickinson v. Valpy, 10 B. & C., 128
(1829). Hx parte Hirschel, 15 Jur., 924
(1851), held that a subscriber for stock
in an abortive company was not liable
for debts incurred. The vice-chancellor
said: ‘‘ Where courts have been contra-
dicting each other for years this court
can do no otherwise than follow the
last decision.”

| Ashpitel v. Sercombe, 5 Ex., 147
(1850), where the court says: ‘‘There
scems to be no doubt that the plaintiff,
having paid his money for shares in the
concern which never came into exist-
ence, or a scheme which was aban-
doned before it was carried into execu-
tion, has paid it on a consideration
which has failed, and may recover it
back as money had and received to its
use, unless he can be shown to have
consented to or acquiesced in the appli-
cation of the money which the directors

The subscriber need not submit to the deduction of any

have made.” See, also, Thompson on
Liabilities of Officers, etc., 210;
Nockels v. Crosby, 8 B. &'C., 814 (1825),
the leading case; 1 Lindley on Partner-
ship (4th ed.), 119, citing Walstab v.
Spottiswoode, 15 M. & W., 501 (1846); —
Moore v. Garwood, 4 Ex., 681 (1849);
Coupland v, Challis, 2 Ex., 682 (1848);
Owen v. Challis, 5 C. B., 115 (1848);
Ward v. Londesborough, 12 OC. B., 252

-(1852); Mowatt v. Londesborough, 8

E. & B., 307 (1854), and 4 id., 1. See,
also, Vollans v. Fletcher, 1 Ex., 20
(1847); ‘Chaplin v. Clarke, 4 Ex., 402
(1849),

22 Lindley on Partnership (4th ed.),
954, citing Harvey v. Collett, 15 Sim.,
382 (1846). “A bill in equity lies to re-
cover back money paid in a bubble.”
Colt v. Woolaston, 2 P. Wms. 154
(1728), where there was fraud; Green °
v. Barrett, 1 Sim., 45 (1826); Blain ».
Agar, 1 Sim., 37 (1826); 2 id,, 289 (1828);
Cridland v. De Mauley, 1 De G. & &.,
459 (1847), before the Judicature Acts;
and Cooper v. Welb, id., 454 (1846);
Wilson v. Stanhope, 2 Coll., 627 (1846);
Apperly v. Page, 1 Phillips, 775 (1847);
Clements v. Bowes, 17 Sim., 167; Shep-
pard v. Oxenford, 1 K. & J., 491 (1855);
Butt v. Monteaux, id., 98 (1854), since
such acts. In these latter cases the de-
murrers were overruled. See, also,
Williams v. Page, 24 Beav., 654 (1857),
and “The Bubble Act,” 9 Geo. I., ch.
18.

31 Lindley on Partnership (4th ed.),
121, citing Baird v. Ross, 2 McQueen,
61, 68 (1856); Garwood v. Ede, 1 Ex.,
264 (1847); Watts v. Salter, 10 C. B.,
477 (1850); Vane v, Cobbold, 1 Ex., 798

902
7

CH. XLII. |

HOW CORPORATE CONTRACTS ARE MADE.

[$ 707.

part of his subscriptions to be applied to the payment of the ex-
penses incurred by the promoters in attempting the incorporation."

§ 707. Great difficulty has arisen in determining whether a cor-
poration is liable on contracts made in its behalf by its promoters

before the incorporation took place.

The decided weight of au-

thority holds that the corporation may repudiate such contracts

and refuse to be bound thereby.

(1848); Atkinson v. Pocock, id., 796
(1848); Willey v. Parratt, 3 Ex., 211
(1848); Clements v. Todd, 1 Ex., 268
(1847); Jones v. Harrison, 2 Ex., 52;

Aldham v. Brown, 7 E. & B., 164 (1857); °
.2 E. & E., 398 (1859); Burnside v. Dey-

rell, 8 Ex., 224 (1849).
lNockels v. Crosby, supra.
Williams v. Salmond, supra.
2Munson v. Syracuse, etc., R. R. Co.,
103 N. Y., 58, 75 (1886). An insurance
company may refuse to pay a/loss in-
curred after its incorporation, but grow-
ing out of a policy taken by its pro-
moters before incorporation. Gent v.
Mfg., etc., Co., 107 Til., 652 (1883); S.C.,
106 id., 252. The corporation is not lia-
ble for the debts of an old partnership,
and not even the parol promise of its
president makes it liable. Georgia Co. v.
Castleberry, 43 Ga., 187(1871). See § 206.
An agreement among the donors to an
academy that the money should be re-
paid does not bind the academy after
incorporation. Bluehill Academy v.
Witham, 13 Me., 403 (1836), An agree-
ment of promoters to pay a person for
obtaining subscriptions is not binding
on the corporation. New York, etc.,
R. R. v. Ketchum, 27 Conn., 169 (1858),
the court saying: ‘‘Can a few persons
combine 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
on 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 all
incumbrance.” In Illinois the rule is

Contra,

9

2 Nevertheless, the corporation

favored that the corporation is never
liable on contracts made by its pro-
moters unless it expressly agreed to
perform. So held as regards prelimi-
nary surveys. Rockford, etc., R. R. v.
Sage, 65 Ill., 828 (1872); and book-keep-
ing for one of the promoters, Safety,
etc., Co. v. Smith, id., 309 (1872); and
the liability of a new company for the
services of the superintendent of an
abortive company by the same parties,
Western, etc., Co. v. Cousley, 72 IIL,
531 (1874). An agreement of promoters
that a-certain person shall have a cer-
tain part of the stock ypon incorpora-
tion, upon his paying therefor, does not
bind the corporation. Morrison v. Gold,
etc., Co., 52 Cal., 306 (1877). An agree-
ment with a vendor before formation
of the company provided that he should
not be removed from directorate until a
certain date. The memorandum and
articles provided that this agreement
should be adopted, and the articles
“* confirmed ” and incorporated it. -The
agreement was acted on, but no con-
tract was made between the vendor and
the company. Held, the, articles did
not form a contract between them, and
the vendor could be removed. Eley v.
Positive, etc., 34 L. T. Rep. (N.S.), 190;
1 Ex. Div., 88, followed; Brown v.
La Trinidad, 58 L. T. Rep., 137. See
Lindley, book ii, cap. 2, sec. 3, 4th ed.,
896; Chadwyck, Healey, 36.

Where the bondholders in order to
procure a government land grant con-
tracted with plaintiff to complete the
road, and subsequently the bondholders
foreclosed and re-organized, the court
held that the new company was not lia-
ble on such contract merely from hav-
ing accepted the complete road. The,

903
§ 707.]

may ratify and accept the contract if it chooses.

court said: ‘‘From all the authorities
it seems clear that, in order to recover
in an action ‘at law, the plaintiff must
show either an express promise of the
new company or that the contract was
made with persons then engaged in its

formation, and taking preliminary steps,

thereto, and that the contract was made
on behalf of the new company, in the
expectation on the part of the plaintiff
and with the assurance on the part of
the projectors that it would become a
corporate debt, and that the company
afterwards entered upon and enjoyed
the benefit of the contract, and by no
other title than that derived through it.”
Little Rock, ete., R. R. v. Perry, 37
Ark., 164, 191 (1881); aff'd in Perry v.
Little Rock, etc., R. R., 44 Ark., 383
(1884). See, also, Re The Empress En-
gineering Co., 43 L. T. Rep., N. 8., 742
(Ct. of App., 1881), where G. & A., the
owners of the right to manufacture
‘the Empress Water Motor,” agreed
with C., the agent of the proposed com-
pany, to sell their right to the company,
and it was agreed with C. on behalf of
the company that it could pay the costs
and charges of J. & P., solicitors, for
services and disbursements in perfect-
ing the organization thereof. Petition
by J. & P. for purpose ‘of winding up
the company and for their pay under
the said contract. The court say: ‘“‘ The
contract between the promoters and the
so-called agent of the company of course
was not a contract binding on the com-
pany, for the company had then no exist-
ence; nor could it become binding on the
company by ratification, because it.has
been decided, and, as it appears to me,
well decided, that there cannot’ be in
law an efficient ratification of a con-
tract which could not have been made
binding on the ratifier at the time it
was made, because the ratifier was not
then in existence” Claim cismissed, but
without prejudice to any equitable claim

ma quantum meruit. Re Northum-

HOW CORPORATE CONTRACTS ARE MADE.

, (CH. XLUIL

~

Upon such: ratifi.

berland Avenue Hotel Co., Ltd., Sully’s
Case, 54 L. T. Rep, N. S., 777 (Ct.
of App., 1886), holding. that, in the ab-
sence of a new contract made ,by a com-
pany after its incorporation, a contract
made before its incorporation by a per-
son purporting to contract as trustee for
the company is not binding on the com-
pany, though the parties afterwards
carry out some of the terms of the con-
tract and act on the supposition that it
is binding on the company. Affirming.
S. C., Ch. Div., page 76, same volume.
A provision in the by-laws, which in.
England are filed, that a certain person
shall be the attorney for the company
is not binding on the company. Eley
v. Positive, etc., Co., L. R., 1 Ex. D.,
20 (1875). ‘See, also, 60 L. T. Rep., 406.
An agreement of promoters with a
turnpike company that the proposed
railway company will make a certain
grade crossing with the former is not
binding on the railway company. Al-
dred v. North, etc., R’y, 1 R’y Cas., 404
(1839). An attorney cannot collect his
fees from the corporation for services
previous to incbrporation, even though
the by-laws provided for payment and
the directors in meeting assembled said
that he would be paid. Re Rotheram,
etc., Co., 50 L, T. Rep., 219 (1883). The
corporation is not liable for services in
obtaining street permits and franchises
prior to its incorporation. Hutchinson

v. Surrey, etc., Ass’n, 11 C. B., 689

(1851)... A railway company is not
bound by the agreement of its promot-
ers that it will purchase the canal of a
canal company if the latter will not op-
pose the giant of the charter, Leo-
minster, etc., Co. v. Shrewsbury, ete.,
Ry, 8 K. & J., 654 (1857). A railway
company is not bound by the contract
of its promoters for it with a town
that the company would build certain
wharves, etc. ‘1f such secret or un-
expected terms are to be held binding
on those wha take shares, the result.

904
ex, ‘xLut]

HOW CORPORATE CONTRACTS ARE MADE.

[§ 707.

cation the corporation may enforce the contract,! and the contract

may be ruinous to those who act on the
faith of what appears on the face of the
legislative incorporation.” Caledonian,
etc., R’y v. Magistrates, etc.. 2 Macq.
(H. of L., Scotch), 391 (1855), questioning
Edwards v. Grand Junction R’y, 1 De
G., M. & G.; 1M. & C., 650; Stanley v.
Chester, etc., R’y, 1 Ry Cas., 58; 9
Sim.,'264; aff'd in 3M. & C., 773 (1888),
and Petre v. Eastern, etc., R’y, id.,
462. Where, by the articles of incor-
poration, the subscribers are not to be
bound until a certain amount of stock
is subscribed, the corporation is not
liable for the salary of. an engineer em-
ployed before such full subscription.
Pierce v. Jersey, etc., Co., L. R., 5 Ex.,
209 (1870). A corporation is. not liable
on the contracts of its promoters to em-
ploy plaintiff as a broker, nor does an
express ratification of the contract bind
it unless a consideration is alleged.
Payne v. New South, etc., Co., 10 Ex.,
283 (1854), An agreement of promoters
that the company shall pay an attorney
a certain sum for services is not bind-
itig on the company — not even by rati-
fication and agreement between the
company and the promoters. In re
Empress, etc., Co., L. R., 16 Ch. D.,
125 (1880).

It has been held that equity will en-
force an agreement of the promoters
that, if opposition to the grant of tts
charter is withdrawn, the company will
contract to do certain things which the
opposition desired to put into the charter.
Edwards v. Grand, etc., R’y, 1 My. & Cr.,
650 (1886); aff’g 7 Sim., 337. But an
agreement to pay a large price for land
owned by the opposition party is not so
enforceable. Preston v. Liverpool, etc.,
Ry, 5 H. L. ©., 605 (1856); aff’g: 17
Beav., 114; S. C., before amendment of
the bill, 1 Sim. (N. S.), 586 (1851). Cf.
Stanley v. Chester, etc., R’y, 3 My. &
Cr., 773: (1888); and Eastern, etc., R’y
v. Hawkes, 5 H. L. Cas., 3881 (1855);
Earl of Lindsey v. Great Northern R’y,

10 Hare, 664 (1853), in an inferior court. |
This doctrine is sustained in Earl of
Shrewsbury v. North, ete., Ry, L. BR,
1 Eq., 593 (1865), disapproving Edwards
v. Grand, ete,, R’y Co., 1 My. & Cr.,
650 (1836), and Petre v. Eastern, etc.,
Co., 1 Rail. Cas., 462, and is sustained
also in Gooday v. Colchester, etc., R’y, 17
Beay., 132 (1852). -The articles of asso-
ciation may provide for the payment of
promoters’ contracts. Terrell v, Hut-
ton, 4 H. L. Cas., 1091 (1854). Of.
Gunn v. London, ete., Ins, Co., 12 G
B., N. S., 694 (1862). Contra, Mulhado
v, Porto, ete., R’y, L. R., 9 C. P., 503
(1874); Im re Empress, etc., Co., L. R.,
16 Ch. D., 125 (1880). Under a charter
provision that the company shall be lia-
ble, see In re Brampton, etc., R’y, L.
R., 10 Ch., 177 (1875), where an attor-
ney was allowed to collect although he
had assured subscribers that they would
not be liable, distinguishing Savin v-
Haylake R’y, L. R., 1 Ex., 9 (1865),
Where the articles of incorporation ex-
pressly provide for the payment of a
specified amount to a person who had
contracted with the promoters to sell to
the company certain facilities for busi-
ness the company is liable. Touche v.
Metropolitan R’y, etc, Co., L. R., 6
Ch., 671 (1871); rew’g 4 De G., M. & G.,
465. Judgment against the company
entered by consent ona claim of a land-
owner that the promoters agreed that
the company would take his land at a
certain price is binding. Williams v.
St. George, etc., Co., 2 De G. & J., 547
(1858).

1An agreement of land-owners with
a promoter that they will sell to the
contemplated railway a right of way
at a specified price may be enforced by

the railway. Bedford, etc., R’y v. Stan-

ley, 2J. & H., 746 (1862). But the com-
pany cannot enforce it where no for-
mal ratification has been made. Penn.
Match Co. v. Hapgood, 141 Mass., 145

(1886). A corporation cannot ratify a
905
§ 707.]

s
HOW CORPORATE CONTRACTS ARE MADE,

[CH. XLII

may be enforced against it.! The question of whether there was a

ratification is a question of fact.

The corporation is not liable to the promoters for their expenses
and labor in effecting the incorporation.?

contract made for it before it was incor-
porated, but it may adopt the contract
expressly. See 8 R’'y & Corp. L. J.,
482 (English cases). If the corporation
cannot enforce the contract the pro-
moters may. Carmody v. Powers, 26
N. W. Rep., 801 (Mich., 1886). Mort-
gagor to a corporation cannot set up
‘usury on ground that the promoters re-
quired him to subscribe for stock in
order to obtain loan. Central, etc., Ins.
Co. v. Callaghan, 41 Barb., 448 (1864).
And see many cases in chapter IV,
supra, holding that a corporation may
enforce subscriptions taken before its
incorporation.

1 Bonds and mortgages executed by
corporate officers in pursuance of a
resolution made by promoters previous
to incorporation are valid where the
directors ordered the issue of the bonds
after their execution. Wood v. Whelan,
93 Ill., 153 (1879). A bank, after incor-
poration, may ratify and become lia-
ble on the contract of its promoters to
the effect that the bank would give
stock and a certain sum of money to a
person for his'services. McDonough v.
Bank, 34 Tex., 809 (1870). Where a cor-
poration is organized before its articles
are filed and a contract of purchase is
made the contract price is collectible,
the company having received the prop-
erty after incorporation. Paxton, etc.,
Co. v. First Nat’l B’k, 21 Neb., 621 (1887).
A corporation is liable for machinery
which is accepted by it on a contract
made by its organizers for it before
incorporation, Whitney v. Wyman, 101
U. S&., 392 (1879). An agreement by
corporate organizers that the corpora-
tion will-pay royalties on a patent is en-
forceable against the corporation when
it has acted on the contract and for a
time paid the royalties. Bommer v.
American, etc., Co., 81 N. Y., 468 (1880).

See, also, Lorillard v. Clyde, 86 id., 384
(1881). A preliminary agreement that
a person may turn in property for stock
is valid where the corporation has after-
wards accepted the property and issued
the stock therefor. Reichwald v. Com-
mercial Hotel Co., 106 IIl., 429 (1888).
See, also, chapter II, supra. A contract
made by the president as such after the
certificate of incorporation was signed,
but before it was filed, binds the corpo-
ration where it has adopted the contract
by carrying it out. Grape, etc., Co. v.
Small, 40 Md., 395 (1874). A corpora-
tion is not bound by the contracts of its
promoters, but it-may adopt them after
incorporation. Adoption may bein any
way in which it might make the con-
tract de novo, Battelle v. Northwestern,
etc., Co, 33 N. W. Rep., 327 (Minn,
1887), and note. The company may of
course employ and be liable to a super-
intendent whom the promoters agreed
should be employed. Browning wv,
Great, etc., Co., 5 H. &N,, 856 (1860).
A grant of a license to use a patent
made to an individual with the privi-
lege to assign to a contemplated corpo-
ration may, as to royalties, be enforced
against the corporation when the cor-
poration expressly adopted the contract
and acted on it. Spiller v. Paris, etc.,
Co, L. R., 7 Ch, D., 868 (1878); distin-
guishing Melhado v. Porto, etc., Co., L.
R., 9 C. P., 508, as being a case at law.
Money paid by a town after its incorpo-
ration to a person for bribing the legis-
lature to grant the charter may be re-
covered back by a bill in equity. Frost
v. Inhabitants, etc., 88 Mass., 152 (1863).

2 A person who, at the request of a mi-
nority of the promoters, attends meet-
ings of the promoters, lobbies ‘for the
charter, makes a preliminary survey
and pays some expenses, cannot recover
from the subsequently incorporated

1 906
HOW CORPORATE CONTRACTS ARE MADE.
XN

The question whether a person who has contracted with a cor-
poration as an existing corporation can repudiate his contract on
the ground that it was never incorporated is discussed elsewhere.

§ 708. Acts which must be authorized by stockholders’ meetings
instead of by directors’ meetings — Stockholders make the by-laws.—
The functions of stockholders are exceedingly limited. The theory
of a corporation is that stockholders shall have all the profits, but
shall turn over the complete management of the enterprise to their
representatives and agents, called directors. Accordingly there is
little for the stockholders to do beyond electing directors, making
by-laws, increasing or decreasing the capital stock, authorizing an
amendment to the charter, dissolving the corporation, and a few
others. Of the functions of the stockholders the most important,
perhaps, is that of making by-laws. The law is clear that stock:
holders in meeting assembled have the power to make the by-laws

- OH, XLII]

[§ 708.

of the corporation.

company. The court said that in all
the cases to the contrary‘ the services
were either performed after the charter
had been obtained, and there was there-
fore an inchoate corporation, or there
was an informal organization prepara-
tory to obtaining a charter, and the em-
ployment was authorized by the organ-
ization as such, and was not the mere
employment by individuals having no
authority, express or implied, to con-
tract for any one.” Bell’s, etc., R. R. v.
Christy, 79 Pa.'St., 54 (1875), For case
where one of promoters of consolidation
used his stock to bring it about, but
‘ failed to hold consolidated company
liable therefor, see Eldred v. Bell Tel.
Co., 119 U. S., 513 (1886). Company
on winding up is not liable for pro-
moters’ expenses. ;Terrell’s Case, 2
Sim., N. S., 126 (1851); Hx parte Lloyd,
1 Sim., N. S., 248 (1851). A promoter
cannot recover from the corporation
money which he expended before its
incorporation in bribing the legislature
to grant thecharter. Marchaud v. Loan,
etc., Assoc., 26 La. Ann., 389 (1874). See,
also, Hall v. Vermont, etc., Co., 28 Vt.,
401 (1856). The statutes may provide
that corporations shall pay the promot-
ers’ expense of obtaining a charter.
Hitchins v. Kilkenny R’y, 9 C. B., 586
(1850). Where a corporation was not to

exist until a certain amount of stock
was subscribed the secretary cannot re-
cover from the corporation any com-
pensation for his services prior to the
obtaining of that amount of subscrip-
tions. Franklin, etc., Ins. Co. v. Hart,
31 Md., 59 (1869). In Law v. Conn.,
etc., R. R., 45 N. H., 370 (1864), a suit
at law by a promoter against the com-,
pany for services rendered in procuring
subscriptions was sustained on the
ground that ‘‘a corporation is liable at
law, upon an implied assumpsit, for
services rendered before it came in esse,
but which were necessary to perfect its
organization, and which, after such or-
ganization was perfected, it accepted,
and the benefits of which it enjoyed.”
Affirmed, 46 N. H., 284 (1865). Tosame
effect, Hall v. Vermont, etc., Co., 28
Vt., 401 (1856), ..

1See § 637.

2See Kidman v. Bowman, 58 Il., 444
(1871); Metropolitan, etc., R’y Co. v.
Manhattan, etc., R’y Co., 11 Daly
(N. Y.), 877 (1884). . As to increasing or
reducing the capital stock, see § 285,

supra; amending charter, chapter
XXVIII, supra; dissolution, chapter
XXXVIIL

3 For a full discussion of the subject
of by-laws, see § 700a, supra.

907 a
HOW CORPORATE OONTRACTS ARE MADE. (cH. XLIIT.

§ 709.)

8 709. Stockholders cannot carry on the business or enter into
contracts for the corporation — These are the functions of the di-
rectors.— The stockholders cannot enter into contracts with third
persons. Contracts between the corporation and third persons
must be entered into by the directors and not by the stockholders.
The corporation, in such matters, is represented by the former and

not by the latter.
istence.
of corporate contracts.

Such is one of the main objects of corporate ex-
To the directors are given the management and formation
The stockholders cannot, in meeting ‘as-

sembled, bind the corporation by their contracts in its behalf;! and

1Conro v. Port Henry, etc., Co., 12
Barb., 27 (1851), where a lease of iron
works was declared void because it was
‘the act of the stockholders and not of
the directors; McCullough v. Moss, 5
Denio, 567 (1846), in which a promissory
note signed by the president and secre-
tary of the corporation was held invalid
because authorized only by the stock-
holders and not by the directors; Dana
v. Bank of U. S35 Watts & S., 223,
245 (1843); Union Gold, etc., Co. v.
Rocky, etc., B’k, 2 Col., 565 (1875), hold-
ing that it is for the directors and not
the stockholders to repudiate corporate
contracts made by an authorized agent;
Gashwiler v. Willis, 33 Cal., 11 (1867),
holding that the stockholders have no
power to authorize a sale of corporate
property. Such authority must come
from the directors. There are many
decisions to the effect that one or more
stockholders cannot contract for or rep-
resent the corporation, outside of cor-
porate meetings, unless they do so, not
as stockholders, but as individuals and
corporate agents, acting under the au-
thority of the directors. Thus, the
stockholders, as such, cannot convey
the real estate of the corporation, though
they all join in the deed, unless the exe-
cution is in pursuance of some vote of
the corporation. Isham v. Bennington
Iron Co., 19 Vt., 280 (1847); Wheelock
v. Moulton, ete., 15 Vt., 519 (1843). The
misrepresentations of a stockholder in-
ducing @ person to purchase stock of
the corporation are not binding on the
corporation, Burnes v, Pennell, 2 H.

L. C., 497, 519 (1849). The circumstance
that a person is a member of an incor-
porated company gives him no author-
ity to release a debt due to the corpora-
tion. Harris v. Muskingum, etc., Co.,
4 Blackf. (Ind.), 267 (1836). Where all
the individuals composing a corpora-
tion covenanted in behalf of such cor-
poration for themselves and their heirs
that the corporation should do certain
acts, they were held to be bound per-
sonally. Tileston v. Newell, 13 Tyng
(Mass.), 406 (1816). In a suit to recover
damages of a corporation for flooding
the plaintiff's land it was held error to
ask a witness whether individual mem-
bers of the company had employed him
to deprive the plaintiffs of their claim.
Shay v. Tuolumne, etc., Co., 6 Cal., 74
(1856). Where the plaintiff claims the
amount of his disbursements for work
on the defendant corporation’s road,
but the evidence does not prove ‘a re-
quest to the plaintiff by the corpora-
tion, its directors or authorized agent,
or any stipulation, expressed or implied,
to authorize a charge against the cor-
poration for such disbursements, no act
of an individual member can be held to
bind the corporation. Hayden v. Mid-
dlesex, etc., Corp., 10 Mass., 397, (1813).
The intention of a corporation can only
be learned by the language of its re-
corded acts; and neither the private
views nor the public declarations of in-
dividual members of such corporation
are for this purpose to be inquired
after. Thus, a plaintiff resisting a tax
may not establish its illegality by evi-

908
\

CH. xin] HOW CORPORATE CONTRACTS ARE MADE.

[$ 709.

'

where one person owns a majority of the stock,! or all of 1t,? or all
but two shares,* he does not in consequence thereof acquire the
right to act for the corporation, or as the corporation, independ-
ently of the directors. One person may own all the stock, and yet
the existence, relations and business methods of the corporation
continue,t A single stockholder cannot make a contract for andin
the name of the corporation which shall have any binding force
or validity, except by subsequent ratification or adoption in the
regular. manner.> A stockholder, however, may of course be ap-
pointed its agent.

The law seems to be clear that all corporate contracts are to be
made by the directors. This includes the original contracts as well
as modifications of them. If a contract is within the express or
implied powers of the corporation then the directors need not con-

dence as to the intent of those voting
the levy. Bartlett v. Kinsley, 15 Conn.,
827 (1843). A deed of real estate exe-
cuted by the directors of a corporation
separately and at different times, but
not formally authorized by them as a
board, is not only ineffectual as a con-
veyance of real property, but equally
s0 as a contract to convey. Baldwin v.
‘Canfield, 26 Minn., 48, 54 (1879). Stock-
holders owning all the stock and bonds
of aroad cannot destroy the same and
then sell the road to another company.
Gulf, etc., R'y Co. v. Morris, 4 8, W.
Rep., 156 (Tex., 1887). Stockholders
who transfer the corporate property are
jointly and severally liable to corporate
creditors. Graham v. Hoy, 38N. Y. Sup.
Ct., 506. Fact that manager of corpora-
tion and his brothers own all the capital
stock does not make their acts the acts
of the corporation. Bank of Monroe
v. Gifford, 32 N. W. Rep., 669 (Iowa,
1887); 89 Fed. Rep., 157; 16 Abb. Pr., 14,
1 Hopkins v. Roseclare Lead Co,, 72
Iil., 873 (1874). He cannot sell the cor-
porate property.
2Button v. Hoffman, 61 Wis. 20
(1884), where it is held that such a stock-
‘holder is not the corporation. Contra,
Swift v. Smith, 6 East. Rep., 674; 8, C.,
8 Cent. Rep., 899 (Md., 1886); 84 Alb.
Law Jour., 257.
3 England v. Dearborn, 141 Mass., 590
poo

(1886). Sueh a stockholder cannot mort-
gage the corporate property.

4 Newton Mfg. Co. v. White, 42 Ga.,
148 (1871). See, also, Sharp v. Dawes, 46
L. J. (Q. B.), 104 (1876); Button v. Hoff-
man, 61 Wis., 20 (1884); Swift v. Smith,
(Md., 1886), 6 East. Rep., 574; England
v. Dearborn, 141 Mass., 509 (1886);
Hopkins v. Roseclare Lead Co., 72 IIl.,
873 (1874); Bellona Company’s Case, 3
Bland (Md.), 442, 446 (1881), The rule
is the same where two persons buy all
the stock. Russell v. McLellan, 14
Pick., 63 (1883). The corporation still
subsists, and the two purchasers do not
become partners, or joint tenants, or
tenants in common .of the corporate
property. Cf. Commonwealth v, Cul-
len, 18 Penn. St., 183 (1850); § 6630.

5 Morelock v. Westminster Water.Co.,
4 Atlantic Rep., 404 (Md., 1886); Mays
v. Foster, 10 Pac. Rep., 17 (Oreg., 1886);
Rice v. Peninsular Club, 52 Mich., 87
(1888); 4.N. Y. Supp., 886.

6Stoddert v. Port Tobacco Parish, 2
Gill & J., 227 (1880), where a religious
corporation employed a member of its
vestry to make sale of pews; Spear v,
Ladd, 11 Mass., 94 (1814), where the
president of a bank was appointed its
agent to indorse a note; Northampton
Bank v. Pepoon, 11 Mass., 288 (1814);
Bank Commissioners v. Bank of Brest,
Harring. Ch., 106 (1840).

909
ao

§§ 710, 711.] HOW CORPORATE CONTRACTS ARE MADE. [oa. XLII.

/sult the stockholders nor follow their wishes, even though the lat.
ter constitute a majority or a minority, and though | these stock-
holders object in meeting assembled or individually in ‘the courts.
However, if the contract is beyond the express and implied powers
of the corporation, then any stockholder may have the contract en-
joined or set aside. He can do so even though a majority of the
stockholders approve the act and ratify it in meeting assembled.
He may resort to the courts.”

§ 710. The eapulsion of stockholders.— The law forbids the di-
rectors or stockholders of a corporation having a capital stock
from depriving him of his rights as a stockholder. He certainly
cannot be deprived of his right to dividends equally with other
stockholders.’ He cannot be deprived of his right to votes And
it is clear that his various rights as a stockholder cannot be taken
from him by any or all of the other stockholders. In this re-
spect a corporation having a capital stock is clearly different from
a corporation formed for religious, social, charitable and other
similar purposes. The former is for purposes of gain, and the
property which is represented by. stock cannot be taken from a
stockholder by expelling him from the corporation.

§ 711. Stockholders cannot change the directors except at elections.
The term of office of directors is usually fixed by the charter of
the corporation or the statutes applying to it. Such being the case,
a director having been elected is entitled to hold his position until

1Beveridge v. New York Elevated
R’y Co., 19 North East Rep., 489 (New
York,
etc., Ry Co., 20 Blatch., 142 (1881);
People v. Metropolitan R’y Co., 26 Hun,
82 (1881); Nashua, etc., R. R. Co. v. Bos-
ton, etc., R. R. Co., 27 Fed. Rep., 821
(1886). But as to leases, see, contra, Met-
ropolitan R’y Co. v. Manhattan R’y Co.,
15 Am, & Eng. R’y Cas., 1(N. Y. Com,
PL, 1884). Cf. Harkness v. Manhattan
R’y Co., 64 N. Y. Sup. Ct., 174 (1886);
also § 670, supra.’ The result is that di-
rectors are never obliged to consult the
stockholders in meeting assembled, nor
as a majority, as regards corporate con-
tracts. But the directors must consider
that any stockholder may object to
ultra vires acts, Thus, stockholders
cannot control the direction of the di-
rectors when the latter direct an as-
signment to be made for the benefit of
creditors, 0 held though the direct-

1889); Flagg v. Metropolitan,.

ors were to go out ‘of office in four
days. Hutchinson v, Green, 1 8, W.
Rep., 863 (Mo., 1886). . An extension of
a railway cannot be enjoined merely
because a majority of stockholders op-
pose it. Ultra vires must be alleged.
Moses v. Tompkins, 4 South. Rep., 768
(Ala., 1888); 21 Pac. Rep., 878.

2Part IV of this work discusses this
subject. As regards the ‘relation and
rights of stockholders towards suits and
compromises of suits by or against the
corporation, see § 750, infra,

+See § 542, supra.

{See § 618, supra.

5The right to forfeit stock for non-
payment of calls may possibly be called
an ‘‘expulsion,” but is a misuse of that
term. See chapter VIII, supra. Bro-
kers’ associations frequently have by-
laws authorizing the expulsion of meni-
bers. Concerning expulsion in gen-
eral, see § 7000, supra, /

910
CH. XLut.] [3 712.

HOW CORPORATE CONTRACTS ARE MADE.
‘the expiration of his term of office. He cannot be turned out either
by the stockholders or the directors.! Sometimes, however, the
’ charter or statutes authorize and empower the stockholders to re-
move directors at any time? And where the stockholders have
power by charter or statute to remove the directors for cause, the
exercise of their discretion therein will not be reviewed in equity.*
So, likewise, where such a power is given to the stockholders, a
court of chancery will not enjoin the holding of a meeting called by
the stockholders to consider, among other matters, the removal of
the directors.

§ 712. Directors — Their power as a board and as individuals to
contract for the corporation.— All contracts of a corporation are to
be made by or under the direction of its board of directors. The
board of directors make corporate contracts by a regular vote of
the board; or by authorizing an agent to make them; or by allow-
ing an agent to assume and exercise that power; or by accepting a
contract or its benefits after it has been made by an unauthorized
agent. But in all cases the board of directors and not the stock-
holders, nor the president, secretary, treasurer or other agent, is
the original and supreme power in corporations to make corporate
contracts. The stockholders, indeed, have very few functions.°
The board of directors have the widest of powers. All of the
various acts and contracts which a corporation may enter into are
entered into by and through the board of directors. The board of
directors make or authorize the making of the notes, bills, mort-
. gages, sales, deeds, liens and contracts generally of the corporation.
They appoint the agents, direct the business and govern the policy
and plans of the corporation. They institute, prosecute, compro-

1Imperial, etc., Hotel Co. v. Hamp-
son, L. R., 28 Ch. D., 1 (1882); Nathan
v. Tompkins, 2 S. W. Rep., 747 (Ala.,
1887), holding, also, that an election’ is
wholly void where part of those elected
are to fill the place of officers illegally
removed, there being no particular per-
sons designated to fill the legal vacan-
cies. See, also, Berry v. Cross, 3 Sand.
Ch., 1 (1845). Cf. dicta‘in State of Ohio
v. Bryce, 7 Ohio (pt. 2d), 82 (1836);
Burr v. McDonald, 3 Gratt., 206 (1846);
Bayless v. Orme, Freeman’s Ch. (Miss.),
161 (1841). A director, however, may
resign, and in such a case the corpora-
‘tion may accept the resignation. Clout-
man. vy, Pike, 7 N. H., 209 (1834), a mu-
Licipal corporation case.

.Thompson’s N. B. Cases, 760 (1878).

2Such is the law in Ohio, West Vir-
ginia, and many other states. See Cook
on Corporations as created and regu-
lated by constitutions and statutes.
Such, also, is the law applicable to'na-
tional banks. See § 5136, U. 8S. RB. S.;
also, Taylor v. Hutton, 48 Barb., 195
(1864). The-president may remove the
teller. Harrington v. First Nat’l B'k,

sInderwick v, Snell, 2 Mac. & G., 216
(1850),

4Isle of Wight R’y Co. v. Tahourdin,
L. R., 26 Chan. Div., 820 (1883).

5 See §§ 708, 711, supra.

6See chapter XLI, and in fact most
of the preceding chapters of this book.

911
HOW CORPORATE CONTRACTS ARE MADE.

§ 712]

[CH. XLIIT.

mise or appeal suits at law and in equity which the corporation
brings or has brought against it.1 But there are limitations on
their powers.
make a contract which the corporate charter does not give the cor-
poration the power to do or enter into, then any stockholder may
enjoin that act or contract.?, Moreover, the directors can contract
and act only as a board, duly notified and assembled. The mem-
bers of the board cannot agree separately and outside of the meet-
ing and thereby bind the corporation. 3 Nor can a minority of the
board meet and bind the board. A majority must be present, and
then a majority of that majority binds the corporation.*

A single director has no power to contract for the corporation?
It is perfectly legal, however, for a board of directors to delegate
to an agent the power to make a contract,’ and this agent may, of
course, ‘be a director as well as a third person.’’ The board of di-
rectors and the corporation are bound also by the contracts of a

1See § 750, infra.

2See chapter XL. As to ratification
of such acts by the stockholders, see
chapter XLIV, infra.

3 See § 592, supra.

4See § 592, supra.

5 See the cases under § 716, infra,
where the president even, who is nearly
always a director, was held not to have
power to contract. See, also, Chicago,
etc., R. R. Co. v. James, 22 Wis., 194
(1867); Trundy v. Hartford, etc., Co., 6
Rob. (N. Y.), 312 (1868), where a director
employed a broker; New Haven, etc.,
Co. v. Hayden, 107 Mass., 525, where a
director, stockholder and overseer con-
tracted to extend the business; Titus v.
Cairo, ete., R. R. Co., 37 N. J. L., 98

(1874), where a director sold bonds;
Lockwood v. Thunder, etc., Co., 42
Mich., 586 (1880); Bramah v. Roberts, 3
Bing. N. C., 963 (1837), where a director
accepted a bill; Rice v, Peninsular
Club, 52 Mich., 87 (1883), where a di-
rector said that a purchase was all right.
But in Bradstreet v. B’k of Rutland, 42
Vt., 128 (1869), it was held that an em-
ployee who was emploved by three
directors might recover. If the corpo-
ration is only an intermediary of title,
-such as payee and indorser, the indorsee
-may recover against the maker without

“making strict proof as to the authority

of the directors to indorse. Smith v.
Johnson, 3 H. & N,, 222 (1858). He is
not an agent to discount paper. Wash-
ington B’k v, Lewis, 39 Mass., 24 (1839).
Nor to agree togive extra pay. Stoys-
town, etc., Co. v. Craver, 45 Pa. St., 386
(1863); Lindley on Partnership, p. 244
(Callaghan & Co., 1881); 2 N. Y¥. City
Ct. Rep., 269.

6Spear v. Ladd, 11 Mass., 94 (1814);
Northampton Bank v. Pepoon, 11 Mass.,
288 (1814), where a director was author-
ized to indorse a note; Bank Commis-
sioners v. Bank of Brest, Harring. Ch.,
106 (1840); Stevens v. Hill, 29 Me., 133
(1848); Lester v. Webb, 1 Allen, 34

lf the board of directors attempt to do an act or.

*

(1861); Abbott v. American H. R. Co.,

38 Barb., 578 (1861); United States Bank
v. Dana, 6 Pet., 51 (1832); Metropolis
Bank v. Jones, 8 Pet., 12, 16 (1834);
Percy v. Millaudon, 5 La., 568 (1888);
Pennsylvania Bank %. Reed, 1 Watts &
S., 101 (1841); Ridgway v. Farmers’
Bank, 12S. & R., 256 (1824); Leavitt v.
Yates, 4 Edw. Ch., 134 (1848), As to
delegation of discretionary powers, see
§ 715, infra; 5 N. Y. Supp., 529,

7A director who is authorized to pur-
chase and pay in stock cannot agree to

pay in cash, Hayden v. Middlesex, etc.,,

Co., 10 Mass., 403 (1883).

912
CH. XL. | HOW CORPORATE CONTRACTS ARE MADE.

[§ 713.
person who has assumed to contract for the company, and for some
time has been aliowed by the board to so act and contract.!' So,
also, the board of directors and the corporation are bound by an
unauthorized agent’s contract when the contract is acquiesced in
or the benefits of that contract are accepted;? or when the. corpo-
ration expressly ratifies and confirms the contract,’

§ 713. De facta directors and officers of a corporation — The va-
lidity of their contracts.— A de facto officer is one who has the repu-
tation of being the officer he assumes to be and yet is not entitled
to the office in point of law. A de jure officer is one who has the
lawful right to the office, but who has either been ousted from it
or has never actually taken possession of it. An officer is de facto
when the statute under which he holds office is unconstitutional ; *
‘ or when he was elected but was ineligible,’ or was irregularly or

illegally elected.?’ An officer who holds over by reason of the ,
failure of the corporation to elect his successor is not only a de’

facto but a de. jure officer.®

1See many cases in the following sec-

tions. Also Beers v. Phoenix, etc., Co.,
14 Barb., 358 (1852), where a. director
and secretary borrowed money as he
was accustomed to do. But unless the
custom'is known to the directors the
corporation is not bound. Lawrence v.
Gebhard, 41 Barb., 575 (1864). And the
act must be intra vires. Women’s, etc.,
Union v. Taylor, 8 Col., 75 (1884),

2See many cases in subsequent sec-
tions herein. Also New York, etc.,
“Co. v. Phoenix B’k, 8 N. Y., 156 (1849),
where ‘loans of the company’s money
were made by a director. ;

3 See § 706, supra, on promoters’ con-
tracts.

4King v. Bedford Level, 6 East, 356;
Mechanics’, etc:, B’k v. Burnet, etc., Co.,
32 N, J. Eq., 236 (1880). See, also, Ham-
lin v. Kassafer, 15 Pac. Rep., 778, Jan. 5
(Oreg., 1887). Contra, Litchfield Iron
Co. 'v. Bennett, 7 Cow., 284 (1827); Clark
vw. Farmers’ Mfg. Co., 15 Wend., 256
(1836); Waite v. Mining Co., 36 Vt.,
18 (1863). See, also, Wait on Insolvent
Corporations, § 23. Officers are still de
facto after judgment of ouster is ren-
dered, but before its entry, even though
they acted with knowledge of the de-
cision. Mining Co. v. Anglo, etc., B’k,

(58)

,

104 U. S., 192 (1881); S. C. in U. 8. Ct.
Ct., 6 Rep., 705.. Cf. Walker v. Flem-
ming, 70 N. C., 483 (1874). In McCall
v. Byram, etc., Co., 6 Conn., 428 (1827),
it is held that a secretary is de facto
only where there is at least a pretended

‘election. See Hamlin v. Kassafer, supra.

A demand on a corporation for certain
property is not ‘proved by showing a de-
mand on those who afterwards became
its incorporators and officers. McCal-
lum v. Purssell, etc., Co., 1 N.Y. Supp.,
428 (1888). Directors whose title is con-
tested are not de facto officers as against
the old officers holding over. Ellsworth,
etc., Co. v. Faunce, 10 Atl. Rep., 250
(Me., 188%). aoe

5 Leach v. People, 12 N. E. Rep., 726
(Ill., 1887).

6 Dispatch,-etc., Co. v. Bellamy, etc.,
Co., 12 N. H., 205 (1841).

7 Baird v. B’k of Washington, 11 8. &
R., 411 (1824), where a minority of the
directors elected him; Delaware, etc.,
Co. v. Penn., etc., Co., 21 Pa. St., 181
(1853), where the president was not a
resident as required by statute.

"8 See § 620, supra; Thorington v.
Gould, 59 ‘Ala., 461 (1877). Contra,
Curling v. Chalklen, 3 M. & S., 496,
510 (1838); Peppin v. Cooper, 2B. &

913

‘
§ 713.4}

HOW CORPORATE CONTRACTS ARE MADE.

[CH. XLIII.

The contracts of an officer de facto, acting within the sphere of
his office, are binding upon, the corporation."

Where corporations allow persons to act publicly as their offi-
cers, their right to act in the offices will be presumed in favor of
third parties contracting with the corporations through them.’

Ald., 481 (1819); People v. Twaddell, 18
Hun, 427 (1879).
1§¢. Luke’s Church v, Matthews, 4
Dessau., 578 (1815); Vernon Society v.
Hills, 6 Cow., 28 (1826); All Saints
Church v. Lovett, 1 Hall, 191 (1828);
Lovett v. German Reformed Church, 12
Barb., 67 (1852); Riddle 7. Bedford, 7 8.
& R., 892 (1821); York County v. Small,
i 1 Watts & S., 315 (1841); Kingsbury v.
Ledyard, 2 id., 41 (1841); Despatch
Line v. Bellamy Manufacturing Co., 12
N. H., 205 (1841); Smith v. Erb, 4 Gill,
487 (1846); Burr v. McDonald, 3 Gratt.,
206, 215 (1846); Granville Charitable
Ass’n v. Baidwin, 1 Met., 359 (1840);
Green ‘v. Cady, 9 Wend., 414 (1832);
Elizabeth City Academy v. Lindsey, 6
TIred., 476 (1846); McCall v. Byram Mfg.

Co., 6 Conn., 428 (1827); Lathrop v. Sci-—

oto Bank, 8 Dana, 115 (1839); Delaware
Canal Co. v. Penn. Coal Co., 21 Pa. St.,
181 (1858); St. Mary’s Bank v, St. John,
25 Ala., 566 (1854); Baird v. Washington
Bank, 11 8. & R., 411 (1824; Ha parte
Rogers, 7 Cow., 580, n. (1827); Doremus
v. Dutch Reformed Ch., 2 Green, Ch.,
832 (1885); Matter of Mohawk & Hud-.
son R. R. Co., 19 Wend., 185 (1888);
Matter of Chenango Ins. Oo., 19 id,, 685
(1838); Blandford v.. School District, 2
Cush., 89 (1848); Sampson v. Bowdoin-
ham Co., 36 Me., 78 (1853); Penobscot uv.
Dunn, 39 Me., 587 (1855); Fairfield Turn-
pike Co. v. Thorp, 138 Conn., 178 (1889);
King v. Bedford Level, 6 East, 356,
868 (1805); Parker v. Kett, 1 Lord Ray-
mond, 658 (1701); Wild v. Passama-
quoddy Bank, 3 Mason, 505 (1825); Bar-
rington v. Washington Bank, 14S. &
R., 405 (1826) ; Minor v. Mechanics’ Bank,
1 Pet., 46 (1828); Cahill v. Kalamazoo
Ins. Co., 2 Doug., 124 (1845); McGarzell
v, Hazelton Coal Co, 4 W. & S., 424
(1842), an action for a penalty, in which

evidence was admitted to show that
the person representing the company
was an officer de facto; In re County,
etc., Co., L, R., 5 Ch., 288 (1870) ; Maho-
ney v. East, etc., Co., L. R., 7 H. L.,.
869 (1875); Partridge v. Badger, 25
Barb., 146 (1857), where the treasurer
was only de facto; Doremus v. Dutch,
etc., Co., 3 N. J. Eq., 3382 (1835), where
seceding trustees made a mortgage; Me-
chanics’, etc., B’k v. Burnet, etc., Co.,
32 id., 236 (1880), and Charitable Assoc.
v. Baldwin, 42 Mass., 359 (1840), where
de facto directors brought suits; Clark
v. Town of Easton, 14 N. E. Rep., 794
(Mass., 1888); Cooper v. Curtis, 30 Me.,
488 (1849), holding that debtors to the
corporation cannot set this up; Susque-
hanna, etc., Co. v, General Ins. Co., 3
Md., 805 (1852), holding that a president
who executes an instrument is pre-
sumed to be president; Hackensack, |
etc., Co. v. De Kay, 36 N. J. Eq., 548.
(1883), where de facto directors gave a
mortgage. Directors who are elected
at a stockholders’ meeting not properly
called cannot make und enforce calls.
Hawbeach, etc., Co. v. Teague, 5 H. &
N., 151 (1860). A board of directors who.
are ineligible cannot revoke an agree-
ment to arbitrate a suit. Richards v.
Attleborough Nat'l B’k, 19 N. E. Rep.,
353 (Mass., 1889).

2United States Bank v. Dandridge,
12 Wheat., 64 (18929); Union Bank v.
Ridgely, 1 Harris & G., 892 (1827); Bar-
rington v. Washington Bank, 14 S, &
R., 421 (1826); Wild v, Passamaquoddy
Bank, 8 Mason, 505 (1825); Perkins v.
Washington Ins. Co., 4 Cow., 645 (1825);
Troy Turnpike Co. v. M’Chesney, 21
Wend., 296 (1839); Doremus v. Dutch
Reformed Church, 2 Green, Ch., 332
(1835); Warren v. Ocean Ins. Co., 16
Me., 439 (1839); Badger v. Cumberland

914

'
CH. XLII. ] HOW CORPORATE CONTRACTS ARE MADE.

[§ 714.

The de facto director cannot avoid a liability by setting up that
he was not a de jure director; nor collect a salary as a de facto of-
ficer;? nor make a note to himself and claim that his office gave
him the authority.? A de facto officer is ousted by a guo warranto
proceeding? and not by a suit in equity,’ nor by an action in tres-
pass,® nor a writ of prohibition.” .

§ 714. Minute-book of directors’ meetings and other books of the
corporation. as evidence of acts and contracts of the corporation and
authorization of agents The minute-book of the proceedings of
the directors’ meetings is the proper evidence to prove a corporate
contract or the authority of a corporate agent to act or contract

 

for it.

Bank, 26 Me., 428 (1846); Davidson v.
Bridgeport, 8 Conn., 472 (1881); Selma
& T. R. R. Co. v. Tipton, 5 Ala., 787
(1843); Detroit v. Jackson, 1 Doug., 106
(1848); Farmers’ Bank v. Chester, 6
Humpbh., 458 (1846) ; Hallv. Carey, 5Ga.,
259 (1848); Conover v. Albany Ins. Co.,
1 Comst., 290 (1848); Lohman v. New
York & E. BR. R. Co., 2 Sandf., 39 (1848);
Beers v., Phoenix Glass Co., 14 Barb.,
358 (1852); Alabama Bank v. Comegys,
12 Ala., 772 (1848); Mead v. Keeler, 24
Barb., 20 (1857); Fryeburg Canal Co. v.
Frye, 5 Greenl., 38 (1827); Northern
Liberties Bank v. Cresson, 12 S.& R.,
306 (1824),

1 Keyser v. McKissam, 2 Rawle (Pa.),
189 (1828), involving a bond; Bank of
St. Mary’s v. St. John, 25 Ala. 566
(1854); West. B’k of Scotland and its
Liquidators v. Baird and others, 11 Vol.
Cases in Court Sessions (8d' series),
pp. 96-121.

2 Riddle v. Bedford County, 75. & R.,
(Pa.), 886 (1821).

3Lebanon, etc., Co, v. Adair, 85 Ind.,
244 (1882).

4See §§ 615, 619, supra. A superin-
tendent elected by de facto directors
may be ousted. State v. Curtis, 9 Nev.,
825 (1874),

51d,

8Kingsbury v. Ledyard, 2 W. & &.,
37 (1842).:

7San Jose, etc., B’k v. Sierra, etc.,
Co , 63 Cal, 179 (1883).

8 Where the appointment of an agent

is by resolution of the directors or in
any other manner requiring a record of
the matter, the entry upon the minutes
or books of the corporation may be in-
‘ttoduced in evidence of the appoint-
ment. Buncombe Turnpike Co. v.
McCarson, 1 Dev. & B., 306 (1835);
Owings v. Speed, 5 Wheat., 420, 424
(1820); Thayer v. Middlesex Ins. Co., 10:
Pick., 826 (1880); Narragansett Bank v..
Atlantic Silk Co., 3 Met., 282 (1841);.
Clark v. Farmers’ Mfg. Co., 16 Wend.,
256 (1886); Methodist Chapel v. Herrick,.
25 Me., 354 (1845); Haven v. New
Hampshire Asylum, 13 N. H., 582 (1843).
A contract duly accepted and agreed to
in a directors’ meeting and entered on
the minutes, which are duly signed, is
a contract in writing. Texas, etc., Ry
v. Gentry, 8S. W. Rep., 98 (Texas,
1888). An entry on the corporate min-
utes of a resolution to form a corporate
contract is sufficient on notice of the’
same to the other party, and suffices to
form the contract. It satisfies the stat-
ute of frauds, Argus Co. v. Mayor,
etc., 55 N. Y., 495 (1874). An entry on
the directors’ minute-book, duly signed,
is sufficient to prevent a contract being
void by the statute of frauds. Jonesv.
Victoria, etc., Co., L. R., 2 Q. B. D.,
314 (1877). Directors’ minutes are evi-
dence of a contract, though written up
after the meeting. Wells v. Rahway,
etc., Co., 19 N. J. Eq., 402 (1869), Per-
gon purchasing mortgage from savings
bank through its treasurer and secretary

915
§ 714]

HOW CORPORATE CONTRACTS ARE MADE,

[cH. XLII.

J :
A corporation may enter into a contract directly by a vote, which
may be entered upon its records or not.! These books are evidence
against the officers,” but not against strangers.’ Proof of their

may rely upon a copy of a resolution
passed by the trustees authorizing such
sale, and duly signed by the secretary.
So though the secretary had intention-
ally made the copy different from the
original. Whiting v. Wellington, 10
Fed. Rep., 810 (1882).

1 United States Bank v. Dandridge, 12
Wheat., 64, 95 (1827); Union Bank v.
Ridgly, 1 Har. & G., 824, 425 (1827); St.
Mary’s Church v. Cagger, 6 Barb., 576
(1849); Maxwell v. Dulwich College, 1

-Fonbl. Eq., 296 (1834); Magill v. Kauf-
man, 4 S. & R., 317 (1818); Brady v.
Brooklyn, 1 Barb., 584 (1847); Essex
Turnpike, etc., v. Collins, 8 Mass., 292,
298 (1811); Marshall v. Queensborough,
1 Sim. & 8., 520 (1828); Elysville Mfg.
Co. v. Okisko Co., 1 Md. Ch., 392 (1849);
Garvey v. Colcock, 1 Nott. & McC., 281
(1815); Bates v. Bank of Alabama, 2
Ala., 452 (1841). Corporate secretary’s
letters to vendor are admissible as evi-
dence. Scott v. Middletown, etc., R. R.
Co., 86 N. Y., 200 (1881). Authority to
agent given by board of directors may
be proved by oral evidence, there being
no record of the same in the corporate
books. There is no law requiring a
board of directors to keep a record of
their proceedings. Morrill v. C. T.,
etc., Co., 32 Hun, 543 (1884). Contra,
Andover, etc., Turnpike Co. v. Hay, 7
Mass., 102, 107 (1810); Garvey v. Col-
cock, 1 Nott & McC., 231 (1815); Peek v.
Detroit, etc., Works, 29 Mich., 313
(1874); but see Taymouth v. Koehler,
35 Mich., 22 (1876). Acts of directors
need not be formally entered on cor-
porate minutes, ‘Nashua, etc., R. R.
Co. v. Boston, etc., R. R. Co., 27 Fed.
Rep., 821 (1886); Morrill v, Segar, etc.,
Co., 32 Hun, 543 (1884); Moss v. Aver-
ell, 10 N. Y., 449 (1853). Parol evi-
dence may show that corporate records
have been burned. Baptist House v.
‘Webb, 66 Me., 398 (1877). Orlost. Wal-

lace v. First Parish, etc., 109 Mass., 263
(1872); Prothro v. Meriden, etc., 2 La.
Ann., 989 (1847). May prove by parol
that the board of directors authorized
an agent to draw a bill of exchange.
No corporate seal necessary, nor record
evidence. Preston v. Missouri, etc., Co.,
51 Mo., 48 (1872). Directors’ votes may
be proved by parol when they were not
recorded. Edgerly v. Emerson, 23 N.
H., 555 (1851); Wait on Insolvent Cor-
porations, § 529. It may be for the
jury to say whether a subsequent meet-
ing changed the minutes. Delano v.
Trustees, etc., 138 Mass., 63 (1884). The
company is not bound by fraudulent in-
sertions, at least where strangers have

“not relied thereon. Holden v. Hoyt, 134

Mass., 181 (18838).

2Corporate books are admissible in
evidence to show money received as
against corporate officer on trial for
embezzlement, even though the entries
were not made by him. Humphrey v.
People, 18 Hun, 398 (1879). The min-
utes of a directors’ meeting: are evi-
dence of who were present and what
was done, so far as a suit between the
corporation and one of those who were
present is concerned. Olney v. Chad-
sey, 7 R. 1, 224 (1862), A director and
vice-president is chargeable with know]-
edge of what is on the corporate rec-
ords. First Nat’] B’k v. Tisdale, 84 N.
Y., 655 (1881). Qucere, as to entries ‘in
miscellaneous corporate works. Billings
v. Trask, 30 Hun, 314 (1883).

3 Person contracting with corporation
is not bound to know what is contained
in corporate records. Blair v. St. Louis,
etc., R. R. Co., 25 Fed. Rep., 684 (1885).
Entries in corporation books of matters
relating to any property or right claimed
by them can never be evidence for them
unless made so by act of the legislature.
Not admissible in favor of corporation
as against strangers. Graville v. N. Y.,

916
 

 

cg. Xiu]

HOW CORPORATE CONTRACTS ARE MADE.

L$ 15,

contents is made by the original, or by secondary evidence in case
they are lost, or after a notice to produce.! After notice to the
corporation to produce its micordss is given, secondary evidence may

be introduced.?
§ 715. Executive committee —

There is some doubt as to whether

the powers of a board of directors may be delegated to an exec-

utive committee.

The right of the board of directors to delegate

to agents the transaction “of the ordinary and routine business of

ete., R. R. Co., 34 Hun, 224 (1884). See,
also, 15 Wend., 256, note; Wait on In-
solvent Corporations, § 528.

1$worn copies taken from corporate
books are incompetent unless evidence
is given of loss of the book itself. La-
tourette v. Clark, 51 N. Y., 639 (1872),
Copy of directors’ resolution is evidence.
not when merely certified to by the sec-
retary, but when sworn to by him.
Hallowell, etc., B’k v. Hamlin, 14 Mass.,
178 (1817). Entries need not be proven
by the clerk who made the entries.
First Nat'l B’k v. Tisdale, 84 .N. Y., 655
(1881). Books of board of directors, in
which their proceedings are recorded,
proved by proving handwriting of the
clerk and president, are competent evi-
dence to prove the facts therein re-
corded. Owings -v. Speed, 5 Wheat.,
420 (1820). Acts and resolutions of di-
rectors, if not recorded, may be proved
by parol. Langsdale v. Bonton, 12 Ind.,
467 (1859); Bay, etc., Ass’n v. Williams,
50 Cal., 353 (1875). Minutes not signed
by the ‘chairman are not evidence of a
call; nor is a subsequent ratification of
those minutes. Cornwall, etc., Co. v.
Bennett, 5 H. & N., 423 (1860).

2Thayer v. Middlesex, etc., Co., 27
Mass., 325 (1830); Elems v. Ogle, 15
Jur., 180 (1850); Lohman v. N. Y., etc.,
R. RB. Co., 2 Sand., 39, holding that the
failure to produce may send the ques-
tion to the jury. To same effect, Nar-
ragansett B’k v, Atlantic, etc., Co., 44
Mass., 282. The presumption is that a
suit in the corporate name was author-
ized by it. Bangor, etc., R. R. Co. v.
Smith, 47 Me., 34 (1859). In proving
employment notice to produce must be

*prove his entries.

given. Haven v. N. H. Asylum, 13 N.
H., 532 (1843). So, also, in proving

agency. Clark v. Farmers’, etc., Co., 15 ,

Wend., 256 (1836); Montgomery R. R.
Co. v. Hurst, 9 Ala.,-513 (1846). As to
proving subscription to stock, see chap-
ter IV, sugra. Parol evidence cannot
explain the minutes. Gould v. Norfolk,
etc., Co., 63 Mass., 388 (1852). The
rough minutes are evidence if not sub-
sequently written out. Waters v. Gil-
bert, 56 Mass., 27 (1848). It may be
shown that the minutes are incorrect.
Van Hook v. Somerville, etc., Co., 5 N.
J. Eq., 187, 169 (1845). If on production

of books no resolution is found, proof

of acts, etc., may be given. Boston, etc.,
Co. v. Barton, 59 Mass., 158, 179 (1849).
Proof that the book is a corporate rec-
ord is made by the person having cus-
tody of the book. Smith v. Natchez,
etc., Co., 2 Miss., 479, 492 (1837). Must
prove that it is a corporate book, kept
as such, and by the proper officer.
Turnpike Co. v. McKean, 10 Johns.,
154 (1813); Whitman v. Granite Church,
24 Me., 236 (1844). Proof may be by
the secretary. Stebbins v. Murrill, 64
Mass., 27 (1852). The book-keeper may
Union B’k v. Knapp,
20 Mass., 96 (1825). Or if he is dead, his

oe

handwriting may be proved. Id.; also:

Chenango, etc., Co. v. Lewis, 63 Barb., ~

111 (1872). Where a corporation is dis-
proving agency it is held to strict proof.
Its records are inadmissible unless proof
is giventhatthey were kept by the proper
officer, and-unless he testifies to them,
Union, etc., Co. v. Rock, etc., B’k, 2 Col.,

565 (1875). See Gafford.v. American, etc.,'

Co., 42 N. W. Rep., 550 (Iowa, 1889),

917
§ 715.)

the corporation is unquestioned,
But in matters involving discretion there are decisions to

sary.!

HOW CORPORATE CONTRACTS ARE MADE,

[oH: xq.

and indeed is absolutely neces-

the effect that the directors cannot delegate that discretion.’

The clear weigh of authority however, holds that the’ powers
of a board of directors may be delegated to an executive commit-
tee of that board and the acts and contracts of such a committee

are binding on the corporation.’

1 Directors may authorize two of their
number to execute corporate notes to a
person. Leavitt v. Oxford, etc., Co., 3
Utah, 265 (1883), Or appoint an agent to
execute a deed. Arms v. Conant, 36
Vt., 744 (1864). Directors having power
to fix the rates of their railroad may
delegate that power to agents. Man-
chester, etc., R. R. v. Fisk, 33 N. H.,
297 (1856). See, also, many-cases in the
following sections of this work. The
corporation may authorize its president
to sell and assign its negotiable paper.
Stevens v. Hill, 29 Me., 183 (1848); North-
ampton B’k v. Pepoon, 11 Mass., 288
(1814). Nearly all corporate acts are
done by means of subordinate agents.
Such delegations of authority are nec-
essary. See Manchester R’y v. Fisk, 38
N. H., 297 (1856). Difficulty occurs in
defining the line which separates pow-
ers that may be delegated from those
which may not be. See Lyon v. Jerome,
26 Wend., 485 (1841); Gillis v. Bailey,
21 N. H., 149 (1850). See, also, § 712,
supra.

2The directors’ duty to pass on paper
offered for discount cannot be delegated
in Louisiana, Percy v. Millaudon, 3 La.,
568 (1852). Cf. Morse on Banking, 108,
Directors having power to purchase
stock cannot delegate that power to a
general manager. No ratification arises
from the fact that the purchase was
entered on the books. Cartmell’s Case,
L. R., 9 Ch., 691 (1874).. Directors can-
not delegate to two of their number the
question of whether a conditional sub-
scription to shares should be accepted.
Howard’s Case, L. R., 1 Ch., 561 (1866).
Two directors acting as agents to re-
ceive calls have no power to waive a
forfeiture of stock and receive the calls

thereon. Card v. Carr, 1 C. B., N. S.,
197 (1856). Directors cannot delegate
to a committee the power to forfeit and
sell stock for non-payment of calls.
York, etc., R. R. v. Ritchie, 40 Me., 425
(1855), In Gillis v. Bailey, 21 N. H., 149
(1850), it was held that a board of di-
rectors could not delegate to an agent
the power to lease various pieces of
property owned by .the corporation.
Power to make assessments cannot be
delegated by the directors. Farmers’,
etc., Ins. Co, v. Chase, 56 N. H., 341
(1876); Silver, etc., Road v. Greene, 7
Rep., 187 (R. L., 1878), where the delega-
tion was to the treasurer. Butsee Read
v. Memphis, etc., Co., 9 Heisk. (Tenn.),
545 (1872), where such delegation to the
president was upheld. Cf. Lindley on
Partnership, pp. 245-247 (Callaghan &
Co., 1881). :

3 Hoyt v. Thompson’s Executor, 19 N.
Y., 207 (1859), where the committee
consisted of any five or more directors
who attended meetings of whicli notice
was given to all. See, also, Hoyt uv
Sheldon, 3 Bosw., 267. The right of a
board of directors to delegate its pow-
ers to an executive committee was
raised but not fully passed upon in
Metropolitan, etc., Co. v. Domestic, ete.,
Co., 14 Atl. Rep., 907 (N. J., 1888), where
it was remarked that the rigidity of the
old rule prohibiting such delegation has
been somewhat relaxed. ‘‘The man-
agers might, undoubtedly, clothe acom-
mittee, in the intervals between the sit-
tings of the board, with all their own
authority to conduct the ordinary busi-
ness of the company.” But it seems that
this executive committee could not dele-
gate its power to one of their number.
Olcott v. Tioga R. R. Co., 27 N. Y., 546,

918
CH. XLHI. |
\

HOW CORPORATE CONTRACTS ARE MADE.

[$ 715.

Where the board of directors delegates to'a committee the power
to act for it, due notice of meetings of the executive committee
must be given to.all of its members; but a majority of the com-
mittee suffices to constitute a meeting and proceed to business, and
a majority of that majority binds the committee, the directors and

the corporation by its vote.!

558 (1863), The by-laws may authorize
the directors to delegate their powers to
acommhittee. Harris’ Case, L. R., 7Ch.,
587(1872), where the committee allotted
shares. Directors may delegate to a
committee power to sell corporate prop-
erty, and a mortgage given by the.rom-
mittee is valid. Certainly so where the
board of directors subsequently accepted
the papers connected with it. Burrill
v, Nahant B’k, 48 Mass., 163 (1840).
Where the by-laws authorize the direct-
ors to transact business through a com
mittee, that committee may consist of
one person. In re Tourine Co., L. R.,
25 Ch. D., 118 (1883). An employee of
acompany who sues for services, undér
a written contract made with the
“‘chairman” and ‘‘ managing director,”
may collect; their authority is presumed
as agents or executive committee. Tot-
terdell v. Fareham, etc., Co., L. R., 1C.
P., 674 (1866). In New York itis clearly
held that the directors of a banking or
loan and trust company may appoint
an executive committee and authorize
it to act for the board of directors, and
that the acts of this committee are as
binding, valid and effective as though
they had been authorized by the board
of directors directly. Palmer v. Yates,
8 Sand. Rep., 1387 (1849). Cf. Bank
Com‘rs v. B’k of Buffalo, 6 Paige, 497
(1837). In the case of Bank of Columbia
v. Patterson’s Adm’r, 7 Cranch, 299
(1818), the right of the directors to dele-
gate their power to contract. to a com-
mittee was not questioned. Stockholders
cannot elect a committee and compel the
directors to act with that committee in
corporate matters. Boot, etc., Co. v.
Dunsmore, 60 N. H., 85 (1880).

‘It is fraudulent for an executive com-
mittee to vote large eutiipenkation to

themselves for services as promoters.
Blatchford v. Ross, 54 Barb., 42 (1869).
In the case of St: Louis, etc., Assoc. v.
Augustin, 2Mo. App., 128 (1876), a.loan
committee contracted for the corpora-
tion. But where the executive com-
mittee can act only when the president
is present, action without his presence
is void. Corn, etc., B’k v. Cumberland,
etc., Co., 1 Bos., 486 (1857). As to com-
mittees of municipal corporations, see
Dillon on Munic. Corp., §§ 60, 374. Con-

_ tracts, etc., by an executive committee

have often been recognized as valid.
See Tracy v. Guthrie; etc., Soc., 47 Iowa,
27 (1877). A stockholder’s request to
sucha committee to bring an action to
remedy acorporate wrong is sufficient.
Hazard v. Durant, 11 R. I., 196 (1875),
The committee’s consent to an arbitra-
tion may be ratified by the company.
Proprietors, etc., v. Frye, 5 Me., 38
(1827). Although a contract is irregu-
larly made by the executive committee
of a corporation, there being no notice
and no quorum, yet by accepting the
benefits of the contract after wards the
company is bound. Metropolitan, etc.,
Co. v. Domestic, etc., Co., supra. In
Curtiss v. Leavitt, 15 N..Y., 1 (1857), a
finance committee had authorized the
issue of bonds. The charter requireda
resolution of the board of directors.
The court held that-acquiescence cured
the defect. In Taylor v. Agricultural
Assoc., 68 Ala:, 229 (1880), the executive
committee was provided for by charter.
A committee authorized to settle with a
person cannot also settle with a firm in
which he is interested, but the company
may ratify. Merchants’, etc., Co. v.
Rice, 29 N. W. Rep:, 784 (Iowa, 1886).
1Burleigh v. Ford, 61 N. H., 360
(1881); Metropolitan, etc., Co. v. Do-

919
{

§ 716.] HOW CORPORATE CONTRACTS ARE MADE. ; [cu. xu.

8716. President — His power to contract for the corporation.—
The president of a corporation has no power to buy, sell or con-
tract for the corporation, nor to control its property, funds or man-
agement.! This is a rule which prevails everywhere, excepting
possibly the state of Illinois. Both the decisions and the reasoning
of the Illinois courts tend to relax the rule given above.’

It is true that the board of directors may expressly authorize the
president to contract; or his authority to contract may arise from
his having assumed and exercised that power. in the past; or the
corporation may ratify his contract or accept the benefits of it'and
thereby be bound.? But the general rule is that the president cannot
act or contract for the corporation. This question has frequently
been before the courts, and many decisions have been rendered in

regard to it.

mestic, etc., Co., supra. Such, also, is
the case with municipal corporations.
State v. Jersey City, 27 N. J. L., 493
(1859); Junkins v. Union, etc., District,
89 Me., 280 (1855), But where many per-
sons authorize eight to act as a manag-
ing committee, they are not liable for
debts contracted by a meeting of six of
that committee. Brown v. Andrews,
13 Jur., 938 (1849). Power to executive
committee of directors ‘‘ to do all acts
necessary for the prosperity ” does not
authorize purchase of real estate by
majority of executive committee. The
company is not bound by same majority
improving the land. Tracy v, Guthrie,
etc., Soc., 47 Iowa, 27 (1877). The mi-
nority of the committee certainly can-
not act. Trott v. Warren, 11 Me., 227
(1884). The managing committee of an
unincorporated assuciation may legally
resolve that checks signed by any three
of them shall bind all. Maitland’s Case,
4 DeG., M. & G., 769 (1853). The ex-
ecutive committee cannot delegate their
powers to one of their number. Cook
v. Ward, L. R., 2 C. P. Div., 225 (1877),
See, also, Lyon v. Jerome, 26 Wend.,
485 (1841), where canal commissioners
delegated their powers to an engineer.
One of two supervisors cannot contract,
Cooper v. Lampeter, 8 Watts (Pa.), 125
(1889).

1“Tn the absence of anything in the

act of incorporation bestowing special
power upon the president, he has from
his mere official station no more con-
trol over the corporate property and
funds than any other director.” Titus
v. Cairo, etc., R. R. Co., 37 N. J. L., 98
(1874); 21 N. E. Rep., 155 (N. Y., 1889),
' 2The president, and general manager
may together bind an insurance com-
pany to an agreement that its mortga-
gor redeem even after foreclosure.
Union Mutual, etc., Ins. Co. v. White, -
106 Ill., 67 (1883). The president of a
railroad company has power to con-
tract for the transportation of railroad
dron, Chicago, etc., R. R. Co. v. Cole-
man, 18 Ill., 297 (1857), A deed of land
executed by the president and secretary
is valid where all the stockholders join
also in the deed. Hull v. Glover, 18 N.
E. Rep., 198 (Ill., 1888). The president
of a railroad company may assign notes,
and mortgages given to it to aid in con-
structing the road.. Irwin v. Bailey, 8
Biss., 528 (Ill. Circuit, 1879).

3 For a clear statement of this princi-
ple, see Dabney v. Stevens, 40 How.
Pr., 841 (1870); 181 U. S., 371 (1889).

4 A president of a bank cannot agree
that sureties on paper given to the bank
will not be held liable. First Nat. B’k
v. Bennett, 88 Mich., 520 (1876). ‘‘It is
not within the authority of the pres-
ident of a bank, when he discounts

920
 

OH. XLII. ]

HOW CORPORATE CONTRACTS ARE MADE.

" [g 716.

The president merely presides and signs contracts when ordered

“

paper for the bank, to promise the
maker that he need not pay it.” (Cases.)
First Nat. B’k v. Tisdale. 18 Hun, 151
(1879); aff'd, 84 N. Y., 655. The pres-
ident cannot borrow money for com-
pany unless charter authorizes or board
of directors authorize him. Life, etc.,
Ins. Co, v. Mechanics’, etc., Co., 7
Wend., 31 (1831).
signed by the president, secretary and

treasurer of a religious corporation, yet:

it may be shown that they were not au-
thorized by the board of trustees to
sign. People’s B’k v. St. Anthony’s,
etc,, Church, 109 N. Y., 512 (1888). The
president and cashier cannot agree with
an indorser that he will not be held
liable. B’k of U.S. v. Dunn, 6 Peters,
51°(1832); B’k of Metropolis v. Jones, 8
Peters, 12 (1884). The president of a
bank has no power to release a claim.
Olney v. Chadsey, 7 R. I., 224 (1862);
Hodges’ Ex’r v. First Nat. B’k, 22 Gratt.,
51 (1872). President and cashier have
no power to execute a mortgage. Leg-
gett vu. N. J, etc., Co, 1 N. J. Hq., 541
(1832). Nor has the president alone that
power. ‘ Corbett v. Woodward, 5 Saw-
_yer, 403 (1879). President of bank has
no power to sell and assign a note held
by it. Hallowell, etc., Bk v. Hamlin,
14 Mass., 178 (1817). The president of a
national bank cannot bind it by his pur-
chase of bonds and stock for it. First
Nat. B’k v. Hoch, 89 Pa. St., 324 (1879).
The president of a railroad corporation
has no power to let a construction con-
tract. Templin v. Chicago, etc., R. R.,
85 N. W: Rep., 634 (Iowa, 1887); Grif-
fith v, Chicago, etc., R. R., 86 N. W.
_ Rep., 901 (lowa, 1888). The president
and a director of a miner’s water supply
company have no power-to purchase
land for an extension of the works, but
the board of directors may ratify the
purchase. Blen v. Bear, etc., Co., 20
Cal., 602 (1862). The president of a
ditch company has no power to ex-
change half of its ditch for half of the

.Miss., 116 (1856).
Although a note is .

ditch of another company. Bliss v.
Kaweah, etc., Co., 65 Cal., 502 (1884).
A railroad president cannot sell its ties.
Walworth, etc., B’k v, Farmers’, etc.,
Trust Co., 14 Wis., 325 (1861). The pres-
ident cannot execute a note for the com-
pany. Bacon v. Miss., etc.; Ins. Co., 31
The president of a
railroad company cannot give a chattel
mortgage on one of its engines, even
though he is also its ‘business and finan-
cial agent.” Luse v. Isthmus, etc., R’y
Co., 6 Oreg., 125 (1876). If the president -
of a bank sells its securities he is liable
to it for any loss incurred thereby. First
Nat. B’k v. Lucas, 21 Neb., 280 (1887).
The president of a bank has no power
to compromise a debt due to it from an
insolvent firm. Wheat v. B'k of Louis-
ville, 5S. W. Rep., 305 (Ky., 1887).

The president of a lumber company
has no power to employ a general agent
in another part of the country. The
latter can hold the company liable: for
his salary only by proving that at least
amajority of the directors knew thereof
and acquiesced. Murray v. Nelson,
etc., Co., 9 N. E. Rep., 634 (Mass., 1887).
The president of a railroad cannot sell
its bonds. Titus v. Cairo, etc, R. R.
Co., 87 N. J. L., 98 (1874). The presi-
dent has no power to sell goods unless
he is specially authorized or has made
similar sales without objection. Pitts-
burgh, etc., Co. v. Reese, 12 Atl. Rep.,
362 (Pa., 1888). The president of a com-
pany cannot agree for it to redeem cer-
tain-outstanding claims against it —
‘“labor tickets.” Stanley v. Sheffield,
etc., Co., 4 South. Rep., 34 (Ala., 1888).
The president cannot increase the pay
allowed to a director by a vote of the
directors. Hodges v. Rutland, etc., R.
R. Co., 29 Vt., 220 (1857); Bailey v. Buf-
falo, etc., R. BR. Co., 14 Hun, 483 (1878),
A president authorized to execute a
mortgage cannot insert unusual terms —
such as that the principal sum should
become due at the option of the bond-

921
§ 716.)
to do so.

holder, in case of non-payment of in-
terest. Jesup v. City B’k, etc., 14 Wis.,
331 (1861). The president and secretary
cannot issue drafts in the company’s
name. Dabney v. Stevens, 40 How.
Pr., 341 (1870). Misrepresentations of
the president as to property which the
company sells are not binding upon it.
Crump v. U.S. Min. Co., 7 Gratt., 352
(1851). The president and cashier can-
not even conjointly sell the safe of a
bank. Asher v. Sutton, 31 Kan., 286
(1884). One who is president, treasurer
and gereral manager cannot confess
judgment for the company even though
he owns all but two shares of the stock.
Stokes v. N. J., etc., Co., 46 N. J. L.,,
237 (1884). Nor give a mortgage. Eng-
land v. Dearborn, 141 Mass., 590 (1886).
Nor give accommodation or renewal
notes. McClellan v. Detroit, etc., Works,
56 Mich., 579 (1885). The president of
a bank has no power to transfer its
paper. Smith v, Lawson, 18 W. Va.,
212, 228 (1881). The president of a
manufacturing company cannot buy
goods for it. Westerfield v. Radde, 7
Daly, 326 (1877). Cf. Silva v. Metro-
politan, etc., Co., 42 N. Y. Super. Ct.,
307 (1877). Where a contract to build
arailroad is made by contractors with
a committee of directors duly author-
ized to make it, a provision against sub-
letting cannot be waived’ by the presi-
dent of the railroad and a director.
Western R. R. Co. v. Bayne, 11 Hun,
166 (1877); affirmed, '75°'N. Y., 1. A di-
rector is liable to his bank on a note
given to it by him, although the presi-
dent, who has purchased stock of the
director, cancels the note in payment
for the stock and considers himself in-
debted to the bank for that amount.
There was no ratification by the bank,
Rhodes v, Webb, 24 Minn., 292 (1877).
A bank receiving funds from its presi-
dent in payment of his debts to it,
which funds he had fraudulently ob-
tained from another bank by using his

f 1
HOW CORPORATE CONTRACTS ARE MADE.

[CH. XLII.

A president, however, may employ an attorney for the

standing as president of the former, is
bound to pay over the same to the de-
frauded bank, where such president
had complete control of the former
bank. City Nat’l B’k v. Nat’l Park B’k,
32 Hun, 105 (1884).

Brokers employed by the president
cannot hold the corporation liable, even
though the corporation has had the
benefit of their services, the board’ of
directors having no knowledge thereof.
Twelfth Street: Market Co. v. Jackson, |
102 Penn. St., 269 (1883); De Bost v.
Albert P. Co., 35 Hun, 386 (1885); Alle-
gheny Co. Workhouse v. Moore, 95 Pa,
St., 408 (1880); in the last case the su-
perintendent joined in employing the
broker. Not even the president, secre-
tary and treasurer can give a note in
the name of a religious corporation,
People’s B’k v. St. Anthony’s, etc.,
Church, 39 Hun, 498 (1886). A president
authorized by resolution of the board
of directors to sell bonds cannot loan
them; if he does so it is a conversion of
the property of the corporation. Sec-
ond Ave. R. R. Co. v. Mehrbach, 46 N.
Y. Super. Ct., 267 (1883). The president
of an insurance company cannot in-
dorse and transfer notes. Marine B’k,
etc., v. Clements, 3 Bosw. Rep., 600
(1858). But in an earlier case it was
held that the indorsee in good faith was
protected. Caryl v. McElrath, 3 Sandf.
Rep., 176 (1849). A bank president has
no implied authority from the bank to
agree to pay interest on a particular de-
posit, there being no evidence of special
authority nor of a bank custom to that
effect. The president of a corporation
has no implied authority to check cor-
porate funds out of bank unless there
is an established usage to that effect.
Fulton B’k v. N. Y., etc., Canal Co., 4
Paige, 127 (1833). The president, secre-
tary and general agent cannot issue the
corporate notes. McCullough v. Moss,
5 Denio, 567 (1846). Cf. Moss v. Rossie,
etc., Co., 5 Hill, 187 (1848), A railroad

922

\
 

5

CH. XL. ]

HOW CORPORATE CONTRACTS ARE MADE.

[§ 716.

company, and authorize him to prosecute or defend a case.' And
in all cases the president binds the corporation by his acts and: con-
tracts when he is expressly authorized to so act or contract,? or when

president cannot contract to pay a com-
mission to a promoter who induces a
contractor to build the road. Risley v.
Indianapolis, etce., R. R. Co., 1 Hun,
202 (1874); rev’d on other points, 62 N.
Y., 240. The president cannot employ
workmen, Mt. Sterling, etc., Co. v.
Looney, 1 Mete: (Ky.), 550 (1858). Nor
agree to pay a salary. Murray v. Nel-
son & Co, 9 N. E. Rep., 634 (Mass.,
1887); Wood’s Railway Law, pp. 486-
439. President may accept:a constitu-
tional subscription to stock. Pittsburgh,
etc., R. R. Co. v. Stewart, 41 Pa. St.,
54 (1861). A president of a bank may
bind it by his agreement With an in-
dorser of a note that the maker of a
note will give a mortgage and that
the indorser will not be held liable.
Cake v: Pottsville B’k, 9 Atl. Rep., 302
(Pa., 1887). Tender of calls on stock
may be made to the president in order
to avoid forfeiture. Mitchell v. Vt,
etc., Co., 67 N. Y., 280 (1876). Where

the corporation is merely an intermedi- |

ary of title to a note, less strict proof is
required. Brown v. Donnell, 44 Me., 421
(1860), The company is liable to an ar-
chitect who has done work at the in-
stance of the president and two direct-
ors. Hooker v. Eagle B’k, 30 N. Y., 88
(1864). The president cannot lease land.
Yellow, etc., Co. v. Stevenson, 5 Nev.,
224 (1869). The vicetpresident may sign
a corporate deed if the president refuses
to do so, Smith v. Smith, 62 IIll., 492
(1872), A telegram from the president
authorizing an agent to contract is in-
sufficient proof of authority. Felton v.
McClane, 46 N. Y. Super. Ct., 53 (1880).
‘Where he is authorized to discharge one
mortgage, the company is not bound by
his mistake in discharging two mort-
gages. Smith v. Smith, 117 Mass., 72
(1875); 5S. Rep., 138.

lAmerican Ins. Co. y. Oakley, 9
Paige, 496 (1842); Mumford v. Haw-

kins, 5 Denio, 855 (1848): Potter v.
N. Y.,ete., Asylum, 44 Hun, 367 (1887).
He may also employ special counsel.
Davis v. Memphis, etc., R’y Co., 22 Fed.
Rep., 883 (1883). Contra, Bright v.
Metairis, etc., Assoc., 33 La. Ann., 58
(1881). The president cannot authorize
an attorney to accept service where the
board of directors were accustomed to
vote on the employment of attorneys.
Bridgeport Sav. B’k v. Eldredge, 28
Conn., 556 (1859). President and secre-
tary authorized to execute mortgage
have no authority to insert provision
to pay attorney fee in case of fore-
closure. Ratification of the mortgage
by the directors without knowledge
of such provision is not ratification
thereof. Pacific, etc., Mill v. Dayton,
etc., R’y Co., 5 Fed. Rep., 852 (1881.)
The case of Ashuelot, etc., Co. v.
Marsh, 55 Mass., 507 (1848), holds that
the president cannot cause an action to
be commenced. Where the president
is: dead the vice-president may employ
an attorney. Colman v. West, etc., Co.,
25 W. Va., 148 (1884); 5 N. Y. Supp., 648.
2Under express power to have full
control of the business the president
may purchase materials. Castle v. Bel-
fast, etc., Co., 72'Me., 167 (1881), Under
power to adjust and pay losses he may
transfer papers. Baker v. Cotter, 45
Me., 286 (1858). Howland v. Meyer, 2
Sand. Rep., 186; 3 N. Y., 290 (1850),
where the express power was very gen-
eral. Express authority, of course, may
be given to the president to sell and as- '
sign the securities of the corporation.
Mitchell v. Deeds, 49 Ill, 416 (1867),
Authority to president to borrow in-
cludes authority to give ordinary secu-
rities, 7. @, bonds, notes, acceptances
and collaterals. Person dealing with
him may rely on it. He is not bound
to know that the president’s authority
has been revoked. Hatch v. Codding-

923
~

8 716.]

HOW. CORPORATE CONTRACTS ARE MADE.

(cH. XL.

he has been permitted by the corporation for some time to act and
contract for it;! or when the company ratifies or accepts the con-
tract after it is made, or accepts the benefit of the contract.’

ton, 95 U. S, 48 (1877). Where the

* president has, by by-laws, authority

'
to make a contract, and does make one,

and it is signed by him as such, though .

no corporate seal and no resolution are
recited, the president may compromise
and release the same. Six months’ de-
lay by directors in repudiating the com-
promise after knowledge is a fatal de-
lay. Rolling Mill v. St. Louis, etc.,
R. R. Co., 120 U. S., 256 (1886). Parol
authority to the president suffices to
enable him to pay out money. New
Orleans Building Co. v. Lawson, 11 La.,
84 (1887). Although the president is
given power to make a contract, yet
the directors may make it, and their
action overrules his. East, etc., Co. v.
Brown, 7 8. E. Rep., 273 (Ga., 1888).
Authority to sell gives authority to
contract to sell. Augusta B’k v. Hami-
blet, 35 Me., 491 (1853).

1 Where the president and secretary
of a mining company have for a long
time signed checks, and they have been
paid by a bank, they may continue to
draw checks and the bank must pay
them. The corporation is liable for
overdrafts caused thereby. Mining Co.
v. Anglo, etc., B’k, 104 U. S., 192 (1881).
A uniform practice of a company for
several months previous to transfer of
a corporate note by its president, in
cases of notes negotiated for the purpose
of raising money to carry on its legiti-
mate business, where such notes were
payable to the company, to have them
indorsed by its president, is sufficient
authority for his indorsement. Marine
B’k v. Clement, 31 N. Y., 33 (1865). See,
also, in general, Chicago, etc., R’y Co.
v. James, 24 Wis., 388 (1869); First Nat’l,
etc., B’k v. North, etc., Co., 86 Mo., 125
(1885), where the president and sec-
retary were accustomed to make notes.
Where the board of directors for three
years relinquishes to the president the

exclusive management of the business
of the corporation and the purchase of
all classes of articles, giving corporate
notes, bills and securities therefor, and
then the directors took charge and for
several years continued business with-
out repudiating his acts, his purchase
of locomotives and giving corporate
notes therefor while he was in charge
binds'the corporation. Olcott v. Tioga
R. R. Co., 27 N. Y., 546 (1863). If ac-
customed so to do, the president may
settle an account and take a due-bill in
payment. Dougherty v. Hunter, 54 Pa,
St., 880 (1867). Where the president
has been accustomed to make and in-
dorse paper, the corporation will be
bound, even though the directors sup-
posed that all business had been stopped.
Nat'l Park B’k v. German, etc., Co., 53 N,
Y. Super. Ct., 367 (1886).' The authority
of one who is the president and general
manager to borrow money for the cor-
poration and giveits paper therefor ‘‘may
be inferred from the general manner
in which, for a period sufficiently long
to establish a settled course of business,
he was allowed without interference to
conduct the affairs of the company.”
Martin v. Niagara, etc., Co., 44 Hun,
180 (1887). Where the president, who
is also general manager and financial
agent, is accustomed to borrow money
for the corporation, he binds the com-
pany by a loan, even though he misap-
plies the proceeds. Kraft v. Freeman,
etc., Co, 87 N. Y., 628 (1881). If he
has been accustomed for a long time to
sign notes, a person taking a note with-
out his signature is not protected.
Davis, etc., Co. v: Best, 105 N. Y., 59
(1887). /

2 Where the president bought railroad
iron without authority so to do, but the
directors stood by and allowed the cor-
poration to use it, the company is liable
for the price. Scott v. Middletown,

924
 

CH. XLII. ]

HOW CORPORATE CONTRAOTS ARE MADE.

($ 717.

§ 717. Secretary and treasurer — Their power to contract for the
corporation.— The secretary of a corporation has no power, merely
as secretary of the company, to make contracts for it.! But the

etc., R. R. Co., 86 N Y., 200 (1881).
Rates as advertised by the president

_ bind the railroad when it continues to

accept them. Willard v, Gould, 32 N.
H., 230 (1856). The president’s unau-
thorized contracts, when known to and
acted upon by the directors and corpo-
ration, are binding. Perry v. Simpson,
etc., Co., 387 Conn., 520 (1871). Where
the president of a bank instructs its
correspondent bank to charge to the
former a debt due by him to the latter
bank, and the accounts of the latter to
the former bank showed to that effect,
and no objection is made, the former
bank is bound. Burton v. Burley, 9
Biss., 258 (1880). Lease by the presi-
dent and treasurer without authority
may be ratified by the stockholders.
Mt. Washington Hotel Co. v. Marsh, 63

N. H., 280 (1884), Ora mortgage. Mar-.

tin v, Niagara, etc., Co., 44 Hun, 130
(1887). A bank is liable on an agree-
ment of its president to give a person
ten shares of stock if he would deposit
with it, the deposit having been made.
Rich v. State Nat'l B’k, 7 Neb., 201
(1878). Where the company acquiesces
in work done by contract with the presi-
dent it‘is liable. Grape Co. v. Small,
40 Ma., 395 (1874). The company may
ratify a mortgage given by him. Krider
v. Trustees, etc., 31 Iowa, 547 (1871);
Sherman v. Fitch, 98 Mass., 59 (1867),
where all but one of the directors knew
and acquiesced. The acquiescence of a
minority of the directors is insufficient.
Yellow, etc., Co. v. Stevenson, 5 Nev.,
224 (1869), Acceptance of the property
purchased, with knowledge, is ratifica-
tion. Dent v. North, etc., Co., 49 N. Y.,
890 (1872), The failure of the president
to repudiate at once an agent’s unau-
thorized act is ratification. First Nat’l

Bk v. Fricke, 75 Mo., 178 (1881); Ala--

bama, etc., R. R. Co. v. Kidd, 29 Ala,

corporation may, of course, expressly authorize the secretary to

221 (1856). See, also, § 727, infra, on
Notice. Ratification of a president’s
acts may be by long use of the results,
even though the directors expressly re-
pudiated the.act, but did not notify the
other party. Belleville Sav. B’k v.
Winslow, 35 Fed. Rep., 471 (1888). It
is a sufficient ratification if the direct-
ors discuss the matter at a meeting,
though they take no action. Walworth,
etc., B’k v. Farmers’, etc., Co.; 16 Wis.,
629 (1883). A corporate agent with full
powers may ratify the president’s act.
Perry v. Simpson, etc., Co., 87 Conn.,
520 (1871). Acquiescence of the board
of directors may cure the omission of a
previous resolution as required by the
charter in the issue of bonds. Curtis v.
Leavitt, 15 N. Y., 1 (1857), the court
saying of the board (p. 49): ‘‘ They may
previously resolve; they may subse-
quently acquiesce; they may expressly
ratify; they may intentionally receive
and appropriate the proceeds of the un-
authorized transaction, and so put it
out of their power to dispute its valid-
ity.”

1 He cannot sell and assign its notes,
Blood v. Marcuse, 38 Cal., 590 (1869);
nor sign a draft for it, First Nat'l B’k
v. Hogan, 47 Mo., 472 (1871); nor pur-
chase iron for it, Williams v. Chester,
etc., R. R. Co., 15 Jur., 828 (1850); nor
accept a bill of exchange, Neale v. Tur-
ton, 4 Bing., 149 (1827); nor bind it to
pay a debt of an old company whose
property it purchased upon a re-organi-
zation, American, etc., R’y Co. v. Miles,
52 IIL, 174 (1869); nor rent a place for
the company, Ridley v. Plymouth, etc.,
Co., 2 Ex., 711 (1848); nor accept ac-
commodation paper, Farmers’, etc., B’k
v. Empire, etc., Co., 5 Bosw., 275 (1859) ;
nor purchase, Kings Bridge, etc., Co. v.
Plymouth, etc., Co., 3 Ex., 718 (1848).

925
§ 717.) HOW CORPORATE CONTRACTS ARE MADE. [CH. XLII.
contract for it, or may accept and ratify his contracts after they are
made.!

The treasurer of a corporation has no power, merely by reason
of his office as treasurer, to contract for the corporation? But if
the treasurer has been accustomed to make certain contracts for
the corporation and the corporation acquiesced in them, it is bound
by a new contract of that kind entered into by him.* It is for the
jury to decide whether such a custom exists. If the treasurer is,
accustomed to act as the managing agent of the corporation he
can sell its property,> and borrow money and give security. The
treasurer binds the corporation by a contract, which he is expressly
authorized to make.’ The secretary and treasurer cannot even con-
jointly bind the corporation by their purchases of the article in
which it deals;* nor can they borrow money for the corporation,
nor release the maker of a note to the corporation.” If the com-

1 Hill v. Manchester, etc., Co., 5 B. &
Ad., 866 (1838), where the secretary was
authorized to affix the corporate seal ;
New Eng., etc., Ins. Co. v. De Wolf, 25
Mass., 56 (1829), where the company ac-
cepted the benefits. A note signed by
the corporate secretary as directed by
the president, the money therefor be-
ing used by the corporation, is enforce-
able against it. Jansen v, Otto, etc.,
Co., 1 N. Y. Supp., 605 (1888).

2 He cannot compromise or relinquish
its claims, Carver Co. v. Manuf’rs, etc.,
Co., 72 Mass., 214 (1856); nor sell and in-
dorse its paper, Bradley v. Warren, etc.,
B’k, 127 Mass., 107 (1879); Holden v. Up-
ton, 134 id., 177 (1888). Contra, Perkins
v. Bradley, 24 Vt., 66 (1851); nor assume
the debt of a third person, Stark B’k v.
U. 8. Pottery Co., 84 Vt., 144 (1861); nor
sell and assign a mortgage owned by
the corporation, even though he uses the
corporate seal. Jackson v. Campbell, 5
Wend., 572 (1830). He may employ an
attorney to collect unpaid bills. Bristol,
etc., Bk », Keary, 128 Mass., 298 (1880).
He cannot assign a mortgage even upon
payment of a debt. Jackson v. Camp-
bell, 5 Wend., 572 (1880). Cannot give
release under seal. Dedham Inst. v.
Slack, 60 Mass., 408 (1850). May accept

money. Brown v. Winnissimmet Co.,
93 Mass., 326 (1865).

3Lester v. Webb, 83 Mass., 34 (1861),
where the treasurer indorsed a note;
Bk of Attica v. Pottier, etc., Co., 1
N. Y. Supp., 483 (1888); Partridge v.
Badger, 25 Barb., 146 (1857); Foster v.
Ohio, etc., Co., 17 Fed. Rep., 180 (1883),
where he gave a note.

_4Foster v. Ohio, etc., Co., 17% Fed.
Rep., 130 (1888); Fifth, etc., Sav. B’k v.
First Natl B’k, 7 Atl. Rep., 318 (N. J.,
1886), where the treasurer pledged se-
curities.

. 5Phillips v. Campbell, 43 N. Y., 271
(1870).

6Fay v. Noble, 12 Cush., 1 (1853);
Fifth, etc., Bk v. First, etc.,. Bk, 7
Atl. Rep., 318 (N. J., 1886).

.10dd Fellows v. B’k of Sturgis, 42
Mich., 461 (1880), where the authority
was oral; 42 N. W. Rep., 550.

8 Alexander v. Cauldwell, 88 N. Y.,
480 (1881), where a coal company was
held not liable for coal so purchased,
there being no evidence that the corpo-
ration authorized it, or used it, or rati-
fied it. Cf. Alexander v. Brown, 9
Hun, 641 (1877).

9 Adams v. Mills, 60 N. Y:, 583 (1875).

10 Moshannon, etc., Co. v. Sloan, 7 Atl.
Rep., 102 (Pa., 1885),

926
CH. XLUI. |

HOW CORPORATE CONTRACTS ARE MADE.

[$ 718.

pany acquiesces in a contract made by either or both of these offi-

cers it is bound.!

§ 718. Cashier — The extent of his powers.— The cashier of a
bank has greater inherent*powers than any other corporate author-

ity excepting the board of directors.

By virtue of ‘his office he

performs many and important acts for the bank. He may borrow
money and pledge the bank’s securities;? and sell and assign its
paper;* and extend the payment of a note;* and certify checks,®
and may bind the bank by various other acts. But a cashier can-
not authorize a person to loan money to the bank, and deliver it

1St. James, etc., v. Newbury, etc., R.
R, Co., 141 Mass., 500 (1886), where the
treasurer gave an obligation under seal
and reported it in his reports, and a
committee approved. If the company
ratifies a contract made by the presi-
dent and secretary the company may
compel its officers to give it the benefit
of the contract. Church v. Sterling, 16
Conn., 888 (1844). Accepting the benefit
of an. insurance contract made by the
secretary and president accepts the con-
tract itself. Emmet v. Reed, 8 N. Y.,
312 (1858). An indorsement by the sec-
retary, with the knowledge and ac-
quiescence of the directors, is binding.
Williams v. Cheney, 69 Mass., 215 (1855).
So, also, where he pledges bonds with
their knowledge and acquiescence.
Darst v. Gale, 83 Ill, 136 (1876). And
see Durar v. Ins. Co., 24 N. J. L., 171
(1853), in insurance contracts, and Con-
over v. Mutual Ins. Co., 1 N. Y., 290
(1848), where he was accustomed to con-
tract for the company; Chicago Build-

ing, ete., Co. v. Crowell, 65 Ill, 453;°

Talledega Ins. Co. v. Pencock, 67 Ala.,
258 (1880), where the secretary was ac-
customed to sign notes.

2 Coats v. Donnell, 94.N. Y., 168 (1883) ;
Barnes v. Ontario Bk, 19 id., 152 (1859);
Donnell v. Lewis, etc., B’k, 80 Mo., 165
(1888).

3Smith v, Lawson, 18 W. Va., 212,
227 (1881); Wild v. B’k, 8 Mason, 505
(1825); Lafayette B’k v. State B’k, 4
McLean, 208 (1847); Everett v. U. S., 6
Porter, 166 (1887); Crocket v. Young, 9
Miss., 241 (1848). May indorse paper

in private -bank after banking hours.
Bissell v. First, etc., B’k, 69 Pa. St.,
415. ‘

4 Wakefield B’k v. Truesdall, 55 Barb.,
602 (1864).

5 Merchants’ B’k v. State B’k, 10 Wall.,
604 (1870); Cooke v. State Nat’l B’k, 52
N. Y., 96 (1873). A bona fide holder of
a certificate of indebtedness issued by
him is protected. Citizens’,'’etc., B’k v.
Blakesley, 42 O. St., 645 (1885).

6A bank is liable for the embezzle-
ment by’a cashier of a special deposit
of bonds. First Nat’! B’k v. Dunbar,.9
N. E. Rep., 186 (Ill., 1886). See, also,
Caldwell v. Nat?l Mohawk B’k, 64 Barb.,
333 (1869), and § 682,.supra. He may
sell assets to pay a debt and may
guaranty the priority of a mortgage.
Peninsular B’k v. Hanmer, 14 Mich.,'
208 (1866). He may employ an attor-
ney. Root v. Olcott, 42 Hun, 536 (1886);

‘Potter v. N. Y., etce., Asylum, 44 id.,

367 (1887); Western B’k v. Gilstrap, 45
Mo., 419 (1870), where the other officers

‘were absent; Mumford v. Hawkins, 5

Denio, 355 (1848). The president and:
cashier are presumed to have authority
to compromise a debt. Chemical Nat'l
Bk v. Kohner, 85 N. Y., 189 (1881). May
transfer stock held in pledge. Mat-
thews v. Mass. Nat’l B’k, 1 Holmes, 396
(1874). A bona fide holder may enforce
accommodation paper indorsed by him.
City B’k v. Perkins, 29 N. Y., 554 (1864);
B’k of Genesee v. Patchin B’k, 19,N. Y.,
312 (1859); Faneuil, etc., B’k v. B’k of
Brighton, 16 Gray, 584 (1860).

927
§ 719.]

HOW CORPORATE CONTRACTS ARE

MADE.. [CH. XLII,

to an agent to carry it to a distant city;’ nor any other act which is

not in the regular course of business.”

However, though if a cashier

does an act in excess of his powers, yet if the board of directors
ratify it or accept its benefits the corporation is bound.?

§ 719. General manager, superintendent and general agent —
Their power to contract for the corporation.— The general man-
ager of a corporation has no power to make and deliver the prom-
issory note of the company;‘ nor can he indorse the company’s

1In no case has the term “ordinary
business” ‘‘ been judicially allowed to
comprehend a contract made by a cash-
ier, without an express delegation of
power from a board of directors to do
so, which involves the payment of
money, unless it be such as has been
loaned in the usual and customary way.

‘Nor has it ever been decided that a
cashier could purchase or seli the prop-
erty or create an agency of any kind
for a bank which he had not been au-
thorized to make by those to whom had
been confided the power to manage its
business, both ordinary and extraordi-
nary.” U.S. uv, City B’k, etc., 21 How.,
356 (1858). ‘

2 Cannot bind bank by indorsing bank
as accommodation indorser to his own
note. West, etc., B’k v. Shawnee, etc.,
Bk, 95 U.S., 557. A cashier may in-
dorse bank paper to any one except him-
self, Preston v. Cutter, 13 Atl. Rep.,
874 (N. H., 1888). :

3Martin v. Webb, 110 U.S.,. 7 (1884),
where the cashier had canceled a deed
of trust; Payne v. Commercial B’k,

etc., 14 Miss,, 24 (1846); Bank of Pa. .

v. Reed, 1 Watts & §&., 101 (1841);
Ryan v. Dunlop, 17 Ill, 40 (1855), where
he satisfied a mortgagee; Kelsey v.

Nat’l B’k, 69 Pa. St., 426 (1871), where |

he offered a reward with the knowledge
and acquiescence of the directors; Med-
omak B’k v, Curtis, 24 Me., 36 (1844),
where the bank claimed the benefit of
a contract; United States Bank v. Dan-
dridge, 12 Wheat., 64 (1827), where a
cashier’s bond in possession of a banlr
was held to have been accepted by the

bank, though no vote accepting it was
to be found in its records; B’k of Lyons
v. Demmon, Hill & Denio, Supp. (N.
Y.), 398 (1844), where the president and
secretary sold stock, and agreed to pur-
chase it if the vendee desired. ‘Cannot
assign non-negotiable paper. Barrick
v. Austin, 21 Barb., 241 (1855). Cashier
and president together cannot pledge
paper for antecedentdebt, State of Tenn,
v. Davis, 50 How. Pr., 447 (1874), Cashe
ier cannot take payment in other notes,
etc. Sandy, etc., B’k v. Merchants’,
etc., B’k, 1 Biss., 146 (1857). A cashier
has no power to agree with an indorser
of a note to a bank that he shall not be
liable. Thompson v. McKee, 87 N. W.
Rep., 867 (Dak., 1888); B'k of Metrop-
olis v. Jones, 8 Peters, 12 (1884); B’k
of U. S. v. Dunn, 6 Peters, 51 (1882).
Person taking note from cashier on lat-
ter’s personal debt cannot hold bank
liable on latter’s indorsement of note as
cashier. West St. Louis S. B’k v. Shaw-
nee, etc., B’k, 3 Dill., 403 (1874); 95 U.
§., 557. A cashier cannot assign corpo-
rate notes to a depositor in payment of
a deposit. Schneitman v, Noble, 89 N.
W. Rep., 224 (lowa, 1888). He cannot
render the charter forfeitable by taking
payment on subscriptions in an illegal
manner. State v. Commercial B’k, 14
Mass., 218 (1846). :

4New York, etc., Mine v. Negaunee-
Bk, 39 Mich., 644 (1878), in which case
the note was held not enforceable, al-
though the general manager had often
drawn drafts on the company. See
Simpson’ s Claim, 58 L, T. Rep., 16
(1887).

928
CH. XLII]

HOW CORPORATE CONTRACTS ARE MADE. [§ 719.

name on commercial paper,’ except in payment of debts;? nor can
he change the terms of a sealed contract of the corporation;* but
he may give a note in payment of wages due;! and he may accept
a draft? There is grave doubt as to whether he may borrow
money and give a lien or chattel mortgage therefor.®

It has been held that he may waive demand and notice of a note.
indorsed by the company;’ may also employ an attorney ;® may
render the company liable for overpayment of a check by mistake
of the bank;*® may contract for the use of a patent; may render
the company liable for an illegal use of the word “ patented; ” " and
may enter into various contracts which pertain to the regular

course of his business.”

1Accommodation acceptances, ac-
cepted in the corporate name by the
manager of the corporation without the
knowledge of the directors, are not
enforceable, though the manager had at
times drawn notes to meet expenses.
Merchants’, etc., B’k v. Detroit, etc.,
Works, 86 N. W. Rep., 696 (Mich., 1888).
The manager of a manufacturing com-
pany has no implied power to indorse
the company’s name to a promissory
note. Proof must be given that the
note concerned the corporate business,
or that the corporation received the’
benefit therefrom, or that the manager
had express power to sign. Middlesex,
etc., B’k v, Hirsch, etc., Co., 4 N. Y.
Supp., 385 (1888, City Court). But he
may accept a draft if he is accustomed
soto do. Munn v. Commission Co., 15
Johns,, 44 (1818). And the general agent
of a bank may indorse. Merchants’
B’k v, Central B’k, 1 Ga., 418 (1846).

2McKiernan v.-Lusgan, 56 Cal., 61
(1880); Seeley v. San Jose, 59 Cal., 22
(1881), :

3Boynton v. Lynn, etc., Co, 124
Mass., 197 (1878).

4 Bates v. Keith, etc., Co., 48 Mass.,
224 (1843). ‘

5 Hascall v. Life, etc., Ass’n, 5 Hun,
151 (1875): aff'd, 66 N. Y., 616.

8 The general agent and treasurer may
borrow money and give a chattel mort-
gage as security. Fay v. Noble, 66
Mass., 1 (1653). The superintendent of
a mine cannot borrow money for the

(59)

company. Union, ete., Oo. v. Rocky,
etc., B’k, 1 Col., 531 (1872). Where a
superintendent borrows money for him--
self, giving a lien on corporate property
as security, the parties loaning the
money with knowledge of these facts
cannot hold the company liable. Plant-
ers’, etc., Co. v. Olmstead, 3 S. E. Rep.,.
647 (Ga., 1887). The well-considered
case of Whitwell v. Warner, 20 Vt., 425.
(1848), holds that the general manager:
cannot give a lien to secure the price of
goods which he purchases; but it is held:
that if the company uses the goods even.
without knowledge of the lien, the-
vendors may pursue the goods or the
proceeds realized therefrom. In Leon-
ard v. Burlington, etc., Ass’n, 55 Iowa,
594 (1881), it is held that he may borrow
money, and the company is liable if it
has used the money. A superintend-
ent’s mortgage was upheld in Poole v.
West., etc., Ass’n, 30 Fed. Rep., 513 (1887).

TWhiting v. Smith, etc., Co., 39 Me.,
316 (1855). ;

8St. Louis, etc., R. R. v. Grove, 18
Pac. Rep., 958 (Kan., 1888); Frost v.
Domestic, etc., Co., 183 Mass., 563 (1882) ;
Southgate. v. Atlantic, etc., R. R. Co.,
61 Mo., 89 (1875).

9 Kansas, etc., Co. v. Central B’k, 34
Kan., 635 (1886).

10 Eureka Co. v. Bailey Co., 11 Wall.,
488 (1870).
“Tompkins v. Butterfield, 25 Fed.
Rep., 556 (1885).

122A general manager authorized to

929
\

§ 719.]

HOW CORPORATE CONTRACTS ARE MADE.

A railroad superintendent may employ a physician in cases of
accidents,! and may offer rewards for the conviction of persons ob-

structing the tracks.

It has been held that a superintendent has

not the powers of a general manager The superintendent may,

of course, be given express powers to contract.

If the company

ratifies the contract or accepts its benefits the contract becomes

binding. .

pay commissions on receipts from sales
may agree to pay commissions on sales
irrespective of the receipts. American,
etc., Co. vu. Maurer, 10 Atl. Rep., 762
(Pa., 1887). A contract for a corpora-
tion by its general superintendent to
give a right of way to another railroad
may become binding by acquiescence.
Alabama, etc., R. R. v, South, etc., R.
R., 8 South. Rep., 286 (Ala, 1887).
President and manager of a milling
company cannot purchase flour. Getty
v. Barnes, etc., 19 Pac, Rep., 617 (Kan.,
1888). As to insurance agents, see Ins.
Co. v. McCain, 96 U. S., 84 (1877). A
treasurer of a corporation not author-
ized to sell any part of its property, but
who was its sole managing agent, may
pass a valid title of personal property
to a vendee as against the claim of one
who levied upon it under a judgment.
Phillips v. Campbell, 43 N. Y., 271 (1870).
The managing agent may employ a per-
son, but not for a long time in the future.
Smith v, Cook, etc., Assoc., 12 Daly, 804
(1884),. He cannot, employ a broker.
Allegheny, etc., Co. v. Moore, 95 Pa.
St., 412 (1880).

1 Pacific R. R. Co. v. Thomas, 19 Kan.,
257 (1877); Toledo, etc., R. R. Co. wv
Rodreques, 47 III, 188 (1868); Atlantic,
etc., Ri R. Co. v. Reiser, 18 Kan., 458
41877). Contra, Stephenson v. N. Y.,
ete., R. R, Co., 2 Duer, 341 (1853);
Shriver v. Stevens, 12 Pa St., 258
(1849), holding that the agent of a stage
line cannot. A yard-master cannot em-
ploy a physician for the company. Mar-
quette, etc., R. R. Co. v. Taft, 28 Mich.,
289 (1873). Noran engineer. Cooper v.
N. Y., etc, R. R. Co, 6 Hun, 276
(1875), Nor astation agent. Tucker v.

St. Louis, etc., R. R. Co., 54 Mo., 177
(1873); Cox v. Midland, etc., R. R. Co., 3
Ex., 268 (1849). Unless the superintend-
ent ratifies it by silence upon being
notified thereof. Cairo, ete., R. BR, Co.
v. Mahoney, 82 Ill., 73 (1876); Toledo,
etc., R. R. Co. v. Prince, 50 IIL, 26
(1869). The general manager cannot

render the company liable for medical’

services rendered on an occasion of a
private brawl, - Dale v, Donaldson, etc.,
Co., 2 S. W. Rep., 703 (Ark., 188%);
Wood's Railway Law, pp. 489-444,

2Central, etc., Co. v. Chatham, 4
South. Rep., 828 (Ala., 1888).

3 Adriance v. Roome, 52 Barb., 899
(1868), holding that the superintendent
cannot borrowamoney and agree to make
payment in iron.

4Where the by-laws give the presi-
dent and superintendent power to make
a contract, they have power to release
that contract. Directors knowing of
release must act promptly if they in-
tend to question its validity. Indian-
apolis, etc., Co. v. St. Louis, etc., R, R.
Co., 26 Fed. Rep., 140 (1886); afi’d, 120
U. S., 256.. A general power authorizes
the purchase of a house and the giving
of a mortgage. Shaver v. Bear, etc.,
Co., 10 Cal., 896 (1858),

6Kechland v, Menasha, etc., Co., 81
N. W. Rep., 471 (Wis., 1887), where the
superintendent and a director took a
deed and agreed to pay an extra price;
Despatch, etc., v. Bellamy, etc., Co., 12
N. H., 205 (1841), where he gave a
mortgage and the company received
the money; Lyneborough,, etc., Co. v.

‘Mass., etc., Co., 111 Mass., 815 (1878),

where he bought glass and the directors
acquiesced ; Seeley v, San Jose, ete., Co.,

930 <

(CH. XLII.
CH, XLII. ] HOW CORPORATE CONTRACTS ARE MADX. [$ 720. .
§ 720. Subordinate agents — Their power to contract.—It is a
general rule that a corporate agent, like theagent of an individual,
can make only such contracts as he is expressly authorized to make,
or such contracts as pertain to the duties which the corporation
impose upon him. It is true, also, that the corporation may ratify
_ and confirm a contract which an unauthorized agent has made in
its name; and this ratification may be by express vote of the direct-
ors, or it may be implied by an acceptance of the benefits to the
corporation. The subordinate agents of a corporation may be of
great variety: tellers, engineers, stewards, station agents, local
agents, freight agents, roadmasters, clerks, attorneys and miscel-

 

laneous agents.
notes.!

59 Cal., 22 ( 1881), where he and the presi-
dent gave a note; Goodwin v, Union,
etc., Co., 34 N. H., 878 (1857), where he
and the president employed workmen;
Starr v. Gregory, etc., Co.,.13 Pac. Rep.,
195 (Mont., 1887), where he accepted a
mill; Union, etc., Co. v. Rocky, etc., B’k,
2 Col., 565 (1875); aff’d, 96 U. S., 640,
where a loan of the bank’s money was
~ made by him and the president. Rati-

fication cannot be by the same persons _

who assume power to contract. Tracy
v. Guthrie, etc., Soc., 47 Iowa, 27
(1877).

1The cashier and clerk of a lumber
company cannot agree to give a cus-
tomer a carload of lumber in case cer-
‘tain other lumber is not satisfactory.
Delta, etc., Co. v. Williams, 40 N. W.
Rep., 940 (Mich., 1888). Local manager
of branch bank renders, it liable for
his embezzlement of depositor’s funds,

which he induces the depositor to give ‘

to him to pay a lien of the bank on
property. Thompson v. Bell, 26 Eng.
L. & Eq., 586 (1854). Receiving teller
of savings bank has no power to bind
bank not to pay out money deposited in
one name, except upon the order of
three other persons. Bank is protected
in paying on check of person in whose
ame deposit is made. Riley v. Albany
Sav. B’k, 36 Hun, 518 (1885). A teller’s
certification of a check in bad faith
does not bind the bank, Mussey v. Eagle
’ B’k, 50 Mass., 806 (1845); unless it is in

Various decisions on their powers are given in the
These decisions show that a corporation is bound by its

the hands of a bona yide indorsee.
Farmers’, etc., B’k v. Butchers’, etc.,
B’k, 16 N. Y., 125 (1857); Farmers’, etc.,
Bk wv. Same, 14 N. Y., 624 (1856). As,
to certification of check, see, also,
Meads v. Merchants’ B’k, 25 N. “Y, », 148
(1862); Cooke v. State, etc., B’k, 52 N.
Y., 96 (1878); in the latter case the cer-
tification being by the cashier. Where
a depositor sends deposits by the bank’s
book-keeper without the bank-book, the
bank is not liable for the book-keeper’s
fraud. Manhattan Co. v. Lydig, 4
Johns,, 377 (1809). A teller may receive
a special deposit of valuables. Patter-
son v, Syracuse Nat'l B’k, 80 N. Y., 82
(1880). It may be a question for the
jury as to whether the foreman of the
works of a foreign corporation may em-
ploy workmen on long time.
v. Detroit, etc., Co., 41 N. W. Rep., 502
(Mich., 1889).

The following decisions are concern-
ing railroad agents: The civil engineer
of a railroad cannot employ a station
agent. Willis v. Toledo, etc., R’y Co.,
40 N. W. Rep., 205 (Mich., 1888). The
engineers of a railroad conipany cannot
bind it to an agreement to pay the con-
struction contractors extra pay. Wood-
ruff v. Rochester, etc., R. R., 108 N. Y.,
39 (1888). The construction engineer of
a railroad has no power to vary the
construction contract. Campbell »,
Trustees, 6 S. W. Rep., 837 (Ky., 1888).
A person whom a railroad holds out as

931

Tunison >
§ 720.]

HOW CORPORATE CONTRACTS ARE MADE.

[cu XLII

agents’ acts only when a partnership would be bound under similar
circumstances. And in general the corporation may ratify and adopt

the general freight agent of the com-
pany may bind it by his contracts rela-
tive to freight. Baker v. Kansas, etc.,
R. B., 38. W. Rep., 486 (Mo., 1887). A
roadmaster of a railway has power to
purchase such material as he uses, and
the company is liable therefor where
the material has been used. Walker v.
Wilmington, etc., R. R., 1 S. E. Rep.
(S. C., 1887). A station agent may con-
tract that goods will be delivered at a
certain time. Blodgett v. Adams, 40
N. W. Rep., 491 (Wis., 1888). See, also,
Wood's Railway Law, ‘pp. 444-454,

The following decisions concern mis-
cellaneous agents and powers: Agent
with power to give and indorse notes
may waive notice of protest, etc, Whit-
ney v. South, etc., Co., 39 Me.,; 316
(1855). A resident: agent of a mining
company has no implied authority io
borrow money on account of the corpo-
ration to pay arrears of wages due the
workmen in the mines. Hawtayne v.
Bourne, 7 M. & W., 595 (1841). An
agent attending to the daily routine of
the business of a corporation cannot
create a’general lien upon its property
to secure a creditor, unless by the ap-
proval of the board of directors. White-
well v. Warner, 20 Vt., 425, An agent
employed to promote the interests of a
corporation in every way has no author-
ity to purchase land for it. Bocock’s
Ex’rs v, Alleghany, etc., Co.,1S. BE.
Rep., 825 (Va., 1887). Where a corpo-
rate agent buys land for the company
at a certain price, and agrees that the
company will pay also to the vendor
one-half of its profits upon sale of’ said
land, the company is bound by this lat-
ter parol agreement. Kirkland v. Me-
nasha, etc., Co., 31 N. W. Rep., 471
(Wis., 1887). Persons expending money

. for a corporation under the direction of
authorized corporate officers may hold
the corporation liable. Topeka, etc., v.
Martin, 18 Pac. Rep., 941 (Kan., 1888).
A sewing-machine company’s agent to

séll machines has no power to trade the
company’s horse, but ratification suf-
fices. Singer, etc., Co. v. Belgart, 4

South. Rep., 400 (Ala., 1888). Acts of

local insurance agents appointed by —
general agent of foreign insurance com-
pany are binding on company, such acts
being within the express powers given
him by the general agent therein to
solicit or take insurance. Kavey w
Amazon Ins, Co., 36 Hun, 66 (1885). In
Rice v. Peninsular Club, 52 Mich., 87.
(1888), Cooley, J., says: ‘‘ A party deal-
ing with the agent of a corporation
must at his peril ascertain what au-
thority the agent possesses, and is not
at liberty to charge the corporation by
relying upon the agent’s assumption of
authority.” The club is not liable for
the steward’s purchases. The powers of
an agent appointed for a special purpose
cease when the object of his appoint-
ment is accomplished. Seton v. Slade,
7 Ves., 265, 276 (1802). A subordinate
agent cannot employ an attorney for
the company. Maupin v. Virginia, etc.,
Co., 78 Mo., 24 (1883). Nor can he make
‘the corporation liable for the debt of
another. Rehm v. King, etc., Co., 16
Kan., 277 (1876). Nor make a note for
the company. Benedict ¥. Lansing, 5
Denio, 283 (1848). If the purchaser of
corporate bonds knows that the agent is
selling for his own purposes he is not
protected. Chew v. Henrietta, etc.,
Co., 2 Fed. Rep., 5 (1880). Secret in-
structions to a general insurance agent
do not bind a person dealing with him,
Ins. Co. v. McCain, 96 U. S., 84 (187%).
So also as to a cashier. Merchants’ B’k
v, State, B’k, 10 Wall., 604, 650 (1870), A
grantor to a corporation cannot deny
the authority of the corporate agent to
accept the deed. Case v. Benedict, 63
Mass., 540 (1852). An agent who is ac-
customed to contract for the company
may bind it. Christian University v.
Jordan, 29 Mo., 68 (1859); Mead v.
Keiler, 24 Barb., 20 (1857), Acceptance

982
OH. XLII. |

the unauthorized acts of an agent;

of services known to officers binds the .

ecmpany. Lee v. Pittsburgh, etc., Co.,
66 How. Pr., 375 (1877). But the use of
a building has been held not to consti-
tute an acceptance of debts incurred in
building it. Ruby v. Abyssinian Soc.,
15 Me., 806 (1839). Use of goods with
knowledge is acceptance. Smith v.
Hull, etce., Co., 11 C. B., 897, 925 (1852);
8 id., 668. Even if the agent gave a
note which is not binding. Emerson v.
Providence, etc., Co., 12 Mass., 237
(1815). Acceptance is presumed where
a written statement is placed before a
directors’ meeting. State B’k v. Com-
egys, 12 Ala., 772 (1848). Satisfaction
by subsequent officers is good. Chou-
teau v. Allen, 70 Mo., 290 (1879). If an
agent with authority to give a note em-
bezzles the funds the company is liable.
Bird v. Daggett, 97 Mass., 494 (1867). A
suit on a note is a ratification of its ex-
ecution. Planters’ B’k v. Sharp, 12
Miss., 75 (1844). An actuary of.a bank,
whois accustomed so to do, may give
the note of the bank, especially where
the directors acquiesce. Creswell v.
Lanahan, 101 U. S., 347 (1879). As to
insurance agents, see Perkins v. Wash-
ington Ins. Co., 4 Cowen, 645 (1825).
Knowledge of the president of drafts by
an agent, and acquiescence therein,
binds the company. Gold, etc., Co. v.
Nat'l B’k, 96 U. S.. 640 (1877). See
§ 727, infra, on Notice; also Lindley
on Partnership, p. 248 (Callaghan &
Co., 1881). An agent’s authority to act
for a corporation is not terminated by
the fact that the members of the board.
of directors or other body which ap-
pointed have gone out of office by the
ex iration of their terms or by removal.
Anderson’ v. Longden, 1 Wheat., 85
(1816); Brown v. Somerset, 11 Mass.,
221 (1814); Northampton Bank v. Pe-
poon, 11 id., 294 (1814); Dedham Bank

v, Chickering, 3 Pick., 835 (1825); Exeter -

Bank v. Rogers, 7 N. H., 21, 38 (1884);
- Thompson v. Young, 2 Ohio, 334 (1825).

HOW CORPORATE CONTRACYS ARE MADRE.

[§ 720.
' and a contract may be inferred

It has been held that a mortgage of cor-
porate property which is. illegal for
want of authority may be rendered
valid by subsequent ratification by acts
of the legislature. White Water Val-
ley, etc., v. Vallette, 21 How., 414
(1858); Shepley v. Atlantic & St. L.
R. R., 55 Me., 395 (1868); Richards v.
Merrimack, etc., R. R., 44 N. H., 127
(1862), where an act authorizing the
trustees of a mortgage to sell the mort-
gaged property was\held to be a ratifi-
cation; Shaw v. Norfolk Co. R. RB., 5
Gray, 162 (1855); Whitney v. Union
Trust Co., 65 N. Y., 576 (1875), where
bonds signed by the treasurer instead of
the secretary were held ratified by a
subsequent act referring to them as
‘now a valid lien on said property.”
Power to act as agent of corporation
may be conferred by a general resolu-
tion. Elwell v. Dodge, 33 Barb., 336
(1861). ‘

Essex Turnpike Co. v. Collins, 8
Mass., 292 (1811); Hayden v. Middlesex
Turnpike Co., 10 Mass., 403 (1818);
White v. Westport Cotton Mfg. Co., 1
Pick., 220 (1822); Bulkley v. Derby
Fishing Co., 2 Conn., 252 (1818); Peter-
son v. New York, 17 N. Y., 449 (1858);
Canal Bridge v. Gordon, 1 Pick., 297
(1823); Baker v, Cotter, 45 Me., 236
(1858); Bennett v. Md., etc., Ins. Co.,
14 Blatch., 422 (1878); Church v. Ster-
ling, 16 Conn., 388 (1844); Pennsylvania
Bank v. Reed, 1 Watts & S., 101 (1841);
Hayward v. Pilgrim Soc., 21 Pick., 270
(1838); Despatch Line v. Bellamy Mfg.
Co., 12 N. H., 205 (1841); Planters’ Bank
v. Sharp, 45m. & M., 75 (1844); Burrill
v, Nahant Bank, 2 Met., 167 (1841);'Fox
v, Northern Liberties, 3 Watts & S.,
108 (1841); New Hope Bridge Co. v.
Phoenix Bank, 3 Comst., 156 (1850);
Alabama, ete, R. R. Co. v. Kidd, 29
Ala., 221 (1856); Everett v. United
States, 6 Port. (Ala.), 166 (1887); Medo-
mak Bank v. Curtis, 24, Me., 88 (1844);
Whitwell v. Warner, 20 Vt... 425 (1848);

933
§ 721.] [CH. XLIm1.

HOW CORPORATE CONTRACTS ARE MADE,
from corporate acts and customs without a vote ordeed.! It is not
necessary that such assent and acceptance should be under seal or in
writing or be spread upon their records.? The acceptance of the con-
sideration of an unauthorized contract by the corporation, however,
without knowledge of the terms of the contract or of the account
upon which it is paid, is not in itself a ratification of the contract.

B. THE FORM OF CORPORATE CONTRACTS — THE CORPORATE SEAL IS. NECES-
SARY ONLY WHEN THE SAME INSTRUMENT BY AN INDIVIDUAL MUST
BE UNDER SEAL—FORMS OF THE BODY OF THE CONTRACT; ALSO
THE METHOD OF SIGNING AND SEALING — LIABILITY OF OFFICERS
AND AGENTS ON CORPORATE CONTRACTS WHICH ARE INFORMALLY
EXECUTED.

§ 721. The corporate seal need not be attached to a corporate con-
tract unless a similar contract when made by an individual would
require a seal This is now the well-established rule, although
anciently it was supposed that a corporation could not enter into a
contract except by attaching the corporate seal to a written state-

ment of that contract.*

Trott v. Warren, 2 Fairf., 227 (1834);
Detroit v. Jackson, 1 Doug., 106 (1842);
Merchants’ Bank v. Central Bank, 1
Kelly, 428 (1846); Hoyt v. Bridgewater
Copper Co., 2 Halst., 253 (1847); Durar
v. Insurance Co., 4 Zab., 171 (1853);
Moss v. Rossie Lead Co., 5 Hill, 187
(1843): Brown v, Winnissimmet Co., 11
Allen, 326 (1865); Sherman v. Fitch, 98
Mass., 59 (1867); Lyndeborough Glass
Co. v. Massachusetts Glass Co., 111
Mass., 815 (1878); Moss v. Averell, 6
Seld., 449 (1858); Olcott v. Tioga R. R.
Co., 27 N. Y., 546 (1863); Shaver v.
Bear River, etc., Co., 10 Cal., 896 (1858).

1 Columbia Bank v, Patterson, 7 Cr.,
299, 806 (1813); Randall v. Van Vechten,
19 Johns., 60, 65 (1821); Haight v:
Sahler, 80 Barb., .218 (1859); Canal
Bridge v. Gordon, 1 Pick., 296 (1828);
Dunn v. St. Andrew’s Ch., 14 Johns.,
118 (181%); Mendham v. Losey, 1 Pen-
nington, 252 (1808); Saddle River v.
Colfax, 1 Halst., 115 (1821); Baptist
Church v. Mulford, 8 Halst., 182 (1824);
Powell v. Newburgh, 19 Johns, 284
{1821); Chestnut Hill Turnpike v. Rutter,
4S. & R., 6 (1818); American Ins. Co. v.
Oakley, 9 Paige, 496 (1842); Fister v.
La Rue, 15 Barb., 828 (1858), where a

contract was inferred from the acts of .
the corporate officers; Bulkley v. Derby
Fishing Co., 2 Conn., 252 (1819); Witte
v. Derby Fishing Co., 2 Conn., 260
(1817); Petrie v. Wright, 6 Sm. & M.,
647 (1846); Lime Rock Bank v. Macom-
ber, 29 Me., 564 (1849); Bank of Metrop-
olis vu. Guttschlick, 14 Pet., 19 (1840)
(contract inferred from acts of officers);
New York & H. R. BR. Co. v. New York,
1 Hilton, 587 (1858); Wood’s. Railway
Law, pp. 454-457.

2Dedham Bank v. Chickering, 3
Pick., 335 (1825); Union Bank v. Ridge-
ley, 1 Har. & G., 324 (1827); Burgess v.
Pue, 2 Gill, 11 (1844); Apthorp v. North,
14 Mass., 167 (1817); Smith v. Bank of
Scotland, 1 Dow. P. C., 272 (1841); Mo-
nomoi Great Beach v. Rogers, 1 Mass.,.
159 (1804); Amherst Bank v. Root, 2
Met., 522, 538 (1841); Western R. R. v.
Babcock, 6 Met., 846 (1848), and the
many cases supra,

8 Pennsylvania Co. v. Dandridge, 8
Gill & J., 248 (1886); Christian Univer-
sity v. Jordan, 29 Mo., 68 (1859); Hil-
liard v. Goold, 84 N. H., 230 (1856), and
cases supra.

4“ The English rule that a corporation
cannot expressly bind itself except by

934 \
C.. XLII. ]

HOW CORPORATE CONTRACTS -ARE MADE.

($ 721.

It is settled law that it is not necessary to use a seal in appoint-
ing agents or entering into ordinary contracts = the corporation}

deed, unless the act establishing it au-
. thorizes it to contract’ in another mode,
has been broken in upon, and indeed
entirely overturned, as a general propo-
sition, throughout the United States;
and it is here 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; that it may as well be bound by
express promises through its authorized
agents as by deed; and that promises
may as well be implied from the acts of
its agents as if it had been an individ-
ual,” citing many cases: City of Dav-
enport v. Peoria, etc., Co., 17 Iowa, 276
(1864), See, also, Bank of U. S. wv.
Dandridge, 12 Wheat., 64 (1827); Gott-
fried v. Miller, 104 U. S., 521 (1881);
Barry v., Merchants’ Exchange Co., 1
Sandf. Ch., 280 (1844); Hoag v. Lamont,
60 N. Y., 96 (1875); McCullough wv. Tal-
ladega Ins. Co., 46 Ala., 376 (1871);
Ruerbach v. La Soeur Mill Co., 28
Minn., 291 (1881); Racine & M. R. RB.
Co, v. Farmers’ Loan & T. Co., 49 IIL,
831 (1868); Bulkley v. Briggs, 30 Mo.,
452 (1860); New England F. & M. Ins.
Co. v. Robinson, 25 Ind., 536 (1865);
Hamilton v. Lycoming Ins. Co., 5 Pa.
St., 339 (1847); Muir v. Louisville’ & P.
Canal Co., 8 Dana (Ky.), 161 (1889);
Henning v. U.S. Ins. Co., 47 Mo., 425
(1871); Salem Bank v. Gloucester, 17
Mass., 1 (1820); Gloucester Bank v.
_ Salem Bank, 17 Mass., 83 (1820); Foster
v. Essex Bank, 17 Mass., 479 (1821);
Smith v. Lowell Meeting-house, 8 Pick.,
178 (1829); Limerick Academy v. Dayis,
11 Mass., 113 (1814); Farmington Acad-
emy v. Allen, 14 Mass., 172 (1817); Am-
herst Academy v. Cowls, 6 Pick,, 427

(1828); Kennedy v. Baltimore Ins, Co.,

8 Har. & J., 867 (1813); Stone v. Berk-
shire, etc., Soc., 14 Vt., 86 (1842);
Episcopal, etc., Society v, Needham,

etc., Church, 1 Pick., 372 (1828); Banks.
wv. Poitiaux, 8 Rand. (Va.), 186 (1825);
Columbia Bank v. Patterson, 7 Cr., 299
(1818); Randall v. Van Vechten, 19
Johns., 60 (1821); Gooday-v. Colchester
R’y Co., 17 Beav., 132 (1852); Magill v.
Kauffman, 4 8. & R., 317 (1818); Dunn
v. St. Andrew’s Church, 14 Jobns., 118
(1817); Waller v. Bank of Kentucky, 38
J. J. Marsh., 201 (1830). Crawford eé al.
v. Longstreet et al., 43 N. J. Law, 325,
held that, to bind a corporation under a
lease for years, execution under its cor-
porate seal is not necessary. See; also,
in general, Moss v. Averill, 10 N. Y.,
449 (1853). The corporate seal to a note
is superfluous. St. James, etc., v. New-
buryport, etc., R. R., 141 Mass., 500
(1886). Contra, Benoist v. Carondelet,
8 Mo., 50 (1848); Clark v. Farmers’,
etc., Co.,-14 Wend., 256 (1836). So,
also, as to other contracts. Itis consid-
ered to be the company’s signature.
Levering v. Mayor, etc., 7 Humph., 553
(1847). See, also, § 722, infra. Des-

patch, etc., v. Bellamy, etc., Co., 12 N,

H., 205 (1841), a chattel mortgage. The-
officers’ seal to the contract. may be dis-
regarded, Bank, etc., v. Guttschlick,
14 Peters, 19 (1840); Eureka Co. v.
Bailey Co., 11 Wall., 488 (1870); Dubois
v. Delaware, etc., Co., 4 Wend., 285
(1830). .

1 Pennsylvania R, R. Co. v. Vandiver, 42
Pa, St., 865, 369 (1862); B’k of Columbus
». Patterson, 7 Cranch, 299 (1813); Lath-
rop v. Commercial Bank, 8 Dana, 114
(1839), Where all the stockholders,
being directors, agree informally and
without meeting that a certain person
shall be the corporate agent and take
entire control, he is authorized to bind
the corporation by his acts. Wood v.
Wiley, etc., Co., 18 Atl. Rep., 187(Conn.,
1888), See, also, Perkins v, Washing-
ton Ins, Co., 4 Cowen, 645 (1825); Hoag
v. Lamont, 60 N. Y., 96 (1875); Fleckner
v. Bk of U. S., 8 Wheat., 388 (1828);

935
! \

§ 721.)

4

HOW CORPORATE CONTRACTS ARE MADE.

[CH. XLII.

The corporate seal must be used in deeds and other instruments
which would require a seal if they were the deeds or instruments

_Elysville Mfg. Co. v. Okisko Co., 1 Md.
Ch., 292 (1849), holding that an ap-
pointment need not be entered upon
the records of the corporation; White
v. Westport Mfg. Co., 1 Pick., 215 (1822),
holding that an agent cannot bind a
corporation for a debt contracted before
it was incorporated without express
authority; Buncombe Turnpike Co. v.
McCarson, 1 Dev. & B., 310 (1835), hold-
ing that the appointment need not be
under the corporate seal; Bates v. Bank
of Alabama, 2 Ala., 452 (1841), where
the appointment was by vote of the cor-
poration; Maine Stage Co. v. Longley,
‘14 Me., 444 (1887), holding that the fact
of agency may be proved by parol;
Union Mfg. Co. v. Pitkin, 14 Conn., 174
(1841); State Bank v. Bell, 5 Blackf.,
127 (1839); Brookville Ins. Co. v. Rec-
ords, 5 Blackf., 170 (1889); Bridgeton
v. Bennett, 23 Me., 420 (1844), retaining
an attorney ‘proved by his statement;
Randall v. Van Vechten, 19 Johns., 60
(1821) ; Baptist Church v, Mulford, 3
Halst., 182 (1824); Perkins v. Washing-
ton Ins. Co., 4 Cowen, 645 (1825); Lath-
rop v. Scioto Bank, 8 Dana, 115 (1839);
Savings Bank v. Davis, 8 Conn., 191
(1830), vote of directors without evi-
dence under seal; Columbia Bank v.
Patterson, 7 Cranch, 299 (1818); Ando-
ver Turnpike Co. v. Hay, ¥ Mass., 102
(1810); Hayden v. Middlesex Turnpike
Co., 10 Mass., 397 (1818);.Essex Turn-
pike v. Collins, 8 Mass., 292 (1811);
Wright v. Lanckton, 19 Pick., 288 (1837);
Bancroft v. Wilmington, etc., 5 Houst.
(Del.), 577 (1876); Dunn v. St. Andrew’s
Church, 14 Johns., 118 (1817); Union
Bank v, Ridgley, 1 Har. & G., 824 (1827);
. Kennedy v. Baltimore Ins. Co., 8 Har,
 & J., 867 (1818); Garrison v. Coombs, 7
J. J. Marsh., 85 (4831); Legrand v.
Hampden-Sidney College, 5 Munf., 324
(1817); Bates v. Alabama Bank, 2 Ala.,
451 (1841); Stamford Bank v. Benedict,
15 Conn., 487, 445 (1848); Detroit v.

Jackson, 1 Doug., ‘106 (1843); St. An-
drew’s Bay L. Co. vw. Mitchell, 4 Fla.,
192 (1851); Topping v. Bickford, 4 Allen,
120 (1862). Parol evidence may prove
the creation of a debt by the company.
Borland v. Haven, 87 ‘Fed. Rep., 394
(1888), Appeal bond given by a corpo-
ration may be signed without the cor-
porate seal. Campbell v. Pope, 10 S. W.
Rep., 187 (Mo., 1888). Corporations
may enter into contracts through agents
duly authorized, and such contracts ~
may be by writing not under seal or by
parol, as though made by natural per-
sons. § 714, supra; also American Ins,
Co. v. Oakley, 9 Paige, 496 (1842);, Wat-
son-v. Bennett, 12 Barb., 196 (1851);
Hamilton v, Lycoming Ins. Co., 5 Pa.
St., 344 (1847); Union Bank v. Ridgely, .
1 Har. & G., 324, 413 (1827); Hayden »v.
Middlesex Turnpike Co., 10 Mass., 401
(1818); Shotwell v. McKown, 5:N. J. L,
828 (1820); and an agent is not person-
ally liable on a note signed by him as
agent. Merrick v. Burlington & W. P.
R. Co., 11 Iowa, 74 (1860), a verbal con-
tract made by an agent; Buckley »v.
Briggs, 830 Mo., 452 (1860); Dunn v. Ree-
tor, etc., of Church, 14 Johns., 118
(1817). ‘In England a contrary rule has
been upheld. Homersham v. Wolver-
hampton Water-works, 6 Exch., 187
(1851) ; Diggle v. London R’y ©o., 5
Exch., 442 (1850); Copper: Miners v.
Fox, 16 Q. B., 229 (1851); Clark v. Crick-
field Union, 11 Law & Kqg., 462 (1852),
citing and reviewing other authorities.
In England, by statute 8 and 9 Vict.,
ch. 16, sec. 97, directors may contract
by parol on behalf of a corporation
where private persons may make a
valid parol contract. See, also, Pauling
v. London & N. W. R’y Co., 8 Ex., 863
(1853). Cf. Crampton v. Varna Ry. Co.,

‘L.R., 7 Ch., 562 (1872). But after a con-

tract for necessary work or goods is ex-
ecuted by the other party, and accepted -
by the corporation, it must pay for the

936
CH. XLII1.] HOW CORPORATE CONTRACTS ARE MADE. [§ 722.
of individuals.) A corporation, consequently, may become bound by
a contract which is executed in any of the following ways: By a
written instrument sealed with the corporate seal; by an unsealed
written instrument signed with the corporate name; by a written
record of a resolution of its directors;? by an unwritten resolution of
its directors;* by the oral agreements of its authorized agents; or
by ratifying, acquiescing in or accepting the benefits of contracts
made in its name by unauthorized agents.

§ 722. Method of drafting, signing, sealing and acknowledging a
corporate deed or contract.— A deed or contract of a corporation
should be drawn so that the name of the corporation appears in
the body of the instrument, and not the name of the officer or
agent who signs, seals or acknowledges it.5. The name of the cor-
poration should be signed to the instrument, and then should fol-
low the word “by” and the name of the officer or person who

makes the signature.®

same notwithstanding the irregularity.

Clark v. Crickfield Union, supra; Doe.

v. Tainere, 12 Q. B., 1011 (1848). Cf.
Lindley on Partnership, pp. 352-361
(Callaghan & Co., 1881).

1§tinchfield v. Little, 1 Me., 231 (1821);
Savings Bank v. Davis, 8 Conn., 191
(1880); Hatch v. Barr, 1 Ohio, 390 (1824);
Brinley v. Mann, 2 Cush., 337 (1848);
Kinzie v. Chicago, 2 Scam. (IIl.), 187
(1839), in which it is also held that the
mode of executing an instrument by a
corporation “‘is to affix the seal with a
declaration that it is the seal of the cor-
poration, and to verify the act by the
signature of the president and secretary
of the corporation.” Koehler v. Black
River, etc., Co., 2 Black, 715 (1862).

2See § 714, supra.

3 Ibid.

4See §§ 716-720 relative to the inher-
ent powers of the president and various
other corporate agents to contract. A
parol contract with a corporation may
be proved, although the director with
whom it was made is dead: South,
ete., Co., v. Muhlbach, 16 Atl, Rep., 117
(Md., 1888),

3A mortgage made in the president’s
name, signed by him and sealed with
his own seal, is not a mortgage al-
though authorized by the corporation.

It operates, however, as an equitable
mortgage as regards subsequent mort-
gagees with notice. Miller v. Rutland,
etc., R. R. Co., 36 Vt., 452 (1863). See
Hatch v. Barr, 1 Ohio, 180 (1823). A
corporate chattel mortgage is good if
it runs in the corporate name, even
though the president signs only his
own name. Sherman v. Fitch, 98 Mass.,
59 (1867):. Hamilton v. McLaughlin, 12
N. E. Rep., 424 (Miss, 1887), If so
drawn it is immaterial as to who signs
or seals. Wiley v. Board of Educa-
tion, 11 Minn., 871 (1866), involving a
bond. If the statute authorizes the
trustees to convey, their personal deed
suffices. De Zeng v. Beekman, 2 Hill,
489 (1842). Where the president has
title in his name he may convey as
president. Vilas v. Reynolds, 6 Wis.,
214 (1858). A deed made before incor-
poration to be delivered to the corpora-
tion after incorporation is good. Spring,
etc., B’k v. Hulings, etc., Co.,9 S. HB.
Rep., 248 (W, Va., 1889). A deed to the
“¢ trustees of the First Baptist Church ”
passes title to the corporation. Keith,
etc., Co. v. Bingham, 10S, W. Rep., 32
(Mo., 1888).

6Clark v. Farmers’, etc., Co., 15
Wend., 256 (1836). A deed of corporate '
land properly drawn in the body of the

937
§ 722]

HOW CORPORATE CONTRACTS ARE MADE.

[cou. XLII.

The courts will hold any device. or form to be the corporate seal
if there was an intent 'to bind the corporation and a seal of some

kind was used.}

It is no longer necessary that the impression of a corporate seal
shall be made upon wax or other adhesive substance — an impression
upon the paper itself being held sufficient? It is not necessary that

deed, sealed with the corporate seal
and properly acknowledged, but signed
““M. Brayman, president, C. & F. R. R.
Co.,” etc., is nevertheless good. Chou-
teau v. Allen, 70 Mo., 290 (1879). Cf.
Taylor v. Agricultural, etc., Assoc., 68
Ala., 229 (1880). A corporate mortgage
signed by the officers with their own
names, followed by their titles and
scrolls for seals, is good. Johnston v.
Crawley, 25 Ga., 316 (1858). <A lease
running to the company is good though
only its officers’ names. were signed.
Clark v. Gordon, 121 Mass., 330 (1876);
Carroll v. St. Johns, etc., 125 Mass., 565
(1878). A sealed instrument .to pay
money signed by an individual’s name,
followed by the words ‘‘ President of
the New York Banking Company,” is
enforceable against it.’ Boisgerard v.
N. Y. Banking Co., 2 Sandf., 23 (1844).

\Christie v. Gage, 2 T. & C., 844
(1878), where the private seals of trustees
of a church were held to be the corpo-
rate seal to a deed of its property. / To
same effect, Johnston v. Crawley, 25
Ga., 316 (1858); Porter v. Androscoggin
R. R. Co., 87 Me., 349 (1853); Taylor v.
Higgie, 83 N. C., 244 (1880). Cf. Saxton
e. Texas, etc., R. R., 16 Pac. Rep.,
851 (New Mex., 1888); South Baptist
Church v. Clapp, 18 Barb., 85 (1858);
Tenney v. Lumber Company, 48 N. H.,
850 (1861). See, also, Ransom »v. Ston-

ington, etc., Bank, 13 N. J. Eg., 212 °

(1860); Mill-dam Foundry v. Hovey,
21 Pick., 417 (1889); Stebbins v. Mer-
ritt, 10 Cush., 27 (1852); Sherman v.
Fitch, 98 Mass., 59 (1867); McDaniels v.
Flower, etc., Co., 22 Vt., 274 (1850);
Woodman v. York, etc., R. RB. Co., 50
Me., 549 (1861), where an imprint in red
ink upon bonds was held valid; Ontario
Salt Co, v. Merchants’ Salt Co., 18

Grant’s Ch. (U. C.), 551 (1871), where
simple wafer seals-‘used by corporations
in executing a ceed were held sufficient
in the absence of evidence that they
were not their proper corporate seals;
Hamilton v. Dennis, 12 Grant’s Ch.
(U. C.), 325 (1866), in which a ribbon
woven through slits in the paper so as
to appear at intervals opposite the sig-
natures was held sufficient: Bates v.
N. Y. Central R. R., 10 Allen, 251 (1865),
where, however, it was held that a fac-
simile printed in ink when the blank in-
strument was printed is a mere scroll
and not a validseal. Cf. Royal Bank v.
Junction, etc., R. R. Co., 100 Mass., 444
(1868), in which a seal printed upon
bonds by direction of the officers of a
corporation after they had been other-
wise executed, and which purported to
bear the corporate seal, was held valid.
Contra, Mitchell v. Union, etc., Co., 45
Me:, 104 (1858). The corporation may
have several seals. B’k of Middleberry
v. Rutland, etc, R. R. Co., 30 Vt., 159
(1858), and cases supra. A.blank wafer
will do for aseal. Brinley v. Mann, 56
Mass., 337 (1848). A scroll has been held
good, City of Kansas v. Hannibal, etc.,
R. RB. Co., 77 Mo., 180 (1882). Any seal
is presumed to be the corporate seal, the
signature of the agent executing the in-
strument heing proved. Penn., etc., Co.
v. Cook, 16 Atl. Rep., 762 (Pa., 1889),
2Hendee v. Pinkerton, 14 Allen, 381
(1867), holding that a distinct and vis-
ible impression of a corporate seal upon
and into the substance of the paper
is sufficient and valid —a scroll is not a
seal of a corporation ; Pillow v. Roberts,
13 How., 472 (1851); Allen v. Sullivan,
etc., R. R. Co., 32 N. H., 446 (1855);
Corrigan v. Trenton, etc, Co, 5 N.d.
Eq., 52 (1845). Bus see, contra, Farmers’

938
‘ Cu. XLOL]

HOW CORPORATE CONTRAOTS ARE MADE.

Bi

{§ 722.

express authority or authority under seal be given to an officer
or agent to affix the corporate seal to an instrument; such powers
may be inferred from the general powers of the officer or agent,
the usual course of business and similar circumstances.!

The mere affixing of the corporate seal is of itself sufficient ex-
ecution of a contract or deed, when properly affixed by a person:
duly authorized, and no signature.at all need be made or used.?

& Manufacturers’ Bank v. Haight, 3
Hill, 493 (1842). A seal printed on the
instrument is not good. See preced-
ing note. The company cannot object
to a seal which it uses. Haven v.
Grand, etc., R. R. Co., 94 Mass., 337
(1866).

1Union Gold Mining Co. v. The Bank,
2 Colo., 226 (1873); Merchants’ B’k v.
Goddin, 76 Va., 503 (1882); Hill v. Man-
chester, etc., Co., 5 B. & Ad., 866 (1833);
Berks, etc., Railroad Co. v. Myers, 6 S.
& R., 12 (1820), holding that the ques-
tion of authority to affix a corporate
seal is for the jury; Haven v. Adams,
86 Mass., 80 (1862); Gordon v. Preston,
1 Watts, 385 (1833), saying that power
to affix a seal carries with it the power
to acknowledge the execution of the
instrument. See, however, Hoyt v.
‘Thompson, 5 N. Y., 320 (1851), holding
that the usual duties and powers of the
president and cashier of a bank are not
such as will justify them in affixing its
corporate seal without express author-
ity from the directors. A corporate
officer may execute a mortgage for it
without being authorized under the cor-
porate seal. A mere resolution suffices.
Hopkins v. Gallatin, etc.,Co., 4 Humph.
(Tenn.), 403 (1848); Fitch v. Lewiston,
etc., Co., 12 Atl. Rep., 732 (Me., 1888);
Sav. B’k v. Davis, 8 Conn., 191 (1830);
Howe v. Keiler, 27 Conn., 538 (1858);
Hutchins v. Bynum, 75 Mass., 367
(1857); Beckwith v. Windsor, 14 Conn.,
594 (1842). Members of the board of di-
rectors may affix the corporate seal to a
mortgage and acknowledge the execu-
tion. Gordon v. Preston, 1 Watts, 385
(1833). An employee may be directed
to affix the seal. Royal B’k v. Grand,

etc., R. R. Co., 100 Mass., 445 (1863),
where it was affixed by the printer.
2Union Bridge Co. v. Troy & L. R. R.
Co., 7 Lans,, 240 (1872); Clark v. Farm-
ers’, etc., Co., 15 Wend., 256 (1836);
Whiting v. Union Trust Co., 65 N. Y.,
576 (1875), where authority was given to
thesecretary to sign an instrument, and
it was held that signature by the treas-
urer did not render it invalid, since the
seal of the corporation was sufficient
execution; McDaniels v. Flower, ete.,
Co., 22 Vt., 274 (1850); Baron v. Kings
Mountain Mining Co., 90 N. C., Ai?

(1884), holding that a deed concluding

“in witness whereof the said corpora-
tion has caused this indenture to be
signed by the president and attested by
its secretary and its common seal to be
affixed,” signed ‘‘G. C. W., president,”
with the seal affixed, is a valid common-
law deed; Shewalter v. Pirner, 55 Mo.,
218 (1874); Miners’ Ditch Co. v. Zeller-
bach, 87 Cal., 543 (1869); President
Union Bridge Co. v. Troy & L. R. BR.
Co., 7 Lans., 240 (1872), saying “it
seems a corporate seal being properly
affixed, no signature is necessary ;”
Lowett v. Steam Saw-mill Ass’n, 6
Paige, 54, 60 (1836); Bank of Vergennes
v. Warren, 7 Hill, 91 (1845); Whitney v.
Union Trust Co., 65 N. Y., 576 (1875);

“Campbell v. James, 17 Blatch., 42

(1879); rev’d on other grounds, 104 U.
S., 357; Lamson, etc., Co. v. Russell,
112 Mass., 387 (1873). Where three di-
rectors, as a committee, are authorized
to make a lease, and the lease is signed
by two, and the corporate seal is af-
fixed by them, it is sufficient, the third
acquiescing. Union, etc., Co. v. Troy,
etc., R. RB. Co., 7 Lans., 240 (1872). But

989
§ 722.1

HOW CORPORATE CONTRACTS ARE MADE.

(CH. XLII.

If an instrament or contract appears to ‘be signed by the proper
officer and the corporate seal appears to be affixed, the courts will
presume that the seal is the corporate seal and was affixed by proper
authority, when proof is given that the officer signed and sealed the
instrument; but this presumption may be overthrow n by proof that
the seal was affixed without proper authority.? The corporation, by

see Isham v. Bennington, etc., Co., 19
Vt., 230 (1847), holding that affixing a
corporate seal will not excuse default in
signing a deed when signing is neces-
sary by statute.

2Blackshire v. Iowa, etc., Co., 89
Towa, 624 (1874); Southern California
C. Asso. v. Bustamente, 52 Cal., 192
(1877); Wood v. Whelen, 93 IIl.,
(1879); Mickey v. Stratton, 5 Saiw., 475
(1879); Thorington v. Gould, 59 Ala.,
461 (1877); Morris v. Keil, 20 Minn., 581
(1874); Abbott’s Trial Evidence, 385;
Trustees of Canandaigua Academy v.
McKechnie, 19 Hun, 62 (1879); 90 N. ¥.,
628; Union Gold Mining Co. v. The
Bank, 2 Colo., 226 (1873); Mill-dam
Foundry, v. Hovey, 21 Pick., 417, 428
(1889); Malone v. Crescent, etc., Co., 18
Pac. Rep., 858 (Cal., 1888); Johnson v.
Bush, 8 Barb, Ch., 207 (1848); Leggett
v. New Jersey M. & B..Co., 1 N. J.
Eq., 541 (1832); Parker v. Washoe Mfg.
Co., 49 N. J. Law, 465 (1888); Hoyt v.
Thompson, 5 N, Y., 320 (1851); Hill v.
Manchester, etc., Co., 5 B. & Ad., 866
(1833); Chicago, etc., R, R. Co.'v. Lewis,
53 Iowa, 101 (1880); Morse v. Beale, 68
Iowa, 463 (1886); Bliss v. Kaweah, etc.,
Co., 65 Cal., 502 (1884); Goodnow v.
Oakey, 68 Iowa, 25 (1885); Evans wv.
Lee, 11 Nev., 194 (1876); Cincinnati, etc.,

R. R. Co. v. Harter, 26 O. St., 426 (1875); ,

Whitney v. Union, etc., Co., 64 N. Y.,
576 (1875); President, etc., v. Myers, 6
5. & R., 12 (1820); Adams v, Creditors, 14
La., 454 (1840); Darnell v. Dickens, 4
Yerg. (Tenn.), 7 (1838); Burrill v. Na-
hant B’k, 48 Mass., 163 (1840); Flint v.
Clinton, etc., Co., 12 N. H., 484 (1841);
Indianapolis, etc., R. R. v. Morgans-
town, 103 Ill., 149 (1882); Solomon’s
Lodge v. Montmoclin, 58 Ga., 548 (1877);
St. Louis v. Risley, 28 Mo., 415 (1859);

153°

St. Johns v. Steinmetz, 18 Pa. St., 278
(1852); Lovell v. Steam, ete., Assoc., 6
Paige, 54 (1886); B’k of Vergennes v.
Warren, 7 Hill, 91 (1845); New Eng.,
etc., Co. v. Gilbert, etc., R. R. Co:, 91'N,
Y., 153 (1883). A corporate deed twenty- -
five years old, reciting that it is under
seal, is presumed to have been under
seal though none is present. Catlett v.
Starr, 7 S. W. Rep., 844 (Tex., 1888).

The seal is not proof per sé. Must prove

the signature of the officer. Southern,
etc., Assoc. v. Bustamente, 52 Cal., 192
(1877). The seal of a corporation, like
the seal of an individual, must be prdved
in establishing the assignment of a
mortgage. Jackson v. Pratt, 10 John.,
881 (1813). Must prove that the seal is
the company’s seal. Den v. Vreelandt,
TN. J. L,, 852 (1800); Leazure v, Hille-
gas, 7S. & R., 313 (1821). ‘‘ A corporate
deed can be proved only by proving that
the seal affixed is the seal of the corpc-
ration, or that it was affixed as the cor-
porate seal by an officer of the corpora-
tion or other person thereunto duly au-
thorized.” Osborne v. Tunis, 25 N. J.
L., 688, 658 (1856). A mortgage with.
the corporate seal attached is presumed
to have been regularly sealed. It is not
invalidated by proof that the directors
passed no resolution authorizing the use
of the seal. Fidelity, etc., Co. v. Shen-
andoah, etc., R. R. Co., 9 S. E. Rep.,
180 (W. Va., 1889).

2Koehler v. Black River Falls Iron
Co., 2 Black, 715 (1862); Parker v.
Washoe Mfg. Co., 49 N. J. L., 465 (1888),
holding also that the testimony of a
single officer that he had no knowledge
of any authority having been given by
the corporation to execute the instru-
ment in suit was not sufficient to over-
come the presumption of proper exect-

940
OH. XLII. ]

HOW CORPORATE CONTRACTS ARE MADR,

[§ 723,

ratification and otherwise, may easily cure a defect as to the seal-

ing.

A defect in the acknowledgment or attestation is overlooked by
the courts if there is sufficient to indicate the intent to acknowl-

edge.”

§ 723. Corporate instruments made out in the name of an officer
or agent instead of in the name of the corporation may be enforced
by or against the corporation This is now the well-established

rule.’

tion raised by the fact that the corporate
seal was affixed to it. Union Gold Min-
ing Co. v, The Bank, 2 Colo., 226 (1878).
‘Where deeds are duly sealed with a cor-
porate seal, the testimony of a director
that he knew nothing thereof does not
invalidate the sealing. Parker »,
Washoe, etc., Co., 9 Atl. Rep., 682 (N,
J., 1887),

1Wood v. Whelan, 98 Ill, 153 (1879),
where a mortgage executed by corpo-
ration officers under its seal without
proper authority was held to be adopted
by a simple resolution without again
affixing the seal; Royal Bank of Liver-
pool v. Grand Junction R. R. & D. Co.,
100 Mass., 444 (1868); Parish, etc., v.
Newburyport & A. Horse Railroad Co.,
141 Mass., 500 (1886), in which the facts
that two directors:‘had examined corpo-
rate notes under seal and pronounced
them genuine, and that the treasurer
had paid interest upon them, were held
to constitute a ratification. A court of
equity may compel a corporation to affix
its seal. Missouri River F. 8. & G. R.
Co. v. Commissioners of Miami Co., 12

_ Kans., 483 (1874). Mandamus sometimes
lies, Rex v. Vice-Chancellor, 3 Burr.,
1647.

2 The deed is good though there is no
attestation as to the seal. Smith v,
Smith, 62 Ill, 492 (1872). Ifthe presi-
dent signs the deed he is the proper per-
son to acknowledge it. Lovett v. Steam,
etc., Assoc., 6 Paige, 54 (1836), An ac-
knowledgment similar in form to that
of an individual suffices. Hoopes v.
Auburn, ete., Co., 87 Hun, 568 (1885).
Cf. Howe, etc., Co. v. Avery, 16 Hun,
555 (1879). See, also, Kelly v. Calhoun,

95 U. &., 710 (1877); Frostburg, ete.,
Assoc. v. Bruce, 51 Ind., 508 (1879);
Muller v. Boone, 683 Texas, 91 (1885) ;
Eppricht v. Nickerson, 78 Mo., 482
(1883); City of Kansas v. Hannibal, etc.,
R. RB, Co., 77 Mo., 180 (1882); Tenney v.
Lumber Co., 48 N. H., 350 (1861). A
deed should conclude with the words
“In testimony whereof the common
seal of said company is hereunto af-
fixed.” Bason v. Min. Co., 90 N.C,,
417 (1884); Gerard, Titles to Real Estate.

An approved form of attestation is:
“In witness whereof the said party of
the first part has hereunto caused its
corporate seal to be affixed, and these
presents to be subscribed by its presi-
dent and secretary ” {or other corporate
officers, as the case may be].

[Seal.] (Signatures. ]

The New York form of proof of the
deed of a corporation by the president
is as follows: ‘‘ On this —— day of ——,
in the year 18—, before me personally
came A. B., the president of the ——
company, with whom I am personally -
acquainted, who, being by me duly
sworn, said that he resided in the city
of ——; that he was the president of
the —— company; that he knew the
corporate seal of said company; that
the seal affixed to the above instrument
was such corporate seal; that it was af-
fixed by order of the board of directors
of said company ; and that he signed his
name thereto by the like order as presi-
dent of said company.” See Abbott's
Clerks’ and Conveyancers’ Assistant.

3 See p. 937, supra, and notes. Where
the president loans corporate funds and
takes notes in his own name, the cor-

941
HOW CORPORATE CONTRACTS ARE MADE. {cu. XLII.

§ 724.]

§ 724. Liability of officers and agents on corporate securities
which are not properly drawn, signed or sealed in the corporate
name.— The rule that an officer or agent, to bind the corporation,
must have an instrument made out in the corporate name applies
only to deeds and not to simple contracts.’ It frequently happens,
however, that the person with whom the contract is made attempts
* to hold liable the officer or agent of the corporation on the ground
that such officer or agent used his own name in the body of the
contract, or signed it as agent instead of using the corporate name.
The courts, however, have quite uniformly defeated such attempts
to hold the officer or agent liable. Ifthe instrument or contract
indicates that the officer or agent is acting only asagent, and if the
name of the corporation appears on the instrument, the officer or

agent is not liable thereon.’

poration is considered to be the payee.
New Eng., etc, Co. vu Gay, 33 Fed.
Rep., 686 (1888); Elwell v. Dodge, 33
Barb., 336 (1861). A bond running to
the treasurer may be suéd on by the
company. ‘New York, ete, Soc. wv.
Varick, 18 Jchns., 88 (1816). So, also,
as to a note running to a cashier, Bald-
win v. B'k, etc., 1 Wall., 234 '(1863);
Com. B’k v. French, 88 Mass., 486 (1839).
Or toa manager. Societe, etc., v. Mack-
_intosh, 18 Pac. Rep., 868 (Utah, 1888).
The company is liable on an -order for
goods though the order is signed by an
officer as such officer. Rogers, etc., Co.
v. Union, etc., Co., 184 Mass., 81 (1883),
The case of Farmers’, etc., B’k v. Haight,
8 Hill, 493 (1842), holds a corporation
not liable on a note informally made
out. See, also, Steele v. Oswego, etc.,
Co,, 15 Wend., 266. Itis not liable on
‘a deed to the manager. Pickering’s
Claim, L, R., 6 Ch., 525 (1871). Suit lies
against a bank on its check signed by
its cashier in his own name. Mechan-
ics’ B’k, etc., v B’k of Columbia, 5
Wheat., 826 (1820), See, also, Edwards
_ v, Cameron’s, ete, R’y Co., 11 Eng. L.
» & Ey., 565 (1852), where directors signed
anote. See, also, O:cott v. Tioga R. R.
Co., 27 N. Y., 546 (1868). Bank, ete, v
Hooper, 71 Mass., 667 (1856); Morrill v.
Segar Co., 82 Hun, 648 (1884), where the
secretary signed a contract; Van Leu-
ven v, First Nat'l B’k, 54 N. Y,, 671

But there have been many cases up-

(1878), where the president signed. See,
also, B’k of Genesee v. Patchin B’k, 19
N. Y., 812 (1859); S. C., 18 N. Y., 808
(1855) ; Many v. Beekman, etc., oo. 9
Paige, 188 (1841). But see De Witt v,
Walton, 9 N. Y., 570 (1854). A sealed
contract to sell land running to the
president cannot be enforced by the cor-
poration. Buffalo, etc., Institute v,
Bitter, 87 N. Y., 250 (1881). A cashier
may transfer a note by signing his own
name as cashier. McIntyre v. Preston,
10 Il., 48 (1848); 12S. W. Rep., 4; § 724,
notes,

1See New Eng., etc., Co. vu. De Wolf,
25 Mass., 56 (1829), ata ennes in preced-
ing section.

2Nott v. Hicks, 1 Asiiea, 513 (1828);.
Billinger v. Bentley, 1 Hun, 562 (1874);-
Hascall v. Life Assoc., 5 Hun, 151 (1875);

aff'd, 66 N, Y., 616: Morrill v., Segar
Co., 82 Hun, 548 (1884), the court say-
ing: “The rule nowis that, where the
instrument raises on its face a question
as to the personal liability of the party
signing it, parol evidence is admissible
to show the intention of the parties;”
Babcock v, Beman, 11 N. Y., 200 (1854);
Whitney v. Wyman, 101 U.'S., 802
(1879); Whitford v. Laidler, 94 N. Y., 145
(1883), where even a lease made out to
an officer as such was held not enforce-
able against him; Holt v, Winfield, 26
Fed. Rep., 812 (1885), where an attempt |
was made to hold a president liable on

942
 

CH. XLII. |

holding a contrary rule.'
corporation alone is liable.

an ultra vires subscription; Haight v.
Sabler, 30 Barb., 218 (1859), where also
the contract was sealed; Pitman v.
Kintner, 5 Blackf. (Ind.), 250 (1889);
Stanton v. Camp, 4 Barb., 274 (1848);
Haight v. Sayler, 30 Barb., 218 (1859),
where also scrolls as seals were used;
Draper v. Moss, etc., Co., 87 Mass., 338
(1862); Sharpe v. Belles, 61 Pa. St.. 69
(1869); Hopkins v. Mehaffy, 11 S. & R.
(Pa.), 126 (1824), where also a seal was
used, the body of the instrument being
in the company’s name. To same effect,
Abbey v. Chase, 60 Mass., 54 (1850), and
Ellis v. Pulsifer, 86 id., 165 (1862); Mc-
Henry v. Duffield, 7 Blackf. (Ind.), 41
(1848), where a due-bill was signed by a
committee; Passmore v. Mott, 2 Binn.
(Pa.), 201 (1809), where a secretary
‘signed a ticket; Hovey v. Magill, 2
Conn., 680 (1818); McWhorter v. Lewis,
4 Ala, '198 (1842); Means v. Sworm-
stedt, 32 Ind., 87 (1869); Mann v. Chan-
dler, 9 Mass., 835 (1812); Carpenter v.
Farnsworth, 106 id., 561 (1871) An
officer is not liable personally on a note
payable to him as ‘‘Sec. & Treas.,” and
indorsed by him likewise. Falk wv.
Moebs, 127 U.S8., 597 (1888). A note
signed in the company’s name, followed
by the words ‘‘B, L. Brownell, Pres.,”
binds him personally. Heffner vv.
Brownell, 81 N. W. Rep., 947 (Iowa,
1887). So, also, of a note signed ‘‘C, F.
Clark, Trustee Omega Lodge.” Coburn
v. Omega Lodge, 82 id., 513 (lowa,
1887). A promissory note that ‘' we
promise to pay,” etc., signed ‘‘ Houston
Flour-mills Co., D, P. Shepherd, Presi-
dent,” is enforceable against the com-
pany only. Latham v. Houston, etc., 3
S. W. Rep., 462 (Tex., 1887); Jefts v.
York, 68 Mass., 871 (1849); 64 Mass.,
392 (1852); O’Kell v, Charles, 34 L. T.
Rep., 822 (1876). It may bea question
of fact as to whether a treasurer in
buying stock bought for himself or the
company. Haynes Hunnewell, 42
Me., 276 (1856). See, also, Randall v.

HOW CORPORATE.OONTRACTS ARE MADE.

[§ 724.

The weight of authority holds that the

f

Van Vechten, 19 Johns., 60-(1821), hold-
ing a committee not liable on a sealed
instrument; Stearns v, Allen, 25 Hun,
558 (1881). Cf. De Witt v. Walton, 9
N, Y., 571 (1853). In support of the text.
see, also, Dubois v. Delaware, etc., Co.,
4 Wend., 285 (1830); Olcott v. Tioga,
etc., R. R. Co., 27 N. Y., 546 (1868).
See, also, Lindley on Partnership,
pp. 846-852 (Callaghan & Co., 1881);
Green’s Brice's Uitra Vires, p. 754. The
denial of the directors’ liability on a
note signed by them as directors is
raised by answer, not by demurrer.
McKensey v. Edwards, 10 8, W. Rep.,
815 (Ky., 1889).

\1Tippets v. Walker, 4 Mass., 595
(1808). A note in the form “I promise
to pay,” and signed by ‘‘E., Pres, &
Treas, C. Co.,’” has been held to be the
note of E, and not of the corporation.
Davis v. England, 141 Mass., 587 (1886);
Stinchfield v. Little, 1 Me., 231 (1821),
where a deed was to the agent; Bruce
v. Lord, 1 Hilton, 247 (1856), holding the
agent prima facie liable on a draft;
Mare v. Charles, 5 Ell. & B., 978 (1856);
Dayton v, Warne, 43 N. J. L., 659 (1881),
involving a bond; Sawyer v. Winne-
gance, etc., Co., 26 Me., 122 (1846). hold-
ing the company not bound by an
agreement to arbitrate; Seaver v, Co-
burn, 64 Mass,, 324 (1852), involving a
lease; Drake v. Flewillen, 33 Ala., 106
(1858), holding the secretary prima facie
liable; Dutton v. Marsh, L. R., 6 Q. B.,
361 (1871); Tucker, etc., Co. v Fair-
banks, 98 Mass., 101 (1867); Barker v.
Mechanics’, etc., Co., 3 Wend., 94 (1829);
Taft v. Brewster, 9 Johns., 334 (1812),
involving a bond; Brockway v. Allen,
17 Wend., 40 (1837), Where a draft
was drawn on an individual name, fol-
lowed by the words ‘‘ President Rosen-
dale M’ng Co., New York,” and ae-
cepted by him by the samie signature,
he is liable personally on it. Moss wv
Livingston, 4.N. Y., 208 (1850); Hills v.
Bannister, 8 Cowen, 81 (1827).

943
§ 725.]

: \ :
HOW CORPORATE CONTRACTS ARE MADE.

(CH. XLII

§ 725. Requirements by charter or by-laws that contracts shall be
made by certain officers or with certain formalities.—It has been
held that, where the charter prescribes that corporate contracts
shall be sigued by certain officers, a contract that is signed by only
a part of them is not enforceable, even in bona jide hands.’ But
the harshness and the inconvenience of this rule have caused it to
be widely departed from and practically abandoned?

1Safford v. Wyckoff, 4 Hill, 442 (1842) ;
Head v. Providence Ins. Co., 2 Cranch,
127 (1804); Badger v. American Ins. Co.,
103 Mass., 244 (1869); Dawes v. North
River Ins. Co., 7 Cowen, 462 (1827); Hill
v. Manchester Water-works, 2 Nev. &
M. (1838); 8. C.,.5 B. & Ad., 866; Corn
Exch. B’k v. Cumberland Coal Co., 1
Bosw., 486 (1857), A corporate deed not
countersigned by the secretary as re-
quired by statute is void as against a
subsequent levy’ of execution. Gallo-
way v. Hamilton, 32 N. W. Rep., 636
(Wis., 1887). Where the articles pro-
hibit a purchase on credit a vendor who
knew it cannot recover. Hotchin v.
Kent, 8 Mich., 526 (1860). Where the
charter prescribes who may be the cor-
porate agents for particular purposes
the provision is a limitation upon the
power of the corporation, and it cannot
appoint other agents for such purposes.
Washington Turnpike v. Cullen, 8S. &
R., 517, 521 (1822). And see United
States Bank v. Dandridge, 12 Wheat.,
64, 113 (1827); Royalton v. Royalton
Turnpike Co., 14 Vt., 311 (1842); Union
Turnpike v. Jenkins, 1 Caines, 381, 391
(1808); Beatty v. Marine Ins. Co. 2
Johns., 109 (1807); Commonwealth »v,
St. Mary’s Church, 6 8S, & R., 508 (1821);
Como v. Port Henry Iron Co., 12 Barb.,
_ 27 (1851); In re General, etc., Co., 38-L.
J. (Ch.), 820 (1869), where the general
manager signed instead of two directors
and the secretary. Time notes are void
where the charter forbids all except de-
mand notes. Root v. Godard, 3 McLean,
102 (1842); Root v. Wallace, 4 McLean,
8 (1845). The president cannot discount
paper where the charter requires the
board to pass on it. Manderson v, Com.
Bk, 28 Pa, St., 379 (1857). See, also,

British Assurance Co. v. Brown, 12C.B.,
723 (1852); but here the contract, being
unilateral, was held not to be within the
statute; Edwards v. Cameron’s Coal-
brook R., 11 Eng. L. & Eq., 565 (1852) —
an acceptance of a bill; Halford v; Cam-
eron’s Coalbrook R., 16 Q, B., 442 (1851);
Andrews, etc., Co. v. Youngstown, etc.,
Co., 39 Fed. Rep., 358 (1889). +,
2The custom of the corporation may
have that effect. Barnes v. Ontario B’k,
19 N. Y., 152 (1859); Bulkley v. Derby,
etc., Co., 2 Conn., 252 (1817); Kilgore v.
Bulkley, 14 Comnn., 362 (1841); Kenner
v. Mfg. Co., 91 N. C., 421 (1884), holding
also that the provision must be pleaded ;
Witte v. Derby Fishing .Co., 2 Conn.,
260 (1817). If the corporation ratifies

- or receives the benefits of the contract,

the contract is valid. Whitney v. Union
Trust Co., 65 N. Y., 576 (1875); Curtis
v. Leavitt, 15 N. Y., 1 (1857); Merchants’
B’k v. Central B’k, 1 Ga., 418 (1846). A
statute requiring that no contract shall.
be binding upon a corporation unles3
made [in writing is held to refer wholly
to contracts executory. Foulke v. San
Diego, etc., R’y Co:, 51 Cal., 865 (1876);
Reuter v. Electric Tel. Co., 6 Ellis & B.,
841 (1856). In this case an agreement
of the chairman was held to have been
ratified by the corporation though the
deed of settlement required the signa-,
tures of three directors to contracts ‘of
the kind in controversy. Bargate wv.
Shortridge, 5 H. L. Cas,, 297 (1855), A
corporate lease not mala prohibita nor
mala in se, but informal in that all the
statutory formalities were not complied
with, supports action for past-due rent.
Mayor v. Wylie, 48 Hun, 547 (1887). But
where a statute prohibited transfers of
securities over $1,000 in va'ue by cash-

944
CH. XLUI.]

HOW CORPORATE CONTRACTS ARE MADE.

- [§ 795.

Where the charter provides that certain contracts may be made
only after an act has been performed by the company, a third
person inay rely on the company’s representation that the act has
been done!’ A by-law requiring that contracts be made only by
certain officers, or that certain formalities shall be observed, is of
little consequence. Persons contracting with the corporation are
not bound to know of the by-law, and the courts are reluctant to
invalidate a contract by reason of it.?

ier, unless directors had previously au-
’ thorized, a director taking such securi-
ties without there being a previous au-
thorization takes nothing by thetransfer
and cannot recover back what he paid
therefor, the corporation being in a re-
ceiver’s hands. Gillett v. Phillips, 18
N. Y., 114 (1855), A statute providing
that the president and two other mem-
bers of a corporation shall sign deeds
does not exclude the common-law
method. Baron v. Mining Co., 90 N.
C., 417 (1884). A deed of corporate
land made by the president under his
own name and seal is good when the

statute said “‘ the deed of the president.”

Warner v. Mower, 11 Vt., 885 (1839).
But see Isham v. Bennington, 19 id.,
280 (1847), where the deed was signed
by the president and failed to recite a
resolution authorizing it, and was held
void. A statute authorizing a corpo-
ration to convey real estate by an agent
appointed for the purpose does not ex-
clude other means of conveyance, as by
its officers. Morris v. Keil, 20 Minn.,
581 (1874), where the deed was by a for-
eign corporation. And in general the,
ordinary contracts of the company may
be made without observing this statu-
tory provision as to what officers shall
contract. Mechanics’ Bank v. Bank of
Columbia, 5 Wheat., 326 (1820); Prince
of Wales Ass. Co. v. Harding, Ellis, B.
& E., 183 (1858); Rockwell v. Elkhorn
Bank, 13 Wis., 658 (1861); Merrick v.
Burlington Plank-road, 11 Iowa, 74
(1860); Dana v. Bank of St. Paul, 4
Minn., 385 (1860); De Groff v. Ameri-
can Linen T. Co., 21 N. Y., 124 (1860);
Creswell v. Lanahan, 101 U. 8., 347

(60)

'

:

(1879); Kelley v. Mayor of Brooklyn, 4
Hill, 263 (1843); Moreland v. State Bank, :
1 Breese, 208 (1828); South Carolina
Bank v. Hammond, 1 Rich. L., 281 (1845);
Boisgerard v. N. Y., etc., Co., 2 Sand.
Ch., 28 (1844). See. also, Merritt v. Lam-
bert, Hoff. Ch., 166 (1840), where title
to land was taken in the president’s
name instead of the company’s. Cf.
Farmers’ Loan & T. Co, v Carroll, 5
Barb., 613 (1849). See, also, Fountaine
v. Carmarthen, etc., Co., L. R., 5 Eq.,
316 (1868), where no previous authori-
zation by the stockholders was ob-
tained; also, § 989, supra; Agar v.
Atheneum, etc., Soc, 3 C. BN. S.,
725 (1858), where a seal was required
but was omitted; Lindley on Partner-
ship, p. 248 (Callaghan & Co., 1881).

1Hackensack Water Co. v. De Kay,
36 N. J. Eq., 548 (1883), where bonds
were to be issued only after a certain
amount of the capital stock had been
paid in; Royal, etc., Bank v. Turquand,
5 Ell. & B., 248 (1855), where a resolution
was to precede all contracts. See, also,
Ex parte American, etc., Co.,3 De G., J.
&8., 147 (1865), and Prince of Wales, etc., ,
v. Harding, Ell., Bl. & Ell, 188 (1857).
See, also, Akin v. Blanchard, 32 Barb.,
527 (1860); Kingsley v. New Eng., etc., .
Ins. Co,, 62 Mass., 393 (1851); Union, ..
etc., Ins, Co. v. White, 106 IIl., 67 (1883); .
Irvine v. Union, etc., B’k, L. R.,:2 App., ~
366 (1877); 5 N. Y. Supp., 291.

2Fay v. Noble, 66 Mass., 1 (1853);,.
Ten Broeck v. Winn, etc., Co., 20 Mo. -
App., 19 (4885); Walker v. Wilming--
ton, ete., R. R. Co., 18. E, Rep:,. 366.
(S. C., 1887); Bank 1 Cresson, 12 S..
& R., 806 (1825); Manville v, Belden,

945
HOW CORPORATE CONTRACTS ARE MADE.

(cH. XLII.

C. ADMISSIONS OF AND NOTICE To THE VARIOUS OFFICERS AND AGENTS
OF A CORPORATION.

§ 726. Admissions and declarations of a-director, presiaent,
cashier, general manager, treasurer, agent or stockholder as regards
the corporation.— This subject is closely identified with the ques-
tions discussed in preceding sections. If a particular officer or
agent has power to represent or contract for a corporation, he may
in most cases bind the company by his admissions or declarations
in regard thereto. But his power to do so must be shown.

The law is clear that the admissions of a stockholder do not bind
the corporation.!. The board of directors acting as a board may
bind the company by admissions and declarations, but a single di-
rector cannot do so except as a special agent of the company.?

etc., Co., 17 Fed. Rep., 425 (1883); Mor-
rill v. Segar, etc., Co., 82 Hun, 548
(1884); Martin v. Niagara, etc., Co., 44
Hun, 130 (1887); Samuel v. Holladay, 1
Woolw., 400 (1869); Mechanics’ B’k v.
Smith, 19 Johns., 115 (182!) A com-
pany is bound by the customary con-
tracts of its general freight agent,
though he does not obtain the approval
of the president as required by the by-
laws,
Co., 26 Barb., 564 (1858). Contra, Sus-
quehanna Ins. Co. v. Perrin, 7 W. &
S., 848 (1844); Rathbun 7. Snow, 3 N.
Y. Supp., 925 (Com. PIl., 1889),

1Polleys v. Ocean Ins. Co., 14 Me.,
141 (18387); Mitchell v. Rome R. R. Co.,
17 Ga, 574, 586 (1855); Fairfield, etc.,
Co. v. Thorp, 13 Conn., 178 (1889); In re
Kip, 1 Paige, 601 (1829); Soper v. Buf-
falo, etc., R. R. Co., 19 Barb., 310 (1855);
Hartford Bank v. Hart, 8 Day (Conn. )s
491, 495 (1807); Morrell v. Dixfiela, 30
Me., 157 (1849); City B’k of Balt. v.
Bateman, 7 Har. & John., 104 (1826);

Magill v. Kauffman, 4 Serg. & Rawle, .

317, 321 (1818); Stewart v. Huntington
B'k, 11 id., 267, 269 (1824); Hosack v.
College of Physicians, etc., 5 Wend.,
547 (1880); New York Code of Civil
Pro., § 839; Angell & Ames on Corp.,
§§ 309, 657-660; 2 R. 5S. N. ¥., 407, § 80;
1 Phill. Ev., 487, note 184, saying, “the
admissions of corporators or quasi cor-
porators in the United States are re-

946

Medbury v. N. Y., etc, R. RB.’

-ceived or rejected upon much the same

principle as governs in respect to ad-
missions of agents.” The frequently
cited case of Hartford Bank v. Hart,
supra, where it was offered to prove
that the president and directors of a
bank knew when they-discounted a note
that the indorsement was forged, and ta
prove this by the confessions of said
president and directors held that the
evidence was inadmissible.

2Magill v. Kauffman, 4 8. & R., 817
(1818), holding that while acts and dec-
larations of trustees and agents of a
congregation, in their official capacities,
are evidence against those whom they
represent, yet their statements made
not in the transaction of the business of
their principal are not evidence. “A
fact once admitted by a corporation
through its officer, duly and properly
acting within the scope of his authority,
is evidence against it, and cannot be
withdrawn to the prejidies of any one
who in reliance upon it has changed his
situation in respect to the matter af-
fected thereby. In such a case the doc-
trine of estoppel applies to'a cor poration
as well as to an individual.” O’ Leary
v. Bd of Education, 93 N. Y., 1 (1888),
Admissions of a director who is also a
member of the discount board of a bank
do not bind the corporation unless he
was a duly. authorized agent. East
River B’k v, Hoyt, 41 Barb., 441 (1864),
f

CH. XLIt. |

HOW CORPORATE CONTRACTS ARE MADE.

[$ 726.

Neither do the admissions or declarations of the president bind
the company unless he has extra powers given to him;! nor ordi-
narilv those of the secretary and treasurer;? nor those of a cashier,
except as to matters in the ordinary course of his duties.*

Declaration of a director that a certain
person is a corporate agent does not bind
the company. Florida, ete, R. R. v.

Varnedge, 7S. E. Rep., 129 (Ga., 1888);

Stewart v. Huntington B’k, 115. & RB.,
267 (1824), where certain declarations of
bank cfficers as to the disposition to be
made of certain collaterals were held
not evidence against the bank. Reports
to stockholders and directors do not bind
the company by reason of that fact.
Hall v. Mobile, etc., R. R. Co., 58 Ala.,
10 (187%). Phe company is not bound by
a director’s declaration that an attorney
would be paid. Hillyer v. Overman,
etc., Co., 6 Nev., 51. (1870). Nor as to
the purpose of afund. Grayville, etc.,
R. R. Co. v. Burnes, 92 IIl., 802 (1879).

. See, also, in general, Peck v. Detroit,

etc., Works, 29 Mich., 318 (1874).
1His admissions eannot create a lia-
bility. Spyker v. Spence, 8 Ala., 833

(1845); Henry, etc., Co. v. Northern B’k,

63 id., 527 (1879). Admissions of the pres-
ident of a bank that it did not owna
note which was assigned to it are not
admissible. Tuthill, etc., Co. v. Shaver,
etc., Co., 85 Fed. Rep., 644 (1888). See,
also, City B’k of Balt. v. Bateman, 7
Har. & Johns., 104 (1826), where a dec-
laration by the president of a bank to
an inférior officer, that certain money
which had been brought into the bank
by one of the directors was the money
of the plaintiff, was held not admissible.
But his admissions may prove its actual
indebtedness. Hoag v. Lamont, 60 N.
Y., 96 (1875). And as an active agent
his admissions may bind the company.
Northrup v. Miss., etc., Ins. Co., 47 Mo.,
435 (1871); Spalding v. B’k, etc., 9 Pa.
St., 28:(1848), So, also, where the com-
pany itself first uses his admissions as
evidence. Western Union Tel. Co. v.
B. & O. Tel. Co., 26 Fed. Rep., 55 (1885),
the court saying, “a corporation can

947

only speak through its officers and
agents and their declarations made in
the course of their employment, and re-
lating to the immediate transaction in
which they are engaged, are always
competent against the corporation.”
Statement of the president as to an ac-
cident, he not being present, is not ad-
missible. Lombard, etc., R’y Co. v.
Christian, 16 Atl. Rep., 628 (Pa., 1889);
5S. Rep., 853. !

2 Alexander v. Cauldwell, 83 N.' Y.,
480 (1881); Tripp v. New, etc., Co., 187
Mass., 499 (1884), where treasurer said
that a condition had been performed;
Kaiamazoo, etc., Co. v. McAlister, 36
Mich., 827 (1877), where he stated a
matter relative toasalary. Admissions
or declarations of a secretary as to the
amount due the corporation on a mort-
gage are not admissible unless it is
shown that he was specially authorized
to make them. Johnston v. Elizabeth,
etc., Ass’n, 104 Pa. St., 394 (1883). Sec-
retary and assistant treasurer of a cor-
poration has no authority to bind the
corporation by an account rendered by
him to a creditor of the corporation.
Harvey v. West Side, etc., Co., 18 Hun,
392 (1878). The assignee of a contract-
or’s claim against a company cannot
enforce it on the ground that at the
time of assignment the secretary of the
company represented that it would be
paid. Barnett v. South, etc, R’y, 57
L. T. Rep., 486 (1887).

3 He cannot admit that the signature
of the person to whom a certificate of
deposit is issued is genuine, Merchants’
P’k v. Marine B’k, 3 Gill, 96 (1845); nor
that a new company is liable for the
debts of an old one, Wyman v. Hallo-
well, etc., B’k, 14 Mass., 58 (1817); nor
make representations as to.an indorser’s
responsibility, Mapes v. Second Nat'l
B’k, 80 Pa. St., 163 (1875), But he may
§ 726.]

HOW CORPORATE CONTRACTS ARE MADE.

[OH. XLII.

The power of a superintendent to bind the company by his ad-
missions and declarations depends on whether they. pertain to his.

work and duties.!
of the corporation.?

Such also is the rule in regard to other agents

'

The admissions and representations made by an agent of a cor-
poration, acting within the scope of his authority and concerning
matters intrusted to him, are binding upon the corporation.

admit to a surety that a note has been
paid. Coheco B’k v. Haskell, 51 N. H.,
116 (1871).°

1The admissions of 'a superintendent
that a reward offered by his company
is to go to a certain person is not bind-
ing, Blain v. Pacific Ex. Co., 6 8. W.
Rep., 679 (Tex., 1887); nor his represen-
tations as to the cost of mining, Han-
over, etc., Co. v. Ashland, etc., Co.,
84 Pa. St., 279 (1877). But he may ad-
mit the amount ef damage caused by a
nuisance. McGinness v. Adriatic, 116
Mass., 177 (1874). May make admissions
as toan assault made by an employee.
Malecek v. Tower, etc., R. R. Co., 57
Mo., 17 (1874).

2Their admissions in regard to who
paid for water in a ditch are evidence
as to ownership thereof. Imboden v.
Etowah, etc, Co., 70 Ga., 86 (1883).
So, also, of a‘conductor as to a trunk,
Morse v. Conn., etc., R. R. Co., 72 Iowa,
450 (1856); of a freight agent relative to
the delivery of freight, Lane v. Boston,
etc., R. R. Co., 112 Mass., 455 (1878);
and of a bridge-tender as to the proper
way to pass through, Toll, etc., Co. v.
Betsworth, 80 Conn., 380 (1862); but not
of a road-master .as to trees that were
cut down, Coyle v. Ball, etc., R. R. Co.,
11 W. Va., 94 (1877); nor as to an acci-
dent after it had happened, McDermott
v. Hannibal, etc., R. R. Co., 73 Mo.,
516 (1881); nor of trainmen, Adams v.
Hannibal, etc., R. R. Co., 74 Mo., 558
(1881); nor of an engineer that brake-
man would be paid, Stiles v. Western
R. R. Co., 49 Mass., 44 (1844); nor of a
telegraph operator, Sweatland v. IIL,
etc., Tel. Co., 27 Iowa, 488 (1869); nor
of an engineer as to an accident, Rob-

inson v. Fitchburg, etc., R. R. Co., 7
Mass., 92. The admissions of a con-
tractor may bind the company. Morris,
etc., R, R. Co. v. Green, 15 N. J. Eq,
469 (1862). Declarations of agents made
and known by the officers bind the cor-
poration. Toll-bridge Co. v. Betsworth,
30 Conn., 380 (1862).

3 Fairfield Co. Turnpike v. Thorp, 13
Conn., 173 (1839); Stewart v. Hunting-~
ton Bank, 11 S. & R., 267 (1824); Hay-
ward v. Pilgrim Soc., 21 Pick, 270
(1838); Sterling v. Marietta Co., 11 S.
& R., 179 (1824); Westmoreland Bank
v. Klinesmith, 7 Watts, 523 (1838); Har-
risburg Bank v. Tyler, 3 Watts & 8., 377
(1842); Farmers’ Bank v. McKee, 2 Barr,
821° (1845); Hackney v. AHegheny Ins.
Co., 4 Barr, 185 (1846); Spalding v, Sus-
quehanna Co, Bank, 9 Barr, 28 (1848);
Crump v. United States M. Co., 7 Gratt.,
852 (1851); Baptist Church v. Brooklyn
Ins. Co., 18 Barb., 69 (1854); Devendorf
v Beardsley, 23 Barb., 656 (1857); Troy
Ins. Co. v. Carpenter, 4 Wis., 20 (1855);
Metropolis Bank v. Jones, 8 Pet:, 12
(1834) ; Merchants’ Bank v. Marine Bank,
3 Gill, 96 (1845); Hartford Bank ».

‘Hart, 3 Day, 491 (1807); Osgood v. Man-

hattan Co., 3 Cow., 682 (1824); Polleys
v. Ocean Ins. Co., 14 Me., 141 (1887);
Ruby v. Abyssinian Soc., 15 Me., 306
(1838); Oldtown Bank v. Houlton, 21
Me.; 507 (1842); Holman v. Norfolk
Bank, 12 Ala., 369 (1847); Soper v. Buf-
falo & R. R. R., 19 Barb., 810 (1855);
Mitchell v, Rome R. R. Co., 17 Ga, 574
(1855); Toll-bridge Co. v. Betsworth, 30
Conn., 880 (1862); Morse v. Connecticut
River R. R., 6 Gray, 450 (1856) ;’ McGen-
ness v. Adriatic Mills, 116 Mass., 177.
(1874), See, also, Green’s Brice’s Ultra

948
CH. XLII. ]

HOW CORPORATE CONTRACTS ARE MADE.

[§ 797.

§ 727. Notice to an incorporator, stockholder, agent, superintend-
ent, treasurer, secretary, cashier, president or director — When
does their knowledge of facts constitute a notice of those facts to the
corporation.—It is well settled that a corporation is not charge-
able with knowledge of facts merely because those facts were
known to its incorporators! or stockholders? or clerk.? But the
corporation has notice of facts which come to the knowledge
of its officers or agents while engaged in the business of the

corporation, provided that those facts pertain to that branch of

the corporate business over which the particular officer or agent
has some control. Thus, a corporation has been charged with
notice of facts which were known to its local agent,‘ superin-

Vires, pp. 500-504; Wood's , Railway
Law, pp. 457-465; Morawetz on Corpo-
rations, §§ 540-540c.

1 Where an owner of a patent makes
a contract to assign it, but afterwards,
instead of doing so, forms a corpora-
tion and transfers the patent to it, the
corporation is protected in its title, al-
though the patentee was one of the in-
corporators and also a director of the
corporation. Davis, etc., Co. v. Davis,
etc., Co., 20 Fed. Rep., 699 (1884). Upon
the re-organization of a corporation after
bankruptcy the new company is not
bound by the knowledge of its corpo-
rators as to the existence of incum-
brances on property purchased from the
old company. Burt v. Batavia Paper
Mfg. Co., 86 Ill., 66 (1877). ‘‘If false
and fraudulent representations are
made to persons who afterwards be-
come officers or agents of a corporation,
and the corporation acts on the faith of
such representations and is thereby de-
frau@ed, an action will lie in favor of
the corporation for the damages thus
sustained.” Iowa, etc., Co. v.. Ameri-
can, etc., Co., 32 Fed. Rep., 735 (1887).

2 Housatonic Bank v. Martin, 42 Mass.,
294, 308 (1840), where it was unsuccess-
fully sought by a mortgagor to defeat
his deed by a subsequent assignment,
on the ground that members of corpo-
ration mortgagee had knowledge of the

_ assignment; Union Canal Co, v. Lloyd,
4 Watts & S. (Pa.), 393 (1842), where, in
a contest over title to land, evidence

was held properly overruled which de-
pended on the -fact that a party was a
stockholder in a company, and con-
structive notice of adverse claims was
thereby sought to be established against
the company. See Fairfield Sav. B’k v.
Chase, 72 Me., 226.

3 Knowledge of a bank clerk of the

place of residence of a party chargeable.

as indorser is not notice to the bank.
Goodloe v. Godley, 21 Miss., 233 (1849).
4Knowledge of a local insurance

agent that the insured is insuring for ,

his firm is notice to the company.
Keith v. Globe Ins. Co., 52 Tll., 518
(1869).
insured had gone beyond the limits, and
receipt of premiums thereafter, binds
the company. Wing v. Harvey, 5 De
G., M. & G., 265 (1854). Notice to in-
surance company of a subsequent in-
surance. Schenck v. Mercer, etc., Ins.
Co., 24 N. J. L, 447 (1854). See, also,
in general as to insurance, Troy, etc.,
Ins. Co. v. Carpenter, 4 Wis., 20 (1855) ;
Bennett v. Maryland, etc., Co., 14
Blatch., 422 (1878); McEwen v. Mont-
gomery, etc., Co., 5 Hill, 101 (1848).
And see text-books on insurance law.
** Notice to an agent of a bank, or other
corporation intrusted with the man-
agement of its business, or of a particu-
lar branch of its business, is notice to
the corporation in transactions con-
ducted by such agent, acting for the
corporation, within the scope of his

authority, whether the’ knowledge of’
949°

Knowledge of local agent that _
§ 797]

HOW CORPORATE CONTRACTS ARE MADE.

[CH. XLII.

tendent,! treasurer,’ secretary,’ cashier,‘ and sometimes the presi-

such agent was acquired in the course
of the particular dealing or on some
prior occasion.” Cragie v. Hadley, 99
N. Y., 131 (1885); Wood’s Railway Law,
pp. 457-465; Smith v. Board,, etc., Co.,
88 Conn., 208 (1871). To this rule there
are certain limitations more or less de-
pending on the time of notice and the
occasion of such notice; for example,
_while acting in the ordinary course of
his employment as agent, notice tosuch
agent of a corporation is notice to the
corporation itself. But if such notice
is given at an inopportune time, or
upon an unseemly or inappropriate oc-
casion, constructive notice to the corpo-
ration may ipso facto be easily rebutted.
Seneca County Bank v. Neass, 5 Denio,
829 (1848); Holden v. N. Y. & Erie Bank,
72 N. Y., 294 (1878). It is well known
that presumptive notice to a principal
by reason of knowledge of an agent or
trustee interested in concealing the fact
from his principal cannot be imputed
to the principal. Curtis v. Leavitt, 15
N. Y., 194, 195 (1857); Commissioners v.
Thayer, 94 U. S., 681 (1876). This is
equally true in the case of corporate
agents. Seneca County Bank v. Neass,
5 Denio, 329 (1848). When the agent
_ himself is the person charged with the
fraud, notice to the principal through
such an agent cannot be presumed, for
it is the interest of the agent to conceal
the fact from his principal. Cave v.
Cave, L. R., 15 Ch. D., 639 (1880); 49 L.
J., Ch., 505; 42 L. T., 780; 28 W. R.,
798. Knowledge obtained by the cor-
porate attorney and agent in another
transaction does not bind the corpora-
tion. Constant v. University, etc., 111
N. Y., 604 (1888); Fairfield, etc., Bk v.
‘Chase, 72 Me., 226 (1881). Notice to a
bank clerk of matters not under his
charge is not notice to the bank. Good-
loe v. Godley, 21 Miss., 233 (1849).
1Knowledge of the general officers
that an employee is incompetent is no-
tice to the corporation, and it is liable

-ers for work done.

for his negligence in running a train.
Pittsburgh, etc., R’y v. Ruby, 38 Ind.,
294, 818 (1871). Knowledge of the com-
pany’s supervising engineer that the
contractors in the construction of the
bridge are innocently omitting certain
things, is notice to the company. Dan-
ville, etc., Co. v. Pomroy, 15 Pa. St.,
151 (1850). Knowledge of a superin-
tendent of an unrecorded lien is not
notice to his company to which he con-
veys the property so subject. Wicker-
sham v, Chicago, etc., Co., 18 Kan., 481
(1877). Knowledge of superintendent of
coal mine of dangerous roof is notice to
thecompany. Quincy, etc., Co. v. Hood,
77 Ill, 68 (1875); 42 N. W. Rep., 200.

2? Where the treasurer of two corpora-
tions takes the funds of one and places
them with the other to make good a
defalcation from the latter, the latter
corporation is liable, since it is charge-
able with the knowledge of its treasurer.
Atlantic, etc., Mill v. Indian, etc., Mill,
17 N. E. Rep., 496 (Mass., 1888). Pay»
ment to the treasurer, who enters same
on books, is notice to the company, since
the directors, if they did their duty,
would know of such entry. New Eng.,
etc., Co. v. Union, etc., Co., 4 Blatch.,
1 (1857). “

3 Knowledge of the secretary that a
vessel is being run not by the owners,
but by a third person, is notice to the
corporation, and it cannot sue the own-
Pontchartrain R.
R. v. Heirne, 2 La. Ann., 129 (1847). .
Knowledge of the secretary that his
wife, the owner of stock, had pledged
that stock is not notice to the corpora-
tion. Platt v. Birmingham, etc., Co.,
41 Conn., 255 (1874),

4 Knowledge of the cashier and man-
ager of a bank, acquired in the bank
business, that an unrecorded deed has
been made, defeats the bank’s deed.
Johnson v, Shortridge, 6 8, W. Rep.,
64 (Mo., 1887), A bank may be a bona
Jide purchaser of a draft from its cash-

950
 

CU. XLII]

HOW CORPORATE CONTRACTS ARE MADE.

&

[$ 727.

dent.'| But in all cases the test turns on whether the corporate
agent received the knowledge in the regular course of business.

ier who has notice of défenses. Hum-
mell. v. B’k of Monroe, 37 N.,W. Rep.,
954 (Mich., 1888). Knowledge of cash-
ier of bank that stock received in pledge

-.is trust stock is notice to the bank.

Loring v. Brodie, 184 Mass., 453 (1883),
Cashier’s knowledge of fraud in note is
notice to the company. Fall, etc., B’k
v. Sturtevant, 66 Mass., 372 (1858). No-
tice to cashier of acceptance of the bank
to receive payment in bonds is good no-
tice. Branch B’k v. Steele, 10 Ala,
915 (1846). Notice to a cashier that
bank funds have been loaned is notice
to the bank. New Hope, etc., Co. v.
, Phenix B’k, 3 N. Y., 156 (1849). Where
the directors acquiesce in the cashier’s
assumption of exclusive management of
the bank’s business, they will be held
chargeable with knowledge of such
things as by proper diligence they might
‘and should have known as to the condi-
tion of business. Martin v. Webb, 110 U.
_S., 7 (1884). Knowledge of the cashier
that a person turning in property to the
bank is insolvent is notice to the bank.
Witters v. Sowles, 32 Fed. Rep., 762
(1887). Notice to the cashier is notice
to the bank. B’k of St. Mary’s v. Mum-
ford, 6 Ga., 44 (1849); Trenton, etc., Co.
v. Woodruff, 2 N. J. Eq., 117 (1838).
But knowledge obtained by the cashier

outside of his duties is not notice to the

bank (dictum), Seneca Co. B’k v. Neass,
5 Denio, 829, 837 (1848).

1 Knowledge which a trustee of a rail-
road mortgage receives as trustee binds
another company in which he is presi-
dent and superintendent. N. Y., etc.,
R. R. v. N. Y.,-etc.; R. R., 52 Conn.,

274, 280 (1884). Notice to the presidént

that stock is held in trust is notice to
the company. Porter v. B’k of Rut-
land, 19 Vt., 410 (1847). Notice to the
president of a bank that the village is
being sued for damage due to the bank’s
sidewalk is notice to the bank. Port
\ Jervis v. First Nat. B’k, 96 N. Y., 550

(1884). See, also, Gold, etc., Co. v. Nat.
Brk, id., 640. Knowledge of the presi-
dent that a person who is turning prop-
erty in to the bank is insolvent is no-
tice to the bank. Gilman v. Second
Nat. B’k, 23 Hun, 498 (1881). See, also,
Central, etc., B'’k v. Levin, 6 Mo. App.;
548 (1879); First Nat. B’k v, Fricke, 75
Mo., 178 (1881). Cf. First Nat. B’k v.
Sherburne, 14 Bradw. (Il.), 566. No-
‘tice to the president and certain stock-
holders who are sent to investigate for
the corporation is notice to the corpora-
tion. United States v. San Pedro, etc.,
Co., 17 Pac. Rep., 337 (N. M., 1888).
Knowledge of a president in regard to
property which he sells to the company ’
is not notice to the company. Barnes
w. Trenton, etc., Co., 27 N. J. Eq., 33
(1876), citing cases. Where it was at-' -
tempted to impute to a corporation the
knowledge of its president of a prior
unrecorded conveyance, it was held
this could not be doe where the know!1-
edge was general and not specific or
official. U. S. Ins. Co. v. Shriver, 3 -
Md. Ch., 381 (1851); S. C. on appeal,
sub. nom. Gen. Ins. Co. v. U. S. Ins.
Co., 10 Md., 517 (1857). Knowledge of
the president of outstanding equities to
land mortgaged by him to the corpora-
tion is not notice thereof to the com-
pany. Winchester v. Balti. & Susq.
‘R. R., 4. Md., 281, 289 (1858). Notice to
a stockholder who is also president of
another company is ‘not notice to the
latter. First Nat. B’k ». Anderson, 5
8. E. Rep., 343 (8. C., 1888). The com-
pany is bound to take notice of the ex-
tent of a power of attorney given by a
third person to its president. Mechanics’
B’k v. Schaumberg, 38 Mo., 228 (1866),
The knowledge of the vendor of per-.
sonalty to a corporation that a chattel
mortgage exists is not necessarily no-
tice to the corporation, although he be-
comes its president and general man-
ager. It is for the jury to decide

951
§ 727]

HOW CORPORATE CONTRACTS ARE MADE.

!

(CH. XLIII.

The corporation is generally chargeable with knowledge of facts

which are known to one of its directors;

* but there are so many

exceptions to this rule that the only safety lies in a study of the

cases themselves.”

whether there are not bona fide stock-
holders who would be injured by such
a result. International, etc., Co.. v.
McMorran, 41 N. W. Rep., 510 (Mich.,
1889). Knowledge of one who is presi-
dent of arailroad and also of a bank,
where.the bank discounts paper for the
railroad, is notice to the bank if he took
part in its action. Waynesville Nat.
B’k v. Irons, 8 Fed. Rep., 1 (1881) i, and
see the note. Notice toa member of a
copartnership is not notice to a corpo-
ration of which that member is presi-
dent, Miller v. IIL, ete., R. R., 24
Barb., 312 (1857). President and treas-
urer who stand by and allow another
to purchase property without saying
that the company has a claim thereon
bind the company thereby. Mihills,

etc., Co. v. Camp, 49 Wis., “180 (1880). ’

Knowledge of a president and director
of a transfer of stock is notice to the
company. Factors’, etc., Co. v. Marine,
etc., Co., 31 La. Ann., 149(1879). Knowl-
edge of a vice-president is not notice to
the company. Fisher v. Murdock, 13
Hun, 485 (1878).

1Jf a director act in behalf ofa Bank
in a transaction of which the bank
takes the benefit the bank is chargeable
with a knowledge of all the director’s
acts in such transaction. Smith ».
South Royalton B’k, 32 Vt., 341 (1859).
Notice to a director who is acting asa
special agent is notice toa bank. Ful
ton B’k v. Benedict, 1 Hall (N. Y.), 480,
557 (1829); Farmers’ Bank v. McKee, 2
Pa, St., 318. Notice to three trustees
and superintendent of repairs for a cor-
poration that the water from the bank
building was not properly conducted
away is notice to the corporation.
“Jury may presume that the trustee
did his duty by communicating to the
corporation the knowledge he had ob-
tained, and which it was material that

the corporation should know.” ‘Winne
v. Ulster, etc., Inst., 87 Hun, 349 (1885).
Knowledge of a firm dissolution im-
parted to the board by a director at a
regular meeting is notice to the bank.
Bank of Pittsburgh v. Whitehead, 10
Watts (Pa.), 397 (1840); In re Carew’s
Estate Act, 31 Beav., 39 (1862), where a
director and local manager of a bank
obtained possession of certain accept-
ances without consideration, had them
discounted by the bank and carried to
his account, which was largely over-
drawn; and the bank was held to have’
notice sufficient to prevent its being a
bona fide owner. Notice once given to
a board of directors is notice to its suc-
cessor, although the individuals consti-
tuting it are all different. Mechanics’: -
Bank v. Seton, 1 Pet., 299, 309 (1828).
A director who as attorney for the com-

‘pany takes an acknowledgment of a

mortgage to it binds the company with
notice when he had previously taken
an acknowledgment of an unrecorded
deed. Fairfield, etc., B’k v. Chase, 72
Me., 226 (1881). Contra, Hauseman v.

Bldg. Assoc., 81 Pa. St., 256.

2 Although three of a body of city
commissioners, who have defrauded the
city by a conspiracy in expending
money, are directors in a bank which
advanced the money to the city, yet the
bank may collect, it being proved that
these three did not attend directors’
meetings in reference to the matter and
did not act for the bank in any way in
regard to it. Mayor, etc, v. Tenth

‘Nat'l B’k, 111 N. Y., 446 (1888). See,

also, Nat’l Park Bank v. German, etc.,
Co., 53 N. Y. Super. Ct., 867 (1886).
Knowledge of a director that a note is
tainted with illegal gambling is not no-
tice to the bank, although he recom-
mended it for discount. Shaw v. Clark
49 Mich., 384 (1882) The fact that a

952
 

L

CH, XLUI.]

4
HOW CORPORATE CONTRACTS ARE MADE.

[9 727,

The question of serving notice or papers upon corporations in

cashier who discounts a note for a cor-
poration payee is also a director in the
latter is not notice to the bank of facts
known to the corporation payee. First
Naf’l B’k v. Loghed, 28 Minn., 396 (1881).
Knowledge of a director that a mem-
ber.of a firm in which the director is
also a member has withdrawn there-

‘from is not notice to the corporation.

But it was proved that the director
had.no management or interference in
the corporate affairs. Powles v. Page,
3 C. B., 16, 24, 81 (1846). Where a di-
rector causes his bank to discount a
note which he holds as an indorsee, the
bank is not chargeable with knowledge
of facts which he knows and which
would defeat payment. Loomis v. Eagle
B’k, 1 Disney (Ohio), 285 (1859); Louisi-
ana State B’k v. Senecal, 13 La., 525
(1839). Where a board of bank direct-
ors discounted a note for one of their

‘number, who had knowledge of fraud

in its inception, the maker was held lia-
ble on the ground that the knowledge
of the director which was not commu-
nicated to any other director could not
be considered. notice to the bank. Ter-
rell v. Branch Bank at Mobile, 12 Ala.,
502 (1847). .And see Lucas v. Bank of
Darien, 8 Ala. (O. 8.), 280, 321: (1830) ;
Washington B’k v. Lewis, 39 Mass., 24

(1889); Commercial B’k v.. Cunningham, ©

41 Mass., 270, 276 (1841); First Natl Bk
v, Christopher, 40 N. J. L., 485 (1878).
Where a director had knowledge that
certain bills which were discounted at

the bank had been given originally as

accommodation paper, but was not
present when the board discounted
them, and did not communicate his
knowledge to any one, the bank was not
régarded as having notice. Farmers’
& Citizens’ B’k v. Payne, 25 Conn., 444

(1857); Westfield B’k v. Cornen, 37 N.,

Y., 320 (1867). But if the director who
has such knowledge acts for the bank
in discounting the note, his act is the
act of the bank, and the latter is af-

fected with his knowledge. National
Security B’k v. Cushman, 121 Mass.,
490 (1877); Bank of U. 8S. v. Davis, 2
Hill, 451, 464 (1842). Cf. North River
Bk v. Aymar, 3 Hill, 262, 274 (1842).
Notice to an individual director, who
has no duty to perform in relation to:
such notice, cannot be considered a
notice to the corporation. And even
knowledge of the president that certain

deposits were only to be drawn in a cer-

tain manner was held not to be knowl-
edge of the bank so as to render it liable
when such money had, unknown to the’
president, been wrongfully withdrawn.
Fulton Bank v. N. Y. & Sharon Canal,
4 Paige, 127, 186 (1883). Knowledge of
directors in a matter of their own in
which they are not acting for the cor-
poration is not notice to the latter. So
held in a patent case where this defect
of actual.or constructive notice enabled
the legal title to prevail over the equita-
ble. Davis, etc., Wheel Co, v. Davis,
etc,, Wagon Co., 20 Fed. Rep., 699 (1884),
An insurance company taking mort-
gages subsequent in date to an unre-
corded deed of the same premises will
not be charged with constructive notice
of such deed by the fact that the |
grantor and mortgagor was, at the date
of the deed and execution of the mort-
gages, a director in the insurance com-
pany. La Farge Fire Ins. Co. uv. Bell, ,
22 Barb., 54, 61 (1856). Knowledge of
a director, acquired by reading a notice
thereof in a newspapér, that a firm has
dissolved and that certain partners are
no longer liable, is not notice to the cor-
poration; he did not acquire the knowl-
edge nor was it given to him for the
corporation. Nat'l B’k vs. Norton,
1 Hill, 572 (1841).
the ratification by a company of the
unauthorized act of its president, where

‘itis necessary to show knowledge on

the part of the company, it isnot enough
to show an individual knowledge on
the part of the minority of the board of

953

On a question as to

\
§ 197.)

HOW CORPORATE CONTRACTS ARE MADE.

[cH. XLII.

judicial proceedings is discussed elsewhere.’ The publication of a
notice in a newspaper is not notice, unless the party notified is

proved to have read the notice.’

Facts which are known to the

corporation are not thereby held to be known necessarily to its
officers.2 A stockholder is chargeable with notice of entries on the
corporate books if made in his presence and he personally assented

trustees, even if a knowledge by all of
them in their individual capacity, and
not acting as a board, would be suffi-
cient.. Yellow Jack, etc., Co. v. Steven-
son, 5 Nev., 224 (1869). A corporation
is not chargeable with any knowledge
of a deed which a director discovers on
examining the record unofficially. Far-
rell Feundry v. Dart, 26 Conn., 376
. (1857). Notice to a director, not consti-
tuted an organ of communication be-
tween the parties, that a promissory
note was made to be discounted for a
special purpose, is. not notice to the
bank although the director was present
when the note was discounted. Custer
v. Tompkins County B’k, 9 Pa. St., 27
(1848). Knowledge by a director of a
deed drawn by him professionally is
not notice to the corporation whose
subsequent deed of the same property
is first recorded. Armstrong v. Abbott,
17 Pac. Rep., 517 (Colo., 1888). Notice
of an unrecorded lien does not come to
the corporation by the fact that a stock-
holder had notice and that he after-
wards became an officer. Merchants’,
etc., Co., 8 Monthly L. Rep. (N. S.), 91
(Mass. U. S. D. C., 1855). Knowledge
of director that a bill purchased by
company is accommodation on the part
of the drawee is not knowledge of com-
pavy if the director took no part in the
purchase. In ve Peruvian R’y Co.,
L. R., 2 Ch., 617 (1867). Knowledge ac-
quired by a director while acting as a
member of the firm which sells a note
to the company is not notice to the com-
pany. Atlantic, etc., Bk v. Savery, 82
N. Y., 291 (1880), Corporations having
common directors or officers are not
chargeable with knowledge of each
other’s transactions and condition, In

ve Marseilles Extension R’y, L. R., 7 Ch.
App., 161 (1871). See, also, in general,
Third Nat’! B’k v. Harrison, 3 McCrary,
816; West, etc., B’k v. Thompson, 124
Mass., 506.

1See § 752.

2See § 119, supra. Though the com-
pany takes a newspaper, the announce-
ment therein of a dissolution of part-
nership is not notice to it. Vernon v.
Manhattan Co., 22 Wend., 183 (1889);
aff’g 17 id., 524. Cf. 1 Hill, 578, note.
Contra, B'k of 8. C. v. Humphreys, 1
McCord (S. C.), 388 (1821); Martin v.
Walton, 1 McCord (8. C.), 16. Notice
in a newspaper taken by an individual
is not notice. Rawley v. Horne, 3
Bing., 2 (1825). But if contained in a
newspaper taken by a marine insur-
ance company and is marine news, and
the president knew the fact involved,
the company has ‘notice. Green v%
Merchants’ Ins. Co., 2% Mass., 402
(1880). '

3 Knowledge imparted to the corpora-
tion is not notice to its president, who
buys a note from it. Peckham v.
Hendrew, 76 Ind., 47 (1881). The rule
that a bank is estopped’by the state-
ment of its cashier to a surety that his
principal had paid the note is not appli-
cable where the surety is a director of
the bank, for he will be conclusively
presumed to know whether payment
was made. His knowledge.will also be
imputed to a firm which was the se-
curity and of which he was a member. *
Merchants’ B’k v. Rudolf, 5 Neb., 528
(1877). See, also, § 714, supra. Direct-
ors’ minute-book is evidence against a
director. Allison v. Coal, etc., Co., 9
S. W. Rep., 226 (Tenn., 1888); First
Nat'l B’k v. Tisdale, 84 N, Y., 655 (1831).

954
CM. XLUt.]

HOW CORPORATE CONTRACTS ARE MADE..

[§ 727.

r

thereto.! But. generally a stockholder is not chargeable with
knowledge of corporate contracts of which as a fact he knows

nothing.’

1See Abbott’s Trial Evidence, p. 53.

2Tarbox v. Gorman, 31 Minn., 62
(1888).

A stockholder in a telegraph com-
pany, who is suing the latter for mis-
sending a message, is not chargeable
with knowledge of the corporate by-
laws relative to the sending of mes-
sages, even though he be a stockholder.
Pearsall v. Western U. Tel. Co., 44 Hun,
532 (1887). But one who is a stock-
holder, director and vice-president is
chargeable with knowledge of entries
on the corporate books. First Nat'l B’k
_ ®. Tisdale, 18 Hun, 151 (1879); aff'd, 84
N. Y., 655. See, also, chapter XXX.
One who is a stockholder and also di-
rector is as fully bound by entries in
them as a partner is by entries in the
partnership books. Montgomery v. Ex-
change B’k, 6 Atl. Rep., 183 (Penn.,
1886).
to be evidence against a subscriber to
disprove certain defenses set up by him
to hissubscription. Bedford R. R. Co. v.
Bowser, 48 Pa. St., 29 (1864). The cases
of Union Canal Co. v. Loyd, 4 Watts
& S. (Pa.), 893, 398; and Graff v. Pitts-
burgh, etc., R. R. Co., 31 Pa. St., 489,
495 (1858), hold that a stockholder pres-
ent and assenting to an entry on the
corporate books is bound by it. But

Minutes of directors were held

,

Hill v. Manchester, etc.,Co., 5B. & Ad.,
866 (1833), per Parke, B., holds that
corporate minutes are not admissible on
behalf of the company in a suit against
it by one of its stockholders. Corporate
books are not only evidence of corpo-
rate acts when they are to be proved,
but are to the same extent evidence
against stockholders who are charge-
able with knowledge of their contents.
Blake v. Griswold, 103 N. Y., 429 (1886);
Billings v, Trask, 30 Hun, 314 (1888).
As between stockholders, the books of
a corporation and sworn copies thereof
are conipetent evidence to show the acts
of a corporation. Hubbell v. Meigs, 50
N. Y., 480 (1872). See, also, Lindley on
Partnership, p. 550; Black vw Shreve, 13
N. J. Eq., 455; Haynes v. Brown, 36
N. H., 545; Pittsburg Coal Co. v. Foster,
59 Pa. St., 365. Where a person is
merely in possession af bank stock as
collateral security, and does not partici-
pate in the meetings of the stockhold-
ers, and is not recognized by the stock-
holders as a member, he is not sucha
part of the corporaticn as to be bound
to have knowledge of the facts in pos-
session of the corporation or its officers.
Baker v. Woolston, 27 Kas., 185, 189
(1882).

955
CHAPTER XLIV.

RATIFICATION, ACQUIESCENCE OR LACHES AS A BAR TO A STOCK-
HOLDER’S ACTION HEREIN.

$3 728. Introductory. 1
4729. Laches, acquiescence or ratifi-
cation as a defense to a stock-
holder’s action to remedy ille-
gal corporate acts which are
prohibited by statute or con-

trary to public policy.
780. Ratification herein may be ex-

" press or implied.

$731. Stockholder chargeable with

laches only after he has a full
knowledge of the facts.

732. Stockholder must sue within
reasonable time after knowl-
edge of the acts. ;

"83. Miscellaneous applications of
the doctrine of laches herein.

§ 728. Introductory— When a stockholder brings an action to
remedy the frauds, wltra vires acts or negligence of a director or
third person, the most common and dangerous defense that he has
to encounter is the defense that he has been guilty of laches in
bringing his action. Like the defense of contributory negligence —a
modern principle of law that defeats many actions for negligence —
so the defense of laches, acquiescence or ratification has sprung
up to defeat stockholders’ actions herein. The principles which
govern, define and explain this defense have become well settled.
They form the subject of this chapter.

§ 729. Laches, acquiescence or ratification as a defense to a stock-
holder’s action to remedy illegal corporate acts which are prohibited
by statute or contrary to public policy.— It has already been shown
that a stockholder may bring an action to remedy frauds, negligence
or ultra vires acts.. As regards the frauds and negligence of cor-
porate officers, it is well settled that laches is a good defense to a
stockholder’s action herein. In reference to ultra vires acts, how-
ever, which are mala prohibita or. mala in se, there is more diffi-

culty. It is very clear that no assent or acquiescence of the stock-
holders can validate such acts.!

1See Kent v. Quicksilver Min. Co., 78 the corporation, Barton v. Port Jack-

N. Y., 159, 186 (1879), where the court
says: ‘‘ A corporation may do acts which
affect the public to its harm, inasmuch
as they are per se illegal or are malum
prohibitum. Then no assent of stock-
holders can validate them.” A con-
tract in which the directors are inter-
ested, being void by statute, cannot be
enforced on the ground of waiver by

son, etc., Co., 17 Barb., 397 (1854).
“Void” cannot be construed as “ void-
able” in a statute which is enacted
from public policy, and: not for the
benefit of parties only. King v. Inhab-
itants, etc., 8 B. & C., 466 (1826), con-
cerning a statute against binding out
children,

956
 

ies

“ es

OH. XLIV.] DELAY AS A BAR TO STOCKHOLDER’S ACTIONS. [§ 730.

4

But it is a different question to determine whether, after long
acquiescence, the stockholder may take advantage of the invalidity
of such acts. As regards acts mala prohibita — that is, acts expressly
prohibited by statute——the stockholder may be barred from com-
plaining thereof, since the state, through its attorney-general, may
protect the interests of the public! The stockholder, however,
may sue on the ground that unless the evil is corrected the state
may forfeit the corporate franchises.2 As regards acts mala in se,
probably the rule will depend on the circumstances of the case. If
the stockholder has participated in the act or knowingly accepted
the benefit thereof the court will not aid him, since he who comes
into equity must do so with clean hands.? When, however, a stock-
holder has not participated or knowingly accepted the benetit of
corporate contracts which are mala in se, there would seem to be
no reason why mere delay on his part in bringing suit to set aside
such acts should be fatal to his bill.

§ 730. Ratification herein may be express or implied.— There are
in general two ways in which a stockholder may be said to have
ratified an act of the directors which he is attempting to enjoin or
set aside. The ratification may be by an express agreement or
statement to that effect,or it may be by such laches or acquies-
cence as will amount to an implied ratification! Cases involving
the defense of an express ratification rarely arise, since this defense
is easy to prove.’ If the complaining stockholder participated in
the act complained of, he of course-is barred of his remedy.’ But

powers of the directors.” See, also,
Kent v. Quicksilver Min. Co., 78 N. Y.,

1See Stewart v. Erie, etc., Trans. Co.,
17 Minn., 372 (8871); and in Gray v.

Chaplin, 2 Russ. Ch., 126 (1826), the court
said that the stockholder cannot claim
thatthe public is wronged. ‘If a pub-
lic right is to be enforced it must be at
the suit of those to whom the protec-
tion of public rights belongs.” Cf. Ash-
bury R’y, etc., Co. v. Riche, L. R., 7 H.
of L., 653 (1875); Taylor v. Chichester,
etc., R’y Co., L, R., 2 Ex., 356 (1867).

2Manderson v. Commercial B’k, 28
‘Pa, St., 379 (1857), where discounts were
being improperly made.

3See § 89, supra.

4 Thus, in Evans v. Smallcombe, L. R.,
3H. of L., 249 (1868); aff’g L. R., 3 Eq.,
769, the court said: ‘‘ Consent might be
either express or might be inferred
from the acquiescence of the share-
holders after full knowledge of the
transaction which was in excess of the

159, 187 (1879).

5 As an instance of express ratifica-
tion, see Allen v. Wilson, 28 Fed. Rep.,
677 (1886). Cf. §§ 652, 662, 683.

6 Branch v. Jesup, 106 U.&., 468, 476
(1872); United States v. U. P. R. R. Co.,
98 U.S., 569, 612 (1878). If all of the
directors and stockholders know of a
sale of property by a director to the
corporation and do not object, and use
the property, the transaction cannot be
set aside. Battelle v. Northwestern,
etc., Co., 88 N. W. Rep., 827 (Minn.,
1887). A bondholder who is a party to,
the purchase at the foreclosure sale
cannot object to the legality of the
proceedings. Crawshaw v. Soutter, 6
Wall., 739. Knowledge of stockholders
is not knowledge of the corporation.
Hence, after the guilty directors are

957
8 731.)

DELAY AS A BAR TO STOCKHOLDER’S ACTIONS. [CH. XLIV.

the defense of an implied ratification is more difficult to establish.
An implied ratification is generally spoken of as laches. It is the
subject of the remainder of this chapter.’

§ 731. Stockholder chargeable with laches only after he has a full
knowledge of the facts.— Laches is a defense only when the stock-
holder, with a full knowledge of the facts, has delayed an unreason-
able length of time in bringing his action. These two elements,
knowledge and delay, are the essential elements of the defense.’
Until the stockholder has full and complete knowledge of all the
essential facts which would be likely to induce him to institute the
action the beginning of the time from which laches will run cannot
be said to commence.? Where, however, the facts would be well
known to any intelligent man, and the means of knowledge are open
to the stockholder, he is chargeable with knowledge from the date
when he should have ascertained the facts.‘

But it is not incumbent on the stockholder to keep himself in-
formed as to the various acts of the corporation. He is not charge-
able with knowledge merely because he might have ascertained the
facts by an examination of the corporate books.’ Moreover, it is

ousted by an election, the corporation TIIl., 426 (1875). Where there is not a

itself may sue. Pacific R. R. v. Mo. P.
R. R. Co., 111 U. 8., 505 (1884). Unless
inequitable, or rights of third persons
have intervened. Id. ‘‘A receipt of
money as a part of the ear nings of a cor-
poration is no ratification of acts of pusi-
ness carried on outside of the corpora-
tion without knowledge of, him who is
sought to be charged with them that

the moneys came from such business.”

Central, etc., Bk v. Walker, 66 N. Y.,
424 (1876). Stockholder in old and
new company who aids in the latter’s
improvement of property purchased by
it from former is estopped from object-
ing to validity of sale. St. Louis, etc.,
Co. v. Sandoval, ete., Co., 5 Northeast.
Rep., 270 (IIL, 1886).

1See First Nat’! B’k v. Drake, 29 Kan.,
311 (1883), for a definition of ratifica-
tion.

2 See the leading case of Cumberland
Coal Co. v. Sherman,
(1859), quoting from Lewin on Trusts;
and the equally important case of Hoff-
man, etc., Co. v., Cumberland, etc., Co.,
16 Md., 456 (1860).

*Gilman, ete, R, R. Co, v. Kelly, 77

80 Barb., 533:

full disclosure at a stockholders’ meet--
ing the members present are not bound
by their assent. Ives v. Smith, 3 N. Y.
Supp., 645 (1888). oF
4Taylor v. South, ete., R. R. Co., 4
Woods (U. §.), 575 (1882), the court say-
ing: ‘‘The means of knowledge are the
same thing in effect as knowledge itself.
The circumstances of the dis-
covery must be fully stated ‘and proved.
and the delay which bas occurred must
be shown to be consistent with the req-
uisite diligence.” See, also, Kelley v.
Newburyport, ete., R. R. Co. (Mass.,
1886), 24 Am. & Eng. R’y Cas., 27. In
the case of Phosphate, ete., Co. v.
Green, L. R., 7 Com. Pl., 43 (1871), it was
held that to show assent and acquiesr
cence it is not necessary to prove the -
acquiescence of each individual share-
holder. It is enough to show circum-
stances which are reasonably calculated
to satisfy the court or a jury that the
thing to be ratified came to the knoil-
edge of all who chosejto inquire, all
having full opportunity and means of
inquiry,

5Stewart’s Case, L. RB, 1 Ch., 511

958
 

:
CH. XLIV.] DELAY AS A BAR TO STOUKHOLDER’S ACTIONS. [§ 732.
the well-established rule that lapse of time alone cannot support
the defense of laches. » There must be both knowledge and delay.!

§ 732. Stockholder must sue within reasonable time after knowt-
edge of the facts.— After a stockholder has knowledge or is charge-
able with knowledge of an ultra vires, fraudulent or negligent act
of the directors, he must institute his suit, if at all, within a reason-

able time thereafter? As to what will constitute a reasonable time-—

depends on the circumstances of the case. If it is evident that the
.stockholder is waiting to see whether the unauthorized act will be

profitable to the corporation, the court will refuse to grant him.

any relief.* So, also, if the stockholder, after a full knowledge of

the facts, stands by and allows large operations to be completed.

or money expended or alterations to be made before he brings

 

suit, he is guilty of laches, and his remedy is barred.t In like man-

°

(1866); Stanhope’s Case, id., 161, where
the court said: ‘‘It is no part of the
duty of a shareholder to look into the
management of the business... . It

is not enough to show that they might ~

have become acquainted with the mis-
management of their affairs. It must
be shown that they did so.” See Ryan
v, Leavenworth, etc., R’y Co., 21 Kan.,
865 (1879). Also Holmes v. Newcastle,
etc., Co., 45 L. J. (Ch.), 388 (1876), hold-
ing that knowledge of a salé of property
is not knowledge of an illegal dividend
from the proceeds, See, also, Spack-
man v. Evans, L. R., 3 H. of L., 171
(1868). See, also, Houldsworth v. Same,
id.. 263. ;

1 Evans v. Smallcombe, L. R., 3 H. of
L., 249 (1868); aff’ L. R., 3 Eq., 769,
thé court saying: ‘‘ Lapse of time alone
certainly would not make valid that
which at the beginning was invalid.

Length of time may, in many
cases, materially assist in establishing
the presumption of acquiescence in an
act which requires a confirmation to
give it validity. But then itis not time,
but the acquiescence, which changes
what would otherwise be a void act
into a valid one.” Ashhurst’s Appeal,
60 Penn. St., 290 (1869), where, how-
ever, the court says that ‘‘ acquiescence
is presumed from delay.” : F

2In the case of Twin Lick Oil Co, v.

17 Minn., 372 (1871).

Marbury, 91 U. §., 587(1875), Mr. Justice

Miller gives a clear statement of the law
herein. Taylor v. South, ete.. R’y Co..
4 Woods (U. §.), 575 (1882); Fredericks

v. Penn. Canal Co., 2 Atl. Rep., 48 (Pa.,.

1885). See, also, Nashua, etc., R. R.
Co. v. Boston, ete., R. R. Co., 27 Fed.
Rep., 821, 826 (1886).

3Story’s Eq. Jurisprudence, § 1539a;

Kitchen v. St. Louis, ete, R’y Co., 69.
Mo., 224 (1878); Gregory v. Patchett, 83 -

Beav., 595 (1864); Atchison, etc., R. R.
Co. v. Fletcher, 10 Pac. Rep., 596 (Kan.,
1886); Banks v. Judah, 8 Conn., 145
(1830); Watts’ Appeal, 78 Penn. St., 370
(1875); Sheldon v. Hickemeyer, etc., Co.,
90 N. Y., 607 (1882).

4Same cases; also Houldsworth v.

Evans, L. R., 3 H. of L., 263, 276 (1868). .
Delay of eight months held fatal. Great

Western R’y Co. v. Oxford, etc, R’y
Co., 8 De G., M. & G., 341 (1858), See,

also, Boston, etc., R. R. Co. vu. N.Y. & «

N. E. R. RB. Co., 13 R. 1., 260 (1881); Au-
rora, etc., Soc. v. Paddock, 80 Ill, 263
(1875); Stewart v. Erie, etc., Trans..Co.,
Goodin v. Cincin-
nati, etc., R. R. Co., 18 O, St., 150 (1868).
In the well-considered case, however,
of Covington, etc., R. R. Co. v. Bowler’s
Ex’rs, 9 Bush, 570, the court held that a
delay of six years was not a bar to the
stockholder’s remedy; and the court
said that ‘“‘merely remaining passive

959

\

$
§ 732.]

DELAY AS A BAR TO STOCKHOLDER’S ACTIONS.

[cH. XLIV.

ner, where the stockholder, with full knowledge, has accepted the

benefit of the act, he cannot complain thereafter.!

And, in general,

where it is clear that the stockholder had full knowledge of all
the essential facts of an act which he might bring a suit to remedy,
but which for an unreasonable. length of time he fails to object to
by a bili in equity, be will be held guilty of laches, and his right to

institute the suit is barred.?

does not deprive a party of the right to

seek redress unless, in addition thereto, |

he does some act to induce or encourage
others to expend their money or to alter
their conditions, and thereby render it
unconscientious for him to enforce’ his
rights.” But see Pacific R..R. v. Mis-
souri Pac. R’y, 111 U. §., 505; rev’g 12
Fed. Rep., 641, holding that delay pend-
ing appeal is not fatal. See, also,
8§ 161, 162, supra.

1London Assurance Co.’s Case, 5
De G., M. & G., 465, 481 (1854). See,
also, Weed v. Little Falls, etc., Co., 31
Minn., 154 (1883).

2 Spackman. v. Evans, L. R., 3H. L.,
171 (1868); Downes v, Ship, id., 343;
Ashhurst’s Appeal, 60 Penn. St., 290
(1869); Zabriskie v. Hackensack, etc., R.
R. Co., 18 N. J. Eq., 178 (1867); Nashua,
ete, R. R. v. Boston, etc., R. R., 27
Fed. Rep., 821, 826 (1886); London, etc.,
Assoc, v. Kelk, 19 W. N., 67 (1884); Mc-
Loughlin v. Detroit, etc., R’y Co., 8
Mich., 100 (1860); Gray v. Chaplin, 2
Russ, Ch., 126 (1826), where the stock-
holder had acquiesced forty-seven years
in an ultra vires lease. In the case of
Mills v. Central R. R. Co., 41 N. J. Eq.,
6 (1886), it was very properly held that
a delay of fifty-four days was no bar,
and also that a failure to vote against
the act was no bar. Inthe case of Gif-
ford v. N. J. R. R. Co., 10 N, J. Eq., 171
(1854),-a delay of twenty years was held
to be a bar.
court held delay to be a bar: Peabody
v. Flint, 88 Mass., 54 (1868), the delay
being three and one-half years; Greg-
ory v. Patchett, 38 Beav., 595 (1864), six
years; International, etc., R, R. Co.
Bremond, 58 Tex., 96 (1880), two years;

In the following cases the.

Graham v. Birkenhead, etc., Co,, 2 Mac,
& G., 146 (1850), eighteen months;
Kitchen v. St. Louis, etc., R’y Co., 69
Mo., 224 (1878), two years; Boston, etc.,
R. R. Co. vu. N. ¥. & N. HE. R. R. Co., 18
R. 1., 260 (1881); Ashhurst’s, Appeal, 60
Penn. St., 290 (1869), seven years; Shel-
don, etc., Co. v. Eickemeyer, etc., Co.,
90 N. Y., 607 (1882), four years; Pneu-
matic Gas Co: v. Betry,-113 U. S., 322
(1884); Graham wv. Boston, etc, R. R.
Co., 118: U. §., 161 (1886); in re Pinto
Silver Min. Co., L. RB., 8 Ch. D., 273;
Royal B’k of Liverpool v. Grand June:
tion R. R. Co., 125 Mass., 490 (1878); In:
re Magdalena, etc., Co., 6 Jur., N. S.,
975 (1860), where a delay of ‘two yeara
was held a bar; Brotherhood’s Case, 81
Beav., 365 (1862), twelve years; Hervey
v. Illinois, etc., R’y Co., 28 Fed. Rep.,
169 (1884); Thompson v. Lambert, 44
Iowa, 289 (1876); Vigers v. Pike, 8 Cl.
& Fin., 562, 650 (1840); Zabriskie v.
Cleveland, etc., R. R. Co., '23 How., 381
(1859); Allen v. Wilson, 28 Fed. Rep.,
677 (1886). Cf. Boardman v. Lake
Shore, etc., R’y Co., 84.N. Y., 157 (1881);
Badger v. Badger, 2 Wall, 87; Har-
wood v. Railroad Co., 1% Wall., 78;

Rochdale Canal Co. v. King, 2 Bim, N.

8., 89; §$ 161, 162, 198, supra. Seven-
teen years’ delay bars the right of pre-
ferred stockholders to reach a fund
which was to be given them as a com-
promise by first bondholders, a fore-
closure by second bonds having subse-
quently followed. Sullivan v. Portland,
etc., R. R. Co, 94 U. S., 806 (1876).
Five years’ delay in attacking consoli-
dation is too late, Bell v, Penn,, etc,
R. R. Co,, 10 Atl, Rep., 741 (N.J., 1887).

But a delay of eleven years and a half

960
?

‘OB, XLIV. ]

DELAY AS A BAR TO STOCKHOLDER’S ACTIONS.

1

[$ 732.

There has been considerable doubt and difficulty i in determining
whether the statute of limitations will be applied by a court of

equity to cases of this nature.

It has been held in England that.

the statute will be applied to a corporate action to compel a di-
rector to pay over to the corporation money received by him as a
bribe, and that the statute begins to run from the time when the

corporation discovers the facts.!

was held not fatal to a stockholder’s ac-
tion to set aside an ultra vires issue of
bonds, where the railroad had been
abandoned, the bonds never dealt in
nor enforced, and the complainant had
in view the removal of the lien, and in-
‘tended. to proceed and construct the
road. City of Chicago v. Cameron, 11
Northeast. Rep., 899 (Ill., 1887). Four
years’ delay in suing to set aside an
ultra vires assignment of property held
fatal. Descombes v. Wood, 4 5S. W.
Rep., 82 (Mo., 1887). Where a corpo-
ration is insolvent, and turns in its
property at a fair price to a creditor
whose debt is also secured by the guar-
anty of the -president of the corpora-
tion, and the creditor at once sells the
property. to the president at an ad-
vanced price, a stockholder who delays
suit for two years, during which time
the property becomes valuable and
the president, who purchased, dies, is
barred from complaining. Hancock v.
Holbrook, 3 8. Rep., 851 (La., 1888).
Laches bars the right of preferred stock-
‘holders to object to an ultra vires lease.
Emerson v, N. Y., etc, R. R., 4RB1.,
555 (1884); aff’g Boston, etc., R. R. v. N.
Y., etce., R. R., 18 id., 260; Butterfield
». Cowing, 20 N. E. Rep., 369 (N. Y.,
1889). Three years’ delay fatal to stock-
holders’ suit to compel treasurer to pay
back. Dunphy v. Travelers’, etc., Asso-
ciation, 16 N, E. Rep., 426 (Mass., 1888).
A lease of corporate property may be
ratified by one hundred days’ delay of
the company in repudiating it, the
lessee in the meantime expending
money thereon. Hoosac, etc., Co. v
Donat, 16 Pac. Rep., 157 (Col., 1888). A
lessor railroad cannot, nineteen years

(61) ,

And a similar rule seems to pre-

after the lease, sue in equity to set aside

the lease as ultra vires. Laches is a

bar. St. Louis, etc., R. R. v. Terre,

etc., R. R., 33 Fed. Rep., 357 (1888). Ten

years’ delay bars an action by a stock-

holder to set aside a fraudulent fore- .
closure of a mortgage given by the

company. Foster v. Mansfield, etc., R.

R., 36 Fed. Rep., 627 (1888). Seven

years’ laches is fatal to a stockholder’s

complaint that a majority of the stock-

holders had committed fraud and

brought about the pending foreclosure,

Alexander v. Searcy, 8 S. E. Rep., 630

(Ga., 1889). A lease of a water. com-

pany’s property to an ice company, '
with the privilege to the stockholders

of the former to take stock in the latter,

will not be set aside at the instance of

stockholders who did not offer to take

such stock until too late, and who de-

layed complaining until after the ice

company proved a success. Shaaber’s
Appeal, 17 Atl. Rep., 209 (Pa., 1889).

The time consumed by the guilty offi-

cers in legal proceedings to collect their.
gains is not included in the time which,
constitutes laches on the stockholders’

part. Davis v. Gemmell, 17 Atl. Rep.,

259 (Md., 1889).

1 Metropolitan B’k v. Heiron,. L. B., 5
Ex. D., 319 (1880). The statute of limita-
tions is no bar to an action against a di-
rector for fraud, when notice of the
fraud came only to the directors, part of
whom were alsoimplicated. Re Fitzroy,
etc., Co., 50 L. T. Rep,, 144 (1884). An
action against a third person to recover
money paid by the corporation to him
for stock must be brought within six
years or ‘it is barred by the statute of
limitations. Pierson v. McCurdy, 38

‘961
§ 733.] DELAY AS A BAR TO STOCKUOLDER’S ACTIONS. [CH. XLIV.
vail in Pennsylvania and California; but there is a difference of
opinion as to the application of the statute.!

§ 733. Miscellaneous applications of the doctrine of laches herein.— .
It is well settled that the ratification of an act which the stock-
holder might have complained of does not authorize or ratify in
advance a repetition of that act.2 A stockholder’s right to object
to a director’s act can. be exercised by him alone.’ It is also well
established that the ratification which will bind a stockholder must
be by himself alone. It cannot be by the other stockholders But
the acquiescence of a stockholder bars an action by any transferee
of that stock.®

If neither the defendants nor others have been induced by the
delay to act upon the matters which are complained of, laches is no
bar to the stockholder’s action.®

°

raised by demurrer.’

Hun, 520 (1884). But in Pierson v.
Morgan, 20 Abb. New Cases (N. Y.,
1887), and Brinckerhoff v. Bostwick, 99
N. Y., 185 (1885), the ten-year statute
was applied to fraud. In general a
court of equity. will apply the statute or
will not apply it,as may seem most just,
and will even shorten the time. Sulli-
van v. Portland, etc., R. R., 94U.5.,
806, 811 (1876). See, also, Ernest v.

Croysdill, 2 DeG., F. & J., 175 (1860);

Flitcroft’s Case, L. R., 21 Ch. D., 519.

‘The statute of limitations is. no bar toa

receiver’s action to recover back from
directors a salary which was paid in
breach of trust. Ellis v. Ward, 20N.
E, Rep., 671 (Ill., 1889).

1 Watts’ Appeal, 78 Penn. St., 370
(1875). See, a&so, Taylor v. South, etc.,
R. RB. Co., 4 Woods, 575 (1882), Also in
California. See Dannmeyer v. Coleman,
11 Fed. Rep., 99 (1882), holding that in
California the three-years’ limitation to
actions based on fraud after discovery
thereof applies to directors’ frauds
herein. But see Philippi v. Philippi,
115 U.8., 151; Twin Lick, ete.,.Co. v.
Marbury, 91 U. S., 587 (1875); Moyle v.
Landers, 21 Pac. Rep., 1183 (Cal., 1889),
See, in general, Coit v. Campbell, 82 N.
Y., 509, 514; Farnam v, Brooks, 9 Pick.,
242; Godden v. Kimmel, 99 U. S., 201,
210; Preston v. Preston, 95 U. 8., 200;

The question of laches can be

Badger v. Badger, 2 Wall., 87; Medder
v. Norton, 11 Wall., 442; Bowman v.
Wathen, 1 How., 188; Beckford v.
Wade, 17 Ves., 87. The statute of lim-
itations is a bar to an action against di-
rectors for negligence in allowing over-
drafts and illegal loans. Williams v.
Halliard, 38 N. J. Eq., 873, 877 (1884).

2Irvine v. Union Bank of Australia,
37 L. T., N. S., 176 (1877); 8. C., L. R., 2
App., 366; Bloxham v. Metropolitan R’y
Co., L. R., 8 Ch., 337, 854 (1868),

3’Taylor.v. Chichester, etc., R. Co., L.
R., 2 Ex., 856, 878 (1867).

4Hazard v. Durant, 11 R. T., 195 (1875).
This principle of law is substantially a
mere restatement of the principle that
the majority cannot bind the minority
as regards ultra vires acts; nor can the
directors. See Gallery v. Nat’l Ex. B’k,
41 Mich., 169 (1879).

5 Ffooks v. South, etc., R’y Co., 1 Sm.
& G., 142 (1855); 8S. C., 1 Sm. & G., 142
(1853).
etc,, R. R., 28 Fed. Rep., 581, 591 (1886).
Even new stock is bound. Re British,
etc., Co, L. R., 17% Ch. D., 467 (1881).
See, also, § 40, supra.

6 Whitman v. Bowden, 2 S. E, Rep.,
680 (S. C., 1887).

7Crumlisle v. Shenandoah, etc., R. R.
Co., 28 W. Va., 623 (1886).

962

See, also, Venner v. Atchison, -
CHAPTER XLV.

PARTIES, PLEADINGS, ETC., IN SUITS BY STOCKHOLDERS IN BEHALF
OF THE CORPORATION — SUITS BY OR AGAINST THE CORPORA-
TION IN GENERAL.

,

A. SUITS BY STOCKHOLDERS IN BEHALF ( § 746. Injunction against corporate of-

OF THE CORPORATION. ficers acting at all, and the
§ 784. Jurisdiction of the court. appointment of a receiver.
735. Parties plaintiff — Who may| 747. Miscellaneous remedies.
bring the suit. 748. The complaining stockholder
736. Rule when the plaintiff stock- controls the conduct of the
holder sucs in the interest of suit. i
a rival company, or purchases} 749. No contribution among the di-
his stock for the purpose of rectors.
bringing suit. B. SUITS BY OR AGAINST THE CORPORA-

737%. The complainant stockholder

must sue in behalf of himself cle mabrpacei

apd other stockholders. § 50. The discretion of the directors
'"38. Parties defendant herein. in refusing to institute or to
739. Complainant’s bill must not im- defend an action involving
properly join two or more corporate interests is not gen-
causes of action herein. erally interfered with by the
740. Complainant must allege that courts.
he requested the corporation | 751, Suits by and against the corpora-
to bring the suit, and that the tion. ',
corporation refused or neg-| 752. Service—A ppearance—Answer,
lected to do so. 758. Allegation and proof of incor-
41. When such an allegation may poration.
be omitted. 754. Confession of judgment.
742, Miscellaneous allegations of the} 755. Injunction and contempt.
complainant. 756. Contempt and sequestration,
148. Prayer for relief. "57. Foreign corporations may sue-
7144, Property received under the act and be sued.
; objected to must be returned| 758. Service in suits against a for~
upon that act being set aside. eign corporation.

745, Injunction restraining the cor-
porate officers and others
from doing specified acts.

 

A. SUITS BY STOCKHOLDERS IN BEHALF OF THE CORPORATION.

§ 784. Jurisdiction of the cowrt.— There has been some difficulty pert

in determining whether the federal courts have jurisdiction of a
stockholder’s suit herein when the corporation and the directors
are citizens of one state and the complainant stockholder is a resi-
dent of another state. Inasmuch as the suit is for the benefit of
the corporation, it has been claimed that the’ non-residence of the
stockholder is insufficient to give jurisdiction. The federal courts
have decided, however, that such jurisdiction exists, and it is in
these courts that a large proportion of these suits are brought.’

1Dodge v. Woolsey, 18 How., 881; (1881); Pond v. Vt. Valley R. R. Co., 12
Greenwood v. Freight Co., 105 U. 8.,18 Blatch., 280 (1874), the court holding’
‘ ; 963

‘
'

 
-§ 734.]

PARTIES, PLEADINGS, ETO.

[cH. XLY.

Moreover, the stockholder’s suit herein must always be brought in
a court of equity. It is never in a court of law.!

The question of whether a court will entertain jurisdiction of a
case against a foreign corporation when there .is difficulty in ob-
taining service on the corporation or enforcing the decree of the
court is discussed elsewhere in this chapter.’

also that the complainant might omit
as party plaintiff a stockholder residing
in the state of the corporation. See,
also, Hatch v. Chicago, etc., R. R. Co.,
6 Blatch., 105 (1868); Foote v. Linck, 5
McClain, 616 (1853); Bell v. Donohue,
17 Fed. Rep., 710 (1888),’ holding that
the court has no jurisdiction if the
stockholder and one of the defendants,
a third person, who is alleged to have
defrauded the corporation, are citizens
of the same state. Cf.°La Grange v.
State Treasurer, 24 Mich., 468 (1872).
In Hawes v. Oakland, 104 U. S., 450
(1881), the court vigorously denounced
transfers of stock made for the purpose
of giving the federal courts jurisdiction.
The ninety-fourth rule was made in con-
sequence thereof, Where ‘‘the parties
on one side of the controversy are citi-
zens of New Jersey, and those on the
other side of the controversy are a New
Jersey corporation and other citizens of
New Jersey as well as a Pennsylvania
corporation and citizens of Pennsyl-
vania and of Maryland, all
the parties on one side of this contro-
versy not being citizens of different
states from all those upon the other
side, the citizenship of the parties did
not bring the case within the jurisdic-
tion of the circuit court.” N. J. Central
R. R. Co. uv. Mills, 1138 U. S., 249 (1885);
East Tenn., etc., R. R. Co. v. Grayson,
119 U. S., 240 (1886). If the two par-
ties in interest are both corporations of
the same state, it seems that a stock-
holder cannot sue in the federal court
by reason of his living in another state.

Quincey v. Steel, 120 U. S., 241 (1887). ,

See, also, Huntington v. Palmer, 104 U.
S., 482. In suits by one or more in behalf
of others, others will not be allowed to
come in as parties plaintiff when to do

so would oust the United States court
of jurisdiction. Jackson, etc., Co. v.
Burlington, etc., R. R. Co., 29 Fed.
Rep., 474 (1887). Cf. Thouron v. East.,
etc., R’y Co., 88 Fed. Rep., 673 (1889).
As to jurisdiction, see, also, Peninsu-
lar Iron Co. v. Stone, 121 U. S., 681
(1887). The United States court, which
decreed a foreclosure, has jurisdiction
to set aside a foreclosure as fraudulent,
irrespective of citizenship in the latter
case. Pacific R. R., etc., v. Missouri P.
Ry Go., 111 U. 8., 505 (1884); rev’g 12
Fed. Rep., 641. See, also, § 562, notes,
supra, as to the jurisdiction of the
United States courts.

1See Gardiner v. Pollard, 10 Bosw.,
674 (1863); Craig v. Gregg, 83 Pa. St.,
19 (1876); and see § 701, supra. This
principle of law is assumed in nearly all
the cases cited in Part IV of this work.
Priest v. White, 1S. W. Rep., 361
(Mo., 1886), where an action at law bya
corporate-creditor for fraud and deceit
failed. The stockholder, however, may
often have also another remedy — an ac-
tion for deceit against the guilty par-
ties. In Kimmel v, Stoner, 18 Pa. St.,
155 (1851), and Kimmel wv. Geeting, 2
Grant’s Cases (Pa., 1853), however,
where the corporation, through its di- —
rectors, ordered an agent to purchase
for the corporation certain shares of its
stock which the state was about to sell,
and after the purchase the directors di-
vided it among themselves, it was held
that a stockholder could sue such di-
rectors in an action on the case and
obtain damages for the proportionate
loss sustained by himself, See, also,
§§ 157, 855, 651, 747., Cf. Quincey v.
Steele, 120 U. S., 241 (1887),

2See §§$ 757, 758, infra.

964
CH. XLV. ] PARTIES, PLEADINGS, ETO. | [$ 735. °
_ § 735. Parties plaintiff — Who may bring the suit.-- Ordinarily,
a suit herein is instituted by one or more stockholders who are reg-
istered as such on the corporate books. It has been held, however,

that the suit may be brought by a purchaser of a certificate of
stock who has not as yet obtained a registry thereof! The suit
brought by one or more stockholders herein must be in behalf of
themselves and such other stockholders as may wish to come in.
Care is to be exercised, however, that stockholders who are dis-
qualified from participating in the suit should not be joined as
parties plaintiff.2 There has been a difference of opinion as to
whether a corporate creditor could maintain a suit herein to com-
pel the corporate directors to account for their frauds, negligence

or ultra vires acts.
lie.’

1Bagshaw v. Eastern Union R’y Co..
7 Hare, 114 (1849); Ervine v. Oregon,
etc., Co., 28 Hun, 269 (1882): Parrott v.
Byers, 40 Cal., 614 (1871). Cf. Landes
v. Globe, etc., Co., 73 Ga., 176 (1884),
where a stockholder had not paid his
subscription; Mills v Northern Ry,
L. R., 5 Ch., 621 (1870), a queere. Con-
tra, Ramsey v. Erie R’y Co., 7 Abb.
Pr. (N. 8.), 156 (1869); Heath v. Erie R’y
Co., 8 Blatch., 347 (1871); Hersey v.
Veazie, 24 Me., 9 (1844).

2Clements v. Bower, 1 Drew., 684
(1858). Cf. Parrott v. Byers, supra,
holding that if one of the complainants
is competent it is immaterial that the
others are not. See, also, Pittsburgh,
etc., R. R. Co.’s Appeal, 1 R’y & Corp.
L. J., 139 (Pa., 1886); Burt v. British,
etc,, Ass’n, 4 De G. & J., 158 (1859),
where the court said that if the stock-
holders “‘ sue by a plaintiff who is per-
sonally precluded from suing the suit
cannot proceed.”

3Warner v. Hopkins, 111 Penn. St.,
828 (1885); Lothrop v. Stedman, 42
Conn., 583(U. 8, C. €., 1875); Brown v.

Orr, 8 Atl. Rep., 815 (Penn., 1886); but:

see Balliet v. Brown, 103 Penn. St.,
546 (1883); Pond v. Framingham, etc.,
Co., 180 Mass., 194 (1881); Mills v.
Northern R’y, etc, Co, L. B., 5 Ch.,
621 (1870); Gavenstein’s Appeal, 49
Penn. St.; 310 (1865); Heath v. Erie R’y

Under certain circumstances such a suit will
Moreover, it has been held, where a person who holds stock

N. Y., etc, R. R. Co., 35 Hun, 355
(1885). See N. Y. Code of C. P., §§ 1781,
1782. The receiver of an insolvent rail-
road corporation may file a bill in equity
to’compel the directors and their attor-
ney to disgorge corporate furlds which
they divided among themselves. Gin-
drat v. Dane, 4 Cliff., 260 (1874). In
Bewley v. Equitable Life Assurance
Soc., 61 How. Pr., 344 (1881), where a
policy-holder sought to hold liable for »
misuse of funds the directors who were
elected by the holders of the $100,000

of stock of that corporation. It was held

that ‘the action by him would not lie.
If he had been a judgment creditor and
the corporation had been insolvent a
different rule would have applied, thus
distinguishing Evans v. Coventry, 5
De G., M. & G., 911 (1854); Aldebert v.
Leaf, 1 Hem. & M., 681 (1862); Re State,
etc., Ins. Co., 11 Week. Rep., 746; Bel-
knap v. North, etc., Ins. Co., 11 Hun,
282 (1877). As sustaining the rule in the
text, see, also, Conro v. Gray, 4 How.
Pr., 166 (1849); Fisk v. Union P, R. R.,
10 Blatch., 518 (1873); Irons v. Manuf’rs’
Nat’l B’k, 6 Biss., 301 (1875); Pond wv.
Framington, etc., Co., 180 Mass., 194 ,
(1881); but see Columbus, etc., R. R.
Co. v. Burke, Opinion of Arbitrators,
1888; Van Weel v. Winston, 115 U. 8,
228; Cole v. Knickerbocker, etc., Co.,
28 Hun, 255 (1880); 91 N. Y., 641; Mills

Co., 8 Blatch., 347 (1871); Currier v. v. Northern R’y, L. R., 5 Ch., 621 (1870);
965
§ 735.] [OH. XLV.

PARTIES, PLEADINGS, ETC.

as a trustee refuses to bring the suit, that the cestui que trust may
institute it, making the trustee a party defendant.! A person who:
has sold his stock cannot sue;? nor can a subscriber who has not
paid as required by charter; * but an unregistered pledgee may sue.*

Another important principle to be borne in mind is that a holder
of stock which at the time of the act complained of was held by
a party who participated in the act ‘or acquiesced therein cannot
bring the suit.» When some of the complainants are prosecuting
the same cause of action elsewhere, the suit will be dismissed.6 The
smallness of the stockholder’s interest, however, will not prevent
his instituting a stockholder’s suit to remedy a corporate wrong.
An owner of one share is to be protected by a court of justice
equally with the owner of a thousand shares. The old.doctrine of
de minimis non curat lez has sometimes been applied to this class
of cases, but such decisions are not to be commended. If there
are no suspicious circumstances connected with the suit, it is be-
lieved that this maxim of the law will not be applied to a case of

this character.’

Paulson v. ‘Van Steenburgh,'65 How.
Pr., 842. Corporate creditor may sue
to set’ aside sale of whole assets to an-
other corporation. Blair v. St. Louis,
etc., R. R. Co., 22 Fed. Rep., 36° (1884).
As to the right of corporate creditors to
sue for negligence, and an action by a
receiver or assignee, in behalf of them,
see Penn. B’k v. Hopkins, 2 Atl. Rep.,
83 (Pa., 1886). Directors are liable for
damages in an action on the case
brought by depositors in a bank after it
was insolvent, the directors having neg-
lected to know of the insolvency. De-
lano v. Case, 121 Ill., 247 (1887); aff’g 17
Bradw., 531. A receiver may sue them
for negligence as the corporation might
have done. Movius v. Lee, 80 Fed.
Rep., 298 (1887). Suit by creditor against
directors under the Wisconsin statute.
Hurlbut v. Marshall, 62 Wis., 590 (1885).
Where a receiver sues directors for neg-
ligence stockholders are not proper par-
ties. Kimball v. Ives, 80 Hun, 568
(1883). A stockholder who participates
in a corporate act cannot as a corporate
creditor attack that act. B’k of Fort
Madison v. Alden, 129 U. 8., 872. See
131 U. S., 352; 6 N. Y. Supp., 296; 38
Fed. Rep., 191. »

1Great Western R’y Co. v. Rushout,
5 De G. & Sm., 290 (1852). Cf. 38 Fed.
Rep., 197: :

2Doyle v. Muntz, 5 Hare, 509 (1846).

3 Busey v. Hooper, 35 Md., 15 (1871).

4Baldwin v.-Canfield, 26 Minn., 43
(1879). ar

5If the stock purchased is tainted
with the fraud — that is tosay, if the
persons guilty of the act complained of
owned that stock when they did the
act—no action will lie by a bona fide
transferee of that stock. See § 40, supra.
Ffooks v, Southwestern R’y, 1Sm. &G.,
142 (1853) ; Re British, etc., Co., L. R., 17
Ch. D., 467 (1881).

6 Black v. Huggins, 2 Tenn., Ch. 780
(1877). See, also, as to who may be a
complainant herein, Green’s Brice’s\
Ultra Vires (2d ed.), 649. In the case of
Dannmeyer v. Coleman, 11 Fed. Rep.,
97 (1882), the court queries whether each
stockholder may institute a separate”
suit herein. The party with whom the
alleged illegal contract was made can-
not sustain a billin equity to prevent
a multiplicity of stockholders’ suits.
Manhattan R. R. Co. v. N. Y. El. BR, R.
Co., 29 Hun, 309 (1883),

TArmstrong v. Church Society, 18

966
 

CH, XLV. ]

PARTIES, PLEADINGS, ETC..

[$ 736.

§ 736. Rule when the plaintiff stockholder sues in the interest of
a rwal company or purchases his stock for the purpose of bringing .
suit.— The law is well settled that if a stockholder institutes a suit
in behalf of himself aud other stockholders to enjoin or to bring to
an accounting the corporate directors, and such suit is instituted,
not to protect and benefit the stockholders’ interest in the corpora-
tion, but to benefit some other corporation, the court will refuse to
entertain the suit and will dismiss it.1 The application of a stock-

Grant Ch. (U. C.), 552 (1867), the court
saying: ‘‘Every member of a corpora-
tion has a right to object to any illegal
diversions of its funds; and in this re-
spect those who contribute most have
no greater rights than those who con-
tribute least.”' Seaton v. Grant, L.
R., 2 Ch., 459 (1867), where the court
said the maxim did not apply, since the
stockholder sued not on his own be-
half alone, but for himself and others.
However, in the case of Dannemeyer
v. Coleman, 11 Fed. Rep., 97 (1882), the
court said: ‘‘It is always a suspicious
circumstance where a single stock-
holder among a large “number in a
corporation rushes into a court of
equity to vindicate, unaided and alone,
the rights of the corporation and all
other stockholders; and especially is
this so where the amount of stock

owned by him is so very limited that:

in case of success his own share of the
recovery will be so small as to make the
maxim de minimis non curat lex very:
properly applicable.”
Co. v. Treman, 93 N, Y., 660 (1883). In.
the case of Charlton v. Newcastle, etc.,
Ry Co.,5 Jur., N. S., 1096 (1859), the
court said: ‘‘ A single shareholder, hold-
ing five or ten shares or less, is per-
fectly justified in applying to the court
to restrain a company, on behalf of’
himself and the other shareholders, by
injunction, from committing any illegal
act beyond their powers. It does not
signify if all the other shareholders are
pitted together against this holder of
ten shares; the court holds it is bet-
ter for the real interests of the com-
pany that they should obey the law,
and any one single shareholder who

Cf. Ithaca, etc., .

invokes the aid of the court is en-
titled to its aid for that purpose.” See,
also, to effect that the holder of a single
share may bring the suit, Beman v.
Rufford, 1 Sim., N. 8., 550, 564 (1851); -
Zabriski v. Cleveland, etc., R. R., 23
How., 831, 395 (1859); Kean v. Johnson,
9 N, J. Eq., 401, 410 (1858), reviewing
the cases; Gifford v. N. J. R. R., 10°
id., 171 (1854); Elkins v. Camden, etc.,
R. R., 36 id., 5 (1882),

1The difficulty herein is in proving

_that the complainant is suing for the

rival company. If, however, the latter
is paying the costs of the suit, that is
sufficient proof. Forrest v. Manchester,
etc., R’y Co., 4 De G., F. &J., 126 (1861);
Belmont v. Erie R’y Co., 52 Barb., 637
(1869); Filder v. London, etc., R’y Co.,
1 Hem. & M., 489 (1868); Camblos v.
Phil., etc., R. R. Co., 4 Brews,, 568 (U. 8.
C. C., 1873); Waterbury v. Merchants’,
etc., Ex. Co., 50 Barb., 157 (1867); S. C.,
3 Abb. Pr. (N. &.), 163; Rogers v. Ox-
ford, etc., Ry Co., 2 De G. & J., 662
(1858). See, however, Densmore v. Cen-
tral R. R. Co, 19 Fed. Rep., 153 (1888),:
holding that the fact that the complain-
ant stockholder has business relations
with the rival company and is aided by
it in preparing his case is no bar, and
that if it were the objection is to be
raised by a plea in abatement. Ffooks.
v. Southwestern R’y Co.,1 Sm. & G.,
142 (18538). See, also, where this’ de-
fense failed, Sandford v. R. R., 24 Pa.
St., 378 (1855); Colman v. Eastern, etc.,
R’y, 10 Beav., 1 (1846), where a rival
company instigated the suit; Central
R. RB. v. Collins, 40 Ga., 582 (1869), where
the plaintiff was interested in a rival
company.

967
PARTIES, PLEADINGS, ETO. [CH. XLv.

§ 736.]
holder herein to a court of.equity will not be denied merely be-
cause it is for the interest of the public or of the corporation, or of
the stockholder himself, that the act complained of be allowed to.
stand. The law does not depend upon the opinion of the ‘court as
to the benefit of the act.) |

In regard to purchases of stock for the very purpose of bringing
a stockholder’s suit herein, there is some difference of opinion. The
common law clearly is that such a stockholder has the same right.
to bring the suit that his transferrer had.’ Such is the rule even
though the stock was purchased for the purpose of bringing the

suit.

1 Hoole v. Great, etc., R’y Co., L. R.,
3 Ch., 262 (1867); Stevens v. Rutland,
etc., R. R. Co., 29 Vt., 545 (1851).

2Winsor v. Bailey, 55 N. H., 218
(1875); Bloxam v, Metropolitan R’y Co.,
L. R., 3 Ch., 387 (1868),. where the com-
plainant on December 18, 1867, adver-
tised to induce the stockholders to com-
bine; on January 15, 1868, purchased
stock himself, and on January 25, 1868,
commenced suit. So, also, see Seaton
v. Grant, L. R., 2 Ch., 459 (1867), where
the court sustained the suit, although
it said: ‘He buys five shares in the
company, and then files his bill in order
to induce the company to buy off the
litigation. That, no doubt, is a course
of conduct which would meet with
little approval in this court, or, indeed,
in any other court; and such conduct
might be material at the hearing with
reference to the amount of relief which
the plaintiff could obtain, or whether
he was entitled to any relief at all.”
Nevertheless the court said, also, that
“‘ however questionable the mode of the
plaintiff's introduction to the company
may have been, he has an actual inter-
est in the subject-matter of the suit.”
Du Pont v. Northern Pac. R. R. Co., 18
Fed. Rep., 467 (1883). See, also, Atchi-
son, etc., R. R. Co. v. Fletcher, 10 Pac,
Rep., 597 (Kan., 1886); Ervin v. Oregon
Ry & Nav. Co., 35 Hun, 544 (1885);
S. C:, 28 Hun, 269 1882); Young »v.
Drake, 8 Hun, 61 (1876); Kingman v.
Rome, etc., R. R. Co., 30 Hun, 78 (1888).
If, however, the transferrer participated

The law has nothing to do with the motive of a legal act.’.

or aaquiiesced in the act complained of,
then the transferee is also barred. See
§ 40.

3Cases supra; also Elkins v. Cam-
den, etc., R. R. Co., 36 N. J. Eq, 5
(1882); Ramsey v. Gould, 57 Barb., 398
(1870), where the motive was “ bring-
ing men to justice; ” Salisbury v. Met-
ropolitan R’y, 38 L. J. (Ch.), 249 (1869).
The right of a stockholder to enjoin
an interference with an election is not
defeated by the fact that a rival com-
pany purchased his stock for him.
Camden, etc., R. R. v. Elkins, 37 N. J.
Eq., 273 (1888). If the complaining
stockholder has but a small interest he
is aided only where he makes out a
clear case. Benedict v. Western Union
T. Co., 9 Abb. N. C., 222; Reiff vu.
Same, N. Y. Daily Reg., Aug. 23, 1887.
Such parties are not favored by the
courts, and an injunction will be de-
nied where their rights can be pre-
served by damages. Kingman v. Rome,
etc., R. R. Co., 30 Hun, 73 (1883). Per--
son may purchase stock for purpose of
bringing suit. Solomans v. Laing, 12
Beav., 389, 353 (1850); Pender v. Lush-
ington, L. R., 6 Ch. D., 70 (1877). But
where a railroad contracts to run trains.
on Sunday, and afterwards a person
buys five shares of stock and brings.
suit to enjoin the company, his real
object being to preserve the Sabbath,
equity will not aid him. Sparhawk v,
Union, etc., R’y, 54 Pa, St., 401, 453
(1867).

968
PARTIES, PLEADINGS, ETC. [§ 737.

But where the transfer is merely nominal the transferee cannot
bring suit herein, since he has no pecuniary interests of his own to
protect, and equity will not aid him.’ In the federal courts differ-
ent rules prevail. It was found that transfers of stock were fre-
quently made for the purpose of securing jurisdiction of the case
in the federal courts. Litigation that properly belonged to the
state courts was added to the already overburdened calendars of
the United States courts? Accordingly, by judge-made law, the
supreme court of the United States made it a rule of the federal
courts that a transferee of stock cannot sustain a stockholder’s suit
to remedy a corporate wrong which was perpetrated before he be-
came a stockholder.’ In Georgia the rule of the federal courts is
adopted that a subsequent stockholder cannot complain.‘

§ 737. The complainant stockholder must sue in behalf of him-

CH. XLv.]

self and other stockholders.—It is a well-established rule of law

that a stockholder’s suit to remedy a wrong done to the corpora-
tion must. be in behalf of all-the stockholders, since they are all
equally interested in the results of the suit. Accordingly, the com-
plainant or complainants must bring the suit in behalf of them-

selves and such others of the stockholders as care to come in.®

1M’Donnell v. Grand Canal Co., 3
Ir. Ch. Rep,, N. 8., 578 (1858); Robson: v.
Dodds, L. R., 8 Eq., 301 (1869).

2See the yigorous denunciation of
such transfers by Mr. Justice Miller, in
Hawes v. Oakland, 104 U. S., 450 (1881).

3Rule 94, as follows: ‘Every bill
brought by one or more stockholders in
a corporation against the corporation
and other parties, founded on rights
which may properly be asserted by the
corporation, must be verified by oath,
and must contain an allegation that the
plaintiff was a shareholder at the time
of the transaction of which he com-
plains, or that his share had devolved
on him since by operation’ of law, and
that the suit is not a collusive one to
confer on a court of the United States
jurisdiction of a case of which it would
not otherwise have cognizance.” Pro-
mulgated January 23, 1882. See Dimp-
fel v. Ohio, etc., R. R. Co., 110 U.S.,
209 (1884); but see Leo v. Union Pa-
cific R’y Co., 17 Fed. Rep., 2738 (1883);
8. C., 19 id., 283. In Lafayette Co. v.
Neely, 21 Fed. Rep., 788 (1884), it is
held that this rule does not bar the

Tf

stockholder’s right to bring the action
after a dissolution of the corporation.
See, also, Whittemore v. Amoskeag
Nat’l B’k, 26 Fed. Rep., 819 (1885). See,
also, Vennor v, Atchison, etc., R. R.,
28 id., 581 (1886). :

4 Alexander v. Searcy, 8 S. E. Rep.,
630 (Ga., 1889).

5 Wallworth v. Holt, 4 Mylne & C.,
619 (1840); Taylor v. Soloman, id., 134
(1838), on the ground “ 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 on behalf of themselves
and of the others;” Beman v. Ruf-
ford, 1 Sim., N. §., 550 (1851); Bald-
win v. Lawrence, 2 Sim. & Stu., 18
(1824); Bromley v. Smith, 1 Sim., 8
(1826); White v. Carmarthen, etc,, R’y
Co., 1 Hem. & M., 786 (1868); Bailey v.
Birkenhead, etc., R’y Co., 12 Beav.,
438 (1850); Preston v. Grand Collier
Dock Co., 11 Sim., 327 (1840); Winsor
v. Bailey, 55 N. H., 218 (1875); Blatch-
ford v. Ross, 54 Barb., 42 (1869); Cun-
ningham v. Pell, 5 Paige, 607 (1836);
Fawcett v. Laurie, 1 Dr. & Sm., 192

969
PARTIES, PLEADINGS, ETC. [cH. XLY.

§ 738.)
all the stockholders, however, are made parties, there is no need of
the suit being brought in behalf of others who may choose to
come in.!

§ 738. Parties defendant herein.— The corporation itself is an
indispensable party defendant to a stockholder’s action for the.pur-
pose of remedying, a wrong which ‘the corporation itself should
have remedied.2 This rule is due to the fact that all other pos-
sible future suits by the corporation are thereby prevented, the
rights of the corporation are duly ascertained, and the remedy
made effectual against the corporation as well as others. It is not
necessary or proper to join the directors of the corporation as
parties defendant where the only object of the suit is to enjoin an
act or to set aside an ultra viresact. The decree against the cor-
poration is effective and binding upon all the officers of the corpo-

ration.’

(1860); March v. Eastern R. R. Co., 40
N. H., 548 (1860); Whitney v. Mayo, 15
Ill, 251 (1853). But see Cass v. Ottawa,
etc., Co., 22 Grant (U. C.), 512 (1875),
and Hoole v. Great Western R’y Co.,
L. R., 3 Ch., 262 (1867), to the effect
‘that the rule is otherwise as regards
ultra vires acts. The complaining
stockholder cannot ask for his share of
the property or money involved. Pratt
v. Bacon, 27 Mass., 122 (1880). Need not
allege who the other gtockholders are,
how numerous or whether a majority.
Descombes v. Wood, 4 8. W. Rep., 82
(Mo., 1887).

1Rogers v. Lafayette Agri’l Works,
52 Ind., 295 (1875). Cf. Bengley v
Wheeler, 45 Mich., 493 (1881). Several
stockholders may join in bringing the
suit. Marie v. Garrison, 83 N. Y., 14
(1880).

2Davenport v. Dows, 18 Wall., 626
(1873); Coxe v. Hart, 58 Mich., 657
(1884); Black v. Huggins, 2 Tenn. Ch.,
780 (1877); Samuel v. Holladay, 1
Woolw., 600. (1869); Allen o N. J,
Southern R. R. Co., 49 How. Pr., 14
(1875); Bagshaw v. Eastern, etc., R’y
Co., 7 Hare, 114 (1849); Gregory v.
Patchett, 33 Beav., 595 (1864); Charles-
ton, etc., Co. vu, Sebring, 4 Rich. Eq.
(8. C.), 342 (1853); Brinckerhoff v. Bost-
wick, 88 N. Y., 52 (1882); Cunningham

Where, however, the object of the suit is to hold the

v. Pell, 5 Paige, 607 (1886), holding
also that if the corporation is foreign,
service may be by publication. In a
stockholder’s suit against directors the
receiver of the insolvent corporation
must be made a party. Porter v. Sabin,
36 Fed. Rep., 475 (1888).

8 See §§ 745, 746, 755, infra; Winch ».
Birkenhead, etc., R’y Co., 5 De G. &
Sm., 562 (1852), where the court said: “I
do not think it is necessary that the di-
rectors should be parties. The act that
is sought to be restrained is the act of
the company, The company itself can-
not act except by means of its officers.”
Pioneer Gold, etc., Co. v. Baker, 20
Fed. Rep., 4 (1884); Heath v. Erie R’y
Co., 8 Blatch., 347 (1871); Chase v.
Vanderbilt, 62 N. Y., 307, 814 (1875);
Bryson v. Warwick, etc., Co., 1 Sm. &
G., 447 (1853); Bagshaw v. Eastern, etc.,
R’y Co., 7 Hare, 114 (1849); Allen v. N.
J. Southern R. R. Co., 49 How. Pr., 14
(1875), the court saying: ‘‘ They are rep-
resented by the corporation of which
they are alleged to be directors, and
when the corporation itself is made a
party defendant it is improper to add
the trustees or directors as parties when
no personal claim or judgment is asked
against them.” But see Ribon v. Rail-
road Cos., 16 Wall., 446 (1872). - The di-
rectors are bound to obey an injunction

970
 

CH. XLY.]

PARTIES, PLEADINGS, ETC.

($ 738.

directors personally liable for frauds or for negligence, the rule is

different.

In such cases they, of course, are necessary parties de-

fendant.!. As regards outside parties, they are to be joined as
parties defendant whenever the relief asked would affect their

rights.’

against the company if it comes to
their notice. Hatch v, Chicago, etc., R.
R., 6 Blatch., 105 (1868); People v.
Sturtevant, 9 N. Y., 263 (1858).

1See cases in chapter XXXIX and
chapter XLII; Ducket v. Gover, L,
R., 6 Ch. D., 82; Mason v. Harris, L. R.,
11 Ch. D., 97 (1879); Ferguson v. Wil-
son, L. R., 2 Ch., 77, 90 (1866); Imperial.
etc,, Assoc. v. Coleman, 6 H. L., 189
(1873); rev’g L. R., 6 Ch., 568,

2 Russell v. Wakefield, etc., Co., L. R.,
20 Eq., 474, the court saying: ‘‘ When
you have got the second corporation or
person a party to the suit, it may happen
that, in addition to the relief that you
are entitled to as regards the first, you
are entitled to have relief against the
second for something that has been done
under the ultra vires agreement. You
may be entitled to have money paid back
which has been paid under the ultra
vires agreement, and you may
be entitled to have property returned or
other acts done; ”~ Hare v. London, etc.,
R’y Co., 1 John. & H., 252 (1860), hold-
ing that in an action to set aside a traffic

’ contract all the corporations who were
parties to the contract are necessary
parties; Tyson v. Mahone, 1 Hughes
(U.S. C. Ct.), 80 (1871), to the effect that,
in an action to set aside a consolidation,
the other corporation is a necessary
party; Bill v. Donohue, i7 Fed. Rep.,
710 (1888); Taylor v. Miami, etc., Co., 5

O., 162 (1831), where a guilty stock-
holder was made a party defendant;
Abbot v. American Hard Rubber Co., 4
Blatch., 489 (1861); Bengley v. Wheeler,
45 Mich., 493 (1881); Shawhan wv. Zinn,
79 Ky., 300 (1881), holding that the ob-
jection to a defect of parties herein may
be raised at the trial, and need not be
raised by demurrer; Cass v. Ottawa,

ete., Co., 22 Grant (U.'C.), 512 (1875), -

holding that the attorney-general is not
a necessary party defendant. Cf. Ryan
wv. Ray, 33 Alb. L. J., 321 (Ind., 1886).
Sometimes the directors of another cor-
poration are proper parties defendant.

‘See Terhune v. Midland R. R. Co., 38
-N. J. Eq., 428 (1884). -

A person may be
made a party defendant for purposes of
discovery only. See Lewis v. St. Albans,
etc., Works, 50 Vt., 477 (1878).

In an action by a person against a
corporation for any cause of action a
secretary and book-keeper may be made
a party defendant for the purpose of
getting an answer of discovery under
oath, which the corporation cannot
make. Wych v. Meal, 3 P. Will., 310
(1734). See, also, § 519, supra. See,
also, Chase v. Vanderbilt, 62 N. Y., 307,
314 (1875); Many v. Beekman Iron Co., 9
Paige, 188 (1841); Masters v. Rossie, etc.,
Co., 2 Sand. Ch., 301 (1845); Brumly v.
Westchester, etc., Soc., 1 John. Ch., 366
(1815); McIntyre v. Union College, 6
Paige, 239 (1837); Vermilyea v. Fulton
B’k, 1 Paige, 387 (1828). But not where
the corporation is not a party. Ells-
worth v, Curtis, 10 Paige, 105 (1848). In
stockholder’s suit,in behalf of a dissolved
corporation, the receiver is a necessary
party. Clark v. San Francisco, 53 Cal.,
306 (1878). In a suit to set aside a lease
both the lessor and lessee railroad com-
panies are necessary parties. New Jer-
sey Central R. R. Co. v. Mills, 1138 U.S.,
249 (1885); East. Tenn., etc., R. R. Co.
v. Grayson, 119 U. S., 240 (1886). A
director who resigned before the acts
complained of were done is not to be
made a defendant, even though the res-
ignation was never accepted. Nor isa
director liable who was absent by rea-
son of sickness. Movius v. Lee, 30 Fed.
Rep., 298 (1887). In a suit to compel
directors to turn over to the corporation

971
§$ 739, 740.] PARTIES, PLEADINGS, ETC. ’ (OH. XLY.

§ 739. Complainant’ s bill must not improperly Join two or more
causes of action herein.— If the complainant’s bill is multifarious,
it of course cannot succeed as against the objection of the defend-
ants. Thus, it has been held that the stockholders cannot join an
action in reference to dividends with one for an injunction to re-
strain the corporate directors from committing a fraud.’ A bill
combining an action to restrain the corporation from investing in
the stock of another company, and one to restrain it from aiding
that company, has been held to be multifarious.?, The stockholders
cannot join a suit against the corporation with one against third
persons in behalf of the corporation.’

§ 740. Complainant must allege that he requested the corporation —
to bring the suit, and that the corporation refused or neglected to do
so.—Inasmuch as a fraud, ultra vires or negligent act of the di-
rectors of a corporation is an injury done to the corporation itself, .
it is the duty and proper function of the corporation to institute
any action that may be brought to remedy the injury to the cor-
poration. As already explained, however, a stockholder may bring
the action if the corporation improperly refuses or neglects to in-
stitute such suit. Before the stockholder brings suit he must make
a formal request to the corporate officers that suit be instituted
by the corporation. Upon its refusal or neglect to comply with
that request he may then bring” suit himself. It is well settled,
however, that he must allege in his bill in equity that such a re- «
quest has been made and has not been complied with. There has

profits improperly realized by them a (1849). Buta bill by stockholders and

separate action may be brought against
each director. Langdon v. Fogg,’ 18
Fed. Rep., 5 (1883); but see Chandler v.
Bacon, 30 Fed. Rep., 541 (1887), holding
that the liability is joint and several,
the court saying: “When the conduct
of parties operates as a fraud or deceit
upon third persons, whatever their pri-
vate intention, the relation of partner-
‘ship may be said to exist as to such
third persons.” To same effect, Ervin v.
Oregon, etc., Nav. Co., 20 Fed. Rep.,
577 (1884). See § 663.

lWinsor, v. Bailey, 55 N. H., 218
(1875). ' A stockholder’s suit is not mul-
tifarious, although it is to compel the
treasurer to pay back certain funds, and
also to!have a dividend declared there-
from. Dunphy v. Travelers’, etc., Ass'n,
16 N. E. Rep., 426 (Mass., 1888).

2Salomons v. Laing, 12 Beav., 339

creditors to restrain acts and have a dis-
solution is not multifarious. Mills v.
Hurd, 82 Fed. Rep., 127 (1887).

3 Thomas v. Hoblen, 8 Jur., N. S., 125
(1862). And see in general on multifa-
riousness herein, Merchants’, etc., Line
v. Waganer, 71 Ala., 581; Smith v. Rath-
bun, 22 Hun, 150 (1880); 88 Fed. Rep.,
629. An action to be allowed to enter a
re-organized company and one to hold
its officers liable for fraud cannot be
joined» Stanton v. Missouri, etc., R’y
Co., 4 R’y & Corp. L. J., 370 (N. Y., 1888).

*Cogswell v. Bull, 39 Cal., 320 (1870);
Hazard v. Durant, 11 R. L, 195 (1875),
the court saying that the allegations of
request ‘ will be sustained by proof of
a request to the stockholders in corpo-
rate meeting, or to the directors in otfice
when the suit began, or in any other
mode so that it be in legal effect a re-

972
eZ

 

CH. XLY.] PARTIES, PLEADINGS, ETO.

[$ 740.

been considerable discussion as to whether the stockholder, in ad-
dition to his request to the corporate officers to institute the suit,

' should not also be required to attempt to induce the stockholders

in meeting assembled to take action by directing the directors to
bring suit, or by refusing to re-elect them at the next election. The
facts, however, that the stockholders in meeting assembled cannot
control the discretion of the directors in bringing such a suit; that
_the remedy of refusing to re-elect them involves delay, and the as-
“sumption that a minority of the stockholders can by the election
control such a suit; that irreparable injury or the vesting of great
financial interests may ‘occur in the meantime; and that laches may
arise as a bar to the stockholder’s suit _-have settled the rule that
the stockholder’s request to the corporate directors to institute the

suit is sufficient.
ing!

quest to the corporation; Talbot v.
Scripps, 31 Mich., 268 (1875); Ware v.
Bazemore, 58 Ga., 316 (1877); Mer-
chants’, etc., Line v. Waganer, 71 Ala.,
581; Hersey v.iVeazie, 24 Me., 9 (1844);
Memphis City v. Dean, 8 Wall. 64
(1868); House v. Cooper, 30 Barb., 157
(1858); Wilkie v. Rochester, etc., R’y, 12
Hun, 242 (1877); O’Brien v. O'Connell,
7 Hun, 228 (1876); Abbott v. Merriam, 62
Mass., 588 (1851); Morgan v. R. R. Co., 29
Vt., 545 (1851). But a request to bring
the suit in a federal court is insuffi-
cient. See Newby v. Oregon Central
R. R. Co., 1 Sawyer, 63 (1870). The lead-
ing case of Foss v. Harbottle, 2 Hare,
461 (1848), failed by reason of a failure to
make this effort to induce the corpora-
tion to act. See, also, the important case
of Greaves v. Gouge, 69 N. Y., 154 (1877);
Cogswell v. Bull, 39 Cal., 820 (1870);
Palmer v. Hawes, 40 N. W. Rep., 676
(Wis., 1888). The defendant cannot raise
this point in the appellate court for the
first time. See Bulkley v. Beg, etc., Co, 5;
77 Mo., 105 (1882). The request to the
directors must be made in good faith
and the actual wrong set, forth, and the
directors must not’be charged in the re-
quest as being guilty unless they really
are so. Bacon v. Irvine, 11 Pac. Rep.,
646 (Cal., 1886). An allegation simply

that the corporation neglected is insuffi-

cient. Must allege refusal. Leslie v.

He need not also apply to a stockholders’ meet-
In the federal courts the necessity of an allegation that the

Lorillard, 21 Hun, 305 (1888). Need not
allege spevifically that the present board
of directors have refused to act. Brown
v. Buffalo, ete., R. R., 27 Hun, 344
(1882), A request to and refusal by the
president, who is also the manager,
suffices even though he is the party
guilty of the acts complained of. City
of Chicago v. Cameron, 11 N. E. Rep.,
899 (Ill., 1887); 6 N. Y. Supp., 255.. If
receiver is in charge request is to be to
him. Nelson v. Burrows, 9 Abb. N. C.,
280; Fisher v. Andrews, 87 Hun, 176
(1885); Kelsey v. Sargent, 40 Hun, 150,
(1886). A request to the executive com- .
mittee issufficient. Hazard v. Durant,
11 R, L, 196 (1875), A stockholder suing .
in behalf of his corporation, which has
been dissolved many years, must nev-
ertheless show that he sought to have
the directors bring suit. Taylor v.
Holmes, 127 U. 8., 489 (1888). No re-
quest: to directors if ultra vires act.
Botts v. Simpsonville, etc., Co, 10 8.
W. Rep., 184 (Ky., 1888).
1Mason v. Harris, L. R., 11 Ch. D.,

97 (1879), holding also that the court
has no power to order such a meeting.
See a discussion of this question in
Brewer v. Boston Theater, 104 Mass. , 378
(1870). See, also, Gregory v. Patchett,
38 Beav., 595 (1864). In McDougall v.
Gardiner, 1 Ch. D., 18, 22, the difficulty
herein. probably arose from cases where

973

\
§ 741.] PARTIES, PLEADINGS, EIC. [cH. XLV.
corporation has been requested to sue and has refused is fixed by
a rule of the court.

§ 741. When such an allegation may be omitted There are oc-
casions when the allegation that the stockholder has requested
the directors to bring suit and they have refused may be omitted,
since the request itself is not required. This occurs when, the
corporate management is under the control of the guilty parties.
No request need then be made or alleged, since the guilty parties
would not comply with the request; and even if they did the court

‘would not allow them to conduct the suit against themselves.?

a stockholder sought to enjoin acts
which the directors could not do, but
which the majority of stockholders
could do. If the stockholders have the
power to remove the directors, a request
to the stockholders to act must be made
before suit is brought by a stockholder.
Rathbone v. Parkersburg, etc., Co., 8
8. E. Rep., 570 (W. Va., 1888).

1Rule 94: *. It [the bill] must
also set forth with particularity the
efforts of the plaintiff to secure such
action as he desires on the part of the
managing dir ‘ectors or trustees ; and, if
necessary, of the shareholders, and the
causes of his failure to obtain such ac-
tion.” McHenry v. N. Y., etc, R. R.

Co,, 22 Fed. Rep., 130; 25 id., 65, 114.

_See Leo v. Union Pacific R’y Co., 19
Fed. Rep., 288 (1884); 8. C., 17 id., 278;
Converse v. Dimock, 22 Fed. Rep., 573
(1884); Bill ». Western Union Tel. Co.,
16 Fed. Rep., 14; Quincy v. Steel, 120
U. S., 241 (1887); Foote v. Cunard Min.
Co., 17 id., 46 (1883), holding that an
allegation that the corporation would
probably refuse relief is insufficient,
Not to be omitted merely because the
guilty party owns a majority of the
stock, Allen v. Wilson, 28 Fed. Rep.,
677 (1886). Fact that the guilty party
elected the existing board of directors
does not excuse request. Allen v. Wil.
son, 28 Fed. Rep., 677 (1886).

2 Brinckerhoff v. Bostwick, 88 N,' ¥.,
52; Rogers v. Lafayette, etc., Works,
52 Ind., 295 (1875); County of Tazewell
v. Farmers’, etc., Co., 12 Fed. Rep., 752
(1882); Davis v. Gemmell, 17 Atl. Rep.,

259 (Md., 1889); Board of Tippecanoe
Co. v. Lafayette, etc., R. R. Co., 50 Ind.,
85 (1875); Wilcox v. Brickel, 11 Neb.,
154 (1881), where. the officers had ab-
sconded; Currier v. N.Y., etc., R. R. Co.,
35 Hun, 355 (1885); Ramsey v. Gould, 57
Barb., 398 (1870); Kelsey v. Sargent, 40
Hun, 150 (1886); Parrott v. Byers, 40
Cal., 614' (1871); Fisher v. Andrews, 37
Hun, 176; Young v. Drake, 8 Hun,
61 (1876); Heath v. Erie R’y Co., 8
Blatch., 347 (1871), the court saying:
“It would be a mockery to require or

. permit a suit against them to be brought

and prosecuted under their manage-
ment to obtain the relief sought by
this bill; ” Mussina v. Goldthwaite, 34
Texas, 125 (1870); Dowd v. Wisconsin,
etc., R. R. Co,, 65 Wis., 108 (1886);
Pond v. Vermont, ete., R. R. Co., 12
Blatch., 280 (1874). But an allegation
that the management is under the con-
trol of persons appointed by the guilty
parties is insufficient. See McMurray
v. Northern, etc., R’y Co., 22 Grant (U.
C.), 476 (1875). And an allegation that
the directors are ‘‘nearly if not en-
tirely ” in league with the guilty parties
is insufficient. Cogswell v. Bull, 89
Cal., 320 (1870). If the directors are thes
guilty parties, a stockholder suing to
prevent their running the corporation
for the benefit of a partnership need
not allege a request to them to sue,
Rothwell v. Robinson, 38 N. W. Rep.,
772 (Minn., 1888). If the fraud has
been by the majority of the stockhold-
ers on the minority, no request to the
directors to sue need be made, Nathan

974
CH. XLY.] PARTIES, PLEADINGS, ETC. [$$ 742-744.
Nevertheless, instead of this allegation the complainant must al-
lege the facts which excuse such a demand or request to the
directors, and these facts must be stated with particularity and
definiteness.'

§ 742. Miscellaneous. pllagaiinns of the complainant.— The alle-
gations which set forth the complaining stockholder’s cause of ac-
tion will of course depend largely on the particular facts of each
case. It is necessary, however, to determine first whether the al-
legations are to make out a case of fraud, or of an ultra vires act,
or of a negligent act. If an ultra vires act is complained of, the
gist of the action is not fraud, and it need not be alleged.? But
where the action is to remedy a fraud, the allegations must clearly
charge to that effect. The word “corrupt” has been held insuffi-
cient herein.’ If the action is to set aside an wltra vires act, the act
itself must be stated with particularity.‘

§ 743. Prayer for relief.— The relief for which srayer is made
in the bill will depend upon the character of the act complained of,
and also of the facts in the particular case. Generally it is to com-
pel the director or third parties to pay over to the corporation
money.or property fraudulently held by the defendants, or to en-
join acts, or to set aside transactions, or for a receiver, or for dis-
solution, or for more than one of these. It is well settled that the
prayer for relief may be in the alternative® The relief granted
cannot exceed that which is asked.

§ 744. Property received under the act objected to must be re-
turned upon that act being set aside— This is-a principle of law
that applies to all the remedies given by a court of equity in rem-
edying the frauds or wltra vires acts of the directors or third per-
sons against the corporation. He who seeks equity must do equity.
An ultra vires act will not be set aside unless the money or prop-

v.. Tompkins, 28. Rep., 747 (Ala., 1887).
See 21 Pac. Rep., 1133. Need not re-
quire directors to undo illegal lease
when they cannot, except-with consent
of another company. B’d of Com’rs v.
Lafayette, etc., R: R. Co., 50 Ind., 85
(1875). Request to directors is not ex-
cused by the fact that the guilty party —
the corporate treasurer — owns a major-
-ity of the stock. Dunphy v. Travelers’,
etc., Ass’n, 16 N. E. Rep., 426 (Mass.,

1888).
’ 18 ee cases in preceding note. The
stockholder may bring his suit although
the ‘corporation has been dissolved.

Lafayette: Co. v. Neely, 21 Fed. Rep.,
788 (1884).

2Clinch v. Financial Co,, L. R., 5 Eq.,
450, 482 (1868).

3 Russell v. Wakefield, etc., Co., L. R.,
20 Eq., 474 (1875).

4Leo v. Union, etc., R’y Co., 19 Fed.
Rep., 288 (1884); S. C., 17 id., 2738.
Must allege that the corporation is one
for profit. Applegarth v. McQuiddy, 19
Pac. Rep., 692 (Cal., 1888).

5 Colton v. Ross, 2 Paige, 396 (1831);
Thomas v. Hobler, 4 De G., F. & J., 199
(1861).

6 Latimer v. Eddy, 46 Barb., 61 (1864).

975
§ 745.] | PARTIES, PLEADINGS, ETC. [cH. XLV.
erty received by the corporation from third persons thereby is
returned to such persons.’

§ 745. Injunction restraining the corporate officers and others
from doing specified acts— The ordinary remedy of the stock-
holder is an injunction by a court of equity restraining the corpo-
rate officers from doing the specified fraudulent or wltra vires act
which the stockholder complains of.? Generally the injunction.
runs to the corporation itself; and this is sufficient to make it ef-
fectual and binding upon all corporate officers to whose notice it

comes.?

1 Buford v, Keokuk, etc., Co., 69 Mo.,
611 (1879); Harpending v. Munson, 91
N. Y., 650 (1883); New Castle, etc., R. R.
Co. v. Simpson, 23 Fed. Rep., 214 (1885),
allowing to the party outlays, com-
pensation and interest. C/. Gray v. N.
Y¥., etc, Co, 5 T. & C., 224 (1875);
Thomas v. R. R. Co, 101 U. 8., 71;
Louisiana v. Wood, 102 U. 8., 294; Lind-
ley on Partnership, 363; Chapman v.
Douglas County, 107 U. S., 348; Salt
Lake City v. Hollister, 118 id.; 256, 263;
Green’s Brice’s Ultra Vires, 717. Con-
sideration must be returned. Pirson v.
McCarty, 38 Hun, 520 (1884), where a
receiver sued a director for funds used

to purchase stock, See, also, Gould v. —

Cayuga, etc., B’k, 86 N. Y., 75 (1881);
but see Allerton v. Allerton, 50 N. Y.,
670 (1872). Payment by bondsmen
of moneys used by directors in illegal
purchases of bonds prevents action
by receiver of corporation against di-
rectors. Hun v, Van Dyck, 26 Hun, 567
(1882). As tothe right of the fraudu-
lent possessor to compensation for im-
provements, see Jackson v. Ludeling,
99 U.S., 518 (1878). If, however, the
complainant never received the consid-
eration and cannot compel others to re-
turn it, it is not necessary for him to
offer to return it. See Lamb v. San
Pedro, etc., Co., 9 Pac. Rep., 525 (New
Mex., 1886).

Where two religious corporations
united by one conveying its property to
the other and the latter paying the debts
of the former, a judgment setting aside
such sale will also require the former

vanced by it. Madison Ave., etc., Ch.
v. Oliver St. Bap. Ch., 73 N. Y., 82
(1878); Pierson v. McCurdy, 33 Hun, 520
(1884). A stockholder seeking to have
corporate bonds canceled must offer to
return the consideration. Spencer. v.
Clarke, 1 N. Y. Supp., 533 (1888). It is
clear, however, that the stockholder
himself cannot be expected to repay
this consideration. A just rule would
allow him to pray in his bill that the
corporation repay the consideration.
Cf. Atlantic & Pac. Tel. Co. v. Union
Pac. R’y Co., 1 McCrary, 541 (1880),
holding that though a contract be ultra
vires a corporation will be restrained
from recovering possession of property
conveyed by it, except by due process of
law and after return of the considera-
tion. A stockholder suing to set aside
need not tender if the party sued knew
of stockholder’s dissent at the time
when he envered into the act. Metro-
politan, etc., R. R. Co. v. Manhattan,
etc., R. R.Co., 11 Daly (N. Y. Com. Pl.)
873 (1884).

2River Dun Nav. Co. v. North, etc.,
Ry Co., 1 R’y Cas., 184, 158 (1888);
Blatchford v. Ross, 54 Barb., 42 (1869).
In Indiana it is held that no injunction
will be granted against the payment of
an unfounded claim by the directors,
but that the action will proceed and
other relief be. granted. Rogers v, La-
fayette, etc., Works, 52 Ind., 296 (1876).

5See §§ 738, 755; also Hatch v. Chi,
cago, etc., R. R. Co., 6 Blatch., 105
(1868); Trimmer v. Penn., etc, R. R.
Co., 86 N. J. Eq., 411 (1888), holding,

to restore to the latter the money ad- however, that the officers are not liable
976 :
 

‘CH. XLV. |

PARTIES, PLEADINGS, ETC.

(8 746.

§ 746. Injunction against corporate officers acting at all, and the
appointment of a receiver.— The law is well settled that the courts

have no power to remove corporate officers.! -

Nor can. the stock:

holders, in meeting assembled, remove the officers.? It is also well
established that a court of equity cannot practically remove cor-
porate officers by enjoining them from performing any of their
customary duties, and by appointing a receiver to manage the cor-
porate affairs? Frequently, however, the power to restrain or re-

herein for coutempt by reason of the
, acts of subcontractors. See People v.

Sturtevant, 9 N. Y., 263 (1853); Same v.
" Pendleton, 64 N. Y., 622 (1876).

‘1Neall v. Hill, 16 Cal., 145 (1860), the
court saying: ‘‘It is well settled that
there is no jurisdiction in equity with
regard to the removal of corporate offi-
cers of any description.” §27.

2Imperial, etc., Co. v. Hampson, 1882,
W.N., 189. See § 627.

3 People v. Albany, etc., R. R, Co., 55
Barb., 344, 383 (1869); Einstein v. Rosen-
field, 88 N. J. Eq., 309 (1884); Howe v.
Deuel, 43 Barb., 504 (1865); Waterbury
v. Merchants’, etc., Co., 50 Barb., 157
(1867); Cicotte v. Anciaux, 53 Mich., 227
(1884); La Grange v. State Treas., 24
Mich,, 468 (1872). In Hyde Park Gas
Co. v. Kerber, 5 Bradw. (Il.), 182 (1879),
where a decree had been made that a
receiver be appointed unless the officers
paid over money received by them in
fraud of corporate rights, the court set
aside the decree and said: ‘‘ In principle
this is very much like sending the cred-
itor to jail because his debtor cannot
pay him, and is so opposed to that spirit
of justice which pervades all the true
doctrines of equity jurisprudence that
it will not bear discussion.” Bayles v.
‘Orme, Freeman’s Ch. (Miss.), 161 (1841);
People v. Conklin, 5 Hun, 452 (1875) ;
Hand v. Dexter, 41 Ga., 454 (1871);
Baker v. Adm’r of Backus, 32 Ill., 79
(1868); People v. Albany, etc., R. R. Co.,
% Abb. Pr., N. 8., 290; Belmont v. Erie
R’y Co., 52 Barb., 637 (1869); Smith v.
Wells, 20 How. Pr., 158. Even where
two rival boards of directors are litigat-
ing their respective rights, the court

(62)

cannot turn the corporate affairs over
toareceiver. See Karnes v. Rochester,
etc., R. R. Co., 4 Abb. Pr., N. S., 107
(1867). See Gavenstine’s Appeal, 49
Penn. St., 310 (1865), holding that the
appointment of a receiver is equivalent
to enjoining the officers from managing
the corporate business. A few cases
have held that the court, under extreme
circumstances, may appoint a receiver
to take charge of the corporate busi-
ness, even though the corporation is
solvent, and no dissolution is intended,
and no corporate creditors’ interests are
involved. See Stevens v. Davison, 18
Gratt. (Va.), 819 (1868), where a railroad
was turned over toa receiver to protect
stockholders’ rights. Court will not en-
join officers from acting. Foss v. Har-
bottle, 2 Hare, 461; Mozley v. Alston,
16 L. J., Ch., 217 (1847); Hattersley v.
Earl Selburne, 31 L. J., Ch., 873 (1862).
So, also, Manneck, ete., Co. v. Man-
neck, 28 Alb. L. J., 216 (1881). Mere
disagreements of the parties as to the
management of the property is no
ground for a receivership. America,
etc., Co. v. Toledo, etc., R’y Co., 29
Fed. Rep.; 416 (1886). A stockholder
may have receiver appointed of foreign
corporation which is insolvent and in
hands of a receiver in state creating it.
Phoenix Foundry v. North River Con. |
Co., 33 Hun, 156(1884), In New York an
injunction herein enjoining the corpo-
rate officers from acting can be granted
only by the court and after notice. See
Wilkie v. Rochester, etc., R’y Co., 12
Hun, 242 (1877). See Cincinnati, etc.,
R. RB. v. Duckworth, 2 R’y & Corp. L. J.,
560 (1887), refusing a receiver at the in-

977 .
§§ 747, 748.] PARTIES, PLEADINGS, ETC. (CH. XLY.
move corporate officers, and to appoint a receiver of the corporation,
is given to the court by a statutory enactment.!”

§ 747. Miscellaneous remedies.—It has been held and clearly
established that a stockholder cannot bring about the dissolution
of the corporation merely because the officers have been guilty of
a breach of trust.2, Nor can he defeat an action for his subscrip-,
tion by alleging such a defense.’ There are various other remedies
and rules which govern this subject.’

§ 748. The complaining stockholder controls the conduct of the suit.
It is a principle of equity practice, when a person brings a suit in
behalf of himself and such others as may wish to come in who are,
similarly situated, that the complaining stockholder controls the

stance of a stockholder and discussing
the question. In New York a stock-
holder’s action under the statute to place
the corporate property in a receiver's
hands and for an accounting by its offi-
cer will be compelled to give precedence
to another action instituted by the at-
torney-general under the statute to re-
move the officers, etc. Keeler v. Brook-
lyn EL. R. R., 9 Abb. N. C., 166 (1880).
In New York misconduct of a trustee
authorizes a court to appoint receiver.
Jenkins v. Jenkins, 1 Paige, 243 (1829).
See, also, in general, Frostburg Bldg.
Ass'n v. Stark, 47 Md., 338 (1877). In
the case of Hayward v. Lincoln Lumber
Co., 26 Northwest. Rep., 184 (Wis,
1885), the corporation was insolvent.
In Lawrence v. Greenwich Fire Ins. Co.,
1 Paige, 587 (1829), the court appointed
a receiver to preserve the corporate
property, there having been no officers
elected by the stockholders. See, also,
Conro v. Gray, 4 How. Pr., 166; Kelly
v. Mariposa, etc., Co., 4 Hun, 632 (1875).
Receiver appointed if the corporation is
practically defunct and there has been
a breach of trust. Hall. Astoria, etc.,
Co., 5 R’y & Corp. L. J., 412 (Louisville
Ct., 1889).

1In New York it would seem, under
§ 1810 of the Code of Civil Procedure,
that a receiver cannot be appointed at
the instance of a stockholder suing to
remedy the frauds, ultra vires acts or
negligence of a director. ‘See, also, Ver-
planck v, Mercantild Ins, Co,, 1 Edw.

Ch., 88 (1831), and the New York cases
in the preceding note. In New York it
has been held that a stockholder may
have a corporate officer arrested for his
frauds on the corporation. Crook v,
Jewett, 12 How. Pr., 19 (1854). ,

2See § 629, supra. :

3See § 187, supra; also Chetlain v.
Republic Life Ins, Co., 86 IIL, 220 (1877);

_ South Georgia, etc., R. R. Co. v. Ayres,

56 Ga., 230 (1876). Nor can the stock.
holder enjoin a call. Ea parte Booker,
18 Ark., 338 (1857). If an illegal con-
solidation is set aside, the stockholders
of the new company may recover back
the amount paid in by them. In re Bank
of Hindustan, L. R., 16 Eq,, 417 (1878).

4 Where money is recovered and is to
be distributed among the stockholders,
see Pacific R. R. Co. v. Cutting, 27 Fed.
Rep., 638 (1886). Director cannot. set,
off claims due to him from the com-
pany. Ew parte Pelly, 21 Ch. D., 492.
His bankruptcy is no defense. Emma
Min. Co. v. Grant, 17 Ch. D,, 122. The
corporation may appeal from the judg-
ment. Sheridan v. Sheridan Electric
L, Co., 88 Hun, 396 (1886). Defendant
cannot demand trial by jury. Brincker-
hoff v. Bostwick, 105 N. Y., 567 (1887);
21 N. E. Rep., 1044 (1889), Even though
the plaintiff proves fraud, yet if the
findings are not full enough to sustain
the judgment, the higher court will re-
verse a judgment in the plaintiff's favor.
Beach v, Cooper, 13 Pac. Rep., 161

‘(Cal., 1887).

. 978
CH. XLV. ]

PARTIES, PLEADINGS, ETC.

t

[§ 749.

case and may continue, compromise, abandon or discontinue it at

-his pleasure.! In case the suit is successful the complaining stock-
holder is entitled to have his costs paid by the corporation.

_ -§ 149. No contribution among the directors.— There is no contri-
bution among directors guilty of a breach of trust for which a part

are held liable.? The director cannot set up a set-off,‘ or bank-

ruptcy, where he is guilty of fraud.’

1“ The plaintiff, as he acts upon his
own mere motion and at his own ex-
‘pense, retains (as in other cases) the ab-
solute dominion of the suit until decree,
and may dismiss the bill at his pleasure.
After decree, however, he cannot by his

‘conduct deprive other persons of the.

same class of the benefit of the decree if
they think fit to prosecute it.” 1 Daniels
on Ch, Pl. & Pr. (4th Am. ed.), 244;

Allen v. N. J. Southern R.R. Co., 49°

How. Pr., 14 (1875); Tremain v. Guard-

ian, etc., Ins. Co., 11 Hun, 286 (187%), .

allowing discontinuance, and reviewing
cases. See, also, the valuable briefs in
this case. But see Seaton v. Grant, L. R.,

2Ch., 459 (1867). Cf. Scarth v. Chad-'

wick, 14 Jur., 300 (1850). In the case of
Belmont v. Erie R’y Co., 52 Barb., 637
(1869), the court held that the other
stockholders could interfere in the man-
agement of the case. If the guilty di-
rectors settle with the complaining
stockholder by paying him out of the
corporate treasury the corporation may
‘subsequently recover back the money
so paid. Erie R’y Co. v. Vanderbilt, 5
Hun, 128 (1875). See, also, Derby v.

Yale, 18 Hun, 273 (1878); Tremain v. .

Guardian, etc., Ins. Co., 11 Hun, 286
.(1877), The stockholder who sues may
discontinue or go on. Mattison v. Dem-
carest, 1 Rob., 717 (1863). Cf. Thouron
v. East., etc., R’y Co., 88 Fed. Rep., 673
(1889); Innes v. Lansing, 7 Paige, 584
(1889). The suit stops if the complain-
ing stockholder is paid. Scarth v. Chad-
_wick, 14 Jur., 300 (1850).
2Meeker v. Winthrop Iron Co., 17
Fed. Rep., 48 (1883); Trustees v. Green-
ough, 105 U. 8., 527 (1881); Central R. R.

: I

Co. v. Pettus, 113 U. §., 116 (1885), also

holding that the attorney may have

certain costs from parties benefiting

thereby. When the majority enters

into litigation with the minority costs .
are not to be paid by the majority out

of the corporate funds. Pickering v.

Stevenson, L. R., 14 Eq., 322 (1872).

The case of Hubbard v. Camperdown

Mills, 1 S. E. Rep., 5(S. C., 1886), holds

that the attorney for stockholders re-

straining the corporation from a fraud

and having a receiver appointed cannot.
collect his fees from the corporate as--
sets, but that the fees of the attorney-
defending the corporation should be-
paid from the fund. Cf. In re Attorney-
General v. North, etc., Ins. Co., 91 N. Y,,.
57 (1888).

3 Wilkinson v. Dodd, 40 N. J. Hq., 128.
(1885); Ervin v. Oregon, etc., Co., 20:
Fed. Rep., 577 (1884); Peck v. Ellis, 2.
Johns. Ch., 181 (1816). See Power v.
Conner, 19 W. R., 928. In Lingard:
v. Bromley, 1 Ves. & B., 114 (1812),.
contribution was enforced between as-
signees in bankruptcy, one of whom had
improperly paid a loss with the concur-
rence of the others. In Ramskill v. Ed-
wards, L. R,, 31 Ch. D., 100 (1885), con-
tribution was enforced against a director
who subsequently ratified an unauthor-
ized loan which another director made
and was held responsible for. An exec-
utor of a deceased director was also held *
liable. A director who objects and pra-
tests is not liable. '

4 Kx parte Pelly, L. R., 21 Ch. D., 492
(1882). = a

5Emma, etc., Co. v. Grant, L. R., 17
Ch, D., 122 (1880). :

979
§ 750.] PARTIES, PLEADINGS, ETC. [CH. XLV,

SUITS BY OR AGAINST THE CORPORATION IN GENERAL ~~: SERVICE

AND JURISDICTION.

B

§ 750. The discretion of the directors in refusing to institute or
to defend an action uwolving corporate interests is not generally in-
terfered with.— It frequently happens that the corporation has a
cause of action against a third party which the directors think best
not to press, or that the corporation is sued and the directors think
best not to defend, or, where an action is pending, the directors de-
cide to compromise the matter. The judgment of the directors
may, in the opinion of a stockholder, be erroneous, and yet it can-
not be controlled or changed by the stockholders except by refus-
ing to re-elect the directors to office. The stockholder cannot go
into court and attempt to change the policy of the directors as
regards the management of the suit.! In general a corporation
represents and binds the shareholders in bringing and defending
suits which involve the rights and obligations of the corporation,
and binds them as fully as in the making of contracts.?

Thus, it is not for the stockholder to institute a suit for a trespass
against the corporate property ;* nor can he take out an appeal or
certiorari which the corporation does not take out;* nor bring an

1 These principles of law follow neces-
sarily from the fact that the manage-
ment and policy of the corporation
are determined and controlled by the
directors and not by the stockholders.

The only cases wherein the stockholders.

may interfere are cases where the di-
rectors are guilty of fraud, ultra vires
acts or gross negligence in protecting
the corporate interests.

‘‘There may be claims against direct-
ors; there may be claims against offi-
cers; there may be claims against debt-
ors; there may be a variety of things
which a company may well be entitled
to complain of, but which, as a matter
of good sense, they do not think it right
to make the subject of litigation; and it
is the company, as a company, which
has to determine whether it will make
anything that is wrong to the com-
pany a subject-matter of litigation, or
whether it will take steps itself to pre-
vent the wrong from being done.” Mac-
Dougall v. Gardiner, L. R., 1 Ch. D., 13
(1875). See, also, 15 Fed. Rep., 361, note.

Even a majority of stockholders cannot
go into court and have appeals dis-
missed where the directors order them
to be continued. Railway Co. v. Alling,
96 U. S., 468 (1878).
_? Farnum v. Ballard, etc., Shop, 12
Cush., 507 (1853); Oglesby v..Attrill, 105
U. S., 605 (1881); Came v. Brigham, 39
Me., 35 (1854); Lane v. Weymouth School
Dist., 10 Metc., 462 (1845); Graham v,.
Boston, Hartford & Erie R, R. Co., 118
U.S., 161 (1886), affirming S. C., 14 Fed.
Rep., 758 (1883). Minority bringing suit
against a third person to enforce aright
which the corporation ought to enforce
must make the corporate officers co-
defendants. Slatterly v. St. Louis, etc.,
Co., 48. W. Rep., 79 (Mo., 1877). A stock-
holder cannot appeal from a decree
against the company. Ex parte Cut-
ting, 94 U. S., 14 (1876). For the right
of a stockholder or bondholder to inter-
vene, see §§ 659, 687.

3 Dale v. Grant, 34 L. J., 142 (1870).

4 Silk Mfg. Co. v. Campbell, 27 N. J.
L., 589 (1859).

980
oH. XLv.] |

PARTIES, PLEADINGS, ETC. $750.

ay

action against other corporate agents for injury and loss to the
corporation. The great case of Dodge v. Woolsey,’ however, was
on the very point now under discussion, and it was decided under
the facts of that case, where the corporation refused to defend
itself against an illegal tax, that a stockholder of the corporation
might do that which the corporation should have done.’ It is
within the power of the directors to compromise a pending lawsuit
by or against the corporation, and a stockholder cannot control the
directors’ decision.!

It has been held, however, that a stockholder may bring suit on
behalf of the corporation to remove a cloud from the corporate
title to real estate,® and that a stockholder may sue for the corpora-
‘tion to compel delinquent stockholders to pay in their unpaid sub-
seriptions.® In one case it has been held that where there is a.
controversy among the stockholders as to how many directors one
of the stockholders—a municipality —is entitled to, a stockholder
may file a bill to settle it, since the corporation is not bound to
decide or test the matter.’

The rule which ordinarily prevents a stockholder from instituting
or defending a suit against third persons herein is clearly to be
distinguished from all other classes of actions treated of in the
fourth part of this work. The actions now being considered are

1 Forbes v. Whitlock, 3 Edw. Ch., 446
(1841). See, also, Quincey v. Steel, 120
U. S., 241 (1887).

218 How., 381 (1855), where the court’
said: ‘‘ Now, in our view, the refusal
upon the part of the directors, by their
own showing, partakes more of disre-
gard of duty than of an error of judg-
ment. It was a non-performance of a
confessed official obligation, amounting

to what the law considers a breach of -

trust; though it may not involve in-
tentional moral delinquency.” See,
also, Memphis, etc., Co. v. Williamson,
9 Heisk, (Tenn.), 314 (1872), where suit
was brought on the bond which the
plaintiff in Memphis City v. Dean (8
Wall., 73), gave in obtaining an injunc-
tion, |

3See, also, Park v. Petroleum Co., 25
W. Va., 108 (1884); 8. C., 26 id., 486
(1885),

41t cannot be contended that the
directors of acorpuration do not possess
authority, acting in good faith and in

the exercise. of their best judgment, to
settle a pending action, or that the
settlement is not binding on their stock-
holders, even though it may subse-
quently appear that they failed to se-
cure the best terms to which the cor-
poration might have been entitled.”
Donohue v. Mariposa, etc., Co., 66 Cal.,
317 (1885). See, also, Shawhan wv. Zinn, -
79 Ky., 300 (1881). The board of direct-
ors may compromise claims and law-.
suits. New Albany v. Burke, 11 Wall.,
96 (1870); First Nat'l B’k v. Nat'l Ex--;
B’k, 92 U. S., 122 (1875), aff’g 39 Md.,
600; Pneumatic, etc., Co. vy. Berry, 113.
U. §., 322 (1885); Frankfort Bk v.
Johnson, 24 Me., 490 (1844): Seeley wv.
San Jose, etc., Co., 59 Cal., 22 (1881).

5 Baldwin v. Canfield, 26 Minn., 48, 56
(1879).

6 Wallworth v. Holt, 4 Mylne & C.,
619 (1840).

7 City of Wheeling v. Mayor of Balti-
more, etc., 1 Hughes, 90 (1862).

981
§§ 751, 752.] PARTIES, PLEADINGS, ETC. [cH. XLV.

those which exist for or against the corporation in a multitude of

‘eases, and which are of daily occurrence to all great corporations.
They are actions not involving frauds or ultra vires acts of the di-
rectors, but involve at the most only a neglect of the directors to
begin or defend suits.

There is a class of cases which are midway between these two
classes. This third class involves a neglect of the directors to de-
fend a suit against the corporation, and this class involves the fur-
ther fact that the defense is not made on account of the fraud and
collusion of the directors with the complainants in the suit. This
generally happens in foreclosures of mortgages on the property of
the corporation, a subject which has already been treated.

§ 751. Suits by and against corporations.— It is stated by Black-
stone that one of the distinguishing features of a corporation is
that it may sue and be sued in its artificial corporate name. This
is an elementary principle of law. Consequently, the stockholders
are not to be made parties in suits against the corporation. More-
over, a suit by or against the corporation must be by or against it
in its corporate name, and not in the names of its officers.? The
president of the company may employ an attorney to bring suit
or to appear for the company.‘

§ 752. Service— Appewrance-— Answer.— If the suit is against
the corporation, service is made upon it, not by service upon a.
stockholder,® but upon the chief officer of the corporation within
the jurisdiction.®

1See § 659, supra.

2Kelley v. Miss., etc., R. R. Co, 1
Fed. Rep., 564 (1880).

3 Action against an individual,
“president of the,” etc., is nof a suit
against the corporation. The suit must
be against the corporation in its corpo-
rate name. Ogdensburgh B’k v. Van
‘Rensselaer, 6 Hill, 240 (1848).
against stockholders does not bind or

affect the corporation unless it is made.

a party by name and service. Lillard
v. Porter, 2 Head (Tenn.), 177 (1858).
When there is no prayer for process
against a corporation by its corporate
name, but only against its officers, and
the body of the bill does not describe
the corporation as a party, the corpora-
tion is not before the court, though it is
in the title. Verplanck v. Mercantile
Ins. Co., 2 Paige, 488 (1881), An im-
portant exception to this rule arises, of

Action ~

course, where the corporation refuses to
sue and a stockholder sues for it. See
Part IV of this work ad

4See § 716.

5 Bache v. Nashville, ste .» Soc., 10
Lea (Tenn.), 486 (1882): Lillard v. Porter,
2 Head (Tenn.), 177 (1858); De Wolf v.
Mallett’s Adm’r, 23 Dana (Ky.), 214
(1885). '

6 Service of notice of attachment in a

garnishment case upon two of the offi-_

cers and directors of a corporation has
been held sufficient notice to the cor-
poration. Boyd v, Ches. & Ohio Canal,
17 Md., 195 (1860). Notice of a motion
for a rule to establish the election of di-
rectors is sufficient if served on the

directors whose election is questioned,

and it need not be served on the other
directors or on the president. Ew parte
Holmes, 5 Cowen, 426 (1826). Upon
affidavit that the corporation had no

982
OH. XLV. ] PARTIES,' PLEADINGS, ETC. [§ 759.

Generally the statutes of the state specify the corporate officers
upon whom service may be made. When a foreign corporation
is defendant, great care has to be exercised in obtaining jurisdic-
tion, and such suits frequently fail for want thereof. The corpora-
tion may appear either generally or specially for the purpose of
objecting to the service.? Formerly a corporation made complaint
or answer ina suit by attaching the corporate seal to the bill of
complaint or answer. But this rule left the answer unverified, and
consequently, by statute now, it is generally prescribed that some
officer of the corporation shall verify the pleading for the corpora-

tion?

presiding officer or treasurer, and that
the secretary had left the country, the
court ordered service to be on ‘the
trustee. Tom v. First Society, etc., 19
Wend., 25 (1837). Where the corpora-
tion had suspended business, and the
chairman of the directors: was dead,
the court directed service to be made
on the deputy chairman and secretary
who had last served as such for the
corporation. Gaskell v. Chambers, 26
Beav., 252 (1858). Service on the chief
resident agent has been held sufficient.
Newby v. Van Offen, etc., Co, L. R.,
7 Q. B., 298 (1872). If the president is
the plaintiff, service of the process can-
not be on himself. Beck v. Ashuelot,
etc., Co., 86 Mo., 357 (1862). A notice
of a lien served on the secretary is suffi-
cient. Fletzell v. Chicago, etc., R. R.
C©o., 77 Mo., 315 (1888), Service on the
president is sufficient. Chamberlin v.
‘Mammoth, etc., Co., 20 Mo., 96 (1854).
But not on a mere agent. McCall v.
Byram, etc., Co., 6 Conn., 428 (1827). A
suit against a supposed corporation is
not good against its members, there
being merely a copartnership. Service
on the general manager does not make
him a party defendant. Leatherman
v. Times Co., 11 S. W. Rep., 12 (Ky.,
1889), See § 758.

1 See &§ 757, 758, infra.

2See § 758, infra. ‘‘A corporation,
like a natural person, may appear vol-
untarily by attorney, and such appear-
ance gives jurisdiction to the same
extent as et there was actual service of

process. Att’y-Gen., etc., v..Guardian,
ete., Ins. Co., 77 N. Y., 272 (1879).

3In an answer by a corporation: ‘‘ The
answer should be made by the principal
officer of the defendant corporation,
who should be able to admit or deny the
facts charged and interrogated about, or
to state want of knowledge clearly and
truly as a reason for not doing either.”
Hale v. Continental Life Ins. Co., 16
Fed. Rep., 718 (1883). An injunction
against a corporation is not dissolved by
an answer verified by the present secre-
tary, who became such after the acts
occurred, and who verified that his acts
therein referred to were true, and that
the acts of others he believed to be true.
Some officer cognizant of the facts must
verify. Fulton B’k v. N. Y., etc., Canal
Co., 1 Paige, 311 (1829). At common
law a corporation answers by attaching
its seal. The answer is not evidence,
since it is not sworn to. If a sworn an-
swer is desired, some of the officers or
members must be made co-defendants.
Baltimore, etc., R. R. v. Wheeling, 13
Gratt. (Va.), 40 (1855). In legal proceed-
ings answers which, if made by an in-
dividual, should be under oath, are
made by corporations under their cor-
porate seals. Daniel’s Ch. Prac., 146;
Ransom v. Stonington, etc., Bank, 13
N. J. Eq., 212 (1860); Bronson v. La
Crosse R. R. Co., 2 Wall., 302 (1863);
Baltimore & Ohio R. R. Co. v. Gallahue,
12 Gratt., 655 (1855), answer of gar-
nishee. See, also, Brumley v. West- .
chester, etc., Soc., 1 John, Ch., 366

983
‘18; Union B’k v. Geary, 5 Pet.,

§ 753.)

PARTIES, PLEADINGS, ETC.

[ou. xxv.

8.753. Allegation and proof of incorporation.—If the corpora:
tion is plaintiff, it is customary to allege that it has been and is in-

corporated.'

If the defendant pleads the general issue he admits
the incorporation of the plaintiff. ,

The fact of incorporation is proved by showing the certificate of
incorporation, the corporate minutes proving an organization by a
corporate meeting, and the, user of the corporate name in business.’

| a ¥

(1815); Vermilyea v. Fulton Bank, 1
Paige, 37 (1828); Bouldin v. Bull, 15 Md.,
99;
Haight v. Morris Aqueduct, 4 Wash. C.
C., 601.

1Failure to allege incorporation is
cured by judgment where defendant
failed to object. St. Cecilia Academy v.

Hardin, 28. E. Rep., 305 (Ga., 1887). The

following decisions have been made:
A corporation plaintiff need not allege
that it is a corporation; it suffices to
state in the commencement of the dec-
laration the name of the corporation.
Some of the states have a different rule.
Union Cement Co. v. Noble, 15 Fed.
Rep., 502 (1882). In a libel in admiralty
such averment should be made. Sun,
etc., Ins. Co. v. Mississippi, etc., Co., 14
Fed. Rep., 699 (1882). ‘*The bringing
of an action in a name purporting to be
a corporate name is a sufficient aver-
ment of the existence of the plaintiff as
a corporation.” Canandaigua Academy
v. McKechine, 19 Hun, 62 (1879). There
has been considerable controversy as to
whether at common law a corporation
plaintiff need allege that it is incorpo-
rated. See Henriques v. West India
Co., 2Ld. Raym., 1582; Cent., etc., Co.
v. Hartshorn, 8 Conn., 199; Ewing, v.
Robinson, 15 Ind., 26; Zion Ch. v. St.
Peter’s Ch., 5 W. & S., 215; Vance v.
Bk of Ind., 1 Blackf., 80; Emery wv.
Evansville, etc., R R. Co., 18 Ind., 148;
O’Donald v. Evansville, etc., RB. R. Co.,
14Ind., 259; Rees v. Conocheaugue B’k,
5 Rand., 326; Jackson v. B’k of Mari-
etta, 9 Leigh, 240; Farmers’, etc., B’k

v. Troy, etc., B’k, 1 Doug. (Mich.), 4375:

Lighte v. Everett Ins. Co., 5 Bosw., 716;
Lewis v, B’k of Ky., 12 Ohio, 182; Miss.,

etc., R. R. Co. v. Gaster, 20 Ark., 455;
Bk of Utica v. Smalley, 2 Cowen, 770;
Jackson v. Plumbe, 8 John., 378; Dutch-
ess, etc., Co. v. Davis, 14 John., 288;
B’k of Mich. v. Williams, 5 Wend., 482;
B’k of Waterville v. Belster, 18 How.
Pr., 270. Cf. 129 U.S., 677; 21 N: E.
Rep., 340; 30 Barb., 491.

2 Bailey v. Valley, etc., B’k, 19 N. BE.
Rep., 695 (IIL, 1889). But see Oregonian.
Ry v. Oregon, etc., Co., 23 Fed. Rep.,
282 (1885), holding that the defense of
no corporate capacity to sue in a par-
ticular case is raised by plea in abate-
ment, and the defense of no corporate
capacity at all by a plea either in abate-
ment or bar. Cf. Pullman v, Upton, 96:
U. S., 328; and see President, ete., v
Weed, 19 Johns., 300 (1822), holding that
the plea of nul tiel corporation is not
good, and that the general issue should
be* pleaded. Denial of corporate ex-
istence of plaintiff can be only by plea.
in abatement. Denial of merits waives.
this defense. Conard v. Atlantic Ins,
Co,, 1 Pet., 386 (1828). Contra, U.S. Bk
v. Stearns, 15 Wend., 314 (1836), An an-
swer of nul tiel corporation precedes.an
answer tothe merits. De facto exist-
ence must then be proved. An answer
alleging want of parties raises the ques-
tion of whether the corporation is more
than a partnership. Heaston v. Cincin-
nati, ete., R. R., 16 Ind., 275 (1861).

* Proof: of incorporation may be by an
exemplified copy of the charter and evi-
dence of user, Special charter may
also be proved by statute book. U. 8.
B’k v. Stearns, 15 Wend., 314 (1836).
Incorporation’may be proved by putting
in evidence the records, books and min-
utes of the company showing an organ-

984.
4

CH. XLY.|

PARTIES, PLEADINGS, ETC.

(88 754, 758:

§ 754. Confession of judyment.— A corporation may confess judg-
ment, but there is doubt whether it can be done except by order

-of the board of directors.!

In New York, by statute, a corporation

cannot confess judgment in contemplation of insolvency.”

§ 755. Injunction and contempt.— An injunction against a corpo-
ration should run to the corporation in its corporate name. All
officers and agents upon whom it is served or to whose knowledge
it comes are guilty of contempt of court if they disregard it.2 The

ization in pursuance of the charter.
Glenn v. Orr, 1 8. E. Rep., 538 (N. C.,
1887). Production of corporate books
showing election of officers is sufficient
to raise presumption of existence of cor-
poration. Wood v. Jefferson Co. B’k, 9
Cowen, 198 (1828). ‘‘The production
of the act of incorporation and proof of
user under it by the corporate body
afford presumptive proof in the first in-
stance of the fact of incorporation.”
People v. Beigler, Hill & Denio Supp.,
188 (1848). See, also, on the method of
proof, Chamberlain v. Huguenot, etc.,
Co., 118 Mass., 582 (1875); Spring, etc.,
Works v. San Francisco, 22 Cal., 434

(1868); Eastern, etc.,'Co. v. Vaughan, 14.

N. Y., 546 (1856); Hughes v. Antietam,
etc, Co., 34 Md., 316 (1870); Leonards-
ville B’k v. Willard, 25 N. Y., 574 (1862);
Reynolds v. Myers, 51 Vt., 444 (1879);
West, etc., B’k v. Ford, 27 Conn., 282
(1858); Society, etc., v. Town, etc., 4
Peters, 480 (1830); Alderman, etc., v.
Finley, 10 Ark., 423 (1850); Oldtown,
etc., R. R. v. Veazie, 39 Me., 571; Pull-
man v. Upton, 96 U. S., 328 (1877);
Penobscot, etc., R. R. v. Dunn, 39 Me.,
587 (1855); Heaston v. Cincinnati, etc.,
R. R., 16 Ind., 275 (1861); Inhabitants,
etc., v. Wedgewood, 44 Me., 49 (1857);
Litchfield B’k v. Church, 29 Conn., 137,

148 (1860); United States v. Ins. Co., 22

Wall., 99 (1874); De Witt v. Hastings,
40 N. Y. Sup., 468 (1876); aff'd, 69 N. Y.,
518; Commonwealth v. Bakeman, 105
Mass., 58 (1870); South, etc., Co. v.
Gray, 30 Me., 547 (1849); Utica, etc., Co.
». Tilman, 1 Wend., 555 (1828); Jackson
v. Leggett, 7 Wend., 877 (1831). A for-
eign corporation proves incorporation

- Rep., 98 (1883).

by its papers and proceedings, and by
putting in evidence the statute author-
izing incorporation. Savage v. Russell,
4 South. Rep., 235 (Ala., 1888), Exist-
ence of a plank-road corporation is not
proved by fact that governor had’ ap-
pointed inspectors of it, and they had
certified that the road was completed.
Bill v. President, etc., 14 Johns., 416
(1817).

1A president and treasurer have no
power to confess judgment for the cor-
poration. Adams v. Cross, etc., Co., 5 ©
Ry & Corp. L. J., 18 (Ill., 1888). Con-
tra, Chamberlin v. Mammoth, ete.,
Co., 20°"Mo., 96 (1854). ‘Upon a con-

fession of judgment /by a corporation

the court in which the action is pending
must of.necessity judge of the author-
ity of any natural person who may ap-
pear for the company in that behalf,

and its judgment as to the right
and authority of the person so appear-
ing to bind the corporation must be
conclusive in all other proceedings
where the same judgment is drawn in
question.” White v. Crow, 17 Fed.
Treasurer cannot con-
fess judgment. Stevens v. Carpe, etc.,
Co., 57 Mich., 427 (1885).

2 In re Waterbury, 8 Paige, 380 (1840);
Kingsley v. First Nat’! B’k, 31 Hun, 329
(1884); National Shoe, etc., B’k v. Me-
chanics’, etc., B’k, 89 N. Y., 467 (1882).
See 6 N. Y. Supp., 346; N. Y. L.'J.,
Aug. 10, 1889. ;

3 An injunction against a corporation.
in New York may be served on a di-
vision superintendent of the division
interested. Moreover, knowledge of
the injunction is ag. good as service,

985
8 756.],

PARTIES, PLEADINGS, ETC.

[CH. XLY.

corporation and also all of its officers and agents who wilfully vio-
late the injunction may be fined for contempt of court.!

§ 756. Contempt and sequestration.— Inasmuch as a corporation
is an existence entirely distinct from its officers or members, the
latter cannot be held answerable and in contempt of court for its
neglect or refusal to perform the orders, decrees or judgments of

courts.

Such is the rule so far as the corporation is commanded

to do a specified thing. But the corporation itself is bound to

Disobedience is contempt. Rochester,
etc., R. R. v. New York, etc., R. R., 48
Hun, 190 (1888). See, also, High on In-
junctions; also § 745, supra. The com-
pany may be indicted for not obeying
the order of the court. Queen v. Bir-
mingham, etc., R. R., 9 Car. & Payne,
469. An. injunction against a foreign
corporation may apply to its acts out of
the state as well as in'it. Prince, etc.,
* Co. v. Prince, etc.,, Co., 51 Hun, 4438
(1889). In suit by Néw York receiver
of dissolved New York corporation for
receiver in Pennsylvania, a former di-
rector being defendant, for interfering
with assets against injunction of New
York court, held, that he could not
evade injunction by going out of state.
Receiver appointed. Williams v. Hin-
termeister, 26 Fed. Rep., 889 (1886).
Though a bank may be in contempt it
does not follow that each servant or
agent of the bank also is in contempt.
Southern D. Co, v. Houston, ete, R’y
Co., 27 Fed. Rep., 344 (1886). Where
the defendant is a foreign corporation
and has no property in the state which
could be reached by sequestration, a
court of chancery will not decree an in-
junction which cannot be enforced.
Bank of B. Falls v. Rutland, etc., R. R.
Co., 28 'Vt., 470 (1856); 118 N. Y., 476.
Cf. § 758,

1In re Tift, 11 Fed. Rep., 463 (1881).
Injunction against certain directors of
corporation from using patented arti-
cles is violated by their forming a new
corporation to do the same acts, they
being directors also of latter. Iowa
Barb., etc., Wire Co. v. Southern
Barbed Wire Co., 30 Fed. Rep., 123

(1887). Injunction against corporation
running a ferry cannot be evaded by
corporation transferring its boats to
its president individually. Corporation
fined, and president imprisoned for
contempt. ‘‘Injunction orders must
be fairly and honestly obeyed, and not
defeated by subterfuges and tricks on
the part of -those bound to obey them;
they may be violated by aiding, coun-
tenancing and abetting others in viola-
tion thereof as well as by doing it di-
rectly; and courts will not look with
indulgence upon schemes, however
skilfully devised, designed to thwart its
orders.” Mayor, etc., v. N. Y. & Staten
I, etc., Co., 64 N. ¥., 622 (1876). For-
eign corporation violating injunction
may be fined for contempt of court.
Service in same way asin ordinary case.
Its agents violating injunction may
also. be fined. U.S. v. Memphis, ete.,
R. R. Co., 6 Fed. Rep., 237 (1881).
2There seems to be no case holding
that the corporate officers are liable for
contempt for neglecting or refusing to
do an act which the court has ordered
the corporation to do. The case of
Lackarme v. Quartz, etc., Co., 1 H. &
C., 184 (1862), whereby an order was
enforced by reaching the corporate offi-
cers, is based on the English statute giv-
ing the courts such a power. In the an-
cient case of Salmon v. Hamborough Co..
1 Ch, Ca., 204 (1683), where the corpora-
tion defendant did not obey an order
of the court and had no property, the
house of lords issued an order directed
to the corporate officers ordering them
to obey the former order or be com-
mitted for contempt. Papers against a

986
ae

_ CH. XLV.)

[§ 756.

PARTIES, PLEADINGS, ETC.

obey the court, and for failure to do so the court will sequestrate
the corporate property. Sequestration is a chancery remedy
whereby the property of a party is seized by the officers of the
court of chancery to punish contempts and to compel obedience
to the order or decree of the court.! It is used not only to compel
the corporation to do an act commanded by a court of chancery,
but also to subject the corporate property to the payment of a
money decree which a court of chancery has made against the
corporation,”

A sequestration reaches all the goods and chattels and the rents
and profits of land belonging to the corporation ;* but there is some
doubt as to whether choses in action and the title to real estate can
be subjected to this remedy of acourt of chancery. It is clear that

originally the corporate realty could not be so reached.t

corporation are not to be directed against
its officers personally, even as officers.
Verplanck v, Mercantile Ins. Co., 2 Paige,
488 (1831). The only remedy in such a
case seems to be a sequestration of the
corporate property. If the corporation
is insolvent there seems to be no remedy
at all to compel obedience. See 4 Wait’s
Pr., 206; Curzon v. African Co., 1
Vern., 182. Where, however, the corpo-
ration is enjoined from doing a certain

‘thing, then the officers are personally

liable for contempt if they do the thing
enjoined, See § 755, In the case of Davis
v, Mayor, etc., 1 Duer, 451, 484 (1853),
the court said that it was admitted that
a mandamus directed to the corpora-
tion in its corporate name bound all

the officers and members (citing mu-.

nicipal corporation cases). Chancellor
Bland, in McKim v. Odam, 3 Bland, 422,
with good reason objects to the tech-
nical and senseless rule that corporate
officers cannot be compelled to do an
act which the corporation is com-
manded to do. A somewhat similar
instance of the power of the court
arises in a mandamus to make a trans-
fer of stock. See § 3890. Of. 21 N. E.
Rep., 606.

1See Daniel’s Ch. Pr., vol. Il, p. 1052,
etc.; Barb. Ch. Pr., vol. I, p. 71, ete.,
and p. 444; Angell & Ames on Corp’ns,
§ 667, etc. As regards corporations
this remedy was used to compel the cor-

poration to appear and answer a bill in
equity, and also to subject the property
of the corporation to the payment of a
money decree of a court of chancery.

Sequestrations in chancery correspond

greatly to executions at law. Seques-
tration ‘‘is most certainly of the nature
of an execution.” It is demandable of
right. It issues though the corporation |
has no property. Reid v. Northwestern
R. R, Co., 82 Pa. St., 257 (1858.) The
case of Jones v. Boston Mill Corp’n,
4 Pick., 507 (1827), holds that sequestra-
tion is a proper as to enforce a
decree.

21f the sequestration ig to compel the
corporation to do something other than
pay money, the corporate property is
merely seized and held by the court
until the corporation complies. If,
however, the sequestration is to compel
the payment of a money decree, the
corporate property seized will be sold
and the proceeds applied to that debt.
See authorities cited supra. .

3Same authorities.

4Daniel’s Ch. Pr., vol. II, p. 1054;
Coats v. Elliott, 28 Texas, 606. Seques-
tration is the proper remedy to subject
the net profits of a turnpike company
to the payment of a judgment. Neither
sequestration nor a common-law execu-
tion can effect a sale of the road, how-
ever, since the franchise is a trust from
the state. Ammont v. President, etc.,

987
§ 157)

PARTIES, PLEADINGS, ETO.

. (CH. XLV.

§ 757. Foreign corporations may sue and, be sued.— A foreign
corporation is considered a resident of the state wherein it was cre-
ated; and it is regarded as a citizen of that state in all questions

of jurisdiction.!

18S. & R., 210 (1825). But where, under
the statutes, a receiver is appointed in
sequestration proceedings, the decisions
are inclined to hold otherwise. Atlas
Bk v. Nahant B’k, 23 Pick., 480 (1889);
but see Foster v, Townsend, 68 N. Y.,
2083; N. Y. Code of C. P., § 1772. In
proceedings under § 1784, etc., of the
N. Y. Code of C. P., all the corporate
personalty and realty vests in the re-
ceiver. See § 67 of III R. S., 468, ap-
plicable to such proceedings under
§ 1788 of Code of C. P. The origin of
this code proceeding is II N. Y. RB. S.,
468, § 86. See, in construction thereof,
Bangs v. McIntosh, 23 Barb., 591; De-
vendorf v. Beardsley, 23 Barb., 656;
Judson v. Rossie Galena Co., 9 Paige,
598. See, also, Devoe v. Ithaca, etc.,
R. R. Co., 5 Paige, 521 (1835), as to the
practice. As regards choses in action
the old authorities differed. 1 Barb.
Ch. Pr., p. 71, says that the choses in
action cannot be reached by sequestra-
tion, Daniel’s Ch. Pr., vol. II, p. 1052,
saye that possibly choses in action in.
the possession of third persons cannot
be reached. The later authorities, how-
ever, are inclined to extend this remedy,
to choses in action. Grew v. Breed, 12
Metc., 363; Hosack v. Rogers, 11 Paige,
608 (1845); White v. Geraerdt, 1 Edw.
Ch., 340. It has been doubted whether
sequestration proceedings could reach
the books and papers of the corpora-
tion. Lowten v. Colchester, 2 Meriv.,
395 (1816); but it would seem that such
papers should be subject to sequestra-
tion so far as they contain information
or give title to property which has been
sequestered.

1 Louisville, C. & C. R. R. Co. v. Lat-
son, 2 How., 497 (1844); Stafford v, Amer-
ican Mills Co., 18 R. 1, 310 (1881); Cow-

ardin v. Universal Life Ins. Co., 32,

Gratt., 445 (1879), holding that it is sub-

ject to attachment as a non-resident;
Marshall v. Baltimore & O. R. R. Co.,
16 How.,.314 (1853); Covington, etc.,
Co, v. Shepherd, 20 How., 227 (1857);
Myers v. Dorr, 13 Blatch., 22 (1870);
Merrick v, Van Santvoord, 34 N. Y., 208 |
(1866); Daly v. National Life Ins. Co.,
64 Ind., 1 (1878); Hadley v. Freedman’s,
ete, Bank, 2 Tenn. Ch., 122 (1874);
Harding v. Chicago & A. R. R. Co., 80
Mo., 659 (1888); McGregor v. Erie R’y
Co., 35 N. J. L., 115 (1871); Stout wv
Sioux City & Pac. R. R. Co., 8 Fed.
Rep., 794 (1881), holding that a foreign.
corporation which had filed its charter
with the secretary of state and other-
wise complied with the local statute
was a domestic corporation under the
law of. Nebraska; Railway Co. v, Whit;
ten, 18 Wall., 283 (1871), holding that a.
corporation is deemed-to. be a citizen of
the state creating it for the purpose of
conferring jurisdiction upon the. courts
of the United States, and the legislation
of other states will not affect this pre-
sumption; Insurance Co. v. Francis, 11
Wall., 210 (1870), holding that an alle-
gation that a New York corporation.
is located and: doing business. in. Mis-
sissippi was not an allegation that
it was a citizen of the latter state;
Steamship Co. v. Tugman, 106. U.S.,
118 (1882), holding that the residence of
the corporation does not at all depend.
on the residence of its stockholders;
Blackburn v, Selma, ete., R. R. Co., 2
Flipp., 525 (1879), holding that. entering
appearance waives. the right to. object
to the jurisdiction of a federal court. To
same effect, De Sobry. v. Nicholson, 8
Wall., 386 (1865); Hayden v. Bates Mfg.
Co., 1 Fed. Rep., 98 (1879), holding that
it may be sued in federal courts though
its property has been attached, if doing

_ business in the state and process.can. be

served; Boston Electric Co, v, Electric,

988
‘

CH. XLv.]

PARTIES, PLEADINGS, ETC. [$ 757

By the comity of states the courts of a state will entertain a suit
brought by a foreign corporation.!

etc., Co., 23 Fed. Rep., 838 (1885). In
this case a Maine corporation had its
principal office in Massachusetts, where
also a’ majority of its officers and direct-
orsresided. Held, that the federal courts
of Massachusetts had no jurisdiction
over it though suit was begun by at-
tachment and service upon the corpo-
rate officers. Union National Bank v.
Miller, 15 Fed. Rep., 703 (1883), holding
that the act of July 20, 1882, placed na-
tional and other banks as to their right
to sue in the federal courts on the same
footing; Hatch v. Chicago, R. L, etce.,

Co., 6 Blatch., 105 (1868), holding that’

having an office and doing business in
another state does not affect its citizen-
ship; Williams v. Missouri, K. & T. R.
R. Co., 8 Dill, 267 (1875); Stevens v.
Phoenix Ins. Co., 41 N. Y., 149 (1869).
As to restrictions by the state on the
right of a foreign corporation to re-
move cases to the federal courts, see
$695, supra.
1Silver Lake B’k v. North, 4 John.
Ch., 870 (1820); Newburg Petroleum
Co. v. Weare, 27 O. St., 343 (1876);
Lewis v. Bank of Kentucky, 12 0. St.,
182 (1843); Smith v. Weed Sewing M.
Co., 26 O. St., 562 (1875), holding also
that it meed not allege in its pleading
the terms of its charter showing its ca-
‘pacity to sue; Hanna v. International
Petroleum. Co., 23 O. St., 622 (1873);
Lathrop v. Commercial Bank of Scioto,
8 Dana, 114 (1839); Louisville, C. & C.
R. B.'Co. v. Latson, 2 How., 497 (1844);
Bank of Augusta v. Earle, 18 Pet., 519
(1839); Bank of Michigan v. Williams, 5
Wend., 478 (1830); Beaston v. Farmers’
Bank of Delaware, 12 Pet., 135 (1888);
‘Marine & F. I. B. Co. v. Jauncey, 1
Barb., 489 (1847), holding that its au-
thority to sue need not be set forth in
-its pleading; Tombigbee R. R. Co. v.
Kneeland, 4 How., 16 (1846); N. Y. Dry
Docks v. Hicks, 5 McLean, 111.(1850);
Lucas v. Bank of Georgia, 2 Stew. (Ala.),

é

147 (1829); Guaga Iron Co. v. Dawson,
4 Blackf., 202 (1886); New Jersey, etc.,
Bank v. Thorp, 6 Cow., 46 (1826); Mut-
ual Benefit Life Ins. Co. v. Davis, 12
N. Y., 569 (1855); Direct U. S. Cable Co.
v. Dominion Tel. Co., 84 N. Y., 153
(1881); Hibernia Nat’] Bank v. Lacombe,
84.N. Y., 367 (1881), holding that it has
the same right to remedies and liens as
citizens; Williams v. Creswell, 51 Miss.,
817.(1876), where a District of Columbia
corporation was complainant; Ameri-
can, etc., Ins. Co. v. Owen, 81 Mass.,
491 (1860); Leasure v. Union, etc., Ins.
Co., 91 Pa. St., 491 (1879); Portsmouth,
etc., Co. v. Watson, 10 Mass., 91 (1818);
B’k of Edwardsville v. Simpson, 1 Mo.,
184 (1822); National B’k v. De Bernaleés,
1 Carr. & P., 569 (1825); Henriques v.
Dutch,-etc., Co., 2 Ld. Raym., 1532 (2
Geo. II.); Lycoming F. Ins. Co. v. Long-
ley, 62 Md., 196 (1884); Portsmouth Liv-
ery Co. v. Watson, 10 Mass., 91 (1813);
British American Land Co, v. Ames, 6
Metc., 391 (1848), holding that a corpora-
tion of a foreign country may sue; Im-
porting, etc., Co. v. Locke, 50 Ala., 832
(1878) ; Savage Mfg. Co. v. Armstrong, 17

Me., 34 (1840); American Colonization

Soc. v. Gartrell, 28 Ga., 448 (1857). In
this case the charter declared the corpo-
ration to be created for a specified pur-

pose, ‘‘and for no other purpose,” and |

its right to sue in another state was
questioned. Bank of Marietta v. Pin-
dall, 2 Rand., 478 (1824); Leazure v.
Union Mut., etc., Co., 91 Pa. St., 491
(1879); Hahneman, etc., Co. v. Beebe,
48 Ill., 88 (1868), where the right to
sue in another state for libel was
questioned; United States v. Insurance
Companies, 22 Wall., 99 (1874), hold-
ing that corporations created merely
for domestic and business ‘purposes in
the seceding states during the rebellion

may sue in the federal courts; Insur- '

ance Co. v. The “C. D., Jr.,” 1 Woods,
72 (1870), holding that it may sue either

989
§ 758.]

PARTIES, PLEADINGS, ETC.

[cH. XLV.

§ 758. Service in suits against a foreign corporation.— At com-
mon law a foreign corporation could not be sued outside of the state
creating it, inasmuch as service on its officers was held insufficient.
This view of the law is now abandoned. Jurisdiction over a for-
eign corporation may be acquired, in suits on contracts made or
business done within the jurisdiction, by service upon an officer of
the corporation or upon its agent engaged in the state.’

in state or federal courts; Fidelity Ins.
T., etc., Co. v. Niven, 5 Houst. (Del.), 416
(1878), holding that if empowered to act
as an administrator it may sue as such
in another state. But the statutes of a
_state may prohibit a foreign corporation
from suing or being sued in its courts
except in such cases as the statute may
designate. A statute to this effect ex-
ists in New York. Duquesne Club
Penn. B’k, 35 Hun, 390 (1885). See
Bank of Commerce v. Rutland, etc.,
R. R. Co., 10 How. Pr., 1 (1854); Code
of © P., §§ 1779, 1780. In New York
a non-resident cannot sue a forgign cor-
poration on a cause of action which
arose out of the state. 112 N. Y., 315;
Robinson v. Oceanic, etc., Co., 19 N.
E. Rep., 625 (1889).

18t. Clair v. Cox, 106 U. S., 350 (1882) ;
Hayden v. Androscoggin, 1 Fed. Rep.,
93 (1879), where service was on the
president ; Peckham v. North Parish, 33
Mass., 274, 286 (1834); Martens v. Inter-
national, etc., Soc., 53 N. Y., 339 (1878);
City, etc., Ins, Co. v. Carrugi, 41 Ga.,
660 (1871); Henning v. Planters’ Ins. Co.,

28 Fed. Rep., 440 (1886), holding that |

the judgment is conclusive only when
it shows that the corporation was doing
business in the jurisdiction; Barnett v.
Chicago, etc., R. R. Co., 4 Hun, 114
(1875); Augerhoefer v. Bradstreet Co.,
22 Fed. Rep., 305 (1884). Suit by non-
resident against foreign corporation for
cause arising out of state by service on
treasurer gives no jurisdiction. Newell
v. Great Western R’y Co., 19 Mich., 336
(1869); Despar v. Continental, etc., Co.,
187 Mass., 444 (1884), holding that serv-
ice on the treasurer is insufficient. But
in Massachusetts a bill lies to subject

assets of foreign corporation to the
payment of its debts. Silloway v. Co-
lumbia, etc., Co., 74 Mass., 199 (1857).
And attachment lies against it. Ocean
Ins. Co. v. Portsmouth, etc., R’y Co.,
44 Mass., 420 (1841). And if it has a
place of business in the state it may be
sued under the statute. Nat'l Bk of
Commerce v. Huntington, 129 Mass.,
444 (1880). At common law service on
the officer in charge of the resident
business of a foreign corporation gives
jurisdiction for a cause of action aris-
ing in the jurisdiction. Newby v. Von
Opper, etc., Co, L. BR. 7 Q. B., 293
(1872). But service of injunction papers
on a resident selling agent is insufii-
cient. Carron Iron Co. v. McClaren, 5
H. of L. Cases, 416 (1855). A corpora-
tion incorporated by the United States
may be reached by service on the presi-
dent anywhere in the country. Eby
v. Northern Pac. R. R. Co., 18 Phil.,
144 (1879). An Iowa corporation could
not be sued in the District of Colum-
bia (Lathrop v. Union Pac. R’y Co., 1
McArthur, 234— 1878), until a statute
authorized service. Dallas v. R. R. Co.,
2 id., 146 (1875). Judgment in another
state against a foreign corporation do-
ing business there, service being on an
officer who is accidentally in the state,
is conclusive and valid. Moulin v. Ins.
Co., 24 N.. J. L., 234 (1853), Attach-
ment of property in the state does not
make the cause one arising in the state.
Whitehead v. Buffalo, etc., R’y Co., 18
How. Pr., 230 (1859). Service on the
president of a foreign corporation in a
cause of action not arising in the state
gives no jurisdiction. State». District
Court, 26 Minn., 284 (1879). Service on

990
 

 

CH. XLv.]

PARTIES, PLEADINGS, ETO.

[§ 758.

Generally the statutes of a state provide for suits against foreign

the secretary who is casually in the
state is not good. Middlebrooks v.
Springfield, etc., Ins. Co., 14 Conn., 301
(1841). <A foreign corporation may sue
a foreign corporation where both do
business in the state. Emerson v. Mc-
Cormick, etc., Go., 51’ Mich., 5 (1883).
Foreign corporation doing business in

‘ the state may be sued. Thomas v.
Placerville, ete., Co., 65 Cal., 600 (1884).
Service of notice of attachment on a
director suffices, Boyd v. Ches., etc.,
Canal Co., 17 Md., 195 (1860). Service
on the treasurer is insufficient to com-
pel the transfer of patents. Despar v.
Continental, ete, Co., 187 Mass., 252
(1884), Service on a stockholder of a
foreign corporation is not good. Rand
v. Upper Locks, etc., Co., 3 Day (Conn.),
441 (1809); O’Brien v, Shaw’s, etc., Co.,
10 Cal., 348 (1858). <A default. is effect-
ual only when the papers show a proper
service. Willamette, etc., Co. v. Will-
jams, 1 Oreg., 112 (1854).

Stockholders are not entitled to notice
of the suit. Peirce v. Somersworth, 10
N. H., 369 (1839). Cf. § 750, supra;
Bankright v, Liverpool, L. & G. Ins,
Co., 55 Ga., 194 (1875), holding that in
Georgia a foreign corporation cannot be
sued: in personam except upon a con-
tract made there. The remedy upon a
foreign contract or foreign judgment is
in rem by attachment and garnishment.
Camden Rolling-mill Co. v. Swede Iron
Co., 82 N. J. L., 15 (1866), holding that
a ‘foreign corporation which has no
place of business in New Jersey cannot
be sued in the courts of that state on a
contract made in another state, but
otherwise on a contract made in the
state. See National Condensed Milk
Co. v. Brandenburgh, 40 N. J, L., 111
(1878); Bushel v. Commonwealth Ins.
Co., 15S. & R., 176 (1827), holding that
an attachment will lie against it. To
same effect, St. Louis, ete., Ins. Co. v.
Cohen, 9 Mo., 421 (1845); Andrews v.
Michigan Central R. R. Co,, 99 Mass.,

584 (1868); National Bank of Commerce
v. Huntington, 129 Mass., 444 (1880);
Barr v. King, 96 Pa. St., 485 (1880),
holding that it may be garnished on
execution; Smith v, Mutual Life of
N. Y., 14 Allen; 386 (1867), holding that
a citizen of another state cannot sue in
the courts of Massachusetts a corpora-
tion which is foreign to that state on a
cause of action which did not arise
within the jurisdiction; Despar v. Con-
tinental, etc., Co., 187 Mass., 252 (1884),
holding that it cannot be compelled to
specifically perform a contract. The
leading case of McQueen v. Middletown,
etc., Co., 16 John., 5 (1819), states the
common-law rule as to suits against
a foreign corporation, Process against
a foreign corporation canfot be served
upon its officers who may be found
within the jurisdiction of the court un-
less such service is authorized by the
statutes of the state where suit is
brought. Pomeroy v. New York & N.Y.
R. R. Co., 4 Blatch., 120 (1857); Eaton
v. St. Louis, etc., Co., 2 McCrary, 362
(1881); Latimer v. Union Pacific R’y
Co., 43 Mo., 105 (1868); Wright v. Liver-
pool & G. Ins, Co., 30 La. Ann., 1186
(1878), holding that process cannot be
served on local agent. No attachment
lies on insurance money due by resident
branch of a foreign insurance company
to another foreign company. Straus v.
Chicago, etc., Co., 46 Hun, 216 (1887).
Moch », Virginia, etc., Ins. Co., 10 Fed.
Rep., 696 (1882), as to judgment by
service on agent doing business in the
state; also Block v. Atchison, etc., R. R.
Co., 21 id., 529 (1884); Talcott & Co. v.
McCormick Harvesting Machine Co., 51
Mich., 5 (1883), holding that foreign
cor porations may sue each other in
Michigan if both are doing business
within the state and the cause of action
accrued there; Farmers’, etc., Nat'l
Bank v. Dearing, 91 U. S., 34 (1875),

followed in Rhoner v. First National

Bank, 14 Hun, 126, holding that an at-

991
,

§ 758.]

PARTIES, PLEADINGS, ETC.

[cH. XLY.

corporations by service on an officer or agent.' Sometimes, also,
the statute requires a foreign corporation to appoint a resident

tachment cannot be issued against na-
tional banks until after final judgment;
and overruling Southwick v. First Na-
tional Bank, etc., 7 Hun, 96, and Bowen
v. First Nat?] Bank, 34 How. Pr., 409
(1867). It has been held that they are
so far foreign corporations that they
may be required to give security for
costs. See National Park Bank v.
Gunst, 1 Abb. N. C., 292 (1876). But
they may obtain an attachment on prop-
erty to the same extent that a domestic
corporation may. Market Nat: B’k v.
Pacific Nat’l B’k, 64 How. Pr., 1 (1882).
See, also, Pennoyer v. Neff, 95 U. S.,
714; Am., etc., Co. v. Conant, 45 Mich.,
642; Moulin v. Trenton Ins. Co., 24 N. J.,
222; Pope %. Terre, etc., Co., 87 N, Y.,
187; Good Hope Co. v. R. R., etc., Co.,
22 Fed. Rep., 6835; Camden, etc., Co. v.
Swede, etc., Co., 82 N. J.,15. If, under
a statute, the foreign corporation ap-
points an agent in the state to accept
service, a personal judgment may’ be
rendered against the corporation. Wil-
sop v. Martin, etc., Co., 20 N. E. Rep.,
318 (Mass., 1889).
1§ee Hiller v. Burlington, etc., R. R.
Co., 70 N. Y., 228 (1877); Childs v. Har-
ris ‘Mfg. Co., 104 N. ¥., 477 (1887); Pope
v. Terre Haute, etc., Co., 87 N. Y., 187
(1881). Service cannot be upon an offi-
cer who has resigned, and the resigna-
tion accepted. Ervin v. Oregon, etc.,
Co., 22 Hun, 598 (1880). As to Penn-
sylvania, see Hussey Mfg. Co. v. Deer-
ing, 20 Fed. Rep., 295 (1884). See Bar-
nett v. Chicago, etc., R. R. Co., 4 Hun,
114 (1875), to effect that sometimes the
judgment is binding though the corpo-
ration has no property in the juris-
diction, The legislature may change
the mode of service. Railroad Co. v.
\ Becht, 95 U. S., 168 (1877). The statute
must be strictly followed. St. Clair v.
Cox, 106 U. 8., 850 (1882). Attachment
does not lie against a foreign corpora-
tion after a receiver of it has been ap-

pointed in the state where it exists.
Thomas v. Merchants’ B’k, 9 Paige, 216
(1841). For service under the Pennsyl-
vania statute, see Benwood fron Works
v. Hutchinson, 101 Pa. St., 359 (1882);
Hussey Mfg. Co. vu. Deering, 20 Fed.
Rep., 795 (1884). Service on a resident
agent whose agency is for other
states ‘only is not good. Schmidlapp
v. Louisiana, etc., Co., 71 Ga., 246
(1883). Service under the Utah statute,
Walker v. Continental-Insurance Co., 2
Utah, 231 (1879); the Missouri statute,
McNichol v. United States, etc., Agency,
74 Mo., 457 (1881). Service must be on
the de facto officers. Berrian v. Method-
ist Soc., 4 Abb. Pr., 424 (1857). Service
on clerk under the statute. Libbey v.
Hodgdon, 9 N. H., 394 (1838). Service
under the New Jersey statute. National,
etc., Milk Co. v. Brandenburgh, 40 N.
J. L., 111 (1878), On a contract made in
the state, service on agent suffices in
New York, though the foreign corpora-
tion does no business and has no prop-
erty inthe state. Barnett v. Chicago,
etc., R. R. Co., 4 Hun, 114 (1875). Fre-
quently the statute allows service ona
‘““managing agent.” Difficulty arises
in defining this term. It has beén held
that a person is a ‘‘ managing agent” if
he is a general manager, Carr v. Com-
mercial B’k, 19 Wis., 272 (1865); a local
insurance agent, Bain v. Globe Ins.
Co., 9 How. Pr., 448 (1854); a local
agent, American Ex. Co. v. Johnson, 17
O. St., 641 (1867); a general freight
agent, Palmer v. Penn. Co., 35 Hun,
869 (1885); the agent who made the
contract, Estes v. Belford, 22 Fed. Rep.,
275 (1884), “But a stock transfer agent
is not a managing agent, Riddington v.
Mariposa, etce., Co., 19 Hun, 405 (1879);
nor an assistant secretary, Sterett v.
Denver, etc., R. R. Co., 17 Hun, 316
(1879); nora horse-car superintendent,
Emerson v. Auburn, etc, R. R. Co., 18
Hun, 150 (1878); nor a ticket agent,

992
cH. XLy.]
'

PARTIES, PLEADINGS, ETC.

[8 758.

agent to accept service before it does business in the state.! Some-
times the courts refuse to entertain jurisdiction over a forei gn corpo-
ration in cases where the decree of the court cannot be enforced? —

Doty v. Michigan C. R. R. Co, 8 How.
Pr., 427 (1854) ; nor a baggage-master,
Flynn v. Hudson, etc., R. R. Co., 6 id.,
308 (1851); nor a boat captain, Upper,
etc., Co. v. Whittaker, 16 Wis., 220
(1862). The term “special agent” in-
cludes a conductor, New Albany R. R.

Co. v. Grooms, 9 Ind., 243 (1857); New.

Albany R. R. Co. v. Tilton, 12 id., 3
(1859); Ohio & M. R. R. Co. v. Quier, 16
id., 440 (1861); the person in charge who
attends to the business, Angirhoefer v.
Bradstreet Co., 22 Fed. Rep., 305 (1884);
but not the traveling agent, Parke v,
Commonwealth Ins, Co., 44 Pa. St., 422
(1863); nor the collecting attorney,
Moore v. Freeman’s Nat’l B’k, 92 N. C.,
590 (1885), For many other cases on
these and similar statutes and on the
general principles governing service of
process on corporations, see 8 Southern
Law Rev., 199; and 1 Barb. Ch. Pr., 52.
Service on a domestic corporation can-
not be made by personal service on the
president outside of the jurisdiction.
Dillard v. Central, etc., Iron Co., 1 S.
E. Rep., 124 (Va., 1887). In Oregon the
statute is construed to hold that a do-
mestic corporation must be sued in the
county of the principal office, or where
the cause arose. Holgate v. Oregon P.
R’y, 17 Pac. Rep., 859 (Oreg., 1888).
Contra, Glaize v. 8. C. R. R., 1 Strobh.
L, (S. C.), 70 (1846). A vice-president
and general superintendent is an “ offi-
cer”? upon whom service may be made
under astatute. Norfolk, etc., R. R. v.
Cottrell, 2 S. E. Rep., 123 (Va., 1887).
Service on the foreign corporation is
not sufficient. Either the cause of ac-
tion must have arisen here or it must
have property here. Tuchbund v. Chi-
cago & A. R. RB. N. Y. Law J., March
12, 1889; Barnes v. Mobile R. R., 12

Hun, 126 (1877).
1Qoodwin v. Colorado, etc., Co., 110
U: S., 1 (1884); Gibbs v, Queen Ins. Co.,
(63)

63 N. Y., 114 (1875). See, also, $$ 694-
696, supra. A judgment obtained by
such service cannot be impeached in
other jurisdictions. Lafayette Ins, Co.
v, French, 18 How., 404 (1855); Moch v.
Virginia, etc., Ins, Co., 10 Fed. Rep..
696 (1882). Transacting business with-
out filing is equivalent to filing. Ehr-
man v. Teutonia Ins. Co., 1 McCrary,
123 (1880). The appointment of such
an agent does not affect the right of the
corporation, as a citizen of another

-State, to sue and be sued in the federal.

courts. Stevens v. Phoenix Ins. Co., 41
N. Y., 149 (1869); Gray v. Quicksilver:
Min. Co., 21 Fed, Rep., 288 (1884). For
decisions under Massachusetts statute,

requiring foreign insurance companies
to appoint an agent to accept service, see -
Thayer v. Tyler, 76 Mass., 164 (1857);

National, etc., Ins. Co. v. Pursell, 92
Mass., 281 (1865); Leonard v, Washburn,

100 Mass., 251 (1868); Gillespie v. Com--
mercial, etc., Ins. Co., 78 Mass., 201

(1858); Morton v. Mutual Ins. Co., 105-
Mass., 141 (1870). An appointment,

under statute, of a resident agent to ac--
cept service continues until a new ap-
pointmentis made. Gibson v. Manuf’rs,.
etc., Co, 10 N. E. Rep., 729 (Mass.,

1887).

2 Williston v. Michigan, etc, R. R.
Co., 95 Mass., 400 (1866); Howell v. Chi-
cago, etc., R'y Co., 51 Barb., 378 (1867),
a stockholder’s action to enjoin an
ultra vires act; Gregory v. N. Y., etc.,
R. R. Co., 40 N. J. Eq., 88 (1885), where
a resident stockholder in a foreign cor-
poration sought to set aside its lease to
a resident corporation; Cunningham v.
Pell, 5 Paige, 607 (1836), holding that no
‘personal judgment could be rendered
against an absent director who was not
personally served. In the case of Ervine
v. Oregon, etc., Co., 28 Hun, 269 (1882),
the court sustained the jurisdiction
wheré service on the directors 'was per-

993
§ 758.)

PARTIES, PLEADINGS, ETO.

(CH. XLV.

In the circuit court of the United States it was formerly the law

that a corporation incorporated

beyond the circuit in which the

suit was brought may be made a defendant by such service as suf-
fices in the state wherein the suit is brought, if it does business

there.!

sonal, even though the corporate prop-
erty was not in the state. The court
said: ‘The relief within the power of.
the court to grant may be incomplete,
and not commensurate with the injuries
and loss sustained, growing out of the
fact that material interests affected are
outside of this jurisdiction; but that af-
fords no adequate reason why an at-
tempt in that direction should not be
made. Efforts in such direction fre-
quently afford only approximate jus-
tice.”

A West Virginia stockholder in a
Pennsylvania construction company
may sue a West Virginia railroad com-
pany which owes bonds to the con-
struction company, and compel an ac-
counting and distribution of such bond
assets, when. the Pennsylvania company
is insolvent and has been dissolved. No
request to the directors is necessary.
Cromlisle v. Shenandoah V. R. R. Co.,
28 W. Va., 365 (1876). It has been held
that a resident stockholder of a foreign
corporation may enjoin it from making
an ultra vires extension of its line by
building branches, etc, Ives v. Smith,
8 .N. Y. Supp., 645 (1888). But it will
not be ordered to pay a dividend. Red-
mond v, Enfield, etc, Co., 18 Abb. Pr.,
N. &., 832 (1872), Nor has the court ju-
risdiction where of two bodies of men”
each claim to be the rightful stock-
holders, Wilkins v, Thorne, 60 Md., 258
(1883), Nor will the court enjoin a for-
eign corporation from delivering stock
and bonds to a construction company,
though the plaintiff claims that he has
the contract for construction. Kansas, ,
etc., R, R. Co, v. Topeka, 185 Mass., 84
(1883), A court will not order a domes-
tic corporation to do an act in another
state, such as opening ditches, etc.
Port Royal, etc, R, R. Co. v. Ham-

mond, 58 Ga., 523 (1877. Cf. Fisk v.
Chicago, etc., R. R., 53 Barb., 518 (1868) ;
Prouty v. Mich., etc., R. R., 1 Hun, 655;
85 N. Y., 278; Boardman wv, Lake, etc.,
R. R., 84 N. Y., 157, See, also, Ervin
v. Oregon, ete., Co., 28 Hun, 269; 85 id.,
544. <A foreign corporation cannot sue
another foreign. corporation in New
York to compel a conveyance of land
located in another state. Cumberland,
etc., Co. v. Hoffman, etc., Co., 80 Barb.,
159, 171 (1859), See 4 N. Y. Supp., 886.

1New Eng., etc., Ins, Co. v. Wood-
worth, 111 U. S., 188, 146 (1883); Eaton
v, St. Louis, ete., Co., 7 Fed. Rep., 189
(1881); M’Coy v. Cincinnati, etce., R. R..
Co., 18 Fed. Rep., 8 (1882); St. Louis,

etc., Co, v. Consolidated, etc., Co., 82 .

Fed. Rep., 802 (1887); Hunter wv, Inter-
national R’y, etc., Co., 26 Fed. Rep., 209
(1886); Block v. Atchison, etc., Co., 21
id., 529 (1884); Carpentér v, Westing-
house Air-brake Co,, 82 Fed. Rep., 484
(1887), But see Good Hope Co. v. R’y,
etc., Co,, 22 Fed. Rep., 635 (1884), holding
that service on the president, who was
there to adjust a difficulty, was insuffi-
cient. Cf. Estes v, Belford, id., 276,
where a patent-right had been used: in
the jurisdiction. Service on an agent
of g domestic corporation does not give

_ jurisdiction over a foreign corporation

though the latter operates through the
former, United States ,v. American
Bell Tel. Co., 29 Fed. Rep., 17 (1886).
Unless the state statute provide other-
wise, no jurisdiction is acquired by at-
tachment of property and service of
papers on resident officers of a foreign
corporation. Boston Electric Co. wv.
Electric Gas, etc,, Co., 28 Fed. Rep.,
838 (1885), reviewing the authorities,
Where the foreign corporation has ap-
pointed a resident agent to accept serv-
ice, the federal court has jurisdiction

904
"on. XLY.]

- (1878).

PARTIES, PLEADINGS, ETC.

[$ 758.

But by the act of congress of 1887 a suit in the federal courts
can be instituted only in the district where either. the plaintiff
or defendant resides, where the jurisdiction of the court is due to
the parties being citizens of different states! N evertheless, where
a removable suit is properly commenced in a state court*it may be
removed to the federal court, though neither of the parties reside

in that district.2

A corporation incorporated by the United States may, by reason °
of that fact, bring suits in or remove them to the federal courts
unless the statute provides otherwise. If a foreign corporation

by service on such agent. Ex parte
Schollenberger, 96 U. S., 369 (1877);
Knott v. Southern, etc., Ins. Co., %
Woods, 479 (1874); Merchants’ Mfg. Co.
v. Grand, etc., Ry Co., 63 How. Pr.,
459 (1882, U. S. C. Ct.), where a foreign
corporation sued an alien corporation;
Lung Chung v. Northern Pac. R’y Co.,
19 Fed. Rep., 254 (1884), where service
was insufficient; Gray v. Quicksilver
Mining Co., 21 id., 288 (1884). The fact
that a state is a stockholder in a cor-
poration does not deprive the United
States courts of jurisdiction where the
corporation is a party. Bank of United
States v. Planters’ Bank, 9 Wheat., 904
(1824). In the federal courts service on
a ticket solicitor of a railroad defend-
ant for a cause of action arising in an-
other circuit is insufficient. Maxwell
v, Atchison, etc., R. R., 34 Fed. Rep.,
286 (1888). As to the affidavit to be
made by the corporation in order to re-
move a case to the United States court,
see Mix v. Andes Ins. Co., 74 N. Y., 53
An order to show cause may be
served on the cashier of an insolvent
bank, although the bank is in a receiv-
er’s hands. Platt v. Archer, 9 Blatch.,
559, A Connecticut corporation cannot
be sued by an alien in the California
circuit court of the United States. Den-
ton v. International Co., 36 Fed. Rep., 1
(1888); Filli v. Delaware, etc, R. R.,
87 Fed. Rep., 65 (1888). But see Riddle
v. N. Y., etc., R. R. Co., 39 Fed. Rep.,
290 (1889). See, also, Connor v. Vicks-
burg, etc., R. R., 87 Fed. Rep., 273; Pres-
ton v. Fire, etc., Co., 8% Fed. Rep., 721.

1Ch. 378, Stat. at L. 1887.
cases in preceding note.

2? Kansas, etc., R. R. v. Interstate, etc.,
Co,, 87 Fed, Rep., 3 (1888). See, also,
Zambrino v. Galveston, etc., R’y Co.,
38 Fed. Rep., 449 (1889); Riddle v. N. Y.,
etc., R. R. Co., 39 id., 290 (1889).

3 Pacific R. R. Removal Cases, 115 U.
S., 2 (1884); Union Pac. R. R. Co. v,
McComb, 1 Fed. Rep., 799 (1880); Eby
v. Northern P. R. R., 36 Legal Intel.,
164 (1879); Hughes v. Northern Pac, R’y
Co., 18 Fed. Rep., 106 (1888); Allen v.
Texas, etc., R’y Co., 25 Fed. Rep., 518
(1885), where even a consolidation with
domestic corporations had been made
and state statutes prohibited the re-
moval. A case to the contrary is Myers
v. Union Pac. R’y Co., 16 id., 292 (1882).
As to national banks, see Cruikshank
v. Fourth Nat. B’k, 16 id., 888 (1888).
A company incorporated in a territory
cannot thereby remove a case to the
United States courts. Adams Ex. Co.
v. Denver, etc., R’y Co., 16 id., 712
(1883). A right to change of venue to
the residence of the defendant may en-
able a corporation defendant to change
it to the place where it does its busi-
ness, though incorporated elsewhere.
Guinn v. Iowa Cent. R’y Co., 14 id.,
828 (1882).
surance company cannot remove cases
to federal court for that cause alone.
Scheffer v. Nat. Life Ins. Co., 25 Minn.,
584 (1879). National banks are citizens
of the state wherein they are located,
Nat. Park B’k v. Nichols, 4 Biss., 315
(1869); Manufacturers’ Nat. B’k vw,

See, also,

995

*

A District of Columbia in- ‘
§ 758.]

PARTIES, PLEADINGS, ETC.

desires to deny that it has been properly served, it may put in a
special appearance and raise the objection of no jurisdiction.!

Baack, § Blatch., 137 (1871); Davis v.
Cook, 9 Nev., 184 (1874). Cf. Kennedy
v. Gibson, 8 Wall., 498 (1869); R. 8. of
U.S., § 640; County of Wilson v. Nat.
Bk, 108 U. S., 770 (1880); Osborn w.
U.S. B’k, 9 Wheat., 738 (1824); Cooke
v. State Nat. B’k, 52 N. Y., 96 (1878);
St. Louis Nat. B’k v, Allen, 5 Fed. Rep.,
551 (1881); First Nat. B’k of New O. v.
Bohne, 8 Fed. Rep., 115 (1881); Third
Nat. B’k of St. L. v. Harrison, 8 Fed.
Rep., 721 (1881); chapter 866, Acts of
Congress, 1888. As to unincorporated
joint-stock companies, see Chapman v.
Barney, 129 U. S., 677 (1889),
1Provident Sav. Bk v, Ford, 114
U. S., 635 (1885); Friezen.v. Allemania,

etc. Ins. Co., 30 Fed. Rep., 349 (1886),
holding that a general appearance
waives the objection to jurisdiction.
See, also, Brooks v. N. Y., etc., R. B..
Co., 30 Hun, 47 (1882), holding that a
general ansve- has the same effect;
also Cook v. Champlain, etc., Co., 1
Denio, 91 (1845); North Mo. R. R. Co,
v, Akers, 4 Kan., 453 (1868), holding
that after entering appearance it cannot
question the jurisdiction of the court
in an action upon contract. See, also,
§ 752, supra; McCormick v. Penn. Cen-
tral R. R. Co., 49 N. Y., 303 (1872);
Lung Chung v. Northern Pac, R’y Co.,
19 Fed. Rep., 254 (1884); Moch v, Vir-
ginia, etc., Co., 10 Fed. Rep., 696 (1882),

996
GENERAL INDEX. |

 

(The references are to the sections.]

,

A.

ABANDONMENT of enterprise, no defense to subscriptions, 189.
see DEFENSES.

ABATEMENT, of actions by dissolution of corporation, see SUITS.
of a legacy of stock, 306.
plea in, in a suit by a corporation, 753, note.

ABORTIVE COMPANY, liability of promoters to subscribers, 62.

ABSORPTIONS, are legal when, 668-671.
see ULTRA VIRES.

ABUSE OF CHARTER. See MIsusER.
of franchises, see DISSOLUTION.

ACADEMY, regulation of, 675.

ACCEPTANCE, corporation may make an, 686.
of an amendmentto a charter, should be by the stockholders, 499,
of charter, may be implied, 640.
of a conditional subscription, 84.
of office, 620.
of subscription by corporation, 70, note.
of amendments, see. CHARTER.
the benefits or position of stockholder, 52.
ACCOMMODATION indorsement of notes by a corporation, 679.
ACKNOWLEDGMENT of execution of corporate contracts, mode of, 722.
ACQUIESCENCE barring a stockholder's right to enjoin the issue of preferred
stock, 267, note. .
of stockholders in an act which the directors do, but which should bé done
by the stockholders, validates the act, 285.
as a bar to stockholder’s actions, see LACHES.
ACQUISITIONS, future, mortgage of, see MORTGAGE.
ACTION AT LAW by corporate creditors to reach unpaid subscriptions, 203.
to enforce stockholder’s statutory liability, 221.
for money had and received, 159.
on subscriptions, see DEFENSES.
to collect subscriptions, chapter IV, C. : : ;
when stockholder is deprived of his stock; pleading and practice herein, 573.
assumpsit, 574.
trespass on the case, 575.
trover, 576.
detinue and replevin, 577.
action for money had and received, 578.
bill in equity, 579. .
see PLEADING AND PRACTICE; SUITS.
ACTS of the legislature. See CONSTITUTIONALITY ; CHARTER.
ADEMPTION of a legacy of stock, 306.

ADJOURNED meetings, 601.
997
998 GENERAL INDEX.

[The references are to the sections.]

ADMINISTRATOR'S sale of stock, 433.
duty as to legacies of stock,.307.
rights and duties of corporation as to transfers by, 397, 398.
liability on stock, 248, .
right to vote, 612.
see EXECUTORS.

ADMISSIONS of stockholder do not bind another stockholder, 4a. _
of a corporation, how far the admissions and declarations of a director, pres-
ident, cashier, general manager, treasurer, agent or stockholder affect the
corporation, 726, 7
ADOPTION. See CONTRACTS.
ADVANCES. See ULTRA VirRES ACTS; PROMOTERS.
ADVERTISEMENT. See Notice; PROSPECTUS.
AFTER-ACQUIRED PROPERTY, may be mortgaged, 689.
AGENT, general, extent and limitations of his powers, 719,
selling stock without autNority, 351.
selling or pledging stock, 321.
may subscribe for stock, 67.
when unauthorized principal may repudiate, 67.
when unauthorized to represent corporation; effect of subscription, 68,
liability of, see LIABILITY OF TRUSTEES, EXECUTORS, AGENTS, ETC,; SALES
OF STOCK, ETC,
of company obtaining secret profit, 650.
powers of various, see CONTRACTS.
selling stock, 429.
various subordinate, powers of, 720,
rights and duties of corporation as to transfers by, 397.
liability on stock, 249.
of municipality making subscription, 96.
of a corporation, bind the corporation by their frauds, 139, 140.
liability of, on irregularly-executed corporate contracts, 724,
pledging stock in breach of trust, 474. 2
admissions and declarations of, 726.
notice to, 727.
purchase of stock by one for all, 320, note.
see ‘‘ POOL;” ‘* BLIND POOL;” PARTNERS.
AGREEMENTS to subscribe, how far enforceable, 69-71.
see CONTRACTS; SUBSCRIPTIONS.
AID by municipalities to railroads. See Municipal SUBSCRIPTIONS.
by one corporation to another, 682.
ALIEN CORPORATION. See ForEIGN CORPORATION.
ALLEGATIONS. See PLEADINGS; SUITS.
ALLOTMENT OF SHARES. See Contract oF SUBSCRIPTION; INCREASE AND
REDUCTION OF STOCK.
ALTERATION OF CHARTER, See AMENDMENT; CHARTER.
ALTERING OF CHARTER. See AMENDMENTS.
of articles of incorporation, before incorporation, 53.
after incorporation, chapter XXVIII.
AMALGAMATIONS without authority of charter or statute are ultra vires, 668.
definition of, 631, note.
are legal, when, 668-671.
see ULTRA VIRES.
aa oe to constitution of a state, prohibiting municipal subscriptions,
AMENDMENTS TO CHARTERS.
a corporate charter is a contract between three parties — the state, the cor-
poration and the stockholders, 492.
the charter as a contract between the corporation and the stockholders, 493.
charter as a contract between the state and the corporation, 494. :
charter as a contract between the state and the stockholders, 495,
charter amendments imposed upon the stockholders, 497,
charter amendments offered to the stockholders, 498,

‘
‘GENERAL INDEX. 999

‘

: "(The reférences are to the sections.]

AMENDMENTS TO CHARTERS — continued.
auxiliary and incidental amendments are constitutional, though some of the
stockholders dissent, 499.
material amendments offered to the stockholders can be accepted only by a
~ unanimous vote, 500.
amendments under the reserved power of the state to alter or amend the
charter, 501.
dissenting stockholder’s remedy against an illegal amendment, 502.
assent and acquiescence as a bar to the stockholder’s remedy, 3 503.
acceptance should be by stockholders, 499. os) 3
relative to taxation, 494.
relative to liability of stockholders, 497.
relative to change in route, 499, note.
building branch lines, 499, note, 501, note.
issuing preferred stock, 499, note.
or more common stock, 499, note.
or extending time of work, 499, note..
or authorizing consolidation, 499, note, 500, note, 501, note.
or change of name, 499, note.
or change of terminus, 499, note, 500, note.
or reduction of capital, 499, note, 501, note. .
or shortening the road, 499, note, 500, note,
or enlarging the capital, 499, riote.
or extending the road, 499, note, 500, note,
or purchasing a road, 499, note, 500, note.
or increasing the directors, 499, note.
or buying or guarantying stock, 499, note.
or varying the route, 500, note.
or enlarging the business, 500, note.
or commencing on part subscription, 500, note.
or dividing the line, 500, note. ° i
or ‘transferring the subscription, 500, note. ‘
‘or increasing power to hold property, 500, note,
or increasing the par value of stock, 500, note.
or a lease, 501, note.
or borrowing money, 501, note.
application for, cannot be enjoined, 502, note.
a waiver of right of state to forfeit, 636.
use of corporate funds to obtain, will be enjoined, 671.
constitutionality, 633, note. .
authorizing sale, lease, etc., of railroads, 671.
see CONSTITUTIONALITY 3 CHARTER. .  /

AMOTION of officers, 620.-
ANIMUS of asuit. See Motive.
ANSWER by a corporation in a suit, 752.
APPEALS in corporate suits cannot be controlled by the stockholders, 750.
APPEARANCE, special, in or der to object 0 the jurisdiction, 758.
by a corporation in a suit, 752.
APPOINTMENT of agent. See AGENTS.

' APPORTIONMENT of subscriptions, 58.
of “tolls,” see TRAFFIC ARRANGEMENTS; CONTRACT OF SUBSCRIPTION.

AQUEDUCT, taking property under power of eminent domain,, 693.
ARREARS of dividends on preferred stock, 272, 274. See PREFERRED Stock.
ARREST for conversion of stock, 576.

by a corporation, 698. ©
ARTICLES OF AS3O0CIATION, definition, 5, note.

false, a misuser, 633, note.
liability of stockholders where articles not filed, etc., 231-235.

\ subscriptions attached thereto, 53.
ASSAULT and battery by a corporation, 698.
liability of officer, 668a, note.

X
1000 GENERAL INDEX.

[The references are to the sections.}

ASSENT. See ConTRACT oF SUBSCRIPTION.

ASSESSMENTS by the corporation on stock in excess of the par value, 241.
such assessments considered, 241, 242.
are generally invalid, 242.
‘see CALLS. apeue ;
of stockholders by themselves; effect as to statutory liability, 219, note.
beyond the par value of stock, 422. :
voluntary, by the stockholders, no debt thereby incurred by the corporation,
241, note.
definition, 104. A
ASSETS. See CapiTaL STOCK.
upon dissolution, 641, 642.
upon the repeal of a charter, 689. : '
ASSIGNEE in bankruptcy, sale of stock, 320. : ,
of corporation, for benefit of its creditors, cannot enforce the stockholder’s stat-
utory liability, 218. ‘
_in insolvency, liability of, in transfers of stock, 252. ; a3)
in bankruptcy, his powers and duties in respect to unpaid subscriptions, 208.
sale of stock, 430. :
for creditors, liability on stock, 252. .
for benefit of corporate creditors, may collect subscriptions, 208.
see SALES OF STOCK.
ASSIGNING certificate of stock, method, 441.
ASSIGNMENT of certificate. See Sates or STOCK.
of stock to defrand creditors, 319, 484.
for benefit of creditors, 321, note.
with preference for directors’ debts, 661.
for benefit of creditors, may be made-by corporations, 691.
preferences may be given, 691...
of certificates of stock, see TRANSFERS.
of subscriptions by the corporation before or after call, 111.
ASSOCIATIONS. See Joint-Stock ASsocIaTIONS; UNINCORPORATED JOINT-STOCK
COMPANIES.
ASSUMING the position of stockholder, 52.
ASSUMPSIT. See AcTIon.
in suits relative to stock, 574.
to recover back money paid on subscription, 159,

ATTACHMENT OF SHARES OF STOCK.

an execution at common law could not reach shares of stock, 480.

nor i seems, could a court of equity subject stock to the payment of debts,

by statutory provisions executions are generally sufficient to reach the debt-
or’s stock, 482. :

attachment of stock as allowed by the statutes of the various states, 483.

attachment of pledge, etc., and of' stock which the debtor has fraudulently
transferred away, 484.

stock can be attached only in the state creating the corporation, 485.

rights of an unregistered transferee of a certificate of stock as against an at-
tachment or execution levied on that stock, 486.

rule in New York, Pennsylvania, New Jersey, South Carolina, Texas, Louisi-
ana, and the federal courts, 487. 2

rights and duties of the corporation in such cases, 488. | :

rule in Connecticut, Maine, New Hampshire, Vermont, Indiana, Illinois,
Iowa, Maryland, Wisconsin and California, 489, :

rule in Massachusetts, 490. .

shares of stock cannot be subjected to the payment of the stockholder’s debts
by the process of garnishment, 491.

of unissued bonds, 687.

of stock, 430. f

to reach unpaid subscriptions, 201.

of stock, duty of corporations, 404.

of stock as against an unregistered pledgee of the certificates, 465.

ATTESTATION to corporate contracts, 722.

‘
 

GENERAL INDEX. 1001

[The references are to the sections.]

ATTORNEY of company taking pay from the opposite side, 650, note.
salary of, 657.
sharing fees with directors, 649, note.
power of, see LAWYER; SALES OF STrocx..

ATTORNEY-GENERAL. See DISSOLUTION, ETC.
AUTHORITY of president, secretary, treasurer, cashier, etc. See CONTRACTS.

'

B.

BALLOTING, in elections, 605, 608, 607, note,

BANK, branch, may be a misuser, 683, note.
purchasing stock, 316, 809-315.
pledges of stock to a, 316. ~
cannot be a subscriber to stock, 63.
certification of checks, 720, note.
president interested in bad loans, 649, note.
guarantying bonds, 678, note.
BANKING, power of corporation to do, 690.
BANKS, taking mortgages contrary to'statute, 690.
liability of officers for negligence, 701-703,
may be regulated by legislature, 675
ultra vires acts, 682, note.
powers of cashier, 718,
powers of teller, etc., 720.
national, double liability of stockholders, 215.
cannot act as a broker, 446. :
see NOTICE; ADMISSIONS,
BANKRUPTCY, as a defense to an action for breach of trust, 749,
BAR, plea in, in a suit by a corporation, 753, note.
‘‘BEAR,” in stocks, defined, 445, note.
BENEVOLENT associations, 504.
BEQUEST. , See Lecacizs; Lirr Estatus AND REMAINDERS,
of stock to a corporation, is legal, 811.
to a corporative, 692.
BILL in equity relative to stock, 579.
of discovery, to ascertain facts from corporate books, 512, 519.
of exchange, corporation may issue, 686.
» BLANK assignments of certificates of stack are legal in America, 380.
indorsement of certificates, 441.
subscriptions, 58, note.
“BLIND POOL” in stock, 820, note.
see ‘‘ POOL,” AGENTS; PARTNERS,
BOARD OF DIRECTORS. See Dirzctors,
BOARD of trade, public duties of, 675, note.
BOATS run by a railroad, 672. i
BONA FIDE PURCHASER. See Sates or STock. _
of stock that has been attached or sold under execution, 486-490.
of stock from a trustee, 325, 326. . :
of stock. See non-negotiability of stock and dangers incurred in the pur-
chase of certificates of stock; Rules for corporations in regard to refusing
or allowing registries of transfers of stock.
of stock, is protected against a person to whom the vendor had agreed to
transfer it, 338. : :
or pledgees of stock from a pledgee are protected, 473.
of stock, not affected by rights of holders of that stock back of the last reg-
istry, 443.
of stock from an agent, is protected, 351.
of forged transfers of stock, 364, 367. _
of stock, bound by the acts, etc., of his vendor, 733.

.
£002 GENERAL INDEX.

[The references are to the sections.)

BONA FIDE PURCHASER — continued.
of overissued stock, is not a stockholder, 292, 293.
of bonds, must take notice of statutes, 90.
sce NOTICE.
transferees of ‘‘ watered ” stock, liability, 50.
right to complain, 40.
holder of commercial paper issued by corporation, 679.

BONDS, ‘“‘ income,” 687.
dividend, 536. ‘
holders and re- organization, 654-656,
holders cannot object to the corporation’s ‘buying stock, 315, note.
foreclosure by bondholders, 689.
suit by bondholder to foreclose mortgage, 687.
of municipality used to pay a subscription, 98.
by or to an irregularly-incorporated company, 637+
fraud inducing subscription, 157, note.
issued at discount to a director in Ohio, 27.
preferred stock sometimes very similar to, 270, note, -
negotiability of, 687.
may be received in payment of stock, 283, note.
stolen, 687, note.
irredeemable, 687.
of the United States, cannot be taxed, 569.
to be issued as a ‘** bonus” on a subscription, 78, note.
exchanged for stock, 317, note.
guaranty of, by one ‘corporation for another, 678.
issued without consideration, 48, note.
issued for construction work, validity, 26, note.
may be issued by a corporation, 687.
of municipality, cannot be issued at less than par, 98, “note.
unissued, not attachable, 687.
moay be pur¢ghased by stockholders, 320.
in excess of limit, liability- of officers, 663a.
convertible into stock, 283.
“watered,” 5la.
“water ed, ” may be issued by one stockholder owning all the stock, 662.
misrepresentations as to, 140, note.
deferred, definition, 9.
see MORTGAGE. :
BOOKS out of the state, may be a misuser, 633, note.
of corporation, mandamus to compel illegally-elected officers to turn them
over, 613,
minute, of directors, as evidence, 714.
of corporation, as evidence against stockholders, 727.
corporate, as evidence of incor poration, 753, note.
of corporation for registry of transfers, 382,
of a corporation, right of a stockholder to examine, see INSPECTION. ‘

BOOK-KEEPER, powers of, 720, notes.
BOOMING COMPANIES taking property under power of eminent domain, 693.
BORROW MONEY, corporation may, 685.
BORROWING money from corporation, 690.

money, amendment to charter authorizing, 501, note.
BRANCH BANK, may bea misuser, 633, note.
BRANCH LINES, amendment of charter authorizing, 499, note, 501, note.
BREACH OF TRUST. See Directors.

by a trustee in selling stock, 323-327.
BREACH OF CONTRACT to sell stock, 334-338,
BRIBES. See DIRECTORS.

BRIDGE, exclusive privileges, 676,
made free, 682,
legislature may control, 675.
GENERAL INDEX. 1003

[The references-are to the sections,]

BROKERS in stocks and their contracts.
definitions and scope of the subject, 445.
who may be a broker and customer, 446.
facts making person a broker or customer unintentionally, 447,
broker must obey specific orders of customer, 448.
must act in good faith and in reasonable time, 449.
cannot purchase from or sell to himself, 450.
duties and liabilities of customer towards broker, 451.
duties and liabilities of a broker towards customer, 452,
method of completing a broker’s contract, 453.
privity of contract between broker and opposite parties, 454,
privity of contract between the opposite customers, 455.
intervening sub-brokers and sub-customers, 456.
purchases or sales on margins; broker as a pledgee, 457.
broker’s rights and duties on failure of margin, 458.
what will excuse notice and demand for more margin, 459
customer’s remedies and damages herein, 460,
broker’s remedies and damages herein, 461.
broker’s customs and usages, 462.
see GAMBLING SALES OF STOCK. .
holding stock on a margin is a pledgee, 467.
measure of damages in actions by or against, 587,
usury in their transactions, 451, note.
sales, etc., of spurious stock, 451.
“ BULL” in stocks defined, 445, note.
BUSINESS of corporation may be in one state although it is incorporated by an-
other state, 237-239.
failure to commence, asrequired by charter, 638.
new, undertaken by the corporation, 681.
BY-LAWS. |
when liens on stock'can be created by, 522.
no lien on national bank shares can be created by, 513.
liens on stock created by, bind only purchasers with notice, 524,
authorizing administration of oath at elections, is not good, 611.
restricting the right to vote, are void, 618. ~ :
illegal, cannot be legalized by printing on certificate, 700a, note.
various, which may or may not be enacted, 700a, notes.
imposing further liability, is void, 700a, note.
of a corporation, 700a.
how created and modified, 700a.
third persons are not bound to know of them, 725. *
power to make, may be delegated, 700a. ey eet a : :
regulating the method of transferring or registering transfers of stock,'382.
cannot compel stockholder to sell his stock to the company, 289, note. _
rendering stockholders liable for more than the par value of the stock is not
valid, 242. f :
cannot authorize the issue of preferred stock, 267.
fixing the time, place, etc., of a corporate meeting, 594,
requirement that contracts shall be executed in a certain manner, 925,
cannot authorize forfeiture of stock, 123.
restraining the sale of stock, 332. .
see CORPORATE MEETINGS. F

\

C.

.

CALL, defined, 104. |
is generally necessary, 105.
when unnecessary, 106.
New York rule, 107.
not necessary if the corporation is insolvent, 108,
who is to make calls, 109.
calls by directors, 110.
assignment of subscriptions by the corporation before or after call, 111. .
interest runs from the time the call is due, 112.
1004 GENERAL INDEX.

[The references are to the sections.]

CALL — continued. “4

stockholders cannot question advisability of call, 113.
must be uniform and impartial, 114,
no formalities in making calls, 115.
time, place, amount and person to whom payable, 116.
notice of calls, 117, 118.
service of notice, 119.
demand, waiver, pleadings, etc., 120.
payment before, 193, note.
of meeting of municipality, must comply with statute, 94.
contract to postpone indefinitely is void, 53, note 3.
of stockholders’ or directors’ meetings, see MEETINGS; DIRECTORS’ MEETINGS.
on subscriptions payable in property, 19.
right of corporation to refuse registry of transfer until call is paid, 394.
on a conditional subscription, 89.
may be made payable in instalments, 116.
in stock gambling explained, 445, note.
by a court of equity, 207. .
liability therefor wheré there has been a transfer, see TRANSFER.

_ CANADIAN law as to re-organization, 654.

CANAL, exclusive privileges, 676.

ina re See DEFENSES; COMPETENCY OF VARIOUS PARTIES TO Buy
‘ TOCK,
subscriber cannot cancel, 55.
CAPACITIES. See CORPORATIONS.
CAPITAL STOCK, amendment to charter authorizing commencement of busi-
ness before there is a full subscription, 500, note. :
stockholders not liable for untaken part, though they commence business
before it is fully subscribed, 243.
by some charters is left for the corporation to fix, 182,
definition of, 199. :
is a trust fund for creditors, 199,
not fully subscribed, 176-181.
amendment to charter authorizing increase, 499, note.
defined, 3.
a trust fund for benefit of creditor, 42.
see CORPORATE CREDITORS; INCREASE AND REDUCTION OF CAPITAL
STOCK; OVERISSUED STOCK; COMPETENCY oF Partizes to Buy AnD
SELL STOCK.
CAR companies, liability of, 672, note.
‘*trust,” its nature and rights, 508a,
CARS, mortgage of, 689.
mortgages covering, 689,
rentals, precedence of, 689.
CARRIERS.« See COMMON CARRIERS.
CASH, in payment of stock, See ‘* WaTERED” Stock; Issuz or STock.
CASHIER has wide powers, 718.
but only such powers as are involved in the regular course of business, 718.
purchasing from. corporation, 653.
admissions and declarations of, 726.
notice to, 727.
CATTLE-GUARDS, legislature may regulate, 675.
CEMETERIES, taking property under power of eminent domain, 693.
CERTIFICATE, filed, under statute, by foreign corporations, 696, 694, notes.
of incorporation, liability of stockholders where the certificate is deficient,
or is not filed or not published, 231-235. ,
cannot contain powers except those given by the statute, 8a,
as proof of incorporation, 753, note, ;
false, a misuser, 633, note.
subscriptions attached thereto, 53.
- holders in a trust, liability of, 503¢.
‘of stock, not necessary, 8, :
GENERAL INDEX. 1005

(The references are to the sections.} '

CERTIFICATE — continued.
indorsed in blank, lost or stolen, duty of corporation, 402, 403, 406,
accepting, is sufficient subscription, 53, note 3, .
lost or stolen, new one may be obtained, 370,
rights of purchaser of, 368, 369.
stockholders entitled to, 10.
not essential to stockholdership, 10.
negotiability of, 411, etc.
defined, 10.
not.same thing as the stock itself, 10.
failure to tender, see DEFENSES; SALES OF STOCK,
outstanding, duty of corporation in regard to, 402.
corporation must issue, 60. ‘
stockholder may demard, 192, note.
printing an illegal provision on, does not validate it, 700a, note.
may be demanded by a municipa! corporation as a stockholder, 100.
its issue not essential to stockholdership, 192.
} see NON-NEGOTIABILITY OF STOCK; DANGERS INCURRED IN THE PURCHASE
OF STOCK. “
nature of, 10.
not negotiable in any respect in England, 325.
not delivered on sale, 435.
attachment of, 485,
see TRANSFERS.
CERTIFICATION of checks, 720, notes.
CESSATION of business, no dissolution, 631.
CESTUI QUE TRUST of stock, liability of, 503c.
CHANGE in route, amendment to charter authorizing, 499, note, 500, note.
in constitution or statutes relative to municipal subscriptions, 93.
see AMENDMENT. ;
CHARGES, reducing. See CONSTITUTIONALITY.
CHARTER, amendment and repeal of, 492, 503,
a triple contract, 492, 665.
@) between corporation and stockholders, 493, 666.
(b) between state and corporation, 494,
_ (ce) between state and stockholders, 495,
stockholders may prevent repeal of, except under the reserve power, 639.
what amendments may be imposed upon stockholders, 497.
amendments of, offered to shareholders, 498,
auxiliary and incidental amendments, 499.
material amendments, valid only upon unanimous consent, 500,
amendments under the reserve power, 501.
dissenting stockholders’ remedy, 502.
assent and acquiescence as a bar, 503.
powers under general act, 3a. . eS o
requirement that contracts shall be executed in a certain manner, 720.
application for amendment cannot be enjoined, 502, note.
forbidding the corporation from borrowing, 685, 686.
liability of stockholders where incorporation is deficient, 231-235,
provision requiring registry of transfers of stock, 37).
prohibiting corporation from lending, 690.
false, a misuser, 633, note.
see DISSOLUTION, FORFEITURE, ETC.
acceptance of, 640.
. definition, 3a. ,
subscriptions attached thereto, 53.
repeal of, 639. :
ienerainente to, constitutionality and right.of a stockholder to object, see
AMENDMENTS TO CHARTERS,
CHARITABLE corporations may purchase stock, 317.
CHATTEL mortgage of shares of stock, See MorTaaGEs.

CHECK, power to certify, 720, notes,
CIRCULARS, See Prospectus.
1006 GENERAL INDEX.

[The references are to the sections.] |

CITIES. See MUNICIPAL CORPORATIONS.
“‘ CITIZEN,” when a corporation is a, 700,
CITY as a subscriber. °
see MUNICIPAL SUBSCRIPTION.
cannot grant exclusive privileges, 676.
CLASSES of corporations, 1.
ae of stock, 9.
CLERKS, powers of, 720.
CLUBS, 504.
powers of agents of, 720, notes,
COAL cases, 672, 674.
COLLECTION of subscriptions, 69-71.
COLLUSION. See Directors; FRAUDS.
COLORABLE SUBSCRIPTIONS. See DrErenses To SUBSCRIPTIONS; ‘ Dum-
MIES.”
COMBINATION OF STOCKHOLDERS. See ELECTIONS; FRAUDS.
in stock, 3382a.
in elections, 618.
see MONOPOLIES; ‘‘ TRUSTS.”
COMITY of states, allowing foreign corporations to sue or be sued, 757.
. gee LIABILITY AS PARTNERS.
COMMERCE, interstate, taxation of, 572c.
COMMENCING BUSINESS, time of, prescribed by charter, effect of non-compli-
ance, 638, ~
COMMON STOCK, definition, 9.
COMMON CARRIERS. See RartRoaps; ULTRA ViRES ACTS.
COMMON DIRECTORS, 657. ;
COMMISSIONERS, . See RAILROADS.
as subscribers for stock, 64.
as authorized to take subscriptions, 57.
railroad, 675. ,
‘to take subscriptions, cannot bind the corporation by representations, 141.
COMMISSIONS to directors, 650. :
COMMITTEE, executive, legality of, 715,
COMPANIES. See CoRPoRATIONS.,
COMPETENCY of various parties to buy and sell stock, chapter XIX.
of acorporation to purchase shares of its own capital stock, 809, 310.
rule in the United States, 311-313. i
the stock is not merged, 314,
purchase by a corporation of stock in another corporation; purchase by a
railroad, 315.
purchases of stock by banks and pledges to banks, 316,
purchases of stock by insurance, manufacturing and other corporations, 817.
infants as purchasers of stock, 318. ,
married women as purchasers or vendors of stock, 319,
competency of miscellaneous parties, 320.
sales, purchases and transfers by. agents, 821.
purchases of stock by guardians, executors and trustees, 322,
sale or pledge of stock by trustee in breach of his trust, 823, 824,
transferee of stock from trustee is protected, when, 825, 826.
rights and liabilities of the corporation allowing a transfer by a trustee in
breach of his trust, 327.
sales of stock by a guardian, 328,
sales by executor or administrator, 829.
duty aa liability of the corporation in sales by an executor or administrator,

see SALES OF STOCK,
to subscribe, 63, ete,

COMPETING railroads, prohibition against consolidation, 668,
see RAILROADS; COMPETENCY.
company, suit in the interest of, 786,
GENERAL INDEX. 1007

[The references are to the sections.]

COMPROMISE. See DEFENSES. \

by corporation of a contract of subscription to the capital stock, 171,

of claims by directors, 682. : ° :

of corporate suits, rests in the discretion of the directors, 750.
CONCEALMENT of truth, may bea misrepresentation, 147.
CONDEMNATION PROCEEDINGS. See Eminent DoMAIn,

defendant may allege illegal incorporation of plaintiff, 637.
CONDITION to subscription that interest shall be vaid, 277,

subsequent and precedent, 78.

to charter, 638. :

parol, no defense, 128.

to subscription, precedent and subsequent, 97,

subscriptions in England, 18, note.

subscriptions, payment in property, 14,

municipal subscription, 97,

CONDITIONAL subscriptions, chapter V.
definition, 77.
conditions subsequent, 78.
taken before incorporation, 79, 80
parol conditions, 81, _
taken after incorporation, 82.
what may be the condition, 88.
acceptance by the corporation, 84.
construction of the condition, 85.
performance of the condition, 86, 87,
waiver of the condition, 88,
notice and calls, 89, .
Baar peions not counted in ascertaining whether full capital is subscribed,

Jar

CONDONATION., See RATIFICATION,
CONFEDERATE MONEY, how far payment for stock stock in is valid, 197.
CONFESSION of judgment by a corporation, 754.

‘CONFIRMATION, vote of, by majority of stock, when the guilty party also votes,
652.
CONFISCATION OF STOCK, 871.
see SALES OF STOCK.

CONGRESS may incorporate a company, 1, note.

CONNECTING lines, contracts of, 672. :
railroads or railroad and steamboats, contracts, 672.
lines, duty to exchange freight, 674.
legislature may regulate, 675.

CONSIDERATION for subscriptions, 69-71,
to be returned, 744.

CONSOLIDATIONS without authority of charter or statute are ultra vires, 668.
see CHARTER. :
are legal, when, 668-671.
see ULTRA VIRES.
liability for debts of old companies, 643,
amendment to charter authorizing, 499, note, 500, note, 501, note,
is not always a dissolution of the old companies, 631
of railroads after municipal aid is voted, 102.
and exemptions from taxation, see TAXATION.
CONSPIRACY in the sale of stock, 357.
* by a corporation, 698.
CONSTITUTIONAL LAW. See CHarTeR AMENDMENTS; EMINENT DOMAIN,
legislature cannot compel a person to subscribe, 53, note 3,
CONSTITUTIONAL PROVISIONS prohibiting municipal subscriptions, 92.
changes after the subscription is made, 93.
making fictitious stock void, 26.
against ‘‘ watered” stock, 26-28,
1008 GENERAL INDEX.

[The references are to the sections.)

CONSTITUTIONALITY of amendment to charter authorizing sale, lease, etc.,

of railroads, 671.

amendment to charter allowing issue of preferred stock, 267, note.

of statute increasing the liability of stockholders, 212,

of various statutes, 675, notes.’ :

of a repeal of an exemption from taxation, 572d.

of certain amendments to charters, 633, note. ;

of amendments to charters; right of a stockholder to object, see AMEND-
MENTS TO CHARTERS. z

of acts reducing railroad rates, 675.

requiring the building of fences, etc., 675.

various police regulations, 675.

CONSTRUCTION company, director interested in, 649.
contracts, 17, note, 18.
work in payment of a subscription, 83.
lien, 689.
company may subscribe to railroad stock, 63.
work in payment for stock, 12, etc.
of a conditional subscription, 8&5.

CONTEMPT of court by officers or agents, 755.
by the corporation, 756.
of court by stockholders, 663b. \ ;
of court in refusing to obey decree requiring transfer of stock, 388, note.

CONTRACT of subscription, no formalities necessary, 52-54,

certificate no part of, 60.

need not be in a special book, 53,

valid if on a scrap of paper, 53.

may become binding by estoppel, 52-54,

when subscriber is not bound, 52-54.

the English rule, 56.

as to commissioners, 57, 64.

who competent to make, 63-68. i

corporation itself not, 63.

not to sell stock, 332.

to buy back stock which is sold, 339, 333, note.

for payment of subscription in property, performance of, 19,

by stock dividend, 20.

work in payment for stock, 12, ete.

with corporation, director interested in, 649.

by or with an irregularly-incorporated company, 637.

a corporate charter is a, 492-495.

relative to voting. 618, :

between corporation and stockholder, 4a.

to es stock, see FORMATION AND PERFORMANCE OF THE CONTRACT; SALES OF

TOCK. !

of a corporation, may be formed by ratification, acquiescence or implied au-
thority to a person to contract, 705-720.

for construction, 17, note, 18.

under what circumstances is a corporation bound by a contract made in its
name, 704.

Beometeisr their liability and the liability of the corporation and subscribers,

a

stockholders; their power to make by-laws and contracts, expel members
and remove directors, 708-711.

directors; their power to contract; de facto directors; their minute-book as
evidence, 712-714. :

executive committee, 715.

president, 716.

secretary and treasurer, 717.

cashier, 718,

general manager and superintendent, 719.

subordinate agents, 720. :

GROUTAEy corporate contracts by the modern rule need not be under seal,
GENERAL INDEX. 1009

[The references are to the sections.]

CONTRACT — continued. .
method of drafting, signing, sealing and acknowledging a corporate con-
tract; proof of seal and authority to attach it, 722,
corporation is liable on irregularly-executed instruments, 723.
liability of officers on irregularly-executed instruments, 724.
charter and by-law requirements as to manner of executing corporate con-
tracts, 725. :
when is the corporation bound by its officers’ or agents’ admissions, 726.
notice to the corporation by notice to the officers, 727,
dividing profits with directors, 649.
restricting the sale of stock, duty of the corporation, 408,
objection of, see CONSTITUTIONALITY.
the various ways in which the corporation enters into or becomes bound by
contracts, 721.
+ between corporations having one or more directors in common, 657,
building road, cannot hold new corporation liable, 707, note.
CONTRACTOR’S LIEN, 689.
see CONSTRUCTION.
CONTRIBUTION, shareholder compelled to pay his unpaid subscription may en-
force contribution from other shareholders, 211.
as distinguished from donation, 53, note.
as a gift and not for stock, 70, note.
among stockholders liable by statute, 227.
among directors, etc., guilty of fraud, etc., 749.

CONVERSION of stock by a pledgee, waiver, 475.
‘by acorporation, 698,

CONVERTIBLE BONDS. See INCREASE AND REDUCTION OF STOCK.
CONVEYANCE. See CoRPoRATION; ConTRACTS; DEED, '

COPARTNERSHIP. See “ Poors.”
sale of assets tor stock, 200.
corporation as a partner, 677.

CORPORATE CREDITORS cannot object toa forfeiture of stock unless fraud is
involved, 127.
*may complain when stock is issued for property, etc., when, 42-44,
rights upon a reduction of the capital stock, 289. 5
as distinguished from preferred stockholders, 270.
see CREDITORS; CAPITAL STOCK; DIVIDENDS; LIABILITY OF STOCKHOLD-
ERS, ETC. =

CORPORATE BUSINESS, general method of transacting, 621, ete.
can be transacted by stockholders only at corporate meetings, 624,

CORPORATE POWERS. See ULTRA ViRES.

CORPORATE PROFITS and stockholders, 4a. See DIVIDENDS.

CORPORATE INSOLVENCY as a bar to a stockholder’s defense of fraud, 163,
164

liability of person selling stock to the corporation, 309-313. See CREDITORS,

CORPORATE MEETINGS. :
must be within the state creating the corporation, 591.

‘ no legal corporate meeting can be outside of the state, 591,
no valid acts can be performed at such a meeting, 591.
validity of corporate acts at meetings outside the state, 591.
by whom meetings must be called, 593.
notice of, when stockholders are entitled to, 594. ;
essential elements of notice are time, place and business, 595.
service of notice, 596. .
must be served a reasonable time before the meeting, 597.
ordinary and extraordinary meetings, 598. .
waiver of notice by stockholder, 599.
what constitutes a, 599. ;
presumed to have been regularly given, 600.
adjourned meetings, 60i. ,
what may be done at, 601. See DIRECTORS’ MEETINGS,

64

1
1010 GENERAL INDEX.

[The references are to the sections.]

‘CORPORATOR, defined, 4, :
see PROMOTERS,
CORPORATION, powers where incorporation is under a general law cannot be
enlarged by inserting provisions in the certificate, 3a.
powers inherent at common law; perpetual succession; sue and. be sued,
grant and receive; purchase and hold property; seal; by-laws; limited
liability ; transferability of stock, 1, note. ‘ 2
power to issue stock for money or property, or by a stock dividend, 11-200.
issue ‘‘ watered ” stock, 21-51.
issue ‘‘ watered” bonds, 51a.
take subscriptions from various parties and collect the same, 52-71,
take conditional subscriptions, 77-89.
enforce municipal subscriptions, 90-102.
make calls, 104-120. —
forfeit stock, 121-134.
issue preferred stock, 268. / 2 Oe
do all its business in a state other than the state incorporating it,
237-239,
aasess stockholders for more than the par value of the stock, 241,
242,

increase or reduce its capital stock, 281. \

buy its own stock, 309-314,

buy the stock of another corporation, 315-317.

sell all its property, 667.

consolidate, lease, absorb, amalgamate, merge or sell, 668-671.

pool, 672.

make traffic contracts, 672,

carry beyond its line, 672.

limit its liability, 672, 674.

contract with connecting steamboats, 672.

cease operating its line, 673.

make discriminations, 674.

acquire a monopoly or exclusive privilege, 676.

be a partner, 677. ,

guaranty bonds or dividends of another corporation, 678.

give away its assets in aid of another enterprise, 678.

be an accommodation indorser or maker of commercial paper, 679.

‘be an executor or trustee, 680. ‘

undertake a new business, 681.

make gifts, 682.

pay for lobbying, 682. ‘

to borrow money, 685,

make bills, notes and acceptances, 686.

issue bonds and coupons, 687,

debentures, 688. :

make a mortgage, 689.

loan money, 690.

take a mortgage, 690. ¥

assign for the benefit of creditors and to make preferences, 691.

purchase, hold and mortgage land, 692.

to exercise the right of eminent domain, 693.

of foreign corporations to do all these acts, 694-697,

commit and liability for torts, 698.

have a name and to protect it, 699.

do acts which ‘‘ persons ” may do under statutes, 700.

make by-laws, 700a. :

expel members, 700b.

create and enforce a lien on the stock of stockholders, see LIEN.
: forfeit stock, see FORFEITURE. : ‘
musi, informal or incomplete, liability of stockholders to creditors, 231—

incorporation for purposes not authorized, by the general act, 286.

liability on its own stock held by itself, 251.

incorporated in one state and doing all its business in another state, 237-289.
selling all its property for stock in another corporation, 667.
\ GENERAL INDEX. 1011 ©
7 :
[The references are to the sections.]

CORPORATION — continued.

buying or selling stock, 428,

drawing, signing, sealing, acknowledging contracts, seal, etc., see CONTRACTS.

notice to, see NOTICE.

admissions and declarations of, see ADMISSIONS,

ee and duties in allowing or refusing registry of a transfer of stock, 885-

may require proof of identity; also of genuineness of signature, etc., 385.

cannot refuse registry on' account of the motive of the transferrer or trans-
feree in the transaction, 386. :

may interplead between two claimants to stock, 387.

must obey mandate of court ordering registry and issue of new certificates,

remedies of a transferee of stock against the corporation for refusal to allow
registry, 389.

remedy by mandamus, 390.

remedy by suit in equity, 391.

remedy by an action for damages, 392. @

entitled, to subscribe for new stock, director taking it, 653, note.

is the proper party to remedy frauds, ultra vires acts, etc., 6440.

assuming the obligations of a partnership, 20D, note.

may pledge its unissued stock, 247, note.

de facto, sufficient to enforce subscriptions, 183-186.

definition, 185, note.

irregularly-incorporated, no defense to subscriber, 138, 186.

powers, see, also, ULTRA VIRES.

books of, right of a stockholder to examine, see INSPECTION.

cannot restrict the right to vote, 618. -

stockholder’s act to remedy act against, see SUITS.

suits by or against, see SuITs. i

requirements of charter or by-laws that contracts shall be executed in a cer-
tain manner, 725.

representations that the corporation has performed certain necessary acts as

to making contracts, 725.
see NOTICE.

stockholder’s actions to remedy wrongs against, see, also, SUITS.

effect of a purchase of its own shares of stock, 282,

‘issue of bonds convertible into stock, 283, (

liability on overissued stock, 2938, 294.

agents taking subscriptions, 68.

de facto, 687. :

powers of stockholders, directors, executive committee, promoters, presi-
dent, secretary, treasurer, cashier, general manager, superintendent,
agents, etc., see CONTRACTS. ;

liability of, on promoters’ contracts, 707.

power to adopt promoters’ contracts, 707.

proceedings, proof of, 714.

the stockholders do not represent it, and cannot contract for it, 709. -

as transferrer or transferee of its own shares, its liability thereupon, 251, 809-
314,

as vendor or vendee of shares of stock, see SALES OF STOCK.

rights and duties of, in allowing or refusing registry, 385-392. See SALES OF
STOOK.

rules regulating registry, 393-410. .

may eel sta property, though a suit is pending against its stockholders, 480,
note. '

may give security to stockholder, 4a.

may sue stockholder, 4a.

may contract with stockholders, 4a.

powers under general act, 3a.

must sue and be sued in its corporate name, 751,

resides where it is incorporated, 757. See FOREIGN CORPORATIONS.

its rights and duties where an attachment or execution is levied on shares of
stock, but the certificates have been sold to a bona fide purchaser, 490.

domicile, 1, note.
1012 GENERAL INDEX.

[The references are to the sections.]

CORPORATION — continued.
its incidents and powers, 1, note.
stockholder may sue it, 157, note.
is liable for allowing a trustee to sell stock in breach of trust, 327,
its duty as to sales by an executor or administrator, 330.
not liable to action for deceit, 157.
refusing to transfer stock when notified not to allow transfer, 382,
ultra vires acts as distinguished from intra vines acts, 683.
when pean heey no call is necessary, 108, :
mortgage does not include uncalled subscriptions, 111, note.
different from an unincorporated association or joint-stock company, 504.
refusing to register transfer is guilty of conversion, 576. —. .
cannot enforce the stockholder’s statutory liability, 218.
pledging its own stock, 20a. ; : ‘
foreign, enforcement of stockholder’s liability, 223.
public, may be aided by municipalities, 91.
private cannot be so aided, 91. ;
constitutionality of amendments to charter, right of a stockholder to object,
see AMENDMENTS TO CHARTERS. :
classification of, 1. |
having capital stock, the subject of this treatise, 2.
are chargeable with the frauds of their agents, 139, 140.
see Rules for corporations in regard to refusing or allowing registries of
transfers of stock,
are not merged though one owns most of the stock of another, 315, note.
created by two states, 697. ;
insolvent, transfers of stock to avoid liability, 263-266.
may be bound by a contract where it acquiesces therein or has impliedly au-
thorized a person to contract for it, 705-720.
liability for allowing registry of forged transfer of stock, 365, 366.
registering transfers without a surrender of the old certificate, 358-360,
may pay dividends to the registered owner, 540.
assigning subscriptions before or after a call, 111.
cannot subscribe for stock, 63,
its existence sometimes ignored by the courts, 6630.
definition and classes, 1, 2.
created by the joint action of two states, 697.
cannot vote shares of its own stock, 613.
see ‘‘ TRUSTS;” ELECTIONS; FRAUDULENT ACTS OF DIRECTORS; MaJoRITy
OF STOCKHOLDERS, ETC.
see, also, DISSOLUTION; FORFEITURE, ETO. ; MEETINGS; DIRECTORS’ MEET-
INGS; ADMISSIONS AND DECLARATIONS.

“ CORNER,” in stock, explained, 445, note, 332a.
see ‘* TRUSTS.” . :

COST-BOOK mining companies, 504.
COSTS, statutory liability of stockholder to pay judgment recovered against the
corporation for, 225.

payment of, by a rival company, 736.

incurred in stockholder’s suit to remedy corporate wrongs, 748,
COTTON-PRESS RATES, reduction of, 675, note.
COUNTER-CLAIM. See DEFENSES.

as a defense to subscriptions, 198, 194:

as a defense to a stockholder’s statutory liability, 225,
COUNTY as a subscriber. See MunIcIPAL SUBSCRIPTIONS,
COUPON BONDS may be issued by a corporation, 687.

COURT ordering an issue of stock, 284.
must be obeyed by corporation in transferring stock, 388,
cannot remove directors, 746,
contempt of, by officers or agents, 755.
by the corporation, 756. ;
decree of, in regard to stock, duty of corporation, 405.
will enforce the liability of stockholders in foreign corporations, 228.
GENERAL INDEX. 1013 -

[The references are to the sections.] ,

CREDITOR who is also a director may reach subscriptions, 197.

, of corporation, cannot object to the corporation’s puying stock, 315, note.
who is also a stockho.der, may begin suit to collect subscriptions, 205, note.
as to the statutory liability, 221, ae

Tight to subject shares of stock to the payment of debts, see ATTACHMENT,

and unpaid subscriptions, chapter XI.

as distinguished from preferred stockholders, 270.

assignments for benefit of, may be made by corporations, 691.

rights upon a reduction of the capital stock, 289. : 3

liability of stockholders to; amendment of charter increasing or decreasing

such liability, 497. : 7s

and re-organization, 654-656.

cannot cause dissolution, 632. .

may object to directors buying up debts of insolvent company, 660.

corporate, see, also, SEQUESTRATION.

corporate; common-law right to enjoin or set aside the frauds, ultra vires

acts, etc., of directors, etc., 735.

may attack a release of a subscription, 170.

priority among in regard to stockholder’s statutory liability, 226.

as to subscription liability, 205, note.

of partnership turned into a corporation, 20b.

upon repeal of charter, 639, 643. :

upon dissolution, 641, 642.

action against officers for issuing ‘‘ watered” stock, 48.

remedies on such stock, 42-44.

liability of stockholders by statute, see L1aBILITY.

assignment of stock to defraud, 319, 484.

see CORPORATE CREDITORS.

CRIMINAL ACT OF CORPORATION, liability of officer, 668a, note.
CRIMINALS, prosecution of by corporation, 682.
CROSSINGS, legislature may regulate, 675.
CUMULATIVE, remedy, 124.

voting, 609.
CUSTOM as to time, place, etc., of corporate meetings, 594.

of a broker, 453, 462.
CUSTOMER OF A STOCK-BROKER. See BROKERS.

. CUSTOMS OF STOCK-BROKER, 453, 461, 462.

D.

DAMAGES, the action for, in case of a breach of contract to buy or sell stock,
855

defenses herein, 336.
specific performance, 337, 338.
see MEASURE OF DAMAGES.
in suit against a corporation, 698.
DANGERS INCURRED IN PURCHASING STOCK, 417-444.
status of the purchaser of a certificate, 417.
liability of purchaser on unpaid par value, 418.
to forfeiture a Bor ee of calls, 419.
upon statutory liability, F
a Panaer is ma e to a nominal holder, 421.
for assessments, 422. :
when stock was originally issued for property, 423.
as partner under certain circumstances, 424.
as to lien of the corpora
in case of overissued stock, 426. ,
wien ‘transferrer or previous holder was incompetent to contract or hold
stock, 427. aa
when stock is transferred by or from the corporation itself, 428.
by joint owners, partners or agents, 429.
1014 GENERAL INDEX.

[The references are to the sections.]

DANGERS INCURRED IN PURCHASING STOCK — continued.
at sheriff’s sale, or from assignee in bankruptcy or insolvency, 480.
from pledgee, 431.
when the transferee of a pledgee is protected, 432,
from executor or administrator, 483.
from a trustee, 484.
in respect to the possibility of, there being another vendee of the same stock
without delivery of, certificate, 485.
in respect of forgery, 436.
or of a loss or theft of the certificate indorsed in blank, 487.
or of a previous holder’s loss of the stock by fraud, 438.
or of the statute of frauds, 439.
in gambling sales of stock, 440.
in respect to the methods of assigning a certificate, 441.
as to the registry, 442. ‘ . ;
not affected by rights of holders back of the last registry, 4493.
summary, 444, ;
DARTMOUTH COLLEGE CASE. See CoNsTITUTIONALITY.
DEATH OF STOCKHOLDER, as affecting his liability, 259, note.

DEBENTURE, defined, 5, note.
definition, issue and nature of, 688.
in excess of limit, liability of officers, 663a.
_in England, may be issued at a discount, 51a.

DEBT, canceled in payment of subscription, 15.
of corporation, director buying up, 660.
due from stockholders to the corporation, lien of the corporation, see LIEN,
due to or from corporation on dissolution, 641, 643.
excessive, a misuser, 633, note. 1
of company in excess of limit, liability of-officers, 663d,
DECEIT, action for, inducing subscriptions, 157.
by a corporation, 698. ,
action for, for fraud in sale of stock, 355.
action for, does not lie against a corporation, 157.
see FictiTIous Stock; FRAUDULENT REPRESENTATIONS; SALES OF STOCK.
DECLARATION OF DIVIDENDS. Seo DIvIDENDs.
DECLARATIONS. See ADMISSIONS.
DECREE of court as to stock, duty of corporation, 405. See Court.
’ injunction, against corporation, 756. -
DECREASE of capital stock by a purchase by a corporation of its own stock, 314,
DEED OF SETTLEMENT, defined, 5, note.
DEED by or to an irregularly-incorporated company, 687.
by or to ac Eernven method of drafting, signing, sealing and acknowledg-
ing it, 722. \
after consolidation, 641, note.
of settlement, definition, 5, note.
of trust, see MORTGAGE.
DEDUCTIONS in taxation. See TaxaTION.
DE FACTO corporation, definition, 185, note.
directors, 615, 619. rs
directors and calls, 110,
directors, 713.
directors may make calls, 110.
directors, see DIRECTORS.
corporation, liability of stockholders where incorporation is deficient, 281-285.
corporation, is sufficient to enforce subscriptions, 183-186,
corporation, 637.
see LIABILITY aS PARTNERS.
DEFAMATION. See Lise.

DEFAULT in mortgage, foreclosure; right of stockholder to come in, 659,
DEFECT OF AUTHORITY. See Contracts.
DEFENDANTS. See Surrs.
GENERAL INDEX. 1015

[The references are to the séctions.]

DEFENSES TO ACTIONS TO ENFORCE SUBSCRIPTION S, 166, ete,
see LIABILITY OF STOCKHOLDERS. —
not favored by the courts, 166.
definition of the terms “release,” “ withdrawal,” ‘‘surrender,” ‘‘ cancellae
. tion,” and “ rescission,” 167.
subscription may be canceled by mutual consent, 168,
consent must be unanimous, 169.
when cancellation may be impeached; 170,
‘compromise of subscription, 171. s
non-payment of statutory percentage not available as a defense, 172,
this is the general rule, 173,
the New York rule herein, 1'74,
_. the Pennsylvania rule herein, 1'75.
failure to obtain the full amount of subscription, 176.
a charter provision may do away with this defense; 177.
the express provision of the contract may govern, 178,
in England the matter is governed by statute, 179.
what subscriptions are to be counted herein, 180.
this defense may be waived, 181. .
failure to fix definitely the capital stock, 182. ,
this defense avails especially in the New England states, 182.
irregular incorporation of the company, 183.
this defense not available against corporate creditors, 184.
quere as between the de facto corporation and the subscribers, 185.
effect’ of the'law of estoppél or of acquiescence herein, 186.
' ultra vires acts of the corporation or the corporate officers, 187,
the various remedies open to the subscribers herein, 187.
frauds and mismanagement of the directors, 188
_. when this defense is not available, 188,
delay and abandonment of the enterprise, 189.
this defense not generally open to the subscribers, ‘189.
failure of the corporate enterprise, 190.
other subscriptions canceled, or released, or taken conditionally, 191,
how far this defense is available, 191.
failure to tender certificate, 192.
this generally not a valid defense, 192.
set-off and counteér-claim, 193. “
this defense not available against corporate creditors, 193.
where subscriber has voluntarily paid corporate debts, 194,
statute of limitations, 195. :
how far available in a court of equity, 195.
ignorance or mistake, 196.
generally invalid, 196.
miscellaneous grounds of defense herein, 197.
material alteration of the terms of the contract, 197.
waiver of, 198. .
failure to obtain subscription for the full amount of increase of stock is not
a defense, 288, 289, note,
that officers are guilty of breach of trust, 747.
to subscriptions, where corporate creditors seek to enforce them, 210.
to actions to enforce subscriptions, see, also, PAROL AGREEMENTS; FRAUDU-
LENT REPRESENTATIONS; SUBSCRIPTIONS.
consolidation, lease or sale under an amendment to the charter, 671.
to subscription ; illegal directors, 110.
amendment to charter, 502. ;
to subscription, that the charter is different from facts stated in the prospec-
tus, 502, note. : :
to stockholders’ statutory liability ; release; payment; set-off; interest; costs;
statute of limitations, 225. ;
to subscription, no defense that preferred stock was issued, 267, note,
irregularity of increase of capital, 288. !
see, also, LIABILITY.
DEFINITION of corporation, 1,
of capital stock, 3,
of charter, 3a. i
¢

1016 GENERAL INDEX.

[The references are to the sections.]

DEFINITION — continued.
of corporator, subscriber, shar eholder and stockholder, 4,
of shares of stock, 5.
of certificate of stock, 10.
of stock, 5.
of shares, 5.
of articles of association, 5, note.
of memorandum of association, 5, note,
of deed of settlement, 5, note.
of scrip, 5, note.
of parol agreements and of fraud as defenses to actions to enforce subscrip-
tions, chapter IX.
of stock exchange, 445.
broker, 445.
“*bull,” 445,' note.
“bear, » 445, note.
“short e sale, 445, note.
‘‘long” purchase, 445, note.
“put,” 445, note. ‘
*‘call,” 445, note.
“straddle,” 445, note.
**corner,” 445, note.
*‘loan,” 445, note.
“* flat, 4 445, ‘note.
of general, specific and demonstrative legacies of stock, 299.
of capital stock, 199.
of franchise, 1, ‘note.
of conditional subscription, 77.
of special stock, 9.
of “ margin,” 457.
of debenture, 688, .
of preferred and guarantied stock, 267.
of ultra vires, 664,
ot mortgage of shares of stock, 463,
oF Rete 8 of stock, 463.
jen, 463.
ef release, withdrawal, surrender, cancellation and rescission, 167.
of assessment, 104.
of instalment, 104.
of amalgamation, 631, note.
of de facto corporation, 185, note.
of ‘‘stop order,” 448. '
of common stock, 9.
of preferred stock, 9.
of watered stock, 9.
of fictitiously paid up stock, 9.
of deferred stock or bonds, 9.
of overissued stock, 9.
of spurious stock, 9, '
of ‘ call,” 104,
of ‘‘ trusts,” 508a,
of unincorporated joint-stock companies, 504
of dividends, 534,

DEFERRED stock or bonds, definition, 9.
DE JURE DIRECTORS, 713. See Dg Facto.

DELAY. See Lacuzs.
in completing enterprise, no defense to subscriptions, 189,

DELEGATION of authority to executive committee, 715.
by directors, of power to make calls, 110, 111.
of legislative power; municipality voting municipal aid, 95.
of power by a municipality or its agents, 95, note,
of powers, see CALLS; CORPORATE MEETINGS.
' GENERAL INDEX. JULT

[The references are to the sections.]

DELIVERY of stock on a contract, 333, 834.
of certificates of stock, see STATUTE OF FRAUDS.
of certificate of stock, sale without, 485.

DEMAND OF CALLS, 120.
DE MINIMIS NON CURAT LEX, 75.

DEMONSTRATIVE LEGACY OF STOCK. See Legacies or Stock,
DEPOSIT BY SUBSCRIBERS. See PRomorERs.
DEPOT, location of, as condition, 78, note.
legislature may regulate, 675.
DETINUE, in actions relative to stock, 577,
see ACTION.
DEFICIENT incorporation. See INCORPORATION.
DEVISES, legality of, to corporations, 692. ‘
DIRECTORS, their discretion as to calls not disturbed by the courts, 113,
meetings, entries of proceedings not necessary, 115, note. ;
participating in call on subscription waives informalities, 115, note.
may make calls, 109, 110.
may compromise claims, 682.
discretion of, and of majority of stockholders as to intra vires acts, cannot
be questioned by single stockholder unless fraud is involved, 684,

liability of, on irregularly-executed corporate contracts, 724.

minority cannot make a call, 110.

de facto, may make calls, 110.

cannot delegate power to make calls, 110, 111.

their discretion in regard to declaring dividends on preferred stock, 271.

though disqualified, no defense to subscriptions, 197, note.

not liable for commencing business before full capital is subscribed, 243.

their discretion as to declaring dividends, 539..

motives in making calls not inquired into, 114, note.

are liable for causing the corporation to. purchase its own stock, 309,

meetings, evidence of proceedings, 714.

Ae to third persons for frauds, trespasses, contracts and ulira vires acts,

630,

same, in two corporations, 657.

salary or compensation, 657.

liability for negligence, 701-703. ;

right to vote at stockholders’ meetings, 652.

methods of drafting, signing, sealing and acknowledging corporate contracts
made by them, 722. i

amendment to charter authorizing increase of, 499, note.

must refer to the stockholders the question of accepting an amendment to a
charter, 499. aot

a single director does not represent the corporation, and cannot contract for
it, 712. \ ‘

a single director may be expressly authorized to act for the corporation, 712.

failure to elect, not a dissolution, 631. .

meetings, time, place, notice, action without meeting, quorum, 592,

liability for ultra vires acts, 682, note (p. 816).

innocent, not liable for frauds of others, 158.

are not parties to corporate suits, 751. ; .

may institute, carry on, discontinue, compromise or settle corporate suits,
750.

admissions and declarations of, 726.

notice to, 727. :

as co-defendants in stockholders’ suits, 738.

cannot be enjoined from acting at all, 746.

see, also, INJUNCTION. ;

cannot be removed by the courts, 746. :

duty to obey orders by a court to a corporation, 957,

liability for fraud inducing subscriptions, 157, 158.

power in poe to Ba a sale of stock,’ 382.

may buy and sell stock, 320. . |

Be bend to know that stock has been transferred to them on the books, 253,

\
1018 GENERAL INDEX. °

[The references are to the sections.}

DIRECTORS — continued. ;
transact corporate business, stockholders do not, 709.
cannot be removed by stockholders, 709, 4 .
de facto, 615, 619. ,
cannot make the by-laws, 700a.
power may be delegated to them, 700a.
may change their own by-laws, 700a, notes: 3
and not the stockholders, exercise a charter power to sell or lease, 670.
two sets of, receiver, 684, ‘
cannot dissolve corporation, 629,
who may be elected, 619.
cannot be removed by stockholders, 620.
three classes of stockholders’ wrongs considered, 643.
the corporation is the proper party to bring action to remedy these
wrongs, 644. :
but the corporation failing or refusing to sue, a stockholder may bring
the action, 645.
methods of perpetrating these frauds, 647.
in general a breach of trust, 648,
when interested in a construction company, 649.
when gifts are received from persons contracting with the corpora-
tion, 650. , ba
in sales of property by them to the corporation, 652.
in purchases of property by them from the corporation, 653.
when such purchases or sales are valid, 652, 653.
in voting salaries or compensation to corporate officers, 657.
in contracts between companies having one or more directors in
common, 658.
in collusion with mortgagees on the foreclosure of a mortgage on
corporate property, 659.
stockholder’s remedies herein, 659.
in buying. up property for resale to the company, 660.
in the misapplying or giving away of corporate funds, 674,
in the misuse or embezzlement of corporate funds, 661.
in re-organizations, 654-656.
see RE-ORGANIZATIONS.
delegation of powers, 715.
de facto and de jure, 713.
holding over, 713. ‘
liability on ‘‘ watered” stock, 48,
who receive stock as promoters, 48.
may loan to corporation, 661.
liability on overissued stock, 295.
vacancies reducing the number below a quorum, 592, note,
receiving gift of stock from the corporation, 652, note. ay
salary of, 657.
acting without qualification stock, are not liable as stockholders, 52, note.
may subscribe for stock, 64.
as receivers, 4a. .
an increase of stock is to be ordered by stockholders only, 285,
cannot release a subscriber, 168. :
holding over, 620. j 1
as trustees, 648. ‘
liability for declaring dividends when there are no profits, 549,
need 'not be stockholders, 4a,
see DE Facto; ELECTIONS; FRAUDULENT ACTS, ETO.; OFFICERS,
DISCHARGE OF SUBSCRIBERS. See DEFENSES.
DISCOUNT, shares issued at a. See ‘‘ WATERED” STOCK.
in issue of stock, see ‘‘ WATERED” STOCK.
of notes, power of corporation, 690.
DISCOVERY, bill of, to ascertain facts from corporate books, 512, 519.
of names of stockholders, 204, note, 206, note.
DISCRETION of directors as to calls not disturbed by the courts, 113. .
of directors as to intra vires acts, not to be questioned by the courts unless
fraudulent, 684,
GENERAL INDEX. 1019

[The references are to the sections.]

DISCRETION — continued. |
of directors or of majority of stockholders as to acts intra vires, cannot.be
questioned by single stockholder unless fraud is involved, 684.
of ao. as to instituting, compromising, etc., the suits of the corpora-
ion, 750. :
of directors in declaring dividends on preferred stock, 271.
of directors as to declaring dividends, 539.

DISCRIMINATIONS, legality of, 674.
in taxation, see TAXATION.
as to dividends, see DIVIDENDS.

DISFRANCHISEMENT. See EXPuLsion.

DISPUTES. See INTRA VIRES; STOCKHOLDERS; INTERNAL MANAGEMENT,
DISSENTING stockholders may prevent issue of ‘‘ watered ” stock, 41.
as to intra vires acts, 684.
see STOCKHOLDERS; DirEcToRS; FRauDS; ULTRA VIRES ACTS.
DISSOLUTION, FORFEITURE AND IRREGULAR INCORPORATION.
methods of dissolution, 628. ‘
dissolution by the stockholders, 629-30.
acts which do not constitute dissolution, 631.
only the attorney-general can institute a suit to forfeit a charter, 632.
forfeiture for misuser, 633.
forfeiture for non-user, 634. ‘
forfeiture for ultra vires acts and for usurpation of franchises, 635.
state may waive forfeiture, 636. :
who may set up forfeiture, dissolution or non-legal incorporation, 687.
lapse of charter by failure to comply with conditions, 638.
stockholders may prevent a repeal of the charter unless the right is reserved
by the state, 639.
acceptance of charter, 640.
the assets upon dissolution, 641-42.
the liabilities upon dissolution, 648.
not effected by failure to elect officers, 631.
nor by sale of property, 631.
nor by having but one stockholder, 6381.
nor by cessation of business, 631.
nor by death of all stockholders, 631.
nor by insolvency, 631.
nor always by consolidation, 631.
no judgment necessary when the quéstion involved is the statutory liability
of stockholders, 219. — :
effection liability of stockholder for subsequent transactions, 243.
of a “trust,” 503d,
for the purpose of selling’all the property to another corporation, 667.
sale of property for stock, 667.
preferred stockholders in case of, 278.
not decreed merely because the directors are guilty of a breach of trust,
TAT, 7 .
DISTRIBUTION OF ASSETS. See DISSOLUTION.
DIVERSION OF CORPORATE FUNDS. See ULTra VIRES ACTS.
DIVIDENDS ON STOCK. é Se
definition of a dividend and the four kinds of dividends, 534-35.
scrip dividends and property dividends, 536.
stock dividends, 537. :
interest-bearing stock, 538. . _, ?
discretion of the directors as to declaring dividends, 539.
to whom the corporation is to pay the dividend, 540.
to whom the dividend belongs, 541.
dividends must be equal and without preferences, 542.
dividend, when declared, is a debt due absolutely to the shareholder, 548,
it is a debt which may be collected by legal proceedings, 544. :
right of the corporation to apply dividends to the payment of debts due to it
by the shareholder, 545.
dividends can be made only from net profits; net profits defined, 546.
1020 GENERAL INDEX.

[The references are to the sections.]

DIVIDENDS ON STOCK—continued. ;
dividends which impair the capital stock are illegal, and may be recovered
back from the stockholders, 547.
proceedings to recover back such a dividend, 548,
the liability herein of the corporate officers, 549.
to preferred stockholders, can be only from profits, 270.
a court will order a dividend to preferred stockholders, when, 271.
arrears of preferred dividends, 272. :
of stock is legal, 11.
stock, 51.
in stock, legality, 20.
exist only after declaration, 4a.
guarantied by a vendor of stock, 384, note.
stock, as a method of issuing new stock, 287. ;
may be applied to debts due from the stockholder to the corporation, 526, 545.
upon dissolution, 642.
where stock has been converted, 584.
of bonds, 535.
contract to pay, irrespective of net earnings, is void, 270, 277.
apportionment of, 558. :
may be waived and profits applied to pay subscriptions, 48, note,
on stock, guaranty by one corporation for another, 678.
upon a reduction of the capital stock, 289.
on overissued stock, may be enjoined, 297. “
see LIFE ESTATES AND REMAINDERS IN SHARES OF STOCK.
DIVISION OF MUNICIPALITY after subscribing, 101.
DOMAIN. See Eminent Domain.
DOMICILE OF CORPORATION, 1, note. .
DONATIO CAUSA MORTIS of stock, 308, a
DONATION by muzicipalities to railroads. *
s see MUNICIPAL SUBSCRIPTIONS.
of money by individuals, 70, note.
as distinguished from subscription, 53, note.
of corporate funds, 682.
DORMANT corporation not thereby dissolved, 631.
DOUBLE LIABILITY ON STOCK. See LiaBiLiry.
DRAFTS. See ACCEPTANCES.
DRAFTING of corporate contracts, 722.
DRUNKEN PERSON'S sale of stock, 320.
DUCES TECUM, SUBPCENA, in reference to corporate books, 619.
“ DUMMIES,” liability on stock held by them, 247, 249, 253,
transfer to, to escape liability, 263-266.
transfer to, 421.
use of, to escape liability on stock, 508c,
acting as director's, 649, note.
DURATION OF CORPORATIONS. See. DissoLution,
DUTIES, See Pustic Dutizs.

E.

EARNINGS. See Divipenps.
EASEMENT. See EMInenT Domain.
EDUCATIONAL CORPORATION, regulation of by legislature, 675.
ELECTION OF DIRECTORS are to be by the stockholders, and may be com-
-pelled by mandamus, 603. ;
conducting, opening and clusing elections, 605.
the majority of votes cast shall elect, 607.
is every share of stock entitled to one vote, 608.
cumulative voting, 609.
proxies, 610.
the transfer book as evidence of a right to vote, 611.
+. GENERAL INDEX. 1021

[The references are to the sections.]

ELECTION OF DIRECTORS — continued. '
worens of trustees, pledgees, married women, administrators, etc., to vote,
the corporation cannot vote upon shares of its own stock, 618.
injunction against voting particular stock, 614.
illegal or fraudulent elections; shareholders’ remedies herein, 615-16.
combinations and contracts as to elections and restrictions on voting, 618,
who may be a director or corporate: officer, 619. '
acceptance and resignation of office, and failure to elect officers; removal of
directors, 620. :
the general method of transacting business, 621.
ig RUSS must be held at the prescribed hour, which must be reasonable,
the quorum; a majority of stockholders attending a meeting may transact
business, 623.
stockholders can act only at corporate meetings, 624,
may be held after the statutory time, 593
failure to hold, not a dissolution, 631.
place of, 622. :
pledgee cannot vote the stock, 468,
holding over, 620.
illegally-elected officers, 7138. ‘
mandamus to turn over books to the legally-elected directors, 618,
de. facto directors, 615, 619.
see MEETINGS.
ELECTRIC LIGHT, exclusive privileges, 676.
ELEVATOR COMPANY, guaranty to, by a railroad, 678.
EMBEZZLEMENT. See Fraups. 3
' EMINENT DOMAIN, corporations may be authorized by the state to exercise
_ the power of, 693.
when and what property may be taken, 693.
taking the property of another corporation, 693.
exercise of, defendant may allege illegal incorporation of the corporation, 637.
franchises, disposition on dissolution, 641.
a stockholder’s interest may be condemned, 671.
power of, may be invoked to put an end to exclusive privileges, 693.
but not to aid sight-seeing purposes, 693, note. 4
disposition of land when no longer used for public purpose or when corpora-
tion is dissolved, 641. :
power of, may be delegated by the state to a corporation, 693.
ENDORSEMENT. See INDORSEMENT.
ENFORCEMENT OF STOCKHOLDERS’ STATUTORY LIABILITY. See Lia-
BILITY.
ENGINEER, powers of, 720, notes. ie
of company interested in contracts with it, 649, note,
ENGLISH rule that transfers of stock must be under seal, 377,
rule as to taking subscriptions, 56.
rule as to non-negotiability of certificates of stock, 325.
statute as to prospectus, 143, note.
law as to re-organization, 654.
statutes as to ‘‘ watered ” stock, 28, 36. a
ENLARGING the powers or business, amendment to charter authorizing, 500,
note,
ENTRIES in minute-book, proof of, 714.
of directors’ resolution in books, 115, note.
ERASURE of subscription, 55.
EQUITABLE action, relative to stock, 579,
suit to subject stock to the payment of debts, 481.
title to stock, an unsatisfactory distinction, Al4, ak
action by corporate creditors to reach unpaid subscriptions, 204,
parties thereto, 205, 206. ive tae
| guit to enforce stockholder’s statutory liability, 222.
action to remedy a fraudulent sale of stock, 356.
=
,

1022 GENERAL INDEX.

[The references are to the sections.]

EQUITABLE — continued.
owners, see TRUSTEE; LIABILITY; AGENT; SALES OF STOCK.
to set aside a subscription for fraud, 155, 156.
to set aside issue of ‘‘ watered ” stack, 41..
to remedy an illegal forfeiture of stock, 134.
to compel a corporation to register a transfer of stock, 391.
to enjoin voting, transferring and dividends on overissued stock, and to
adjust all rights, 297.
to relieve from unauthorized forfeiture, 134.
see SUITS.

ESCROW, subscriptions in, 59. .

ESTOPPEL in the purchase of stock, see Non-negotiability of stock and dangers
incurred in the purchase of certificates of stock; Rules for corporations in
regard to refusing or allowing registries of transfers of stock.

to deny stockholdership, 52.
of municipality from repudiating its bonds issued to a railroad, 94.
of participating stockholder to complain of ‘‘ watered” stock, 39.
as to the regularity and legality of incorporation, 637.
of stockholder from setting aside a forfeiture of stock, 129, 134,
of stockholders, etc., from questioning. the validity of a stockholders’ meet-
ing held out of the state, 591.
see ACQUIESCENCE,
EVIDENCE of stockholder when the corporation is a party to a suit, 4a,
of subscription, 55.
of incorporation, 753.
against stockholders, minute-book as, 727.
see PROOF.
of issue of stock, 10.
minute-book as, 714.
of subscription, what is, 55.
EXAMINATION of corporate books by stockholder, see INSPECTION.
EXCESSIVE ‘subscriptions, 58.
subscriptions, see SUBSCRIPTIONS.
loans, see LOANS.
EXCHANGE of preferred for common stock, 278,
EXCHANGES, definition, 445. See BROKERS.
‘nature of, 504, note.
_ public duties of, 675, note.
EXCLUSIVE privileges, legality of, 676.
privileges by railroads to express companies, 674,
EXECUTED CONTRACTS, 682.
EXECUTION, levy of, on franchises, 668.
must be returned as against the corporation before the stockholders’ statu- Bo
» tory liability is enforced, 219.
sale, purchase by director, 653.
levied on stock, duty of corporation, 404,
levy on stock as against an unregistered pledgee of the certificates, 465.
of contracts, mode of, 722. '
returned unsatisfied as against the corporation is necessary before subscrip-
tions can be reached ‘by corporate creditors, 200.
sale of stock, 480. a
levied upon shares of stock, see ATTACHMENT OF SHARES OF STOOK,
EXECUTIVE COMMITTEE, legality of, 715. .
EXECUTOR AND ADMINISTRATOR, liability of, as transferrer or transferee
: of shares of stock, 248, 322, 397. :
duty as to legacies of stock, 307,
may be a director, 619.
right to vote, 612.
sale of stock, 483. ‘a
i as an, 680.
right and duty of corporation as to registry of transfers by, 397, 398, |
Taabatity On eter aie es ae
pledging stock in breach of trust, 474.

,
s GENERAL INDEX. 1028

[The references are to the sections.]

EXECUTOR AND ADMINISTRATOR — continued.
power to purchase stock, 822.
power to sell stock, 329, 330.
see LIABILITY OF TRUSTEES; EXECUTORS; AGENTS, ETC,
EXEMPLARY damages against a corporation, 698.
EXEMPTION from taxation, amendment repealing, 497,
from taxation, see TAXATION,
of stockholders from statutory liability by express contract, 216.
EXHIBITIONS, guaranties to by railroads, 678.
EXISTENCE of corporation. See DIssoLUTIon.
EXPIRATION OF CHARTER. See DIssoLution.
EXPRESS COMPANIES, limitation of liability, 674.
may be given exclusive privileges by railroads, 674.
EXPRESS PROMISE to pay the pubeeription necessary in New England states,

reason of this rule, 71.
EXPULSION of members, in modern incorporated companies, 7000.

of stockholders, 710.

of members, 700b, 504, notes.
EXTENDING the powers or business, amendment to charter authorizing, 500,

note.

a road, amendment to charter authorizing, 499, note, 500, note.
EXTENSION OF DEBT, asa defense to a stockholder’s statutory liability, 225.
EXTRAORDINARY STOCKHOLDERS’ MEETING, 598.

F,

FAILURE of corporate enter prise, no defense to subscriptions, 190.
to commence business as required by charter, 688.
FAIRS, guaranties to, by railroads, 678.
FALSE REPRESENTATIONS. See FRAUDULENT REPRESENTATIONS,
FALSE IMPRISONMENT by a corporation, 698.
FEDERAL COURTS. See JURISDICTION. ;
FENCES, legislature may order construction of, 675.
FERRY, exclusive privileges, 676.
FICTITIOUSLY PAID UP STOCK, defined, 9, 22.
not void, 25.
constitutional provisions making it void, 26.
may be voidable, 29.
issue of. an ultra vires act, 29.
issue of, by discount in cash, 30.
dangers of this method, $1, 32.
English rule, 32.
issue of, for property taken at an overvaluation, 33.
New York rule herein, 34.
subscriptions to, see DEFENSES; IssUE OF fioitioueee PaIp UP roar:
_ IssvuE oF STOCK, ETC.
as a cause of forfeiture, 683, note, 635, note.
see ‘‘ WATERED” Srocg.
FICTITIOUS SUBSCRIPTIONS. See ‘‘ DuMMIEs.” \
FICTITIOUS STOCKHOLDERS, liability, 253.
FICTITIOUS SUITS. See Suits.
FIDUCIARY POSITION OF DIRECTORS. See DirEecrors.

FILING OF CERTIFICATE OF INCORPORATION, effect of failure to comply‘
with statute, 231-235.
FINE for contempt.of court, 755.
‘“FLAT” loan of stock explained, 445, note.
1024 GENERAL INDEX. :

[The references are to the sections.]

FORECLOSURE AND SALE, purchaser not liable for old debts, 643,
of corporate property and purchase by director, 653.
of mortgage and no defense made, 659.
right of stockholder to object, 659.
and re-organization, 654-656.
see DIRECTORS; FRAUDS; MORTGAGE.
FOREIGN CORPORATIONS.
injunction against, 755.
may sue or be sued, 757.
are inhabitants of the state creating them, 757. | 4
service upon, where they are required to appoint a resident agent to accept
service, 758, i
courts will not entertain suits against, where the decree or judgment cannot
be enforced, 758.
may be excluded or regulated, 694. :
effect of provision requiring the filing of a certificate, etc., 694, notes, 695,
holding land, 695. ‘
restrictions on, interfering with interstate commerce, 696.
restrictions as to removal of cases 10 United States courts, 696,
are not ‘‘ citizens,” 696.
exercising the power of eminent domain, 693,
powers to contract, 694, etc. ;
corporations created by two states, 697. ’
taxation of, see TAXATION.
courts will enforce the liability of stockholders in, 223.
receiver of, 630. .
doing all its business in one state, although incorporated in another state,
* 237-239.
see EMINENT DOMAIN. ;
FOREMAN, powers of, 720.
FORFEITURE of shares for non-payment of the subscription price, 121-184,
the various remedies, 121. ‘
forfeiture can be resorted to only when a statute authorizes it, 123.
is a cumulative remedy; 7, ¢., the corporation may resort to this or to an ac-
tion, 124.
corporations cannot forfeit and then sue, 125.
relieves the stockholder from liability to corporate creditors, '127,
formalities and procedure, 129. , 3
notice of forfeiture, 130.
notice alone is not forfeiture, 131.
tender, by stockholder, before forfeiture, 182.
surplus; after forfeiture belongs to the corporation, 183.
equity will relieve from an unauthorized forfeiture, 134,
of charter, see DISSOLUTION,
of charter for issue of ‘‘ watered” stock, 87, 26, note.
of stock for non-payment of calls, 419.
for non-payment of subscriptions, when the only remedy, 71.
liability of stockholders where incorporation is deficient, 231-235.
_ of stock, pledgee not bound to protect the stock, 468.
of railroad franchises for failure to operate its line, 678.
of stock to the corporation; corporation may sell at less than par, 22,
of charters, see AMENDMENTS.
FORGERY of the names of corporate officers to certificates of stock, 294,
of stock, 426.
of transfers, 436.
of transfers, duty of corporation, 401.
of stock, liability of broker, 454, 451.
as affecting a sale of stock, 363.
rights and liabilities of transferees of forged certificate of stock, there being
_ no intervening registry on corporate books, 364. é
liability of corporation to real owner of stock for allowing registry of forged
: transfer, 865, 366.
rights of transferees who purchase after a registry has been obtained, 367.
as affecting a sale of stock, 363-367, 401.
see SALES OF STOCK.

‘

I
GENERAL INDEX. 1025

[The references are to the sections.]

FORMALITIES in stockholders’ meetings, 621.
statutory, to be complied with, in regard to municipal subscriptions, 94,
as.to forfeiture of stock, 129. '
in entering into contracts, see CONTRACTS,
in making calls, 115.
see CONTRACT OF SUBSCRIPTION; INFORMALITIES,
FORMATION AND PERFORMANCE OF CONTRACTS TO PURCHASE
STOCK, chapter XX.
shares of stock are transferable, 331.
restrictions on right to sell stock, 332.
‘* pools,” corners and combinations in stock, 382a.
contract for sale of stock may be valid without delivery or specific time for
delivery, 338, :
method of performance or offer of performance by vendor, 334.
aa performance as a remedy for breach of a contract to sell stock, 337,.

statute of frauds as affecting sales of stock, 339, 340.
FORMATION OF CORPORATIONS. See LIABILITY AS PARTNERS,
FORMS OF ACTIONS. See PLEADING AND PRACTICE.
FRANCHISES, lease or sale of, 668, 671.
see ULTRA VIRES.
execution levied upon, 668.
of right of way, disposition on dissolution, 641.
mortgage of, 689.
definition, 1, note.
see DISSOLUTION, ETC, @
FREIGHT AGENT, general, powers of, 720, notes.
FRAUD as affecting a sale of stock; what constitutes a fraud, 350.
fraudulent sale by agent, etc., in breach of trust, 351.
fraud may be by corporate reports or prospectus, 352, 353,
remedies for the fraud, 354,
action for damages, 355.
remedy in equity, 356. \ |
fraud in selling stock may amount to a conspiracy, 357.
as impairing the conclusiveness of a judgment’in enforcing a stockholder’s
liability, 224. f:
inducing the sale of stock, 438.
entering into a stock transaction, 438,
and forgery in issue of stock, 426, 436.
statute of, 439.
see STATUTE OF FRAUDS.
of directors, no defense to subscriptions, 188.
of directors in receiving ‘‘ watered ” stock, 48.
as invalidating a judgment by a corporate creditor, when he seeks to en-
force subscriptions, 209.
vitiates a collusive forfeiture of stock, 127.
assignment of stock to defraud creditors,.319, 484.
laches barring a stockholder’s action, see LACHES.
of agents; is chargeable to the corporation, 139, 140.
of stockholders, see STOCKHOLDERS.
FRAUDULENT ACTS. See Derenses; Directors; SALES oF STOCK.
FRAUDULENT ACTS OF DIRECTORS, majority of stockholders and thirdi
ersons.
ine cause and occasion of this subject, 644, _
the three classes of stockholders’ wrongs herein, 644a.
the corporation is ordinarily the party to remedy these wrongs, 644b.
‘put the corporation failing to do so, a stockholder may bring the action, 6455
the facts and conditions which allow and sustain a stockholder’s suit herein,.
646,
. different methods of perpetrating these frauds, 647.
directors as trustees, 648 ; ’
director or other corporate officer interested in construction company, 649,
secret gifts to directors from persons contracting with the corporation, 650.
‘frauds by promoters on the corporation, 651.

65
1026 GENERAL INDEX.

[The references are to the sections.]

FRAUDULENT ACTS OF DIRECTORS — continued. _
sales of property by corporate officers to the corporation, 652,
purchases by directors from the corporation, and purchases at foreclosure
sales, 653.
re-organizations and purchases of corporate property by a majority of the
stockholders, 654-56.
voting salaries or compensation to corporate officers, 657. :
contracts between corporations having one or more directors in common, 658.
foreclosure of mortgage on corporate property, and collusion with directors,
whereby no defense is made to the foreclosure, 659. : .
directors’ purchases of property needed by the corporation; buying up the
debts of the corporation, 660.
loans by the directors to the corporation, mortgages by the corporation to di-
rectors, and the right of a corporation, solvent or insolvent, to give a mort-
gage or assignment-of its property to a director in’ order to prefer the
payment of his debt, 661. /
frauds by a majority of the stockholders upon the minority, 662.
‘stockholders’ actions against third persons for frauds against the corpora-
tion, 663.
liability of directors, officers and agents of a corporation to third persons for
frauds, trespasses, contracts and ultra vires acts, 668a.
the use of a corporation as a “cloak” for defrauding the public or particular
individuals, 6630. :
FRAUDULENT representations of agents as a defense to actions to enforce sub-
scriptions; laches as a bar, 161, 162.
corporate insolvency as a bar, 163, 164.
necessary allegations, etc., 165.
elections, 615, 616.
representations of agents as a defense to actions to enforce subscription;
; definition and distinction from parol agreements, 136,
corporations are chargeable, 139,' 140.
must be by authorized agents, 141.
made at public meetings, 142.
made by prospectuses, 143.
made by reports, 144.
when do they amount to fraud, 145.
statements as to questions of law, 146.
by suppression of the truth, 147.
without knowledge of the falsity, 148.
immaterial representations, 149.
subscribers not bound to investigate, 150.
subscription not void, but voidable, 151.
remedies, 152.
remedy by rescission, 153.
remedy by defense to action, 154.
remedy by bill in equity, 155, 156.
remedy by action for deceit, 157, 158,
remedy by action for money, 159.
ratification as a bar, 160. ‘
release of other subscribers no defense to subscription, 167-170, 191.
representations of agents in obtaining subscriptions, 139-165.
calls to release stockholders may be enjoined, 113.
FULL SUBSCRIPTION of increase of capital stock is not necessary, 288, 289,
note.

G.

GAMBLING SALES OF STOCK.
what are gambling sales of stock, 841. f
statutes prohibiting wager contracts and also certain stock contracts, 342.,
test of legality of stock transactions, 343.
when intent to deliver is a question for the jury, and when not, 344.
gambling stock contracts as affecting the lations between the principal and
his broker, 345, 346.
GENERAL INDEX. 1097

[The references are to the sections] *

GAMBLING SALES OF STOCK — continued.
gambling stock transactions as affecting notes, bonds, mortgages, etc., grow-
ing out thereof, 347. ,
sales of stock, 440.
see SALES OF STOCK.

GARNISHMENT to reach unpaid subscriptions, 201.
of shares of stock, not a proper remedy, 491.

see ATTACHMENT.

GAS COMPANIES taking property under power of eminent domain, 693.
public duties of, 674. :
reduction of rates of, 675,
exclusive privileges, 676.

GENERAL AGENT may sell stock owned by the corporation, 317.
see AGENT.

GENERAL FREIGHT AGENT, powers of, 720, notes,

GENERAL INCORPORATING ACT, when necessary, .1, note.
powers of the corporation, 3a.
effect of failure to comply with its provisions, 231-235.

GENERAL ISSUE pleaded to a suit by a corporation, 753.

GENERAL LEGACY OF STOCK. See Legacies or STOCK.

GENERAL MANAGER, salary of, 657.
secret gift to, 650, note.
extent and limitations of his powers, 719.
admissions and declarations of, 726.
notice to, 727.

GENERAL MEETINGS, 598.

GIFTS to directors, 650.
of stock to a corporation is legal, 311.
of stock by corporation to director, 652, note.
of property by one company to another, 678.
by corporation to employees, etc., 682.
of stock, 308. See, also, LeGacites oF STOCK.
of stock, see LEGACIES AND GIFTs OF STOCK,

“GRANGER CASES,” 675.

GRANT by or to an irregularly-incorporated company, 637,

GRATUITY. See DonaTION. _

GUARANTIED STOCK. See PREFERRED STOCK.

GUARANTY by corporations for accommodation, 686.
of bonds or dividends by a corporation, 678.
of stock, amendment to charter authorizing, 499, note.

GUARDIANS, rights and duties of corporation as to transfers.by, 400.
power to purchase stock, 322.
power to sell stock, 328, 330. °
sale of stock, 433.

H.

HOLDING OVER OF DIRECTORS, 620.
HOTEL COMPANY leasing part of building, 682.
HOUR OF STOCKHOLDERS’ MEETING, 622.

HUSBAND, liability on wife’s subscription, 65.
see MARRIED WOMEN.

I

IDENTITY of shares of stock, not always material, 469.

IGNORANCE as a defense to subscription, 196. :
of the truth of a statement, may be a misrepresentation, 148.
1028 GENERAL INDEK.

[The references are to the sections.]

ILLEGAL elections, 615, 616.
election of officers, 713.
incorporation, who may assert, 637.
‘incorporation, see LIABILITY as PARTNERS,
acts, see ULTRA VIRES.
ILLUSORY SUITS. See Surts.
IMMATERIAL MISREPRESENTATIONS, 149, '
IMPARTIAL, calls must be, 114.
IMPLIED POWERS. See CoRPORATIONS.
INCHOATE COMPANIES. See PROMOTERS.
INCIDENTS of a corporation, 1, note.
‘‘INCOME” BONDS, 687.
are somewhat similar to preferred stock, 270, note.
INCOME. See Divipenps; Lirz Esrate.
INCOMPLETE INCORPORATION. See INCORPORATION.
INCORPORATION, irregular, who may assert, 637.
- ‘words sufficient to incorporate, 1, note.
congress may incorporate a company, 1, no’
irregular, informal or incomplete, liability of ‘stockholders, 281-235,
for purposes not specified in the general act, 236.
irregular, no defense to subscriber, 183-186.
allegation of, in suits, 753.
proof of, "58,
see DISSOLUTION, ETC.
INCORPORATORS. See PROMOTERS,
INCREASE AND REDUCTION OF CAPITAL STOCK.
power of the legislature to authorize an increase or reduction, 280.
power of the corporation to increase or reduce the capital stock, 281.
effect of purchase by a corporation of shares of its own stock, 282,
the issue of bonds convertible into stock, 283.
power of a court to direct an increase or reduction, 284.
shareholders, not directors, should authorize the increase, ‘285.
prior right of the old stockholders to buy the new stock, 286.
issue of an increase of stock by a stock dividend,. 287.
liability of the shareholder upon an increase of the capital stock, 288,
ae and liabilities of the shareholder upon a reduction of the capital: stock,
ee 2
changes in the par value or number of the shares, 281, 290.
‘an illegal increase of the stock is overissued stock, 291-298,
see OVERISSUED STOCK,
equity will enjoin voting, transfers or dividends on, 297,
‘will adjust the rights of all parties, 297.
subscriber may defeat an action to recover subscription to, 298,
and recover back money paid thereon, 298,
right of life tenant to subscribe for, 559,
amendment to charter authorizing, 499, note.
INDEMNITY. See TRANSFERS,
INDICTMENT of a corporation, 698.
of a railroad for not operating its line, 673.
INDIVIDUAL LIABILITY. See Lrapiniry.
INDORSEMENT in blank of certificates, 441.
by or to an irregularly incorporated company, 687,
accommodation, by a corporation, 679.
INFANTS’ transfers of stock, 427.
right of corporation to refuse registry of transfer‘to, 896,
as purchasers of stock, 318,
gambling in stocks, 446.
liability of broker acting for infant, 446.
as trustee of stock, 66, note.
as a subscriber, 66,
liability of, as transferrer or transferee of stock, 250, 318,
see SALES OF ‘STOCK, ;
s

GENERAL INDEX. | * 1029 |

(The references are to the sections.] \

INFORMAL incorporation, who may assert, 687.’
see INCORPORATION. 2
INFORMALITY in increase of capital stock no defense to subscription, 288,
in stockholders’ meetings, 621.
as to forfeiture of stock, 129.
in incorporation, see INCORPORATION.
in making culls, 115. :
in becoming a subscriber, 52.
will avoid subscription for stock, when, 52-54.
see FORMALITY.
INFRINGEMENT of patent, liability of officer, 663a, note.
“INHABITANT,” corporation is an, 700. \
INJUNCTION against forfeitures, 134.
against many suits to enforce subscription liability, 205, note.
against many suits at law to enforce a statutory liability, 226.
against voting particular stock, and against elections, 614.
to compel a railroad to operate its line, 673. a
against a corporation, must be obeyed by directors and agents, ‘755.
against the corporation, directors are bound to obey it, 788, 745.
against directors acting at all, 746.
against a telegraph or telephone company from removing instruments, 674.
against a call on subscriptions made to defraud creditors, 118, ~ ~
against elections, see ELECTIONS.
against forfeiture of stock, 134,
against the corporation accepting an amendment to the charter, 502,
INNOCENT OFFICER not liable for frauds of others, 158,
INSOLVENT PARTNERSHIP turned into a corporation, 20b.
INSOLVENT CORPORATION. See CREDITORS; SEQUESTRATION,
director buying up claims, 660. :
a bar to a stockholder’s defense of fraud, 168,164. —s..
liability of person selling stock to the corporation, 309, 313.
no call then necessary, 108.
-is not a dissolution, 631.
transfers of stock to avoid liability, 263, 266.
see DEFENSES; DISSOLUTION; ASSIGNMENT; LIABILITY.
INSPECTION OF CORPORATE BOOKS BY A STOCKHOLDER.
common-law rights, 511.
common-law action for damages for refusal, 512.
mandamus is the preferable remedy, 518.
not granted as a matter of course, 514.
when it will and will not be granted, 515,
allegations and form of writ, 516. :
right to inspect minutes of meetings of directors, 517,
statutes giving right of inspection, 518. ; ; °
orders to corporation to allow inspection; subpoena duces tecum,; bill of dis-
covery, 519. :
INSPECTORS at elections, 605.
INSTALMENTS, definition, 104.
calls may be payable in, 116.
INSURANCE, stockholder may insure his interest, 4a.
INSURANCE COMPANY, misuser, 633, note.
stockholder’s rights, 42, note. ;
disposition of assets upon dissolution, 641, note.
for life; cannot insure against fire, 681.
regulation of, 675. :
ultra vires acts. 682, note.
consolidation, 668, note. ; .
right of policy-holder to restrain corporate acts, 735, note.
attachment of money due by it toa third person, 758, note.
may be excluded from other states or may be regulated, 694, 696.
purchases of stock by, 317, 312, note.
dividends, 540, note. :
assets, 540, note. x
1030 GENERAL INDEX.
fi

. [The references are to the sections.]

INSURANCE COMPANY — continued. »
as a subscriber for stock, 63, note.
gift to directors, 650.
liability of president, 663a, note.
agents, powers of, 720, notes.

INTEREST where stock'has been converted, 584,
on the stockholder’s statutory liability, 225.
on bonds and coupons, 687.
runs on calls of subscriptions, 112.
on arrears of preferred stock, 272.

INTEREST-BEARING STOCK, how distinguishable from prefer red stock, 277.
rights oe liabilities of the holders of, 277.
stock, 53:

INTERFERENCE with corporate affairs by stockholders, See STOCKHOLDERS;
INTRA VIRES. :

INTERNAL DISSENSIONS, 684.
INTERNAL AFFAIRS. See STOCKHOLDERS; InTRA VIRES.

INTERPLEADER by the corporation, ‘as regards dividends, 540, 544.
by corporation, as to stock, 407.
by corporation between two claimants of stock, 387, 407.
INTERSTATE COMMERCE, taxation of, 572c.
INTERSTATE CORPORATION. See FOREIGN CORPORATIONS.
INTRA VIRES ACTS as distinguished from ultra vires acts, 683.
stockholder cannot object to, 644a.
see CORPORATION; DIRECTORS.
INVESTIGATION of truth of representations, 150.
IOWA. rule as to ‘‘ watered” stock, 47, note.
’ rule as to municipal subscriptions, 91, note.
IRREDEEMABLE BONDS, 687.
IRREGULARITIES in increase of capital stock no defense to pane iption, 288,
in transfers of stock, liability, 258.
in incorporation, see DISSOLUTION ; FORFEITURE,
in incorporation, who may assert, 637,
see INCORPORATION,
in becoming a subscriber, 52.
see FORMALITIES.
IRRESPONSIBLE TRANSFEREE, right of corporation to refuse registry of,
transfer to,, 395. ve
IRREVOCABLE PROXIES are revocable, 503a, note.
ISSUE OF STOCK, 10.
methods, 11.
for partnership property, 20.
of certificates, failure to issue is no defense to subscriptions, 192,
of stock below par in England, 32.
for property at an overvaluation, danger herein, 36,
who may mupia of an issue of stock as “paid up” when it is not full
‘paid, 387-44,
the state, 37.
the corporation itself, 38,
participating stockholders cannot, 89, /
their transferees cannot, 40.
remedy of such transferee herein, 40.
dissenting stockholders may complain, 41,
so corporate creditors, 42-44,
who is liable; corporation, 45. —
persons receiving the stock from the corporation, 46, 47.
extent of the liability, 47. .
the corporate officers, 48,
ae with notice, 49,
j ona fide transferees without notice not liable, 50.
see FICTITIOUSLY PaIp uP STock.
-GENERAL INDEX, 1031

[The references are to the sections,]

J.

JOINDER OF PARTIES. ’ See PARTIES.
JOINT owners of s‘ock, liability, 252.
owners of stock, 429, 308.
owners of stock; subscription by one, 67, note?
owners voting on stock, 612.
owner’s sale of stock, 320,
JOINT-STOCK ASSOCIATIONS different from -corporations, 1, note.
JOINT-STOCK COMPANY, 504-510. :
definition of, 504. i
statutory, 505.
may arise by implication, 506.
how one becomes a member of a, 507.
liability of members of a, to creditors and to the company, 508.
actions against officers and the company by members of a, 509.
the dissolution of a, 510, :
or association, see UNINCORPORATED JOINT-STOCK COMPANIES.
JUDGE, stockholder as a, 4a.
JUDGMENT against corporation necessary betore .a corporate creditor can en-
force subscriptions, 200. :
1 confession of, by a corporation, 754.
against corporations, enforcing, 756. .
must be obtained against a corporation before the stockholder’s statutory lia-
bility is enforced, 219. — /
against a corporation, may be impeached for fraud in suit to enforce stock- :
holder’s liability, 224.
against corporation, when impeachable by stockholder who is sued on his sub-
scription, 209. ; .
how tar conclusive, in action against the stockholder, as to the validity of
the creditor’s claim, 209, 224. :
JURISDICTION, what court has jurisdiction in stockholders’ actions, 734,
of courts to enforce liability of stockholders in foreign corporations, 223.
of federal courts in suits by or against foreign corporations, 758, 757, notes,
of courts in actions against foreign corporations, 758.
of the federal courts in stockholders’ suits to remedy frauds, ultra vires acts,
etc., 734,
JUROR, stockholder as a, 4a. ’
JURY TRIAL in stockholder’s suit to remedy corporate wrongs, 747,

K.

KINDS of corporations, 1.
of stock, 9. |
KNOWLEDGE that stock is not paid up, how far transferee must know, 257.
is necessary before laches becomes a bar to a remedy, 730.
_ see Notice,

L.

‘LABOR in payment of a subscription, 83,
in payment for stock, 12, etc. . alae
“LABORERS, SERVANTS AND APPRENTICES,” who are, in construing
statutes making stockholders liable primarily to such persons, 215, note.
LACHES as a bar to the defense of fraud, 161, 162. :
as a bar to a stockholder’s right to object to an amendment to a charter,
503. ehsch a
as a bar to stockholders’ suits to remedy wrongs against the corporation, 723-
733. 1 ;
1032 GENERAL INDEX.

[The references are to the sections.]

LACHES — continued. ; :
acquiescence or ratification as a defense to a stockholder’s action to remedy
illegal corporate acts which are :prohibited by statute or contrary to public
olicy, 729. ‘
*eatinestion herein may be express or implied, 730..
stockholder chargeable with laches only after he-has a full knowledge of the
facts, 731. ;
stockholder must sue within reasonable time after knowledge of the acts,
782. :
misceilaneous applications of the doctrine of laches herein, 738,
see ACQUIESCENCE ; ESTOPPEL,

LAND, condemnation of, defendant may allege illegal incorporation of plaintiff,

in payment of a subscription, 83,
foreclosed and purchased by director, 653.
deed of, to unincorporated association, 504, note. ;
‘reversion to old owner on dissolution of corporation, 641.
may be bought and sold by corporations, 692.
deeded by or.to an irregularly-incorporated company, 637.
companies, ultra vires acts, 682, note.
in payment of subscriptions, 15.

: see EMINENT DOMAIN. -

LAPSE OF CHARTER. See DISSOLUTION, ETC.

LAPSE OF TIME, See Lacues.

LAW, statement as to, no misrepresentation, 146.
of place, regarding stock, 8, ;

see SUITS.

LAW YER sharing fees with directors, 649, note.
of company taking pay from the opposite side, 650, note,
salary of, 657. . '

/ see ATTORNEY. ;

LEASE forfeited and then taken by director, 658.
of a railroad after municipal aid is voted, 102.
of road, amendment to charter authorizing, 501, note.
of railroads, are legal, when, 668-671.
or pees railroads without authority of charter or statute are wlira vires,

668. ;

see AMENDMENTS; ULTRA VIRES.
LEGACIES OF STOCK, definitions of general, specific and demonstrative lega-
cies of stock, 299. ‘
importance of the difference between general and specific legacies, 300, 301.
fegnates ig stock are construed to be general if the language will permit,
amount of.legacy conveyed by certain legacies, 304, 305.
ademption or revocation of a legacy of stock and abatement, 306.
duty of executor herein, 307. ‘
- see LIFE ESTATES AND REMAINDERS IN SHARES OF STOCK.
LEGATEE, liability on stock, 252.
see LIABILITY OF STOCKHOLDERS; TRANSFERS; LEGACIES OF STOCK.
LEGAL title to stock, an unsatisfaetory distinction, 414,
proceedings as affecting a sale of stock, 361.
proceedings affecting stock, 8. ae
proceedings, see ACTIONS; SUITS.
LEGISLATURE may grant exclusive privileges, 676.
may reduce rates, 675.
may authorize municipalities to subscribe for stock, 91,
cannot compel municipality to subscribe, 91._
cannot compel person to subscribe, 53, note 3,
may control corporations, see AMENDMENTS.
LEGISLATIVE CONTROL. See CoNsTITruTIONALITY.
LEVY. See ExEcuTION; ATTACHMENT, :
LEX "LOCI CONTRACTUS, in regard to subscriptions, 58, note.8,
LEX LOCI, 8 See Law or PLACE,
GENERAL INDEX. 1033

; [The references are to the sections.]

LIABILITY of Stockholders for corporate debts; amendment to charter increas-
ing or decreasing, 497. °
on stock as regards a transferrer.and transferee of that stock, see TRANSFER.
ot stockholders for illegal dividends, 547. :
of, directors for illegal dividends, 549.
of pledgee of stock, 470.
stockholders not liable as partners on ultra vires acts, 234,
to corporate creditors upon unpaid subscriptions —
unpaid subscriptions a trust fund for benefit of creditors, 199,
an American, not an English, doctrine, 199, note.
available only after judgment against the corporation and execution
returned unsatisfied, 200. 3
reason of this rule, 200.
the remedy by garnishment or attachment, 201,
by mandamus, 202.
by action at law, 203.
by bill in equity, 204.
parties to the bill —
(a) parties plaintiff, 205.
(b) parties defendant, 206.
court of equity may make a call, 207.
receivers and assignees in bankruptcy, their functions herein, 208,
may collect unpaid subscriptions, 208.
may make calls, 208.
stand in the place, in this respect, of the corporation, 208.
the judgment against the corporation, how far impeachable, 209; ”
defenses herein available to the subscriber against corporate creditors, 210,
shareholder who pays may. have contribution, 211.
liability where the supposed incorporation does not protect the stockholders,
or where assessments are levied in excess of the unpaid subscription,
chapter XIII. \
the three different liabilities of a stockholder} 280,
liability as partners by reason of deficient incorporation, 231-234.
extent of the liability herein, 235. ae ;
liability as partners by reason of unauthorized incorporation, 236.
liability as partners by reason of the fact that the corporation is incorpo-
rated in one state, but does all its business in another state, 237-239,
assessments in excess of par value of stock, 241, 242.
miscellaneous cases of liability, 243.
of pledgees, trustees, cestui que trust, executors, administrators, etc., on
stock, chapter XIV. 7
of pledgee and pledgor, 247.
of executor or administrator, 248.
of agent, 249.
of infant and married woman, 250.
of the corporation holding its own stock, 251. ‘
of legatees, assignees for creditors and joint owners, 252.
of ‘“‘ dummies” and nominal or fictitious persons, 253.
stockholders not liable for untaken capital stock, though they com-
# meuce business before it is subscribed, 248. ;
of stockholders upon an increase or reduction of the capital stock, 288; 289.
of person who transfers stock to the ccrporation itself, 309, 312.
of stockholders as partners by reason of irregular incorporation, 637.
of members of an unincorporated joint-stock association, 508,
of corporation on ‘‘ watered” stock, 46.
of person receiving ‘‘ watered” stock, 46, 47.
of officers issuing such stock, 48.\
of bona fide transferees of such stock, 50.
of transterees with notice, 49.
of corporation upon dissolution, 643. _
of corporation for refusal to issue certificate, 60.
of partnership assumed by a-corporation, 200, note. — \
of stockholders by statute to creditors of the corporation, chapter XII.
extent of the liability, 212-217.
construed strictly, 214.
particular statutes considered, 215.
1034 ‘GENERAL INDEX.

[The references are to the sections.]

LIABILITY — continued.
waiver of the liability by creditors, 216.
not enforceable to pay for torts, 217.
enforcement of the liability, 218-227.
is enforceable by corporate creditors only, 218.
judgment, execution, etc., against the corporation first necessary,
219.
difficulty in determining whether enforcement is at law or in equity,

the remedy at law, 221. .
the remedy in equity, 222.
enforcement in other states, 223.
\the judgment against the corporation is impeachable only for fraud
and want of jurisdiction, 224. 4
defense of release, payment, set-off, interest, costs, statute of limita-
tion, etc., 225. : : a
priority among creditors, 226.
contribution, 227.
of purchaser of certificate for the unpaid subscription, 418,
where the purchaser has the transfer made to a nominal holder, 421. ' .
no liability after the full par value has been paid, 422,
on stock issued for property, 428.
as partners by reason of deficient incorporation, etc., 424.
by statute, 420. : :
upon shares as affected by transfers, see TRANSFER OF SHARES.
of directors for.ultra vires acts, 682, note (p. 816).
of officers on irregularly-executed corporate contracts, 724.
of directors, officers, etc., for negligence, 701-703.
of trustee and cestui que trust of stock, 503c.
of directors or officers to third persons for frauds, trespasses, contracts and
ultra vires acts, 6636. :
director buying up debts, 660.
of railroad carrying beyond its line, 672,
of a railroad lessor and lessee, 672.
for negligence, contracts against, 674,
of purchasers of a railroad, 243.
see DEFENSES.
LIBEL.
by a corporation, 698.
stockholder not liable for, by bringing suit to remedy frauds, etc., 645.
‘suit against directors for, using corporate funds to defend, 682.
LICENSE. See FoREIGN CORPORATIONS, Z
LIEN of a corporation ona stockholder’s stock for debts due from him to the core
poration.
no lien at common law, 521.
alien may be created by statute, by charter. or possibly by by-law, 522-24.
what phrases in charters or statutes will or will not authorize the corpora-
tion to create or enforce a lien on stock, 525. ‘
ae when established, covers all the stockholders’ shares and dividends,
the lien protects the corporation as to all the debts due to it from the share-
holders, 527.
right of lien as against miscellaneous parties, 523.
the lien can be enforced for the benefit of the corporation only, 529.
methods of enforcing the lien, 530.
the corporation may waive its lien, 581. \
the lien as affected by transfers and notice, 5382,
the lien on national bank stock, 538.
of contractor, 689.
on stock; duty of corporation, 409.
as distinguished from a mortgage and pledge, 463.
of the corporation, 425.
LIFE ESTATES and remainders in shares of stock.
cash dividends belong to the life tenant, 552.
stock or property dividends, 553, '

~
 

 

 

i
:
{
z
J

.GENERAL INDEX. » 1035

: [The references are to the sections.]

LIFE ESTATES — continued.
the Pennsylvania rule, 554.
the Massachusetts rule, 555.
the ‘English rule, 556.
the apportionment of dividends, 558.

the right to subscribe for new shares as between life tenant and remainder-
man, 559.

miscellaneous questions herein, 560...

LIFE TENANT. See Lire Estate.

LIMITATIONS, statute of, 195.
statute‘of, no bar to quo warranto, 635, note. 3

_. Statute of, as a defense to a stockhoider’s statutory liability, 225.

; Of liability for negligence of railroad carrying beyond its line, 672.
of liability for negligence, 674. :
statute of, as a bar to a stockholder’s suit to remedy corporate wrongs, 732.

see STATUTE OF LIMITATIONS.
LIMITED COMPANY. See JoInT-sTOCK. ASSOCIATIONS,
LINE OF ROAD, gifts to influence, 650.

. LIQUIDATION. ‘See DissoLuTion.

LIS PENDENS, as affecting a sale of stock, 362.
LLOYD BOND, 688, note.
‘“*LOAN” of stock explained, 445, note.

- LOAN from company, obtained by gift to director, 650.

by directors to corporation, 661. ;
corporation generally cannot loan money to others, 690.
but may borrow, 685. ‘
prohibited, a misuser, 633, note,
LOBBYING, a misuser, 683, note.
contracts by corporations, 682.
LOCATION of road, gifts to influence, 650. ,
of roads, parol condition as to, no defense to subscription, 138.
of stock as regards attachment, 485. ~ ,

“LODGE funds used for other lodges, 682.

‘* LONG” purchase of stock explained, 445, note.
LOSS of certificates of stock, 437. 7
of certificate, duty of corporation, 403.
of certificate of stock indorsed in blank, 368, 369,
owner may obtain new certificate, 370.
LOST or stolen certificates, 368-370, 406.
see SALES OF Stock; Loss. +
LOWERING OF RATES. See DiscrimmNnations; CONSTITUTIONALITY.
LUNATIC’S transfers of stock, 427.
right of corporation to refuse registry of transfer to, 396.
sale of stock, 320, :

M.

MAJORITY.
of stockholders and re-organization, 654-656.
‘of votes cast, elect, 607.
of stockholders selling’ property to themselves, 656,
at stockholders’ meetings, 607, 623. : :
of stockholders, discretion of, as to intra vires acts, cannot be questioned

unless fraud is involved, 684.
of Stee. are & avon on a es
kkholders surrendering franchises, 629.
\ of stock boliers see FRAUDULENT AcTs, ETC.; ELEcTIONS; Fraups; ULTRA

' Virgs Acts. -

MALA, PROHIBITA, laches no bar to objecting, 729.

MALA IN SB, laches no bar to objecting, 729.
1086 GENERAL INDEX.

[The references are to the sections.]

MALFEASANCE. See DISSOLUTION, ETC.
liability of officers, 663a, note,
MALICIOUS PROSECUTION by a corporation, 698.
MANAGEMENT OF CORPORATIONS. See IntRA VIRES; CORPORATE MEET-
INGS; DIRECTORS,
MANAGER, salary of, 657.
admissions and declarations of, 726. S
notice to, 727. °
secret gift to, 650, note.
general, extent and limitations of his powers, 719. .
MANDAMUS to compel a corporation to register a transfer of stock, 390.
to collect unpaid subscriptions, 202.
to compel a corporation to allow a stockholder to examine the corporate
books, 518-516.
to restore a person unjustly expelled, 7006.
and calls on stock, 108, note.
to compel officers to turn over books to new officers, 613.
to telegraph or telephone company to give service, 674, ‘ .
does not lie to compel transportation free from limitation of liability, 674,
note.
to a railroad to operate its line, 673.
to compel the calling of a stockholders’ meeting, 593.
see CALLS OF MEETINGS; SALES OF STOCK; RULES REGULATING REG-
ISTRY. ;
MANUFACTURING CORPORATIONS, purchases of stock by, 317.
. subscription to bank stock, 63. -
municipality cannot aid it, 91. j
in iron, cannot go into flour business, 681.
various ultra vires acts, 682, note.
MANUFACTORY taking property under power of eminent domain, 693,
“MARGIN,” definition of, 457. ;
see BROKERS. ‘
MARRIED WOMEN, right of corporation to refuse. registry of transfer to, 396.
husband reducing her stock to his possession, 540,
as purchasers or vendors of stock, 319.
may be a director, 619.
liability as a stockholder, 250,
how their stock is reduced to the husband’s possession, 319, note.
right:to vote, 612. \
transfer of stock, 427.
as subscribers, 64,
liability for debts of husband, 319, -
may subscribe for stock, 65.
MASSACHUSETTS, special stock, 275. d
‘ rule as regards transfers of stock without registry, 490.
MATERIAL MISREPRESENTATIONS, 149. "
MEASURE OF DAMAGES.
the first rule, 581.
the second rule, 582.
the third ‘rule, 583.
interest, dividends and accretions, 584,
nominal damages, 586.
-in actions between stock-brokers and their customers, 587,
to customer by broker’s unauthorized sale of stock, 460.
MEETINGS of stockholders and directors.
the place of meeting of stockholders must be within the state creating the
corporation, 591. : :
meetings of directors; place; notice; action without meeting; quorum, 592.
by whom and when meetings are to be called, 593.
when the stockholders are entitled to notice of corporate meetings, 594,
aca elements of a notice of a meeting are time, place and business,
service of the notice, 596,
te
aI

GENERAL INDEX. 10

[The references are to the sections.]

MEETINGS — continued. C
notice must be served a reasonable time before the meeting, 597,
the division of meetings into ordinary and extraordinary, 598.
waiver of notice, 599.
notice is presumed to have béen regularly given, 600.
adjourned meetings, 601.
of municipality, cali must comply with statute, 94.
of directors, evidence of proceedings, 714.

see DIRECTORS’ MEETINGS; ELECTIONS.

MEMBERS. See StocKHOLDERS.
MEMORANDUM OF ASSOCIATION defined, 5, note,

MERGER or decrease of stock by a purchase of it by the corporation, 314,
is legal, when, 668-671.
see ULTRA VIRES; CONSOLIDATION,
METHOD of registering a transfer of stock; registry an important part of a

transfer of stock, 381. : aa

formalities of making registry, 382.

formalities may be waived by the corporation, 383.

either the transferrer or transferee may apply to the corporation for a regis-
try of transfer, 384. : ay} 5

of transferring a certificate of stock; usual forms of assignment and powers
of attorney whereby the transferrer assigns the certificate of stock to his
transferee, 375, :

questions which arise, 376.

a seal is not necessary to a transfer of stock 377. -

the assignment of the certificate of stock, estops the transferrer from claim-
ing any further title in the stock as against subsequent bona fide trans-
ferees, ‘although such assignment be not registered, 378.

effect of charter provision requiring registry, 379.

certificate of stock may be assigned with the name of the transferee left
blank, 380.

of subscribing, chapter IV.

of issuing stock, see STOCK.

see SALES OF STOCK.

MICHIGAN, rule as to municipal subscriptions, 91, note.
rule as to forfeiture of stock, 125.

MINES, sale of, by promoters to company, 651.

MINING COMPANY taking property under power of eminent domain, 693.
right to issue stock at less than par value, 23, note.

MINORS. See InFanrts.

MINOT’S CASE, the rule in, 555...
MINORITY of directors cannot make a call, 110.
of stockholders, see FRAUDULENT ACTS, ETC.
rights of, see ULTRA Virss ACIS; AMENDMENTS; CORPORATE MEETINGS;
ELECTIONS; FRAUDS; STOCKHOLDERS.
MINUTE-BOOK of directors; right of a stockholder to examine it, 518,
of directors as evidence, 714. .
as evidence against stockholders, 727,
MINUTES of directors’ meetings; entries, 115, note. _
MISAPPLICATION of corporate funds, See ULTRA VirEs Acts; Fravps; Dt-
RECTORS; STOCKHOLDERS, ‘
MISFEASANCE, indictment for, 698.
see DISSOLUYION, ETC.
MISJOINDER of causes of action, 739. ;
MISMANAGEMENT of directors, no defense to subscriptions, 188. See INTRA
VIRES.
MISNOMER. See Name. at .
MISREPRESENTATIONS of agents in obtaining subscriptions, 135-165,
see FRAUDULENT REPRESENTATIONS; SALES OF STOCK.

MISSOURI rule as to ‘‘ watered” stock, 47, note.

\
1038 GENERAL’ INDEX.

[The references are to the sections.]

MISTAKE in subscribing, 53.
see SUBSCRIPTION.
as a defense. to subscriptions, 196. |
MISUSER, indictment for, 698.
see DISSOLUTION, ETC.
MODIFICATION of subscription, 55.
MONEY had and received, action for, 159.
had and received: action for, in cases relative to stock, 578,
jin payment of subscriptions, chapter IT.
paid on subscription, recovery back, 62.
MONEYED CORPORATIONS. See Banks.
“‘ MONEYED CAPITAL” defined, 571.
MONOPOLIES, definition, 676.
nature and legality, 676.
see TRUSTS. —
given by arailroad to an express company, 674.
MORTGAGE for debts in excess of the statutory limit, 689.
assent of stockholders required by statute, 689. ‘
foreclosure, defenses, 687.
ultra vires may be enjoined, 682.
to corporations, 690.
foreclosure, 689.
securing preferred stock, 270, note. ,
on railroad; as affecting a car trust, 503a, note.
foreclosure and no defense made, right of stockholder to object, 659.
by corporaticn to director, 661.
ot shares of stock, definition, 463. /
shares of stock may be mortgaged, 464. ,
by or to a corporation; method of drafting, signing, sealing and acknowledg-
ing, 722. :
by a to an irregularly-incorporated company, 687.
corporation may make a, 689.
but not of the franchises, 689.
as to rolling-stock, 689. | :
by corporation, does not cover uncalled subscription, 111, note.
of stock, see PLEDGE AND MorTGAGE OF STOCK.
see ULTRA VIRES ACTS.
MORTMAIN ACTS, 692.
MOTIONS at stockholders’ meetings, 608, 621.
MOTIVES in voting are immaterial, 618.
in selling stock, cannot be inquired into by the corporation, 886.
of directors in making calls, not inquired into, 114, note.
of subscription, is immaterial, 69.
a al or transferee, no ground for refusal to register the transfer,
in bringing suit, 736. \
MULTIFARIOUS bill to relieve from subscription, 156.
bill in equity, 739. :
MUNICIPAL corporations as stockholders may vote, 612.
bonds cannot be sold at less than par, 98, note.
corporation cannot grant exclusive privileges, 676.
corporation cannct ‘be compelled to subscribe for stock, 91.
corporation cannot subscribe before incorporation, 91.
may subscribe to railroad not yet incorporated, 91, é
; donations to railroads, 90, 91. :
MUNICIPAL SUBSCRIPTIONS, chapter VI.
power of municipality to subscribe, 90.
express power from the legislature to subscribe, 91.
constitutional provisions prohibiting, 92. ) ‘
changes in statutes after subscription is made, 93.
statutory formalities to be substantially complied with, 94.
submission to popular vote, 95. 2
what officer or agent of the municipality is to make the subscription, 96,
GENERAL INDEX. 1039

[The references are to the sections.]

MUNICIPAL SUBSCRIPTIONS — continued.
may be conditional, 97.
when it may be paid in bonds, 98.
a municipality has the rights of a stockholder, 99. s
municipality may enforce delivery of certificate to itself, 100.
division of municipality after subscription, 101.
consolidation of railroads after municipal subscription is made, 102.
MUSICAL FESTIVAL, guaranty to, by railroad, 678. :
MUTUAL insurance company, disposition of assets upon a dissolution, 641.
aid associations, 504, See INSURANCE COMPANY.

'

“i \

; N.

NAME, corporation may have and protect its, 699.
-of railroad, change does not release municipal aid, 102.
corporate, suits must”be in the, 751.
amendment to charter authorizing change of, 499, note.
of corporation, see LIABILITY AS PARTNERS.
NATIONAL bank stock, the corporation has no lien upon it for the stockholders’
debts to it, 533.
banks, taking mortgages contrary tostatute, 690.
banks cannot assign for the benefit of creditors, 691.
banks, ultra vires acts, 682, note.
banks, double liability of stockholders, 215.
banks cannot purchase their own stock, 313.
bank cannot act as a broker, 446.
bank stock, taxation of, see TAXATION. a

NEGOTIABILITY of stock. See Bona Fip— PurcHaser; NON-NEGOTIABILITY
o STOCK AND DANGERS INCURRED IN THE PURCHASE OF CERTIFICATES OF
TOCK. . ‘
of corporate bonds, 687. ; ; ;
NEGLIGENCE of the owner of lost or stolen certificates of stock indorsed in
blank, 368, note. ~ ' :
of officers, laches barring a stotvkholder’s action, see LACHES.
liability of directors and officers for, 701-703.
remedy of the stockholder herein, 701. :
instances of negligence herein, 702.
ordinary care required, 703. é
of railroad, liability where contract is to carry beyond its line, 672.
express limitation of that liability, 672.
liability where one road is leased to another, 672.
limitation of liability for, 674.
of directors, see DIRECTORS, NEGLIGENCE OF.
NET PROFITS. dividends on preferred stock can be only from, 270.
defined, 546.
NEW certificate where old one is lost, 370.
corporation liable when for debts of old corporation, 643?
stock, see INCREASE AND REDUCTION OF. CAPITAL STOCK.
NEW ENGLAND rule as to enforceability of subscriptions, 71.
NEW JERSEY rule as regards transfers of stock without registry, 487.
NEW SHARES. See INCREASE AND REDUCTION OF CAPITAL STOCK.
NEW YORK rule as to issue of stock and bonds without consideration, 48, note.
rule as to municipal subscriptions, 91, note.
rule concerning ‘‘ watered ” stock, 34, 27, note.
rule as to conditional subscriptions, 80. :
rule as regards transfers of stock without registry, 487.
rule as to calls, 107, 118.
NEWSPAPER notice of calls, 119.
notice by, 727. ' :
NOMINAL DAMAGES. See Measure or DAMAGES.
1040 GENERAL INDEX.:

[The references are to the sections.]

NOMINAL STOCKHOLDERS, liability, 258.
transfers, liability of transferrer and transferee thereon, 253.

NOMINAL TRANSFER in order that a stockholder’s suit be brought, 736.
“ NON-ASSESSA BLE,” its meaning, 50.

NON COMPOS MENTIS person, sale of stock, 320.

NON-FEASANCE, indictment for, 698.

NON-NEGOTIABILITY of stock and dangers incurred in ‘the purchase of certifi-

cates of stock. Fe

nature and kinds of negotiable instruments, 411.

certificates of stock are not negotiable instruments, 412. :

the term ‘‘ quasi-negotiability,” as applied to certificates of stock, throws
little light upon the subject, 413.

the distinction between the ‘‘ legal” and the “equitable” title in the trans-
fer of certificates of stock is unsatisfactory, 414.

the only method of treatment of the subject seems to be by inquiring under
what facts.the holder or purchaser is protected, 415. :

the particular rules protecting a bona jide purchaser of certificates of stock
are based on estoppel, 416.

liabilities, risks and rights of one who owns or purchases a certificate of stock,

17

liability on unpaid par value; that is, the unpaid subscription price of the

stock, 418. . e

forfeiture for non-payment of calls, 419.

statutory liability, 420. - :

liability where the purchaser has the transfer made to a nominal holder, 421,

no liability for assessments after the par value of stock has been paid in, 422,

liability when stock was issued for property, 423.

liability as partners by reason of defective incorporation or for other rea-
sons, 424,

danger of corporate lien, 425.

overissued stock, 426.

danger that transterrer or previous holder is an infant, married woman o7

4 lunatic, 427. , ‘

purchase of stock by or from a corporation, 428,

purchase from joint owners, partners and agents, 429.

purchase of stock at/sheriff’s execution sale, or from assignee in bankruptcy,
or for benefit of creditors, 480.

purchase from a pledgee, 431.

pledgee is protected in the same way as purchaser of stock, 482. :

danger of purchasing from an executor, administrator or guardian, 488.

purchase from a trustee, 484,

er by venuor to another purchaser without delivery of certificates of stock,

, 485, -

t

danger of forgery, 436.
loss or theft of certificates indorsed in blank, 487.
re that a previous holder has been deprived of that same stock by fraud,

statute of frauds, 439.
gambling sales of stock, 440.
method of assigning a certificate of stock, 441,
registry of transfer, 442, ¢
purchaser not affected by rights of holders of that stock back of the last
registry, 443, ,
summary, 444.
NON-USER OF FRANCHISES+ See DissoLution.
NOTES, discount of, by corporation, 690,
corporation may make, 686
in payment of stock, 15.
by or to an irregularly-incorporated company, 637,
accommodation, by a corporation, 679. ;
NOTICE of calls and performance of ‘a conditional subscription, 89,
chargeable to a stockholder, 730,

to a corporation by notice to an incorporator, promoter, stockholder, agent,
GENERAL INDEX. 1041

[Fhe references are to the_sections.]
NOTICE — continued. 5
superintendent, manager, treasurer, secretary,. cashier, president, or di-
rector, 727. go
of statutes authorizing municipal subscriptions; bona fide purchasers must
take notice, 90. :
of meeting of municipality voting aid to a railroad, 94.
of calls, 117, 118, : : :
to Aas that the stock is not paid up; when is such knowledge presumed,
in.cases of forfeiture of stock, 180, 181. ;
of contract to convey a patent or stock to another person, 338, note,
of sale of stock by pledgee on non-payment of the debt secured, 477.
. of sale of stock held in pledge for non-payment of the debt, 458, 459.,
to the corporation of transfer of stock, as affecting corporate liens, 532.
of stockholders’ meetings, 594-597. :
of directors’ meetings, 592.
to a corporation, 663b..
of limitation of liability for negligence, 672, 674, note.
to produce, to corporation, 714.. - iraetiy
see CORPORATE MEETINGS; SALES OF STOCK; DANGERS IN PURCHASING
Stock; CALLS; FORFEITURE; ACQUIESCENCE,
NOVATION of members. See TRANSFERS,
NUISANCE by acorporation, 698.
NUL TIEL CORPORATION, plea of, 753, note.

NUMBER of directors, vacancies reducing the number below aquorum, 592, note..

oO.

OATH, commissioner’s, may be omitted, 57, note.
to an answer of a corporation, 752.
OBLIGATION of contracts. See CoNSTITUTIONALITY.
OFFER to perform contract to sell stock, 383, 334.
OFFSET. See SET-OFF. : YS -
“OFFICER acting without qualification stock is not liable as a subscriber,. 52;
note, .
Jiability for negligence, 701-708. ,
of corporation, may subscribe for stock, 64.
frauds of, on corporation, see FRAUDULENT ACTS, ETC.
liability on verted apc, rl
liability on ‘‘ watered” stock, 48. eth : :
not Tale for Comacnats, business before full capital is subscribed, 243.
liability of, on irregularly-executed corporate contracts, 724.
innocent, not liable for frauds of others, 158.
making misrepresentations at public meetings, 142,
two sets of, receiver, 684, ; ~ 2
methods of drafting, signing, sealing and acknowledging corporate contracts
made by them, 722. _. .
failure to elect, not a dissolution, 631.
as receiver, 4a, |
cannot be removed by the courts, 746,
admissions and declarations of, 726.
notice to, 727. ;
chargeable with notice of facts known to the corporation, 727.
of municipality making subscription, 96.
de facto and de jure, 713.
i ver, 713.
ne DrnnoToRs; FRAUDULENT ACTS, ETC.; ELECTIONS; INJUNCTION.
OFFICE, usurpation of. See DIRECTORS.
' OPTION to exchange preferred for common stock, 273.
on stock, 333, and notes.

66 :

-
1042 GENERAL INDEX.

[The references are to the “sections.]

ORAL agreements as a defense to actions to enforce subscriptions, 135-138,
subscriptions, 52.
conditions to a subscription, 81.
ORDINARY stockholders’ meeting, 598. ; ;
care and diligence is the measure of the responsibility of directors of corpo-
rations, 703. ; ‘
ORDER of court in reference to allowing examination of corporate books, 519,
of court to a corporation, enforcing, 756.
ORGANIZATION. See DissoLution; InrorMatitins; LIABILITY; LIABILITY as.
PARTNERS.
OUSTER from franchises, 635, note. a /
OUTSTANDING CERTIFICATES of stock, registry of transfer without sur-
render of, 358-360. : :
OVERISSUED STOCK, unauthorized increase of stock may amount to over-
issued stock, 291.
overissued stock is absolutely void, 292, 426.
liability of the corporation on overissued stock, 293, 426.
defenses of the corporation to such actions, 294, ~
personal liability of the officers of the corporation on overissued stock, 295.
liability of the vendor of overissued stock, 296.
equity will enjoin voting, transferring, and dividends on such stock, and
will adjust the rights of all parties, 297.
subscriber’s right to defeat a subscription to overissued stock and to recover
back money paid thereon, 298, ‘
forgery in the issue, 294,
liability of broker, 451.
defined, 9. .
see INCREASE AND REDUCTION OF STOCK,
P.
PACKET COMPANIES, ultra vires acts, 682, note. ;
PAID-UP STOCK, when a transferee is bound to know that it is not paid up,
257, i
see ‘* WATERED” STOCK. ;
PAPER, discount of, by corporation, 690.
PAR VALUE OF STOCK, change therein, 28i, 290,
amendment to charter changing, 500, note.
assessments in excess of, 241, 242,
assessment beyond the, 422. : 5
liability therefor of purchaser of certificate, 418,
corporation purchasing its own stock may sell at markét price, 22.
sale at less than, see ‘‘ WATERED” Stock, :
PARALLEL RAILROADS, prohibition against consolidation, 668,
PARKS, property taken under power of eminent domain, 693.
PARLIAMENT. See ULTRa ViREs ACTS.
PAROL agreements as a defense to actions to enforce subscriptions, 185-138,
definition of, 136, : ’
distinction from the defense of fraud, 186,
are not a good defense, 137, 188,
see FRAUDULENT REPRESENTATIONS,
as affecting subscriptions, 56.
conditions to a subscription, 81.
subscriptions, 52. <
evidence to prove subscription, 55.
conditions affixed to a subscription to stock are void, 81,
i PARTIES to equitable action brought by corporate creditors to enforce unpaid
subscriptions, 205, 206, ;
to stockholder’s suit, the corporation subsequently carrying it on, 682, note.

me may buy and sell stock, see ComPETENCY OF Partizs TO Buy AND SELL
TOCK,
GENERAL INDEX, 1043

' [The reférencés are to the sections]

PARTIES — continued.
to subscriptions, chapter IV, B.
to suits, see Surts.

PARTNERS, liability of stockholders as, by reason of irregular incorporation,

liability of stockholders as, see LIABILITY,
may subscribe for stock, 64.
in stock, 820, note.
sale of shares of stock, 320. '
liability of stockholders as, by reason of deficient incorporation, etc., 424,
owning stock, 429, ‘
may vote partnership stock, 612.
see AGENTS; ‘‘ BLIND PooL;” “Poon,”
PARTNERSHIP, sale of assets for stock, 20D.
may subscribe for stock, 64.
corporation as a member, 677.
see, also, “‘ PooLs;” LIABILITY aS PARTNERS.
PAST SHAREHOLDERS, liability of. See TRANSFERS,
PATENT-RIGHTS in payment for stock. See chapters II and III.
issue of stock for, 423.
agreeing to sell to a corporation for stock and to divide the stock, 338.
contract, notice thereof to a corporation, 663).
sold for stock and stock distributed to officers, 650,
infringement, liability of officer, 668a, note,
PAY, gratuitous, to old employees, 682. ’
, to employees in general, 682. |
to directors, etc., 657 .

_PAYMENT of subscription before call, 198, note, 106.

of subscriptions, chapter IL,
forfeiture for non-payment, see FORFEITURE. f
as a defense to a stockholder’s statutory liability, 225,
PENAL STATUTES imposing a liability may be repealed, 497.
PENAL LIABILITY. See Liapriry, :
PENALTY, stockholder’s statutory liability amounting to a, will not be enforced
by courts of other states, 223, .
PENNSYLVANIA rule as to conditional subscriptions, 80.
rule as to mortmain acts, 692.
rule as regards transfers of stock without registry, 487.
rule as to land purchased by corporations, 692.
PERFORMANCE of a conditional subscription, 86-7,
of contract to sell stock, 333, 334, ,
of work in payment of subscription, 19,
of condition to a subscription, 97.
see SPECIFIC PERFORMANCE,
PERSONAL property, stock is, 6.
service of notice of calls, 119.
‘* PERSONS,” statutes applicable to, are applicable to corporations, 700.
PIPE LINES, taking property under power of eminent domain, 693,
CE where calls are payable, 116. 5
ot business of a corparation: may be out of the state incorporating it, 237-239.
- of stockholders’ and directors’ meetings, see MEETINGS; DIRECTORS’ MEEr-

!

INGS. et
where corporation may carry on business, 237-239.
see FOREIGN CORPORATIONS. ,

of stockholders’ meetings, 622.
PLAINTIFFS. See SUITS. ;
PLANK-ROAD COMPANY cannot run stage line, 681.
guarantying debts of another company, 678.
PLEADING AND PRACTICE in actions relative to stock, 578,
assumpsit, 574,
trespass on the case, 575.
trover, 576,
1044 QENERAL INDEX.

“[The references are to the sections,]

PLEADING AND PRACTICE — continued.
detinue and replevin, 577.
money had and received, 578.
bill in equity, 579.
pleading under the codes, 530. ; ‘ . .
in setting up defense of fraud inducing subscription, 165.
in action on. calls, 120. ,
scienter, 157, note. :
see SUITS.

PLEAS in abatement and in bar in a suit by a corporation, 753, note
nul tiel corporation, 753, note.

PLEDGE OF ‘STOCK.

definition of pledge, 463.

mortgages and pledges of stock, 464.

how a pledge of stock arises or is made, 465.

pledgee may have the stock registered in his own name or the name of an-
other, 466. ‘

‘stock-broker purchasing stock for a customer on a margin is a pledgee, 467...

miscellaneous rights of pledgee or pledgory 468.

pledgee need not retain or return to the pledgor the identical certificates or
shares of stock which were pledged, but must have equal quantity always
on hand, 469. .

pledgee’s liability on subscription and statutory liability on stock, 470.

pledgee has no right to sell or repledge the stock, even termporarily, 471.

purchasers or pledgees of stock from pledgee with notice are not protected,

‘ bona. fide repledgees or purchasers of ‘pledged stock are protected, 473.
pledges by agents, trustees, executors, etc., legally and in breach of trust,
» 474.

pledgor’s remedies, 475.

pledgee’s remedies when debt secured is not paid, 476. '

notice of sale of stock by pledgee to apply to debt secured, 477.

formalities of sale, 478.

pledgee himself cannot purchase at the sale, 479.

of certificates of stock by delivery, without the transfer being signed, 465.

. effect of attachment or levy of execution on the stock before the pledgee ob-
: tains registry, 465.

parol condition that a subscription shall be only a pledge, 188.

of stock to a bank, 316.

of stock by a trustee, 323, 824,

of stock by an agent, 321.

of stock, pledgee not bound to protect it against forfeiture, 468,

not liable for loss of the stock by theft, 468.

by a corporation of its unissued stock, 247, note.

corporation may pledge property, 689.

of stock by the corporation, 20a,

of stock to secure an usurious loan, 464, note, 465.

of stock held by brokers on a margin may be legal, 457. -

of stock, sale on notice for non-payment of the debt, 458, 459,
PLEDGEE, liability on stock, 247.

being a broker holding stock on a margin, may in some cases repledge the

stock, 457. ;

sale of stock, 481.

is protected the same as a purchaser of stock in most cases, 482,

rights and duties of corporations as to transfers by and to, 897.

broker is a, when he holds stock on a margin, 457, etc.

converting stock, is liable in trover, 576.

not entitled to notice of corporate meetings, 596.

cannot vote stock, 468, 612.

of shares, liability of, to corporate creditors, 247, 823, 893.

unrecorded, not protected against corporate liens on the stock, 525,
POLICE REGULATIONS. See CoNnsTITUTIONALITY,
POLICE POWER of the state, 675,
POLL OF VOTE, 605, 608.
GENERAL INDEX. 1045

: [The references are to the sections.]

**POQLS,” 332a.
see ‘‘TRustTs;” “ Brinp PooL,”
contracts, legality of, 672.
see ULTRA VIRES ACTS. .

POPULAR VOTE on municipal subscriptions, 95,
POWER OF ATTORNEY to transfer stock, 375,
POWERS of corporation. See CORPORATION.
of president, see PRESIDENT.
of board of directors, see DIRECTORS,
of agents, see AGENTS.
of stockholders, see STOCKHOLDERS,
of secretary, see SECRETARY.
of treasurer, see TREASURER.
of superintendent, see SUPERINTENDENT,
of general manager, see GENERAL MANAGER.
of vice-president, see VICE-PRESIDENT,
of a corporation, 1, note.
of corporation under general incorporating act, 8a,
see ULTRA VIRES ACTS. 3
of president, secretary, treasurer, cashier, etc., see CONTRACTS,
of municipality to aid various enterprises, 91.
PRACTICE in actions relative to stock. See PLEADING AND PRACTICE.
PRAYER for relief in stockholders’ suits, 743. ‘
PRE-EMPTION. See IncREASE AND REDUCTION,
right of stockholders to take new stock, 286.
PREFERRED stock, definition, 9. s
general rights of preferred stockholders, 269.
preferred stockholders are not creditors, and are entitled to dividends only
from profits, 270. :
the discretion of directors with respect to declaring dividends on preferred
stock and remedies of the preferred stockholders in regard thereto, 271,
arrears‘of preferred dividends, to what extent payable subsequently, 272,
the option to exchange common for preferred shares, 273.
rights of the assignee or transferee of preferred shares in arrears of divi-
dends, 274,
special stock in Massachusetts, 275.
interest-bearing stock, 277.
rights of preferred stockholders on dissolution, 278.
amendment to charter authorizing, 499, note. :
frauds by preferred stockholders upon the common stockholders, 271, note.
frauds by the common upon the preferred, 271, note.
may vote, 269.
‘definition, 267. :
different from guarantied stock, 267.
participates in a stock dividend, 537.
PREFERENCES may be given by a corporation in its assignment for the benefit
of creditors, 691. °
of directors’ debts, 661.
‘in rates, see DISCRIMINATIONS.
- shares, see PREFERRED STOCK.
PRELIMINARY EXPENSES. See LiaBiniry; PROMOTERS.

PRESENTS by corporations, 682. ;
PRESIDENT, liability of, on irregularly-executed corporate contracts, (24,
admissions and declarations of, 726, _

notice to, 727. :
cannot confess judgment for the corporation, 754.

executing corporate contracts, 722. ; ;
cannot aeuale bind the company by representations to subscribers, 141, 142.

has no power by reason of his office to make contracts, 716.

various acts which he cannot do, 716, notes. __ . ;

but express authority, acquiescence or ratification may validate his acts, 716.
liability for negligence, 701-703.

liability for representations, etc., 663a, note.
1046 GENERAL INDEX,

LThe references are to the sections,}

PRESIDENT — continued.
salary of, 657. :
accepting stock or secret gifts, 650."
PRESUMPTION that a corporate contract apparently regularly executed was
regularly executed, 722. :
as to regularity, etc., in stockholders’ meetings, 621, 623.
as to being a subscriber, 55. :
of stockholdership by name appearing on register, 53, note.

PRINTED NOTICE of limitation of liability for negligence, 672, 674, note.

“PRIORITY among creditors in regard to statutory liability of stockholders, 226,
in regard to subscription liability, 205, note. :
of right to subscribe, 64, note, 286.
see PREFERENCES; ASSIGNMENTS,

PRIVILEGES, exclusive, legality of, 676.
see MonopoLY; FRANCHISE.

PROCESS. See SERVICE. .

PROFITS of corporation may be applied in payment of subscriptions, 43, note.
net, defined, 546. . : :
see Net PROFITS.
right of stockholder thereto, 4a.
see DIVIDENDS.
PROHIBITED ACTS, laches no bar to objecting, 729.
PROMISE to pay subscriptions, 69-71.
PROMISSORY NOTES, corporation may make, 686.
PROMOTERS, liability of, i eennecte and persons employed, 705.
liability to subscribers, 706.
liability of corporation to, 707.
liability of corporation on promoters’ contracts, 707.
ljability for fraud inducing subscriptions, 157, 158,
dividing. with directors, etc., 650.
frauds on corporation or stockholders, 651.
who becomes a2, director, liability for ‘‘ watered” stock received, 48,
of company never formed, liability to subscribers, 62. .
the frauds of, as to the corporation, 651. .
ultra vires contracts, 682, note.
pay by corporation to, 657.
“ PROOF of issue of stock, 10.
of subscription, 55. ,
of execution of corporate contracts, 722,
minute-book as, 714.
of subscription by agent, 67, note.
of subscription by payment of calls, 53, note 3,
of subscription by copies, 52, note.
of incorporation, 753. ; ¢
of subscription by accepting certificate, 53, note 3.
of stockholdership by name appearing on books, 53, note,
see EVIDENCE. 3
PROPERTY in payment for stock, 12, etc.
of partnership, issued for stock, 20D,
issue of stock for, 423.
to be returned, 744.
dividends, 536,
amendment to charter increasing the.power to hold, 500, note.
in payment of stock, see ‘‘ WATERED” STOCK.
dividends, controversies between life tenant and remainder-man as to, see
Lirz Estates AND REMAINDERS IN STOCK.
PROSPECTUS,’ misrepresentations by, 148,
English statute as to, 143, note. é
of corporation, fraudulently inducing the purchase of stock, 852, 853.
misstating facts in regard to the charter, 502, note,
see FRAUDULENT REPRESENTATIONS; SALES OF STOCK,

é
’
GENERAL INDEX. 1047

(The references are to the sections.]

' a
PROXIES are revocable, though given as irrevocable, 508a, note,
cannot be given by a, director as such, 592.
by stockholders, 610. 7
see ELECTIONS.
PUBLIC DUTY of railroad to operate its line, 673.
of railroads, gas companies and telegraph and telephone companies, 674.
PUBLIC POLICY, contracts as affected by, 682.
PUBLICATION. See Noticn.
eae CERTIFICATE OF INCORPORATION, effect of failure to do so, '
eel . \
PUNITIVE DAMAGES against a corporation, 698. 2
PURCHASE OF STOCK without the certificates, 435.
of property by corporation from officers, 652.
by officers from corporation, 653. ; ;
without a certificate of the stock, rights of a purchaser of certificate of stock
where the corporation ‘has registered transfer to another without sur-
render of certificate, 358. :
liability of the corporation herein, 359.
rights of purchaser of stock without certificate, 360.
of stock for the purpose of bringing suit, 736.
see NON-NEGOTIABILITY OF STOCK AND DaNnGERS INCURRED IN THE PuR-
CHASE OF CERTIFICATES OF STOCK; COMPETENCY OF PaRTIES TO BUY
AND SELL Stock; Bona FIDE PURCHASER; SALES OF STOCK; DANGERS
INCURRED.
PURCHASERS OF STOCK may rely on the statements of officers that stock is
paid up, 50. ;
PURCHASING a road or stock, amendment to charter authorizing, 499, note,
500, note. ‘i
“ PUTS” in stocks explained, 445, note.

Q.

QUALIFICATION shares, director acting without them not liable as a stock-
: holder, 52, note.
of directors, etc., 619.
see DIRECTORS. ;
QUASI-NEGOTIABILITY OF STOCK. See Non-negotiability of stock and
dangers incurred in the purchase of certificates of stock. :
QUO WARRANTO for issuing ‘‘ watered” stock, 37, 26, note. | :
liability of stockholders where incorporation is irregular, deficient or incom-
plete, 231-235. :
_is the remedy against illegally-elected directors, 110.
against unincorporated associations, 504.
to oust illegally-elected directors, 615, 619. _
against a railroad for failure to operate its line, 673,
to oust from exclusive privileges, 676.
see ELECTIONS; DISSOLUTION, FORFEITURE,
QUORUM at stockholders’ meetings, 607, 623.
at directors’ meetings, 592,
of directors, necessary to make a call, 110.
see CORPORATE MEETINGS.

R.
RAILROAD guarantying bonds or dividends, 678.
cannot go into water transportation, 681.
cannot prevent construction of a parallel line, 676,
exclusive privileges, 676.

may give exclusive privileges to certain express companies, 674.
7 purchase by it of its own stock, 309-313,
1048 GENERAL INDEX.

[The references are to the sections.]

RAILROAD — continued. : ;
purchase by it of stock in another corporation, 315. ;
consolidation, absorption, merger, amalgamation, lease or sale; legality, 668-

671. ‘
. contract to carry beyond its line, 672.

liability for negligence in such case, 672,
express limitation of such liability, 672,

contracts with connecting steamboats, 672.

liability in case of a lease, 672.

exclusive privileges to telegraphs, 672, note.

route, gifts to influence, 650.

coustruction company, director cannot be interested in profits, 649,

route, as a condition to a subscription, 83.

+ nools,” 672. ,

liability of purchasers of, 248. z

corporations, various uléra vires acts, 682, note.

regulations are not by-laws, 700a, note,

cannot improve wharves, 681.

‘rates, reduction of, 675.

rates, the legislature may reduce, 675.

public duties of, 674.

must ‘operate their road, 673.

taking up tracks, a non-user, 634, note.

ceasing business, a non-user, 684, note. ‘

failing to complete or do work, as required by charter, 638,

- subscription for stock, 63.

municipal aid to, see MUNICIPAL SUBSCRIPTIONS.

amendments or statutes changing the charter, see AMENDMENTS,
see EMINENT DoMAIN.

Commissioners, 675, ;

RATES of railroads may be reduced by the legislature, 675.

RATIFICATION by stockholder of issue of ‘‘ watered ” stock, 39, 40, 49.”
is a bar to the defense of fraud, 160. .
by selling part of stock, 160.
by ordering asale. Id.
by participating in meetings. Id.
by paying calls. Id. :

see LACHES.
by majority of stock, when the guilty party also votes, 652.
by acorporation of promoter’s contracts, 707.

REAL ESTATE, stock is not, 6.

_ see LAND. oe

REASONABLE rates to be charged by common carriers, 674, °

REBATES IN RATES. See DiscRIMINATION.

RECAPITALIZATION, 654-656, :
may be constitutional, 656.

RECEIVERS cannot enforce the stockholder's statutory liability, 218,
may collect subscriptions, 208. :
stockholder or director as, 4a.
of foreign corporation, 680.
in cases where the directors have been guilty of fraud, ultra vires acts or

negligence, 746.
distribution of funds, 689.
where there are internal dissensions, 684.
in sequestration proceedings, 756.

RECEIVING TELLER, powers of, 720.

RECONSIDERATION of a vote to increase stock, 285,

RECORDS of corporation, proof of, 714.
corporate, as evidence, 714.

RECOVERY back of money paid on subscription, 62
of money advanced when the enterprise fails, 62. .
of money paid by subscriber for overissued stock, 298.

REDEMPTION. See FoRFEITURE.

‘

Maces,
GENERAL INDEX. 1049

{The references are to the sections.] 3

REDUCTIO i ae
ae eee & capital, amendment to charter authorizing, 409, note, 601, note.

of capital stock, see INCREASE AND REDUCTION OF CAPITAL STOCK.
of rates, see DISCRIMINATIONS.

REFUSAL cf corporation to allow transfer of stock, remedies, 289-892.
to issue certificate, liability of corporation herein, 60.

REGISTRY of transfers of stock on corporate book, irregular or incomplete, 258,

of transfers of stock, charter provision requiring, 379

is an important part of a transfer, 381. .

formalities of making registry, 382.

formalities may be waived by the corporation, 383.

may be applied for by the transferrer or the transferee, 384,

sometimes essential in order to cut off future attachments and levy of exe-
cution on the stock, 465, 486-490, -

of transfer without a surrender of the, old certificate, 358-360.

of transfers of stock, duty of the corporation, 410.

of transfers of stock, method, 442.

of transfer of stock as a protection against attachments and executions issued
against the transferrer, 486-490. —

of forged transfers of stock, 363-367.

of transfer, rules regulating, 393-410.

of transfers, see RULES FOR CORPORATIONS IN REGARD TO REFUSING OR
ALLOWING REGISTRIES OF TRANSFERS OF STOCK; METHOD OF REGISTRY.

REGULAR stockholders’ meeting, 598.
directors’ meeting, 592.

REGULARITY of incorporation. See INCORPORATION.

REGULATION of commerce, See INTERSTATE COMMERCE,
of rates, see CONSTITUTIONALITY.

RE-INCORPORATION, liabilities, 643.
RE-ISSUE OF STOCK. See SaLes or Stock. is

RELEASE as a defense to a stockholder’s statutory liability, 225.
from subscription by amendment to charter, 502,
see DEFENSES. : ;

RELIGIOUS corporations may purchase stock, 317. :
REMAINDERS IN STOCK. See Lire EsTaTEs AND REMAINDERS.
REMEDIES. See ACTIONS; CorPORATION ; SUITS; STOCKHOLDERS ; DIRECTORS,
REMOVAL OF DIRECTORS, 620, 711.
RENTALS, preference of, in mortgage foreclosures, 689.

RENT guarantied by a railroad, 668, 678. :

RE-ORGANIZATION, right of creditor who is also a stockholder, 4a,
liability of purchasers of a railroad, 242.
frauds by preferred stockholders who control the company upon the com-
mon stockholders, 271, note.

liability for debts of old company, 648.

purposes and legality, 654-656. xt

purchases of corporate property by a majority of the stockholders, 654.
may be set aside for fraud, 654.

various methods of, 654.
(a) the usual method by foreclosure of a mortgage, 654.
(b) by foreclosure‘under an arrangement prescribed by statute, 655.
(c) by an assignment of assets to a new corporation, 656.

REPAIR, failure to, indictment for, 698.
failure to make, a misuser, 633, note.

REPEAL of charter, 689.
of exemption from taxation, 5720.
of charter, constitutionality, see AMENDMENT OF CHARTERS.
of charter, see CHARTER,
1050 | , _ GENERAL INDEX.

[The references are to the sections. ]
REPLEDGE of stock by a broker holding it on a margin may be legal, 457,

REPLEVIN in actions relative to stock, 577.
see ACTION.
REPORTS, misrepresentations by, 144. :
of BoROEALION fraudulently inducing the purchase of stock, 852, 858.
see FRAUDULENT REPRESENTATIONS; SaLEs OF STOCK. — :
REPRESENTATIONS of agents in obtaining subscriptions, 185-165.
by corporation that it has performed certain acts as to contracts, 725.
see FRAUDULENT REPRESENTATIONS,
REQUEST to corporation to sue, 740. »
REQUIREMENTS that contracts shall be executed in a certain manner, 725,
RESCISSION of subscription for fraud, 153,
see DEFENSES. ; .* é
RESERVED right of the legislature to amend a charter; its limits, 497, 501:
power of state to repeal charters, 639, .
RESERVATION. See AMENDMENTS.
“ RESIDENT,” corporation may be a, 700. ic
RESIDENCE of a corporation is in the state creating it, 757.
RESIGNATION from office, 620. .
of officer, releasés obligation to obtain qualification stock, 52, note.
of officers, sale of stock with an agreement as to, 332a.
of directors, reducing the number below a quorum, 592, note.
RESOLUTION. See ConTRACTS.
RESTRAINT of trade. See ‘TRusts;” SALES oF Stock; ELECTIONS,
RESTRICTIONS on sale of stock, duty of corporation, 408,
~ on sale of stock, 882. i
on voting, 618. :
RETURN of consideration, '744, .
REVOCATION of vote on municipal aid, 95, note.
of gift of stock, 308.
of a legacy of stock, 306.
RIGHT of way in payment of subscriptions, 15,
disposition or dissolution, 641.
see EMINENT DOMAIN.
to sell stock, restrictions, 332.

RISKS INCURRED IN PURCHASING A CERTIFICATE OF STOCK. See
_ DANGERS INCURRED, ETC.

RIVAL COMPANIES. See Surrs iv Equity.

‘suit in the interest of, 736.
ROAD-MASTER, powers of, 720, notes.
ROLLING-STOCK companies, liability of, 672, note.
mortgage of, 689. : 3
mortgages covering, 689.
as personalty, 689.
seizure and sale of it for taxes, 572c.

ROUTE of railroad, as a condition to a subscription, 83.
parol Ber pepient as to route no defense to a subscription, 188.
gifts to influence, 650. a
RULES FOR CORPORATIONS in regard to refusing or allowing registries of
_transfers of stock, chapter XXII.
right to refuse until the transferrer pays the unpaid subscription price, 394.
whether the corporation may refuse to register a transfer to an irresponsible
transferee, 395. rv Cee
corporation may refuse to register as transferees persons who are incompe-
tent to contract, 396, : oe

f
GENERAL INDEX, | 1051

[The references are to the sections]
RULES FOR CORPORATIONS — continued.

trustees, executors, guardians, agents:and pledgees, 397
sales of stock by executors or Bae Geators, a,
sales by trustees, 399.

sales by guardians, 400.

forgery of transfer, 401.

corporation must require a surrender of i i .
alleged loss of the old certificaie, 4038, me Sere ae
attachmént or execution, 404.

decree of a court that certificates be issued, 405,

theft of certificates indorsed in blank, 406,

interpleader by the corporation, 407.

restrictions by corporation on stockholder’s right to sell or transfer, 408._
lien of the corporation, 409. — ; ;
formalities of registry which the corporation may insist upon, 410.

‘RUNNING ARRANGEMENTS. See TRAFFIC ARRANGEMENTS,

s.

SALARIES to directors, etc., 657.
sale of stock with an agreement as to, 332a,
see FRAUDS.

SALES OF STOCK. ‘
for property, 17. :
competency of a corporation to buy shares of its own stock, 309.
transfers to the corporation by one of the original subscribers, 310.
the rule in the United States herein, 811. :
the English rule, 310,312, =:
statutory, provisions, 313,
the stock is not merged by such a purchase, 314.
competency of a corporation to buy the stock of another company, 315.
charter provisions and statutory prohibitions, 315, .
competency of a bank to purchase stock, 316.
legality of pledges of stock to banks, 316.
' herein of the right of. national banks to take pledges of stock, 316, note.
legality of purchase of stock by. insurance, manufacturing and other com-
panies, 317.
by infants, 318.
by married women, 319. .
by persons non compos mentis, assignees in bankruptcy, partners, direct-
ors, etc., 320.
legality of purchases and transfers by agents, 821,
by guardians, executors and trustees, 322,
sales or pledges herein in breach of trust, 323.
liability of the trustee herein, 324.
transferee of a trustee, when not protected, 325.
how far protected, 326. . mela
rights and liabilities of the corporation allowing such transfer, 327.
legality of sales of stock by a guardian, 328. .
by an executor or administrator, 829.
"duty and liability of the corporation herein, 380,
shares of stock are transferable, 331.
restrictions herein, 332.
how far the sale of stock may be hampered or restricted, 332, f
contract of sale may be valid without delivery, or time specified for delivery,
333.

\

performance of contract or offer to perform by vendor, 334.
the action for damages for breach of the contract, 335. :
defenses herein, 336, ;
specific performance of the contract, when enforceable, 387, 338.
statute of frauds, seventeenth section, as affects this contract, 389.
other sections thereof applicable herein, 340, :
1052 GENERAL INDEX.

[The references are to the sections.)

SALES OF STOCK — continued.
gambling or wager sales of stock defined, 341.
statutes prohibiting such sales, 342.
also certain stock contracts, 342.
test of legality of such contracts, 343.
the intent to deliver, 343. ;
when a question for the jury and when not, 844,
as: between principal and broker, 345. .
the English rule, 345.
a contrary Tule in the United States, 346.
‘ as affecting notes, bonds or mortgages growing out thereof, 347.
fraud, as affecting, 349.
what has been held to constitute, 350, 351. ;
by corporate reports or prospectus, 352, ee ; : ;
the English rule as to false reports or untrue statements in a pro-
' spectus, 352.
remedies herein, 354.
(a) action for deceit, 355.
(b) bill'in equity, 356.
may amount to a conspiracy, 357. .
purchase of certificate and subsequent registry by the corporation to another
transferee, 358. ;
liability of the corporation herein, 359. : p
rights of a purchaser of the stock without certificate, 360.
legal proceedings affecting sale of outstanding certificate, 361,
lis pendens as affecting purchase of stock, 362.
forgery as affecting, 363.
rights and liabilities of transferees of forged certificates, 364.
liability of corporation to real owner for allowing forged transfer, 365,
366. :
rights of transferee who buys after the registry has been obtained, 867.
- stolen or lost certificates indorsed in blank as affecting, 368.
when the thief has obtained registry, 369.
real owner may have new certificate, 370.
confiscation of stock, rights herein of the parties, 371.
formalities of transferring certificate and registry, 372.
two steps usual in perfecting transfer, 373,
s _ omisgion of either or both of such steps, 374,
method of transferring the certificate, 375.
usual forms of assignment, and powers of attorney, 875, note,
questions arising herein, 376. ;
a seal not necessary, 377.
in England the transfer of railway stock must be under seal, 877,
transferrer estopped by assignment of the certificate from claiming title
to the stock, 378, ;
effect of charter provisions requiring registry, 379.
assignment of the certificate indorsed in blank, 380.
method of registering a transfer, 381. .
registry an essential part of a transfer, 381.
formalities of, 382. .
may be waived by the corporation, 383.
either transferrer or transferee may apply for registry, 384.
corporation may require the transferee to be identified, 385.
and the genuineness of the indorsement tobe proved, 385,
motive of transferrer or transferee no ground for refusal to register, 386.
corporation may interplead between two claimants to stock, 387.
: must obey order of court as to registry and issue of new certificates, 388.
suit ee ataias against the corporation for refusal to record the trans-
er, 389. ,
by mandamus, 390. _
by suit in equity, 391,
by action for damages, 392,
of overissued stock, liability of the vendor, 296.
of stock to.be delivered at a future time, 333.
of stock as affected by the corporate lien for stockholders’ debts, 582.
of stock, agreement of several holders to act together, 503a.
GENERAL INDEX. 1053

; [The references are to the sections.]

SALES OF STOCK — continued.

of stock, agreement not to sell, 503a, note.

of certificates of stock by delivery without a transfer being signed, 465.

of stock by pledgee on non-payment of the debt secured, 476.

of stock, who is entitled to the dividends, 541.

of stock for property, 17, ~ i

see NON-NEGOTIABILITY OF CERTIFICATES; DANGERS INCURRED IN PUR-

CHASING STOCK: RULES FOR CORPORATIONS IN REGARD TO REFUSING
OR ALLOWING REGISTRIES OF TRANSFERS OF STOCK; FORMATION AND
PERFORMANCE OF THE CONTRACT; FRAUDULENT SALES; GAMBLING
SALES; CORPORATION’S RIGHTS AND DUTIES IN ALLOWING OR REFUS-
ING REGISTRY; METHOD OF REGISTERING A TRANSFER OF STOCK;
METHOD OF TRANSFERRING CERTIFICATES; CONFISCATION OF STOCK;
FORGERY; PURCHASER WITHOUT A CERTIFICATE OF THE STOCK; SALES
OF STOCK WHILE SUITS ARE PENDING; AFFECTING THAT STOCK;
STOLEN OR Lost CERTIFICATE; COMPETENCY OF PARTIES TO BUY AND

SELL STOCK.

SALE of road, amendment to charter authorizing, 499, note, 500, note.
of a railroad to which municipal aid has been voted, 102.
of all the corporate property, is an ultra vires act, 667.
of railroad, is legal, when, 668-671. ,
see ULTRA VIRES.
of property by corporation to officers, 653.

or lease of railroads without authority of charter or statute, is wltra vires,

668.

of all the corporate property, except by unanimous consent, is ultra vires,

667.
by corporation to new corporation, and liability of latter, 643,
of property by officers to corporation, 652.
to corporation, see NOTICE. :
SAVINGS BANK. See Bank.

SCIENTER in actions for deceit, 157, note,
pleading of. Id.

SCIRE FACIAS, See DISSOLUTION,

SCRIP, definition, 5, note.
dividends, 536,
dividends, see DIVIDENDS.
SCROLL as a seal, 722,
SEAL, impression of, 722.
of corporation, when it must be attached to corporate contracts, 721,
on certificate of stock, 10. aa -
of the corporation, need not be used in appointing agents, 721.
on corporate note, 686, = oy
any device may serve as a, 722. e
_is not necessary to a transfer of stock, 377.
see SALES OF STOCK.
SECRETARY, liability of, on irregularly-executed corporate contracts, 724,
attaching seal to corporate contracts, 722. .
has no implied power to contract for the corporation, 717.
various acts-which he cannot do, 717. d ;
express authority, acquiescence or ratification may validate his acts, 717.
salary of, 657.
admissions and declarations of, 726.
notice to, 727.
SECRET AGREEMENT. See DEFENSES; FRAUDS.
advantages to a few subscribers, 191, ;
agreement to take back stock, 333.

SECURITIES, See Bonps; Notes; DEBENTURES; Mortaaaes; STOCK.
SEQUESTRATION for contempt of court, 756,

SERVANTS, liability of stockholders to, 215.
see Sane
1054 ‘GENERAL INDEX.
[The references aie to the sections.]

SERVICE of notice of calls, 119. ;
of process in suits against’ foreign corporations, 758, ’
in suits against a domestic corporation, 758, notes,
how obtained upon a corporation, 752.
of notice of stockholders’ meeting, 596.
of directors’ meeting, 592.
_ SET-OFF, as a defense to subscriptions, 193, 194,
as a defense to a stockholder’s statutory liability, 225,
by officer who is sued for a breach of trust,.749.
_ see DEFENSES. é
SHAREHOLDER, definition, 4.
see STOCKHOLDER.
SHARES OF STOCK, definition, 6.
are personalty, not realty, 6.
identity not always material, 469.
see INCREASE \AND REDUCTION OF CAPITAL SrocK; OVERISSUED STOCK;,
ATTACHMENT; COMPETENCY OF PARTIES TO BUY AND SELL STOCK;
SUBSCRIPTION FOR STOCK; SALES OF STOCK.
forfeited for non-payment, see FORFEITURE,
are transferable, 331, x
restrictions on sales, 332,
given to directors, etc., 650.
SHERIFF'S SALE OF STOCK, 430. .
“SHORT” sale of stocks explained, 445, note, 5
SHORTENING OF ROAD, amendment to charter authorizing, 499, note, 600,
note,
SIGNATURE OF CORPORATION to a contract, 722,
SILENCE not a waiver, 88.
SITUS of stock as regards attachment, 485,
of stock for taxation, 566. ‘
SLANDER, stockholder not liable for, by bringing suit to remedy frauds, etc.,
645. 5

SLAUGHTER-HOUSE CASES, 676.
SOLE SHAREHOLDER. See STOCKHOLDERS,
SPECIAL STOCK, definition, 9.
in Massachusetts, defined, 9, 275.
see PREFERRED STOCK, ~
SPECIAL STOCKHOLDERS’ meeting, 598,
directors’ meeting, 592.
see CORPORATE MEETINGS.
SPECIAL act of incorporation, 1, note.
agreements, see FRAUDULENT REPRESENTATIONS,
incorporating act, when legal, 1, note.
SPECIE PAYMENTS, suspending, a misuser, 633, notes,
SPECIFIC PERFORMANCE of contract to sell stock, 337, 338, 838, note.
SPECIFIC LEGACY OF STOCK. See Legacies or SToox,
SPEED, legislature may regulate, 675,
SPURIOUS STOCK, 426.
q liability of broker, 451.
definition, 9.
see OVERISSUED STOCK,
STAGE lines run by a railroad, 672,
cannof be run by plank-road ‘company, 681.
STATE, objecting to ‘‘ watered” stock, 87,
visitorial power, 635, note. '
may delegate power of eminent domain to a corporation, 693,
cannot enjoin an ultra vires act, 665.
see DISSOLUTION, ETC,
STATED MEETINGS, 598,

STATION HOUSES, legislature may regulate, 675.
: GENERAL, INDEX. 1055

; : [The references are to the sections.]
STATION AGENT, powers of, 720, notes.

STATUTE OF LIMITATIONS. See Liwrations.
as affecting subscription, 195. ,
on a contract to sell stock, 334.
as a defense to a stockholder’s statutory liability, 225.
STATUTE OF FRAUDS, stock’ not “‘ goods, wares, or merchandise” within, 6
application of _the seventeenth section to the contract of sale of stock, 839.
* other sections applicable to such contract, 340. .
of frauds, 489, ‘
of frauds, as to sales of stock, 889, 340,
of frauds, minute-book of corporation satisfies, 714, notes.
STATUTORY liability on stock, 420. :
see LIABILITY OF STOCKHOLDERS.
as affectéd by transfers, see TRANSFERS,
see chapter XII.

STATUTES prohibiting a corporation from borrowing, 685, 686,
prohibiting acts, laches no bar to objecting, 729.
prohibiting corporations from loaning money, 690.
against ‘‘ watered” stock, 26-28, 34, 35. :
prohibiting corporations from lending, 690.
making fictitious stock void, 27.
relative to municipal subscriptions, see MUNICIPAL SUBSCRIPTIONS.
authorizing consolidations, 668-671, |
repealing or ameénding charter, see AMENDMENTS TO CHARTERS.
relative to a corporation, may be a waiver of right to forfeiture, 636.
formalities relative to municipal subscriptions must be complied with, 94.
STEAMBOAT, contracts with connecting railroads, 672,
' company cannot traffic in grain, 682, note.
company, guaranty to by a railroad, 678.
corporation purchasing stock in another company, 317,
company’s subscription for stock, 63. :
STOCK, effect of purchase by a corporation of its own stock, 282.
liability on, where there has been a transfer, see TRANSFER,
sale at less than par value, see ‘‘ WATERED” STOCK.
purchased by the corporation may be sold at less than par, 22,
change in the par value, 281, 290.
lien on, see LIEN. ;
preferred or guarantied, see PREFERRED STOCK.
unsubscribed for, need not be offered to the old stockholders, 286,
sale of overissue, liability of vendor, 296,
may be issudd in payment of bonds, 283, note. ’
‘pledged by the corporation itself, 20a,
issued for partnership property, 200.
dividend, legality, 20, 51, 537, 11.
dividend as a method of issuing new stock, 287.
dividends, see LirE ESTATES AND REMAINDERS IN SHARES OF STOCK.
definition, 3, 5. ( :
restrictions on sale, 3382. !
fraud as affecting a sale, see FRAUD 4S AFFECTING A SALE oF STOCK.
issue of certificate may be demanded by a municipality, 100.
guaranty of dividends on, by one corporation for another, 678,
who may buy and sell, see COMPETENCY OF PaRTizS TO Buy AND SELL
STOCK.
as property, 7. : ; :
forfeited for non-payment of subscriptions, see FORFEITURE,
purchase of, without the certificates, 485.
amendments to charter in reference to, 499, note, 500, note,
transfers before incorporation, 61.
subscription therefor, see SUBSCRIPTION.
certificate may be obtained from the corporation, 60,
is transferable, 331. :
jocation as regards attachment, 485.
received by corporation on sale of its property, 667,
classes of, 9.

\
1056 GENERAL INDEX.

[The references are to the sections.]

STOCK — continued.
fictitiously paid up, 21,
objects ot issuing, 21.
methods of issuing, 22.
legality of such issues, 28.
issue of, for property. English statute, 18.
methods of issuing, 11.
issue by money subscription, 12,
for property, etc., 13.
sold by the holders to third persons for bonds, 317, note.
may be condenwed, 671.
legal proceedings affecting, 8.
‘“watered,” see ‘* WATERED” STOCK.
given to directors, etc.; 650. . .
common, preferred, watered, fictitiously paid up, deferred, overissued, spuri-
_ ous, special, definitions, 9. :
certificates of, defined, 10. ‘
methods of issuing legally, 11.
issue of, 10. ; d § ‘ \
see INCREASE AND REDUCTION OF CAPITAL STOCK; OVERISSUED STOCK;
GAMBLING SALES OF STOCK; SaLrs OF STooxK; ‘‘ TRusTS;” LEGACIES;
Girts; MorTGAGES OF SHARES OF STOCK; PLEDGE OF Stock; Non-
NEGOTIABILITY OF STOCK AND DANGERS INCURRED IN THE PURCHASE
OF CERTIFICATES OF STOCK; RULES FOR CORPORATIONS IN REGARD TO
REFUSING OR ALLOWING REGISTRIES OF TRANSFERS OF STOCK; CoNn-
TRACT TO SELL; ATTACHMENT; TRANSFERS OF STOCK,
STOCK DIVIDENDS, issue of stock by, 20,:11, 537.
a means of issuing paid-up stock, 51.
as a means of increasing the capital stock, 287.
STOCK-BOOK, irregular or incomplete registries of transfers, 258,
as evidences of stockholdership, 55. = -
right of a stockholder/to examine, see INSPECTION.
registry of transfers, 382.
see INSPECTION; TRANSFERS; CONTRACT OF SUBSCRIPTION.
STOCK-BROKERS, measure of damages in actions by or against, 587.
holding stock on a margin are pledgees, 467. \
see BROKERS. ;
STOCK EXCHANGE, definition, 445,
public duties of, 675, note.
expulsion from, 504, note.
, see BROKERS. .
STOCK-YARD RATES, reduction of, 675, note.
STOCKHOLDERS, defined, 4.
who are also creditors, may begin suit to enforce subscriptions, 205, note.
as to the statutory liability, see 221.
liability on ‘* watered” stock, see “‘ WATERED” STOCK.
action against directors for negligence, 701-703,
voluntary assessment, effect as to statutory liability, 219, note.
_ discovery of their names, 204, note, 206, note.
liability by statute to corporate creditors, see LIABILITY.
may authorize an increase of stock, 285.
may enjoin upauthorized issue of preferred stock, 267.
have prior right to subscribe for new stock, 286.
lien of the corporation on their stock, see LiEn. ‘
cannot gct except in meeting assembled, 624.
may object to amendment to charter authorizing sale, lease, etc., of railroad,

as receivers, 4a,

relation towards corporation, 4a.

owning all.stock, no dissolution, 681.

rights upon dissolution, 642.

persons cannot be compelled to become, 640, note.
as judges, 4a,

as jurors, 4a, :
GENERAL. INDEX. 1057

[The references are to the sections.]

STOCKHOLDERS — continued.

ZG liability as partners by reason of irregular incorporation, 637.
right to examine the books of the company, see INSPECTION.

cannot cause dissolution, 632.' ;

meetings, see MEETINGS; ELECTIONS.

right to dissolve the corporation, see DISSOLUTION, ETC.

may prevent repeal of charter, when, 689.

not bound to investigate the truth of representations, 150.

admissions not admissible as against another stockholder, 4a,

suit, the corporation subsequently carrying it on, 682, note. :

are entitled to certificates, 10. ;

statute requiring their assent to a mortgage, 689.

proof of being such, 55.

may enjoin the corporation from paying an illegal tax, 562.

are liable for dividends received from the capital stock, 547. ‘

suits to remedy fraudulent acts of directors, majority of stockholders, etc.,
see FRAUDULENT ACTS, ETC.

may be interested in construction company, 649, note.

not liable for libel in bringing suit for frauds of directors, 645.

may dissolve the corporation, 629, 680. patent

distinct from corporation, but sometimes the corporate existence is ignored
by the courts, 6680.

majority of, selling property to themselves, 656.

and re-organization, 654-657.

owning all the stock, may issue ‘“‘ watered” bonds, 662, :

agreement to act and vote together, 503a,

make the by-laws, 700a, 708. .

not liable for promoter’s expenses and for incorporating expenses, 706.

have few functions in the corporation, 708-711.

cannot contract for the corporation, 709.

are distinct from the corporation, 709. .

owning all of the capital stock, cannot contract for the corporation, 709.

power to expel members, 710. ;

cannot remove directors, 711.

may enjoin or set aside ultra vires acts, chapter XL.

owning a majority of the stock, are not liable for acts of the corporation,
315, note. - 4

controlling one road, may purchase the control of another railroad, 315,
note.

in contempt of court, 6630.

issue of stock not essential to, 192. :

not liable for that part of the capital stock which is not subscribed, 248.

see LIABILITY.

calls made to defraud creditors will be enjoined, 113. .

municipal, release from subscription by reason of consolidation, 102.

municipality as, 99. ae oe

cannot question the advisability of calls, 118. arte .

majority of; discretion of, cannot be objected to by the minority, as to intra
vires acts, unless fraud is involved, 684.

as witnesses, 4a. ;

may insure their interest, 4a.

may purchase bonds, 820.

liability to corporate creditors, amendment to charter increasing or decreas--

ing, 497 7 .
suits against, do not prevent a sale of the corporate property, 480, note.
right of, to prevent the corporation from undertaking a new business, 681.
actions for the frauds of directors, 645.

under what conditions such suits can be brought, 646,
frauds of a majority upon the minority, 662.

of directors, see DIRECTORS. ‘ Y
actions of, against third persons for frauds against the corporation, 663, -
directors alone have power to exercise a statutory power to lease, 670.
are not parties to suits by or against the corporation, 750, 751. ;
cannot control the beginning, compromising, etc., of corporate suits, 750+
suits against third persons for wrongs to the corporation, 738,

67

i
1

1058 , GENERAL INDEX.

i
[The references are to the sections.]

STOCKHOLDERS — continued. /
suing in the interest of a.rival company, 786. '
suit to remedy corporate wrongs-is in equity, not at law, 784.
actions to remedy corporate wrongs, see SUITS. ; ;
not chargeable with notice of facts known to the corporation, 727, 730,
admissions and declarations of, 726. '
notice to, 727. : ;
service upon, in suits against the corporation, is not good, 752.
may contract with the corporation, 4a, : os
right to object to an amendment to a charter, see AMENDMENTS TO CHAR-
TERS. °
‘instead of directors, are the proper parties to accept or reject amendments
to the charter, 499.
may sue the corporation, 4a.
right to dividends, 4a.
as creditors of the corporation, 4a.
STOLEN or lost certificates of stock indorsed in blank, 368, 369, 370, 406.
owner of lost certificate of stock may obtain new certificate, 370.
stock, duty of corporation, 406. :
certificates of stock, 437.
, negotiable bonds, 687, note.
see SALES OF STOCK.
“STOP ORDER” in stock-gambling, 448.
“ STRADDLE” in stock, explained, 445, note.
STREET RAILWAYS, legislature may regulate, 675.
‘and eminent domain, 693. ‘
exclusive privileges, 676. / ‘ ;
STRICT COMPLIANCE. with formalities: prescribed by statute. See FoRMALI-
TIES. ;
‘‘ STRIKE,” as‘an excuse for not running trains, 678.

SUBPEENA DUCES TECUM in reference to corporate books, 519.

SUBSCRIBER, defined, 4.
bound to know the legal effect of his contract, 54.
who is also a creditor, may begin suit to collect subscriptions, 205, note.
as to the statutory liability, see 221. ‘
discovery of their names,: 204, note, 206, note. 7
not bound to investigate truth of representations, 150.
is not aa for expenses, etc., incurred by promoters and for incorpora-
tion, 7 : :
rights against promoters, 706.
see LIABILITY.
SUBSCRIPTION.
by parol, 52.
estoppel to deny subscription, 52.
assuming the position of stockholder, 52.
accepting the benefits of stockholdership, 52,
proof by' copies, 52, note.
in certificate of incorporation, 53.
mistake, 53.
proof of, by paying calls, 53, note 3.
lex loci contractus, 58, note 8.
presumption from stock register, 53, note 3.
accepting certificate is proof, 53, note 3.
must be payable within a reasonable time, 58, note 8.
on loose sheets of paper, 53, note 3.
acceptance by the corporation, 70, note.
as a gift, 70, note, 652, note. ;
conditional, see CONDITIONAL SUBSCRIPTION.
payable in property, when illegal, 14,
: what property may be received in payment, 15. é
such payments when a matter of favor and when a contract right, 16.
defenses thereto, see DEFENSES. ‘ ir
to overissued stock, rights of the subscriber, 298.
5 ; ,
GENERAL INDEX. 1059

[The references are to the sections.]

SUBSCRIPTION — continued.
full, of increase of stock is not necessary, 288, 289, note. :
right Or cotoratien to refuse to allow registry of transfer until subscription
is paid, 394,
who may subscribe, chapter IV, B.
action to collect, chapter IV, C.
a trust fund for creditors, 199.
by a city, county or town, see MUNICIPAL SUBSCRIPTIONS.
interest-bearing, 277.
defense of illegal directors, 110.
liability on, where there has been a transfer of the stock, see TRANSFERS.
. formalities in making, 52-54, | :
proof of, 55.
taken by commissioners, 57.
in excess of capital stock, 58.
delivered in escrow, 59. :
issue of certificate, 60.
substitution of subscribers, 61.
recovery back of money paid, 62.
corporations cannot subscribe, 63. :
commissioners may subscribe, 64,
directors may subscribe, 64.
a partner may subscribe, 64.
| married woman may subscribe, 65.
infant cannot subscribe, 66.
-agent may subscribe, 67.
taken by corporate, agent, 68.
consideration of, 69-71. ;
for stock, is one mode of issuing, 12. |
collection for the benefit of corpoyate creditors, chapter XI.
parol agreement that it shall not be enforced is no defense, 138.
by municipality, need not be actually written, 96.
is due only after a call, 105. See CALs.
payment before a call, 106.
amendment to charter authorizing commencement of business before there
is a full, 500, note. _ 4 :
assigument by the corporation before or after call, 111.
method of, chapter IV. ©
conditional, payment in property, 14.
though unpaid, does not prevent a claim to dividends, 542. :
for new stock, director taking the right.which belongs to the corporation,
653, note. :
liability of purchaser of certificate, 418.
the right to subscribe for new stock, as between life tenant and remainder-
man, 559. .
amendment. to charter transferring subscriptions to another corporation,
500, note. ; o? :
release from, by reason of amendments to charter, 502. Ys
defense that‘the prospectus misstates the character of the charter, 502, note.
may exist though no certificates of stock are issued, 192.
by insolvents, a misuser, 633, note. :
payable in property, to be returned upon dissolution, 642.
sée, also, CALLS; CONTRACT OF SUBSCRIPTION ; COLORABLE SUBSCRIPTION ;.
7 FICTITIOUS SUBSCRIPTION; CONDITIONAL SUBSCRIPTION. xa
SUBSEQUENTLY-ACQUIRED PROPERTY may be mortgaged, 689.
SUBSTANTIAL PERFORMANCE of the condition to a subscription, 86.
SUBSTITUTION of subscribers, 61. \
of stockholders before issue of stock, 61. ,
of subscriber’s liability on **‘ watered” stock, 50.
SUITS. a :
stockholders’ suits to remedy frauds, ultra vires acts, etc. '
jurisdiction of the court, 784, ;
parties plaintiff; who may bring the suit, 735. Pes
rule when the plaintiff stockholder sues in the interest of a rival com-
pany, or purchases his stock for the purpose of bringing suit, 736.

‘
, - i
1060 GENERAL INDEX.

[The references ‘are to the sections:.]

SUITS — continued. aon, :
the complainant stockholder must sue in behalf of himself and other
stockholders, 737.
parties defendant herein, 738. :
complainant’s bill must not improperly join two or more causes of action
herein, 739. . 4 an
complainant must allege that he requested the corporation to bring the
suit, and that the corporation refused or neglected to do so, 740.
when such an allegation may be omitted, 741.
miscellaneous allegations of the complainant, 742,
prayer for relief, 743. : :
property received under the act objected to must be returned upon that
act being set aside, 744. : Pos
injunction ‘restraining the corporate officers and others from doing speci-'
tied acts, 745. | ‘ “A
injunction against corporate officers acting at all, and the appointment of
a receiver, 746, :
miscellaneous remedies, 747.
the complaining stockholder controls the conduct of the suit, 748. .
no contribution among the directors, 749,
suits by or against corporations. 7 :
. the discretion of the directors in refusing to institute or to defend an ac-
tion involving corporate interests is not generally interfered with by
the courts, 750.
suits by and against the corporation, 751,
service; appearance; answer, 752.
allegation and proof of incorporation, 753.
confession of judgment, 754.
injunction, 755,
contempt and sequestration, 756.
foreign corporations may sue and be sued, 757.
service in suits against a foreign corporation, 758.
affecting sales of stock, 361, 362.
see SALES or STOCK; SaLes oF STOCK WHILE SUITS ARE PENDING AF-
FECTING THAT STOCK,
by corporation, presumed to have been authorized, 714, note.
president may commence, 716. --
who else may commence, 717-720.
by or against a corporation which is dissolved, 641, note, 643.
between corporation and stockholder, 4a.
against a corporation which is dissolved, 629, note.

SUMMONS. See SERVICE.
SUPERINTENDENT purchasing from corporation, 653,
salary of, 657. : s
admissions and declarations of, 726.
notice to, 727.
extent and limitations of his powers, 719.
secret gift to, 650, note.
SUPPRESSION OF TRUTH may be a misrepresentation, 147.
SURETY. See GUARANTY,
SURPLUS PROFITS. See Divipenps.

SURPLUS after forfeiture of stock, 188.
earnings, see DIVIDENDS,

SURRENDER of franchises by the stockholders, 629, 680.
of charter, see DIssoLUTION.
of subscription, see DEFENSES.

SUSPENDING SPECIE PAYMENTS, a misuser, 638, note.

SUSPENSION OF BUSINESS. See DissoLution; DirEcToRS; STOCKHOLDERS,
, GENERAL POWERS oF, 7
of officers, see REMOVAL.

SYNDICATE including directors, purchasing from the corporation, 658, note.
see '‘ TRUSTS.” ‘

«
GENERAL INDEX, 1061

[The references are to the sections.] \

ae

TAKING by eminent domain, See Eminent Domatn,

TAXATION of stock and corporations.

the four methods of taxing corporate interests, 561.

the first three methods of taxation, 562. f

tax on shares of stock as distinguished from the other methods, 563, ‘
tax on stockholders residing in the state creating the corporation, 564.
tax on resident stockholders in a non-resident or foreign corporation, 565.
tax on non-resident stockholders in resident or domestic corporation, 566.
double taxation, 567. :
exemptions from taxation as affecting tax on shares of stock, 568,
taxation of national bank stock, 569.
place in which shares in national bank stock may be taxed, 570.
ae es st not be greater than that imposed on other ‘“‘ moneyed capi-

al, ;

the bank may bring suit to restrain illegal tax on its stockholders, 572.

general principles, 572a.

exemptions from taxation, 572b.

taxation of foreign corporations, 572c.

of the corporation, stockhclder may prevent illegal, 750.

as between life tenant and remainder-man, 560.

sale, purchase by director, 658.

of interstate commerce, 572c.

of property of ‘‘ trusts,” 503d,

construction of words “ capital stock,” 3.

stockholder enjoining payment of, 682.

of certain joint-stock associations, 505, note.

of corporations, amendment to charter, stockholder’s right to object, 494.

exemption from, repeal of, 497.

TELEGRAPH COMPANIES, restrictions on, interfering with interstate com-

merce, 696. : Y

public duties of, 674. ;

may obtain from railroads the exclusive privilege to erect poles or string
wires, 673, note. ; wet ‘

but not the exclusive privilege to all the telegraphing business, 674, note.

limitation of liability, 674, note.

exclusive privileges, 676.

TELEPHONE companies, public duties of, 674.
reduction of rates of, B75.

TELLER, powers of, 720.

TENDER. See DEFENSES.
back of consideration, 744.
of stock on a contract, 333, 334,
to avoid forfeiture, 132.

TERMINUS, amendment to charter authorizing change of, 499, note, 500, note.

THEFT of certificates of stock, 437. 5
of negotiable bonds, 687, note.
of stock, duty of corporation, 406. ,
TIME of payment of subscription cannot be postponed indefinitely, 53, note 3.
see CALLS. : als
as a bar, see LACHES. ae
in the performance of a condition to a subscription, 87.
of calling stockholders’ meetings to order, 622. ;
of stockholders’ and directors’ meetings, see MEETINGS; DIRECTORS’ MEETINGS.-
when calls may be made payable, 116. g
of delivery of stock on a contract, 383, 334. 5
of building road, amendment to charter extending, 499, note.
TOLL-BRIDGE, no exclusive privileges, 676.
made free, 682.
1062 GENERAL INDEX.

[The references are to the sections.]

TORTS, liability of corporation for, 698. a ;
judgment toe, may be collected from unpaid subscriptions for stock, 210,
note. : Sale
judgment for, not collectible from stockholders’ statutory liability, 217. :
liability of lessor and lessee of railroad, 672. ,

TOWN asasubscriber. See MUNICIPAL SUBSCRIPTIONS,

TRACKS not repaired, a misuser, 633, note.
railroad taking up, a non-user. 634, note.

TRADE, restraint of. See “TRusTs;” MONOPOLIES.

TRAFFIC contracts, legality.of, 672.
duty of common carrier to carry on, 673.
TRAINS, duty of railroad to run, 673.
TRANSFER of stock as affecting the liability, chapter KV.
liability of the transferrer on unpaid subscription after registry, 255.
liability of the transferee on unpaid subscription after registry, 256.
knowledge that the shares are not fully paid up, how far imputable to a
transferee, 257. ,
liability on subscription after transfer but before registry, 258.
irregular and attempted transfers, 258. . ;
does the statutory liability attach when the corporate debt is contracted, or
is due or is sued upon, 209. :
transferrer’s statutory liability after transfer but before registry, 260.
the transferee’s statutory liability, 261.
liability of transferee to transferrer, 262. 4
transfers to a,‘ dummy ” or to an insolvent person in order to escape liability,
263-266. ° : + ,
of stock, who is entitled to the dividends, 541.
to increase voting pees 618. .
refused because calls have not been paid, 255, note. :
_of stock to the corporation itself, the transferrer is liable, 809, 312.
of stock after dissolution, 642. .
of stock as affected by the corporate lien for stockholder’s debts, 532.
of forged transfers of stock, 364, 367. : .
without transferring the certificate, 358.
to a ‘“‘dummy,” 421, ;
of certificates of stock by delivery without the transfer being signed, 465.
before incorporation, 61. ’
of stock without registry on the corporate books; effect of attachments or
executions issued against the transferrer, 486-490. :
for purpose of bringing suit, 737.
of certificate of stock, method, 441.
shares of stock are transferable, 331.: s
see NON-NEGOTIABILITY OF STOCK AND DANGERS INCURRED IN THE PUR- 4
CHASE OF CERTIFICATES OF STOCK; RULES FOR CORPORATIONS IN RE-
GARD TO REFUSING OR ALLOWING REGISTRIES OF TRANSFERS OF STOCK;
CoMPETENCY OF PARTIES TO Buy anp SELL Stock: Bona FIpE Pur-
CHASER OF STOCK; METHOD OF TRANSFERRING THE CERTIFICATE; :
METHOD OF REGISTERING A TRANSFER OF STOCK; CORPORATION'S as
naa AND DUTIES IN ALLOWING OR REFUSING REGISTRY; SALES OF
TOCK:
TRANSFER BOOK as evidence of right to vote, 611. .
right of a stockholder to examine, see INSPECTION.
sacral re cannot complain of fraud inducing his transferrer to subscribe,
56, note. : :
of stock, liability, see TRANSFER. ag
irresponsible, right of corporation to refuse registry of transfer to, 395.
of stock tainted with fraud in an election cannot complain, 616:
has same rights that transferrer had as to bringing suits, 736.
bound by the laches, ratification or participation of transferrer, 733.
bona fide of ‘‘ watered” stock, liability, 50.
‘right to complain, 40.
with notice, liability, 49,
see Bona Fins.

\
GENERAL INDEX. 1063

[The references are to the sections.]

TRANSFERRER of stock, liability. See TRANSFER.
TRANSPORTATION, duty of common carrier to give, 673.
see TRAFFIC ARRANGEMENTS. :
TREASURER has no implied power to contract for the corporation, 717.
various acts which he cannot do, 717.
express authority, acquiescence or ratification may validate ‘his acts, 717.
purchasing from corporation, 653. -
admissions and declarations of, 726.
notice to, 727.
cannot confess. judgment for the corporation, 754.
may sell stock owned by the corporation, 317, note.
is person to whom calls are payable, 116.
liability of, on irregularly-executed corporate contracts, 724.
TRESPASS on the case, in actions relative to stock, 575. See ACTION.
liability of directors, etc., 668b.
TRIAL by jury in stockholder’s suit to remedy corporate wrongs, 747.
TROVER, in actions relative to stock, 576. . “bees €
see ACTION. '
‘“‘TRUSTS,” definition and legality, 503a,-503b.
liability of trustee and certificate-holder, 503c,
qualifications, powers, etc., of the trustees and of certificate-holders,:503d.
car ‘‘ trusts,” 503a.
dissolution of, 503d. '
see, also, ‘* PoOLS;” MONOPOLIES.
TRUST DEED. See MortGaGeEs.
TRUST FUND, capital stock, 199. ‘See CapiraL STOCK. :
TRUSTEE of stock, liability of, 508c.
way bring a stockholder’s suit, 735.
director as, 648. \
right and duty of corporation as to registry of transfers by, 397, 399.
power to purchase stock, 322. ; ’
sale or pledge in breach of trust, 323, 324.
transferee is protected, when, 325, 326.
rights and.duties of the corporation in allowing a transfer of stock by, 327.
pledging stock in breach of trust, 474: : :
may be a director, 619. i \
of stock for the benefit of the corporation, 309.
infant as such, 66, note.
purchasing at foreclosure sale, 654.
! corporation as a, 680 :
right to vote, 612. ‘ ;
of. stock for the benefit of the corporation, his liability, 251.
sale of stock, 434. .
sale of stock in breach of trust, effect of, 822-327, 397, 399.
see MortcaGE; Directors; SALES oF Stock; LIABILITY OF TRUSTEES.
TURNPIKE, may be taken under power of eminent domain, 693.
reduction of rates of, 675, note.

U.

ULTRA VIRES ACTS AND CONTRACTS.

meaning of the term ultra vires, 664.

method of treatment of the subject, 665.

-a stockholder may object to an wltra vires act, 666.

neither the directors nor a majority of the stockholders have power to sell all
the corporate property as against the dissent of a single stockholder, 667.’

consolidations, absorptions, mergers, amalgamations, leases and sales of: rail-
roads withbut authority of charter, statute. or amendment of charter, 668.

execution cannot be levied on a franchise, 668. ;

consolidation, lease or sale under express provision in the charter itself, 669.

consolidation, sale or lease under authority of a general statute existing at
the time of incorporation, 670. ,
1064 GENERAL INDEX.

[The references are to the sections.] ,

5 |
ULTRA VIRES ACTS AND CONTRACTS — continued.
consolidation, lease or sale under an amendment to the charter or under a
general statute passed subsequent to the charter, 671.
pooling contracts and traffic arrangements; contract of railroad to carry be-
yond its line, 672.
liability for negligence in such cases, 672.
express limitation of such liability, 672.
contracts with connecting lines of steamboats, 672. *
liability of railroads in case of a lease, 672. ; :
arailroad must operate its line, and for refusal to do so. is liable to indict-
ment, mandamus, injunction or forfeiture of franchises, 678. .
public duties of railroads, gas companies, and telegraph and telephone com-
panies; discriminations; contracts against liability, 674.
the legislature may reduce railroad rates, require fences to be built and com-
pel corporations to accommodate the public and provide for the safety of
‘life and property, 675. : ‘
monopolies and exclusive privileges, 676. :
a corporation cannot be a partner in a copartnership, 677.
can one corporation guaranty the bonds or'dividends of another corporation:
giving away assets of a corporation in aid of another corporation or enter-
prise, 678. oa :
a corporation cannot be an accommodation indorser or maker of commercial
paper, 679 :
a, corporation cannot be an executor or trustee, 680. x
stockholder’s right to prevent the corporation from undertaking a new busi-
ness, 681. . ;
miscellaneous ulira vires acts; gifts and presents by the corporation; lobby-
ing; contracts contrary to public policy; various instances of ultra vires
and intra vires contracts and the right of various parties to raise that ob-
. . jection, 682. .
liability of directors, 682, note (p. 816), 6630.
injunction by the state, 665. :
as a misuser, 638, note. ©
use of the term, 683.
general rules as to, 682.
stockholder’s right to object, 644a.
no defense to subscriptions, 187.
do not render stockholders liable as partners, 234.
no ground for enjoining calls on subscriptions, 113.
penalty for, see DISSOLUTION, ETC.
condition to subscription. 138,
as distinguished from intra vires acts, 683. __
laches barring a stockholder’s action to remedy, see LACHES.
see CORPORATION, POWERS OF, ETC. *

UNAUTHORIZED subscription by agent, 67.
UNCONSTITUTIONALITY. See ConstTITUTIONALITY,
UNION DEPOTS, legislature may order, 675.

UNINCORPORATED joint-stock associations; definition, 504,
statutory joint-stock associations. 505.
may arise by implication of law, 506.
how a person becomes a member, 507.
trarisfers of stock, 507. ’
liability of members to creditors and to the, company, 508.
actions by members against officers and the company, 509.
dissolution, 510.
legality of contracts releasing members from liability, see 216,
deeds of real estate to, 504, note. ig
UNITED STATES courts’ rule as regards transfers of stock without registry, 487.
courts, see JURISDICTION. rs
UNPAID SUBSCRIPTIONS, liability of purchaser of certificate, 418,
USAGES of a broker, 458, 462, See BROKERS.
as to time, place, etc., of corporate meetings, 594,
as an acceptance of an amendment to a charter, 499.

.

.
GENERAL. INDEX. 1065

[The references are to the sections.]

USURY in loans by banks and corporations, 690. ‘
as affecting a pledge of stock, 464, note, 465. -
in brokers’ transactions, 451, note. :
in loans by corporations, 690.

a misuser, 633, note.

USURPATION of officers. See DIRECTORS,
of franchises, see DISSOLUTION, ETC.

Vv,

VACANCIES in board of directors, reducing the number below a quorum, 592,
note, a

VALIDITY of corporate acts. See Corporations; ULTRA VIRES ACTS.
VALUE. See Measure or DAMAGES.

VARYING the route, amendment to charter authorizing, 499, note, 500, note.
subscription by oral evidence, 135-138.

VENDOR of stock, performance of contract, 333, 334.
of overissued stock, liability of, 296.
see TRANSFER.

VERIFICATION of pleadings by a corporation, 752.

VISITATION power of the state, 635, note.
see INJUNCTION. ‘ ;

VOID ahd voidable subscriptions, for fraud, 151.

VOLUNTARY assessment of stockholders by themselves; effect on statutory
liability, 219, note.
assessments by stockholders of themselves, no debt is thereby incurred by the
corporation, 241, note.

, VOTE, revocation after it is cast in an election on municipal aid, 95, note.
of people on municipal subscription, 95.

VOTING, cails made to disqualify persons from, will be enjoined, 114, note.
pledgee cannot vote the stock, 468. ~
preferred stockholders may vote, 269.
‘director owning a majority or a large’*number of shares, 652,
combination to vote together, 503a.
regulated by by-laws, 700a, note.
see DIRECTORS; ELECTIONS.

W.

WAGER sales of stock. See GAMBLING SALES OF STOCK.

WAIVER of defense that full capital stock is not subscribed, 181.
* of a conversion of stock held in pledge, 475.
of defenses to subscriptions, 198. ,
of a conditional subscription, 88. =~
of lien by a corporation, 531.
by corporate creditors of stockholder’s statutory liability, 216,
of stockholder’s right to complain of ‘‘ watered” stock, 39, 40.
of forfeiture of franchises, 636.
of notice of sale of stock held in pledge, for non-payment, 459.
of notice of stockholders’ meeting, 599.
in regard to calls, 120.
in actions to enforce payment of subscriptions, 198.
see. also, ACQUIESCENCE; LACHES,

WAREHOUSE RATES, reduction of, 675, note.
WARRANTY OF CERTIFICATE OF STOCK. See SALus oF Sock.
1066 ; GENERAL INDEX.

[The references are to the sections.]

“ WATERED.”
Stock, definition, 9.
stock, objects of i tee ai.
methods cf issuing,
- dicta as to its eee 28,
it is not void, 25.
constitutional and statutory provisions against it, 26-28,
it may be voidable, 29.
issue for cash, 30-82.
issue for property, 83-35.
right of state to complain, 37.
‘stock, right of corporation to complain, 38.
right ‘of participants to complain, 89.. ° i
right of transferees to complain, 40.
right of dissenting stockholders to complain, 41.
right of corporate creditors to complain, 42-44.
liability of the corporation, 45.
liability of person receiving the stock, 46, 47.
liability of the officer, 48.
liability of transferrers, 45-50.
stock dividends, 51.
bonds may be issued by one stockholder owning all the stock, 682.
bonds, legality, 51a.
stock, as a cause of forfeiture, 633, note, 635, note.

WATER-WORKS, exclusive privileges, 676.
companies, reduction of rates of, 675, note.

WAY, right of. See Eminent Domain.

WHO MAY BUY AND SELL STOCK. See Comperency or PARTIES To Buy
AND SELL STOCK.

WIFE. See MarrRieD Woman.
subscription for stock, 65. ;

WILL. See Legacy; Lire Estate.
WINDING UP. See DissoLUTION.
WITHDRAWAL. See DEFENSES.
WITNESS, stockholder asa, 4a.
‘WOMEN, as subscribers, 65.

WRITING, subscriptions without, see Suseemnas: CONTRACT OF SUBSORIP.
TION. ®

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