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Cornell University Library 
 KF1414.M831886 
 
 V.I 
 
 A treatise on the law of private corpora 
 
 3 1924 019 224 603 
 
A TREATISE 
 
 ON THE LAW 
 
 OF 
 
 PEIYATE CORPORATIONS. 
 
 BY 
 
 VICTOR MORAWETZ. 
 
 <f^ 
 
 SECOND EDITION. -^ 
 
 / 
 
 Vol. I. 
 
 BOSTON: 
 LITTLE, BROWN, AND COMPANY. 
 
 1886. 
 
Copyright, 1886, 
 By Victor Moeawetz. 
 
 Uhiveksity Pkess: 
 John Wilson and Son, Cambkidge. 
 
PREFACE. 
 
 The first edition of this work was prepared according 
 to a plan differing, in some , respects, from that fol- 
 lowed in any previous treatise on the same subject. 
 The author was of the opinion, that the law relating 
 to private business corporations could not be clearly 
 understood, unless the fact were recognized that such 
 a corporation is really an association formed by the 
 agreement of its shareholders, and that the existence 
 of a corporation as an entity, independently of its 
 members^ is a fiction ; and that, while the fiction of a 
 corporate entity has important uses and cannot be dis- 
 pensed with, it is nevertheless essential to bear in mind 
 distinctly that the rights and duties of an incorporated 
 association are, in reality, the rights and duties of the 
 persons who compose it, and not of an imaginary be- 
 ing. An attempt was therefore made to discuss and 
 state the entire body of the law peculiar to private 
 business corporations from this point of view. 
 
 The same general plan has been followed in this 
 edition, and the author has not found it necessary to 
 
IV PBEFACB. 
 
 change his views upon any important question. The 
 order of the chapters has, however, been changed, 
 partly for the sake of convenience, and partly because 
 it was conceived that the present arrangement would 
 be an improvement upon that adopted in the first 
 edition. The numerous additions to the work would 
 in any event have made a change in the section num- 
 bers indispensable. 
 
 The views of the author in respect to the proper 
 treatment of the subject generally considered under 
 the head of " Ultra Vires," have been confirmed by 
 further reflection. The expression uUra vires has not 
 been used in the text, partly because it is too vague 
 to serve any useful purpose, and partly because the 
 variety of meanings attributed to it lead to inevitable 
 confusion of thought. In the chapter entitled " The 
 Validity of Corporate Acts," an attempt has been made 
 to distinguish the different principles of law upon 
 which the legal effect of corporate acts depends, and 
 to deduce from the authorities a series of rules by 
 which the validity of transactions entered into by cor- 
 porations in violation of their charters can be deter- 
 mined. The question what transactions corporations 
 are authorized by their charters to enter into is con- 
 sidered in a separate chapter, entitled "The Construc- 
 tion of Charters." 
 
 A large amount of labor has been spent in the prep- 
 aration of this edition. The entire work has been 
 revised, much new matter has been added, and the 
 
PEEFACE. V 
 
 number of citations has been nearly doubled. The 
 treatise has, however, been confined strictly to the 
 law peculiar to private corporations, and collateral 
 branches of the law have been touched upon only so 
 far as is essential to a clear understanding of the main 
 subject. In conclusion, the author desires to ask the 
 indulgence of the profession for such imperfections as 
 have necessarily resulted from the preparation of a 
 work of this character amid the distractions of active 
 practice. 
 
 New York, April, 1886. 
 
TABLE OF CONTENTS. 
 
 VOLUME I. 
 
 Page 
 
 Table of Cases Cited xiii 
 
 CHAPTER I. 
 
 The Formation of a Cokporation. 
 
 Section 
 
 Definition of a Corporation 1 
 
 The Formation of a Corporation 8 
 
 CHAPTER II. 
 
 The Contract of Membership. 
 
 Part I. How this Contract may be created. — Subscriptions 
 
 for Shares 43 
 
 II. Subscriptions upon Conditions Precedent and upon 
 
 Special Terms 78 
 
 III. Subscriptions obtained by Fraud 94 
 
 IV. Rescission of the Contract of Membership .... 109 
 
 CHAPTER III. 
 
 Liability op Shareholders to contribute Capital . . . 128 
 
VUl TABLE OF CONTENTS. 
 
 CHAPTER IV. 
 
 Seotion 
 
 Teaitsfer or Shaees 159 
 
 CHAPTER V. 
 
 Rights and Remedies op Shakeholdees. 
 
 Part I. The Relation between a Corporation and its Share- 
 holders 227 
 
 II. Rights and Remedies of Shareholders 235 
 
 III. The Mutual Rights and Obligations of Share- 
 holders with Respect to the Contribution of 
 Capital 302 
 
 CHAPTER VI. 
 
 The Construction of Charters. 
 
 Part I. General Rules of Construction applicable to all Cor- 
 porations. — What Acts are authorized . . . . 316 
 II. What Dealings are authorized, — How Corporations 
 
 may carry on Business 362 
 
 III. The Distribution of Profits and Payment of Divi- 
 dends 435 
 
 CHAPTER VII. 
 
 The Management of Corporations. 
 
 Part I. Meetings of Shareholders. — The Powers of the Ma- 
 jority " 474 
 
 II. The towers and Duties of the Agents of a Cor- 
 poration 503 
 
TABLE OF CONTENTS. IX 
 
 VOLUME II. 
 
 CHAPTEE VIII. 
 
 The Validity of Coepohate Acts. 
 
 Section 
 
 Pabt I. The Responsibilitj' of a Corporation for the Acts of 
 
 its Agents 577 
 
 II. The Responsibility of a Corporation for the Acts of 
 
 the Majority 641 
 
 III. The Legal Effect of Common Law and Statutory 
 
 Prohibitions.— General Principles 648 
 
 A. The Effect of Common Law and Statutory Rules . . . 655 
 
 B. Specific Performance of an unauthorized Corporate Act 
 
 cannot be enforced 681 
 
 C. Unauthorized Contracts of a Corporation are Voidable 
 
 while unperformed 685 
 
 D. The Rights of Innocent Parties 686 
 
 E. The Validity of Contracts which have been executed on 
 
 either Side : 689 
 
 F. The Validity of Transfers of Property 707 
 
 G. Obligations resulting from the Performance of Void Con- 
 
 tracts . 714 
 
 H. The Liability of a Corporation for Torts 725 
 
 CHAPTER IX. 
 
 The Legal Consequences of the Formation op a Cor- 
 poration without Authority of Law 735 
 
X TABLE OF CONTENTS. 
 
 CHAPTER X. 
 
 The Eights of Creditors. 
 
 Section 
 
 Part I. The Rights of Creditors of a Corporation with Re- 
 spect to its Capital 779 
 
 II. The Rights of Creditors against Shareholders with 
 
 Respect to the Company's Capital 818 
 
 III. Rights of Creditors against Shareholders under 
 
 special Statutory Provisions 869 
 
 IV. Rights of Creditors against Directors under special 
 
 Statutory Provisions 906 
 
 CHAPTER XI. 
 Franchises 922 
 
 CHAPTER XII. 
 Consolidation of Corporations 939 
 
 CHAPTER XIII. 
 Foreign Corporations 958 
 
 CHAPTER XrV. 
 
 Loss of the Corporate Franchises, and Dissolution of 
 Corporations. 
 
 Dissolution of Corporations 1002 
 
 Jurisdiction in Equity over Corporations 1039 
 
TABLE OP CONTENTS. xi 
 
 CHAPTER XV. 
 
 Legislative Control over Private Corporations. 
 
 Section 
 
 Part I. The Constitutionalitj' of Legislation affecting Pri- 
 vate Corporations 1044 
 
 II. The Effect of a Reservation of Power to repeal or 
 
 alter a Charter 1053 
 
 CHAPTER XVL 
 
 Duties op Corporations which have received State Aid 1114 
 
 Fasx 
 
 Index 1103 
 
TABLE OF CASES. 
 
 THE REFERENCES ARE TO PAGES. 
 
 A. 
 
 Page 
 ATjbot V. American Hard Rubber 
 
 Co. 392, 480, 484, 487 
 
 Abbott V. Aspinwall 871 
 
 V. Baltimore, &c. Packet Co. 375 
 
 V. Merriam 239 
 
 V. Omaha Smelting, &c. Co. 28, 717 
 
 Abeles v. Cochran 111, 542 
 
 Aberdeen Ry. Co. v. Blakie 484, 487, 
 
 489, 490, 494 
 
 Accommodation Loan & S. F. Ass. 
 
 V. Stonemetz 475 
 
 Aekerman v. Halsey 53H 
 
 Aekerson v. Erie Ry. Co. 700 
 
 Acres v. Moyne 781 
 
 Adams's Case 70 
 
 Adderley v. Dixon 214 
 
 V. Storm 824 
 
 Addington v. Allen 541 
 
 Addison v, Lewis 494 
 
 Addison's Case 824 
 
 Adkins v. Thornton 854, 855 
 
 Adler v. Milwaukee, &c. Brick Co. 297, 
 
 539, 792, 833, 836 
 
 Adley v. Reeves 467 
 
 V. Whitestable County 263, 464, 
 
 465 
 
 Adriance v. Roome 561 
 
 Mma Ins. Co., Re 814 
 
 V. Harvey 631 
 
 J<;tna Nat. Bank v. Charter Oak L. 
 
 Ins. Co. 400 
 
 Agate V. Sands 866 
 
 Agricultural Branch R. R. Co. v. 
 
 Winchester 120, 380 
 
 Agriculturist Cattle Ins. Co. v. Fitz- 
 gerald 116 
 Alabama & Fla. R. R. Co. v. Row- 
 ley 148 
 Alabama & Tenn. R. R. Co. v. Kidd B05 
 Alabama Certificates 5, 1054 
 Alabama Gold L. Ins. Co. v. Central 
 
 Agr. & Mech. Ass. 327 
 
 Albert v. Savings Bank 148 
 
 Page 
 Albion Steel, &c. Co. v. Martin 278, 520 
 Albright v. Lafayette, &c. Ass. 32 
 
 Aldebert v. Kearns 766 
 
 Aldrich v. Press Printing Co. 181, 182, 
 
 666 
 
 Alexander v. Cauldwell 373, 475, 697 
 
 V. Central R. R. Co. 550, 559 
 
 V. Horner 336 
 
 V. Relfe 764, 840 
 
 V. ToUeston Club 680, 719 
 
 Alexandria Canal Co. w. Swann 233, 342 
 
 Alford V. Miller 484 
 
 Allegheny v. Ohio, &c. R. R. Co. 342 
 
 Allegheny City ?;. McClurkan 308 
 
 Allegheny County v. Cleveland, &c. 
 
 R. R. Co. 060 
 
 Allen V. Citizens' Steam Nav. Co. 601, 
 
 688 
 
 c;. Curtis 232, 588, 604, 605 
 
 •J. First Nat. Bank of Xenia 367, 
 
 639 
 
 V. Freedman's Savings & Trust 
 
 Co. 663, 669 
 
 V. Frumet Mining, &c. Co. 912 
 
 V. Graves 827 
 
 V. Jay 1047 
 
 V. Life Ass. of America 787 
 
 V. McKean 1061 
 
 V. Montgomery R. R. Co. 124, 159, 
 
 332, 772, 792, 828, 829 
 
 u. New Jersey S. R. R. Co. 234, 972 
 
 V. Sewall 854, 871 
 
 V. "Walsh 843, 864, 870 
 
 V. Woonsocket Co. 399, 665 
 
 AUer V. Town of Cameron 720 
 
 AUibone k. Hager 793 
 
 AUin's Case 169 
 
 Allman v. Havana, &e. R. R. Co. 140, 
 
 387 
 AUoways Creek Township v. String 341 
 All Saints Church v. Lovett 37", 340 
 Alward ;;. Holmes 564 
 
 Ambergate, N. & B. Ry. Co. v. 
 Mitchell 147, 199 
 
XIV 
 
 TABLE OF CASES. 
 
 Ambergate, N. & B. Ey. Co. v. 
 
 Norcliffe 147 
 
 Ambrose Lake, &c. Mg. Co., Re 275, 279 
 American Asylum v. Phoenix Bank 210, 
 
 215 
 American Bible Soc. v. Marshall 817, 
 
 921 
 V. Noble 316 
 
 American Button Hole, &c. Co. v. 
 
 Moore 629 
 
 American Coal Co. v. Consolidation 
 
 Coal Co. 1058 
 
 American Colonization Soc. v. Gar- 
 
 trell 920 
 
 American Dock &c. Co. v. Trustees 1088 
 
 American Express Co. v. Johnson 941 
 
 V. Patterson 401, 697 
 
 American File Co. v. Garrett 160 
 
 American Ins. Co. v, Butler 6-32 
 
 V. Oakley 502 
 
 V. Wellman 632 
 
 American L. Ins. Co. v. Dobbin 39 
 
 American Prim. Soc. v. Pilling 455 
 
 American Rapid Tel. Co. v. Conn. 
 
 Telephone Co. 1092 
 
 American Ey. Frog Co. v. Haven 452 
 American Union Tel. Co. o. Union 
 
 Pac. Ey. Co. 695, 1092 
 
 V. Western Union Tel. Co. 935 
 
 Ameriscoggin Bridge Co. v. Bragg 24 
 
 Ames V. Kansas 947, 987 
 
 Amesbury v. Bowditch Mut. Ins. 
 
 Co. 465, 467 
 
 Amiable Nancy, The 699 
 
 Anacosta Tribe v. Murbach 465, 467 
 
 Anderson v. Longden 501 
 
 V. New Castle, &c. E. E. Co. 292 
 
 V. Speers 880 
 
 AndoTer & M. Turnp. Co. v. Gould 133, 
 
 134, 136 
 
 Andrew «. Murray 882 
 
 Andrewes v. Garstin 46 
 
 Andrews v. Callender 864 
 
 V. Hart 402 
 
 V. Mich. Central E. E. Co. 939 
 
 V. Ohio & Miss. E. E. Co. 100, 145, 
 
 158 
 
 Androscoggin & K. E. E. Co. v. 
 
 Androscoggin R. R. Co. 363 
 
 Androscoggin E. E. Co. v. Auburn 
 
 Bank 334 
 
 Androscoggin Water Power Co. v. 
 
 Bethel Steam Mill Co. 702, 1052 
 
 Angerhoefer v. Bradstreet Co. 943 
 
 An^lesea Colliery Co., Re 821 
 
 Anglo-Australian, &c. Co. v. British 
 
 Prov., &c. Soc. 601 
 
 Anglo-California Bank v. Grangers' 
 
 Bank 199 
 
 V. Mahoney Mg. Co. 594, 602, 607 
 Annapolis & Elk Eidge E. E. Co. 
 V. Commissioners 1016 
 
 Anonymous 339 
 
 Anstruther v. East of Fife Ey. Co. 1090 
 Antoni v. Greenhow 1023 
 
 Archer v. Rose 853 
 
 Arenz v. Weir 843 
 
 Argenti v. San Francisco 688 
 
 Arlington v. Pierce 593 
 
 Arms ti. Conant 461, 500 
 
 Armstrong v. Church Soc. 246 
 
 Arnold D. Mayor of Poole 321 
 
 V. Euggles 219 
 
 V. Suffolk Bank 200, 212, 213 
 
 Arnot V. Erie Ey. Co. 363, 400, 651, 664 
 V. Pittston, &c. Coal Co. 1095 
 
 Arthur v. Griswold 541 
 
 Ash V. Guie 717 
 
 Ashbury Ey. Carriage, &c. Co. v. 
 
 Eiche 374, 586, 628, 674 
 
 Ashe V. Johnson 214 
 
 Asher v. Sutton 505 
 
 Asheville Div. No. 15 v. Aston 314, 
 340, 966 
 Ashhurst v. Mason 535, 882 
 
 Ashhurst's Appeal 491 
 
 Ashley's Case 106 
 
 Ashmore v. Penn. Steam Towing, 
 
 &c. Co. 509 
 
 Ashtabula & N. L. E. E. Co. v. 
 
 Smith 68, 89, 461 
 
 Ashton V. Burbank 119, 124, 374, 376 
 
 V. Langdale 218 
 
 Ashuelot Boot, &c. Co. v. Hoit 47, 50, 
 
 403 
 Ashuelot E. E. Co. v. Elliot 1067 
 
 Ashworth v. Bristol, &c. Ey. Co. 796 
 Aspinwall v. County of Daviess 907, 
 
 1044 
 
 V. Meyer 448 
 
 V. Ohio & Miss. E. E. Co. 119, 898, 
 
 922, 958 
 
 V. Sacchi 710, 711 
 
 V. Torrance 297 
 
 Atchafalaya Bank v. Dawson 967, 986 
 
 Atchison, Col. & Pac. E. R. Co. !>. 
 
 Philhps County 121 
 
 Atchison, Top. & S. F. E. E. Co. v. 
 
 Denver, &c. E. E. Co. 1078, 1079, 
 
 1080, 1081 
 
 Athenaeum L. Ass. Soc, Re 577, 578 
 
 V. Pooley 568, 589, 684 
 
 Atherton v. Sugar Creek, &c. 
 
 Turnp. Co. 737 
 
 Athol & Enfield E. E. Co. v. Pres- 
 
 cott 127 
 
 Athol Music Hall Co. v. Carey 47 
 
 Atkins V. Albree 442 
 
 Atkinson v. Atkinson 173, 180 
 
 V. Marietta, &c. E. E. Co. 12, 736, 
 
 885, 889, 890 
 
 Atlanta v. Gate City Gas L. Co. 24, 736 
 
 Atlanta & Air Line R. E. Co. v. 
 
 State 897 
 
TABLE OP CASES. 
 
 XV 
 
 Atlanta & West Pt. E. E. Co. v. 
 
 Hodnett 98 
 
 V. Speer 1100 
 
 Atlantic & Great Western E. E. 
 
 Co. a. Dunn 699 
 
 Atlantic & Gulf B. E. Co. v. Georgia 
 
 894, 897, 899, 902, 903, 1068 
 Atlantic & Ohio K. E. Co. v. SuUi- 
 
 vant 735 
 
 Atlantic & Ohio Tel. Co. v. Com- 
 monwealth 290 
 Atlantic & Pac. E. E. Co. v. St. 
 
 Louis 351, 735 
 
 Atlantic & Pac. Tel. Co. v. Com- 
 monwealth 290 
 V. Union Pac. Ry. Co. 695 
 Atlantic City Water Works Co. v. 
 
 Atlantic City 1018 
 
 Atlantic Cotton Mills v. Abbott 132, 133 
 Atlantic Delaine Co. v. Mason 135j 456 
 Atlantic Mut. F. Ins. Co. v. San- 
 ders ' 455 
 Atlantic State Bank v. Savery 368 
 Atlas Bank v. Nahant Bank 994 
 Atlas Nat. Bank v. Gardner Co. 474, 
 475, 516, 606 
 Atty.-Gen., Opinion of 1054 
 V. Atlantic Mut. L. Ins. Co. 982 
 V. Bank of Michigan 997 
 V. Bank of Niagara 995, 997 
 V. Beverly 986 
 V. Boston & Maine R. E. Co. 959 
 V. Boston Wharf Co. 1000 
 V. Bowyer 316 
 V. Christ's Hospital 986 
 V. Cockermouth Local Board 1000 
 V. Cohoes Co. 1000 
 V. Delaware, &c. E. E. Co. 986 
 V. Eastlake 986 
 V. Great Eastern Ey. Co. 301, 348, 
 350, 355, 365, 400, 997, 1000 
 V. Great Northern Ey. Co. 302, 357, 
 374, 997, 1000 
 V. Guardian Mut. L. Ins. Co. 840, 
 939 
 V. Hanchett 29 
 V. Hudson Eiver E. E. Co. 1000 
 V. Jamaica Pond Aq. Co. 1000 
 V. Lady Downing 990 
 V. Leeds Corp. ' 1000 
 V. Leicester 999 
 V. Life & E. Ins. Co. 306, 335 
 V. Mayor, &c. of Batley 399 
 V. Mayor, &c. of Eye 316, 340 
 V. Mayor of Southampton 1000 
 V. McArthur 16 
 u. Middleton 468 
 b. Mid Kent Ey. Co. 997, 1000, 
 1098 
 V. North America Life Ins. 
 
 Co. 15, 784, 1040 
 
 V. Oakland County Bank 345 
 
 Atty.-Gen. v. Petersburgh & Eoan- 
 
 oke E. E. Co. 959, 977, 979, 986 
 V. Eailroad Companies 997, 998, 
 1000, 1017, 1059 
 V. Skinner's Co. 316 
 
 V. State Bank 426 
 
 V. Stevens 808 
 
 V. Toronto Street Ey. Co. 1000 
 V. Tudor Ice Co. 997, 999, 1000 
 V. Utica Ins. Co. 995, 997 
 
 V. West Hartlepool Comm'rs 999 
 Atwood V. E. I. Agr. Bank 855 
 
 Atwool V. Merry weather 241, 243 
 
 Auerbaoh v. Le Seueur Mill Co. 565 
 Augusta Bank v. Hamblet 501 
 
 Augusta Mfg. Co. v. Vertrees 744 
 
 Aull V. Colket 188 
 
 Anltman's Appeal 847, 863 
 
 Aurora, &c. E. E. Co. v. Lawrence- 
 burg 735, 737 
 V. Miller 735 
 Aurora Agr., &o. Soc. v. Paddock 319, 
 332, 593 
 Austin V. Guardians of Bethnal 
 
 Green 321 
 
 Austin & N. C. E. E. Co. v. GiUas- 
 
 pie 214 
 
 Australian Aux. Steam Clipper 
 
 Co. V. Mounsey 327, 332 
 
 Australian Mail Nav. Co. v. Mar- 
 
 zetti 321 
 
 Ayers v. South Australian Bank- 
 ing Co. 640, 645, 676 
 Aylesbury Ey. Co. v. Mount 159, 161 
 V. Thompson 161 
 Ayray's Case 339 
 Ayre's Case 102, 814 
 Ayres v. Methodist, &o. Church 1029 
 
 B. 
 
 Babbitt v. Savoy 406 
 
 Babcock v. New Jersey Stock 
 
 Yards Co. 808 
 
 Bache v. Nashville, &c. Soc. 229, 975 
 Bachman, Re 197, 830 
 
 Backus V. Lebanon 1050 
 
 Bacon v. Mississippi Ins. Co. 571 
 
 V. Robertson 990, 991 
 
 Badger v. American, &c. Ins. Co. 553 
 V. Bank of Cumberland 321, 506 
 Bagnall v. Carlton 278, 522 
 
 Bagshaw v. Eastern Union Ey. 
 
 Co. 241, 247, 261, ,397 
 
 Bahia & San F. Ey. Co., Re 205 
 
 Bailey v. Banker 859 
 
 V. Birkenhead, &c. Ey. Co. 246, 265 
 
 V. Citizens' Gas Liglit Co. 421 
 
 V. Ford 268, 391 
 
 V. Hannibal &. St. J. E. E. Co. 265, 
 
 428 
 
XVI 
 
 TABLE OF CASES. 
 
 Bailey v. HoUister 106 
 
 V. Philadelphia, W., &c. E. E. 
 
 Co. 1023 
 
 V. Power St, Church 237 
 
 B. Sawyer 854 
 
 0. Trustees of Lincoln Acad- 
 emy 38 
 Bailey's Appeal 225, 246 
 Bailey's Case 70 
 Bain v. Globe Ins. Co. 941 
 !J. Wliitehaven, &c. Ry. Co. 78 
 Baird v. Bank of Washington 369, 604, 
 
 643 
 
 Baker v. Backus 243, 267, 974, 983 
 
 V. Clarke Institution 316, 928 
 
 V.Marshall 210 
 
 V. Neff 721, 722 
 
 V. Sutton 218 
 
 V. Wascon 187, 204 
 
 V. Windham 406 
 
 V. Woolston 469 
 
 Baker's Case 685 
 
 Bakersfield Town Hall Ass. v. 
 
 Chester ' 719 
 
 Balch V. Hallet 436 
 
 Baldwin v. Canfield 187, 195, 219, 227, 
 
 247, 368, 498, 970 
 
 V. Commonwealth 214 
 
 V. Trustees 1052 
 
 V. Williams 220 
 
 Bale V. Cleland 543 
 
 Balfour v. Ernest 562, 671 
 
 Ballston Spa Bank v. Marine Bank 594 
 
 Baltimore v. Pittsburgh, &c. R. R. 
 
 Co. 1072, 1073 
 
 V. Eeynolds 598 
 
 Baltimore & H. de G. Tump. Co. 
 
 V. Union R. R. Co. 359 
 
 Baltimore & Ohio R. R. Co. u. Gal- 
 
 lahue's Admr. 960 
 
 V. Glenn 919, 920 
 
 V. Harris 944, 954, 957, 960, 961 
 V. Koontz 944 
 
 !>. Marshall County 959 
 
 V. Musselman 912 
 
 u. Noell 961 
 
 V. Wightman's Admr. 960 
 
 Baltimore & Phila. Steamboat Co. 
 
 V. Brown 361 
 
 V. McCutcheon 564 
 
 Baltimore & Pot. R. R. Co. v. Fifth 
 
 Bap. Church 2, 230, 696, 698 
 
 Baltimore & Susq. R. R. Co. n. 
 
 Musselman 912 
 
 V. Nesbit 1015, 1643, 1044 
 
 Baltimore City Pass. Ey. Co. v. 
 
 Sewall 174, 212 
 
 Banet v. Alton & S. R. R. Co. 146, 
 
 238, 381 
 
 Bangor & P. Slate, &c. Co., Re 430, 432 
 
 Bangor, 0. & M. R. R. Co. v. 
 
 Smith 24, 40, 546, 1071 
 
 Bangor House Proprietary v. 
 
 Hinckley 135 
 
 Bank v. Flour Co. 488, 499, 578 
 
 V. Lanier 183, 184, 198, 867, 465 
 
 Bank of Alexandria v. Patton 988 
 
 Bank of America v. McNeil 202, 212, 
 
 518 
 Bank of Attica v. Manufacturers', 
 
 &c. Bank 166, 198 
 
 Bank of Augusta v. Earle 344, 345, 369, 
 
 665, 917, 918, 919, 920, 921, 922, 923, 
 
 926, 936 
 
 Bank of Australasia v. Breillat 327, 366, 
 
 685, 883 
 
 V. Mas 858 
 
 Bank of Bethel 'u. Pahquioque Bank 971 
 
 Bank of British Columbia v. Page 629 
 
 Bank of Charlotte v. Charlotte 119, 385, 
 
 1060 
 
 Bank of Chenango v. Brown 11, 17 
 
 Bank of Chillicothe v. Chillicothe 327 
 
 V. Dodge 559, 560, 637 
 
 V. Swayne 636 
 
 Bank of Columbia v. Okely 1044 
 
 V. Patterson 320, 598 
 
 Bank of Columbus v. Bruce 221 
 
 Bank of Commerce v. Rutland, &c. 
 
 R. R. Co. 941 
 
 Bank of Commerce's Appeal 172 
 
 Bank of England, Ex parte 342 
 
 V. Davis 423 
 
 Bank of GallipoUs v. Trimble 966, 1039 
 
 Bank of Genesee v. Patchin Bank 400, 
 
 563, 654 
 
 Bank of Havana v. Magee 4, 739 
 
 Bank of Hindustan v. Alison 734 
 
 Bank of Holly Springs v, Pinson 197, 
 
 198, 199, 467 
 
 Bank of Louisiana v. Wilson 988 
 
 Bank of Louisville v. Young 637 
 
 Bank of Manchester i\ Allen 24 
 
 Bank of Marietta v. Pindall 920, 928 
 
 Bank of Metropolis v. Gutschlick 323 
 
 Bank of Michigan v. Niles 312, 649 
 
 Bank of Middlebury v. Edgerton 477, 
 
 890, 894 
 
 V. Rutland, &c. R. R. Co. 823, 498, 
 
 584 
 
 Bank of Mississippi v. Duncan 990 
 
 V. Wrenn 965, 988 
 
 Bank of Mut. Redemption v. Hill 764 
 
 Bank of Natchez v. Chambers 989, 991, 
 
 994 
 Bank of New Milford v. New Mil- 
 ford 512 
 Bank of North America •,. Chi- 
 cago, &c. R. R. Co. 1053 
 Bank of Northern Liberties v. Cres- 
 
 son 642 
 
 Bank of Pennsylvania v. Reed 602 
 
 Bank of Pittsburgh v. Whitehead 229, 
 
 611 
 
TABLE OF CASES. 
 
 XVll 
 
 Bank of Poughkeepsie v. Ibbotson 
 
 866, 867, 871, 972 
 
 Bank of Salem v. Caldwell 98y 
 
 Bank of So. Car. t. Gibbs 36 
 
 V. Hammond 664 
 
 Bank of St. Charles v. De Bernales 39, 
 
 920 
 Bank of St. Mary's u. St. John 539, 
 760, 764, 765, 833 
 Bank of Switzerland v. Bank of 
 
 Turkey 391, 392, 480 
 
 Bank of Toledo v. International 
 
 Bank 41, 724 
 
 Bank of U. S. v. Commonwealth 975 
 w. Dallam 867 
 
 V. Dandridge 23, 40, 320, 321, 596, 
 604, 643 
 u. Davis 511, 512 
 
 V. Deveaux 1, 936, 1054 
 
 V. Dunn 508 
 
 V. Lyman 24 
 
 V. Owens 626, 635 
 
 V. Planters' Bank 5, 36 
 
 Bank of Utica v. Hillard 446 
 
 V. Magher 39 
 
 Bank of Virginia v. Adams 833 
 
 V. Craig 511, 512 
 
 Bank of Washtenaw v. Montgom- 
 ery 920, 922 
 Bank of Wilmington v. WoUaston 470 
 Bank of Wooster v. Sterens 838 
 Bank Commissioners v. Bank of 
 
 Brest 480, 481 
 
 V. Bank of Buffalo 501 
 
 Banks, The, v. Poiteaux 369, 646, 649, 
 
 680 
 Banty v. Buckles 819 
 
 Baptist Cliurdi v. Mulford 320 
 
 Barbour County v. Horn 700 
 
 Barclay v. Quicksilver Mg. Co. 761 
 V. Talman 919, 971 
 
 V. Wainewright 435, 441 
 
 Bard v. Poole 345, 920, 922, 923, 928 
 Bardstown, &c. R. R. Co. v. Met- 
 calfe 332, 890 
 Bardwell v. Sheffield Water Works 
 
 Co. 413 
 
 Bargate v. Shortridge 217, 602, 644, 713 
 Baring v. Dix 268, 391 
 
 Barings v. Dabney 770, 787, 992 
 
 Barker, Re 457, 458, 459 
 
 w. Mechanics' Ins. Co. 335 
 
 Barnard v. Vermont, &c. R. R. Co. 
 
 418, 428, 430 
 
 Barnes v. Brown 176, 189, 404 
 
 V. Ontario Bank 326, 335, 563 
 
 V. Trenton Gas L. Co. 494, 514 
 
 Barnett v. Chicago & L. H. R. R. 
 
 Co. 940, 942 
 
 Barnett's Case 834 
 
 Barney v. Daniels 632 
 
 Baron de Beville's Case 796 
 
 Vol. 1. — 6 
 
 Barr v. Bartram, &o. Mfg. Co. 774 
 
 V. King 939 
 
 t,. JSf. Y., &c. R. R. Co. 451 
 
 Barren Creek Ditching Co. v. Beck 739, 
 
 969 
 
 Barrett v. Mead 41, 724 
 
 V. Schuyler County Ct. 325 
 
 Barrett's Case 338 
 
 Barrington v. Mississippi Cent. 
 
 R. R. Co. 72 
 
 Barrow v. Nashville, &c. Tump. Co. 680 
 
 Barry v. Merchants' Exchange Co. 304, 
 
 313, 318, 319, 326, 332, 335, 412, 420, 
 
 750 
 Barstow v. Savage 187 
 
 Bartholomew v. Bentley 474 
 
 Bartlett v. Drew 298, 760, 800, 837 
 V. Pentland 863 
 
 V. Wilbur 719 
 
 Bartlette v. Norwich, &c. R. R. Co. 363, 
 
 366 
 
 Barton, Ex parte 122 
 
 V. ]?ort Jackson Plank R. Co. 113, 
 
 586, 640 
 
 Barton's Trust • 425, 438, 441 
 
 Barwick v. Eng. Joint-Stock Bank 673, 
 
 697 
 Bason v. Mining Co. 319, 324, 554 
 
 Bass V. Chicago & N. W. R. R. Co. 699 
 Bassett v. St. Albans Hotel Co. 791, 
 
 864 
 
 V. Monte Christo Mg. Co. 488, 500 
 
 Basshor v. Dressell 22, 620 
 
 V. Forbes 844 
 
 Batehelor v. Planters' Nat. Bank 534 
 
 Bateman v. Mayor of Ashton 552, 673 
 
 V. Mid- Wales Ry. Co. 337, 338 
 
 Bates V. Androscoggin & K. R. R. 
 
 Co. 419, 433 
 
 c7. Bank of Alabama 306, 321, 642 
 
 V. Boston, &o. R. R. Co. 170 
 
 V. Lewis 288 
 
 V. Mackinley 435, 441 
 
 V. N. Y. Ins. Co. 197, 200 
 
 Bates County v. Winters 53, 68, 909 
 
 Bath Commissioners v. Boyd 20 
 
 Battershall v. Davis 213 
 
 Batty V. Adams County 50 
 
 Bavington v. Pittsburgh, &e. R. R. 
 
 Co. 82, 84, 91 
 
 Bawknight v. Liverpool, &c. Ins. 
 
 Co. 943 
 
 Baxter U.Nashville, &c. Tump. Co. 1088 
 Bayard v. Farmers', &o. Bank 180, 207 
 Bay less v. Orne 266, 267' 
 
 Bayliss v. La Fayette, &c. Ry. Co. 262 
 Beach v. Smith 71, 72 
 
 Beale v. Railway Co. 699 
 
 Beard u. Union, &c. Publg. Co. 631 
 Beaston v. Farmers' Bank 1052 
 
 Beatty v. Marine Ins. Co. 553 
 
 Beaty v. Knowler 25, 39, 308 
 
XVlll 
 
 TABLE OF CASES. 
 
 Beaver County v. Armstrong 325 
 
 Becher v. Wells Flouiing Mill Co. 171, 
 237, 246, 457 
 Beck V. Kantorowicz 278 
 
 Beckett v. Houston 55 
 
 V. TJniontown Building, &c. 
 
 Association 32 
 
 Beckitt V. Bilbrough 214 
 
 Beckvvith v. Burroughs 192 
 
 V. Windsor Mfg. Co. 322 
 
 Bedford v. Bagshaw 644 
 
 Bedford R. R. Co. v. Bowser 93, 107, 
 
 109, 590, 710 
 
 Beecher v. Dacey 400 
 
 V. Marquette, &c. Rolling Mill 
 
 Co. 603, 642, 645 
 
 Beekman v. Saratoga, &c. R. R. 
 
 Co. 1079 
 
 Beene v. Cahawba, &c. R. R. Co. 131 
 
 Beer Co. u. Massachusetts 1013, 1022, 
 
 1027, 1028, 1069 
 
 Beers v. Bridgeport Spring Co. 262, 413, 
 
 421, 424 
 
 V. Phcenix Glass Co. 326, 564, 604, 
 
 605 
 
 Behler v. German Mut. F. Ins. Co. 632 
 
 Belcher v. Willcox 834 
 
 Belfast & M. L. Ry. Co. v. Cottrell 132 
 
 V. Moore 132 
 
 Belharen's Case 113, 288, 816 
 
 Belknap v. Boston, &c. R. R. Co. 699 
 
 V. North America L. Ins. Co. 768 
 
 Bell V. Bank of Nashville 11 
 
 Bell's Gap R. R. Co. v. Christy 523, 525 
 
 Belhneyer v. Independent District, 
 
 &c. 300 
 
 Bellows V. Hallowell & Augusta 
 
 Bank 781, 782, 994 
 
 V. Todd 461, 500 
 
 Belmont v. Coleman 851, 859 
 
 V. Erie Ry. Co. 239, 249, 253, 266, 
 267 
 Beman v. Rufford 243, 246, 261, 849, 
 363, 676, 889, 1083 
 Bend v. Susq. Bridge Co. 160 
 
 Bennett v. Maryland Fire Ins. Co. 602 
 Bennett's Branch Imp. Co 's Ap- 
 peal 308 
 Bennington v. Park 598 
 Benoist v. Carondelet 325 
 Ben't College v. Bishop of London 316 
 Bent V. Hart 764 
 V. Priest 493 
 Benwood Iron Works v. Hutchin- 
 son 942 
 Beresford's Case 170 
 Berger v. Williams 858 
 Bergman v. St. Paul, &c. Bldg. 
 
 Ass. 803, 464 
 
 Berks, ■&c. Tump. Co. v. Myers 340, 
 
 341 
 Berrian v. Methodist Society 941 
 
 Berry v. Yates 407 
 
 Berryman v. Cincinnati Southern 
 
 Ry. Co. 486 
 
 Best V. Thiel ■ 808 
 
 Best's Case 69 
 
 Bestor v. Wathen 484, 1092 
 
 Bethany v. Sperry 454 
 
 Bewick v. Alpena Harbor Imp. Co. 993 
 
 Bewley v. Equit. Life Ass. Soc. 768 
 
 Biddle v. Bayard 188 
 
 Biddle's Appeal 439 
 
 Bigelow, Re 200, 367 
 
 V. Gregory 28, 717 
 
 V. Hartford Bridge Co. 996 
 
 Bill V. Western Union Tel. Co. 23-5, 497 
 
 Billings V. Robinson 807, 820, 841 
 
 Binney's Case 319 
 
 Bird V. Bird's P. D. & TJ. Sewage 377, 
 
 394, 612, 674 
 
 V. Chicago, &c. R. R. Co. 181, 207 
 
 V. Hayden 877 
 
 Birkenhead, L. & C. Ry. Co. u. 
 
 Brownrigg 78 
 
 Birmingham v. Sheridan 167 
 
 Birmingham Banking Co. Ex parte 305 
 Birmingham Nat. Bank v. Mosser 856, 
 
 857 
 
 Birmingham Ry. Co. v. White 446 
 
 Bish V. Bradford 97, 98, 117 
 
 V. Johnson 120, 121, 386, 1061 
 
 Bishop V. Brainerd 756, 898, 961, 1061 
 
 V. Globe Co. 170, 199, 202, 559 
 
 Bishop's Case 169 
 
 Bishop's Fund ?>. Eagle Bank 107 
 
 Bissell V. City of Kankakee 399 
 
 V. First Nat. Bank 506 
 
 V. Michigan Southern, &c. R.R. 
 
 Co. 571, 665, 667, 668, 669, 
 
 723 
 
 V. Spring Vallev Township 581 
 
 Bissit V. Ky. River Nav. Co. 834, 838 
 
 Black V. Bernard 26 
 
 V. Delaware, &c. Canal Co. 357, 
 
 376, 392, 394, 395, 396, 614, 889, 
 
 1008, 1021, 1050, 1083 
 
 V. Homersham 176 
 
 V. Huggins 235, 248 
 
 V. Zacharie 170, 192, 195 
 
 Black's Case 869 
 
 Black River & Utica R. R. Co. v. 
 
 Barnard 620 
 
 V. Clarke 72, 743 
 
 Blackburn v. Selma, &c. R. R. Co. 357, 
 720, 987, 954, 957, 961, 962 
 Blackett v. Bates 1100 
 
 Blackman v. Central R. R. Co. 232 
 Blackshire v- Iowa Homestead Co. 584 
 Blackstone Mfg. Co. v. Inhab. of 
 
 Blackstone 953, 959 
 
 Black wall. The 342 
 
 Blair v. Gray 875 
 
 v. Perpetual Ins. Co. 306, 930 
 
TABLE OF CASES. 
 
 XIX 
 
 Blair v. St. Louis, &c. R. R. Co. 781 
 
 V. Worley 1052, 1053 
 
 Blair Town Lot, &c. Co. v. Walker 485, 
 
 493 
 
 Blake v. Bayley 473 
 
 V. Bufealo Creek R. R. Co. 484 
 
 V. Kinkle - 832, 969 
 
 V. HoUey 309, 719 
 
 V. Portsmouth, &c. R. R. Co. 993 
 
 V. Wheeler 535 
 
 Blake's Case 165, 814 
 
 Blakeman v. Benton 845 
 
 Blakemore v. Glamorganshire Canal 
 
 Nar. Co. 308, 1090 
 
 Blanchard v. Dedham, &c. Co. 193 
 
 V. Detroit, &c. R. R. Co. 1100 
 
 V. Dow 461 
 
 V. KauU 717 
 
 Blanchard's Gun Stock & T. Fac- 
 tory V. Warner 312 
 Blandford Sch. Dist. u. Gibbs 28, 40, 
 
 458 
 Blatchford v. Ross 475, 482, 484 
 
 Blauin v. Hart 190 
 
 Blen V. Bear River, &o. Mg. Co. 594, 
 
 602 
 Bligh I). Brent 218 
 
 Bliss V. Anderson 259 
 
 V. Kaweah Canal, &c. Co. 504, 584 
 V. Mattson ,484, 486 
 
 Bliven v. Peru Steel, &c. Co. 267, 269 
 Block V. Atchison, &c. R. R. Co. 946 
 Blodgett V. Morrill 288 
 
 Blossburg, &c. R. R. Co. v. Tioga 
 
 R. R. Co. 1053 
 
 Bloxam v. Metrop. Ry. Co. 245, 252, 
 255, 262, 416 
 Blundell v. Winsor 165 
 
 Blunt V. Walker 304, 305 
 
 Bly V. Second Nat. Bank 639 
 
 Boardman v. Cutter 220 
 
 V. Lake Shore, &c. Ry. Co. 162, 
 178, 265, 429, 431, 913 
 Bogardus v. Trinity Church 313 
 
 Bohannon v. Binns 975 
 
 Bohn V. Brown 852, 853, 859 
 
 Boise City Canal Co. v. Pinkham 31 
 Boisgerard v. N. Y. Banking Co. 340 
 Bolton V. Madden 451 
 
 Bommer v. Am. Spiral Spring, &c. 
 
 Co. 524 
 
 Bonaparte u. Camden & Amboy 
 
 R. R. Co. 4, 998 
 
 Bond V. Appleton 847, 861, 866 
 
 V. Central Bank 642 
 
 Bonelli's Tel. Co.. Re 499 
 
 Bonnell v. Griswold 535 
 
 Boody V. Rutland, &c. R. R. Co. 403 
 Booe V. Junction R. R. Co. 119, 376, 1061 
 Boogher v. Life Ass. 697, 698 
 
 Booker, Ex parte 116, 590 
 
 Boom Co. V. Patterson 1048 
 
 Booth V. Bunce 761, 781 
 
 u. Campbell 854 
 
 V. Robinson 407, 483, 497 
 
 Bosanquet v. Shortridge 708 
 
 Bostock 0. North Staffordshire Ry. 
 
 Co. 304 
 
 Boston & Albany R. R. Co. v. Pear- 
 son 55, 142, 388, 794, 848, 952 
 V. Richardson 207 
 
 Boston & Lowell R. R. Co. v. Com- 
 monwealth 160 
 V. Salem & Lowell R. R. Co. 1018, 
 1050 
 Boston & Maine R. R. Co. v. Bart- 
 
 lett 86 
 
 Boston & Prov. R. R. Co. v. New 
 York & N. E. R. R. Co. 226, 587, 611, 
 953, 954, 1087 
 Boston, Barre, &c. R. R. Co. v. 
 
 Wellington 123, 136, 142, 388, 403 
 Boston, Concord, &c. R. R. Co. i-. 
 
 State 702, 1029 
 
 Boston Beer Co. v. Massachusetts 
 
 1013, 1022, 1027, 1028, 1069 
 Boston Electric Co. n. Electric Gas 
 
 Lighting Co. 939 
 
 Boston Glass Manufactory v. Lang- 
 don 969, 970, 971 
 Boston Music Hall Ass. v. Cory 193 
 Boulard v. Calhoun 699 
 Bouton V. Dry Dock, &c. Stage Co. 145 
 Bow V. Allenstown 20, 21, 37 
 Bowden v. Johnson 830 
 V. Santos 830 
 Bowen v. Lease 308 
 Bowlby V. Bell 220 
 Bowling Green & M. R. R. Co. v. 
 
 Warren County Ct. 307 
 
 Bowring v. Shepherd 175, 827 
 
 Boyce v. City of St. Louis 317, 923 
 I). Towsontown Sta. M. E. 
 
 Church 666, 720 
 
 Boyd V. Alabama 1012, 1013 
 
 V. Chesapeake, &c. Canal Co. 941 
 
 V. Peach Bottom Ry. Co. 71, 72, 
 
 93, 707, 712 
 
 Boynton v. Andrews 405 
 
 V. Hatch 405 
 
 V. Lynn Gas Light Co. 552 
 
 Bradlee v. Warren, &c. Sav. Bank 371, 
 
 476 
 Bradley v. Ballard 327, 331, 564, 601, 
 652, 654, 658, 663, 669 
 V. Harwell 757 
 
 V. Holdsworth 218 
 
 V. Marine, &c Mfg. Co. 489 
 
 V. New York & N. H. R. R. Co. 307 
 V. Poole 104 
 
 V. Richardson 494 
 
 0. South Carolina Phosphate 
 
 Co. 1018 
 
 Bradstreet v Bank of Royalton 498 
 
XX 
 
 TABLE OF CASES. 
 
 Bradt v. Benedict 972 
 
 Brady v. The Mayor 300 
 
 Brainerd u. New York, &o. E. R. 
 
 Co. 325 
 
 Bramah v. Roberts 339 
 
 Branch v. Atlantic & G. R. R. Co. 358, 
 
 359, 1086 
 
 V. Baker 854 
 
 V. City of Charleston 905 
 
 V. Jesup 402, 590, 724, 891, 1086 
 
 V. Roberts 539, 765 
 
 Brander v. Brander 441 
 
 Brandon Iron Co. v. Gleason 971 
 
 Branin v. Connecticut, &c. R. R. 
 
 Co. 1022, 1029 
 
 Branson v. Oregonian Ry. Co. 824 
 
 Brant v. Ehlen 402, 810 
 
 Brauser v. New England Kre Ins. 
 
 Co. 1052 
 
 Bray v. FarWell 140, 803, 387, 888 
 
 Breedlove v. Martinsville, &o. R. R. 
 
 Co. ^ 147 
 
 Breitung v. Lindaner 877 
 
 Breneman v. Franklin, &c. Ass. 467 
 Brennan v. Tracy 343, 702 
 
 Brent v. Bank of Washington 198 
 
 Brewer v. Boston Theatre Co. 236, 241, 
 243, 246, 261 
 Brewster v. Hartley 409, 452, 460, 466 
 V. Sime 181, 182 
 
 Brick Presbyterian Church v. City 
 
 of New York 462 
 
 Bridge Proprietors v. Hoboken Co. 1018 
 Bridgeport Bank v. New York & 
 
 N. H. R. R. Co. 183, 184, 569 
 
 Bridger's Case 292 
 
 Bridport Old Brewery Co., Be 456 
 Brien v. Harriman 391 
 
 Briggs V. Cape Cod, &c. Canal Co. 963, 
 964, 967 
 V. Penniman 972 
 
 Brigham v. Mead 174, 175, 828 
 
 Bright V. Lord 176 
 
 Brinckerhofi v. Bostwick 233, 258, 526, 
 
 840 
 
 u. Brown 973 
 
 Brinham v. Wellersburg Coal. Co. 297, 
 
 864 
 Brinley v. Grou 439 
 
 V. Mann 323 
 
 Brisbane v. Delaware, &o. R. R. 
 
 Co. 163, 172 
 
 Briscoe v. Bank of Kentucky 11, 36 
 Bristol 0. Chicago & Aurora E. E. 
 
 Co. 1052 
 
 V. Sanford 842, 843 
 
 Bristol County Sav. Bank v. Keavy 502 
 
 Bristol Milling, &c. Co. v. Probasco 227, 
 
 834 
 British & Am. Tel. Co. v. Colson 70 
 British & Foreign Cork Co., Re 351 
 British Am. Land Co. o. Ames 920 
 
 British Prov. Soc. v. Norton 684 
 
 British Seamless Box Co., Be 275 
 
 British Sugar, &c. Co., Re 462 
 
 Broadway Bank v. McElrath 183, 192, 
 
 195 
 Brockett v. Oliio & Pa. R. E. Co. 959 
 Brockway v. Allen 840 
 
 Brockwell's Case 814 
 
 Brodhead v. City of Milwaukee 399 
 Brokaw v. N. J. R. R., &c. Co. 696 
 
 Bronson v. La Crosse, &c. R. R. 
 
 Co. 232, 244, 261, 262, 322 
 V. Wilmington, &c. L. Ins. Co. 297 
 Brooklyn Gravel R. Co. u. Slaugh- 
 ter 300 
 Brooklyn Life Ins. Co. v. Bledsoe 633 
 Brooklyn, Winfield, &c. Ey. Co., 
 
 Be 736, 963, 967 
 
 Brooks V. Marbury 596 
 
 V. Martin 694 
 
 V. New York, &c. R. R. Co. 945 
 
 Brooks Steam Transit Co. v. City 
 
 of Brooklyn 963, 966, 967 
 
 Brookville, &e. Tump. Co. v. Mc- 
 
 Carty 711 
 
 Brotherhood's Case 591 
 
 Broughton w. Pensacola 781, 992 
 
 Brouwer v. Appleby 27, 719 
 
 Brown v. Adams 173, 268 
 
 V. Byers 338 
 
 ». Commonwealth 459 
 
 V. Eastern Slate Co. 844 
 
 V. Fairmount Gold, &c. Mining 
 
 Co. 482, 1021 
 
 V. Fisk 840 
 
 V. Florida Southern Ry. Co. 427 
 V. Hitchcock 861 
 
 V. Howard Fire Ins. Co. 205 
 
 V. Kennebec Agric. Soc. 7 
 
 V. Killian 638 
 
 V. Lehigh Coal, &c. Co. 421, 425 
 V. Mayor of N. Y. 1058 
 
 V. Monmouthshire Ry., &c. Co. 262, 
 421 
 V. Pacific Mail S. S. Co. 449 
 
 V. Penobscot Bank 1029 
 
 V. Scottish American Mort- 
 gage Co. 742 
 V. Second Nat. Bank 637 
 V. Thompkins 317 
 V. Town of Belleville 321 
 V. Winnisimmet Co. 353 
 Brown's Case 796 
 Browne v. Collins 178 
 Browning v. Great Central Mining 
 
 Co. 605 
 
 Brownlee v. Ohio, &o. R. E. Co. 68, 98 
 Bruce v. Piatt 536 
 
 Bruff V. Mali 545 
 
 BrufEett v. Great Western R. R. 
 
 Co. 777, 782, 913, 971, 973 
 
 Brum V. Merchants' Mut. Ins. Co. 761 
 
TABLE OP CASES. 
 
 XXI 
 
 Erundage v. Brundage 69, 176 
 
 Brunton's Claim , 568 
 
 Bryan v. Memphis, &o. R. R. Co. 361 
 Bryon v. Carter 197, 198 
 
 Bryson v. Warwick, &c. Canal Co. 689 
 Buchanan v. Barton Iron Co. 880 
 
 V. Litichfield 580 
 
 V. Meisser 850 
 
 Bucher v. Dillsburg, &c. R. K. Co. 62, 
 
 71 
 Buckfield Branch R. R. Co. v. 
 
 Irish 132, 136 
 
 Buckley v. Briggs 306, 321, 336 
 
 Buck Mountain Coal Co. v. Lehigh 
 
 Coal, &c. Co. 996, 1098 
 
 Bucksport & Bangor R. R. Co. v. 
 
 Buck 121, 141, 149, 157 
 
 Budd V. Munroe 181 
 
 Budd's Case 832 
 
 Buell V. Buckingham 319, 489, 491, 
 492, 593, 757, 770 
 Bufialo & Allegheny R. R. Co. v. 
 
 Gary 711, 712, 723 
 
 Buffalo & J. R. R. Co. v. Clark 48 
 
 V. Gifeord 47, 65, 68, 116, 117, 152, 
 
 710 
 
 Buffalo & N. Y. City R. R. Co. v. 
 
 Dudley 55, 56, 67, 121, 131, 384, 
 
 385, 1060 
 
 Buffalo, C., & N. Y. R. R. Go. v. 
 
 Pottle 119 
 
 Buffalo F. & U. Ins. Co. u. Morse 931, 
 935, 1065 
 Buffalo, N. Y., & Erie R. R. Co. v. 
 
 Lampson 484 
 
 Buffett V. Troy, &c. R. R. Co. 360, 361 
 Buf ord V. Keokuk, &c. Packet Go. 258, 
 
 392 
 
 Bugg's Case 289, 824 
 
 Building, &c. Ass. v. Dorsey 1031 
 
 Bulkley v. Big Muddy Iron Co. 236 
 
 V. Derby Eishing Co. 602, 642 
 
 BuUard v. Bell 846 
 
 V. Nat. Eagle Bank 198, 367, 465 
 
 V. Thompson 928 
 
 BuUer v. Society, &c. 998 
 
 Bullock V. Kilgour 870 
 
 Bult V. Morell 339 
 
 Buncombe County Commrs. v. 
 
 Tommey 1076 
 
 BuncombeTurnp. Co. w. McCarson 321, 
 
 736 
 Bundy v. Iron Co. 227 
 
 Bonn's Appeal 790, 793, 864 
 
 Bunting's Admr. v. Camden, &c. 
 
 R. R. Co. 325 
 
 Burges & Stock's Case 611, 674, 684 
 Burgess v, Seligman 334, 822, 826, 838 
 Burke v. Concord R. R. Co. 364, 398 
 V. Smith 86, 91, 815, 817 
 
 Eurkinshaw v. NichoUs 810 
 
 Burlington, &c. R. R. Co. w. Boestler 90 
 
 Burlington, &c. R. R. Co. v. Stewart 598 
 Burmester v. Norris 830 
 
 Burnap v. Haskins Steam-Engine 
 
 Co. 717 
 
 Burnell v. New York Central R. R. 
 
 Co. 361 
 
 Burnes v. Pennell 102, 800, 819 
 
 Burnham v. N. W. Ins. Co. 795 
 
 V. Savings Bank 341 
 
 Burr V. McDonald 322, 332 
 
 V. Wilcox 55, 63, 853 
 
 Burrall v. Bushwick R. R. Go. 55, 166, 
 
 213, 272, 990 
 
 Burrill v. Dollar Savings Bank 471 
 
 V. Nahant Bank 477, 500, 501, 594 
 
 Burroughs v. North Carolina R. R. 
 
 Co. 176 
 
 Burrows v. Smith 63, 84 
 
 Burt V. Batavia Paper Mfg. Co. 228, 
 
 229 
 
 V. British, &c. Life Assur. Ass. 246, 
 
 249, 251, 253 
 
 V. Farrar 58 
 
 V. Rattle 332, 431 
 
 Burtis V. Buffalo, &c. R. R. Co. 361 
 
 Burton v. Peterson 187 
 
 V. Schildbach 727 
 
 Burton's Appeal 187, 319 
 
 Busey v. Hooper 71, 247 
 
 Bush V. Cartwright 856 
 
 Bushel V. Commonwealth Ins. Co. 939, 
 
 940, 1052 
 
 Bushnell v. Chatauqua County 
 
 Nat. Bank 370 
 
 Butchers', &c. Bank of St. Louis v. 
 
 McDonald 719, 720 
 
 Butler V. City of Milwaukee 406 
 
 V. Cumpston 175, 825 
 
 V. Watkins 697 
 
 Butternuts & O. Tump. Co. v. North 81 
 
 Button V. Hoffman 227 
 
 V. Am. Tract See. 340 
 
 Butts V. Wood 484 
 
 Byers v. Franklin Coal Co. 853 
 
 Gable v. McCune 849, 853 
 
 Cabot &W.S. Bridge Co. sJ.Ghapin 80, 
 140, 141, 157, 404 
 Cadman v. Cadman 219 
 
 Cady V. Smith 849 
 
 Cahall V. Citizens' Mut. Bldg. Ass. 721 
 Cahill V. Bigger 339 
 
 V. Kalamazoo Mut. Ins. Co. 969 
 Cairo, &c. R. R. Go. v. Hecht 1044 
 
 Calder, &c. Nav. Co. v. Pilling 464, 
 
 467 
 Caldwell v. City of Alton 300 
 
 V. National Mohawk Valley 
 Bank 506, 564 
 
xxu. 
 
 TABLE OF CASES. 
 
 Caldwell v. New Jersey Steamboat 
 
 Co. 699 
 
 Caledonian, &c. Ry. Co. v. Helens- 
 burgh Harbor 523, 524 
 Caley v. Philadelphia, &c. R. R. Co. 84 
 California State Tel. Co. v. Alta 
 
 Xel. Co. 14 
 
 California Sugar Mfg. Co. v. Schafer 62 
 Callaway County v. Foster 121, 1058 
 Calloway Mining, &c. Co. v. Clark 355 
 Camanche, The 342 
 
 Camblos v. Philadelphia, &c. R. R. 
 
 Co. 2.54, 360, 361 
 
 Cambridge "Water Works u. Somer- 
 
 Tille Dyeing, &c. Co. 856 
 
 Camden & Amboy R. R. Co. v. 
 
 Briggs 1029 
 
 V. Elkins 249 
 
 Camden Rolling Mill Co. v. Swede 
 
 Iron Co. 942, 944 
 
 Came e. Brigham 335, 463, 858 
 
 Cameron v. Seaman 473 
 
 Cammeyer v. United German, &c, 
 
 Churches 499 
 
 Camp V. Byne 720 
 
 Campbell v. Mississippi Union Bank 971 
 V. Morgan 210 
 
 Campbell's Case 733 
 
 Canada Carriage Co. v. Harris 1002 
 Canada Southern Ry. Co. v. Geb- 
 
 hard 785, 1002, 1043 
 
 Canadian Oil "Works Co., lie 689 
 
 Canandarqua Academy v. McKech- 
 
 nie 584 
 
 Candee v. Pennsylvania R. R. Co. 361 
 Candy v. Globe Rubber Co. 697 
 
 Cannon v. Trask 243, 453 
 
 Cape's Executors' Case 160 
 
 Cape Sable Co.'s Case 322 
 
 Capper's Case 217, 827 
 
 Card V. Carr 553 
 
 V. Hope 451 
 
 Carew's Estate, Re 229 
 
 Carey v. Cincinnati, &c. R. K. Co. 721, 
 
 971 
 
 V. Giles 756 
 
 Carling's Case 796 
 
 Carlisle v. Cahawba, &c. R. R. Co. 139 
 
 V. Saginaw "Valley, &c. R. R. 
 
 Co. 59, 65, 67, 707 
 
 V. South Eastern Ry. Co. 262, 423 
 
 Carmichael v. Trustees 7 
 
 Carpenter v. Black Hawk Mg. Co. 333, 
 
 890 
 
 V. N. Y. & N. H. R. R. Co. 261, 
 
 262 
 
 Carr v. Commercial Bank 941 
 
 ti. Le Fevre 403, 796 
 
 Carroll v. City of East St. Louis 923 
 
 V. Green 846 
 
 V. Mullanphy Sav. Bank 197, 198 
 
 Carson v. Arctic Mg. Co. 125, 131 
 
 Cartan v. Father Matthew, &c. Soc. 466, 
 
 467 
 
 Carter v. Howe Mach. Co. 698 
 
 V. Sanderson 866 
 
 Cartmell's Case 217, 826 
 
 Carver a. Braintree Mfg. Co. 852 
 
 Case V. Benedict 721 
 
 V. Citizens' Nat. Bank 773 
 
 V. Mechanics' Banking Ass. 951 
 
 Casey v. Adams 949 
 
 V. Galli 853, 854 
 
 V. Soci^td, &c. 773 
 
 Cass V. Pittsburgh, &c. R. R. Co. 69, 
 
 80, 85, 157 
 
 Cass County v. Johnston 449 
 
 Castle V. Belfast Foundry Co. 505 
 
 Castleman v. Holmes 826, 854, 862 
 
 Catlin V. Eagle Bank 755, 771 
 
 Catskill Bank ». Gray 665 
 
 Cayuga Bridge Co. v. Magee 308 
 
 Cayuga Lake R. R. Co. v. Kyle 711, 712 
 
 Cazeaux v. Mali 539 
 
 Cecil, Re 458, 460 
 
 Cecil Nat. Bank v. "Watsontown 
 
 Bank 202 
 
 Central Agr. & Mech. Ass. v. Ala. 
 
 Gold L. Ins. Co. 12, 722, 830 
 
 Central Bank v. Empire Stone Co. 335 
 Central Branch, &c. R. R. Co. u. 
 
 "Western Union Tel. Co. 1092 
 
 Central Bridge Co. v. Lowell 342, 1050 
 Central City Sav. Bank v. "Walker 717 
 Central Cross-town R. B. Co. f. 
 
 Twenty-third St. R. R. Co. 974, 986 
 
 Central Nat. Bank v. Levin 613 
 
 V. "Williston 193 
 
 Central Ohio Salt Co. v. Guthrie 1095 
 
 Central Plank R. Co. v. Clemens 114, 
 
 711 
 Central R. R. & Banking Co. v. 
 
 Georgia 899,-902, 905 
 
 V. Papot 160 
 
 V. "Ward 205 
 
 Central R. R. Co. v. Collins 249, 253, 
 260, 261, 348, 407, 613, 1094 
 Central R. R. Co. of N. J. v. Penn- 
 sylvania R. R. Co. 3.5, 408, 7S5 
 Central By. Co. of "Venezuela v. 
 
 Kisch 94, 99, 104, 105, 106 
 
 Central Trust Co. v. "Wabash, &c. 
 
 R. R. Co. 607 
 
 Central Turnp. Co. v. "Valentine 30, 
 77, 141, 143, 388 
 Centre & K. Turnp. Co. v. McCon- 
 
 aby 106, 107, 590, 737, 980 
 
 Chadsey v. McCreery 340 
 
 Chafee v. Fourth Nat. Bank 928 
 
 Chaffe V. Ludeling 717 
 
 Chaffee v. Rutland R. R. Co. 290, 428, 
 470, 592 
 Chaffin V. Cummings 55 
 
 Challis's Case 590, 733 
 
TABLE OF CASES. 
 
 XXUl 
 
 Chamberlain v. Chamberlain 
 V. Pacific Wool Growing Co. 
 
 317 
 485, 
 589 
 
 II. Painesville, &c. E. E. Co. 74, 80 
 
 89, 454 
 
 Chamberlin v. Huguenot Mfg. Co. 856 
 
 V. Mammoth Mg. Co. 941 
 
 Cliambera v. Falkner 374 
 
 V. Manchester, &c. Ey. Co. 554 
 
 V. St. Louis 680 
 
 Chambersburgh Ins; Co. v. Smith 171, 
 
 217 
 Champion v. Memphis, &o. E. E. 
 
 Co. 119, 381 
 
 Chancellor of Oxford's Case 340 
 
 Chandler v. Brown 296 
 
 V. Hoaft 535 
 
 V. Siddle 790, 840 
 
 Chapin v. School District 818, 840 
 
 Chapman v. Colby 39 
 
 V. Shepherd 175 
 
 Chapman's Case 70 
 
 Chapman & Barker's Case 817, 818, 
 
 821 
 Chappell's Case 169, 832 
 
 Charitable Ass. v. Baldwin 605, 606 
 Charitable Corp. v. Sutton 528, 584 
 Charles River Bridge Co. v. War- 
 ren Bridge Co. 31, 307, 308, 737, 978, 
 980, 1018 
 Charleston v. Branch 905 
 
 Charleston & J. Tump. Co. i-.Willey 310 
 Charleston City Council v. Moor- 
 head 323 
 Charleston Ins. Co. v. Sebring 248 
 Charlestown Boot, &c. Co. i;. Duns- 
 more 478 
 Cliarlotte & So. Car. E. E. Co. v. 
 
 Blakeley 71, 707 
 
 Charlton v. Newcastle, &c. Ey. Co. 261, 
 
 398 
 Charter Oak L. Ins. Co. v. Sawyer 631 
 Chase v. Lord 852, 875 
 
 V. Sycamore, &c. E. E. Co. 77 
 
 V. Vanderbilt 913 
 
 Chattahoochee Nat. Bank v. Schley 370 
 Cliattaroy lly. Co. v. Kinner 1044 
 
 Chautauque County Bank v. Risley 309, 
 
 564 
 Cheale v. Kenward 175, 210 
 
 Cheek v. Merchants' Nat. Bank 637 
 Cheever v. Meyer 195 
 
 Cheltenham, &c. Ey: Co. v. Daniel 711 
 Chemical Nat. Bank v. Kohner 506, 508 
 Chenango, &c. Ins. Co., Ee 459 
 
 Cheraw & Chester E. E. Co. v. Gar- 
 land 75, 145 
 V. White 75, 131, 142 
 Cherry v. Frost 187 
 Chesapeake & Ohio Canal Co. v. 
 Baltimore & Oliio R. E. Co. 959, 967, 
 969, 973, 981, 986, 1017, 1020 
 
 Chesapeake & Ohio E. E. Co. v. 
 
 Virginia 905 
 
 Chesapeake & Ohio Ey. Co. v. Mil- 
 ler 885, 894, 1068 
 Chesley v. Pierce 861 
 Chesnut v. Pennell 838 
 Chester Glass Co. v. Dewey 55, 135, 
 
 661 
 Chetlain v. Eepublio L. Ins. Co. 112, 
 116, 261 
 Chew V. Bank of Baltimore 203, 207 
 Chicago V. Hall 868 
 
 V. Jones 700 
 
 V. Kelly 700 
 
 Chicago, &c. E. E. Co. v. Ackley 1035 
 V. Davis 696 
 
 V. Iowa 1017, 1035 
 
 Chicago & Alton E. E. Co. v. Peo- 
 ple 1026,1079 
 Chicago & Iowa E. R. Co. v. Davis 696 
 Chicago & N. W. Ey. Co. v. Auditor- 
 General 962 
 V. Crane 1084, 1097 
 V. James 323, 504, 549, 602 
 V. People 1076, 1097, 1099 
 V. Williams 697 
 Chicago, B., & Q. R. E. Co. v. Atty.- 
 
 Gen. of Iowa 1032 
 
 V. Iowa ■ 1017, 1035 
 
 V. Lewis 680 
 
 V. Page 178 
 
 V. Wilson 351 
 
 Chicago Building Soc. v. Crowell 602, 
 
 658, 661 
 
 Chicago City Ey. Co. v. AUertou 242, 
 
 376, 386, 409, 479 
 
 Chicago, Danville, & V. E. E. Co. v. 
 
 Loewenthal 1085 
 
 Chicago Life Ins. Co. v. Auditor 1040 
 V. Needles 774, 982, 1025, 1039 
 Chicago, Milwaukee, & St. P. E. E. 
 
 Co. V. Ackley 1035 
 
 Chicago, P., & S. W. E. E. Co. u. 
 
 Marseilles 112 
 
 Chicago, R. I., & Pac. E. E. Co. v. 
 
 Howard 336, 338, 592, 680, 759 
 
 V. Moffitt 908 
 
 Chioora Co. v. Crews 17, 725 
 
 Child V. Boston, &c. Iron Works 853 
 
 V. Coffin 1041 
 
 V. Hudson's Bay Co. 198, 462, 464 
 
 Childs V. Smith 28, 67 
 
 Chinnock's Case 831 
 
 Chorley, Ex parte 567 
 
 Chouteau v. Allen 334, 494, 592, 594, 
 
 597,677 
 
 V. Dean 795 
 
 Chouteau Ins. Co. v. Floyd 97, 150, 
 
 152, 287 
 
 V. Holmes 499 
 
 Chouteau Spring Co. v. Harris 159, 166, 
 
 167, 168, 216, 828 
 
XXIV 
 
 TABLE OF CASES. 
 
 Christ Church v. Pope 458 
 
 Clirist Church Hospital v. Philadel- 
 phia County 1014 
 Christian Church v. Johnson 320 
 Christian Union v. Yount 317, 680, 919. 
 921 924 926 
 Chubb V. Upton 106, 723, 730,' 734 
 Cliurch of Redemption v. Grace 
 
 Church 646 
 
 Cicotte V. Anciaux 248 
 
 Cincinnati, Hamilton, & D. R. R. 
 
 Co. V. Cole 26, 1070 
 
 V. Pontius 361 
 
 Cincinnati, Indianapolis, & C. R. R. 
 
 Co. V. Clarksou 408 
 
 Cincinnati Mut. Ass. Co. v. Eoseu- 
 
 tha,l 631 
 
 Cincinnati, Union, & Ft. W. R. R. 
 
 Co. 1!. Pearce - 345, 921 
 
 Citizens' Bank of Phila. «. Keim 502 
 Citizens' Bldg. Ass. v. Coriell 530 
 
 Citizens' Mut. F. Ins. Co. v. Sortwell 454 
 Citizens' Nat. Bank v. Elliott 475 
 
 V. Leming 637 
 
 Citizens' Sav. & L. Ass. v. Topeka 1047, 
 
 1075 
 Citizens' Sav. Bank v. Blakesley 564 
 City Bank of Columbus v. Beach 369 
 V. Bruce 111, 114 
 
 City Bank of Macon v. Bartlett 94, 
 103, 104 
 City Bank of New Haven v. Per- 
 kins 506, 563 
 City Bank of New York v. Barnard 513 
 City Council of Charleston, &c. See 
 
 Charleston City Council, &c. 
 City Fire Ins. Co. v. Carrugi 559, 560, 
 666, 939, 943 
 City Hotel in Wore. «. Dickinson 30, 
 123, 136, 140, 353 
 City Ins. Co. of Providence v. Com- 
 mercial Bank 970, 988, 992 
 City of Charleston, &c. See Charles- 
 ton, &c. 
 Claflin V. Farmers', &c. Bank 485, 570 
 Claiborne County v. Brooks 580 
 Clapp V. Peterson 112, 762, 837, 838 
 Claremont Bridge Co. u. Royce 921 
 Clark V. Barnard 953, 954 
 V. City of Washington 1083 
 V. Continental Imp. Co. 59 
 V. Edgar 545 
 V. Farmers' W. Mfg. Co. 325, 335, 
 339, 606 
 V. Farringtou 304, 305, 373, 402 
 V. Iowa City 325 
 V. Middleton 633 
 V. Monongahela Nav. Co. 120, 378, 
 380, 712 
 V. Titcomb 326, 332 
 Clarke v. Brooklyn Bank 66 
 V. Dickson 544 
 
 Clarke v. Hart 123 
 
 V. Imperial Gaslight, &c. Co. 400 
 0. Lincoln Lumber Co. 626, 647, 
 795, 804 
 V. School District No. 7 335 
 
 V. Tliomas 144, 723, 817, 820 
 
 Clarke Nat. Bank v. Bank of Al- 
 bion 507 
 Clarkson v. Clarkson 437, 438, 441 
 V. Hudson River R. R. Co. 1071 
 Clay Township v. Buchanan Dist. 739 
 Clearwater v. Meredith 376, 614, 897, 
 898, 1008, 1021 
 Cleaveland v. Stewart 4 
 Clegg V. School District 12 
 Cleghorn v. New York, &c. E.R. Co. 699 
 Clem V. Newcastle, &c. R. R. Co. 96 
 Clement v. City of Lathrop 340 
 Clerks' Sav. Bank v. Thomas 512 
 Cleve V. Financial Co. 467 
 Cleveland v. Burnham 801 
 Cleveland & Mahoning E. R. Co. v. 
 
 Himrod Furnace Co. 477 
 
 V. Robbins 163, 171, 172, 185 
 
 V. Tapett 184 
 
 Cleveland & Pittsburgh R. E. Co. 
 
 V. Speer 356, 959 
 
 Clincli V. Financial Co. 246, 248, 249, 
 376, 394 
 Clive V. Clive 435, 441 
 
 Close V. Glenwood Cemetery 721, 1059, 
 1061, 1067 
 Clowes V. Brettell 863 
 
 Coalfield Co. v. Peck 838 
 
 Coates V. Nottingham Water Works 262, 
 
 429 
 Coates's Case 796 
 
 Coats V. Dopnell 506, 770, 772 
 
 Coburn r. Boston Papier Mache Co. 970 
 Cocheco Nat. Bank v. Haskell 506, 
 507, 569 
 Cochran v. Ocean Dry Dock Co. 834 
 Cockburn v. Union Bank 445 
 
 Cocker's Case 783 
 
 Codd V. Ratlibone 4 
 
 Coe V. Columbus, &c. R. E. Co. 233, 
 890, 894 
 Coey V. Belfast, &c. Ey. Co. 290 
 
 Coffey V. Nat. Bank 780 
 
 Coffin V. Collins 76 
 
 V. Rich 1041 
 
 Cogswell V. Bull 234, 236 
 
 Cohen v. Wilkinson 261, 397 
 
 Coil V. Pittsburgh Female College 98, 
 
 103 
 Colt V. North Carolina, &c. Amal- 
 gamating Co. 796, 801, 805 
 Colchester i>. Brooke 781, 995 
 V. Seaber 781, 988, 995 
 Cole V. Butler 853, 868 
 V. Cassidy 543 
 V. Fire Engine Co. 7 
 
TABLE OF CASES. 
 
 XXV 
 
 Cole V. Knickerbocker L. Ins. Co. 768 
 
 V. Joliet Opera House Co. 85, 148 
 
 V. Ryan 131, 159, 160, 166 
 
 Coleman v. Coleman 717 
 
 V. San Rafael Tump. Co. 312, 680 
 
 V. Second Ave. R. R. Co. 484, 491 
 
 V. White 866, 868, 870, 872, 873 
 
 Coles V. Bank of England 204, 423 
 
 V. Bristowe 827 
 
 Colglazier v. Louisville, &o. Ry. Co. 960 
 
 Collins V. Hammock 405 
 
 i>. Locke 1094 
 
 Colman u. Eastern Counties Ey. 
 
 Co. 249, 254, 261, 360 
 
 Coloma V. Eaves 579 
 
 Colonial Bank v. WiUan 677 
 
 Colt V. Ives 195 
 
 Colton V. Mississippi, &c. Boom Co. 13 
 Columbia Bottom Levee Co. v. 
 
 Meier 449 
 
 Columbine v. Chichester 214 
 
 Columbus Buggy Co. v. Graves 921 
 Columbus, Chicago, & Ind. Cent. 
 
 Ry. Co. u. Powell 913 
 
 V. Skidmore 911 
 
 Columbus Ins. Co. v. Walsh 633 
 
 Columbus, Piqua, & I. R. R. Co. v, 
 
 Indianapolis & B. R. R. Co. 363 
 
 Combination Trust Co. v. Weed 334, 
 
 494, 495 
 
 Commercial Bank v. Cunningham 514 
 
 V. French 341 
 
 u. Lockwood 782, 989, 994 
 
 Commercial Bank of Buffalo v. 
 
 Kortright 212 
 
 Commercial Bank of Cincinnati u. 
 
 Wood 513 
 
 Commercial Bank of Manchester v. 
 
 Nolan 635, 1053 
 
 Commercial Bank of Natchez v. 
 
 Chambers 988, 991, 992, 994 
 State 978, 982, 983, 986, 987 
 Commercial Bank of New Orleans 
 
 V. Newport Mfg. Co. 327 
 
 Commercial Bank of Rodney v. 
 
 State 1040 
 
 Commercial Ins. Co. n. The C. D., 
 
 Jr. 920 
 
 Commercial Mut. Ins. Co. v. Union 
 
 Mut. Ins. Co. 553 
 
 Commercial Nat. Bank v. Sim-, 
 
 mons 948, 949 
 
 Commissioners of Bath v. Boyd 20 
 Commissioners of Craven v. At- 
 lantic, &c. R. R. Co. 326, 354 
 Commissioners of Douglas County 
 
 V. Bolles 580, 720 
 
 Commissioners of Inland Fisheries 
 V. Holyoke Water Power Co. 1061, 
 
 1072 
 Commissioners of Roads o. Mo- 
 Phersou 1 
 
 Commonwealth v, Allegheny Bridge 
 
 Co. 975 
 
 V. Bonsall 1070 
 
 0. Breed 983 
 
 V. Bringhurst 469 
 
 V. Central Bridge Co. 702 
 
 V. Church of St. Mary's 448 
 
 V. Cochituate Bank 1038, 1041 
 
 V. Commercial Bank 981, 984 
 
 V. Conover 450 
 
 V. CuUen 25, 381, 453, 969 
 
 V. Delaware, &c. Canal Co. 1079 
 ■;. Erie & N. E. E. R. Co. 300, 808 
 V. Essex Co. 1066, 1069 
 
 V. Evans 1029 
 
 V. Farmers', &c. Bank 1039 
 
 V. Fayette County R. R. Co. 1069 
 V. Fitchburg R. R. Co. 397, 977, 
 1082 
 V. Gill 460 
 
 V. Green 7 
 
 V. Intox. Liquors 1028 
 
 V. Hamilton Mfg. Co. 1028, 1029 
 0. Hunt 1095 
 
 V. Mass. Ins. Co. 774 
 
 V. New Bedford Bridge Co. 702, 
 1020 
 V. Phoenix Bank 1052 
 
 V. Phoenix Iron Co. 445 
 
 V. Pittsburgh & Connellsville 
 R. R. Co. 966, 959, 981, 1000, 
 1072 
 u. Pittsburgh, Ft. W., & C. Ry. 
 
 Co. 425 
 
 V. Pottsville W;ater Co. 1014 
 
 V. Smitli 332, 890, 1083 
 
 V. St. Mary's Church 478 
 
 u. St. Patrick's Benev. Soc. 264 
 
 V. Texas, &c. R. R. Co. 452, 946 
 
 </. Union Fire, &c. Ins. Co. 975, 
 
 981 
 
 V. Vermont, &c. E. B. Co. 702 
 
 V. West Chester E. E. Co. 20, 71, 
 
 72,74 
 
 V. Whipps 1019 
 
 u. Wickersham 449 
 
 u. Woelper 460 
 
 V. Worcester 467 
 
 Comstock, Ee 586, 629 
 
 Conant v. Reed 174, 202 
 
 V. Van Schaiek 845, 853, 859 
 
 Conard v. Atlantic Ins. Co. 740 
 
 Concord v. Concord Bank 605 
 
 V. Portsmouth Sav. Bank 1044 
 
 Congar v. Chicago, &c. Ry. Co. 512 
 
 Congregational Soc. v. Perry 720 
 
 Congress, &c. Spring Co. v. Knowl- 
 
 ton 692 
 
 Conine v. Junction, &c. R. E. Co. 584 
 
 Conkey v. Hart 1023 
 
 Conklin v. Second Nat. Bank of 
 
 Oswego 198, 367 
 
XXVI 
 
 TABLE OF CASES. 
 
 Connecticut & P. R. R. Co. v. Bai- 
 ley 58, 78, 105, 288 
 Connecticut Mut. L. Ins. Co. v. 
 
 Albert 637 
 
 V. Cleveland, &c. R. R. Co. 335, 
 
 336, 677 
 
 V. Duerson 1053 
 
 Connecticut River Sav. Bank v. 
 
 Fiske 858 
 
 Conrad v. La Rue 137 
 
 Conro B. Gray 766 
 
 V. Port Henry Iron Co. 335, 394, 
 448, 478, 484 
 Conservators of River Tone v. Ash 20 
 Continental Tel. Co. v. Nelson 274, 291 
 Contoocook Valley R. R. Co. v. 
 
 Barker 141 
 
 Contract Co., Re 514 
 
 Converse v. Dimock 266 
 
 V. Norwich & N. Y. Transp. 
 
 Co. 361, 666 
 
 Conway, Ex parte 770 
 
 u. Duncan 838 
 
 V. St. Louis 608 
 
 Cook V. Berlin Woollen Mill Co. 484 
 
 V. Detroit, &c. R. R. Co. 782, 894 
 
 V. Hager 917, 1053 
 
 V. Kent 971 
 
 V. Sherman 484, 486, 625, 694 
 
 Cooke V. State Nat. Bank 563, 949 
 
 Cooper V. Dismal Swamp Canal 
 
 Co. 210 
 
 V. Frederick 113, 805 
 
 Cooper Mfg. Co. v. Ferguson 306, 631, 
 
 934 
 Copeland o. Memphis, &c. R. R. 
 
 Co. 954, 961 
 
 Copley V. G rover Mach. Co. 698 
 
 Copp V. Lamb 453 
 
 Coppin V. Greenlees, &c. Co. Ill 
 
 Corbett v. Woodward 500, 757 
 
 Cordon v. Universal Gas Light Co. 170 
 Cork & Youghal Ry. Co., Re 329, 626, 
 685, 686, 692 
 V. Paterson 386 
 
 Corn Exch. Bank v. Cumberland 
 
 Coal Co. 499 
 
 Comiek v. Richards 192 
 
 Corning v. McCuUough 844, 846, 853 
 Corry v. Londonderry, &c. Ry. Co. 413, 
 
 429 
 Cortis V. Kent Water W. Co. 1052, 1053 
 Costello's Case 169, 832 
 
 Cotheal v. Brower 44'i 
 
 Cother v. Midland Ry. Co. 355 
 
 Cottara V. Eastern Counties Ry. 
 
 Co. 204, 268 
 
 Cotton V. Mississippi Boom Co. 6 
 
 Coulter V. Robertson 990 
 
 County Life Ass. Co., Re 561, 662, 577 
 County of AUeglienj', &c. See 
 Allegheny County, '&c. 
 
 Courtwright v. Deeda 118 
 
 Covert V. Rogers 498, 770 
 
 Covington u. Covington, &c. Bridge 
 Co. 23, 321, 379, 433, 4.34, 957, 959, 
 
 1041 
 Covington & Cin. Bridge Co. v. 
 
 Mayer 957 
 
 Covington & Lex. R. R. Co. a. 
 
 Bowler 484 
 
 V. Kenton County Court 1015, 1044 
 Covington, C. C, & J. Plank E. Co. 
 
 V. Moore 151 
 
 Covington Drawbridge Co. v. Shep- 
 herd 39, 840, 884, 936, 1088 
 Cowardin v. Universal L. Ins. Co. 917 
 Cowell V. Springs Co. '680, 721, 921, 
 
 926 
 
 Cowles r. Cromwell 159, 829 
 
 V. Mercer County 944 
 
 V. Whitman 214 
 
 Cowley V. Grand Rapids, &c. R. R. 
 
 Co. 498 
 
 Cox's Case 289, 826 
 
 Coyle V. Baltimore, &c. R. R. Co. 510 
 Coyote, &e. Mg. Co. v. Ruble 34, 705 
 Cragie v. Hadley 697 
 
 Craig V. First Presbyterian Church 449, 
 
 459 
 Craig's Appeal 758, 851 
 
 Cram v. Bangor House Proprietary 498 
 Cramer v. Bird 268 
 
 Crampton v. Varna Ry. Co. 322, 553 
 Craven Commissioners k. Atlantic, 
 
 &c. R. E. Co. 326, 354 
 
 Crawford v. Branch Bank 1038 
 
 V. Longstreet 355 
 
 I'. North Eastern Ry. Co. 429 
 
 V. Rohrer 792, 795, 837 
 
 Crawley's Case 70 
 
 Crease v. Babcock 763, 824, 854, 865, 
 
 872, 993, 1073 
 
 Crescent City Gas L. Co. v. New 
 
 Orleans Gas L. Co. 996 
 
 Crescent City Nat. Bank of New 
 
 Orleans v. Case 639, 824 
 
 V. Stewart 640 
 
 Creyke's Case 828 
 
 Crocker v. Crane 27, 56, 65, 66 
 
 V. Crocker 187 
 
 V. Old Colony R. R. Co. 181 
 
 V. Whitnev 626, 640 
 
 Croft V. Baltimore & 0. R. R. Co. 361 
 
 V. Lumpkin C. Mg. Co. 268 
 
 Cromford, &c. Ry. Co. v. Lacey 711 
 
 Crook V. Corporation of Seaford 320 
 
 Cropper, Ex parte 687 
 
 Crosby v. Hanover 1050 
 
 Cross V. Peach Bottom Ey. Co. 878, 
 
 383 
 V. Phoenix Bank 201 
 
 V. Pinckneyville Mill Co. 30, 47 
 V. Sackett 544 
 
TABLE OF CASES. 
 
 XXVll 
 
 Grossman v. Hilltown Tump. Co. 323 
 
 V. Penrose Perry Bridge Co. 97 
 
 Crowley v. Genesee Mg. Co. 321, 473, 
 
 505 
 V. Panama E. R. Co. 929 
 
 Crump V. U. S. Mg. Co. 593 
 
 Cruse V. Paine 175, 825 
 
 Crutcher v. Nashville Bridge Co. 651 
 Cud V. Kutter 213 
 
 Cuddon V. Eastwick 19 
 
 Culver V. Reno Real Est. Co. 400, 430 
 V. Third Nat. Bank 856, 866 
 
 Cumberland & Oxford Canal Co. v. 
 
 Portland 701, 702, 1052 
 
 Cumberlarid Coal & Iron Co. v. 
 
 Parish 484 
 
 «. Sherman 483, 484, 487, 593, 595, 
 598 
 Cumberland Valley R. R. Co. u. 
 
 Baab 81 
 
 Cuming v. Boswell 441 
 
 Gumming v. Prescott 474 
 
 Cummings v. Webster 462, 468, 560 
 Cunliffw. Manchester, &o. Ry. Co. 283 
 Cunningham v. Alabama L. & T. 
 
 Go. 198, 199 
 
 V. Edgefield, &c. R. R. Go. 105, 106 
 
 V. Pell 248 
 
 V. Vermont, &c. R. R. Co. 418, 428 
 
 Curien v. Santini 392, 971, 974 
 
 Curran v. State 751, 759, 774, 784, 786, 
 
 787 991 992 
 
 Currie v. White 176^ 178i 422 
 
 Currie's Case 796 
 
 Currier v. Concord R. R. Co. 1101 
 
 V. Lebanon Slate Co. Ill, 795 
 
 0. N. Y., &c. R. R. Co. 236, 451 
 
 Curry v. Scott 427 
 
 V. Woodward 419, 792, 793 
 
 Curtis V. Harlow 861 
 
 V. Leavitt 326, 332, 335, 692, 756 
 
 V. McCuUough 921 
 
 Cushman v. Thayer Mfg., &e. Go. 215 
 
 Custar V. Titusville Gas, &c. Go. 102, 105 
 
 Custer V. Tompkins County Bank 229, 
 
 514 
 
 Cutting V. Damerel 217 
 
 Cuykendall v. Corning 876 
 
 V. Miles 847 
 
 D. 
 
 Dabney v. Bank of South Carolina 760, 
 
 770, 787 
 
 V. Stevens 561, 595 
 
 Daland v. Williams 442 
 
 Dallas V. Atlantic, Miss., & O. E. R. 
 
 Co. 942 
 
 Dalton, &c. E. E. Go. v. McDaniel 792 
 Daly V. National L. Ins. Co. 632 
 
 Damon v. Granby 7, 322 
 
 Dana v. Bank of St. Paul 309, 602, 642 
 
 V. Bank of U. S. 478, 481, 770 
 
 Danbury & N. E. R. Co. v. Wilson 57, 
 
 120, 127, 148, 157, 590, 711 
 
 Dane v. Dane Mtg. Co. 852 
 
 V. Young 171, 827, 840, 854, 967 
 
 Danforth v. Philadelphia, &o. Ry. 
 
 Co. 1102 
 
 Daniel v. Mayor of Memphis 376, 406 
 Daniell v. Royal British Bank 814 
 
 Dannebroge Gold, &o. Go. u. Ail- 
 ment 722 
 Dannmeyer v. Coleman 256 
 D'Arcy v. Tamar, &o. E. R. Co. 322, 
 
 499 
 Darling v. Boston & Worcester 
 
 R. R. Go. 361 
 
 Darrell v. Hilligoss, &c. R. Co. 743 
 
 Darstw. Gale 594, 602, 663, 677, 680, 681 
 
 Dartmouth College w. Woodward 1,2,4, 
 
 6, 25, 300, 973, 1002, 1010, 1013, 1021 
 
 Dauchy v. Brown 355, 856, 863 
 
 Dauphin, &c. Ry. Co. u. Kennerly 1016 
 
 Davenport v. Dows 247 
 
 Davidson v. Grange 243 
 
 V. New Orleans 1049 
 
 V. Rankin 854 
 
 V. TuUoch 544 
 
 V. Westchester Gas L. Co. 474 
 
 Davidson's Case 288 
 
 Daviess County v. Huidekoper 580 
 
 Davis V. Bank of England 188, 204 
 
 V. Bank of River Raisin 638 
 
 V. Cook 949 
 
 V. Flagstaff Silver Mg. Co. 416, 
 
 503, 559 
 
 V. Haycock 175 
 
 V. Mayor, &c. of N. Y. 248 
 
 V. Memphis City Ry. Co. 475, 502 
 
 ^. Old Colony R. R. Co. 375, 400, 
 
 550, 559, 664, 666, 684, 694 
 
 V. Proprietors of Univ. M. 
 
 House 434 
 
 V. Randall 637 
 
 V. Rock Creek, &c. Mg. Go. 486 
 
 V. Stevens 830, 863 
 
 Davis's Case 565 
 
 Davis Imp. W. I. W. Wheel Go. v. 
 
 Davis W. I. Wagon Co. 224, 228 
 Davis Sewing Mach. Co. v. Best 639 
 Dawes v. North River Ins. Co. 553 
 
 Dawkins v. Antrobus 464 
 
 Day V. Essex County Bank 342 
 
 V. Nat. L. Ins. Co. 946 
 
 V. Newark India Rubber Mfg. 
 
 Co. 944 
 
 V. Stetson 27 
 
 Dayton v. Borst 792 
 
 Dayton & Cine. R. E. Co. 17. Hatch 91, 
 
 381, 40.3, 478, 482, 711 
 
 Deaderick v. Wilson 236, 275, 445, 537, 
 
 554, 590 
 
XXVUl 
 
 TABLE OP CASES. 
 
 Dean v. Biggs 489 
 
 u. Davis 7, 20 
 
 V. Mace 856 
 
 Dean's Appeal 774 
 
 Deansville Cemetery Ass., Be 1049 
 
 De Bost V. Albert Palmer Co. 561, 583 
 
 De Bow V. People 2, 7, 17, 7:27 
 
 De Camp v. Alward 481, 971 
 
 V. Dobbins 646, 680 
 
 De Comeau v. Guild Farm Oil Co. 192, 
 
 212 
 Dedham Bank v. Chickering 501 
 
 Dedham Sav. Inst. v. Slack 595 
 
 De Groff v. Am. Linen Tbread Co. 309, 
 
 661 
 Delacy v. Neuse Kiv. Nav. Co. 264 
 Delafield v. Kinney 951 
 
 De Lancey v. Ins. Co. 308 
 
 Delano v. Smith Charities 473 
 
 Delaware & Atlantic E. R. Co. v. 
 
 Irick 120, 339, 878, 1024 
 
 Delaware & Hudson Canal Co. :;. 
 
 Penn. Coal Co. 606 
 
 Delaware & Earitan Canal Co. v. 
 
 Camden & Atl. R. R. Co. 998 
 V. Earitan, &c. E. E. Co, 1050 
 
 Delaware & Sch. Canal Nav. v. 
 
 Sansom 123, 161 
 
 Delaware Div. Canal Co. v. Com- 
 monwealth 20 
 Delaware, L., & W. R. R. Co. v. 
 
 Erie Ey. Co. 1100 
 
 V. Oxford Iron Co. 198 
 
 Delaware R. E. Co. v. Tharp 381, 1073 
 Delaware Eailroad Tax 308 
 
 Demlng ;;. Bull 853 
 
 Den V. Vreelandt 323 
 
 Denike v. New York, &o. Lime Co. 267, 
 
 269 
 Denny v. Manhattan Co. 537, 538 
 
 Densmore Oil Co. v. Densmore 520 
 Dent V. London Tramways Co. 429, 431 
 Dent's Case 796 
 
 Denton v. Jackson 6, 20 
 
 V. Livingston 219 
 
 V. Macneil 99, 106 
 
 Denver v. Mullen 721, 735 
 
 De Pass's Case 169, 832 
 
 Depeau v. Humphreys 928 
 
 De Peyster v. Am. Fire Ins. Co. 413, 836 
 Derby Tump. Co. v. Parks 1014 
 
 Derrickson v. Smith 877 
 
 De Euyter v. St. Peter's Church 772 
 Desdoity, Ex parte 459 
 
 Des Moines Gas Co. v. West 223, 592, 
 788, 823 
 Des Moines Valley E. E. Co. v. 
 
 Graff 80 
 
 De Sobry v. Nicholson 937 
 
 Despatch Line of Packets v. Bel- 
 lamy Mfg. Co. 321, 323, 474,479, 498, 
 606, 607 
 
 Desper v. Continental Water Meter 
 
 Co. 939 
 
 Detroit v. Dean 256 
 
 V. Detroit, &c. Plank E. Co. 1067 
 
 V. Mut. Gas L. Co. 832, 892 
 
 Detroit, &c. E. E. Co. v. Starnes 810 
 
 Detroit Daily Post Co. v. Mc- 
 
 Arthur 697, 698 
 
 Detroit Schuetzen Bund v. Detroit 
 
 Agitations Vereiu 725 
 
 Deveaux, Re 18, 28 
 
 Dewing v. Perdicaries 203, 205 
 
 De Witt V. Hastings 66, 391, 705, 745 
 Dexter & M. Plank E. v. Millerd 131 
 Dey V. Jersey City 499 
 
 Diamond Match Co. v. Powers 922 
 
 Diana v. Virginia, &e. Ins. Co. 943 
 
 Dickenson v. Chamber of Com- 
 merce 464 
 Dickinson v. Central Nat. Bank 190, 
 
 193 
 
 V. Dudley 187 
 
 V. Valpy 338 
 
 Dietrich v. Madison Relief Ass. 666 
 
 Diggle V. London, &c. Ey. Co. 821 
 
 Dill V. Wareham 691, 693 
 
 Dillingham v. Snow 37 
 
 Diman v. Providence, &c. E. E. Co. 63 
 
 Dimpfel v. Ohio & Miss. Ey. Co. 256, 
 
 681, 901 
 
 Dingman v. People 1018, 1044 
 
 Dinsmore v. Philadelphia, &c. E. E. 
 
 Co. 7, 952 
 
 Direct U. S. Cable Co. v. Dominion 
 
 Tel. Co. 920 
 
 Disderi's Case 796 
 
 District Atty. v. Lynn & Boston 
 
 R. E. Co. 1000 
 
 Diven v. Lee 864 
 
 Diversey v. Smith 849 
 
 Dixon V. Evans 293 
 
 Dixon County v. Field 580, 581 
 
 Dobson, Ex parte 174 
 
 V. Simonton 739, 988 
 
 Dockery v. Miller 309 
 
 Dodge V. Council Bluffs 929 
 
 V. Pyrolusite, &c. Co. 833 
 
 V. Woolsey 232, 239, 244, 245, 246, 
 258, 260, 261, 1016 
 Doev. Chambers 323 
 
 V. Knight 678 
 
 Doloret w. Eothschild 214 
 
 Doman's Case 783 
 
 Domestic Sewing Mach. Co. v. Hat- 
 field 632 
 Donadi v. New York, &c. Ins. Co. 941 
 Donnellu. Lewis County Sav. Bank 325, 
 506, 566 
 Donworth v. Coolbaugh 858 
 Dooley v. Cheshire Glass Co. 720 
 V. Wolcott 721 
 Doolittle V. Marsh 853 
 
TABLE OF CASES. 
 
 XXIX 
 
 Doremus v. Dutch Keformed 
 
 Church 995 
 
 Dorman v. Jacksonville Plank R. 
 
 Co. 116 
 
 Dorris v. Sweeney 63, 67 
 
 Borsey, &c. Rake Co. v. Marsh 351 
 Doss V. Missouri, &c. R. R. Co. 700 
 Dossett V. Harding 814 
 
 Doty V. Michigan Central R. R. Co. 941 
 Dougan's Case 376, 552 
 
 Douglas County Commrs. v. Bolles 580, 
 
 720 
 Douglass V. Ireland 405 
 
 Dousraan v. Wise. & Lake Sup. Mg. 
 
 & Sm. Co. 264 
 
 Dover V. Portsmouth Bridge Co. 996 
 
 Dow V. Clark 469 
 
 Downes v. Ship 595 
 
 Downie v. White 292 
 
 Downing u. Marshall 312, 315 
 
 u. Mt. Washington Road Co. 374, 
 
 686, 666, 667, 669 
 
 V. Potts 122, 457, 458, 459, 460 
 
 Dows V. Naper 76, 590, 726 
 
 Dowse's Case 783 
 
 Doyle V. Continental Ins. Co. 930, 931, 
 
 953, 961 
 
 V. Mizner 28, 29, 498, 499, 721 
 
 V. Peerless Petroleum Co. 995 
 
 Draper v. Springfield 937 
 
 V. Stone 214 
 
 Drinkwater v. Deakin 459 
 
 V. Portland Marine Ry. Co. 848 
 
 Driscoll V. West Bradley, &c. Mfg. 
 
 Co. 197, 198, 199, 471 
 
 Droitwich Salt Co. v. Curzon 408 
 
 Drummond's Case 71 
 
 Drury v. Cross 757 
 
 Dryden v. Kellogg 853, 856 
 
 Ducat V. Chicago 930, 934 
 
 Duckworth, Re 834 
 
 Dudley v. Kentucky High School 237, 
 
 238, 447, 609 
 
 V. Price 993 
 
 Duke V. Andrews 70 
 
 V. Cahawba Nav. Co. 76, 174, 202 
 
 Duncan v. Jaudon 180 
 
 V. Maryland Sav. Inst. 306 
 
 Dunoomb v. N. Y., &o. R. R. Co. 334, 494 
 
 Duncuft V. Albrecht 214, 220 
 
 Dunham v, Isett 892 
 
 Dunkerson, Re 467 
 
 Dunn V. Kyle 527, 534 
 
 V. University 20 
 
 Dunne v. English 485 
 
 Dunstou V. Imperial Gas L. Co. 467 
 
 Dupee V. Boston Water Power 
 
 Co. 319, 351 
 
 Durand v. New Haven, &c. Co. 1060 
 
 Durant v. Kennett 6, 227, 1053 
 
 Durfee v. Old Colony, &c. R. R. 
 
 Co. 237, 384, 385, 448 
 
 Durham v. Monumental Silver Mg. 
 
 Co. 210 
 
 Dutch West India Co. v. Van 
 
 Moses 339, 920 
 
 Dutcher v. Importers, &c. Nat. 
 
 Bank 773 
 
 V. Marine Nat. Bank 842, 843 
 
 Dutchess Cotton Mfg. Co. v. Davis 131, 
 
 340, 711, 723 
 
 Dutchess & C. C. R. R. Co. v. Mab- 
 
 bett 62 
 
 Duviergier v. Fellows 165 
 
 Dyck ;;. McQuade 800 
 
 Dyer v. Walker 974 
 
 Dyte V. St. Pancras Board of 
 
 Guardians 321 
 
 E. 
 
 Eagle Chair Co. v. Kelsey 739 
 
 Eagle Works v. Churchill 41 
 
 Eaglesfield v. Londonderry 542, 545 
 Eakright v. Logansport, &c. R. R. 
 
 Co. 32, 62, 78, 97, 147, 151 
 
 Earp's Appeal 439 
 
 East Anglican Ry. Co. v. Eastern 
 
 Counties Ry. Co. 575, 676 
 
 East Boston Freight R. R. Co. v. 
 
 Eastern R. R. Co. 891 
 
 East Hartford ». Hartford Bridge 
 
 Co. 1051 ■ 
 
 East New Zork, &c. R. R. Co. v. 
 
 Lighthall 403 
 
 East Pant Du Mg. Co. v. Merry- 
 weather 451 
 East Pascagoula Hotel Co. v. 
 
 West 710, 723 
 
 East River Nat. Bank v. Hoyt 509 
 
 V. Judah 951 
 
 East St. Louis v. East St. Louis 
 
 Gas. L. Co. 688 
 
 V. St. John 308 
 
 East Tenn. & Va. R. R. Co. v. 
 
 Evans 912 
 
 V. Gammon 97, 237 
 
 V. Rogers 361 
 
 East Tennessee Iron Mfg. Co. o. 
 
 Gaskel 719 
 
 East & West India Docks, &c. Ry. 
 
 Co. V. Dawes 355 
 
 Eastern Archipelago Co. v. Regina 1072 
 
 Eastern Counties Ry. Co. v. 
 
 Hawkes 302, 374, 564, 572, 574, 
 
 592, 649, 651, 655, 673, 674, 676 
 
 Eastern Plank R. Co. v. Vaughan 32, 
 
 50, 122 
 Eastern R. R. Co. v. Boston & 
 
 Maine R. R. Co. 1051 
 
 V. Loring 775 
 
 Eastham v. Blackburn Ry. Co. 340 
 
 Easton v. Lehigh Water Co. 1097 
 
XXX 
 
 TABLE OF CASES. 
 
 Eaton V. Aspinwall 722 
 
 V. Avery 544 
 
 V. St. Louis, &c. Mg. Co. 944 
 
 Eaton & Hamilton K. R. Co. v. 
 
 Hunt 911, 956, 961 
 
 Eby V. Northern Pao. R. R. Co. 939 
 
 Eclipse Towboat Co. t. Pontchar- 
 
 train R, R. Co. 1079 
 
 Edgerly v. Emerson 498, 499 
 
 Edinboro Academy v. Robinson 49, 51, 
 
 52 
 
 Edinburgh, &c. Ey. Co. v. Philip 1091 
 
 Edwards v. Fairbanks 645, 681 
 
 V. Grand Junction Ry. Co. 525 
 
 u. Hall 218 
 
 V. Kearsey 1023 
 
 V. Shrewsbury, &c. Ry. Co. 246 
 
 Egberts v. Woods " 837 
 
 Elile V. Chittenango Bank 421 
 
 Ehrenfeldt's Appeal 456 
 
 Ehrman v. Teutonia Ins. Co. 633, 944 
 
 V. Union Central Ins. Co. 606, 670, 
 
 682 
 
 Eidman o. Bowman 427, 479 
 
 Einstein v. Rosenfeld 260 
 
 Elder v. First Nat. Bank 639 
 
 Eldridge v. Smith 857, 358, 
 
 894 
 Eley V. Positive, &c. L. Ass. Co. 469 
 Elizabeth City Academy v. Lind- 
 
 sey 722 
 
 •Elkins V. Camden, &e. R. R. Co. 237, 
 
 246, 260, 428, 429, 518 
 
 Elliott V. Richardson 451 
 
 Elliott Nat. Bank v. Western, &c. 
 
 R. R. Co. 562 
 
 Ellis V. Marshall 25 
 
 Ellison V. Mobile & Ohio E. R. Co. 95, 
 
 97 
 Ellsworth u. St. Louis, &c. R. R. 
 
 Co. 567, 648, 922, 927 
 
 Elmore v. Naugatuck E. E. Co. 361 
 Elston V. Piggott 632, 921 
 
 Elwell V. Dodge 606, 645 
 
 Ely V. Sprague 420 
 
 Emerson v. McCormick, &c. Mach. 
 
 Co. 944 
 
 Emma Silver Mg. Co. v. Grant 522 
 Emraert v. Smith 869 
 
 Emniitt v. Springfield, &o. E. E. Co. 149 
 Empire Ass. Co., Re 394 
 
 Empire City Bank, Re 824, 869, 1061 
 Empire Mfg. Co. v. Stuart 720, 727 
 Enfield Toll Bridge Co. v, Connecti- 
 cut Eiver Co. 971, 974 
 V. Hartford & N. H. R. R. Co. 1018 
 Episcopal Char. Soc. v. Episcopal 
 
 Church . 339, 601, 691 
 
 Eppes V. Mississippi, &c. R. R. Co. 120, 
 
 147, 403 
 
 Eppright V. Nickerson 481, 789, 790 
 
 Era Fire & L. Ass. Co. 898 
 
 Erickson v. Nesraith 297, 848, 854, 864, 
 872, 873 
 Erie & N. Y. City R. R. Co. v. Pat- 
 rick 158 
 Erie & North East R. R. Co. v. 
 
 Casey 1072, 1073, 1098 
 
 Erie & W. Plank Road Co. v. Brown 65, 
 
 84, 712 
 Erie City Iron Works v. Barber 697 
 Erie Railway Co. v. State 932 
 
 Erianger v. New Sombrero Plios. 
 
 Co. 520 
 
 Ernest v. Croysdill 689 
 
 V. Nicholls 398, 480, 562, 571 
 
 Brvin v. Oregon Ey. & Nav. Co. 248, 
 253, 451, 945 
 Eslava v. Ames Plow Co. 1052 
 
 Essex Bridge Co. v. Tuttle 131, 135 
 Essex Tump. Co. v. Collins 64 
 
 Estabrook, £a; parte 563 
 
 Estell V. Knightstown, &o. Tump. 
 
 Co. 145 
 
 V. University 399 
 
 Estes V. Belford 942, 946 
 
 Etherington v. Wilson 459 
 
 Etna, &c. See ^tna, &o. 
 Eureka Co. v. Bailey Co. 323 
 
 Eureka Ins. Co. o. Parks 633 
 
 European & N. A. E. R. Co. v. 
 
 Poor 484 
 
 European Assurance Soc, Re 783 
 
 European Life Ass. Co., Re '269 
 
 Evans v. Brandon 538 
 
 V. Coventry 767 
 
 V. Lee 584 
 
 V. Osgood 454 
 
 V. Philadelphia Club 263 
 
 V. Smallcombe 591, 595, 598, 713 
 
 V. Wood 175 
 
 Evans's Case 71 
 
 Evansville, Indianapolis, &c. R. E. 
 
 Co. V. Dunn 81, 90 
 
 V. Evansville 418, 719 
 
 V. Posey 78, 97 
 
 V. Shearer 80 
 
 Evansville Nat. Bank v, Metrop. 
 
 Nat. Bank 198, 367 
 
 Evarts v. Killingworth Mfg. Co. 972 
 Evening Journal Ass. v. McDer- 
 
 mott 697 
 
 Everett v. Smith 449 
 
 V. United States 321, 563 
 
 Everhart v. West Chester, &e. E. E. 
 
 Co. 168, 378, 379 
 
 Ewardu. Lawrenceburgli, &c. E. E. 
 
 Co. 308 
 
 Ewing </. Board of Education of 
 
 Jefferson City 999 
 
 V. Oroville Mg. Co. 404 
 
 Excelsior Grainbinder Co. v. Stay- 
 
 ner 71, 72 
 
 Excelsior Petroleum Co. v. Lacey 533 
 
TABLE OF CASES. 
 
 XXXI 
 
 Exeter & Crediton By. Co. v. Bul- 
 
 ler 242 
 
 Exeter Bank v. Rogers 501 
 
 Express Co. v. Railroad Co. 309, 564 
 Exton V. Scott 678 
 
 Eyerman v. Krieckhaus 763 
 
 Eyton V. Denbigh, &c. Ry. Co. 840 
 
 F. 
 
 Factage Parisien, Re 391 
 
 Factors', &c. Ins. Co. v. Marine Dry 
 
 Docks, &c. Co. 184, 185 
 
 Fairchild v. Masonic Hall Ass. 389, 845 
 Fairfield County Tump. Co. v. 
 
 Thorp 78, 229 
 
 Falconer v. Campbell 16 
 
 Fallon V. Railroad Co. 1102 
 
 Fall River Iron Works i'. Old Col- 
 ony, &c. R. E. Co. 378 
 Family Endowment Soc, Re 777 
 Faneuil Hall Bank u. Bank of 
 
 Brighton 563, 638 
 
 Fanning v. Hibernia Ins. Co. 68 
 
 Fareira v. Riter 237 
 
 Fargo V. Louisrille, &c. Ry. Co. 952 
 V. McVicker 952 
 
 Farmers' & Citizens' Bank v. Payne 513 
 Farmers' & Drovers' Bank v. Wil- 
 liamson 720 
 Farmers' & Mechanics' Bank v. 
 
 Baldwin 368, 682 
 
 V. Little 988 
 
 Farmers' & Mechanics' Bank of 
 Kent County v. Batchers', &c. 
 Bank 563, 654 
 
 Farmers' & Mechanics' Nat. Bank 
 
 V. Dearing 11, 637, 946 
 
 Farmers' & Mechanics' Tump. Co. 
 
 V. McCullough 323 
 
 Farmers' &Meroh. Bank u-Wasson 166, 
 
 192, 197 
 
 V. Williamson 720 
 
 Farmers' & Merch. Ins. Co. v. Har- 
 
 rah , 632 
 
 Farmers' & Traders'' Bank v. Har- 
 rison 635,666,670 
 Farmers' Bank of Fayetteville v. 
 
 Hale 635, 637 
 
 Farmers' Bank of Md. v. Iglehart 198 
 
 Farmers' Loan & T. Co. v. Clowes 309 
 
 V. Curtis 309, 564 
 
 V. Fire Ins. Co. 317 
 
 V. Henning 1099 
 
 V. McKinney 021 
 
 V. Perry 309 
 
 V. St. Joseph, &c. R. E. Co. 690, 691 
 
 i;. Stone 1038 
 
 Farmers' Mut. F. Ins. Co. v. Chase 146, 
 
 aOl, 503 
 
 V. Taylor 605 
 
 Farmers' Nat. Gold Bank v. Wilson 196 
 Farmington Sav. Bank v. Fall 641 
 
 Farnham v. Delaware, &c. Canal 
 
 Co. 736 
 
 Farnsworth v. Wood 842 
 
 Farnum v. Ballard Vale Machine 
 
 Shop 864 
 
 V. Patch 718 
 
 Farrar v. Perley 462 
 
 V. Walker 107, 814 
 
 Farrel Foundry v. Dart 513 
 
 Farrington v. Tennessee 1010, 1016, 
 
 1023 
 Farrow v. Bivingo 297 
 
 Faulds V. Yates 261, 451 
 
 Fawcett v. Laurie 262 
 
 V. New Haven Organ Co. 476 
 
 Fay V. Noble ' 327, 335, 560, 717 
 
 Featherstone v. Cooke 259, 266 
 
 Featherstonhaugh v. Lee Moor, &c. 
 
 Co. 354, 394, 965 
 
 Fee V. New Orleans Gas Light Co. 909 
 
 Feital v. Middlesex E. R. Co. 361 
 
 Fellows V. Miner 928 
 
 Fenwick's Case 825 
 
 Ferguson v. Paschall 213 
 
 V. Wilson 214, 248, 249 
 
 Ferrao's Case 796 
 
 Ferris v. Strong 26, 710 
 
 V. Thaw 718 
 
 Fertilizing Co. o. Hyde Park 307, 308, 
 
 1027, 1028 
 
 Ffooks V. South Western Ry. Co. 249, 
 
 251, 252, 253, 254 
 
 Fidelity Ins. Co. v. Niven 920 
 
 Field V. Chicago & E. I. R. R. Co. 361 
 
 V. Cooks 28, 717, 718 
 
 V. Crawford 469 
 
 V. Field 449 
 
 Fielden v. Lancashire, &c. Ry. Co. 429 
 
 Figes V. Cutler 46 
 
 Filder «. London, &c. Ry. Co. 249 
 
 Financial Corporation, Holmes's 
 
 Case, Re 408 
 
 Fine v. Hornsby 220 
 
 Finley Shoe, &c. Co. v. Kurtz 479 
 
 Fire Department v. Kip 26 
 
 V. Noble 931 
 
 Fireman's Ins. Co., Ex parte 210 
 
 First Municipality of N. 0. v. Or- 
 leans Theatre Co. 116 
 First Nat. Bank of AUentown v. 
 
 Hoch 368 
 
 V. Rex 370 
 
 First Nat. Bank of Barre v. Hing- 
 
 ham Mfg. Co. 824 
 
 First Nat. Bank of Carlisle v. Gra- 
 ham 370, 508 
 First Nat. Bank of Cedar Rapids v. 
 
 Hurford 102 
 
 First Nat. Bank of Charlotte v. 
 Charlotte 119, 385 
 
xxxu 
 
 TABLE OP CASES. 
 
 First Nat. Bank of Charlotte v. 
 Nat. Exchange Bank 305, 368, 
 369, 401, 407 
 First Nat. Bank of Columbus v. 
 
 Garlinghouse 637 
 
 First Nat. Bank of Davenport v, 
 
 Davies 32 
 
 V. Gifford 173, 183, 485, 514 
 
 First Nat. Bank of Ft. Dodge v. 
 
 Haire 367 
 
 First Nat. Bank of Ft. Scott v. 
 
 Drake 469, 475, 489 
 
 First Nat. Bank of Hartford v. 
 
 Hartford, &c. Ins. Co. 195 
 
 First Nat. Bank of Hightstown v. 
 
 Christopher 514 
 
 First Nat. Bank of Lyons v. Ocean 
 
 Nat. Bank 370 
 
 First Nat. Bank of New Orleans v. 
 
 Bohne 948 
 
 First Nat. Bank of Omaha v. Doug- 
 las County 948 
 First Nat. Bank of Plymouth v. 
 
 Price 877 
 
 First Nat. Bank of Rochester v, 
 
 Harris 368 
 
 V. Pierson 368, 682 
 
 First Nat. Bank of Eock Island v. 
 
 Loyhed 948 
 
 First Nat. Bank of Salem v. Almy 717 
 First Nat. Bank of Selma v. Colby 778 
 First Nat. Bank of South Bend v. 
 
 Lanier 188, 184, 198, 367, 465 
 
 First Nat. Bank of Springfield v. 
 
 Fricke 598 
 
 First Nat. Bank of Sturgis v. Reed 492, 
 
 601 
 First Nat. Bank of Trenton v. Gil- 
 
 lilan 681 
 
 First Nat. Bank of Wellsburg v. 
 
 Kimberlands 504, 505, 594 
 
 First Nat. Bank of Whitehall v. 
 
 Lamb 637 
 
 First Parish in Brunswick v. Dun- 
 ning 4 
 First Parish in Sudbury v. Stearns 458 
 First Parish in Sutton v. Cole 340 
 Fiser v. Miss. & Tenn R. R, Co. 71, 72 
 V. Miss. Central R. R. Co. 707 
 Fisher, Ex parte 36 
 V, Brown 180 
 V. Bush 451 
 V. Essex Bank 170, 193, 195, 899 
 V. Evansville, &o. R. R. Co. 147 
 V. Keane 464 
 V. Marvin 862 
 V. Metropolitan El. Ry. Co. 1087 
 U. New York Cent. &c. R. R. 
 
 Co. 904, 1087 
 
 V. Seligman 822 
 
 Fisheries Commissioners «. Holy- 
 oke Water Power Co. 1061, 1072 
 
 Fishkill Sav. Inst. v. Nat. Bank 697, 698 
 Fisk V. Chicago, &c. R. R. Co. 291, 959 
 V. Union Pac. R. R. Co. 766, 988 
 Fitchburg & Wore. R. R. Co. v. 
 
 Hanna 363 
 
 Fitcliburg R. R. Co. v. Gage 1079 
 
 V. Grand Junction R. R. Co. 1060, 
 1061 
 Fitchburg Sav. Bank v. Torrey 174 
 Flagg V. Manhattan Ry. Co. 479, 497 
 Flagler Engraving, &c. Co. v. 
 
 Flagler 275 
 
 Flagstaff, &c. Mg. Co. v. Patrick 603, 
 
 559 
 Flanagan v. Great Western Ry. 
 
 Co. 355, 484, 490 
 
 Flash V. Conn 847, 856, 866 
 
 Fleckner v. Bank of U. S. 305, 320, 321, 
 323, 501, 594, 635 
 Fletcher v. Peck 1010 
 
 Flint V. Clinton Co. 772 
 
 V. Pierce 469 
 
 Flint, &o. Plank R. Co. v. Wood- 
 hull 1073 
 Flint & Pfere Marquette R. R. Co. 
 
 V. Dewey 484, 489 
 
 Floyd Acceptances, The 571 
 
 Flynn v. Hudson River R. R. Co. 941 
 
 Fogg V. Griffln 697 
 
 Folger V. Chase 993 
 
 V. Columbian Ins. Co. 950, 970, 
 
 995 
 
 Foil's Appeal 213, 451 
 
 Follett V. Field 269 
 
 Foote V. Cunard Mg. Co. 256 
 
 Forbes v. Marshall 327 
 
 V. Memphis, &c. R. R. Co. 232 
 
 V. Whitlock 538 
 
 Forbes & Judd's Case 796 
 
 Ford V. Harington 4 
 
 Foreman v. Bigelow 796, 810 
 
 Forrest v. Elwes 214 
 
 V. Manchester, &c. Ry. Co. 249, 
 
 358 
 
 Fort Edward & F. M. Plank R. Co. 
 
 V. Payne 81, 131, 137 
 
 Fosdick V. Sturges 291 
 
 Foss V. Harbottle 235, 239, 240, 241, 244 
 
 Foster v. Essex Bank 370, 1039 
 
 V. Fowler 1088 
 
 V. McKinnon 96 
 
 V. Ohio, &c. Mg. Co. 476 
 
 V. Shaw 823 
 
 Fothergill's Case 796 
 
 Foulke V. San Diego, &o. Ry. Co. 691, 
 
 692 
 Fountain Ferry Turnp. Co. v. 
 
 Jewell 267 
 
 Fountaine v. Carmarthen Ry. Co. 328, 
 
 562, 565, 573, 577, 648 
 
 Four Mile Valley R. R. Co. v. 
 
 Bailey 117 
 
TABLE OF CASES. 
 
 xxxm 
 
 Fowle V. Ward 
 
 214 
 
 Fowler v. Chichester 
 
 699 
 
 V. Scully 
 
 868 
 
 Fox, Re 
 
 1054 
 
 V. Clifton 
 
 140 
 
 V. Horah 
 
 989, 991 
 
 Fraiico-Texan Land Co. v. Laigle 461, 
 553, 613 
 Frank v. Drenkhahn 227 
 
 Frankfort Bank v. Johnson 399, 589 
 Franklin v. Twogood 712, 721 
 
 Franklin At., &c. Sav. Inst. u. Bd. 
 
 of Education 340, 682 
 
 Franklin Bank «. Commercial 
 
 Bank 407, 649 
 
 V. Cooper 1039 
 
 Franklin Bridge Co. v. Wood 11, 17, 18 
 
 Franklin Bldg. Ass. v. Marsh 308 
 
 Franklin County v. Eewiston Sav. 
 
 Inst. 407, 666 
 
 Franklin Fire Ins. Co. v. Hart 27, 56, 
 
 138, 523 
 
 V. Jenkins 535 
 
 Franklin Glass Co. u. Alexander 185 
 
 V. White 135 
 
 Franklin Tel. Co., Re 981 
 
 Franks Oil Co. v. McCIeary 161 
 
 Fraser v. Charleston 189, 192 
 
 V. Ritchie 769 
 
 V. Whalley 245, 261, 452 
 
 Frazer, Ex parte 15 
 
 Frazier v. Willcox 920 
 
 Freehold Mut. Loan Ass. w. Brown 1071 
 
 Freeland u. McCuUough 862 
 
 V. Pennsylvania Central Ins. 
 
 Co. 722, 726 
 
 Freeman v. Fairlie 444 
 
 V. Machias Water Power, &c. 
 
 Co. 461, 592 
 
 V. Matlock 80 
 
 V. Stine 765, 808 
 
 Freeman's Bank v. Euckman 920 
 
 Free Schools, &c. v. Flint 466 
 
 French v. Donohue 742 
 
 V. First Nat. Bank 322 
 
 V. Fuller 537 
 
 V. Quincy 353 
 
 V. Teschemaker 844 
 
 Frend v. Dennett 322 
 
 Freon v. Carriage Co. 209, 210 
 
 Friedlanderi). Slanghter-House Co. 180, 
 
 195 
 Friedman v. Gold & Stock Tel. 
 
 Co. 1092 
 
 Frost V. Belmont 523 
 
 V. Domestic Sewing Mach. Co. 697 
 
 V. Frostberg Coal Co. 26 
 
 V. Walker 718, 722 
 
 Frothingham v. Barney 394, 990 
 
 Frue V. Houghton 214 
 
 Fry V. Lexington, &c. K. E. Co. 55, 
 
 118, 120, 131, 158 
 
 VOL. I. — C 
 
 Fry's Exrs. v. Lexington, &c. E. R. 
 
 Co. 378 
 
 Frye v. Tucker 336 
 
 Fulgam V. Macon, &c. R. E. Co. 56, 
 
 149 
 
 Fuller V. Ledden 862, 866 
 
 V. Naugatuck R. E. Co. 666 
 
 0. Rowe 717 
 
 FuUerton v. Kelliher 972 
 
 Fulton Bank v. N. Y. & Sharon 
 
 Canal Co. 476, 504, 511, 512, 513 
 Fulton County v. Mississippi, &c. 
 
 R. R. Co. 119, 376 
 
 Furman v. Nichol 786 
 
 Furniss v. Gilchrist 327 
 
 Fusz V. Spaunhorst 539, 541, 765 
 
 Fyfe's Case 216,828 
 
 G. 
 
 Gaff V. Flesher 159, 722, 723, 830, 992 
 Gage V. Newmarket Ry. Co. 377 
 
 Gaines v. Coates 308 
 
 Gale V. Leckie 46 
 
 Galena, &c. R. R. Co. v. Loomis 1022, 
 
 1026 
 Gallery v. National Exchange Bank 485 
 Galvanized Iron Co. v. Westoby 67 
 Galveston City Co. v. Sibley 185 
 
 Galveston, Harrisbnrg, & San Anto- 
 nio Ry. Co. V. Donahoe 700 
 Galveston, Houston, & Henderson 
 
 R. R. Co. V. Cowdrey 500, 578 
 
 Gano V. Chicago, &c. Ey. Co. 564 
 
 Garden Gully U. Q. Mg. Co. ... Me- 
 
 Lister 122, 123 
 
 Gardener v. Pullen 214 
 
 Gardiner v. Pollard 536, 538 
 
 Gardner v. Board of Health 7 
 
 u. Butler 485, 491, 493 
 
 u. Hamilton Mut. Ins. Co. 24, 704 
 
 V. James 960, 962 
 
 V. London, &c. Ry. Co. 676 
 
 Garnett v, Richardson 717 
 
 Garrett v. Dillsburg, &c. E. E. Co. 58, 
 
 72, 73 
 Garrison v. Combs 321 
 
 V. Howe 853, 866, 877 
 
 Garstin's Case 169 
 
 Gartside Coal Co. o. Maxwell 717 
 
 Garvin v. Wiswell 187 
 
 Gashwiler v. Willis 448, 478 
 
 Gaskell v. Chambers 485, 493 
 
 Gaskill V. Dudley 858 
 
 Gause v. Clarksville 689 
 
 Gay V. Keys 854 
 
 Gaylord ii. Fort Wayne, &o. E. E. 
 
 Co. 975 
 
 Gelpcke v. Blake 2, 816 
 
 V. Dubuque 573 
 
 General Estates Co., Re 325, 337, 563 
 
XXXI V 
 
 TABLE OF CASES. 
 
 General Exchange Bank, Re 201 
 
 V. Horner 485, 535 
 
 General Ins. Co. of Md. v. U. S. Ins. 
 
 Co. of Bait. 514 
 
 General Provident Ins. Co., Re 553, 
 
 554 
 General South American Co., Re 554 
 Genesee County Sav. Bank w. Mich. 
 
 Barge Co. 477, 567 
 
 Gent V. Manufacturers', &c. Ins. 
 
 Co. 228 
 
 Georgetown v. Alexandria Canal 
 
 Co. 996, 1000 
 
 Georgetown College v. Browne 343 
 Georgia Ice Co. v. Porter 711 
 
 Georgia B. R. Co. v. Smith 1035 
 
 Gerhard v. Bates 543 
 
 German Bank v. Stumpf 743 
 
 German Ev. Congregation, &c. v. 
 
 Pressler 463, 468, 498 
 
 German Ins. Co. v. Stralil 737 
 
 German Mining Co., Re 328, 329, 330, 
 
 331, 685 
 
 German Savings Bank v. Wulfe- 
 
 kuhler 111 
 
 German Security Bank v. JeflEerson 201 
 German Union Bldg., &c. Ass. v, 
 
 Sendmeyer 212 
 
 Germania Fire Ins Co. v. Francis 987, 
 
 961 
 Germantown Farmers' Mut. Ins. 
 
 Co. V. Dhein 639, 666, 670 
 
 Germantown Pass. Ey. Co. v. Fitter 122, 
 128, 792 
 Getty V. Devlin 280 
 
 Geyer v. Western Ins. Co. 198 
 
 Gibbes v. Greenville, &c. R. R. Co. 784, 
 
 786 
 Gibbons v. Ogden 1011 
 
 Gibbs ?;. Queen Ins. Co. 944, 946 
 
 Gibbs & West's Case 327 
 
 Gibson v. Columbia & N. R.Turnp. 
 
 & Br. Co. 117 
 
 V. D'Este 103 
 
 V. Goldthwaite 481 
 
 GifEord v. New Jersey R. R., &c. 
 
 Co. 246, 448, 590 
 
 V. Thompson 160 
 
 Gilbert v. Manchester Iron, &c. 
 
 Co. 174 
 
 V. Nantucket Bank 341 
 
 Gilbert's Case 159, 167, 832 
 
 Gilfillan v. Union Canal Co. 784, 1043 
 
 Gill V. Balis 109, 795, 815 
 
 Gillett V. Bowen 537 
 
 1 1 ». Missouri Valley R. R. Co. 698 
 
 V. Moody 760 
 
 Gillig V. Independent, &c. Mining 
 
 Co. 941 
 
 Gillis V. Bailey 501 
 
 Gilman v. Sheboygan, &c. R. R. 
 Co. 782 
 
 Gilman, C, & S. R. R. Co. ». Kelly 484, 
 487, 488, 493 
 Gilmer v. Grand Rapids 937 
 
 Gilmore v. Norton 15 
 
 Ginger, Ex parte 814 
 
 Ginrieh v. Patrons' Mill Co. 33 
 
 Girard Point Storage Co. v. South- 
 
 wark Foundry Co. 1088 
 
 Glaize v. South Carolina R. R. Co. 941 
 Glamorganshire Iron, &c. Co. v. 
 
 Irvine 99, 103 
 
 Glass V. Tipton Tump., &c. Co. 339 
 Gleadow v. Hull Glass Co. 351 
 
 Glen V. Breard 717 
 
 Glen Iron Works, Re 790, 791, 838 
 Glenn v. Dorsheimer 789, 790, 793 
 
 V. Soule 793 
 
 V. Williams 793, 840 
 
 Godbold V. Branch Bank at Mobile 526, 
 
 532 
 Goddard v. Grand Trunk R. R. Co. 699, 
 
 701 
 V. Merchants' Exchange 464 
 
 Godfrey v. Terry 857, 873 
 
 Goff V. Winchester College 49, 51 
 
 Gold Co., Re 275 
 
 Gold Mg. Co. V. National Bank 601, 
 602, 639, 663 
 Goldsmith v. Home Ins. Co. 930 
 
 V. Sachs 46 
 
 V. Swift 437, 441 
 
 Gooch V. McGee 1088 
 
 Good Hope Co. v. Ry. Barb Fen- 
 cing Co. 942, 946 
 Goodin v Cincinnati, &c. Canal Co. 451, 
 
 497 
 
 Goodloe V. Godley 512 
 
 Goodrich v. Reynolds 22, 102, 103, 336, 
 
 400, 620, 720 
 
 Goodspeed v. East Haddam Bank 697, 
 
 698 
 Goodwin v. Colorado, &c. Invest- 
 ment Co. 631 
 V. Hardy 160 
 o. McGehee 756, 834 
 V. Roberts 187 
 V. Union Screw Co. 321, 605 
 Gordon v. Preston 332, 553, 598 
 V. Richmond, &c. R. R. Co. 428, 
 430 
 j;. Sea Fire Ass. Co. 565 
 V. Winchester Bldg., &c. Ass. 1019 
 Gorman v. Pacific R. R. Co. 1022, 1026 
 Goshen & M. Tump. Co. v. Hurtin 71, 
 
 • 131 
 Goshorn v. Ohio County 959 
 
 Gospel Society. See Society for 
 
 Propagation, &c. 
 
 Gott V Dinsmore 848 
 
 Gould V. Langdon 908 
 
 V. Oneonta 448 
 
 Goulding v. Clark 454, 677, 781 
 
TABLE OP CASES. 
 
 XXXV 
 
 Goundie v. Northampton Water Co. 648, 
 
 680 
 Gouthwaite's Case 830 
 
 Governor v. Allen 4, 7 
 
 V. Gridley 7 
 
 Gover's Case 520 
 
 Gowen v. Penobscot R. E. Co. 1038,1044 
 Gowers's Case 293 
 
 Graff V. Pittsburgh, &e. E. U. Co. 160, 
 288, 710 
 Graham ». Birkenhead, &c. Ey. Co. 252, 
 
 769 
 V. Hendricks 306, 648 
 
 V. National Bank 640 
 
 Grain's Case 767, 783 
 
 Grand Gulf Bank v. Archer 635 
 
 V. JefEers 988 
 
 V. Wood 988 
 
 Grand Gulf R. E., &e. Co. v. Missis- 
 sippi 1072 
 Grand Lodge of Alabama v. Wad- 
 dill 374, 668, 666, 669 
 Grand Rapids Bridge Co. v. Prange 966 
 Grand Rapids Sav. Bank u. War- 
 ren 852, 858 
 Granger i'. Original Empire Mill, 
 
 &c. Co. 577, 578 
 
 Grangers' Life, &c. Ins. Co. v. Kam- 
 
 per 303', 409, 780, 954 
 
 Grangers' Market Co. «. Vinson 68 
 
 Grant v. Fancher 7 
 
 V. Henry Clay Coal Co. 76, 646, 719 
 
 V. Mechanics' Bank 199 
 
 Gratz V. Pennsylvania R. R. Co. 394 
 
 V. Redd 416, 503, 539, 760, 799 
 
 Gravenstine's Appeal 238 
 
 Gray v. Chaplin 250, 592 
 
 V. Coffin 297, 852, 1041 
 
 ■ V. Lewis 284, 242, 243 
 
 V. Monongahela Nav. Co. 340, 378 
 
 V. New York, &e. S. S. Co. 484, 492 
 
 V. Portland Bank 427 
 
 v. Quicksilver Mg. Co. 944 
 
 Grayville, &c. R. E. Co. v. Burns 509 
 
 Great Eastern Ry. Co. v. Turner 681 
 
 Great Falls & C. E. E. Co. v. Copp 135 
 
 Great North of Eng. Ey. Co. v. 
 
 Biddulph 199 
 
 Great Northern Ry. Co. v. Eastern 
 
 Counties Ry. Co. 407, 889, 1083 
 
 V. Kennedy 125, 127 
 
 V. Manchester, &c. Ey. Co. 366 
 
 Great Western Ry. Co. v. Miller 699 
 
 V. Preston, &c. Ey. Co. 375 
 
 u. Rushout 247 
 
 V, Wheeler 514 
 
 Great Western Tel. Co., Ee 335 
 
 Greaves v. Gouge 235, 248 
 
 Greeley w. Smith 988 
 
 Green v. Beckraan 844 
 
 V. Biddle 1023 
 
 V. Cady 606 
 
 Green v. Graves 16, 727 
 
 V. Seymour 22 
 
 V. Walkill Nat. Bank 971 
 
 Green Cnunty v. Conness 904, 909 
 
 Green Mount, &c. Turnp. Co. v. 
 
 Bulla 173, 210 
 
 Green Point Sugar Co. v. Whitin 642 
 Greene v. Dennis 37 
 
 Greeneville & P. R. Nar. Gauge 
 
 R. R. Co. V. Johnson 18, 116 
 
 Greenville & CoIumV E. R. Co. v. 
 
 Coleman 381 
 
 V. Smith 108 
 
 V. Woodsides 712 
 
 Greenwood v. Freight Co. 256, 284, 
 1054, 1055, 1066, 1067, 1072 
 Greer v. Chartiers Ry. Co. 58, 78 
 
 Gregory v. German Bank of Den- 
 ver ' 849, 877 
 V. Lamb 683 
 V. Patchett 241, 246, 360, 598 
 V. Shelby County 21 
 Gridley v. Barnes 849 
 Griffin v. Kentucky Ins. Co. 1069, 1072 
 Griffith V. Pag«t 430 
 V. Watson 219 
 Griffith's Case 777 
 Grissell v. Bristowe 175, 827 
 Grissfell's Case 834, 869 
 Griswold v. Peoria University 49 
 V. Seligman 821, 822, 826 
 Grocers' Bank v. Kingman 775 
 Grose v. Hilt 864 
 Gross v.V.S. Mortg. Co. 1043 
 Grosse Isle Hotel Co. v. Panson 131, 145 
 Grove v. Brien 5% 
 Grover & B S. Mach. Co. v. Butler 936 
 V. Missouri Pac. R. R. Co. 361 
 Grubb V. Mahoning Nav. Co. 147 
 Grubbs v. Vicksburg, &c. R. R. Co. 148 
 Gruber v. Washington, &c. R. E. Co. 355 
 Grund v. Tucker 858, 859, 866 
 V. Van Vlnck 699 
 Grymes v. Hone 219 
 Guaga Iron Co. v. Dawson 920 
 Gue V. Tide Water Canal Co. 884, 1083, 
 
 1088 
 Guest V. Worcester, &c. Ey. Co. 796 
 Guild «. Parker 485 
 
 Gunmakers', &c. Soc. of London v. 
 
 Fell 465 
 
 Gunn V. London, &c. Fire Ins. Co. 523 
 Gunn's Case 70 
 
 Gustard's Case 70, 217 
 
 H. 
 
 Hackensack Water Co. v. De Kay 554, 
 
 565, 695, 721 
 
 Hacketstown v. Swackhammer 671 
 
 Hackett v. Ottawa 580, 582 
 
XXXVl 
 
 TABLE OJF CASES. 
 
 Hadley v. Freedman's Savings & 
 
 Trust Co. 11, 345, 920, 946 
 V. Russell 297, 874 
 
 Hadsell v. Hancock 406 
 
 Hagaii u. Providence, &c. E. E. Co. 700 
 Hagar v. Union Nat. Bank 197, 198, 
 200, 424 
 Hager v. Cleveland 157, 713, 722, 794, 
 
 819 
 Hagerman v. Empire Slate Co. 629 
 Hague V. Dandeson 160, 176, 200 
 
 Hahnemannian Life Ins. Co. v. 
 
 Beebe 39, 343, 920 
 
 Hakim's Case 169 
 
 Hale V. Sanborn 140, 157 
 
 Ball, Ex parte 817 
 
 V. Carey 76 
 
 V. Connell 446 
 
 V. Mobile, &c. Ey. Co. 509 
 
 V. Rose Hill, &o. Co. 171 
 
 V. Selraa, &c. E. E. Co. 72 
 
 V. Sullivan R. E. Co. 620, 887, 889, 
 
 890, 1083 
 
 V. U. S. Ins. Co. 148, 160 
 
 V. Vermont, &c. E. E. Co. 523 
 
 Hall's Case 71, 293 
 
 Hall Mfg. Co. V. American Ey. 
 
 Supply Co. 661 
 
 HaUett V. Hallett 837 
 
 «. narrower 4 
 
 Hallows.!;. Fernie 98, 105 
 
 Halsey v. McLean 877 
 
 Halstead v. Dodge 321 
 
 Hambleton v. Central Ohio, &c. 
 
 E. E. Co. 204 
 
 Hamilton v. Grand Eapids, &c. 
 
 E. E. Co. 146, 498 
 
 V. Grangers' L. & H. Ins. Co. 107, 
 
 814 
 
 V. Keith 1017, 1055 
 
 V. Newcastle, &c. E. E. Co. 327, 
 
 335, 338 
 
 Hamilton & D. Plank E. Co. v. 
 
 Eice 68, 76, 137, 142, 378 
 
 Hamilton Mut. Fire Ins. Co. v. 
 
 Hobart 778 
 
 Hammett v. Little Eock, &c. E. R. 
 
 Co. 116 
 
 Hammond v. Port Eoyal, &c. Ry. 
 
 Co. 782 
 
 V. Shepard 340 
 
 V. Straus 31, 40, 41, 63, 76, 723 
 
 Hampson v. Weare 858 
 
 Hamtramck v. Bank of Edwards- 
 
 ville 720 
 
 Hand v. Savannah, &o. E. E. Co. 786 
 Handrahan v. Cheshire Iron Works 864 
 Handy v. Draper 853, 856, 876 
 
 Hanna v. Cincinnati & Ft. W. 
 
 E. R. Co. 120, 1061 
 
 V. International Petroleum Co. 925 
 
 Hannah v. Moberly Bank 790 
 
 Hannibal & St. J. R. E. Co. v. 
 
 Muder 356 
 
 Hannibal, Ralls County, &o. Plank 
 
 R. Co. V. Menefee 115 
 
 Hannibal Bridge Co. v. Schau- 
 
 backer 807 
 
 Hanover Junction & Susq. R. R. 
 
 Co. V. Blair 288 
 
 V. Haldeman 85 
 
 Hanover Water Co. v. Ashland 
 
 Iron Co. 509 
 
 Hanson v. Donkersley 852 
 
 Harbison v. First Presb. Soc. 406 
 
 Hardenburgh v. Farmers', &c. Bank 455, 
 
 460 
 
 Harding v. Chicago, &o. E, E. Co. 917 
 
 V. Vandewater 578 
 
 Hardon v. Newton 236, 266, 267 
 
 Hardy v. Merriweather 98, 117, 162, 
 
 336, 402 
 
 V. Metropolitan Land, &o. Co. 232, 
 
 689, 690 
 
 Hare v. London & N. W. Ry. Co. 248, 
 
 360, 363, 1094, 1096 
 
 Hare's Case 734 
 
 Hargroves v. Chambers 877, 881 
 
 Harlem Canal Co. v. Seixas 137, 147 
 
 Harman's Case 783 
 
 Harmon v. Page 793 
 
 Harper v. Union Mfg. Co. 856, 866, 870 
 
 Harriman v. First Bryan Bapt. Ch. 349, 
 
 690 
 V. Southam 721 
 
 Harrington v. Workiugmen's Be- 
 
 nev. Ass. 463 
 
 Harris v. McGregor 28 
 
 V. Mississippi Valley, &c. E. R. 
 
 Co. 969, 984 
 
 V. Muskingum Mfg. Co. 971 
 
 V. Runnels 625 
 
 V. San Francisco, &c. Co. 178 
 
 Harris's Case 46, 70 
 
 Harrison v. Mexican Ry. Co. 264, 290, 
 
 432, 433 
 
 Harrison's Case 159, 169 
 
 Harrod v. Hamer 28, 29, 31, 717 
 
 Harsliman v. Bates County 906 
 
 Hart V. Boston, Hartford, &e. R. E. 
 
 Co. 956, 959, 988 
 
 V V. Farmers', &c. Bank 512 
 
 V. Frontino, &c. Mining Co. 205 
 
 V. St. Charles St. R. R. Co. 427 
 
 Harter v. Kernochan 906 
 
 Hartford & New Haven R. R. Co. 
 
 V. Boorman 160 
 
 0. Croswell 119, 376, 381, 382 
 
 V. Kennedy 131, 136 
 
 V. New York &N. H. E. E. Co. 363, 
 
 1094 
 
 Hartford Bridge Co. v. Hartford 1070 
 
 Hartford Fire Ins. Co. v. Doyle 931 
 
 V. Hartford 1052 
 
TABLE OF CASES. 
 
 XXXVU 
 
 Hartman v. Ins. Co. of Valley of 
 
 Va. 294 
 
 Hartridge v. Rockwell 111, 427 
 
 Harts V. Brown 484, 494 
 
 Hartsville University v. Hamilton 975 
 Harvard College v. Aldermen of 
 
 Boston 313 
 
 V. Amory 435 
 
 Hascall v. Life Ass. 335 
 
 0. Madison University 776 
 
 Hasenritter D. Kirchhoffer 721 
 
 Haskell v. Oak ■ 137 
 
 V. Sells , 47, 79, 789 
 
 Haslett V. Wotherspoon 817 
 
 Hasselman v. U. S. Mortgage Co. 721 
 
 Hastings v. Drew 800, 838, 992 
 
 Hatch V. Chicago, Bock Island, &c. 
 
 R. R. Co. 248, 961 
 
 0. Dana 298, 789, 790, 792, 793, 
 
 8.37 
 
 Hathorn v. Calef 1041 
 
 Hatton's Case 169, 832 
 
 Haun u. Mulberry, &o. Gravel R. 
 
 Co. 147 
 
 Haven v. Adams 323 
 
 V. Grand Junction R. R. Co. 825 
 
 Hawes v. Anglo-Saxon Pet. Co. 717, 
 
 858 
 
 V. Oakland 235, 243, 254, 257 
 
 Hawken v. Bourne 329, 3-30 
 
 Hawkins v. Maltby 175, 210, 827 
 
 V. Mansfield G. Mining Co. 212, 228 
 
 V. Mississippi, &c. R. R. Co. 120 
 
 Hawley v. Upton 173 
 
 Hawtayne v. Bourne 329, 330, 687 
 
 Hawthorne v. Calef 784, 786, 787, 845 
 
 Haxtun v. Bishop 772 
 
 Hay's Case 689 
 
 Hayden v. Androscoggin Mills 9.39 
 
 - V. Atlanta Cotton Factory 77, 105, 
 
 402 
 
 i,. Davis 638 
 
 Hayne v. Beauchamp 712 
 
 Haynes v. Brown 56, 857 
 
 V. Covington 666, 670 
 
 V. Palmer 159 
 
 Hays V. Commonwealth 450 
 
 V. Gallon Gas L. Co. 663 
 
 V. Houston, &c. R. R. Co. 696 
 
 V. Lycoming Fire Ins. Co. 790 
 
 V. Northwestern Bank 38 
 
 .;. Ottawa, &c. E. R. Co. 116, 889 
 
 u. Pittsburgh, &c. R. R. Co. 146. 
 
 157, 710, 711 
 
 Hayter v. Tucker 218 
 
 Hayward v. Pilgrim Soc. 593 
 
 Haywood, &c. Plank R. Co. v. 
 
 Bryan 712 
 
 Hayworth v. Junction R. R. Co. 590 
 
 Hazard v. Durant 236, 241, 243, 260, 
 
 588, 589 
 
 Hazen v. Union Bank 1017 
 
 Hazleharst v. Savannah, &c. R. R. 
 
 Co. 407,433,586,843,666,670 
 
 Hkzlett V. Butler 13 
 
 Heaoock v. Sherman 853 
 
 Head v. Providence Ins. Co. 1, 553, 642 
 Heard v. Eldridge 416 
 
 V. Talbot 975 
 
 Heart v. State Bank 197 
 
 Heaston v. Cincinnati, &c. R. R. 
 
 Co. 52,58,149,711,719,747 
 
 Heath v. Erie Ry. Co. 160, 286, 241, 
 248,249 
 Heathcote v. North Staffordshire 
 
 Ry. Co. 285,286,1102 
 
 Hebb's Case 70 
 
 Heck V. McEwen 32 
 
 Hedges v. Paquett 238 
 
 Helm V. Swifegett 172, 212 
 
 Helping HandMarr. Ass., Re 33 
 
 Heman ;;. Britton 755, 774 
 
 Hemming v. Maddick 825 
 
 Hendee v. Pinkerton 1084 
 
 Henderson v. Australian Mail Nav. 
 
 Co 321 
 
 V. Central, &e. Ry. Co. 1069 
 
 V. Lacon 104, 105, 543 
 
 V. Midland Ry. Co. 689 
 
 V. Royal British Bank 814 
 
 V. San Antonio & M. G. R. R. 
 
 Co. 98 
 
 Henderson & N. R. R. Co. v. Leavitt 82 
 Henkle v. Salem Mfg. Co. 809, 824 
 Hennessy's Executors' Case 217, 817, 
 
 826 
 
 Henning v. U. S. Ins. Co. 553 
 
 Henry v. Elder 282 
 
 V. Great Northern Ry. Co. 265, 
 
 428, 429 
 
 V. Jackson 467 
 
 V. Northern Bank 409 
 
 V. Vermillion County R. R. 
 
 Co. 74, 292, 402, 792, 837, 838 
 
 Henry County v. Nicolay 906 
 
 Hepburn v. Exchange, &c. Co. 805 
 
 Heritage's Case 526 
 
 Herkimer Mfg., &c. Co. u: Small 125 
 
 Herrington v. Liston 499 
 
 Herron v. Vance 158, 993 
 
 Hersey jj. Veazie 234, 235, 248 
 
 Hess V. Werts 717 
 
 Hester v. Memphis, &c. R. R. Co. 119, 
 
 881 
 
 Hewett V. Swift 697 
 
 Hewitt V. New York, &c. R. R. Co. 1014 
 
 V. Pioneer Press Co. 697 
 
 Heyl </. Philadelphia, &c. R. R. 
 
 Co. 1084 
 
 Hibblewhite v. McMorine 170 
 
 Hibernia Fire Engine Co. u. Com- 
 monwealth 153 
 Hibernia Ins. Co. v. St. Louis, &c. 
 Transp. Co. 761 
 
XXXVlll 
 
 TABLE OF CASES. 
 
 Hibernia Nat. Bank v. Lacombe 920 
 Hibernia Tump. Co. v. Henderson 71 
 Hichens v. Congreve 522 
 
 Hickling v. Wilson 837 
 
 Higgins V. Hopkins 524 
 
 Higgs V. Northern Assam Tea Co. 202 
 Highland Turnp. Go. v. McKean 71 
 Hightower v. Mustian- 772, 992 
 
 «. Thornton 2, 751, 988, 991, 992 
 Hill V. Beach 717, 925 
 
 V. Frazier 877 
 
 u, Newichawanick Co. 160, 163, 
 176, 177 
 
 V. New Orleans, &c. K. E. Co. 699 
 
 V. Pine River Bank 202 
 
 V. Eeed 711, 772, 790 
 
 Hill Mfg. Co. „. Boston & L. R. R. 
 
 Co. 361 
 
 Hiller v. Burlington, &c. E. R. Co. 946 
 Hilles V. Parrish 500 
 
 Billiard v. Goold 602 
 
 Hillier v. Allegheny County Ins. Co. 834 
 Hilton V. Eckersley 1095 
 
 V. Giraud 218 
 
 Hinckley v. Glldersleeve 889 
 
 Hintermister v. First Nat. Bank 636, 
 
 637 
 Hinton v. Morris County Co-op. 
 
 Soc. 87 
 
 Hitchcock V. Galveston 626, 649, 664, 
 
 688 
 
 «. U. S. Bank 626, 635, 923, 928 
 Hoagland v. Bell 76 
 
 V. Cincinnati, &c. E. E. Co. 140 
 
 V. Hannibal, &c. E. R. Co. 360 
 Hoard v. Wilcox 867 
 
 Hoare's Case 685, 824 
 
 Hoboken Bldg. Ass. v. Martin 340, 969 
 Hodge V. First Nat. Bank of Rich- 
 mond 504, 507 
 Hodges V. New Eng. Screw Co. 528, 531 
 
 V. SUver Hill Mg. Co. 833, 840 
 
 Hodgson V. Cheever 847, 848 
 
 Hoereth v. Franklin Mill Co. 341, 739 
 Hoey V. Henderson 385, 614, 909 
 
 HofFi;. Jasper County 582 
 
 Hoffman v. Banks 632 
 
 V. Dickey 877 
 
 Hoge V. Railroad Co. 1016 
 
 Holbert v. St. Louis, &c. E. E. Co. 929 
 Holbrook v. Basset 327 
 
 V. N. J. Zinc Co. 183, 184, 187 
 
 V. St. Paul Fire, &c. Ins. Co. 717 
 Holden v. Hoyt 509 
 
 f. N. Y., &c. Bank 512 
 
 Holden's Case 828 
 
 Holder v, Lafayette, &c. Ry. Co. 475 
 Holdsworth v. Mayor of Dartmonth 332 
 HoUaday v. Elliot 114, 391 
 
 V. Patterson 81 
 
 Holland v. Heyman 76*', 970, 97.3 
 
 V. Leslie 1053 
 
 HoUingshead v. Woodward 820, 970, 
 
 972 
 Hollis V. Drew Theol. Seminary 921 
 HoUister v. HoUister Bank 760 
 
 HoUister Bank, Re 856 
 
 Holman v. Johnson 693 
 
 Holme's Case 160, 830 
 
 Holmes, Ex parte 409, 452, 577 
 
 V. Eastern Counties Ey. Co. 355 
 
 V. Gilliland 32 
 
 ■;. Holmes, &o. Mfg. Co. 282, 342 
 
 V. Sherwood 839, 840 
 
 Holmes's Case 408 
 
 Holt's Case 289 
 
 Holyoke Bank v. Burnham 824, 861 
 
 V. Goodman Paper Mfg. Co. 722, 
 
 818, 858, 864 
 
 Holyoke Co. v. Lyman 1059, 1061, 1068 
 
 Home Ins. Co. v. Davis 931 
 
 Home Stock Ins. Co. v. Sherwood 74, 
 
 217 
 Home of the Friendless v. Eouse 1016 
 Homersham v. Wolverhampton 
 
 Water Works 321 
 
 Hood V. New York & N. H. R. R. 
 
 Co. 348, 361, 586, 666 
 
 V. Northeastern Ry. Co. 1100 
 
 Hooker v. New Haven, &c. Co. 308 
 
 V. Vandewater 1094 
 
 Hoole V. Great Western Ry. Co. 241, 
 246, 261, 413, 421 
 Hooper v. Rossiter 441 
 
 Hope V. "Valley City Salt Co. 757, 764 
 Hopkins v. Gallatin Turnp. Co. 322 
 
 V. Whitesides 990 
 
 Hopkins's Appeal 757 
 
 Hopper V. Sage 176 
 
 Hoppin V. Bu&um 457 
 
 Hopson V. ^tna Axle, &c. Co. 332, 488 
 Horn V. Chicago, &c. Ey. Co. 1026 
 Hornaday v. Indiana, &c. Ry. Co. 116 
 Hornblower v. Crandall 545 
 
 Home V. Boston, &c. E. E. Co. 961 
 Horner v. Carter 992 
 
 Hornor i: Henning 870, 873, 880 
 
 Horsey's Claim 353 
 
 Hort's Case 783 
 
 Hose V. Wheeler 722 
 
 Hotchin v. Kent 695 
 
 Hotel Co. V. Wade 250, 492, 692, 593, 598 
 Houldswortli v. City of Glasgow- 
 Bank 814 
 
 V. Evans 591, 595 
 
 Housatonic Bank v. Martin 229, 513 
 Household Fire Ins. Co. v. Grant 46 
 Houseman v. Girard Mut. Bldg. Ass. 512 
 Houser v. Hermann Bldg. Ass. 308 
 
 Houston & T. C. E. R. Co. v. Shir- 
 ley 782, 885, 897 
 
 V. Van Alstyne 205 
 
 Hoveiraan v. Kansas City Horse 
 R. Co. 1086 
 
TABLE OP OASES. 
 
 XXXIX 
 
 Howard p. Kentucky, &e. Ins. Co. 1044 
 
 Howard's Case 64, 503 
 
 Howard Nat. Bank v. Loomis 368 
 
 Howe, Re 818, 354 
 
 V. Deuel 267 
 
 V. Keeler 321, 323 
 
 V. Starkweather 219 
 
 Howe Mach. Co. v. Souder 697 
 
 Howell V. Chicago & N. W. R. R. 
 
 Co. 425, 942 
 
 V. Harvey 391 
 
 Howland v. Myer 448 
 
 Hoyle V. Plattsburgh & Montreal 
 
 R. R. Co. 488, 484, 487, 489 
 
 Hoyt V. Chicago, &o. R. B. Co. 1033 
 
 V. Quicksilver Mg. Co. 261 
 
 u. Shelden 756, 920, 928 
 
 u. Thompson 817, 822, 463, 477, 
 
 478, 482, 500, 501, 502, 559, 
 
 560, 594, 920 
 
 Hubbard v. Chappel 721 
 
 V. New York, &c. Investment 
 
 Co. 494 
 
 Hubbell V. Warren 253 
 
 Hubbersty v. Manchester, &c. By. 
 
 Co. 200 
 
 Huddersfield Canal Co. v. Buckley 159, 
 
 160 
 Hudson V. Carman " 40 
 
 Hudson & Del. Canal Co. v. N. Y. 
 
 & E. R. R. Co. 998 
 
 Hughes V. Antietam Mfg. Co. 56, 58, 
 100, 107, 119, 123, 131, 140, 157 
 V. Cine. & S. Ry. Co. 359 
 
 V. No. Pac. Ry. Co. 947 
 
 V. Oregonian By. Co. 790 
 
 V. Parker 26, 460, 643 
 
 V. Vermont Copper Mg. Co. 213 
 Hughesdale Mfg. Co. v. Vanner 31 
 Huguenot Nat. Bank v. Studwell 970 
 Hulett's Case 567 
 
 Hull V. Burtis 866 
 
 Hull Flax, &c. Co. v. Wellesley 711,723 
 Humbert v. Trinity Church 313 
 
 Humble v. Langston 171, 175, 828 
 
 V. Mitchell 218, 220 
 
 Humboldt Township v. Long 580 
 
 Humby's Case 827 
 
 Humphrey v. Jones 542 
 
 V. Patrons' Mercantile Ass. 562, 
 565, 685 
 V. Pegues 894, 1016 
 
 Humphreys v. Mooney 30, 35, 846, 
 592 717 
 Hun V. Cary 526, 528^ 540 
 
 Hunt V. Columbian Ins. Co. 950 
 
 V. Kansas, &c. Bridge Co. 34, 142, 
 389 
 Hunterdon County Bank v. Nas- 
 sau Bank 192 
 Huntington v. Savings Bank 371, 872 
 Hurlbut V. Britain 727 
 
 Hurlbut V. Carter 
 
 790 
 
 0. Marshall 
 
 472, 870 
 
 V. Boot 
 
 790 
 
 V. Tayler 
 
 807 
 
 Hurt V. Salisbury 
 
 30,32 
 
 Hussey v. Gallagher 
 
 464 
 
 Hussey Mfg. Co. v. Deering 946 
 
 Hutchins v. Byrnes 822, 323 
 
 V. New England Coal Mg. Co. 847 
 
 o. Smith 49 
 
 i: State Bank 218 
 
 Hutton V. Scarborough Cliff Hotel 
 
 Co. 261, 432 
 
 Hyam's Case 831, 882 
 
 Hyatt V. Allen 162, 176, 177, 404 
 
 V. McMahou 792, 1062 
 
 V. Whipple 711 
 
 Hyde v. Doe 30, 780 
 
 I. 
 
 lasigi V. Chicago, &c. R. R. Co. 181, 215 
 Ibbotson II. Elam 178 
 
 Illinois & Mich. Canal Co. v. Chi- 
 cago & R. I. R. R. Co. 1018 
 Illinois Central R. R. Co. v. Cope- 
 land 361 
 V. Godfrey 1084 
 t,'. Illinois 1035 
 u. Irvin 360 
 V. People 1035 
 Illinois Grand Trunk R. R. Co. v. 
 
 Cook 22, 116, 119, 151, 381, 620 
 
 Illinois Linen Co. v.' Hough 475 
 
 Illinois River R. R. Co. v. Zimmer 73, 
 
 74, 381 
 Imboden v. Etowah, &c. Mg. Co. 510, 720 
 Imperial, &c. Ass. v. Coleman 485 
 
 Importing, &c. Co. of Ga. v. Locke 725, 
 737, 919, 920, 974 
 Ind's Case 821 
 
 Independent Ins. Co., Re 998 
 
 Inderwick v. Snell 516 
 
 India & London L. Ass. Co., Re 777 
 India Bagging Ass. v. Kock 1095 
 
 Indiana & E. Turnp. Co. v. Phillips 119, 
 
 376 
 Indianapolis & Cin. R. R. Co. v. 
 
 State 1099 
 
 Indianapolis & St. L. R. R. Co. v. 
 
 Morganstern 323 
 
 I). Vance 959 
 
 Indianapolis, Cine, & Lafayette 
 ' R. R. Co. V. Jones 913 
 
 Indianapolis Furnace, &o. Co. v. 
 
 Herkimer 28, 80, 67 
 
 Indianapolis Sun Co. v. Horrell 748 
 Ingalls V. Cole 852, 862, 868 
 
 Ingham v. Reform CInb 305 
 
 Inglehart v. Thousand Island Hotel 
 Co. 489 
 
xl 
 
 TABLE OP CASES. 
 
 Ingraham v. Speed 305 
 
 V. Terry 989, 994 
 
 Inhabitants of Milford, &c. See 
 
 Milford, &c. 
 Inland Fisheries Commissioners v. 
 
 Holyoke Water Power Co. 1061, 1072 
 
 Innes v. Lansing 766, 836 
 
 Instone v. Frankfort Bridge Co. 124, 
 
 127, 131, 136 
 
 Insurance Co. v. Francis 937, 961 
 
 V. McCain 560, 598, 604, 605 
 
 V. Morse 931, 935, 1065 
 
 V. The C. D., Jr. 920 
 
 International & G. N. R. E. Co. v. 
 
 Bremond 119, 690 
 
 International L. Ass. Co. u. Com- 
 missioners 1052 
 Iowa & Minn. B. K. Co. v. Per- 
 kins 68, 145, 149 
 Iowa Lumber Co. v. Foster 112 
 Ireland u. Palestine, &c. Tump. 
 
 Co. 1041 
 
 Iron .Mountain Bank v. Mercantile 
 
 Bank 698 
 
 Iron B. B. Co. v. Fink 215 
 
 V. Ironton 358 
 
 Irons V. Manufacturers' Nat. Bank 766, 
 
 773 
 
 Irvin V. Nashville, &c. By. Co. 363 
 
 V. Susq. & Phil. Tump. Co. 378 
 
 Irwin V. Bailey 505 
 
 Isham V. Bennington Iron Co. 308 
 
 V. Buckingham 159, 216, 217, 
 
 829 
 
 Ives V. Sterling 49 
 
 Jackson u. Brown 332 
 
 u. Campbell 322 
 
 V. Hampden 453 
 
 V. Hartwell 7 
 
 V. Hayner 96 
 
 V. Ludeling 757 
 
 c. Newark Plank B. Co. 229, 230, 
 
 264, 290, 423 
 
 V. Phillips 998 
 
 V. Pratt 323 
 
 V. See. Ave. B. E. Co. 697 
 
 V. Sligo Mfg., &c. Co. 829 
 
 V. Turquand 70 
 
 Jacobson v. Allen 843 
 
 Jagger Iron Co. u. Walker 862 
 
 James v. May 175, 825 
 
 V. WoodruflF 169, 990 
 
 James Eiver, &c. Co. v. Thompson 1050 
 
 Jameson v. People 36 
 
 Jansen v. Ostrander 4, 7 
 
 Jarrett v. Kenedy 543 
 
 Jeaffreson's Case 781, 791 
 
 Jefferson Branch Bank v. Skelly 1016 
 
 Jeffersonville E. B. Co. v. Bogers 698, 
 
 699 
 
 Jefts V. York 7, 542 
 
 Jenkins v. Andover 1047 
 
 V. Union Tump. Co. 71 
 
 Jennings v. Baddeley 268, 391 
 
 V. Broughton 98, 100 
 
 Jermain v. Lake Shore, &c. By. Co. 178 
 
 Jersey City v. Morris Canal, &c. Co. 308 
 
 Jewell V. Eock Eiver Paper Co. 814, 
 
 817, 819 
 
 Jewett V. Lawrenceburg & U. M. 
 
 E. E. Co. 80, 90 
 
 V. Miller 489 
 
 u. Town of Alton 498 
 
 V. Valley Ry. Co. 105, 107, 116, 288 
 
 John V. Farmers' & Mechanics' 
 
 Bank 971 
 
 Johns V. Johns 218 
 
 Johnson v. Albany, &c. B. B. 
 
 Co. 55, 122, 443, 444 
 
 V. Brooks 214 
 
 I'. Bush 111 
 
 V. Common Council of Indian- 
 apolis 339 
 i>. Crawfordsville, &c. E. R. 
 
 Co. 97, 151 
 
 V. Fischer 870 
 
 V. Gibson • 742 
 
 V. Griffin Banking, &c. Co. 308 
 
 V. Johnson 441 
 
 V. Laflin 159, 167, 168, 173, 174, 
 
 189, 829 
 
 V. Shrewsbury, &c. By. Co. 366, 
 
 1100 
 
 V. Somerville Dyeing, &c. Co. 861 
 
 V. St. Louis, &c. Co. 697 
 
 V. Underhill 175, 827 
 
 V. Wabash, &c. B. E. Co. 52, 58, 78 
 
 Johnston v. Charlottesville Nat. Bk. 371 
 
 V. Crawley 323 
 
 V. Elizabeth Bldg., &c. Ass. 663 
 
 V. Jones 455, 457, 460, 518, 519-, 
 
 55.3, 607 
 
 I/. Laflin. See also Johnson v. 
 
 Laflin 189 
 
 V. Benton 188, 204, 263 
 
 Johnston Harvester Co. v. Clark 742 
 
 Joint Stock Coal Co., Re 269 
 
 Joint Stock Discount Co. v. Brown 407, 
 
 534 
 Jones, Ex parte 293 
 
 V. Ark. Mech. & Agr. Co. 470, 487, 
 757, 760, 761, 837 
 V. Bank of Tennessee 720 
 
 V. Barlow 881 
 
 V. Cincinnati Type Foundry 
 
 Co. 719, 742 
 
 V. Dana 720 
 
 V. Guaranty, &c. Co. 332, 333, 663 
 V. Habersham 13, 646 
 
 V. Jarman 870 
 
TABLE OF CASES. 
 
 xli 
 
 Jones V. Kokomo Bldg. Ass. 719 
 
 V. Latham 827 
 
 I.- League 937 
 
 V. Milton, &c. Turnp. Co. 462 
 
 V. Morrison 111, 399, 427, 475, 484 
 
 ti. Ogle 178 
 
 V. Sisson 148, 158 
 
 V. Smith 632 
 
 V. Terre Haute, &c. R. R. Co. 160, 
 
 290, 422, 425 
 
 V. Wiltberger 868 
 
 Jordan v. Ala., &c. R. R. Co. 697 
 
 Joslyu 0. Paoiflu Mail S. S. Co. 384 
 
 Joy V. Jackson, &c. Plank R. 
 
 Co. 379, 894 
 
 Judah V. Am. Live Stock Ins, Co. 26 
 Judson V. Rossie Galena Co. 703, 861 
 Juker V. Commonwealth 460 
 
 Junction R. R. Co. v. Reeve 85, 498 
 Justices of Cumberland v. Arm- 
 strong 7 
 Justices, &c. V. Griffin, &c. Plank 
 R. Co. 308 
 
 K. 
 
 Kaeiser v. Illinois Cent. R. R. Co. 10.38 
 Kahn v. Bank of St. Joseph 200 
 
 Kaiser v. Lawrence Sav. Bank 717 
 Kalamazoo Novelty Mfg. Co. v. 
 
 McAlister 509 
 
 Kanawha Coal Co. v. Kanawha, &c. 
 
 Coal Co. 21 
 
 Kane v. Bloodgood 160, 423 
 
 Kansas City v. Hannibal, &c. R. R. 
 
 Co. 323 
 
 Kansas City Hotel Co. v. Harris 157, 
 
 730 
 
 V. Hunt 67, 712, 730, 731 
 
 V. Sauer 968, 988 
 
 Kansas Pacific Ry. Co. a. Mower 1026 
 
 Kansas Valley Nat. Bank v. Rowell 367 
 
 Karnes v. Rochester, &c. R. R. Co. 238, 
 
 243, 248, 420 
 
 Katama Land Co. v. Holley 67 
 
 V. Jernegan 63, 133 
 
 Kayser v. Town of Bremen 737 
 
 Keau V. Johnson 232, 246, 261, 334, 
 
 376, 392, 612 
 
 Kearney v. Andrews 460 
 
 Kearns v. Leaf 766, 774 
 
 Keene v. Van Reuth 720 
 
 Kehlor v. Lademaun 972 
 
 Keith V. CUric 786 
 
 Keller v. Johnson 91 
 
 Kelley v. Mayor of Brooklyn 335 
 
 V. Miss. Centr. R. R. Co. 739, 740 
 
 Kellock V. Enthoven 175, 827 
 
 Kellogg V. Larkin 1094 
 
 tf. Stockwell 175 
 
 ... Union Co. 974 
 
 Kelly V. Mariposa Land, &c. Co. 261 
 V. People's Transp. Co. 680 
 
 Kelner v. Baxter 524 
 
 Kelsey v. National Bank 401, 585, 594 
 V. Northern Light Oil Co. 97 
 
 Kennebec & Portland R. R. Co. v. 
 
 Jarvis 149 
 
 V. Kendall 132, 135, 466 
 
 V. Palmer 137, 590 
 
 V. Portland, &c. R. R. Co. 890 
 
 Kennebec Co. v. Augusta Ins. & B. 
 
 Co. 345, 920 
 
 Kennedy v. Gibson 854, 872, 948 
 
 V. Green 96 
 
 ». Panama, &c. Mail Co. 697 
 
 Kenner v. Lexington Mfg. Co. 642 
 
 Kenosha, &c. R. R. Co. v. Marsh 383, 
 
 1061 
 
 Kent V. Quicksilver Mg. Co. 250, 252, 
 
 255, 261, 432, 433, 466, 468, 586, 590, 
 
 591, 601, 650 
 
 Kent Benefit Building Soc, Re 687 
 
 Kenton County Court u. Bank Lick 
 
 Turnp. Co. 1076, 1083 
 
 Kenton Furnace, &c. Co. v. Mc- 
 
 Alpin 425 
 
 Kentucky Seminary v. Wallace 340 
 Keppel's Admrs. v. Petersburg 
 
 R. R. Co. 203, 423 
 
 Kerr, Re 1050 
 
 V. Dougherty 317 
 
 Kersey Oil Co. v. Oil Creek, &c. 
 
 R. R. Co. 499 
 
 Kessler v. N. Y. Central R. R. Co. 361 
 Ketchum v. Buffalo 335 
 
 Key's Case 684 
 
 Key City, The 911 
 
 Keyser v. Hitz 722 
 
 V. Trustees of Bremen 18 
 
 Keystone Bridge Co. ». Barstow 762 
 V. McCluney 810 
 
 Kidderminster v. Hardwick 321 
 
 Kidwelly Canal Co. u. Raby 50 
 
 Kilbreth v. Bates 636 
 
 Kilgore v. Bulkley 642 
 
 Kimmel v. S toner 538 
 
 Kincaid v. Dwinelle 739, 950, 970, 995 
 Kinealy v. St. Louis, K. C, &c. 
 
 R. R. Co. 1101 
 
 King V. Accumulative Life, &c. Ass. 
 
 Co. 774 
 
 V. Capper 219 
 
 I'. Merchants' Exch. Co. 332 
 
 V. Nat. M. & E. Co. 633 
 
 V. Paterson, &c. R. R. Co. 419, 
 
 422, 423 
 
 V. Severn & Wye Ry. Co. 1097 
 
 King's Case 169, 289, 824, 826, 832 
 
 Kingsford v. Merry 814 
 
 Kingsley v. First Nat. Bank 772 
 
 «. New Eng. Mut. F. Ins. Co. 560 
 
 Kintrea, Ex parte 832 
 
xlii 
 
 TABLE 01" CASES. 
 
 Kirk V. Bell 553 
 
 V. Nowill 467 
 
 Kirkpatrick v. United Presbyterian 
 
 Church 744 
 
 Kirksey v. Florida & Ga. Plank K. 
 
 Co. 131, 135 
 
 Kirkstall lirewery Co. o, Furness 
 
 Ky. Co. 509 
 
 Kisch V. Central Ry. Co. 99 
 
 Kitchen v. Cape Girardeau, &c. 
 
 E. K. Co. 500 
 
 u. St. Louis, K. C, &c. Ry. Co. 250, 
 
 252, 487, 489, 491, 493, 494, 
 
 495, 497, 598, 601 
 
 Klein v. Alton & S. R. E. Co. 72, 74, 
 
 112, 123, 131 
 
 Klopp V. Lebanon Bank 201 
 
 Knapp V. Eailroad Co. 233 
 
 Knickerbocker Life Ins. Co. v Ec- 
 
 clesiiie 343 
 
 Knight V. Barber 220 
 
 V. Lang 571 
 
 V. Mayor of Wells 339 
 
 Knight's Case 122, 123 
 
 Knights V. Wiffen 205 
 
 Knott V. Southern Life Ins. Co. 944 
 
 Knowlton v. Ackley 864, 971 
 
 V. Congress, &e. Spring Co. 409, 692 
 
 Knox V, Protection Ins. Co. 1052 
 
 Knox County v. Aspinwall 578 
 
 Knoxville v. Knoxville, &c. R. E. 
 
 Co. 226, 261, 614 
 
 Koehler, Ex parte 1038, 1067 
 
 o. Black River Palls Iron Co. 322, 
 484, 486, 584 
 Kold V. United States 1048 
 
 Kortright v. Buffalo, &c. Bank 183 
 Kraft V. Freeman Printing Co. 505 
 
 Krebs w.- Carlisle Bank 990 
 
 Kulin V. McAllister 219 
 
 Kuhns V. Westmoreland Bank 201 
 
 Labouchere v. Earl of Wharncliffe 464 
 Ladd V. Cartwright 837, 840 
 
 c;. Southern Cotton Press, &c. 
 Co. 1083 
 
 Lady Bryan Mining Co., fie 480 
 
 La Farge v. Exchange F. Ins. Co. 1052 
 LaFarge, &c. Ins. Co. v. Bell 514 
 
 Lafayette, B., & M. Ry. Co. c. 
 
 Cheeney 475 
 
 Lafayette Ins. Co. v. French 930, 936, 
 939, 940, 942, 944, 1054 
 Lafayette Sav. Bank v. St. Louis 
 
 Stoneware Co. 400, 563 
 
 Lafond v. Deems 234, 269, 353, 392 
 La Grange & Memphis R. E. Co. v. 
 
 Rainey 965, 966, 971, 986 
 
 Lail V. McSterling Coal E. Co. 149 
 
 Laing v. Burley 217 
 
 V. Reed 328 
 
 Lake Erie, &c. Ey. Co. v. Griffin 782 
 Lake Ontario, Auburn, & N. Y. 
 R. R. Co. V. Mason 55, 58, 73, 131 
 137, 147, 148 
 Lake Ontario Nat. Bank v. Onon- 
 daga County Bank 973 
 Lake Ontario Shore E. E. Co. i>. 
 
 Curtiss 45, 49, 50, 51, 117, 118 
 
 Lake Shore, &c. R. R. Co. v. Cin- 
 cinnati, &c. R. R. Co. 1026 
 Lake Sup. Build. Co. v. Thompson 341 
 Lake Sup. Iron Co. v. Drexel 405 
 Lake View v. Rose Hill Cemetery 
 
 Co. 1013, 1028 
 
 Lamb v. Anderson 359 
 
 V. Cecil 507, 772 
 
 V. Lamb 632 
 
 V. Laughlin 756, 757, 772 
 
 Lambert v. Northern, &g. E. E. Co. 400 
 Lamm v. Port Deposit, &c. Ass. 697 
 Lamphere v. United Workmen 210 
 Lancaster & C. Ry. Co. v. North- 
 western Ey. Co. 287, 363 
 Lancaster County Nat. Bank v. 
 
 Smith 370 
 
 Land v. Coffman 649, 680 
 
 Land Credit Co., Re 337 
 
 V. Fermoy f 35 
 
 Land Credit Co. of Ireland, Re 325, 563 
 Land Grant Ey. Co. v. Coffee 
 
 County 919, 925 
 
 Landman v. Entwistle 524 
 
 Lane v. Brainerd 77, 90, 91, 453 
 
 V. Boston, &c. R. R. Co. 509 
 
 V. Harris 854, 856 
 
 V. Morris 842, 852 
 
 V. Nickerson 793 
 
 Lane's Case 593 
 
 Langdon v. Fogg 275 
 
 Larrabee v. Baldwin 854, 859, 861 
 
 Larwell 0. Hanover Sav. Fund 
 
 Soe. 326, 635, 636, 923, 927 
 
 Lathrop v. Commercial Bank of 
 
 Scioto 312, 321, 345, 920, 921 
 
 V. Kneeland 113, 819 
 
 V. Union Pacific Ey. Co. 942 
 
 Latimer v. Union Pacific Ry. Co. 940, 
 
 942 
 Lauman v. Lebanon Valley R. R. 
 Co. 24, 261, 376, 379, 392, 395, 614, 
 620, 899, 1008, 1021, 1051 
 Laurel Fork, &c. E. E. Co. «. West 
 
 Va. Transp. Co. 1035 
 
 Lawler v. Burt 846, 849 
 
 Lawrence v. Greenwich F. Ins. Co. 266 
 
 ,1. Nelson 834 
 
 V. Smith 359 
 
 Lawrence County v. Chattaroi R. R. 
 
 Co. 7 
 
 Lawton v. Hickman 220 
 
TABLE OP CASES. 
 
 xliii 
 
 Lazear v. Nat. Union Bank 368, 637 
 Lea V. American, Atlantic, &c. Ca- 
 nal Co. 781, 970, 973 
 Leach v. Pobes 214 
 V. Hale 370 
 Leasure v. Union Mut. L. Ins. Co. 646, 
 920, 921 
 Leavenworth County v, Barnes 720 
 Leavitt v. Palmer 638 
 Leazure v. Hillegas 313, 323, 646 
 Lebanon, &o. Gravel R. Co. v. 
 
 Adair 554, 605 
 
 Lebanon Nat. Bank v. Karmany 635 
 
 Lebanon Sav. Bank v. HoUenbeck 921 
 
 Le Blanc, Re 419 
 
 Lee V. Citizens' Nat. Bank 184, 198 
 
 V. Pittsburgh Coal, &c. Co. 559, 
 
 560, 564, 601 
 
 Lee & Co. '8 Bank, Re 1061, 1069 
 
 Leech v. Harris 464 
 
 Leeke's Case 796 
 
 Leggett V. Bank of Sing Sing 200 
 
 V. New Jersey, &c. Banking Co. 554 
 
 Lehigh Bridge Co. v. Lehigh Coal 
 
 & Nav. Co. 969, 1053 
 
 Lehigh Coal, &c. Co. u. Central 
 
 R. R. Co. , 259, 260 
 
 Lehman v. Tallassee Mfg. Co. 334 
 
 Leifehild's Case 351, 796 
 
 Leighty v. Susquehanna, &o. 
 
 Turnp. Co. 71 
 
 Leitch V. Wells 183, 187 
 
 Leland v. Hayden 442 
 
 Lenox v. Roberts 991 
 
 Leo V. Union Pac. Ry. Co. 245, 252, 256, 
 
 384 
 Leonardville Bank v. Willard 7, 951 
 Le Roy v. Globe Ins. Co. 419, 424 
 
 Lester v. Howard Bank 626, 640 
 
 V. Webb 604 
 
 Levisee v. Shreveport City Ry. Co. 484 
 Levita's Case 70 
 
 Levy Court v. Coroner 7 
 
 Lewey's Island R. R. Co. v. Bol- 
 ton 122, 123, 135, 144, 148 
 Lewis V. Bank of Kentucky 920, 923, 
 
 1039 
 
 V. Barbour County 582 
 
 V. Robertson 712, 993, 994 
 
 V. St. Charles County 854 
 
 Lexington & Ohio R. R. Co. v. 
 
 Bridges 760, 764, 765 
 
 Lexington & W. C. R. R. Co. v. 
 
 Chandler 140, 141, 148 
 
 Lexington L., F., & M. Ins. Co. v. 
 
 Page 411, 413, 799, 834 
 
 Libbey v. Hodgdon 939, 942, 943 
 
 Liberty Female Col. Ass. v. Wat- 
 kins 842 
 Liebke v. Knapp 796 
 Life Ass. of America v. Fassett 950 
 V. Levy 834, 950 
 
 Lightner v. Boston, &c. R. R. Co. 910 
 Lillard v. Porter 229 
 
 Lincoln v. Iron Co. 580, 583 
 
 Lincoln, &c. Bank v. Richardson 1039 
 Lindell v. Benton 988 
 
 Linder v. Carpenter 1092 
 
 Lindsay Petrol. Co. v. Hurd 278 
 
 Lionberger v. Broadway Sav. Bank 789 
 Litchfield v. White 528 
 
 Litchfield Bank v. Church 28, 107 
 
 Litchfield Iron Co. v. Bennett 607 
 
 Little V. O'Brien 116, 117, 639 
 
 Little Rock & Ft. S. Ry. Co. v. Page 491 
 
 V. Perry 524 . 
 
 Littleton Mfg. Co. v. Parker 141 
 
 Littlewort v. Davis 666, 670 
 
 Liverpool v. Chorley Water Works 
 
 Co. 308, 996 
 
 Liverpool Ins. Co. v. Massachusetts 7, 
 
 21, 311, 345. 934, 951, 952 
 
 Livesey v. Omaha Hotel Co. 140 
 
 Livingston v. Bank of N. Y. 983 
 
 V. Lynch 611 
 
 Loan Ass. v. Stonemetz 476 
 
 V. Topeka 1047, 1076 
 
 Lockhart v. Van Alstyne 417, 419, 428, 
 
 429, 433, 590 
 
 Lockwood V. Mechanics' Nat. Bank 197, 
 
 473 
 
 V. Thunder Bay, &c. Boom Co. 498 
 
 Lohman v. N. Y., &c. R. R. Co. 403, 
 
 476, 503 
 
 Lombardo v. Case 176 
 
 London & Brighton Ry. Co. v. 
 
 Fairclough 171 
 
 London & County Ass. Co., Re 684 
 London & Provincial Law Assur. 
 
 Soc. V. London & Prov. J. S. Co. 342 
 London, B., &c. R. R. Co. v. Lon- 
 don & S. W. Ry. Co. 366 
 London, Chatham, &c. Ry. Arr. 
 
 Act, Re 283 
 
 London Dock Co. v. Sinnott 322 
 
 London India Rubber Co., Re 340, 431 
 London Mercantile Discount Co., 
 
 Re 235, 239, 240, 242 
 
 London Tobacco P. M. Co. v. 
 
 Woodroffe 153 
 
 Londonderry v. Andover 37 
 
 Long V. Long 637 
 
 V. Penn Ins. Co. 884 
 
 Long Island R. R. Co., Re 122, 455, 
 
 457, 459, 460 
 
 Longley v. Little 861 
 
 Loomis 1!. Eagle Bank 514 
 
 Lord V. Brooks 440 
 
 u. Copper Miners' Co. 237, 240 
 
 V. Essex Building Ass. 32 
 
 V. Yonkers Fuel Gas Co. 333 
 
 Lord Belhaven's Case 113, 288, 816 
 
 Lorillard v. Clyde 309, 402, 404, 503 
 
 Loring v. Salisbury Mills Co. 180, 207 
 
xliv 
 
 TABLE OF CASES. 
 
 Lothrop V. Stedman 236, 768, 787, 993, 
 
 1062, 1072 
 
 Louisiana Paper Co. v. Waples 147, 
 
 804 
 Louisiana Sav. Bank, Be 267 
 
 Louisiana State Banlc v. Senecal 513 
 Louisville & Eliz. Turnp. Co. v. 
 
 Merriweatlier 148 
 
 Louisville & Nashville E. R. Co. v. 
 
 Campbell 361 
 
 V. Commonwealth 702 
 
 V. Palmes 893 
 
 V. Railroad Commission of 
 
 Tenn. 1038 
 
 V. State 702 
 
 V. Thompson 408 
 
 Louisville & Oldham Turnp. Co. v. 
 
 Ballard 1043 
 
 Louisville, Cine, & C. R. R. Co. v. 
 
 Letson 936 
 
 Louisville Gas Co. v. Citizens' Gas 
 
 Co. 1018, 1019, 1069 
 
 Louisville Water Co. v. Hamilton 1083, 
 
 1088 
 Lovegrove v. Nelson 165 
 
 Lovett V. Steam Saw Mill Ass. 484 
 Low V. Buchanan 866, 870, 880 
 
 V. California Pac. E. E Co. 400 
 V. Connecticut, &o. E. E. Co. 528, 
 525 
 V. Galena, &c. E. E. Co. 356 
 
 Lowe V. E. & K. E. R. Co. 65, 80 
 
 Lowe's Case 216, 828 
 
 Lowell V. Boston 1047 
 
 Lowell, &c. Sav. Bank u. Win- 
 chester 566 
 Lowndes v. Garnett, &c. Mg. Co. 329, 
 330, 685 
 Lowry v. Commercial & P. Bank of 
 
 Baltimore 180, 181, 182, 187 
 
 V. Inman 847 
 
 Lucas V. Bank of Georgia 920 
 
 V. Pitney 327, 835, 338, 571 
 
 Ludlow V. Charlton 321 
 
 Luling V. Atlantic Mut. Ins. Co. 264, 
 
 290 
 
 Lum V. Robertson 990, 991 
 
 Lumbard v. Aldrich 921 
 
 V. Stearns 1092 
 
 Lumpkin v. Jones 986 
 
 Lung Chung v. No. Pac. Ey. Co. 944 
 
 Luther v. Saylor 784 
 
 Lycoming F. Ins. Co. v. Langley 520 
 
 V. Wright 631 
 
 Lyde v. Eastern Bengal Ey. Co. 245, 
 
 282, 350, 357, 360, 375, 376, 386 
 
 Lyman v. Boston, &c. R. R. Co. 1029 
 
 Lynch v. Eastern L. & M. Ey. 
 
 Co. 386 
 
 V. Metropolitan El. Ey. Co. 697 
 Lyndeborough Glass Co. v. Mass. 
 Glass Co. 354, 594 
 
 Lyne v. Bank of Ky. 614 
 
 Lyon V. Ewings 402 
 
 V. Jerome 889 
 
 V. Orange, &c. R. R. Co. 22, 23, 
 
 24,31 
 
 M. 
 
 Macauly v. Robinson 828 
 
 Macdougall v. Gardiner 240, 244, 453 
 V. Jersey Imperial Hotel Co. 262, 
 411, 417, 800 
 Macedon & B. Flank R. Co. v. Lap- 
 ham 117, 156 
 MacGregor r. Dover, &c. Ry. Co. 676 
 Maehias Hotel Co. v. Coyle 51 
 Machinists' Nat. Bank v. Field 204, 
 205, 206 
 Maekay v. Commercial Bank 673, 697 
 Mackenzie v. Edinburg School 
 
 Board 743 
 
 Mackley's Case 71 
 
 Macon v. Cummins 406 
 
 Macon & Augusta R. R. Co. t^. 
 
 Georgia R. R. Co. 664 
 
 u. Vason 117, 124, 146, 148, 157, 
 
 265, 290, 402, 553 
 
 Macon County v. Shores 737 
 
 Madison & Indianapolis R. R. Co. v. 
 
 Norwich Sav. Soc. 563,577,654 
 V. Whiteneck 1026 
 
 Madison, &o. Plank Road Co. v. 
 
 Watertown, &c. Co. 400, 666 
 
 Madison Av. Bap. Church v. Bap. 
 
 Church. &c. 449, 646, 691 
 
 Madison County v. Paxton 554 
 
 Madrid Bank v. Pelly 486, 493 
 
 Magdalena Steam Nav. Co., Re 685 
 
 Magee v. Badger 85 
 
 t. Mokelumne Hill Canal Co. 327, 
 
 335 
 
 Maghee v. Camden, &c. E. R. Co. 361 
 
 Magruder v. Colston 824 
 
 Magwood V. Railroad Bank 181 
 
 Mahan v. Wood 63 
 
 Maher v. City of Chicago 688 
 
 Mahonej- v. Bank of Arkansas 20 
 
 V. East Holyford Mg. Co. 677, 605 
 
 V. Spring Valley Water Works 
 
 Co. 884 
 
 Maine Central R. E. Co. a. Maine 902, 
 
 903, 1055 
 
 Malecek v. Tower Grove E. R. Co. 509, 
 
 700 
 Malloy V. Mallett 989 
 
 Maltby v. Northwestern, &c. E. E. 
 
 Co. 711 
 
 Maltz V. Am. Exp. Co. 7, 951, 952 
 
 Manchester & London Life Assur. 
 
 & Loan Ass., Re 177 
 
 Manderson v. Commercial Bank 245, 
 
 259 
 
TABLE OF CASES. 
 
 xlv 
 
 Mandion v. Fireman's Ins. Co. 830 
 Mandlebaum v. No. Am. Mg. Co. 569 
 Manheim P. & L. Tump. Co. v. 
 
 Arndt 119, 381 
 
 Manisty'e Case 293 
 
 Mann v. Cooke 288, 795 
 
 V. Currie 160 
 
 V. Pentz 297, 323, 836 
 
 Manning v. Quicksilver Mg. Co. 162, 
 
 168, 178 
 
 Mansfield, &c. E. R. Co. v. Brown 80 
 
 V. Drinker 706 
 
 V. Stout 80 
 
 Mansfield Iron Works v. Wilcox 867 
 
 Manufacturers' Nat. Bank v. Baaek 949 
 
 Manufacturing Co. v. Bradley 856 
 
 Manville v. Belding Mg. Co. 685 
 
 V. Edgar 844 
 
 Mapes V. Scott 680 
 
 V. Second Nat. Bank of Titus- 
 
 ville 507 
 
 Marble Co. v. Ripley 1100 
 
 March v. Atty.-Gen. 218 
 
 V. Eastern R. R. Co. 160, 246, 261 
 
 Marchand v. Loan, &c. Ass. 523 
 
 Marcy v. Clark 861, 863 
 
 Marie v. Garrison 460 
 
 Marietta & Cine. R. R. Co. v. EUiot 119, 
 
 381 
 Marine Bank v. Ogden 398 
 
 Marine, &c. Phosphate, &o. Mfg. 
 
 Co. V. Bradley 856 
 
 Mariners' Bank v. Sewall 993 
 
 Marino's Case 827 
 
 Marion Sav. Bank v. Dunkin 638, 
 
 666 
 Market Nat. Bank v. Pacific Nat. 
 
 Bank 946 
 
 Marlborough Branch R. E. Co. u. 
 
 Arnold 77 
 
 Marlborough Mfg. Co. u. Smith 171 
 
 381, 482 
 
 Marlow v. Pitfeild 686 
 
 Marr v. Bank of West Tennessee 758, 
 
 760, 772, 836, 1041 
 
 V. Union Bank 391 
 
 Marseilles Extension Ry. Co., Re 111, 
 
 614 
 50 
 41 
 
 Marseilles Land Co. v. Aldrich 
 Marsh v. Astoria Lodge 
 
 V. Burroughs 297, 298, 792, 837 
 V. Fairbury, &c. Ry. Co. 1092 
 
 V. Fulton County 589 
 
 0. Russell 1095 
 
 Marshall v. Baltimore & Ohio R. R. 
 
 Co. 625, 636 
 
 V. Golden Fleece Mg. Co. 152 
 
 V. Harris 8-50 
 
 ... Western N. C. R. R. Co. 36, 781, 
 
 782 
 
 Marshall County v. Schenck 580, 683, 
 
 693 
 
 Martin v. Continental Pass. Ry. Co. 479 
 V. Fewell 717 
 
 V. Mobile & Ohio R. R. Co. 960 
 V. Nashville Building Ass. 462, 464 
 V. Pensacola, &c. R. R. Co. 80, 97, 
 381, 590 
 V. Webb 476, 506 
 
 V. Zellerbach 586, 626 
 
 Martindale v. Kansas City, &c. E. R. 
 
 Co. 1101 
 
 Martino v. Commerce F. Ins. Co. 46d 
 Maryland v. Northern Central R. R. 
 
 Co. 960, 962 
 
 Maryland Hospital v. Foreman 666, 669 
 
 Mason v. Armitage 213 
 
 V. Cheshire Iron Works 864 
 
 V. Davol Mills 427 
 
 V. Frick 325 
 
 V. Harris 278 
 
 Massachusetts Gen. Hospital o. 
 
 State Mut. L. Ass. Co. 1069 
 
 Massachusetts Iron Co. v. Hooper 197 
 Massey v. Citizens' B. & S. Ass. 389, 719 
 Master's Case 169 
 
 Masters v. Eossie, &c. Mg. Co. 297, 867 
 Mathez v. Neidig 866, 868 
 
 Matthews v. Albert 297, 825, 854, 866, 
 
 867 
 
 V. Great Northern Ry. Co. 428, 429 
 
 V. Mass. Nat. Bank 183, 188, 606, 
 
 563, 564 
 
 V. Skinker 300, 640, 666 
 
 Maunsell u. Midland, &c. Ry. Co. 282, 
 
 377 
 Maupin v. Va. Lead Mg. Co. 502 
 
 Maux Ferry Gravel E. Co. v. 
 
 Branegan 475 
 
 Maxwell v. Dulwich College 320 
 
 May V. State Bank 988 
 
 Maynard v. Fireman's Fund Ins. 
 
 Co. 477, 697 
 
 Mayor, &c. of Liverpool v. Chorley 
 
 Water Works Co. 308, 996 
 
 Mayor, &c. of Nashville v. Ray 571 
 Mayor, &c. of New York v. New 
 
 York, &c. Ferry Co. 703 
 
 Mayor, &o. of Stafford v. Bolton 341 
 V. Till 342 
 
 Mayor of Baltimore w. Pittsburgh, 
 
 &c. R. R. Co. 1072, 1073 
 
 Mayor of Colchester v. Brooke 781, 995 
 V. Seaber 781, 988, 995 
 
 Mayor of Kidderminster v. Hard- 
 wick 321 
 Mayor of Ludlow v. Charlton 321 
 Mayor of Macon v. Cummins 406 
 Mayor of Mobile v. Rowland 1052 
 Mayor of Norwich v. Norfolk Ry. 
 
 Co. 825, 850, 351, 374, 572, 574, 673 
 Mayor of Southampton v. Graves 445 
 Mayor of Worcester v. Norwich, &e. 
 R. E. Co. 892, 1060, 1072 
 
xlvi 
 
 TABLE OP CASES. 
 
 McAleer v. McMurray 484 
 
 McAllister v. Plant 892 
 
 McAuley v. Columbus, &c. E. E. 
 
 Co. 22, 735 
 
 McBrlde v. Farmers' Bank 945 
 
 McCall V. Byram Mfg. Co. 500, 941 
 McCallie v. Walton 772 
 
 McCann v. Nashville R. R. Co. 1098, 
 
 1100 
 McCartee v. Orphan Asylum Soc. 308, 
 315, 316 
 McCarthy v. Lavasche 723, 726, 734, 866 
 McClaren v. Franciscus 856, 861, 863 
 McClellan v. Scott 99, 104 
 
 McClelland v. Whiteley 61, 818 
 
 McCllnch V. Sturgis 717, 726 
 
 McCluer v. Manchester, &c. R. E. 
 
 Co. 345, 920 
 
 McClure v. People's Freight Ey. 
 
 Co. 48, 78 
 
 McCord V. Ohio, &c. E. E. Co. 730 
 McCormick v. Penn. Central E. E. 
 
 Co. 945 
 
 McCracken v. San Francisco 587 
 
 V. Melntyre 810 
 
 McCray v. Junction E. R. Co. 119, 
 
 376, 1061 
 
 McCready v. Rumsey 174, 198, 199 
 
 McCuUoch V. Maryland 11 
 
 V. Norwood 739 
 
 McCuUough V. Moss 448, 476, 504, 
 
 653, 861 
 
 V. Talladega Ins. Co. 320 
 
 McCuUy V. Pittsburgh, &c. E. E. 
 
 Co. 63, 117, 137, 153 
 
 McCurdy ji. Myers 394 
 
 MoDaniels v. Flower Brook Mfg. 
 
 Co. 453, 455, 457 
 
 McDermott v. Board of Police 462 
 McDonald v. Patterson 404 
 
 McDonough v. Phelps 847 
 
 McDougald v. Bellamy 21, 57 
 
 V. Lane 577 
 
 McDowell V. Bank of Wilmington 197 
 McDuffee u. Portland, &c. R. R. 
 
 Co. 1079 
 
 McEUienny's Appeal 522 
 
 McEuen v. West London Wharves, 
 
 &c. Co. 171 
 
 McFarlan v. Triton Ins. Co. 309, 719 
 McGargell v. Hazelton Coal Co. 607 
 McGee v. Mathis 1016 
 
 McGenness v. Adriatic Mills 509 
 
 McGoon V. Scales 1039 
 
 McGregor v. Baylis 12 
 
 V. Dover & Deal Ey. Co. 676 
 
 V. Erie Ry. Co. 923, 959 
 
 V. Home Ins. Co. 428, 430 
 
 McHenry v. Jewett 457 
 
 V. New York, &c. R. E. Co. 256 
 MoHose V. Wheeler 819 
 
 Mclndoe v. St. Louis 680 
 
 McTntire v. McLain Ditching Ass. 28, 67 
 V. Preston 836, 568 
 
 Mclntire Poor School «. ZanesviUe 
 
 Canal, &c. Co. 967 
 
 McKay v. Beard 24 
 
 MoKelvey v. Crockett 790 
 
 McKiernan v. Leiizen 804, 476 
 
 McKim V. Odom 4, 11, 702 
 
 McKinney v. Memphis, &c. Hotel 
 
 Co. 1019 
 
 McLaren v. Pennington 994, 1072 
 
 McLaughlin v. Detroit, &c. R. R. 
 
 Co. 418, 593 
 
 McLean v. Eastman 768, 806, 807, 841 
 V. Lafayette Bank 635, 636 
 
 McMahan v. Morrison 897 
 
 McMahon v. Macy 825, 844, 859 
 
 McMasters v. Reed's Exrs. 336 
 
 McMillan v. Carson Hill, &e. Mg. 
 
 Co. 407 
 
 r. Maysville, &c. R. E. Co. 80, 82, 
 
 83, 89, 117, 152 
 
 McMurray v. Northern Ry. Co. 234, 
 
 239, 243 
 
 McNeely v. Woodruff 260, 459 
 
 McNeil V. Tenth Nat. Bank 183, 186, 
 
 187, 457 
 
 McNichol V. United States, &c. 
 
 Agency 944 
 
 McNiel's Case 814 
 
 McPherson v. Foster 571, 580 
 
 McQueen v. Middletown Mfg. Co. 942 
 
 McRae v. Russell 712 
 
 MoVicker v. Ross 394 
 
 Mead v. Bunn 99 
 
 V. Keeler 335 
 
 V. N. y., H., & N. R. R. Co. 898, 
 
 904, 961 
 
 Meadow Dam Co. v. Gray 121, 384, 711 
 
 Meads v. Merchants' Bank 563 
 
 V. Walker 66 
 
 Means, Appeal of 856 
 
 Mechanics & Farmers' Bank v. 
 
 Smith 471, 560 
 
 Mechanics & Farmers' Bldg. & L. 
 
 Ass. V. Dorsey 1031 
 
 Mechanics & Traders' Bank v. 
 
 Bridges 1071 
 
 Mechanics' Bank i.'. Heard 971 
 
 I'. Merchants' Bank 198 
 
 )). Schaumburg 611 
 
 Mechanics' Bank of Alexandria v. 
 
 Bank of Columbia 806 
 
 V. Seton 202, 211, 216, 512 
 
 Mechanics' Bank of N.Y. v. N.Y. & 
 
 N. H. R. R. Co. 569 
 
 Mechanics' Banking Ass. v. N. Y. 
 
 White Lead Co. 335, 386, 339, 563 
 Mechanics' Foundry, &c. Co. v. 
 
 Hall 124, 133 
 
 Mechanics' Nat. Bank v. Burnet 
 Mfg. Co. 502, 619, 605, 606 
 
TABLE OP CASES. 
 
 xlvii 
 
 MechanicB' Society, Re 986, 1098 
 
 Mechanics' Working Men's Mut. 
 
 Sav., &o. Ass. V. Meriden Agency 407 
 Medical College, Re 18 
 
 Medical Institution v. Patterson 18 
 Medill V. Collier 717, m 
 
 Medway Cotton Manufactory a. 
 
 Adams 340 
 
 Meeker v. Winthrop Iron Co. 258, 452 
 Meikel v. German Savings Fund 
 
 Soc. 719 
 
 Meints v. East St. Louis, &c. Mill 
 
 Co. 790 
 
 Metendy v. Keen 104 
 
 Melhado v. Hamilton 432 
 
 V. Porto Alegre, &c. Ey. Co. 524 
 Mellen v. Whipple 469 
 
 Melledge v. Boston Iron Co. 339, 340 
 MelWsh, Ex parte 399 
 
 Melvin v. Lamar Ins. Co. 112, 288, 292 
 Memphis v. Memphis, &c. Gas Co. 666 
 
 670 
 Memphis & Charleston R. E. Co. v. 
 
 Alabama 954, 960, 961 
 
 V. Gaines 893, 1016 
 
 Memphis & Little Eock E. E. Co. v. 
 
 Dow 326, 332 
 
 V. Memphis, &c. Ry. Co. 1080 
 
 V. St. Louis, &c. Ey. Co. 1080 
 
 B. Railroad Commissioners 880, 
 893, 895, 1045 
 Memphis Branch R. R. Co. v. Sul- 
 livan 590 
 Memphis City v. Dean 235 
 Menasha v. Hazard 906 
 V. Milwaukee, &c. E. R. Co. 782 
 Mendelsohn v. Arnheim, &c. Co. 699 
 Menier v. Hooper's Telegraph 
 
 Works 243, 261, 451 
 
 Mercantile Discount Co., Re 240 
 
 Mercer County v. Hackett 325, 579 
 Merchants & Manufacturers' Bank 
 
 V. Stone 717 
 
 Merchants & Planters' Line v. 
 
 Waganer 268, 392, 971 
 
 Merchants & Planters' Nat. Bank 
 
 V. Masonic Hall 840 
 
 Merchants' Bank of Baltimore v. 
 
 Goddin 505 
 
 Merchants' Bank of Easton v. 
 
 Shouse 197 
 
 Merchants' Bank of Fond du Lac 
 
 V. Chandler 858 
 
 Merchants' Bank of Newburyport 
 
 V. Stevenson 880 
 
 Merchants' Bank of New Haven v. 
 
 Bliss 877 
 
 Merchants' Mfg. Co. v. Grand 
 
 Trunk Ry. Co. 944 
 
 Merchants' Nat. Bank v. Mears 367 
 
 D. Pomeroy Flour Co. 488, 499, 578 
 
 V. Richards 192, 212 
 
 Merchants' Xat. Bank v. State Nat. 
 
 Bank 505, 506, 5150, 563, 573, 654, 696 
 Merchants' Steam Nav. Co. t'. East- 
 ern Steamboat Co. 224, 228, 229 
 Merrick v. Bank of Metropolis 481, 501 
 i>. Brainard 925 
 V. Burlington, &c. PI. R. Co. 321 
 V. Van Santvoord 1, 847, 895, 919, 
 925, 926 
 Merrill v. Call 170 
 1). Gamble 118 
 V. Plainfield 406 
 V. Reaver 118 
 V. Suffolk Bank 858, 988 
 V. Walker 76 
 Merrimac Mg. Co. u. Bagley 160 
 V. Levy 160 
 Merritt v. Farris 456 
 V. Lambert 559 
 Messenger v. Pennsylvania R. R. 
 
 Co. 625, 1076, 1078 
 
 Messersmith v. Sharon Sav. Bank 160, 
 
 161 
 Methodist Ep. Church at Little 
 
 Falls V. Tryon 841 
 
 Methodist Ep. Church at Mont- 
 
 pelier v. Town 78 
 
 Methodist Ep. Church at Pittsfield 
 
 V. Remington 313 
 
 Methodist Ep. Church of Kendall- 
 
 ville V. Shulze 332 
 
 Methodist Ep. Union Church at 
 
 Lyons v. Pickett 41, 723, 745 
 
 Metropolitan Bank ;;. Godfrey 300, 369, 
 
 922 
 Metropolitan Board of Excise f. 
 
 Barrie 1012 
 
 Metropolitan Elevated Ry. Co. u. 
 Manhattan Elevated R.JB. Co. 479, 
 
 498 
 Metropolitan Grain, &c. Exchange 
 
 V. Chicago Bd. of Trade 1092 
 
 Metropolitan Saloon Omnibus Co. 
 
 V. Hawkins 843 
 
 Meyer v. Johnston 891, 894 
 
 V. Muscatine 580 
 
 Miami Exporting Co. v. Clark 636 
 
 V. Gano 988, 994 
 
 Michener v. Payson 814 
 
 Michigan State Bank v. Gardner 950 
 Miohoud V. Girod 489 
 
 Mickey v. Stratton 323, 584 
 
 Mickles v. Rochester City Bank 973 
 Middle Bridge Co. v. Marks 929 
 
 Middlebrooks v. Springfield Fire 
 
 Ins. Co. 944 
 
 Middlesex Husbandmen, &c. Co. v. 
 
 Davis 24, 809 
 
 Middlesex R. R. Co. u. Boston & 
 
 Chelsea R. R. Co. 394, 889, 1083 
 
 Middlesex Turnp. Co. u. Locke 119, 
 
 881 
 
xlviii 
 
 TABLE OF CASES. 
 
 Middlesex Turnp. Co. v. Swan 119 
 Middletown Bank v. Magill 297, 853, 
 
 861 
 Midland Great Western Ry. Co. v. 
 
 Gordon 171,384 
 
 Midland Ey. Co. v. Great Western 
 
 Ey. Co. 365, 366, 394 
 
 V. London, &c. Ey. Co. 877 
 
 Mlers V. Zanesville, &o. Turnpike 
 
 Co. 837 
 
 Mihills Mfg. Co. v. Camp 512 
 
 Milbank v. N. Y., &o. E. R. Co. 407 
 Miles V. Bough 148 
 
 Milford V. Godfrey 36 
 
 Milford, &c. Turnp. Co. v. Brush 340 
 Millard v. St. Francis, &c. Acad- 
 emy 335,406,663 
 Mill Dam Foundery Co. c. Hovey 323, 
 
 853 
 
 Miller!). Burlington, &c. E. E. Co. 700 
 
 V. English 455 
 
 V. Ewer 461, 613 
 
 V. Great Repubhc Ins. Co. 159, 830 
 
 V. Hanover, &c. E. E. Co. 97 
 
 V. Illinois Central E. E. Co. 427, 
 
 513 
 
 V. Lancaster 910 
 
 V. N. Y. & E. E. R. Co. 1066 
 
 V. Pittsburgh, &c. E.E. Co. 89, 117 
 
 417 
 
 V. Porter 313 
 
 V. Eutland, &o. E. R. Co. 325, 477 
 
 V. State 1065, 1068 
 
 V. Tiffany 928 
 
 V. White 859 
 
 Milliken v. Whitehouse 858, 862 
 
 Mills V. Northern Ry. Co. 247, 413, 425, 
 
 752 
 
 V. Stewart 124, 293, 828, 829 
 
 V. Western Bank 638 
 
 Milner v. Pensacola 781 
 
 Milnor v. New York & N. H. R. E. 
 
 Co. 361, 922, 923 
 
 Milroy v. Spurr Mt., &e. Mg. Co. 867 
 Milwaukee & Northern 111. R. E. 
 
 Co. V. Field 90 
 
 Mineral Point E. E. Co. v. Keep 1052 
 Miners' Bank v. United States 1073 
 Miners' Ditch Co. v. Zellerbaoh 319, 
 571, 672, 680 
 Mining Co. v. Anglo-Californian 
 
 Bank 476, 559, 607 
 
 Minneapolis Harvester Works v. 
 
 Libby 56, 60, 75 
 
 Minor v. Mechanics' Bank of Alex- 
 andria 26, 288, 399, 482, 561, 604, 
 605, 737 
 Minot V. Boston Asylum, &c. 340 
 
 V. Curtis 339 
 
 V. Paine 178, 425, 441 
 
 V. Philadelphia, W. & B. R. E. 
 Co. 960 
 
 Mississippi & Eum Elver Boom 
 
 Co. V. Patterson 1048 
 
 Mississippi & Tenn. E. R. Co. v. 
 
 Harris 63 
 
 Mississippi Ry. Co. v. McDonald 1048, 
 
 1044 
 Mississippi, Wacliita, & Red River 
 
 E. E. Co. ». Cross 78,97,115 
 
 V. Gaster 121, 148 
 
 Mitchel V. Reynolds 1094 
 
 Mitchell V. Beckman 56, 761 
 
 u. City of Rockland 701 
 
 V. Deeds 501, 506, 620, 720, 724, 898 
 
 V. Hotchkiss 877 
 
 V. Rome E. E. Co. 74, 309 
 
 V. Vermont Copper Mg. Co. 122, 
 
 123, 127, 461, 505 
 
 V. Walker 948 
 
 Mitchell's Case 289, 824 
 
 Mix V, Andes Ins. Co. 1053 
 
 «. Nat. Bk. of Bloomington 742 
 
 Mobile V. Eowland 1052 
 
 Mobile & City Point R. R. Co. v. 
 
 Talman 327 
 
 Mobile & Montgomery Ey. Co. v. 
 
 Steiner 1036, 1038, 1069 
 
 Mobile & Ohio R. R. Co. v. State 392, 
 
 774, 1026 
 
 V. Yandal 66 
 
 Mobile & Spring Hill R. E. Co. v. 
 
 Kennerly 1016 
 
 Moch V. Virginia, &c. Ins. Co. 943 
 
 Moffatt V. Farquharson 451 
 
 Mohawk & Hudson Eiver E. E. 
 
 Co., Be 457, 643 
 
 V. Clute 218 
 
 Mohawk Bridge Co. v. TJtica, &c. 
 
 E. R. Co. 308 
 
 Moles V. Sprague 877 
 
 Mok V. Detroit Bldg., &c. Ass. 727 
 Mokelumne Hill, &c. Mg. Co. v. 
 
 Woodbury 30, 32, 41, 861 
 
 Monadnock R. R. Co. v. Felt 80 
 
 Monmouth Mut. F. Ins. Co. v. 
 
 Lowell 146 
 
 Monongahela Nav. Co. v. Coon 1020, 
 
 1070 
 Monsseaux v. Urquhart 452, 457, 459 
 Monterey & S. V. R. Co. v. Hildreth 66 
 Montgomery v. Montgomery, &c. 
 
 Plank R. Co. 38, 300, 666, 668 
 
 Montgomery & West Point E. R. 
 
 Co. V. Boring 913 
 
 V. Branch 784 
 
 Montgomery Mut. Bldg. & Loan 
 
 Ass. V. Robinson 46 
 
 Montgomery R. R. Co. v. Hurst 720 
 Monument Nat. Bank v. Globe 
 
 Works 335, 339, 400, 663 
 
 Moodie v. Seventh Nat. Bk. 187 
 
 Moore v. Bank of Commerce 167, 202, 
 
 465 
 
TABLE OF CASES. 
 
 xlix 
 
 Moore v. Chicago, &c. By. Co. 435, 954, 
 
 V. Freeman's Nat. Bank 941 
 
 V. Hammond 458, 455 
 
 V. Jones 160, 824 
 
 V. Metropolitan Nat. Bank 187 
 V. Schoppert 36, 236, 974 
 
 Moores v. Citizens' Nat. Bank 569 
 
 Moorhead u. Little Miami B. B. 
 
 Co. 308, 998 
 
 Moran v. Miami County 325, 579 
 
 Moreland v. State Bank 643 
 
 Morford v. Farmers' Bank 400 
 
 Morgan b. Bank of North America 197, 
 
 198 
 
 u. Donovan 356, 374, 651, 666, 
 
 680, 721 
 
 V. Louisiana 893 
 
 V. New Orleans, M., & C. E. E. 
 
 Co. 235 
 
 V. New York & A. E. E. Co. 836 
 
 V. Skiddy 541, 543, 544 
 
 V. Wliite 631 
 
 Morgan County v. Allen 791, 795, 800 
 
 V. Thomas 117 
 
 Morris v. Cannan 175 
 
 V. Keil 319, 554, 584 
 
 Morris & Essex E. E. Co. v. Green 510 
 
 V. Sussex B. E. Co. 309, 377, 628 
 
 Morris Canal, &0. Co. o. Fisher 325 
 
 !;. Lewis 325 
 
 Morris Bun Coal Co. v. Barclay 
 
 Coal Co. 398, 1095 
 
 Morrison v. Dorsey 794 
 
 V. Gold Mt. G. Mining Co. 212, 
 
 228 
 
 V. Ogdenshurgh, &c. E. E. Co. 484 
 
 Morrow v. Superior Court 854 
 
 Morse v, Brainerd 361 
 
 K. Conn. Eiver E. E. Co. 509 
 
 Morton v. Metrop. L. Ins. Co. 697 
 
 Morton's Case 170 
 
 Moseby v. Burrow 971, 974 
 
 Moses V. Boston, &c. B. E. Co. 355 
 
 V. OcoU Bank 764, 795, 808 
 
 V. Watson 204 
 
 Mosier v. Hilton 12 
 
 Moss V. Averell 312, 331, 335, 338, 355, 
 
 397, 398, 627, 851, 854 
 
 V. Haspeth Academy 327 
 
 V. McCullough 358, 844, 859 
 
 V. Oakley 335, 861 
 
 V. Bossie Lead Mg. Co. 335, 338, 
 
 564, 578, 574, 661, 677 
 
 V. Syers 432 
 
 Moss's Appeal 439 
 
 Mott V. Hicks 335, 339, 340, 1053 
 
 V. U. S. Trust Co. 639 
 
 Moulin V. Trenton, &c. Ins. Co. 942, 943 
 
 Moultrie v. Smiley 991 
 
 Moultrie County v. Buckingham, 
 
 &c. Sar. Bank 1044 
 
 VOL. 1. — d 
 
 Mount Holly Paper Co.'s Appeal 199, 
 570, 730 
 Mount Pleasant v. Beckwith 913 
 
 Mount Sterling Coal E. Co. v. 
 
 Little 45, 49 
 
 Mower v. Leicester 702 
 
 V. Staples 381 
 
 Mowrey v. Ind. & Cin. B. B. Co. 376, 
 384, 613, 614, 1021 
 Moxey v. Philadelphia Stock Exch. 464 
 Moyer v. Pennsylvania Slate Co. 852, 
 
 853 
 Mozley ». Alston 243, 246 
 
 Mudgett V. Horrell 76 
 
 Mullen u. Beech Grove D. & P. 
 
 Ass. 33 
 
 MuUer v. Dows 936, 960, 962, 1054, 
 
 1085 
 V. Hanover Junction, &o. B. E. 
 Co. 288 
 
 Mulligan v. Illinois Central B. B. 
 
 Co. 361 
 
 MuUikin v. City of Bloomington 722 
 Mumford v. American L. Ins. Co. 306, 
 
 345 
 
 V. Hawkins 321 
 
 Mumma v. Potomac Co. 774, 973, 988, 
 
 992 
 Mundorffu. Wiokersham 188 
 
 Munger v. Jacobson 853 
 
 Munhall v. Penn. B. B. Co. 368 
 
 Munn V. Commission Co. 335 
 
 V. Illinois 1033 
 
 Munt V. Shrewsbury & Chester By. 
 
 Co. 282 
 
 Murdock v. Brown 1031 
 
 Murphy, Application of 193 
 
 Mx parte 459 
 
 V. City of Louisville 550, 552, 558, 
 
 562, 687 
 
 V. Farmers' Bank 975 
 
 V. Hanrahan 227 
 
 V. O'Shea 484 
 
 Murray v. Bush 159 
 
 V. Glasse 441 
 
 V. Lardner 325 
 
 V. Stevens 210 
 
 V. Vanderbilt 939 
 
 Muscatine Turnverein v. Funck 988, 
 
 993 
 Musgrave v. Morrison 68, 794 
 
 V. Nevinson 462 
 
 Musgrave & Hart's Case 210, 827 
 
 Musser v. Johnson 584 
 
 Mussey v. Eagle Bank 568 
 
 Mussina v. Goldthwaite 236 
 
 Mutual Aid Ass., Be 33 
 
 Mutual Benefit L. Ins. Co. v. Bales 629 
 V. Davis 920 
 
 Mutual Bldg., &o. Bank v. Bos- 
 
 sieux 528 
 
 Mutual L. Ins. Co. v. Wilcox 639 
 
TABLE OF CASES. 
 
 ;rs V. Dorr 
 
 939, 944 
 
 !;. Irwin 
 
 21 
 
 V. Manhattan Bank 
 
 923 
 
 V. Koss 
 
 612 
 
 V. Seeley 
 
 792 
 
 N. 
 
 Naglee v. Pacific "Wharf Co. 196 
 
 Napier v. Poe 71, 74 
 
 Ntirragansett Bank v. Atlantic Silk 
 Co. 32, 321, 335 
 
 Nasliua Lock Co. v. Worcester, &c. 
 R. E. Co. 361 
 
 Nashua, &c. R. E. Co. v. Boston, 
 &c. R. R. Co. 961 
 
 Nashville v. Ray 571 
 
 Nasliville, &e. R. E. Co. u. Starnes 699 
 
 Nassau Bank v. Brown 845 
 
 Natchez v. Mallery 688 
 
 Nathan v. Whitlock 830, 840 
 
 National Bank v. Case 639, 824 
 
 V. Colby 773, 988 
 
 V. Norton 513 
 
 V. Stewart 640 
 
 V. Watsontown Bank 202 
 
 National Bank of Carlisle v. Gra- 
 ham 370, 508, 696 
 
 National Bank of Commerce v. 
 Huntington 939, 944 
 
 National Bank of Genesee v. Whit- 
 ney 640 
 
 National Bank of Gloversville v. 
 Welles 371 
 
 National Bank of -the Metropolis v. 
 Orcutt 720 
 
 National Bank of New London v. 
 Lake Shore, &c. Ry. Co. 184, 212 
 
 National Bank of Rutland v. Page 367, 
 
 368 
 
 National Bank of Schuylerville v. 
 Van Dewarker 7 
 
 National Bank of St. Charles v. De 
 Bernales 39, 920 
 
 National Bank of St. Louis v. Mat- 
 thews 367, 634, 635, 640, 645, 659, 
 663, 680, 681 
 
 National Bank of Washington v. 
 Cont. L. Ins. Co. of Hartford 332,636 
 
 National Condensed Milk Co. n. 
 Brandenburgh 943 
 
 National Docks R. E. Co. v. Central 
 R. R. Co. 735, 737 
 
 National Exch. Bank v. Hartford, 
 &c. E. R. Co. 325 
 
 National Exch. Co. v. Drew 510, 697 
 V. Sibley 645 
 
 National Financial Co., Re 825 
 
 National Funds Ass. Co., Re 760, 764, 
 
 767 
 
 National Manure Co. u. Donald 302 
 
 National Mut. Fire Ins. Co. v. Pur- 
 sell 632 
 National Pahquloque Bank v. First 
 
 Nat. Bank of Bethel 971 
 
 National Park Bank v. Nichols 949 
 National Pemberton Bank v. Por- 
 ter 617, 641, 682 
 National Permanent Benefit Bldg. 
 
 Soc, Re 683, 686, 687 
 
 National Provincial L. Ass. Soc, Re 777 
 National Security Bank v. Cush- 
 
 man 512, 513 
 
 National Shoe & L. Bank v. Me- 
 chanics' Nat. Bank 772, 773 
 National Steamship Co. v. Tugman 937 
 National Trust Co. v. Miller 760, 762, 
 840, 950 
 V. Murphy 345 
 National Union Bank v. Landon 717 
 Nation's Case 216, 828 
 Native Iron Ore Co., Re 554 
 Natoma Water, &c. Co. v. Clarkin 680 
 Natusch V. Irving 261, 374 
 Naugatuck R. E. Co. v. Waterbury 
 
 Button Co. 361, 366 
 
 Naylor v. South Devon Ey. Co. 263 
 
 Neal V. Briggs 878 
 
 Neale v. Janney 197 
 
 V. Turton 339 
 
 Neall V. Hill 243, 266, 267, 518, 530 
 
 Neffw. Wolf River Boom Co. 782 
 
 Neilson v. Crawford 869 
 
 Nelson v. Blakey 67 
 
 V. Eaton 327, 332 
 
 V. Luling 103 
 
 V. Milford 406 
 
 u. Vermont, &c. R. E. Co. 1022, 
 
 1026 
 
 Nesmithi). Washington Bank 174,198, 
 
 202 
 Neuse River Nav. Co. v. Newbern 402 
 Neville v. Litchfield Carr. Co. 268 
 
 Nevitt V. Bank of Port Gibson 988, 992, 
 994, 1008, 1039, 1040 
 New Albany v. Burke 113, 288, 402, 816 
 New Albany & Salem R. E. Co. v. 
 
 Fields 78, 95, 97, 292 
 
 V. Grooms 941 
 
 V. McCormick 149 
 
 u. McNamara 1038 
 
 0. Pickens 145 
 
 V. Tilton 941 
 
 Newark Plank E. Co. v. Elmer 308 
 
 Newark Town Council v. Elliott 319 
 
 New Athens v. Thomns 321 
 
 New Bedford & B. Turnp. Co. v. 
 
 Adams 1,35 
 
 Newberry v. Detroit, &c. Iron Co. 196 
 New Boston v. Dunbarton 37 
 
 New Brunswick, &o. Ey. Co., Re 1099 
 New Brunswick & Can. Ey. & L. 
 Co. V. Muggeridge 99, 104 
 
TABLE OP CASES. 
 
 li 
 
 New Buffalo v. Iron Co. 909 
 
 Newburg Petroleum Co. v. Weare 658, 
 665, 719, 724. 920, 925 
 Newby ». Oregon Central B. R. 
 
 Co. 235, 339, 282, 342, 479 
 V. Von Oppen 920, 939, 941, 948 
 New Castle, &c. R. E. Co. v. Simp- 
 son 684, 693 
 Newcastle Marine Ins. Co., Be 544 
 Newell (I. Great Western Ry. Co. 941, 
 
 942 
 V. Williston 193 
 
 New England Car Spring Co. o. 
 
 Union India Rubber Co. 511 
 
 New England Commercial Bank v. 
 
 Newport, &c. Factory Co. 854 
 
 New England Exp. Co. v. Maine 
 
 Central R. R. Co. 1079 
 
 New England F. & M. Ins. Co. v. 
 
 Robinson 632 
 
 V. Schettler 476 
 
 New England Iron Co. v. Gilbert 
 
 El. R. R. Co. 584 
 
 New England Mu,t. L. Ins. Co. v. 
 
 Woodworth 944 
 
 New Hampshire Central R. R. Co. 
 
 V. Johnson 56, 123, 132, 135, 157, 713 
 New Hampshire Land Co. ». Tilton 921 
 New Haven & Derby R. R. Co. v. 
 
 Chapman 121 
 
 New Haven & Northampton Co. v. 
 
 Hayden 620 
 
 New Hope, &c. Bridge Co. o. Phoe- 
 nix Bank 511, 602 
 V. Poughkeepsie Silk Co. 632 
 New Jersey v. Yard 1069, 1070 
 New Jersey, &e. Bank v. Thorp 920 
 New Jersey Franklinite Co. v. 
 
 Ames 233 
 
 New Jersey Midland Ey. Co. v. 
 
 Strait 778 
 
 New Jersey Southern R. R. Co. v. 
 
 Long Branch Commissioners 974 
 Newling v. Francis 460 
 
 New London v. Brainard 300 
 
 New Orleans Gas Co. v. Louisiana 
 
 Light Co. 1001, 1013, 1017, 1050, 1093 
 New Orleans, Jackson, & G. N. 
 
 R. R. Co. V. Bailey 699 
 
 ■;. Harris 119, 376, 448, 609, 614, 
 1008, 1021 
 V. Hurst 699 
 
 New Orleans Nat. Bank o. Ray- 
 mond 367 
 New Orleans Nat. Banking Ass. v. 
 
 Adams 948 
 
 New Orleans, Spanish Fort, &c. 
 
 R. R. Co. V. Delamore 891 
 
 New Orleans, St. Louis, &c. R. R. 
 
 Co. V. Burke 699 
 
 New Orleans Water Works Co. u. 
 Rivers 1018 
 
 Newry & EnnisklUen Ry. Co. v. 
 
 Edmunds 148, 199 
 
 New Sombrero Phosphate Co. v. 
 
 Erlanger 277, 281, 522 
 
 Newton v. Carbery 24 
 
 Newton County Draining Co. v. 
 
 Nofsinger 735 
 
 Newton Mfg. Co. o. White 970 
 
 New York v. New York, &c. Ferry 
 
 Co. 703 
 
 New York & Canada R. R. Co. v. 
 
 Gunnison 358 
 
 New York & New Haven R. E. Co. 
 
 V. Ketchum 523 
 
 V. Kip 307, 308, 355, 356, 358 
 
 V. Schuyler 183, 184, 206, 409, 555, 
 
 566, 569, 660, 696, 697 
 
 New York & Sharon Canal Co. v. 
 
 Fulton Bank 398 
 
 New York African Soc. v. Varick 841 
 New York Central & Hudson River 
 
 R. R. Co., Re 356 
 
 V. Metropolitan Gas Light Co. 356 
 V. People 1099 
 
 New York Central Ins. Co. v. Na- 
 tional, &c. Ins. Co. 496 
 New York Dry Dock Co. v. Hicks 345, 
 920, 921 
 New York Elevated E. E. Co., Be 16, 
 19, 974, 986 
 New York Firemen Ins. Co. v. Ely 306, 
 307, 637, 663, 666, 920 
 V. Sturges 306, 309 
 New York Floating Derrick Co. v. 
 
 Jersey Oil Co. 346, 920 
 
 New York, Housatonic, & N. E. R. 
 
 Co. V. Hunt 140, 143 
 
 New York Institution, &c. v. How 840 
 New York Iron Mine v. First Nat. 
 
 Bank of Negaunee 227, 477, 571, 718 
 New York, Lackawanna, & W. Ry. 
 
 Co., Be 735, 1088 
 
 New York Marbled Iron Works v. 
 
 Smith 973 
 
 New York Trust, &c. Co. v. Helmer 637 
 Nichols u. Burlington, &c. R. R. Co. 85 
 V. Mase 565, 577 
 
 Nickalls v. New York, &c. R. R. Co. 429 
 Niokerson v. Wheeler 882 
 
 Nicol's Case 100, 102 
 
 NicoU V. N. Y. & E. R. R. Co. 989 
 
 V. N. Y. & N. H. R. R. Co. 313 
 Niemeyer v. Little Rock, &c. Ey. 
 
 Co. 735, 737 
 
 Nimiek v. Mingo Iron Works Co. 844, 
 873, 874 
 Nimmons v. Tappan 970 
 
 Nixon V. Brownlow « 386 
 
 V. Green 861 
 
 Noble V- Callender 79, 817 
 
 Norman v. Mitchell 263 
 
 Norris v. Androscoggin R. R. Co. 1026 
 
lii 
 
 TABLE OF CASES. 
 
 Norris v. Harrison 441 
 
 V. Johnson 854, 866, 867 
 
 V. Mayor, &c. of Stnithville 971 
 V. Wrenshall 846 
 
 North V. Forest 220 
 
 North America Bldg. Ass. v. Sutton 212 
 North American Col. Ass. of Ire- 
 land V. Bentley i 161 
 Northampton Bank v. Pepoon 601 
 North Carolina R. R. Co. v. Caro- 
 lina Central Ry. Co. 892 
 V. Leach 79 
 Northeast, &e. K. E. Co., Ex parte 1044 
 Northeastern R. E. Co. v. Rod- 
 
 rigues 64 
 
 North Hempstead v. Hempstead 7, 20 
 North Missouri E. R. Co. v. Akers 939, 
 
 942 
 
 V. Maguire 1016 
 
 V. Winkler 80, 89 
 
 North Shore, &c. Ferry Co., Re 457 
 
 Northern Assam Tea Co., Re 202 
 
 Northern Bank of Kentucky v. 
 
 Keizer 201 
 
 Northern Bank of Toledo v. Porter 
 
 Township 580 
 
 Northern Central Mich. R. E. Co. 
 
 V. Eslow 48, 59, 64, 85 
 
 Northern Central Ry. Co. v. Bas- 
 
 tian 321 
 
 Northern Liberty Market Co. v. 
 
 Kelly 314 
 
 Northern Pac. Ey. Co. v. St. Paul, 
 
 &c. Ey. Co. 1050 
 
 Northern E. E. Co. v. Miller 55, 121, 
 123, 124, 127, 384 
 Northern Transp. Co. v. Chicago 921 
 Northrop v. Curtis 171, 173 
 
 V. Newton, &c. Tump. Co. 170, 171 
 Northrup v. Miss. Vail. Ins. Co. 510 
 Northwestern College v. Schwagler 839 
 Northwestern Distilling Co. v. 
 
 Brant 840, 341 
 
 Northwestern Fertilizing Co. v. 
 
 Hyde Park 307, 308, 1027, 1028 
 
 ITorthwestern Mut. L. Ins. Co. v. 
 
 Orerholt 633 
 
 Northwestern Union Packet Co. v. 
 
 Shaw 666,669 
 
 Northwestern Unirersity v. Peo- 
 ple 1014, 1016 
 Norton's Case 781 
 Norwegian, &c. Iron Co., Re 397 
 Norwich v. Norfolk Ey. Co. 325, 350, 
 351, 374, 572, 574, 673 
 Norwich & L. Nar. Co. v. Theobald 140 
 Norwich Tarn Co., Re 329, 685 
 Norwood, Be • 739 
 Noyes u. Marsh 213 
 V. Rutland, &c. R. R. Co. . 601 
 Nugent V. Supervisors 119, 121, 386, 
 909, 1061 
 
 Nulton V. Clayton 68, 131 
 
 Nute V. Hamilton Mut. Ins. Co. 465 
 Nutter V. Lexington, &c. E. E. Co. 144 
 Nutting V. Hill 722 
 
 V. Thomason 205 
 
 o. 
 
 Oakes v. Turquand 7, 813, 844 
 
 Oakland Bank v. Wilcox 530 
 
 Oakland E. E. Co. v. Oakland, 
 
 Brooklyn, &c. R. E. Co. 967 
 
 O'Brien v. Cummings 36 
 
 v. Norwich, &e. E. R. Co. 996 
 
 V. Shaw's Flat, &c. Canal Co. 941 
 Occidental Ins. Co. v. Ganzhorn 105 
 Occum Co. V. Sprague Mfg. Co. 249, 312 
 Ochiltree v. Eailroad Co. 787 
 
 O'Connor v. North Truckee Ditch 
 
 Co. 230 
 
 Odd Fellows' Hall Co. v. Glazier 135 
 Odell w. Odell 312 
 
 'Donald v. Evansville, &c. R. E. 
 
 Co. 90 
 
 Offutt !). King 993 
 
 Ogden V. Murray 484, 499 
 
 Ogdensburgh & L. C. E. R. Co. v. 
 
 Pratt 361 
 
 Ogdensburgh, Rome, &c. R. R. Co. 
 
 V. Frost ' 69, 71 
 
 V. WoUey 71, 74 
 
 Ogilvie V. Jeaffreson 96 
 
 V. Knox Ins. Co. 106, 298, 791, 
 
 792, 837 
 
 Oglesby v. Attrill 237 
 
 O'Hare v. Second Nat. Sank 639 
 
 Ohio V. Cleveland, &c. R. E. Co. 176, 
 
 421 
 Ohio & Indianapolis R. R. Co. v. 
 
 Eidge 38 
 
 Ohio & Miss. R. R. Co.t). McCarthy 361, 
 
 552, 564, 623, 661 
 
 V. McClelland 1026 
 
 V. McClure 1001 
 
 V. McPherson 461, 500, 592, 605, 712 
 
 V. Quier 941 
 
 V. Weber 962 
 
 V. Wheeler 1, 936, 960 
 
 Ohio Ins. Co. v. Nunnemacher 427 
 
 Ohio Life Ins. & T. Co., Re 306 
 
 a. Merchants' Ins. & T. Co. 304, 
 
 626,920,922,928 
 
 Ohio Wesl. Fem. Coll. v. Love 137 
 
 Oil Creek, &c. R. R. Co. v. Penn. 
 
 Transp. Co. 651, 661 
 
 Olcott V. Supervisors 1032 
 
 „. Tioga R. E. Co. 835, 838, 501, 
 
 511, 594, 1058 
 
 Old Colony R.R. Co. w. Evans- 304, 
 
 312, 319, 367 
 
 Oldham v. First Nat. Bank 640 
 
TABLE OF CASES. 
 
 liii 
 
 Oldtown & L. K. R. Co. v. Veazie 157, 
 590, 713, 1064 
 Oler V. Baltimore, &c. R. R. Co. 730 
 Oiipliant v. Woodburn Coal, &c. 
 
 Co. 404 
 
 Oliver v. Liverpool, &c. Ins. Co. 951 
 Oliver Lee & Co.'s Bank, Re 1061, 1069 
 O'Neal V. King 80, 90 
 
 Oneida Bank v. Ontario Bank 638, 
 648, 692 
 Ontario Bank v. Bunnell 1052 
 
 Ontario Hotel Co. v. Wade 250, 492, 
 592, 593 
 Ontario Salt Co. v. Merchants' Salt 
 
 Co. 399 
 
 Opdyke v. Pacific R. R. Co. 400 
 
 Opinion of Justices 1022, 1031 
 
 Oregon, &o. Investment Co. v. Rathr 
 
 burn 629 
 
 Oregon Central B. R. Co. u. Scog- 
 
 ■ gin 98, 142 
 
 Oregonian Ry. Co. v. Oregon Ry. 
 
 & Nav. Co. 402, 479, 657, 658, 719 
 O'Reilly v. Bard 297, 864 
 
 Oriental Inland Steam Co. v. Briggs 70 
 Ormsby v, Vermont Copper Mg. 
 
 Co. 461, 500, 595, 613 
 
 Ornn v. Merch. Nat. Bank 367 
 
 Oroville, &c. R. R. Co. v. Plumas 
 
 County 12, 888 
 
 Orr V. Bracken County 1021 
 
 V. Lacey 635, 666 
 
 Orr Water Ditch Co. v. Reno W. 
 
 D. Co. 583 
 
 Osborn v. Bank of U. S. 11, 321, 947 
 Osborne v. Brooklyn City R. R. Co. 996 
 Osgood V. King 795 
 
 b. Laytin 800, 836 
 
 V. Ogden 834 
 
 Oskaloosa Agr. Works v. Parkhurst 80, 
 
 82 
 Ossipee H. & W. Mfg. Co. v. Can- 
 
 ney 157, 565, 648, 654, 711, 723 
 
 Otis V. Gardner 834 
 
 Otis Co. V. Ware 1052 
 
 Ottawa, Oswego, & F. B. R. R. Co. 
 
 V. Black 116 
 
 Otter V. Brevoort Petroleum Co. 291, 
 
 567 
 
 Ould V. Washington Hospital 928 
 
 OVerend v. Gurney 526, 528 
 
 Overmyer v. Cannon 870 
 
 V. Williams 800 
 
 Overseers of the Poor v. Sears 3 
 
 Owen V. Purdy 26, 40, 596 
 
 V. Smith 989, 993 
 
 V. Whitaker 518 
 
 Owsley V. Montgomery, &o. R. R. 
 
 Co. 697, 698 
 
 Oxford Iron Co. v. Spradley 809, 327 
 
 335, 339, 654 
 
 Oxford Turap. Co. v. Bunnell 171 
 
 P. 
 
 Pacific R. R. Co. v. Hughes 55, 119, 881 
 
 V. MoGuire 1016 
 
 V. Mo. Pacific R. B. Co. 226, 599, 
 
 961 
 
 V. Renshaw 121, 381, 884 
 
 V. Seely 312, 874, 649 
 
 V. Thomas 602 
 
 Pacific R. R. Co. Removal Cases 947 
 
 Paddock v. Fletcher 543 
 
 Page V. Cox 165 
 
 V, Heineburg 312 
 
 V. Smith 63, 118, 427, 452, 498, 601 
 
 Paine b. Hutchinson 210, 827 
 
 V. Lake Erie, &c. R. R. Co. 484, 910 
 
 V. Stewart 847, 856 
 
 V. Strand Union 321 
 
 Painesville, &c. R. R. Co. v. King 417 
 
 Palestine v. Barnes 884, 1088 
 
 Palfrey v. Paulding 24, 805 
 
 Palmer v. Grand Junction Ry. Co. 1079 
 
 V. Lawrence 718, 721 
 
 V. Ridge Mining Co. • 160 
 
 Palmyra v. Morton 468 
 
 Pangborn v. Westlake 625 
 
 Paret v. City of Bayonne 322, 342 
 
 Paris V. Paris 438, 441 
 
 Parish v. Cole 812 
 
 V. Parish 214 
 
 V. Wheeler 657, 661, 681 
 
 Park V. Petroleum Co. 232, 262 
 
 Parke v. Commonwealth Ins. Co. 941, 
 
 943 
 Parker v. Mason 416 
 
 V. May 998 
 
 V. McKenna 493, 535, 689 
 
 V. Metropolitan B. R. Co. 1055, 1061 
 V. Niokerson 489 
 
 V. Northern Central, &e. R. R. 
 
 Co. 48, 69, 64, 137 
 
 V. Thomas 91, 95, 97 
 
 Parkersburg v. Brown 1047 
 
 Parks V. Evansville, &o. R. R. Co. 91, 
 
 107 
 
 V. Heraan 145 
 
 Parrott v. Byers 179 
 
 V. City of Lawrence, &e. 1018 
 
 V. Colby 862 
 
 Parsons v. Hayes 275, 277, 279, 692 
 
 Partridge v. Badger 306, 326, 335 
 
 V. Brady 699 
 
 Paschall v. Whitsett 988, 994 
 
 Patent File Co., Re 819, 332 
 
 Patterson v. Lynde 887, 840, 866, 870 
 
 V. Wyoraissing Mfg. Co. 856, 867 
 
 Pattison v. Albany Building, &c. 
 
 Ass. 737 
 
 V. Syracuse Nat. Bank 366, 370, 508 
 
 Paul V. Virginia 883, 918, 930, 934, 937 
 
 Paulding v. Chrome Steel Co. 755, 773 
 
 Payne v. BuUard , 2, 793 
 
liv 
 
 TABLE OF CASES. 
 
 Payne v. Mayor of Brecon 832, 628, 676 
 
 V. New South Wales Coal, &c. 
 
 Co. 623 
 
 V. Western, &c. E. K. Co. 697 
 
 Payson v. Stoever 593, 602 
 
 V. Withers 632, 847 
 
 Peabody v. Flint 226, 232, 236, 243, 
 246, 252 
 Peake v. Wabash E. E. Co. 147 
 
 Pearce ». Madison, &c. E. E. Co. 360, 
 376, 560, 552, 569, 614, 665, 898 
 Pearson ?>. Concord E. R. Co. 489, 497 
 Peck V. Coalfield Coal Co. 796, 801 
 
 V. Miller 870 
 
 Peckham v. Haverhill Parish 939, 942 
 
 u. Hendren 514 
 
 V. Van Wagenen 424, 538 
 
 Peebles v. Patapsco Guano Co. 696, 697 
 Peek V. Detroit Novelty Works 609 
 Peel's Case 106 
 
 Peik V. Chicago, &c. E. R. Co. 1085 
 Peirce v. Somersworth 941 
 
 Pell's Case 402, 796 
 
 Pellat's Case 70 
 
 Pemigewassett Bank v. Rogers 643 
 Pender v. Lushington 168, 249, 458 
 Pendergast v. Bank of Stockton 198 
 Peninsular, &c. Bank, He 473 
 
 Peninsular Ry. Co. v. Tharp 706 
 
 Penn v. Bornman 639 
 
 Penney's Case 168 
 
 Penniman v. Brigga 972 
 
 Penniman's Case 1023 
 
 Pennoyer v. NefE 940 
 
 Pennsylvania Co. v. Wentz 1026 
 
 Pennsylvania College Cases 774, 776, 
 1059, 1070 
 Pennsylvania, Del. & Md. Steam 
 
 Nav. Co. V. Dandridge 595, 666, 668 
 Pennsylvania E. E. Co. v. Balti- 
 more, &c. R. E. Co. 1049 
 
 V. Canal Comm'rs 1052 
 
 V. Vandiver 697 
 
 Pennsylvania R. E. Co.'s Appeal 179, 
 
 187 
 Pennsylvania Transp. Co.'s Appeal 782 
 Penobscot & Kennebec R. R. Co. 
 V. Bartlett 141, 149 
 
 V. Dunn 74, 76, 141, 149, 605 
 
 Penobscot Boom Co. v. Lamson 23, 28, 
 
 974 
 
 Penobscot E. E. Co. v. Dummer 47, 77, 
 
 144, 147 
 
 u. White 77, 144, 147 
 
 Pensacola Tel. Co. v. Western 
 
 Union Tel. Co. 935 
 
 Pentz V. Citizens' Fire Ins. Co. 467 
 People V. Albany 702 
 
 V. Albany, &c. E. E. Co. 397, 453, 
 466, 460, 997, 1087, 1098, 1099 
 
 V. Assessors of Brooklyn 176 
 
 V. Assessors of Watertown 2, 21 
 
 People V. Bank of Hudson 972, 982, 987 
 V. Batehelor 453, 455, 456, 462 
 V. Board of Trade 464 
 
 V. Boston & Albany E. E. Co. 1026, 
 1099 
 V. Bowen 12, 81 
 
 V. Bristol & Eensselaerville 
 
 Turnp. Co. 973, 978, 981, 982, 
 985 
 V. Calif ornia College 989 
 
 V. Campbell 460 
 
 V. Canal Board 284, 287 
 
 V. Chambers 30, 71 
 
 V Cheeseman 32 
 
 V. Chicago Bd. of Trade 237 
 
 V. City Bank 980 
 
 V. Commissioners of Taxes 1014 
 V. Crockett 197, 202, 210, 466 
 
 V. Crossley 459, 460 
 
 V. Cummings 260 
 
 V. Dispensary, &c. Soc. 980 
 
 V. Dutchess, &c. R. E. Co. 1099 
 V. Empire Mut. L. Ins. Co. 777 
 V. Farnham 21 
 
 .;. Fire Ass. 980 
 
 V. Fire Department 466 
 
 V. Fisher 1095 
 
 1!. FishkiU, &c. Plank E. Co. 976, 
 986 
 V. Globe Mut. L. Ins. Co. 982 
 
 </. Governors of Albany Hos- 
 pital 260 
 V. Grand Blanc, &c. Plank E. 
 
 Co. 1070 
 
 V. Hartford & N. H. R. E. Co. 1097 
 V. Hillsdale & Chatham Turnp. 
 
 Co. 976, 981 
 
 V. Howard 924 
 
 V. Jackson & Mich. Plank. E. 
 
 Co. 977 
 
 V. Kankakee Eiver Imp. Co. 397, 
 977 
 u. Kingston & Middletown 
 
 Turnp. Co. 973, 976, 978, 985, 
 986 
 V. Kip 458, 460, 466 
 
 V. Loewenthal 306 
 
 V. Manhattan Co. 967, 986, 994 
 V. Manhattan Gas Light Co. 1093 
 V. Mauran 314 
 
 V. Maynard 37 
 
 w. Mayor, &c. of N.Y. 999 
 
 V. Mechanics' Aid Soc. 263 
 
 V. Medical Soc. 465, 466 
 
 V. Miner 997 
 
 V. Morris 17 
 
 V. Mut. Gas L. Co. 896 
 
 V. Nat. Trust Co. 992 
 
 ». Nelson 18, 33 
 
 ». New York Central, &c., 
 
 R. R.Co. 1078, 1081, 1098, 1101 
 V. New York Commercial Ass. 464 
 
TABLE OF CASES. 
 
 Iv 
 
 People V. New York, Lake Erie, &c. 
 
 R. B. Co. 1101 
 
 u. Northern Pao. R. R. Co. 445,474 
 973 
 V. Oakland County Bank 345, 369, 
 986 
 V. Parker Vein Coal Co. 210 
 
 V. Peck 460, 462 
 
 V. Perrin 21 
 
 V. Phillips 459, 460 
 
 V. Phoenix Bank 981, 986 
 
 V. Plymouth Plank B. Co. 977 
 V. Rensselaer, &c. R. R. Co. 987 
 V. Robinson 171 
 
 V. Rochester, &c. Ry. Co. 1099 
 V. Sailors' Snug Harbor 463 
 
 V. Schoonmaker 1053 
 
 V. Selfridge 29 
 
 V. Stephens 1095 
 
 V. Stockton, &e. R. R. Co. 32, 72, 
 403 
 0. Sturtevaut 248 
 
 ■0. Supervisors of Niagara 412 
 
 V. Throop 515 
 
 V. Troy House Co. 32, 72 
 
 V. Twaddell 459, 969 
 
 V. Utica Ins. Co. 883, 980, 1052 
 V. Walker 965 
 
 V. Washington & Warren Bank 972, 
 982, 983 
 V. Webster 473 
 
 People's Bank v. Gridley 193 
 
 V. Kurtz 188, 569, 730 
 
 V. Manufacturers' Nat. Bank 371 
 
 People's Ferry Co. v. Balch 51, 80, 
 
 149 
 
 People's Mut. Ins. Co. v. Westcott 146, 
 151, 453, 456, 553 
 
 People's Savings Bank v. Collins 721 
 i>. Cupps 471 
 
 Peoria & Oquawka R. R. Co. v. 
 Elting 131, 381 
 
 Peoria & R. I. R. R. Co. v. Coal 
 
 Valley Mg. Co. 908 
 
 V. Preston 119, 140 
 
 Peoria & Springfield R. B. Co. v. 
 Thompson 647, 1085 
 
 Percy v. Millaudon 111, 479, 484, 532, 
 
 540 
 
 Perin v. Carey 312 
 
 Perkins v. Bradley 476 
 
 V. Church 856 
 
 V. Missouri, &c. R. R. Co. 700 
 
 u. Portland, &c. E. B. Co. 361, 598 
 V. Sanders 24, 26, 30 
 
 c. Savage 66 
 
 V. Washington Ins. Co. 321 
 
 V. Watsdn 634, 635, 636, 663 
 
 Perpetual Ins. Co. v. Goodfellow 174, 
 198, 200, 202 
 
 Perrett's Case 590 
 
 Perrin v. Granger 122 
 
 Perrine v. Chesapeake, &c. Canal 
 
 Co. 300 
 
 V. Fireman's Insurance Co. 201 
 
 Perry v. Little Rock, &o. Ey. Co. 523 
 
 V. Millaudon 528, 530 
 
 V. Simpson, &c. Mfg. Co. 602 
 
 V. Turner 854, 871, 872 
 
 Perry's Case 535 
 
 Persse, &c. Paper Works v. Willett 722 
 
 Peru Iron Co., Ex parte 309, 564 
 
 Peruvian Ey. Co. v. Thames, &c. 
 
 Ins. Co. 338 
 
 Peterborough B. E. Co. v. Nashua, 
 
 &c. R. E. Co. 334, 587, 657 
 
 Peters v. St. Louis, &c. E, E. Co. 1022, 
 
 1029 
 Petersburg Savings, &o. Co. v. 
 
 Lumsden 199 
 
 Petersen v. Chemical Bank 945 
 
 Peterson v. Mayor, &c. of New 
 
 York 602 
 
 Peto V. Brighton, &c. Ey. Co. 1100 
 
 Petre v. Eastern Counties Ey. Co. 525 
 Pettis V. Atkins ^ 718 
 
 Petty V. Tooker 460 
 
 Pfohl V. Simpson 836, 866, 867, 868, 872 
 Phelan v. Hazard 796 
 
 Plielps V. Farmers' &c. Bank 422 
 
 V. Lyle 474, 516 
 
 Philadelphia v. Western Union 
 
 Tel. Co. 892 
 
 Philadelphia & Erie B. R. Co. v. 
 
 Catawissa R. R. Co. 1051 
 
 Philadelphia & G. F. P. Ry. Co.'s 
 
 Appeal 1014, 1050 
 
 Philadelphia & Reading R. R. Co. v. 
 
 Derby 697 
 
 c. Fidelity Ins., Trust & Safe 
 
 Deposit Co. 325 
 
 V. Smith 325 
 
 Philadelphia & Sudbury E. E. 
 
 Co. V. Lewis 563 
 
 Philadelphia & West Chester E. E. 
 Co. .-. Hickman 65, 72, 77, 80, 402, 
 
 403 
 Philadelphia Loan Co. v, Towner 
 
 626, 635, 637, 663, 691 
 
 Philadelphia, Wilmington & B. 
 
 B. E. Co. V. Bowers 1017 
 
 V. Cowell 63 
 
 V. Larkin 699 
 
 V. Maryland 904, 961 
 
 V. Quigley 103, 549, 696, 697 
 
 Philips V. Wickhara 469, 460, 967, 969 
 
 Phillips, Re 832 
 
 V. Campbell 476, 559, 602 
 
 V. Coffee 584 
 
 I;. Covington, &c. Bridge Co. 116, 
 
 144 
 
 </. Eastern E. B. Co. 429 
 
 V. Therasson 861 
 
 V. Winslow 1087 
 
Ivi 
 
 TABLE OF CASES. 
 
 Phillips Acad. v. King 318 
 
 Phillipsburg Bank v. Lackawanna 
 
 E. li. Co. 959 
 
 Phoenix Ins. Co. v. Commonwealth 919, 
 
 930 
 Phoenix Life Ass. Soc, Re 374 
 
 Phoenix Warehousing Co. v. Bad- 
 ger 65, 145, 152, 298, 711 
 Phosphate of Lime Co. v. Green 698, 
 601, 640, 674, 676 
 Phosphate Sewage Co. w. Hartmont 278 
 Pickering v. Appleby 220 
 V. Stephenson 245, 261, 406, 481, 
 611, 612, 674 
 V. Templeton 117, 288, 795 
 Pierce v. Commonwealth 450 
 V. Cromptou 922 
 V. Drew 1092 
 V. Emery 332, 894, 1083 
 «. Milwaukee & St. P. R. R. 
 
 Co. 891 
 
 V. SomersWorth 941 
 
 Pierson v. McCurdy 258, 690 
 
 Pike V. Bangor, &c. E. R. Co. 145, 155 
 Pim's Case 817 
 
 Pine Grove v. Talcott 661, 1046 
 
 Pinkerton v. Manchester, &c. E. R. 
 
 Co. 195, 212 
 
 Pioneer Gold Mg. Co. v. Baker 487 
 
 Pioneer Paper Co., lie 458 
 
 Piscataqua Bridge Co. v. New 
 
 Hampshire Bridge Co. 1018, 1050, 
 
 1052 
 Piscataqua Ferry Co. t). Jones 74, 78, 
 
 97 123 
 Pitchford v. Davis 82, 140 
 
 Pitman v. Kintner 340 
 
 Pits V. James 339 
 
 Pitts i: Temple 453 
 
 Pittsburgh & Connellsville R. R. 
 
 Co. V. Allegheny County 417 
 V. Bedford & Bridgeport R. R. 
 
 Co. 890, 892 
 
 V. Clarke 78, 160, 199, 200 
 
 V. Southwest Penn. Ry. Co. 1026 
 
 V. Stewart 65, 84, 403, 711, 818 
 
 Pittsburgh & Steubenville R. R. 
 
 Co V. Biggar 82, 84, 89, 92 
 V. Gazzam 68, 78 
 
 Pittsburgh Locomotive, &c. Works 
 
 V. State Nat. Bank 368 
 
 Pittsburgh, Wheeling & Ky. R. R. 
 
 Co. V. Applegate 76, 711, 712 
 
 Planters & Merchants' Bank v. An- 
 drews 1052, 1053 
 V. Leavens 219 
 Planters & Merchants' Mut. Ins. 
 
 Co. V. Selma Sav. Bank 172, 174, 199 
 Planters' Bank of Fairfield v. Biv- 
 
 ingville, &c. Co. 853 
 
 planters' Bank of Farmville v. 
 Whittle 757, 770 
 
 Planters' Bank of Miss. v. Sharp 685, 
 1023, 1031 
 V. State 982 
 
 Planters' Bank of Tenn. u. Union 
 
 Bank of La 694 
 
 Planters' Warehouse Co. ii. Johnson 475 
 
 Piatt V. Archer 988 
 
 V. Birmingham Axle Co. 514 
 
 V. Union Pac. R. B. Co; 1084 
 
 Platte Valley Bank v. Harding 719 
 
 Platteville v. Galena, &c. R. E. Co. 261, 
 
 360, 397 
 
 Plimpton B. Bigelow 939 
 
 Plumbe V. Neild 441 
 
 Plymouth E. E. Co. v. Colwell 375, 
 
 1088 
 Pneumatic Gas Co. v. Berry 593 
 
 Polar Star Lodge v. Polar Star 
 
 Lodge 392, 399 
 
 Polk V. Plummer 4 
 
 Pollard V. Bailey 864, 869 
 
 V. Maddox 887, 892 
 
 V. Vinton 558 
 
 Pollock V. National Bank 204 
 
 Pomeroy v. N. Y. & N. H. E. E. Co. 944, 
 
 961 
 
 V. State Bank 993 
 
 Pond V. Framingham &c. R. R. Co. 753, 
 
 755 
 V. Vermont Valley R. E. Co. 236, 
 258, 259 
 Pondville Co. v. Clark 756 
 
 Poock V. Lafayette Bldg. Ass. 663 
 
 Poole V. Middleton 168, 214 
 
 Pooley Hall Colliery Co., Re 665, 648 
 Pope V. Brandon 772 
 
 V. Terre Haute Car Co. 946 
 
 Port V. Russell 484 
 
 Port Clinton R. R. Co. v. Cleve- 
 land, &c. R. R. Co. 1100 
 Port Gibson v. Moore 782, 989 
 Port Jervis u. First Nat. Bank 511 
 Port Royal R. R. Co. v. Hammond 956 
 Port of London Ass. Co.'s Case 601, 602 
 Porter v. Androscoggin, &c. E. li. 
 
 Co. 323, 325 
 
 V. Bank of Rutland 511 
 
 Portland Dry Dock, &c. Co. v. 
 
 Trustees 971 
 
 Portsmouth Livery Co. v. Watson 920 
 
 Potter V. Bank of Ithaca 306, 648 
 
 V. Stevens Machine Co. 852, 864 
 
 Poughkeepsie & S. P. Plank R. Co. 
 
 V. Griffin 62, 120, 378 
 
 Poulters' Co. v. Phillips 467 
 
 Poultney v. Bachman 463 
 
 Powell V. Abbott . 464 
 
 V- Jessopp 218 
 
 u. North Missouri R.R. Co. 899, 
 
 904, 913 
 
 Powers V. Hamilton Paper Co. 840 
 
 V. Hazleton 705 
 
TABLE OP CASES. 
 
 Ivii 
 
 Powla V. Harding 814 
 
 Pbwles V. Page 614 
 
 Prairie Lodge v. Smith 661 
 
 Pratlier v. Jeffersonyille, &c. E. E. 
 
 Co. 356 
 
 Pratt V. Atlantic, &e. E. E. Co. 308. 
 
 V. Eaton 306, 692 
 
 V. Jewett 269, 390 
 
 V. Pratt 8, 238, 261, 262, 420, 421 
 
 V. Short 307, 638, 692 
 
 V. Taunton Copper Mfg. Co. 180, 
 
 204, 206, 263 
 
 Pray v. Mitchell 220 
 
 Preachers' Aid Soe. v. Eich 340 
 
 Prendergast v. Turton 128 
 
 Preston v. Grand Collier Dock Co. 246, 
 
 265 
 
 V. Liverpool, &c. Ey. Co. 377, 624 
 
 V. Missouri, &o. Lead Co. 501 
 
 Prettyman v. Supervisors 462 
 
 Price V. Anderson 441 
 
 V. Grand Eapids, &c. E. K. Co. 146, 
 
 156, 158, 498 
 
 Price's Appeal 136 
 
 Price & Brown's Case 824 
 
 Prince of Wales Life, &o. Co. i>. 
 
 Harding 678 
 
 Pritchard v. Norton 1023 
 
 Pritz, Ex parte 12, 14 
 
 Proprietors of Baptist Meeting- 
 
 House V. Webb 971, 974 
 
 Proprietors of Loclis,&c. v. Nashua, 
 
 &c. R. K. Co. 368 
 
 Proprietors of Side Booms v. Has- 
 kell 1072 
 Proprietors of Southold, &e. v. Hor- 
 
 ton 21 
 
 Prospect Park R. E. Co., Re 898 
 
 Protection Life Ins. Co. v. Foote 472, 476 
 
 v. Osgood 212, 403 
 
 Prouty u. Lake Shore, &c. Ey. Co. 913 
 
 <j. Michigan Southern, &c. E. 
 
 E. Co. 265, 429 
 
 Provident Inst, for Savings v. Burn- 
 ham 743 
 Prov. Savings Inst. v. Jackson 
 
 Place Skating Rink 830, 845 
 
 Providence Bank v. Billings 308 
 
 Pudsey Coal Gas Co. v. Bradford 996 
 Pueblo, &c. E. E. Co. v. Taylor 1092 
 Pugh & Sharman's Case 289, 826 
 
 Pullan V. Cincinnati, &c. E. E. Co. 300, 
 890, 892 
 Pullman v. Upton 160, 824 
 
 Pullman's Palace Car Co. v. Mo. 
 
 Pao. Ey. Co. 912, 1080 
 
 Pulsford V. Richards 100, 104, 105 
 
 Pumpelly v. Green Bay Co. 1001 
 
 Purchase v. New York Exchange 
 
 Bank 173 
 
 Purdy V. People 17 
 
 Putnam v. New Albany 63, 288, 816 
 
 Q. 
 
 Queen v. Shropshire Ey., &c. Co. 180 
 Quick V. Lemon 45, 49, 69 
 
 Quincy Bridge Co. v. Adams 
 
 County 956, 959, 961, 962 
 
 Quincy Coal Co. v. Hood 611 
 
 Quiner v. Marblehead, &c. Ins. Co. 174 
 Qainsigamond Bank v. Hobbs 635 
 
 R. 
 
 Eacine, &c. E. R. Co. v. Farmers' 
 
 L. & T. Co. 658, 665, 720, 724, 897, 
 
 901* 911, 961 
 
 Racine County Bank v. Ayres 80 
 
 Rae V. Grand Trunk Ry. Co. 937 
 
 Rafferty v. Bank of New Jersey 722 
 
 Railroad Co. v. Commissioners 1016 
 
 V. Furnace Co. 477 
 
 V. Georgia 894, 897, 899, 902, 908, 
 
 1068 
 
 V. Harris 944, 954, 957, 960, 961 
 
 V. Hecht 1038, 1044 
 
 V. Howard 336, 338, 692, 680, 759 
 
 V. Koontz 944 
 
 V. Maine 902, 903, 1055 
 
 V. McClure 1001 
 
 V. Pratt 361 
 
 V. Rielrmond 1026, 1028 
 
 V. Rodrigues 64 
 
 V. Vance 959 
 
 Railroad Commission Cases 1036 
 
 Railroad Comm'rs v. Portland & 
 
 O. C. R. R. Co. 1, 356, 1032 
 
 Railroad Companies v. Gaines 893, 
 
 1016 
 
 Railway Co. v. AUerton 2, 242, 376, 
 
 386, 409, 479 
 
 «. McCarthy 361,552,664,623,661 
 
 V. Philadelphia 1016 
 
 V. Whitton 936, 960, 961 
 
 V. Whitton's Adm'rs 602 
 
 Eamsay v. Eichmond, &c. R. E. 
 
 Co. 743 
 
 Eamsden v. Boston, &c. E. R. Co. 696, 
 
 697 
 Ramsey v. Peoria, &c. Ins. Co. 993 
 V. Gould 249, 254 
 
 Ramsgate Vic. Hotel Co. v. Monte- 
 
 flore 70 
 
 Ranee's Case 411, 760, 767, 800, 812 
 
 Eand v. Hubbell 425, 442 
 
 V. Proprietors of Locks, &c. 941 
 
 Randall v. Van Vechten 321, 323 
 
 Randolph v. Lamed 884 
 
 V. Wilmington, &c. R. R. Co. 891, 
 
 1085 
 
 Ranger v. Great Western Ey. Co. 673, 
 
 697, 1102 
 
Iviii 
 
 TABLE Oir CASES. 
 
 liankin v. New England, &c. Min- 
 ing Co. 595 
 Ransom v. Stonington Sav. Bank 322, 
 
 823 
 Raritan, &c. E. R. Co. v. Delaware, 
 
 &c. Canal Co. 998 
 
 Rathbone v. Tioga Nav. Co. 26 
 
 ■ Ray V. Mackin 1095 
 
 V. Powers 297 
 
 Raymond v. Leavitt 1095 
 
 V. Palmer 841 
 
 Read v. Frankfort Bank 787 
 
 V. Memphis Gayoso Gas Co. 141, 
 
 144, 503 
 
 Reading Industrial Mfg. Co. v. 
 
 GraefE , 853 
 
 Real Estate Sav. Inst. w. Fisher 742, 
 
 743 
 
 Reciprocity Bank, Re 723, 819, 824 
 
 Redmond v. Dickerson 484 
 
 V. Enfield Mfg. Co. 269, 942 
 
 Red River Bridge Co. v. Mayor, 
 
 &c. of Clarksville 1050 
 
 Red Wing Hotel Co. v. Friedrich 48, 85, 
 
 90 
 
 Reed v. Bank of Newburgh 460 
 
 V, Bradley 584 
 
 V. Hayt 403, 593 
 
 V. Head 435 
 
 V. Home Sav. Bk. 697 
 
 V. Richmond Street R. R. Co. 28, 
 
 62,67 
 
 Reeder v. Maranda 814 
 
 Kees V. Conococliegue Bank 923 
 
 Eeese v. Bank of Commerce 198, 200 
 
 V, Bank of Montgomery 
 
 County 427 
 
 Reese River, &c. Mining Co. v. 
 
 Smith 814 
 
 Reformed Presb. Church, Re 967 
 
 Reformed Prot. Dutch Church v. 
 
 Brown 49 
 
 Regents of University of Md. v. 
 
 Williams 971, 1013 
 
 Begina v. Aldham, &c. Ins. Co. 260 
 V. Arnaud 1053 
 
 V. Bradford Nav. Co. 702 
 
 V. Coaks 459 
 
 V. Eastern Counties Ry. Co. 1090 
 u. Grand Canal Co. 446 
 
 V. Great Northern, &c. Ry. Co. 702 
 - V. Great Western, &c. Ry. Co. 1090 
 V. Grimshaw 462 
 
 V. Lancashire, &e. Ry. Co. 1089, 
 1090 
 V. Liverpool, &c. Ry. Co. 210 
 
 V. Mariquita, &e. Mg. Co. 444 
 
 V. Mayor of Manchester 702 
 
 V. Mayor of Tarn worth 406 
 
 V. Mavor of Tewksbury 459 
 
 V. Pre'st 406 
 
 V. Registrar 339 
 
 Regina v. Rowlands 1095 
 
 V. Town Council of Litchfield 406 
 V. Town Council of Stamford 406 
 V. Wing 199 
 
 V. York, &c. Ey. Co. 1090 
 
 Reichwald v. Commercial Hotel 
 
 Co. 402, 481, 500, 594, 770, 834 
 
 Reid V. Eatonton Mfg. Co. 412, 760, 
 
 799 811 
 
 V. North Western R. R. Co. ' 703 
 
 Reilly v. Oglebay 451, 454 
 
 Reiser ». William Tell Saving Fund 
 
 Ass. 308, 620 
 
 Relfe V. Columbia L. Ins. Co. 777 
 
 V. Rundle 559, 950 
 
 Rendall v. Crystal Palace Co. 259 
 
 Reno Water Co. v. Leete 505 
 
 Rensselaer & Saratoga R. E. Co. v. 
 
 Davis 312, 358, 374 
 
 Rensselaer & Washington PI. R. 
 
 Co. V. Barton 131 
 
 V. Wetsel 116 
 
 Rensch v. Chicago, &e. R. R. Co. 356 
 
 Reuter v. Electric Telegraph Co. 321, 
 
 603 
 Revere v. Boston Copper Co. 971 
 
 Rex V. Amery 23, 35 
 
 u. Bailiffs, &c. of Eye 467 
 
 V. Bank of England 210 
 
 V. Chetwynd 462 
 
 V. Clear 446 
 
 V. Coopers' Co. 465 
 
 V. Cutbush 464 
 
 V. Gardner 1053 
 
 V. Head 460 
 
 V. Hostmen in Newcastle 445 
 
 V. Journeymen Taylors 1095 
 
 V. Langhorn 453 
 
 V. London Ins. Co. 210 
 
 V. Merchant Tailors' Co. 445 
 
 V. Morris 967 
 
 V. Pasmore 967, 987, 988, 995 
 
 V. Severn & Wye Ey. Co. 1099, 
 1100 
 V. Spencer 460, 466 
 
 V. Tappenden 465 
 
 V. Trevenen 462 
 
 V. Westwood 23 
 
 V. Wilts, &c. Canal Co. 446 
 
 Reynolds v. Commissioners 319 
 
 V. Feliciana Steamboat Co. 871 
 V. Glasgow Academy 323 
 
 V. Myers 720 
 
 Rhey v. Ebensburgh & Susq. Plank 
 
 R. Co. 45 
 
 Rhodes v. Webb 486 
 
 Rice V. Minn. & N. W. E. R. Co. 307 
 
 V. Peninsular Club 469, 558, 561 
 
 «. Rock Island & Alton R. E. 
 
 Co. 381 
 
 Eice's Appeal 484 
 
 Eioh V. State National Bank 601 
 
TABLE OF CASES. 
 
 lix 
 
 Richards v. Home Assur. Ass. 70 
 
 V. Merrimack, &c. K. R. Co. 332, 
 
 620, 887 
 
 V. New Hampshire Ins. Co. 767, 
 
 771 
 
 Richardson v. Mass. Charitable, &c. 
 
 Ass. 305 
 
 u. Pitts 717 
 
 u. Richardson 441 
 
 i;. Sibley 884, 890, 1083 
 
 V. Vermont, &c. R. R. Co. 418, 430, 
 
 481, 960 
 
 Richardson's Case 826 
 
 Riche V. Ashbury Ey., &c. Co. 301, 
 
 601, 674 
 
 Richmond's Case 293 
 
 Richmond Factory Ass. v. Clarke 24, 
 
 28, 63, 67, 620, 704 
 
 Richmond, Fredericksburg & P. 
 
 R. R. Co. K. Louisa R. R. 
 
 Co. 308, 998, 1018, 1049 
 
 V. Richmond 1026, 1028 
 
 V. Snead 335, 338 
 
 Richmond Street R. R. Co. v. Reed 63 
 
 Richmond Water Works Co. v. 
 
 Vestry of Richmond 365, 676, 890 
 Richmondville Mfg. Co. v. Prall 217 
 Ricketts v. Bennett 330 
 
 Ricord v. Central Pac. R. R. Co. 401, 
 
 697 
 Riddle v. Proprietors of Locks, &c. 7 
 Ridenour v. Mayo 718 
 
 Rider v. Morrison 795, 815, 830 
 
 Rider Life Raft Co. o. Roach 552 
 
 Ridgefield & N. Y. R. R. Co. v. 
 
 Brush 79, 87, 143, 144, 403 
 
 Ridgway v. Farmers' Bank of 
 
 Bucks 327, 501, 563 
 
 Ridgway Township v. Griswold 897 
 Ridley v. Plymouth S. & D. Bank- 
 ing Co. 553 
 Riggs V. Commercial Mut. Ins. Co. 225 
 V. Cragg 441 
 Right V. Cuthell 156 
 RikhofiFi). Browne's R. S. S. Mach. 
 
 Co. 67, 710 
 
 Ringo V. Biscoe 770 
 
 Rising Sun Ins. Co. v. Slaugliter 632 
 Risley v. Indianapolis, &c. R. R. 
 
 Co. 484 
 
 V. Phcenix Bank 1054 
 
 Ritso's Case 70 
 
 Ritterband v. Baggett 466 
 
 Rivanna Nav. Co. v. Dawsons 113 
 
 Rives V. Dudley 313 
 
 V. Montgomery, &c. Plank R. 
 
 Co. 98, 102, 146 
 
 Rivington's Case 169 
 
 Roads Comm'rs. v. McPherson 7 
 
 Robbins v. The Justices 864 
 
 Roberts v. Mobile, &c. R. R. Co. 85, 90 
 Roberts's Case 70, 82 
 
 Robertson v. Bullions 
 
 318 
 
 V. City ofRockford 
 
 906 
 
 Robie V. Sedgewick 
 
 37, 989 
 
 Robins, Ex parte 
 
 1101 
 
 V. Embry 
 
 771 
 
 Robinson v. Bank of Darien 787, 834, 
 
 837 
 
 V. Bealle 506 
 
 V. Bidwell 800, 844 
 
 V. Chartered Bank 168 
 
 V. Edinboro Academy 49 
 
 V. Lane 855, 994 
 
 V. Nat. Bk. of Newbeme 192, 216, 
 
 778 
 
 V, Pittsburgh, &c. R. R. Co. 288 
 
 V. Smith 233, 234, 2^6, 246, 248 
 
 Robson V. Dodds 249 
 
 Roche V. Ladd 632 
 
 V. Roanoke Seminary 78 
 
 Rochester Ins. Co. v. Martin 666, 667 
 
 Rochester Sav. Bk. v. Averell 333,' 604, 
 
 642 
 Rock V. Nichols 193 
 
 Rockford, &c. R. R. Co. o. Hillmer 1026 
 V. Sage - 523, 624 
 
 V. Schunick 96 
 
 Rock River Bank v. Sherwood 636, 663 
 Rockville & W. Tump. Co. v. Van 
 
 Ness 76 
 
 Rocky Mountain Nat. Bk. a. Bliss 856 
 
 Rockwell y. Elkhorn Bank 327, 335 
 
 Rogers v. Danby Univ. See. 32 
 
 V. Huntingdon Bank 198 
 
 V. Jones 467 
 
 u. Lafayette Agr. Works 236, 243, 
 
 246, 259, 261 
 
 V. Oxford, &c. Ry. Co. 904 
 
 Rogers's Case 70, 86 
 
 Rogers Locomotive Works v. Erie 
 
 Ry. Co. 1076, 1083, 1098 
 
 Rollins V. Clay 480, 671, 971 
 
 Roll's Case 316 
 
 Roman v. Fry 826 
 
 Roman Catholic Orphan Asylum 
 
 V. Abrams 32 
 
 Rome, &c. R. R. Co. v. Ontario, &c. 
 
 R. R. Co. 910 
 
 Roosevelt Hospital v. Mayor of 
 
 N. Y. 1016 
 
 Root V. Great Western R. R. Co. 361 
 V. Wallace 559, 638 
 
 Roper V. McWhorter 1083 
 
 Rorke v. Thomas 972 
 
 Rose V. Tump. Co. 968 
 
 Rosenback v. Salt Springs Nat. Bk. 198 
 Rosenthal v. Madison, &0. Plank 
 
 R. Co. 339 
 
 Rosevelt v. Brown 824, 861 
 
 Ross V. C. B. & Q. R. R. Co. 381 
 
 V. Elizabethtown, &c. R. R. Co. 998 
 
 V. Estates Investment Co. 105 
 
 V. Lafayette, &c. R. R. Co. 147 
 
Ix 
 
 TABLE OF CASES. 
 
 Ross V. Union Pacific Ey. Co. 213, 1102 
 
 Kouse V. Moore 7 
 
 Rowe V. Granite Bridge Co. 998 
 
 Rowland v. Apothecaries' Hall Co. 563 
 
 V. Header Furniture Co. T23, 991, 
 
 993 
 
 Royal Bank of India's Case 407, 561, 
 
 562, 824 
 
 Royal Bank of Liverpool v. Grand 
 
 Junction R. R., &c. Co. 325 
 
 Royal British Bank v. Turquand 662, 
 
 577, 579, 673, 676 
 
 Rnggles V. Brock 723 
 
 V. nUnois 308, 1035 
 
 V. People 1035 
 
 Rumball v. Metropolitan Bank 187 
 
 Rundle v. Delaware, &c. Canal Co. 4 
 
 Eunyan v. Coster's Lessee 313, 918, 
 
 921, 923, 925 
 
 Rush V. Halcyon Steamboat Co. 720 
 
 Russell V. Bristol 819 
 
 V. MoLellan 40, 969, 970, 971 
 
 V. Topping 645 
 
 V. Wakefield Water Works 231, 
 
 234, 243, 245, 246 
 
 Rutland & Burlington R. R. Co. v. 
 
 Lincoln 63 
 
 V. Proctor 626, 661, 681 
 
 V. Thrall 120, 122, 124, 146, 147, 
 
 148, 156, 157, 158, 418, 434 
 
 Rutter V. Kilpatrick , 55 
 
 Rutz V. Eesler, &c. Mfg. Co. 101, 710 
 
 Ryan v. Dunlap 506 
 
 V. Leavenworth, &c. Ry. Co. 160, 
 
 264, 407, 422, 485, 487 
 
 V. Lynch 589 
 
 V. Martin. 340, 742 
 
 Ryder v. Alton & S. R. R. Co. 74, 76, 
 
 112, 290 
 
 Sabin v. Bank of Woodstock 174, 195, 
 
 198 
 Sacalaris v. Eureka, &c. R. R. Co. 476 
 Sackett's Harbor Bank v. Blake 847, 
 
 853 
 V. Codd 692 
 
 V. Lewis Co. Bank 306, 369, 648 
 Safety Deposit Life Ins. Co. i'. 
 
 Smith 523 
 
 Saffold V. Barnes 97, 817 
 
 Safford v. WyckofE 309, 335, 553, 654 
 
 Sage V. Dillard 1061 
 
 V. Lake Shore, &o. Ry. Co. 445, 
 
 959, 962 
 
 Sagory v. Dubois 795, 840 
 
 Sala ». City of New Orleans 967, 1044 
 
 Salem Bank v. Gloucester Bank 399, 
 
 479, 5.53, 559, 589 
 
 Salem Mill -Dam Co. v. Ropes 63, 103, 
 
 136, 140, 141, 144, 161, 269, 388, 409 
 
 Salisbury v. Metropolitan Ry. Co. 254, 
 
 262, 417 
 
 Salisbury Mills Co. v. Townsend 180, 
 
 342 
 Salmon v. Hamborough Co. 792, 838 
 Salomons v. Laing 236, 241, 246, 2^1 
 Salt Co. V. East Saginaw 1014 
 
 Salt Lake City Nat. Bank v. Hen- 
 
 drickson 844 
 
 Saltmarsh v. Planters' & M. Bank 988 
 Sampson v. Bowdoinham Steam- 
 Mill Co. 24, 455, 605 
 Samuel v. Holladay 235, 238, 243, 246, 
 248, 250, 262, 471, 560, 562, 677 
 Samuels v. Evening Mail Co. 697, 699 
 San Antonio v. Meliaffy 683 
 San Buenaventura Mfg. Co. v. Vas- 
 
 sault 453, 455 
 
 Sanderson v. Iron & Nail Co. 601 
 
 Sandford v. Handy 103 
 
 V. Railroad Co. 254, 1079 
 
 San Diego v. San Diego & Los 
 
 Angeles R. E. Co. 487 
 
 San Diego Water Co. v. San Diego 587 
 Sandy River Bank v. Merchants', 
 
 &c. Bank 608 
 
 San Francisco v. Spring Valley 
 
 Water Works 12, 14, 15 
 
 San Francisco & North Pac. R. R. 
 
 Co. V. Bee 757, 761 
 
 San Francisco Gas Co. v. San Fran- 
 cisco 651 
 Sanger v. Upton 723, 750, 790, 792 
 San Jose Sav. Bank v. Sierra Lum- 
 ber Co. 605 
 San Mateo County v. Southern 
 
 Pac. E. E. Co. 1067 
 
 Santa Clara Mg. Ass. v. Meredith 321, 
 
 473, 475 
 
 Santa CruzE. E. Co. v. Schwartz 80, 
 
 140 
 «. Spreckles 135, 685 
 
 Sapp V. Northern Central Ey. 
 
 Co. 1084 
 
 Sappington v. Little Eock, &c. 
 
 R. E. Co. 782 
 
 Sargent v. Boston & Lowell E. R. 
 
 Co. • 996, 1079, 1080 
 
 V. Essex Marine Ey. Co. 192, 193 
 
 „. Franklm Ins. Co. 122, 166, 174, 
 
 197 212 
 
 t>. Webster 453, 474, 481, 498^ 678 
 
 Satterlee v. Matthewson 1043 
 
 Saugatuck Bridge Co. v. Weetport 988 
 
 Savage Mfg. Co. v. Armstrong 920 
 
 V. Worthington 400 
 
 Savannah & Memphis E. E. Co. v. 
 
 Lancaster 868, 1088 
 
 Savings Bank of Hannibal v. Hunt 463 
 Savings Bank of New Haven v. 
 
 Bates 756 
 
 V. Davis 821, 456 
 
TABLE OP CASES. 
 
 Ixi 
 
 Sawyer v. Hoag 232, 768, 795, 800, 
 834, 840 
 V. Winnegance Mill Co. 342 
 
 Sayers v. First Nat. Bank 743 
 
 Sayles )-. Blane 171, 828 
 
 Sayre v. Louisville, &o. Ass. 465 
 
 Scadding v. Lorant 462 
 
 Seanlan v. Crawshaw 389 
 
 Scarlett v. Academy of Music 148 
 
 Scliaeffer v. Missouri Home Ins. 
 
 Co. 55 
 
 Scheffer v. Nat. Life Ins. Co. 948 
 
 Sehenck v. Andrews 272, 405 
 
 Schenectady, &o. Plank R. Co. v. 
 Thatcher 121,142,157,161,384, 
 389, 712 
 Schley v. Dixon 761, 795, 808 
 
 Sehmidlapp v. La Confiance Ins. 
 
 Co. 942 
 
 Schoffu. Bloomfleld 462 
 
 .Schofleld V. Henderson 877 
 
 Scholfield V. Union Bank 457 
 
 SohoUenberger, Ex parte 944 
 
 School Directors v. Carlisle Bank 1052 
 School District in Atchison County 
 
 V. Griner 41 
 
 School District in Blandford v. 
 
 Gibbs 23, 40, 458 
 
 School District in Delhi v. Everett 314 
 School District in Richardson 
 
 County V. Insurance Co. 7, 12 
 
 School District in Rumford v. 
 
 Wood 7 
 
 Schricker v. Ridings 854 
 
 Schroder's Case 402, 403, 796 
 
 Schroeder v. Detroit, &c. Ry. Co. 736 
 Schumra v. Seymour 499 
 
 Sohutte V. Florida Central R. R. Co. 224 
 Schuylkill County v. Copley 96 
 
 Scofield V. State Nat. Bank 367 
 
 Scotland County v, Thomas 121, 906 
 Scott V. Avery 931 
 
 V. Central R. R., &c. Co. 421, 423, 
 424 
 V. Colburn 333, 686 
 
 V. Depeyster 250, 528, 534 
 
 V. Dixon 544 
 
 i>. Eagle Fire Ins. Co. 262, 413, 
 419, 421 
 V. Ebury 523, 524 
 
 V. Nat. Bank of Chester Val- 
 ley 370 
 V. Pequonnock Nat. Bank 192, 193 
 Scottish, &c. liy. Co. v. Stewart 305, 
 319, 1091 
 Scovill V. Thayer 275, 409, 730, 732, 
 793, 820, 834 
 Scripture v. Prancestown Soapstone 
 
 Co. 195, 212 
 
 Scriveners' Soc. v. Brooking 466 
 
 Seaman v. Enterprise, &c. Ins. Co. 225 
 Searight v. Payne 355, 402 
 
 Sears v. Hotchkiss 243, 261 
 
 Searsburgh Turnp. Co. a. Cutler 32 
 Seaton v. Grant 246, 264 
 
 Secombe v. Railroad Co. 1032 
 
 Second Av. B. B. Co. v. Mehrbach 505, 
 
 687 
 Second Nat. Bank of Cincinnati v. 
 
 Hall 717 
 
 V. Lovell 925 
 
 Second Nat. Bank of Louisville v. 
 
 Nat. State Bank of N. J. 867 
 
 Security Loan Ass. v. Lake 463 
 
 Seeley v. Morgan 602 
 
 V. New York Nat. Exch. Bank 416 
 V. San Jose, &c. Co. 401 
 
 Seeligson v. Brown 192 
 
 Selden v. Delaware, &c. Canal Co. 351 
 Seligman v. Charlottesville Nat. 
 
 Bank 371 
 
 Sellers v. Phoenix Iron Co. 260 
 
 Selma & T. E. R. Co. v. Tipton 55, 
 
 107, 137, 712 
 
 Selma, Marion, & M. R. R. Co. v. 
 
 Anderson 96, 98, 104, 140 
 
 Selma, Rome, &D. R.R. Co. v. Har- 
 bin 912, 913 
 Semple v. Bank of British Colum- 
 bia 629 
 Seneca County Bank v. Lamb 465 
 Sewall V. Boston Water-Power Co. 204 
 V. Lancaster Bank 199 
 Sewell's Case 593 
 Seymour v. Sturgess 131, 159, 847 
 Shackleford v. Mississippi C. B. R. 
 
 Co. 912 
 
 Shackleford's Case 70 
 
 Shackley v. Eastern E. R. Co. 1098 
 Shaftner v. Jeffries 90 
 
 Shamokin Valley, &c. R. E. Co. v. 
 
 Livermore 1084 
 
 V. Malone 992 
 
 Shaver v. Bear River, &c. Mg. Co. 594 
 
 Shaw V. Fisher 175, 210 
 
 V. Norfolk County E. R. Co. 233, 
 
 620, 887, 913 
 
 V. Rowley 199 
 
 V. Spencer 180, 181 
 
 Shaw's Claim 524 
 
 Shawhan v. Zinn 248 
 
 Shawmut Bank v. Plattsburgh, &c. 
 
 E. R. Co. 860 
 
 Shea V. Mabrey 528, 530, 534 
 
 Shears v. Jacob 332 
 
 SheflSeld School Township v. An- 
 
 dress 320, 571 
 
 Shelbyville & R. Turnp. Co. v. 
 
 Barnes 119,376,1061 
 
 Sheldon Hat-Blocking Co. o. Eick- 
 
 meyer Hat, &c. Co. 481, 591 
 
 Shellington v. Howland 171, 827, 856, 
 
 857 
 Shelton v. Banks 21 
 
Ixii 
 
 TABLE OF CASES. 
 
 Shenandoah Valley R. R Co. v. 
 
 Griffith 192, 199 
 
 Sliepherd v. Gillespie 210 
 
 Shepherd's Case 167 
 
 Shepley v. Atlantic, &c. R. R. Co. 620, 
 
 890 
 Sheppard v. Graves 937 
 
 V. Murphy 210 
 
 Sherman v. Fitch 821, 323, 594 
 
 V. Smith 1061 
 
 Sherwin v. Eugbee 37 
 
 Sherwood v. American Bible See. 921 
 
 V. Meadow Valley Mg. Co. 187 
 Shewalter v. Piriier 645, 680 
 
 Shields v. Ohio 897, 901, 1017, 1055, 
 1057, 1060, 1066, 1070 
 Shinkle v. First Nat. Bank 367 
 
 Ship V. Crosskill 543 
 
 Shipley v. Mechanics' Bank 210 
 
 Shipman v. Mlna, Ins. Co. 198 
 
 Shipman's Case 828 
 
 Shipper v. Pennsylvania R. R. Co. 1079 
 Shockley v. Fisher 772, 789 
 
 Shoe & Leather Bank v. Thompson 343 
 Shoemaker v. Nat. Mech. Bank 368, 639 
 Shorb V. Beaudry 225 
 
 Short V. Stevenson 280, 522 
 
 Shorter v. Smith 1018, 1050 
 
 Shortz V. Unangst 25, 453 
 
 Shrewsbury v. Blount 541 
 
 V. North Staffordshire Ry. Co. 671 
 Shrewsbury & B. Ry. Co. v. Lon- 
 don & N. W. Ry. Co. 302 
 Shrewsbury, &c. Ry. Co. v. Stour 
 
 Valley Ry. Co. 356 
 
 Shropsbury Union Ry., &c. Co. v. 
 
 Queen 180, 187 
 
 Shultz V. Christman 492, 764 
 
 Shurtz V. Schoolcraft, &c. R. R. Co. 64, 
 
 140 
 Sibley v. Cartaret Club 26.?, 464 
 
 V. Quinsigamond Nat. Bk. 190, 193 
 Sichel's Case 289, 824 
 
 Sidney's Case 71 
 
 Sieghortner v. Weissenborn 391 
 
 Silk Mfg. Co. V. Campbell 232 
 
 Silkstone Fall Colliery Co., Re 456 
 Silliman v. Fredericksburgh, &c. 
 
 R. R. Co. 559, 571 
 
 Silver Hook R. Co. v. Greene 146, 156, 
 501, 503 
 Silver Lake Bank v. North 845, 659, 
 663, 665, 681, 920, 921, 923 
 Simm V. Anglo-American Tele- 
 graph Co. 205 
 Simmons v. Camp 204 
 Simons v. Vulcan Oil, &c. Co. 278, 484, 
 
 522 
 Simpson v. Bldg., &c. Ass. 647 
 
 V. Denison 261, 282, 365, 376, 381 
 
 V. Moore 437, 441 
 
 V. Reynolds 790 
 
 Simpson v. Westminster Palace 
 
 Hotel Co. 246, 353 
 
 Sims V. Street R. R. Co. 287, 387 
 
 Singer Mfg. Co. t. Brown 632 
 
 V. EfBnger 632 
 
 Singleton v. Southwestern R. R. 
 „.Co. 1088 
 
 bniking-Fnnd Cases 1007, 1010, 1043, 
 1059,1061, 1067,1070, 1072 
 Sixth Ave. R. R. Co. u. Gilbert 
 
 Elevated R. R. Co. 996 
 
 Skiddy v. Atlantic, &c. R. R. Co. 233 
 Skowhegan Bank v. Cutler 193 
 
 Skrainka v. Allen 762, 795, 810, 861 
 Slater's Case 169 
 
 Slaughter v. Commonwealth 931 
 
 V. Mobile County 7 
 
 Slaughter-House Cases 1017 
 
 Slaymaker v. Bank 219 
 
 Slee V. Bloom 795, 858, 967, 969, 972, 
 
 995 
 Slipher v. Earhart 55, 91, 149 
 
 Sloan V. Pacific R. R. Co. 1017, 1023 
 Sloman v. Bank of England 204, 263 
 Small i). Herkimer Mfg. Co. 124, 126 
 Smead v. Indianapolis, &c. R. R. 
 
 Co. 23, 24, 400 
 
 Smelser v. Wayne, &c. Turnp. Co. 722, 
 
 735 
 Smiley u. Mayor, &c. of Chatta- 
 nooga 321 
 Smith V. Alabama Life Ins. Co. 666, 
 
 667 
 V. Alvord 500, 925 
 
 V. American Coal Co. 184 
 
 V. Board of Water Comm'rs 511 
 V. Chesapeake & Ohio Canal 
 
 Co. 774 
 
 V. Clark County 325, 720 
 
 V. Cork, &c. Ry Co. 265, 429 
 
 V. Crescent City Live-Stock, 
 
 &c. Co. 192 
 
 V. Danzig 536 
 
 V. Eureka Flour Mills Co. 306, 
 336, 839 
 V. Exchange Bank 368 
 
 V. First Nat. Bank 870 
 
 V. Goldsworthy 408 
 
 V. Gower 117, 149, 152, 894 
 
 V. Huckabee 870 
 
 V. Hull Glass Co. 562, 577, 601, 
 605, 673 
 V. Hurd 248, 536, 638 
 
 V. Indiana, &e. Ry. Co. 147 
 
 V. Kernoehen 987 
 
 V. Lansing 757 
 
 V. Law 827, 462 
 
 V. Little 631, 632 
 
 V. Londoner 866 
 
 t). Mississippi, &c. R. R. Co. 720 
 V. Mutual Life Ins. Co. 939 
 
 V. Nashua, &c. R. R. Co. 355 
 
TABLE OP CASES. 
 
 Ixiii 
 
 Smith V. Nelson 468 
 
 V. Poor 538, 539 
 
 V. Prattville Mfg. Co. 238, 420, 528 
 V. Keese River Co. 96, 99, 102, 
 103, 105 
 V. Sheeley 680, 721 
 
 V. Skeary 770 
 
 V. Smith 505, 560, 578, 969 
 
 V. South BoyaltoQ Bank 512 
 
 V. State Bank 605 
 
 V. Swormstedt 246 
 
 V. Tallassee Central Plank E. 
 
 Co. 74, 79, 97, 102, 116, 148, 
 339 
 Smith's Case 106, 734 
 
 Smock V. Henderson 217 
 
 Smyth V. Darley 453 
 
 Snyder v. Studebaker 719, 721 
 
 Soames v. Spencer 585 
 
 Society for Establishing Manufac- 
 tures V. Butler 998 
 0. Morris Canal Co. 995 
 Society for Propag. Gospel in F. P. 
 
 II. New Haven 919 
 
 V. Pawlet 21, 740 
 
 V. Wheeler 342 
 
 V. Young 39 
 
 Society for Savings v. City of New 
 
 London 598 
 
 Society for Visitation, &c. v. Com- 
 monwealth 28 
 Sodus Bay & C. K. R. Co. v. Ham- 
 lin 78 
 Solomon's Lodge v. MontmoUin 584 
 Somerby v. Buntin 220 
 Somerset & Kennebec B. R. Co. 
 
 V. Cushing 140, 713 
 
 Somerset R. R. Co. v. Clarke 140 
 
 V. Cushing 140, 713 
 
 Sonoma Valley Bank u. Hill 851 
 
 Souhegan Nail, cSbc. Co. u. Mc- 
 
 Conihe 340 
 
 South & North Alabama E. E. 
 
 Co. V. Chappell 697 
 
 South Bay Mill-Dam Co. v. Gray 121, 
 384, 711 
 South Carolina E. E. Co. a. Blake 904 
 South Georgia E. R. Co. u. Ayres 56, 
 149, 155 
 South Mountain, &c. Mg. Co., Re 802 
 South Eoyalton Bank v. Suffolk 
 
 Bank 343 
 
 South School District v. Blakes- 
 
 lee 3.39, 455, 456 
 
 South Wales Ey. Co. v. Eedmond 360 
 
 V. Wythes 1102 
 
 South Western E. E. Co. v. Paulk 1029 
 
 South of Ireland Colliery Co. v. 
 
 Waddle 321 
 
 Southampton v. Graves 445 
 
 Southern Cal. Colony Ass. v. Bus- 
 tamente 323, 584, 677 
 
 Southern Exp. Co. v. Memphis, &c. 
 
 Ey. Co. 1080 
 
 V. St. Louis, &o. Ey. Co. 1080, 1098 
 
 V. Western N. C. E. R. Co. 309, 564 
 
 Southern Hotel Co. v. Newman 63 
 
 Southern Life Ins. Co. v. Lanier 659 
 
 661, 681 
 
 V. McCain 560, 598, 604, 605 
 
 Southern Pacific E. E. Co. u. Orton 13, 
 
 14, 680 
 Southern Penn. Iron & R. E. Co. v. 
 
 Stevens 119, 374, 376 
 
 Southgate v. Atlantic, &c. E. E. 
 
 Co. 502, 605 
 
 Southmayd v. Euss 853, 856, 859 
 
 Southworth v. Palmyra, &c. E. E. 
 
 Co. 16 
 
 Spackman v. Evans 293, 295, 591, 595, 
 
 598, 713, 734, 790 
 
 Spangler v. Butterfield 476 
 
 V. Indiana & Bl. C. Ey. Co. 146, 
 
 147 
 
 Spargo's Case 402, 796 
 
 Sparhawk v. Union Pass. Ey. Co. 249, 
 
 996 
 Sparks v. Farmers' Bank 515 
 
 V. Liverpool Water- Works Co. 127 
 Sparrow v. Evansville, &c. R. R. 
 
 Co. 120, 386 
 
 Spartanburg & A. R. R. Co. v. 
 
 De GrafEenreid 80 
 
 V. Ezell 31, 73 
 
 Spear v. Crawford 55, 312, 357 
 
 V. Hart 176, 178 
 
 V. Ladd 501 
 
 Spence v. Shapard 870 
 
 Spering's Appeal 526, 527, 528, 531 
 
 Spiller V. Paris Skg. Rink Co. 524 
 
 Spooner v. McConnell 996 
 
 Sprague i: Cocheco Mfg. Co. 187 
 
 V. Illinois River E. E. Co. 237, 381 
 
 Sprigg V. Western Tel. Co. 384, 1046, 
 
 1058, 1059 
 
 Spring Valley Water Works, Re 18, 32 
 
 V. San Francisco 307 
 
 V. Schottler 883, 1056, 1064, 1092, 
 
 1093 
 
 Squires v. Brown 536 
 
 St. Andrew's Bay Land Co. v. 
 
 Mitchell 321 
 
 St. Charles Mfg. Co. v. Britton 149, 712 
 St. Clair v. Cox 917, 938, 940, 943 
 
 St. Clair County Turnp. Co. ... Illi- 
 nois 314 
 St. James Church v. Church of Ee- 
 
 deemer 399 
 
 St. John V. Erie Ey. Co. 412, 428, 429 
 St. John's College v. State 1014 
 
 St. Joseph Fire, &c. Ins. Co. u. 
 
 Hauck 682 
 
 St. Lawrence Steamboat Co., Re 458, 
 
 469, 460, 473, 474, 519 
 
Ixiv 
 
 TABLE OP CASES. 
 
 St. Louis V. Rogers 1052 
 
 u. Shields 719 
 
 V. St. Louis Gas L. Co. 658, 1093 
 St. Louis & Utah Silver Mg. Co. v. 
 
 Jackson 522 
 
 St. Louis, Alton, & Chicago E. E. 
 
 Co. V. Dalby 697 
 
 St. Louis, Iron Mountain, & S. B. B. 
 
 Co. V. Berry 893, 905 
 
 V. Loftin 1014 
 
 V. Southern Exp. Co. 1080, 1081 
 St. Louis, Jacksonville, &c. K. K. 
 
 Co. V. Mathes 1092 
 
 St. Louis Colonization Ass. v. Hen- 
 
 nessy 725 
 
 St. Louis Domicile, &c. Ass. v. Au- 
 
 gustin 969 
 
 St. Louis Gas L. Co. u. City of St. 
 
 Louis 963 
 
 St. Louis Nat. Bank v. Allen 949 
 
 St. Louis Perpetual Ins. Co. v. Co- 
 hen 939 
 V. Goodfellow 174, 198, 200, 202 
 St. Louis B. R. Co. v. N. W. St. 
 
 Louis Ry. Co. 22, 620 
 
 St. Louis By. Supplies Co. v. Har- 
 
 bine 845 
 
 St. Louis Stoneware Co. v. Par- 
 tridge 681 
 St. Mary's Church, Re 609 
 St. Paul & Pacific R. R. Co., First • 
 
 Div., V. Parcher 894 
 
 St. Paul, Stillwater, & T. R. R. Co. 
 
 V. Robbins 60, 61 
 
 St. Paul Division v. Brown 25 
 
 St. Paul Fire, &c. Ins. Co. v. Allis 13 
 Stace & Worth's Case 734 
 
 Stackpole v. Seymour 210 
 
 Stafford v. Am. Mills Co. 917 
 
 !). Till 342 
 
 Stafford Nat. Bank v. Palmer 717 
 
 Stamford Bank v. Benedict 321 
 
 Stanhope's Case 125, 293, 591 
 
 Stanley v. Chester & Birkenhead 
 
 Ry. Co. 525 
 
 V. Stanley 1041 
 
 Stanly v. Richmond, &c. R. R. Co. 743 
 Stanton v. Allen 1094 
 
 Stark Bank v. U. S. Pottery Co. 595 
 Starkweather v. Am. Bible Soo. 317, 
 
 923 
 
 State V. Adams 973 
 
 V. Am. Exp. Co. 932 
 
 V. Atkins 4, 1054 
 
 V. Bailey 403, 897, 898, 980, 982 
 
 V. Baltimore & Ohio R. R. Co. 290, 
 
 420, 421, 423, 424, 702 
 
 V. Bank of Louisiana 232, 238, 420, 
 
 421, 422, 478 
 
 V. Bank of Maryland 756, 772, 971 
 
 V. Bank of South Carolina 982 
 
 V. Barron 969, 977 
 
 State V. Beck 28, 859, 980 
 
 V. Bell Teleph. Co. 341, 1037, 1092 
 V. Bonnell 453, 455 
 
 V. Boston, Concord, &c. R. B. 
 
 Co. 921, 929 
 
 V. Bradford 10, 979 
 
 V. Bull 23 
 
 V. Butler 120, 1046 
 
 D. Central Ohio, &c. Relief Ass. 29, 
 979 
 V. Chamber of Commerce 264 
 
 V. Cheraw, &c. R. R. Co. 428 
 
 V. Cincinnati 12 
 
 V. Cincinnati Gas L. Co. 987 
 
 V. Columbia, &c. Turnp. Co. 984 
 V. Columbus Gas L., &c. Co. 1037, 
 1093 
 V. Commercial Bank of Cin- 
 cinnati 981, 983 
 p. Commercial Bank of Man- 
 chester 507, 981, 982, 984, 987 
 V. Commr. of Railroad TTaxa- 
 
 tion 1059, 1070, 1071, 1072 
 V. Concord B. R. Co. 364, 398, 451 
 V. Conklin 467 
 
 V. Consolidation Coal Co. 899, 1083 
 V. Council Bluffs, &c. Ferry Co. 977 
 V. Curtis 448, 464, 467 
 
 V. Davis 
 
 508 
 
 V. Dayton, &c. R. R. Co. 
 
 1000 
 
 V. Delaware, &c. B. R. Co. 
 
 1101 
 
 V. District Court 
 
 942 
 
 V. Einstein 
 
 445 
 
 V. Essex Bank 
 
 984 
 
 V. Fagan 
 
 967 
 
 V. Ferris 
 
 457 
 
 V. Fosdick 
 
 930 
 
 V. Fourth N. H. Tump. Co. 
 
 986 
 
 V. Garroutte 
 
 906 
 
 V. Georgia Med, Soc. 
 
 263 
 
 V. Glenn 
 
 501 
 
 V. Godwinsville, &e, Boad Co 
 
 986 
 
 V. Granville, &c, Soc. 
 
 306 
 
 V. Greene County 
 
 906 
 
 V. Greer 
 
 1021 
 
 V. Guerrero 
 
 210 
 
 V. Hartford, &c. B. B. Co. 
 
 625, 
 
 1077, 
 
 1099 
 
 V. Hazelton, &c. By. Co. 
 
 981 
 
 V. Herdic Coach Co. 
 
 993 
 
 V. How 71' 
 
 ,727 
 
 V. Hunton 457, 474 
 
 V. Jersey City 
 
 308 
 
 V. Kingan 
 
 980 
 
 V. Krebs 
 
 808 
 
 ti. Leete 
 
 474 
 
 V. Lehre 65, 459, 462 
 
 V. Maine Central R. B. Co. 
 
 1055, 
 
 
 1070 
 
 V. Mansfield 
 
 358 
 
 V. Mayor, &c. of N. T. 
 
 999 
 
 V. Mayor of Jersey City 
 
 1070 
 
TABLE OF CASES. 
 
 Ixv 
 
 State V. McDaniel ; 474 
 
 V. Merchant 458 
 
 V. Merchants' Ins., &o. Co. 984, 995 
 V. Metz ' " 959 
 
 V. Milwaukee, &c. Ey. Co. 1, 343, 
 346, 917, 925, 979 
 V. Milwaukee Chamber of 
 
 Commerce 237, 464, 998 
 
 V. Monitor Fire Ins. Co. 33 
 
 V. Morgan.. 890 
 
 V. Morris .1013 
 
 V. Morris, &c. E. E. Co. 696, 702 
 V. Morristown Fire Ass. 135, 313, 
 811 
 V. Murfreesboro 702 
 
 17. Nashville University 1053 
 
 V. Sat. Bank of Baltimore 780 
 v.. New Haven & Northampton 
 
 Co. 1026 
 
 K. New Haven, &c. Ey. Co. 1099 
 t). New Orleans, &c. E. E. Co. 185 
 V. New Orleans G. L. Banking 
 
 Co. 983 
 
 V. Northeastern R. R. Co. 1099 
 V. Oberlin Bldg. Ass. Ill, 113, 328, 
 984 
 V. Overton 467, 470 
 
 V. Paterson, &c. R. R. Co. 1097 
 V. Paterson, &o. Tump. Co. 975 
 V. Pawtuxet Turnp. Co. 975, 976, 
 . -. 977,979,983,985 
 V. People's Mut. Benefit Ass. 984 
 V. Person - 1069 
 
 V. Pettinelli 170, 454, 457, 460 
 
 V. Pipher 982 
 
 V. Railway Co. 981 
 
 V. Eeal Estate Bank 32, 974, 982, 
 984, 987 
 V. Rice 332 
 
 V. Rives 971, 989 
 
 V. Eombauer 210 
 
 «. Eoyalton, &c. Tiirnp. Co. 977 
 o. Saline County Court 999 
 
 V. Seneca County Bank 
 V. Shaw 
 V. Sherman 
 V. Sibley 
 
 V. Sioux City R. E. Co. 
 V. Smith [ex rel. Page] 63, 113, 427 
 452,498,601 
 i;. Socift^ E^publioalne 984 
 
 V. Southern Minnesota R. E. 
 
 Co.: 1091 
 
 V. Standard Life Ass. 981 
 
 ». Stormont • 15 
 
 V. Swearingen 459 
 
 i>. "Tombeckbee Bank 983 
 
 V. Towers - 7 
 
 V. Tudor 459, 463 
 
 V. Union Merchants' Exchange 465, 
 .'. ..;. 467 
 
 V. Urbana, &o. Ins. Co. 984 
 
 VOL. I. — e 
 
 982 
 
 745 
 
 888 
 
 6, 40, 67 
 
 1082 
 
 State V. Van Home 598 
 
 V. Vincennes Univ. 39, 971, 974 
 V. Warren Foundry, &c. Co. 210 
 V. Wheeling, &c. Bridge Co. 1000 
 V. White's Creek Turnp. Co. 976 
 V, Williams 464 
 
 0. Wiltbank 316 
 
 V. Woodward 896, 1013 
 
 V. Woram - 661, 682, 1053 
 
 V. Wright 260 
 
 State Bank v. Chetwood 605, 643 
 
 V. Clark 36 
 
 V. Fox 113 
 
 V. State 973, 975, 981, 983, 988, 991 
 State Board of Agriculture v. Citi- 
 zens' Street Ey. Co. 375, 626, 651, 664 
 State Fire Ins. Co., Re 767 
 
 State Ins. Co., Ee 805 
 
 V. Sax 195 
 
 State Ins. Co. of Mo. v. Eedmond 71 
 State Sav. Ass. v. KeUogg 856, 857, 868, 
 
 972 
 Steacy v. Little Rock, &c E. E. 
 
 Co. 796, 810, 816, 1041 
 
 Steamboat Co. v. McCutcheon 564 
 
 Steam Engine Co. v. Hubbard 877 
 
 Steam Navigation Co. v. Weed 306, 648, 
 
 659, 662, 665 
 
 Steamship Co. v. Tugman 937 
 
 Steamship Dock Co. v. Heron 197, 198 
 
 Stebbins v. Merritt 323, 453, 464, 460, 
 
 462, 584 
 
 V. Phoenix Fire Ins. Co. 174 
 
 Stedman v. Am. Mut. L. Ins. Co. 777 
 
 Steele v. Harmer 339 
 
 V. North Metrop. Ey. Co. 286 
 
 Stein V. Howard 291 
 
 Steinmetz v. Versailles, &c. Tump. 
 
 Co. 151 
 
 Stephens v. Fox 838 
 
 Sterling v. Vaughn 596 
 
 Stetler v. Chicago, &c. Ey. Co. 1081 
 Stetson V. City Bank 923, 1039 
 
 Stevens v. Davison 266, 463 
 
 V. Eden Meeting House Soc. 453, 
 
 455 
 
 698 
 961 
 926 
 282. 
 
 V. Midland Counties Ry. Co. 
 
 V. Phoenix Ins. Co. 
 
 V. Pratt 
 
 V. Rutland, &c. R. R. Co. 231 
 
 283, 376, 881, 609, 614 
 
 V. South Devon Ey. Co. 262, 421, 
 
 428,-430,448 
 
 Stevenson v. Bay City 613 
 
 Stewart v. Austin 543 
 
 V. Erie, &c. Transp. Co. 259, 261, 
 
 861, 362, 363, 1094 
 
 V. Fireman's Ins. Co. 181 
 
 V. Jones 884 
 
 «. Lay 297 
 
 V. Lehigh Valley E. E. Co. 485, 
 
 489,491,494 
 
Ixvi 
 
 TABLE OP CASES. 
 
 Stewart v. Mahoney Mg. Co. 459 
 
 V. National Union Bank 630 
 
 Stewart's Case 591 
 
 Stiles V. Cardiff, &o. Nav. Co. 673, 697 
 V. Western R. R. Co. 509 
 
 Stillwell V. Empire Fire Ins. Co. 944 
 Stirling v. Vaughn 40 
 
 Stock's Case 474 
 
 Stockdale v. Sch. Dist. in Wayland 468 
 Stocken's Case 127 
 
 Stockholders, &c. v. Louisville, &c. 
 
 R. R. Co. 453, 455 
 
 Stockport, &c. Water Works Co. v. 
 
 Mayor, &o. of Manchester 996 
 
 Stockton V. Mechanics, &c. Sav. 
 
 Bank 295, 372 
 
 Stockton & H. Ry. Co. v, Leeds, 
 
 &c. Ry. Co. 284 
 
 Stockton & V. R. R. Co. u. Stock- 
 ton 359 
 Stockwell V. St. Louis Merc. Co. 170 
 Stoddard v, Shetucket Foundry 
 
 Co. 290, 403, 423 
 
 Stokes V. Lebanon, &c. Tump. Co. 136 
 
 V. N. J. Pottery Co. 504, 505, 840 
 
 Stone V. Berkshire Cong. Soc. 341, 720 
 
 V. City & County Bank 814 
 
 V. Farmers' Loan, &c. Co. 1035, 
 
 1038 
 
 V. Illinois Central R. R. Co. 1036 
 
 V. Mississippi 1008, 1011 
 
 V. Wiggin 863 
 
 V. Wisconsin 1035, 1055, 1069 
 
 Stoneham Branch R. R. Co. v. 
 
 Gould 123, 139 
 
 Stoney v. American L. Ins. Co. 563, 653 
 Stoops V. Greeusburgh, &c. PI. R. 
 
 Co. 26, 974 
 
 Story V. Furman 846 
 
 V. Jersey City, &e. PI. R. Co. 285 
 
 V. New York, &c. R. R. Co. 1001 
 
 Stout V. Sioux City, &c. R. R. Co. 935, 
 
 954, 955, 961 
 
 V. Yaeger Milling Co. 757 
 
 Stoutimore v. Clark 720 
 
 Stover V. Flack 824 
 
 Stow V. Wyse 455 
 
 Stowe V. Flagg 10, 28, 45, 50 
 
 Stoystown, &c. Turnp. Co. v. Craver 499 
 
 Strang's Case 834 
 
 Strange v. H. & T. C. R R. Co. 184, 187 
 
 Stranton Iron, &c. Co., Re 168 
 
 Strasburgh R. R. Co, v. Eohter- 
 
 nacht 49, 213 
 
 Stratton v. Allen 494, 614 
 
 V. Lyons 808 
 
 Straus V. Eagle Ins. Co. 300, 335, 666 
 Stribbling v. Bank of the Valley 38, 89 
 Strickland v, Prichard 671 
 
 Stringer's Case 412, 413, 420, 533, 800, 
 
 812 
 Strong V. Brooklyn, &c. R. R. Co. 416 
 
 Strong V. McCagg 267 
 
 V. Wheatoa 859, 871 
 
 Stuart V. Bute 444, 515 
 
 V. Valley R. R. Co. 49, 68, 77 
 
 Studebaker, &o. Mfg. Co. v. Mont- 
 gomery 719, 742 
 Sturge V. Eastern Union Ry. 
 
 Co. 265, 429 
 
 Sturges V. Bank of Circleville 506, 569 
 
 V. Board of Trade of Chicago 264 
 
 V. Crowninshield 1023 
 
 V. Knapp 233 
 
 V. Stetson 272, 291 
 
 V. Vanderbilt 739, 882, 950, 966 
 
 Sturtevants v. Alton 325 
 
 Suburban Hotel Co., Re 269, 391 
 
 Sudlow V. Dutch Rhenish R. R. Co. 128 
 
 Sullivan v. Portland, &e. R. R. Co. 635 
 
 V. SulUvan Mfg. Co. 844 
 
 Sumner v. Marcy 306, 407 
 
 Sumrall v. Sun Mut. Ins. Co. 40 
 
 Supervisors of Marshall County v. 
 
 Schenck 580, 583, 593 
 
 Supreme Commandery v. Ains- 
 
 worth 471 
 
 Susquehanna Bridge, &c. Co. v. 
 
 General Ins. Co. 332, 584 
 
 Susquehanna, &c. Turnp. Co. u. 
 
 People 702 
 
 Susquehanna Canal Co. v. Bonham 884 
 Susquehanna Mut. Ins. Co. v. Per- 
 
 rine 468, 471 
 
 Sussex R. R. Co. v. Morris & E. 
 
 R. R. Co. 363 
 
 Sutherland v. Olcott 409 
 
 Sutton's Case 830 
 
 Sutton's Hospital Case 301 
 
 Suydam v. Moore 1069 
 
 Swan, Ex parte 188 
 
 V. North British Austr. Co. 188, 
 204, 210 
 Swansea Dock Co. v. Levien 455 
 
 Swartwout v. Mich. Air Line R. R. 
 
 Co. 80, 89, 140, 288, 708 
 
 Swatara R. R. Co. v. Brune 403 
 
 Sweatland v. Ill, &c. Tel. Co. 509 
 
 Sweny v. Smith 123, 263, 264, 293 
 
 Sword V. Wickersham 721, 993 
 
 Sykes's Case 796 
 
 Syracuse & P. & 0. R. R. Co. v. 
 
 Gere 84, 86, 91, 93 
 
 Syracuse, C. & N. Y. R. R. Co., Re 
 
 252, 255, 256 
 
 T. 
 
 Taft V. Harrison 167 
 
 V. Hartford, &c. R. R. Co. 419, 428, 
 
 429 
 
 I). Ward 848 
 
 Taggart v. Western Md. R. R. Co. 71, 
 
 80, 120, 380 
 
TABLE OP CASES. 
 
 Ixvii 
 
 Talbot V. Seripps 236 
 
 Talcott V. Pine Grove 1046, 1099 
 
 Talladega Ins. Co. w. Landers 40, 596 
 V. Peacock 332, 476 
 
 Tallmadge v. Fiehkill Iron Co. 834 
 Taltnadge v. No. American Coal, 
 
 &c. Co. 307 
 
 Talmage v. Pell 407, 638 
 
 Tar River Nav. Co. v. Neal 711 
 
 Tarbox v. Gorman 470 
 
 Tasker v. Wallace 404 
 
 Tatem v. Wright 931 
 
 Taunton v. Eoyal Ins. Co. 400 
 
 Taunton & S. B. Tump. Co. v. 
 
 Whiting 136 
 
 Tayler t-. Great Ind. Pen. Ry. Co. 188 
 Taylor v. Agricultural, &c. Ass. 326, 
 
 502 
 V. Bowker 832 
 
 V. Bruen 306 
 
 a. Chichester, &c.Ey. Co. 231,626, 
 628 
 V. Earle 394 
 
 V. Fletcher 91 
 
 V. Grand Trunk Ry. Co. 699 
 
 V. Griswold 450, 459, 460 
 
 V. Heggie 323 
 
 V. Miami Exp. Co. 113, 114, 232, 
 248, 246, 261, 410 
 V. Midland Ry. Co. 188, 204, 263 
 V. Rundell 444, 515 
 
 V. Taylor 757 
 
 Telegraph Co. v. Davenport 204, 207, 
 
 263 
 
 V. Texas 935 
 
 Telegraph Construction Co., Re 767, 
 
 805 
 Temple Grove Sera. v. Cramer 353 
 Tench v. Great Western Ry. Co. 697 
 Ten Eyck v. Delaware, &c. Canal 
 
 Co. 4 
 
 Tennessee v. Sneed 1023 
 
 Tenney v. East Warren Lumber 
 
 Co. 323 
 
 Terhune v. Midland R. R. Co. 908 
 
 Terrell v. Branch Bank 512 
 
 Terrett v. Taylor 5, 973 
 
 Terry v. Anderson 784, 832, 833, 1043 
 
 V. Bank of Cape Fear 793, 834, 869 
 
 V. Calnan 844, 846, 857 
 
 V. Eagle Lock Co. 250, 407, 425 
 
 V. Little 844, 870 
 
 Terwilliger v. Great Western Tel. 
 
 Co. 261 
 
 Texas & St. L. E. R. Co. v. Ro- 
 
 bards 356 
 
 Thames Haven Dock, &c. Co. v. 
 
 Rose 553, 554 
 
 Thames Tunnel Co. v. Sheldon 68 
 
 Thatchers. West River Nat. Bank 340, 
 
 368 
 Thayer v. Middlesex, &c. Ins. Co. 321 
 
 Thayer v. New Eng., &c. Printing 
 
 Co. 858 
 
 V. Tyler 943 
 
 Thebus v. Smiley 866, 867, 868, 869 
 Thigpen v. Miss. Central R. E. Co. 79 
 Third Av., &c. Bank v. Dimock 681 
 ThirdNat. Bank of Bait. U.Blake 367 
 V. Boyd . 368, 369, 370 
 
 Third Nat. Bank of St. Louis v. 
 
 Harrison 948 
 
 Third Ref. Dutch Church's Ap- 
 peal 224 
 Thomas v. Brownsville, &e. Ry. 
 
 Co. 484, 487, 589, 599 
 
 V. Dakin 1, 2, 7, 8, 17, 18, 20, 21 
 
 V. Placerville, &e. Mg. Co. 944 
 
 V. West Jersey R. E. Co. 300, 625, 
 
 657, 694, 889, 1082, 1083 
 
 Thomaston Bank v. Stimpson 369 
 
 Thompson w. Abbott 913 
 
 V. Androscoggin, &c. Imp. Co. 307 
 
 V. Candor 721 
 
 V. Erie Ry. Co. 265 
 
 V. Jewell 867 
 
 V. Lambert 252, 304, 819, 882, 564, 
 
 598, 654 
 
 V. Meisser 850, 851 
 
 V. New York & Harlem E. R. 
 
 Co. 358 
 
 V. Page 60, 232 
 
 V. People 883, 983 
 
 V. School District 502 
 
 V. Swoope 317, 921 
 
 V. Tliompson 218 
 
 V. Universal Salvage Co. 339 
 
 u. Waters 312, 345, 919, 921, 922, 
 
 926 
 
 Thompson's Estate, Re 343 
 
 Thomson v. Pacific R. R. Co. 11 
 
 Thorington v. Gould 584, 606 
 
 Thornburgh v. Newcastle, &c. E. R. 
 
 Co. 96 
 
 Thorns v. Taw Vale Ry. &c. Co. 996 
 V. Travellers' Ins. Co. 629 
 
 Thornton v. Marginal Freight Ry. 
 
 Co. 22, 739, 740, 988, 1072 
 
 V. Nat. Exchange Bank 640, 682 
 
 V. Wabash Ry. Co. 994 
 
 Thoroughgood's Case 96 
 
 Thorp V. WoodhuU 55, 72, 213 
 
 Thorpe v. Rutland, &c. E. E. Co. 1022, 
 
 1026 
 
 Thrasher v. Pike County E. E. Co. 45, 
 
 49, 50, 59 
 
 Tibballs v. Libby 845, 1041, 1070 
 
 Ticonic Water Power Co. v. Lang 61, 
 
 79, 143 
 Tiffany v. Boatman's Institution 635 
 Tildeii v. Young 77 
 
 Tilson V. Warwick Gas L. Co. 524 
 
 Tinkham v. Borst 760, 992 
 
 Tinsman v. Belvidere, &c. E. E. Co. 4 
 
Ixviii 
 
 TABLE OF CASES. 
 
 Tippecanoe County v. Lafayette, 
 
 &0. E. R. Co. 1, 261, 586, 1083 
 
 Tipton County v. Locomotive 
 
 Works 906, 907 
 
 Tipton Fire Co. v. Barnheisel 261 
 
 Tisdale v. Harris 220 
 
 Titus V. Cairo & Fulton E. E. Co. 504 
 Todd V. Taft 214 
 
 Toledo & Ann Arbor E. E. Co. 
 
 V. Johnson 974, 987 
 
 Toledo & Wabash Ey. Co. v. 
 . Daniels 356 
 
 Toledo, Wabash, & Western E. E. 
 
 Co. V. Lockhart 361 
 
 Toll Bridge Co. v. Betsworth 510 
 
 V. Osborn 374 
 
 Tom V. Methodist Ep. Church 941 
 
 Tombigbee E. K. Co. v. Kneeland 369, 
 
 920 
 Tome V. Parkersburgh, &c. E. E. 
 
 Co. 469 
 
 Tomlin v. Tonica, &c. E. E. Co. 148, 
 
 158 
 Tomlinson v. Branch 904, 905, 908 
 
 V. Bricklayers' Union 538 
 
 V. Jessup 1055, 1068 
 
 Tonica & P. E. E. Co. v. Stein 79 
 
 Tooke, Ex parte 199 
 
 Topeka Bridge Co. ». Cummings 140 
 Topping V. Bickford 742 
 
 Totten V. Tison 431, 433 
 
 Toucey v. Bowen 856 
 
 Touche V. Metrop. Ey., &c Co. 469 
 Toulmin v. Copland 444 
 
 Towanda Bridge Co., Re 1050 
 
 Town V. Bank of Eiver Eaisin 970, 971 
 Town Council of Newark k. Elliott 319 
 Town of Bennington, &c. See 
 
 Bennington, &c. 
 
 Townsend !). Mclyer 210, 212 
 
 Townsend's Case 70 
 
 Township of Eock Creek v. Strong 580 
 
 Towson V. Havre de Grace Bank 38 
 
 Tracy v. Guthrie County Agr. Soc. 478, 
 
 502, 689, 695 
 
 V. Tallmage 638, 648, 664, 692 
 
 V. Yates 863 
 
 Travers v. Kansas Pacific E. R. Co. 700 
 
 Treadwell v. Salisbury Mfg. Co. 237, 
 
 392, 394, 448, 1083 
 
 Treasurer v. Commercial Coal Mg. 
 
 Co. 214 
 
 Tredwen v. Bourne 329 
 
 Trenton Bank v. Haverstick 1062, 1053 
 Trenton Banking Co. v. Woodruff 511 
 Trenton Mut. L. & F. Ins. Co. v. 
 
 McKelway 666 
 
 V. Perrine 343 
 
 Tripp V. New Metallic Pkg. Co. 409 
 
 V. Swanzey Paper Co. 477 
 
 Trippe v. Huncheon 859, 862 
 
 Trott V. Sarcliett 84 
 
 Troup's Case 686 
 
 Trowbridge v. Scudder 717 
 
 Troy & Boston E. B. Co. v. Boston, 
 
 &c. Ey. Co. 1087 
 
 u. Tibbits 52, 131, 417 
 
 V. Warren 52, 63, 69 
 
 Troy & Greenfield R. E. Co. v. 
 
 Newton 80, 140, 143 
 
 Troy & Rutland E. E. Co. v. Kerr 119 
 Troy Tump. & R. E. Co. v. Mc- 
 
 Chesney 131 
 
 Trumbull County Mut. Ins. Co. u. 
 
 Horner 711 
 
 Trundy v. Farrar 321 
 
 Trustees of N. C. Endowment 
 
 Fund V. Satchwell 17 
 
 Trustees of Schools v. Tatman 7 
 
 Trustees of University of Ala. v. 
 
 Moody 320, 781 
 
 Tuckahoe Canal Co. v. Tuckahoe 
 
 &c. R. R. Co. 1018 
 
 Tucker v. City of Ealeigh 326 
 
 V. Ferguson 1014, 1076 
 
 TurnbuU v. Payson 76 
 
 Turner v. First Nat. Bank 370 
 
 V. Granger's Life, &c. Ins. Co. 814 
 
 V. North Beach Mission E. R. 
 
 Co. 699 
 
 Turnpike Co. v. Illinois 314 
 
 V. State 977, 1018 
 
 Tuscaloosa Mfg. Co. v. Cox 238, 248 
 
 Tuskaloosa Scientific, &c. Ass. v. 
 
 Green 928 
 
 Tuttle V. Michigan Air Line R. E. 
 
 Co. 376, 614, 706 
 
 V. Walton 174, 197, 198 
 
 Twelfth St. Market Co. v. Jackson 
 
 505, 583 
 Twin Creek & C.^Turnp. Road Co. 
 
 V. Lancaster 49 
 
 Twin Lick Oil Co. v. Marbury 489, 
 491, 492, 494, 495, 592, 693, 598 
 Tyng V. Commercial Warehouse 
 
 Co. 308 
 
 Tyrell v. Cairo, &c. E. R. Co. 592, 
 
 597, 601 
 
 U. 
 
 Ulster Railroad Co. v. Banbridge, 
 
 &c. Ey. Co. 329, 685 
 
 Umsted v. Buskirk 297, 842 
 
 Uncas Nat. Bank a. Eith 382 
 
 Underwood v. Newport Lyceum 659, 
 
 661 
 
 i;..N. Y. &N. H. E. R. Co. 261 
 
 Union Agr. Soc. v. Gamble 232 
 
 Union Bank v. Campbell 612 
 
 V. Jacobs 804, 835, 338 
 
 Union Bank of Fla. v. Call 605 
 
 Union Bank of Georgetown t'. 
 
 Laird 170, 172 
 
TABLE OF CASES. 
 
 Ixix 
 
 Union Bank of Md. v. Eidgeley 320, 
 
 467 
 Union Banlc of So. Car. v. Wando 
 
 Mfg. &c. Co, 858, 862 
 
 Union Bank of Tenn. v. State 219 
 Union Canal Co. v. Loyd 229 
 
 Union Cement Co. v. Noble 740 
 
 Union Central L. Ins. Co. v. Curtis 403 
 V. Thomas 632 
 
 Union Gold Mg. Co. v. Rooky 
 Mt. Nat. Bank 327, 331, 478, 504, 
 ' 584, 601, 602, 604, 6.39, 663 
 Union Hotel Co. v. Hersee 24, 76, 704 
 Union Improvement Co. v. Com- 
 monwealth 1071 
 Union Iron Co. v. Pierce 877 
 Union Locks Co. v. Towne 119 
 Union Mut. F. Ins. Co v. Keyser 448, 
 477, 478 
 Union Mut. Life Ins. Co. v. Frear 
 
 Stone, &c. Co. 817 
 
 V. McMillen 633 
 
 Union Nat. Bank u. Douglass 759, 760, 
 762, 800 
 V. Hunt 98, 445, 470, 663 
 
 V. Matthews 367, 634, 635 
 
 V. Miller 949 
 
 Union Pacific R. R. Co. v. Burling- 
 ton, &c. R. R. Co. 929, 105 
 V. Credit Mobilier 275, 593 
 
 V. Hall 1097, 1099 
 
 V. United States 412 
 
 Union Pass. Ey. Co. v. Philadelphia 
 
 1016 
 Union Turnp. Co. ». Jenkins 131 
 
 Union Water Co. v. Murphy's Flat, 
 
 &c. Co. 661, 663, 681 
 
 United Hebrew Ben. Ass. \i. Ben- 
 
 shimol 1071 
 
 United Society v. Eagle Bank 55, 107 
 United Society of Shakers v. Un- 
 derwood 540 
 United States v. Amedy 1052 
 V. Baltimore & Ohio R. R. Co. 6, 
 702 
 V. City Bank of Columbus 506, 507 
 !). Cutts 174 
 V. Fox 5, 317, 923, 1054 
 V. Insurance Companies 725, 920 
 V. Johns 40 
 V. Knox 855 
 V. San Jacinto Tin Co. 226 
 United States Bank v. Stearns 39, 745 
 United States Express Co. v. Lucas 692 
 United States Ins. Co. v. Shriver 514 
 United States L. Ins. Co. v. Adams 629 
 United States Mortgage Co. v. 
 
 Gross 620, 924 
 
 United States Rolling Stock Co. v. 
 Atlantic, &c. R. R. Co. 492, 494, 497, 
 
 598 
 United States Trust Co. v. Brady 12 
 
 United States Trust Co. v. Lee 924 
 
 Unity Ins. Co. «. Cram 28, 29, 711 
 
 Universal Life Ins. Co. v. Binford 837 
 
 University v. People 1014, 1016 
 
 V. Rouse 1016 
 
 University of Ala. v. Moody 320 
 
 V. Winston 4 
 
 University of Maryland v. Wil- 
 liams 971, 1013 
 
 Unthank v. Henry County Turnp. 
 Co. 158 
 
 Upper Miss. Trans. Co. v. Whit- 
 taker 941 
 
 Upton V. Burnham 827 
 
 V. Englehart 94, 99, 106, 788, 814 
 V, Hansbrough 86, 723, 795, 817 
 V. Jackson 723, 795 
 
 V. Nat. Bank 367 
 
 17. Tribilcock 95, 106, 131, 723, 
 795, 814, 815, 840 
 
 Utica Ins. Co. v. Bloodgood 638 
 
 V. CadweU 638 
 
 V. Kip 638 
 
 V. Scott 332 
 
 V. Toledo Ins. Co. 496 
 
 Utley V. Clark-Gardner, &c. Mg. 
 
 Co. 631 
 
 V, Donaldson 613 
 
 V. Union Tool Co. 28, 32,722 
 
 Vail V. Hamilton 333, 452, 457 
 
 Valley Bank v. Ladies', &c. Sewing 
 
 Soc. 970 
 
 Valpy, Ex parte 554 
 
 Van Aernara v. McCune 697 
 
 Vanatta v. State Bank 692, 693 
 
 Vance v. Erie Ry. Co. 697 
 
 0. Phoenix Ins. Co. 527, 532 
 
 Van Cott V. Van Brunt 402, 403, 796, 
 
 797 
 Vandall v. South San Francisco 
 
 Dock Co. 300 
 
 Vandenburgh v. Broadway Ry. Co. 450 
 Van Doren v. Olden 400 
 
 Van Dyck v. McQuade 373 
 
 Vane v. Cobbold 105 
 
 Van Hook v. Whitlock 866, 867 
 
 Van Leuven v. First Nat. Bank 370 
 Van Ness v. Fisher . 391 
 
 Van Norman v. Central Car, &c. 
 
 Co. 424 
 
 V. Circuit Judge 219 
 
 Van Riper, Ex parte 847 
 
 Vansands v. Middlesex County 
 
 Bank 197 
 
 Vansant v. Roberts 317, 340 
 
 Van Weel v. Winston 539, 542 
 
 Van Wickle v. Camden, &c. R. R. 
 
 Co. 308 
 
Ixx 
 
 TABLE OP CASES. 
 
 Vater v. Lewis 720 
 
 Vawter v. Ohio, &c. E, E. Co. 149 
 
 Veazie v. Mayo 1026 
 
 Veeder v. Baker 877 
 
 V. Mudgett 730 
 
 VeiUer v. Brown 830, 861 
 
 Venable v. Ebenezer Bap. Cliurch 724 
 Venango Nat. Bank v. Taylor 773 
 
 Vermont v. Society for Propag. 
 
 Gospel 919 
 
 Vermont & Canada E. E. Co. v. 
 
 Vermont C. R. E. Co. 590, 657, 775 
 Vermont Central E. E. Co. v. Clayea 26, 
 
 74, 403 
 Vernon Society v. Hills 605 
 
 Verplauck v. Mercantile Ins. Co. 112, 
 995, 997 
 Vick V. Lane 297, 298 
 
 V. La Eochelle 816, 846, 863 
 
 Vicksburg, Siireveport, & T. E. E. 
 
 Co. I'. McKean 74, 96 
 
 Victoria, &c. Building Society, Se 687 
 Victory Webb Printing, &c. Co. v. 
 
 Beeclier 877 
 
 Vidal V. Girard's Executors 318, 650, 
 
 680 
 Viele V. Wells 856 
 
 Vigers v. Pike 279 
 
 Vinas v. Merchants', &c. Ins. Co. 8 
 Vincennes University v. Indiana 19 
 Vincent w. Nantucket 406 
 
 Vintners' Co. v. Passey 467 
 
 Vinton's Appeal 487 
 
 Virginia & Maryland Steam Nav. 
 
 Co. V. United States 341 
 
 Virginia & Truckee E. E. Co. v. 
 
 Elliott 356 
 
 Vogle V. New Granada Canal, &o. 
 
 Co. 1053 
 
 Von Glahn v. De Eossett 991, 993 
 
 Von Hoffman v. City of Quincy 1023 
 Von Schmidt v. Huntington 396 
 
 Vose V. Grant 765 
 
 Vowell V. Thompson 457 
 
 Vredenburg v. Behan 717 
 
 Vreeland v. N. J. Stone Co. 68, 78, 94, 
 
 105 
 
 W. 
 
 Wabash, &c. Ey. Co. v. Ham 911, 913, 
 
 914 
 Waddill V. Ala., &c. E. E. Co. 374 
 
 Wagner v. Meety 906 
 
 Waite & Windham County Mg. Co. 605 
 Wakefield v. Eargo 860 
 
 Wakeman v. Dalley 541 
 
 Waldo V. Chicago, St. Paul, &c. 
 
 E. E. Co. 102, 104, 373, 374 
 
 V. Portland 593 
 
 Wales V. Stetson 308 
 
 Walker v. Bartlett 175, 827 
 
 Walker v. Continental Ins. Co. 943 
 
 V. Detroit, &c. Ey. Co. 191, 215 
 
 V. Devereaux 27, 56, 66, 247 
 
 V. Fleming 607 
 
 V. Mobile, &e. E. E. Co. 65, 97, 
 
 98, 100, 105 
 
 V. Ogden 128 
 
 V. Eeister 808, 841 
 
 V. South Eastern Ey. Co. 698 
 
 Wallace v. Long Island E. E. Co. 240 
 
 V. Loomis 13, 722 
 
 Wallamet Falls Canal, &e. Co. v. 
 
 Kittridge 964, 967, 971 
 
 Wallingford Mfg. Co. v. Fox 51 
 
 Wallis's Case 70 
 
 Wain V. Bank of North America 333 
 Walser v. Memphis, &c. Ey. Co. 872 
 Walsh V. Sexton 219 
 
 V. Trustees of N. Y., &c. Bridge 20 
 Walter A. Wood Mowing-Maehine 
 
 Co. V. Caldwell 345, 626, 632 
 
 Walters's Case 217, 602 
 
 Waltham Bank v. Waltham 219 
 
 Walton's Case 602, 644, 676 
 
 Walworth v. Bracket 32, 722 
 
 Walworth County Bank v. Farmers' 
 
 L. & T. Co. 504, 594, 602 
 
 Wannell v. Kern 445, 470 
 
 Ward V. Combe 441 
 
 V. Farwell 982, 1040 
 
 V. Griswoldville Mfg. Co. 792 
 
 V. Johnson 335, 366, 469, 661 
 
 V. Society of Attorneys 283 
 
 Ward's Case 69, 70 
 
 Wardell v. Union Pacific R. E. Co. 484, 
 
 487, 489, 491 
 
 Wardrobe v. Cal. Stage Co. 699 
 
 Ware v. Bazemore 236 
 
 V. Grand Junction Water Co. 282, 
 
 283 
 
 V. Eegent's Canal Co. 996, 997, 1000 
 
 Warner v. Beers 2, 17, 21 
 
 V. Mower 453, 456, 461, 770 
 
 Warren v. Davenport F. Ins. Co. 225 
 
 V. King 430 
 
 V. Mobile, &c. E. E. Co. 912 
 
 Warren Mfg. Co. v. JEtna Ins. Co. 940 
 
 Waseca County Bank v. McKenna 231 
 
 Washer v. AUensville, &c. Tump. 
 
 Co. 158 
 
 Washington & Baltimore Tump. 
 
 Co. V. Maryland 983 
 
 Washington Bank v. Lewis 514 
 
 Washington Bridge Co. v. State 1020 
 Washington University v. Rouse 1016 
 Waterbury v. Merchants' Union 
 
 Exp. Co. 7, 249, 266, 267 
 
 Waterford, W., & W. Ey. Co. v. 
 
 Dalbiac 140 
 
 Waterhouse v. Jamieson 99, 810 
 
 Waterman v. Troy, &c. E. E. Co. 418, 
 
 428 
 
TABLE OF CASES. 
 
 Ixxi 
 
 Water Valley Mfg. Co. v. Seaman 104 
 
 Watson V. Crandall 545 
 
 V. Earl Cbarlemont 100 
 
 V. Mercer 1043 
 
 V. Spratley 218, 220 
 
 Watts's Appeal 250, 252, 332, 355, 592, 
 
 598 
 
 Waukon & M. K. R. Co. ». Dwyer 55, 
 
 131,145 
 
 WaynesvilleNat. Bank u. Irons 511, 
 
 512, 513 
 
 Wear v. Jacksonville, &c. R. R. Co. 89 
 
 Weaver v. Barden 183, 187, 214 
 
 Webb V. Comm'rs of Heme Bay 648 
 
 V. Earle 429 
 
 ». Graniteville Mfg. Co. 181 
 
 V. Manchester, &o. Ry. Co. 308 
 
 V. Ridgley 1071 
 
 V. Smith 509 
 
 Weber v. Fickey 217, 644, 861, 869 
 
 Webster o. Turner 972 
 
 V. Upton 131, 160, 173, 751, 817 
 
 Weckler v. First Nat. Bank 300, 368 
 
 Weed V. Little Falls, &c. R. R. Co. 252 
 
 V. Snow 638 
 
 Weetjen v. Vibbard 233 
 
 Wehrman v. Reakirt 827, 856 
 
 Weight V. Liverpool, &c. Ins. Co. 943 
 
 Weigley v. Coal Oil Co. 853 
 
 Weikersheim's Case 824 
 
 Weiss V. Mauch Chunk Iron Co. 59, 
 
 853 
 Weld V. May 7 
 
 Welland Canal Co. v. Hathaway 720, 
 
 743 
 
 Welles V. Cowles 218 
 
 WeUs V. Northern Pac. Ry. Co. 1080 
 
 V. Oregon Ry., &c. Co. 15, 479, 
 
 1080 
 
 e. Rahway Rubber Co. 498 
 
 V. Rodgers 145 
 
 Welsh V. St. Paul, &o. R. R. Co. 912 
 
 Wendel v. State 305 
 
 Wert w. Crawfordsville & A. Turnp. 
 
 Co. 96 
 
 Wesson v. Washburn Iron Co. 996 
 West V. Carolina L. Ins. Co. 974 
 
 V. Madison County Agr. Board 332 
 West's Appeal 646 
 
 West Boston Sav. Bank v. Thomp- 
 son 514 
 West Branch, &c. Canal Co.'s Ap- 
 peal 187, 212 
 West Chester, &c. R. R. Co. v. 
 
 Jackson 423, 428, 432, 433 
 
 West River Bridge Co. .;. Dix 1025, 
 1048, 1049 
 West St. Louis Sav. Bank w. Shaw- 
 nee County Bank 400, 485, 506, 557, 
 
 570 
 West Winsted Sav. Bank v. Ford 719, 
 
 721 
 
 West Wisconsin Ry. Co. v. Super- 
 visors 1014, 1059 
 Westerfleld v. Rady 504 
 Western v. Genesee Mut. Ins. Co. 845, 
 
 920 
 
 Western Bank v. Mills 638 
 
 Western Bank of Mo. v. Gilstrap 321, 
 
 405, 500, 502 
 
 Western Bank of Scotland v. Addle 102, 
 
 697 
 V. Tallman 402 
 
 Western Cottage Organ Co. v. Red- 
 dish 305, 306 
 Western Md. R. R. Co. v. Franklin 
 
 Bank 567 
 
 Western N. C. R. R. Co. v. RolUns 994, 
 
 1067 
 Western Penn. R. R. Co.'s Appeal 735, 
 
 736 
 Western R. R. Co. v. Nolan 233 
 
 Western Screw, &c. Co. v. Cousley 523, 
 
 524 
 Western Transportation Co. v. 
 
 Scheu 1053 
 
 Western Union R. R. Co. v. Smith 908, 
 
 911 
 Western Union Tel. Co. v. Axtell 1037 
 V. Burlington, &c. Ry. Co. 695 
 V. Davenport 204, 207, 263 
 
 V. Eyser 696, 699 
 
 V. Hamilton 807 
 
 V. Mayer 930 
 
 V. Rich 355 
 
 V. Texas 935 
 
 V. Union Pac. Ry. Co. 20, 695 
 
 Weston V. Bear River, &c.Mg. Co. 195, 
 
 196 
 
 w. Hunt 4 
 
 Weston's Case 159, 167, 169, 216, 826, 
 
 828 
 Wetherbee v. Baker 795, 796, 838 
 
 Wetmore v. St. Paul, &c. R. B. Co. 226 
 Wetumpka & Coosa R. R. Co. v. 
 
 Bingham 24 
 
 Weyer & Second Nat. Bank 170 
 
 Weymouth v, Penobscot Log Driv- 
 ing Co. 1091 
 V. Washington, &c. R. R. Co. 944 
 Whaley Bridge, &c. Co. v. Green 520 
 Wheatley v. Westminster, &c. Coal 
 
 Co. 1102 
 
 Wheeler, iJe 427,460 
 
 V. Essex Pub. R. Board 666 
 
 V. Faurot 825, 851, 861 
 
 V. Miller 55, 835, 859 
 
 V. San Francisco & A. B. R. 
 
 Co. 360, 361 
 
 v. Walker 77 
 
 Wheeling v. Mayor 244 
 
 Wheelock v. Kost 722, 773, 821, 824 
 Wheless v. Second Nat. Bank 698 
 
 Whitcomb v. Fowle 766 
 
Ixxii 
 
 TABLE OF CASES. 
 
 White V. Brownell 464 
 
 V. Campbell 714, 720, 988 
 
 V. Carmarthea, &c. Ey. Co. 246, 
 
 " 261 
 
 V. Coventry 711 
 
 V. Franklin Bank 691, 693 
 
 V. Howard 317, 620, 638, 921, 923, 
 928 
 V. Ross 711 
 
 ». Schuyler 214 
 
 V. State 37, 478, 1052 
 
 V. Syracuse, &c. E. E. Co. 384, 386 
 V. Vermont, &c. R. E. Co. 325 
 
 White's Bank «. Toledo, &o. Ins. 
 
 Co. 202, 306 
 
 White's Creek Turnp. Co. v. David- 
 son County 986, 1067 
 White HaU & P. E. R. Co. v. 
 
 Myers 79 
 
 Whitehead w. Buffalo &L. H. E. E. 
 
 Co. 942 
 
 White Mountains E. R. Co. v. East- 
 man " 189, 140, 142, 288 
 Whiteside v. United States 613 
 White Water Valley Canal Co. v. 
 
 Boden 39, 620 
 
 V. Vallette 304, 818, 319 
 
 Whitewright v^ Stimpson 836 
 
 Whitfield V. South Eastern Ry. Co. 673, 
 
 697 
 Whitford v. Laidler 320 
 
 Whiting V. Crandall 545 
 
 Whitman, &c. Mg. Co. v. Baker 666, 
 
 670 
 Whitney v. First Nat. Bank 870, 508, 
 
 • 666 
 
 V. Mayo 246 
 
 V. Peay 626, 691 
 
 V. South Paris Mfg. Go. 476 
 
 V. Wyman 524, 627 
 
 Whitney Arms Co. v. Barlow 627, 651, 
 
 659, 665, 877 
 
 Whittemore v. Gibbs 220 
 
 Whittenton Mills v. Upton 398 
 
 Whittlesey v. Delaney 840 
 
 V. Frantz 116, 341, 838 
 
 Whitwell V. Warner 596, 601, 757, 770, 
 
 834 
 Wickersham v. Chicago Zinc Co. 514 
 WickUflfe V. Owings 937 
 
 Wiggin V. First Free Will, &c. 
 
 Church 453, 455 
 
 Wight V. Shelby E. E. Co. 69, 74, 78, 96 
 Wilbur V. Lynde 491 
 
 V. Stockholders 793, 834 
 
 Wilby V. West Cornwall Ry. Co. 361 
 Wilcox V. Bickel 236 
 
 V. Toledo, &c. R. E. Co. 720 
 
 Wild V. Bank of Passamaquoddy 506, 
 
 560 
 Wiles V. Suydam 844, 850, 877 
 
 Wiley ». First Nat. Bank 370, 508 
 
 Wiley V. Starbuck ' 637 
 
 Wilkie V. Rochester, &c. E. R. Co. 560 
 Wilkins v. Thome 248, 260 
 
 Wilkinson v. Delaware &c. R. K. 
 
 Co. 954 
 
 V. Gold Mg. Co. 67 
 
 V. Providence Bank 210 
 
 Willamette Falls Canal, &c. Co. x,. 
 
 Williams 941 
 
 Willamette Freighting Co. v. Stan- 
 
 nus 84, 142, 157, 389 
 
 Willcocks, Ex parte 457, 458 
 
 Williams v. Bank of Michigan 19, 720, 
 
 748 
 
 V. Boice 799 
 
 V. Cheney 632, 724, 742 
 
 V. Cresswell 11, 845, 920, 946 
 
 V. Halliard 526, 535, 537 
 
 V. Hanna 861 
 
 V. Lowe 122, 197 
 
 V. McDonald 631 
 
 V. Mechanics' Bank 195 
 
 V. Missouri, K., &c. R. E. Co. 961 
 
 V. Parker 429 
 
 v. Planters' Ins. Co. 698 
 
 V. Prince of Wales, &c. Ins. Co. 446 
 
 V. Savage Mfg. Co. 118, 114 
 
 V. St. George's Harbor Co. 624 
 
 V. Traphagen 834 
 
 V. Union Bank 21, 38, 39 
 
 V. Western Union Tel. Co. 272, 
 
 411,412,418,425,426 
 
 WilUams's Case- 289, 824, 832 
 
 WilUamson, Ex parte 828, 552, 687 
 
 V. Eokomo BIdg., &c. Ass. 721, 
 
 745. 
 
 V. New Jersey, &c. R. R. Co. 238 
 
 WiUis V. Fry 569 
 
 WiUiston v. Michigan S., &c. R. E. 
 
 Co. 248, 428, 431 
 
 Wills V. Murray 456, 462 
 
 Wilmarth v. Crawford 304 
 
 Wilmer v. Atlanta, &c. Air Line 
 
 Ey. Co. 957 
 
 Wilmington & Ealeigh R. E. Co. 
 
 V. Reid 1002, 1016 
 
 Wilmington, Charlotte, & Ruther- 
 ford R. R. Co. V. Thompson 711 
 Wilson V. Baker 341 
 V. Bank of Montgomery County 427 
 V. Birkenhead, &c. Ry. Co. 159 
 V. Central Bridge Co. 892, 467 
 V. Chesapeake, &c. R. R. Co. 861 
 V. Furness Ry. Co. 854, 358 
 V. Gaines 893 
 V. Miers 892, 480 
 V. Pittsburgh &.Youghiogheny 
 
 Coal Co. 858,859 
 
 a. Proprietors of Central 
 
 Bridge 971 
 
 V. Salamanca 909 
 
 V. Tesson 1071, 1072 
 
TABLE OF CASES. 
 
 Ixxiii 
 
 Wilson V. West Hartlepool, &e. Co. 594 
 
 V. Wills Valley K. R. Co. 147, 380 
 
 V. Wilson 616 
 
 Wilson's Case 565 
 
 Wilson County v. Nat. Bank 948 
 
 Wilson Sewing Maeh. Co. v. Spears 742 
 
 Wiltbank's Appeal 439, 440 
 
 Winch V. Birkenhead, &c. Ry. Co. 248, 
 
 261, 394, 889 
 
 Winchester v. Baltimore, &c. R. R. 
 
 Co. 514 
 
 Wincock v. Turpin 866 
 
 Windham Prov. Inst. v. Sprague 862, 
 
 864 
 Windsor v. McVeigh 938 
 
 Winfield «. Hudson 825 
 
 Winona, &c. R. R. Co. v. Blake 1035 
 Winsor, Ex parte 147 
 
 Winter v. Baker 539, 765 
 
 V. Belmont Mg. Co. 183, 187 
 
 V. Muscogee R. R. Co. 119, 157, 381 
 Winton v. Little 640 
 
 Wintringham v. Rosenthal 810 
 
 Wisconsin Teleph. Co. u. Oshkosh 33 
 Wiswall ij. Greenville, &c. Plank 
 
 R. Co. 259, 874 
 
 WisweU V. Starr 855 
 
 Withers v. Buckley 1001 
 
 Witter V. Mississippi, &c. R. B. Co. 119, 
 
 121, 381 
 
 Witts V. Steere 441 
 
 Wolff. Goddard 321 
 
 Wonson v. Fenno 214 
 
 Wontner v. Shairp 107, 140, 543, 892 
 
 Wood V. Bedford, &o. R. R. Co. 889 
 
 V. Coosa, Sac. R. R. Co. 71, 74, 77, 
 
 644, 707, 712 
 
 V. Dummer 297, 539, 749, 761, 759, 
 
 781 
 
 V. Jefferson County Bank 76 
 
 V. Whelen 323, 484, 594 
 
 Wood's Case 82 
 
 Wood & Brown's Case 684 
 
 Wood Hydraulic, &c. Mg. Co. v. 
 
 King 500, 920 
 
 Woodfork v. Union Bank 381, 795 
 
 Woodhouse v. Crescent Mut. Ins. 
 
 Co. 204 
 
 Woodman v. York, &c. R. R. Co. 684 
 
 Woodruff V. Erie Ry. Co. 364, 657, 1087 
 
 V. McDonald 68 
 
 V. TrapnaU 786, 787 
 
 Woodruff's Estate, Re 441 
 
 Woods V. Figaniere 7 
 
 WooUaston's Case 122 
 
 Worcester v. Essex Bridge Co. 471 
 
 V. Norwich, &c. R. R. Co. 892, 
 
 1060, 1072 
 
 V. Western R. R. Co. 1076 
 
 Worcester & N. R. R. Co. v. Hinds 140 
 
 Worcester Corn Exch. Co., Re 331, 687 
 
 Worcester Med. Inst. v. Harding 719 
 
 Worcester Tump. Co. v. Willard 136 
 Workingmen's Banking Co. v. Rau- 
 
 tenberg 640 
 
 Workingmen's Bldg., &c. Ass. v. 
 
 Coleman 705 
 
 Works V. Junction R. R. Co. 859 
 
 Worrall v. Judson 171, 827 
 
 Worth, Ex parte 102 
 
 Woven Tape Skirt Co., Re 990 
 
 Wright V. Bundy 500 
 
 V. McCormack 842, 856, 870 
 
 V. Merchants' Nat. Bank 840 
 
 V. Oroville Mg. Co. 243, 451, 477 
 
 V. Petrie 760 
 
 V. Pipe Line Co. 659, 663 
 
 V. Vermont, &c. R. R. Co. 418, 428 
 
 Wright's Appeal 569, 730 
 
 Wright's Case 831 
 
 WyUe V. Northampton Nat. Bank 370 
 
 Wyman v. American Powder Co. 212 
 
 V. Hallowell & Augusta Bank 782 
 
 Wynn Hall Coal Co., Re 554 
 
 Wynne v. Price 175, 828 
 
 Wythe V. Myers 937 
 
 Yates V. Van De Bogert 309, 564 
 
 Yeaton v. Bank of Old Dominion 1074 
 Yellow Jacket, &c. Mg. Co. v. 
 
 Stevenson 595 
 
 Yerkes v. National Bank of Port 
 
 Jervis 370, 506 
 
 York & Cumberland R. R. Co. v. 
 
 Ritchie 123, 503 
 
 V. Winans 1083 
 
 York & No. Midland Ry. Co. v. 
 
 Hudson 483, 485, 493 
 
 V. Regina 1091 
 
 Youghiogeny Shaft Co. v. Evans 834 
 
 Young V. Bank of Alexandria 39 
 
 V. Rosenbaum 854 
 
 Youngman v. Elmira, &c. R. R. 
 
 Co. 1088 
 
 Z. 
 
 Zabriskie v. Cleveland, &c. R. R. 
 
 Co. 246, 400, 456, 598, 612, 
 
 642, 648, 664 
 
 V. Hackensack, &c. R. R. Co. 250, 
 
 276, 382, 383, 384, 385, 614, 
 
 1008, 1021, 1046, 1058, 1059, 
 
 1060, 1072 
 
 Zimmer v. State 904, 910, 1017 
 
 Zinn V. Mendel 539, 765 
 
 Zirkel v. Joliet Opera House Co. 112, 
 
 795 
 
 Zottman v. San Francisco 652, 687, 
 
 687, 688 
 
 Zulueta's Claim 111, 689, 690 
 
THE LAW 
 
 PEIYATE CORPORATIONS. 
 
THE LAW OF PRIVATE CORPORATIONS. 
 
 CHAPTER I. 
 
 THE FORMATION OF A CORPORATIOK 
 
 § 1. Definition of a Corporation. — A corporation was de- 
 scribed by Chief Justice Marshall, in the Dartmouth College 
 Case,^ as " an artificial being, invisible, intangible, and exist- 
 ing only in contemplation of law." A corporation has also 
 been designated a legal entity, a creature of the law, a legal 
 institution, a fictitious or political person. These and simi- 
 lar definitions have received the approval of maAy eminent 
 authorities.^ 
 
 According to Kyd, a corporation is " a collection of many 
 individuals united into one body, under a special denomina- 
 tion, having perpetual succession under an artificial form, 
 and vested by the policy of the law with the capacity of act- 
 ing in several respects as an individual, particularly of tak- 
 ing and granting property, of contracting obligations, and of 
 suing and being sued, of enjoying privileges and immunities 
 
 1 Dartmouth College v. Wood- "Van Santvoord, 3d N. Y. 208, 218; 
 ward, 4 Wheat. 518, 636. Thompson v. Waters, 25 Mich. 214, 
 
 2 For example, see Head ». Prov- 223, 224; State v. Milwaukee, &c. 
 idenoe Ins. Co., 2 Cranoh, 127, 167; R. R. Co., 45 Wis. 579, 592; Brice 
 Bank of United States v. Deveaux, on Ultra Vires, 1; Angell & Ames 
 5 Cranch, 61. 88, per Mar.shall, C. J. ; on Corp. , § 1 ; Dillon on Mun. Corp., 
 Ohio, &o. R. R. Co. v. Wheeler, 1 § 9 a; Civil Code of Louisiana, 
 Black, 286, 295, per Taney, C. J. ; § 418 ; Civil Code of California, 
 Tippecanoe County u. Lafayette, &c. § 283; Code of Georgia, §§ 1651, 
 R. R. Co., 50 Ind. 97, 108; Railroad 1670; and see infra, § 1071. 
 Com'rs V. Portland, &c. R. R. Co., Blackstone defined a corporation 
 63 Me. 269, 278; Thomas v. Dakin, as " a franchise." 1 Bl. Com. 123. 
 22 Wend. 73, 104, 107; Merrick v. See also 2 Kent's Com. 267, 268. 
 
 VOL. I. — 1 
 
§ 1 THE LAW OP PRIVATE COEPOEATIONS. 2 
 
 in common, and of exercising a variety of political rights, 
 more or less extensive according to the design of its institu- 
 tion, or the powers conferred upon it, either at the time of 
 its creation or any subsequent period of its existence." ^ 
 
 This definition is not inconsistent with that given by Chief 
 Justice Marshall, when correctly understood. Kyd describes 
 a corporation as a collection of many individuals authorized 
 to act as if they were one person. Chief Justice Marshall, on 
 the other hand, treats the collection of individuals constitut- 
 ing the corporation as a united body, and personifies it, while 
 he considers the individuals who together compose this body 
 merely as component parts. It is apparent that both defini- 
 tions describe the same thing regarded from different points 
 of view. 
 
 While a corporation may, from one point of view, be con- 
 sidered as an entity without regard to the corporators who 
 compose it, the fact remains self-evident that a corporation is 
 not in reality a person or a thing distinct from its constituent 
 parts. The word " corporation " is but a collective name for 
 the corporators or members who compose an incorporated 
 association ; and where it is said that a corporation is itself a 
 person, or being, or creature, this must be understood in a 
 figurative sense only. 
 
 The conception of a number of individuals as a corporate 
 or collective entity occurs in the earliest stages of human de- 
 velopment, and is essential to many of the most ordinary 
 processes of thought. Thus, the existence of tribes, village 
 communities, families, clans, and nations implies a conception 
 
 ^ 1 Kyd on Corporations, 13. See 124, 143-145, and authorities there 
 
 also Thomas «. Dakin, 22 Wend. 9, quoted; Railway Co. v. Allerton, 
 
 69; Gelpcke v. Blake, 19 Iowa, 263, 18 Wall. 233, 235, per Justice Brad- 
 
 268, per Lowe, J.; People v. As- ley. " Private corporations are but 
 
 sessors of Watertown, 1 Hill, 616, associatures of individuals united 
 
 620, per Bronson, J.; De Bow v. for some common purpose, and per- 
 
 People, 1 Denio, 9, 15; Hightower mitted by the law to use a common 
 
 V. Thornton, 8 Ga. 486, per Lump- name and to change its members 
 
 kin, J. ; Payne v. Bullard, 23 Miss, without a dissolution of the as- 
 
 90; Dartmouth College v. Wood- sociation," per Justice Field, in 
 
 ward, 4 Wheat. 667, per Story, J. ; Baltimore, .&c. R. R. Co. v. Fifth^ 
 
 Warner v. Beers, 23 Wend. 103, 122- Baptist Chuich, 108 U. S. 317, 830.' 
 
8 THE FORMATION OP A COBPORATION. § 2 
 
 of these several bodies of individuals as entities having cor- 
 porate rights and attributes. An ordinary copartnership or 
 firm is constantly treated as a united or corporate body iji 
 the actual transaction of business, though it is not recognize4 
 in that light in the procedure of the courts of law. So, in 
 numberless other instances, associations which are not legally 
 incorporated are considered as personified entities, acting 
 as a unit and in one name ; for example, political parties, 
 societies, committees, courts. 
 
 A legally constituted corporation is ordinarily treated at 
 law, as well as in the transaction of ordinary business, as a 
 distinct entity or person, without regard to its membership. 
 In most cases this is a just as well as convenient means of 
 working out the rights of the real persons interested ; how- 
 ever, it is essential to a clear understanding of many impor- 
 tant branches of the law of corporations to bear in mind 
 distinctly, that the existence of a corporation independently 
 of its shareholders is a fiction ; and that the rights and duties 
 of an incorporated association are in reality the rights and 
 duties of the persons who compose it, and not of an imaginary 
 being.i 
 
 § 2. Different Kinds of Corporations. — Aggregate and Sole. — 
 The word " corporation " has been applied to various widely 
 dissimilar classes of institutions. Thus, certain corporations, 
 called corporations aggregate, are composed of many mem- 
 bers ; while others, called corporations sole, consist of a single 
 person each.^ The dignitaries of the Church in England are 
 
 > See infra, §§ 227 et seq. by Zitelmann (published in Stettin, 
 
 What a corporation really is pre- Jan. 5, 1873) ; and in briefer form, 
 
 sents a question of fact, and not of see Taylor on Corporations, §§ 1-9. 
 
 law, and the solution of the question ^ Overseers of the Poor v. Sears, 
 
 must be reached through the per- 22 Pick. 122, 125-129, per Shaw, 
 
 ceptions, rather than by abstract C. J. 
 
 reasoning. Yet the question has All the shares in a corporation 
 given rise to a vast amount of fruit- aggregate whose shares are transfer- 
 less metaphysical discussion, both able may become vested in a single 
 among the civil law and common corporator. Under these circum- 
 law writers. For a full collection stances, the corporation in legal 
 of the civil law writers, see an es- contemplation retains its original 
 say entitled " Juristische Personen," character as a corporation aggre- 
 
§ 3 THE LAW OF PEIVATB OOEPOEATIONS. 4 
 
 often cited as examples of corporations sole.^ The same term 
 has been applied in Massachusetts to a minister seised of par- 
 sonage lands to himself and his successors, in right of the 
 parish.^ The King, the Governor of a State, or any other 
 public officer who is invested with any of the attributes of a 
 corporation by reason of his official position, is in this respect 
 a corporation sole.^ 
 
 § 3. Private and Public Corporations. — By another classifi- 
 cation corporations have been divided into public corporations 
 and private corporations. The difference between these two 
 classes of corporations is radical, and hence they are in many 
 instances governed by widely different principles of law. 
 Private corporations are associations formed by the voluntary 
 agreement of their members, such as banking, railroad, and 
 manufacturing companies. Public corporations are not vol- 
 untary associations at all, and there is no contractual relation 
 between the corporators who compose them ; ^ they are merely 
 government institutions, created by law, for the administration 
 of the public affairs of the community. States, counties, and 
 municipalities are examples of public corporations.^ 
 
 gate. The several shares are treated * Infra, § 24. 
 as remaining distinct, and may at ^ Dillon on Mun. Corp., §§ 19- 
 any time be redistributed by the 24; Dartmouth College v. Wood- 
 sole owner. Infra, § 989. ward, 4 Wheat. 518, 668, 669, per 
 A private banker doing business Justice Story; Bonaparte v. Cam- 
 under the banking laws of New York den, &c. R. R. Co., 1 Baldw. 
 is not a corporation in any sense of 205, 222; Rundle e. Delaware, &o. 
 the word. Codd v. Rathbone, 19 Canal Co., 1 Wall. Jr. 275, 290, 
 N. Y. 37; Bank of Havana v. Ma- 291; Ten Eyck v. Delaware, &c. 
 gee, 20 N. Y. 355; Hallett v. Har- Canal Co., 18 K. J. L. 200; Tins- 
 rower, 33 Barb. 537. man v. Belvidere, &c. R. R. Co., 2 
 
 1 Kyd. on Corp., 20; 1 Bl. Com. Dutch. 148; City of Louisvillft ». 
 469; 2 Kent's Com. 273; Ford v. Universityof Louisville, 15 B.Monr. 
 Harington, L. R. 5 C. P. 282. 642; Cleaveland v. Stewart, 2 Ga. 
 
 2 Weston V. Hunt, 2 Mass. 500; 283. Compare University of Ala- 
 First Parish in Brunswick v. Dun- bama v. Winston, 5 Stew. & P. 
 ning, 7 Mass. 445, 447. (9 Ala.) 17; McKim v. Odom, 3 
 
 s Kyd on Corp., 20, 27, 28; 1 Bland Ch. 407, 417. In State of 
 
 Bl. Com. 479 ; Polk v. Plummer, 2 Georgia v. Atkins, 35 Ga. 315, it 
 
 Humph. 500, 506; Governor v. Al- was held that the State was not a 
 
 len, 8 Humph. 176; Jansen v. Os- corporation within the meaning of 
 
 trander, 1 Cowen, 670, 679. an internal revenue law apjplicable 
 
5 THE FORMATION OP A COBPORATION. § 4 
 
 The fact that part, or even all, of the shares in a corpora- 
 tion are held by the State, does not necessarily render it a 
 public corporation. Whether a corporation be public or pri- 
 vate depends wholly upon its organization. Shares in a cor- 
 poration may be held by a State in the same manner as by a 
 private individual. This has been decided repeatedly with 
 regard to various State banks. A State may undoubtedly 
 establish a bank as a government agency subject to govern- 
 ment control, thus giving it the characteristics of a public 
 corporation, unless prohibited by the Constitution ; but if a 
 corporation is formed -by the State with transferable shares, 
 for the purpose of carrying on the banking business in the 
 same manner as a private corporation, it must be classed as 
 a private corporation in name as well as in fact.^ 
 
 § 4. Religious, Charitable, and Civil Corporations. — Private 
 corporations have been subdivided into ecclesiastical or re- 
 ligious corporations, eleemosynary or charitable corporations, 
 and civil corporations. 
 
 Religious corporations are those which are formed for the 
 advancement of religion, or the administration of church 
 property for religious purposes. Abbeys and monasteries, 
 in former times, and the various incorporated churches now 
 in existence in the United States, are of this class.^ The 
 distinguishing feature of charitable corporations is, that they 
 are formed for the administration of charitable trusts, and not 
 for the profit of the corporators themselves ; for example, 
 corporations formed for the management of free hospitals 
 and asylums for the relief of the poor, insane, blind, or other- 
 wise helpless.* Colleges and academies founded for the 
 administration of private donations are governed by the same 
 principles of law, and are ordinarily classed under the same 
 
 to persons and cnrporadons. See er's Bank of Georgia, 9 Wheat. 904, 
 
 also Alabama Certificates, 12 Op. 907. Infra, § 35. 
 Atty..-Gen. 176, 180; United States " Kyd on Corp. 22-25; 2 Kent's 
 
 t>. Railroad Co., 17 Wall. 328. Com- Com. 274; Terrett v. Taylor, 9 
 
 pare United States v. Fox, 94 U. S. Cranch, 43, 46. 
 315; 8. c. 52 N. Y. 530. » Kyd. on Corp. 25-27; 1 Bl. 
 
 1 Bank of United States v. Plant- Com. 471; 2 Kent's Com. 274. 
 
§ 6 THE LA"W" OP PBIVATE CORPORATIONS. 6 
 
 head.i A charitable corporation is merely a trustee or agent 
 selected by the donor of the charity for the purpose of ad- 
 ministering funds given for charitable purposes, and the ben- 
 eficiaries of this trust are frequently the public, or parties 
 outside of the corporation. The principles of law applicable 
 to charitable corporations differ, on this account, in many re- 
 spects, from those which apply to ordinary business corpora- 
 tions. The term " civil corporations " applies to all those 
 incorporated associations which are formed for the temporal 
 benefit of their members, such as railroad companies, manu- 
 facturing companies, banks, clubs, and other associations of a 
 similar character. 
 
 § 5. The associations falling within any one of the sev- 
 eral classes which have been enumerated often differ greatly 
 in their character and constitution. No well-defined dividing 
 line can be drawn by which corporations of one class can be 
 distinguished from those of another class ; and sometimes 
 the distinctive features of different classes of corporations are 
 joined in one and the same association. The real nature of 
 a corporation, in every case, depends upon the charter or 
 articles of association under which it is formed, and must be 
 determined by reference thereto ; whether the association 
 should be termed a public, or private, or religious, or chari- 
 table, or civil corporation, is simply a question regarding the 
 meaning of those words. 
 
 § 6. Quasi Corporations. — Associations and government 
 institutions possessing only a portion of the attributes which 
 distinguish ordinary private or public corporations have some- 
 times been denominated quasi corporations. 
 
 Towns and other political divisions, school districts, boards 
 of commissioners, overseers, or trustees of the poor, etc., hav- 
 ing authority to act and bring suit as united bodies without 
 regard to their membership for the time being, are quasi cor- 
 porations of a public character.^ Individual public officers 
 
 1 Kyd on Corp. 25, 26, 28; 2 nett, L. R. 5 C. P. 262, 272. Corn- 
 Kent's Com. 274; Dartmouth Col- pare 1 Bl. Com. 471. 
 lege V. Woodward, 4 Wheat. 518, " Kyd on Corp. 29; 2 Kent's 
 640, 681. See also Durant v. Ken- Com. 278; Denton v. Jackson, 2 
 
THE FORMATION OF A CORPORATION. 
 
 §7 
 
 having authority to sue, in their official capacities, upon con- 
 tracts made with their predecessors in office, are examples of 
 quasi corporations sole.^ Joint-stock companies may be cited 
 as quasi corporations of a private character. They are asso- 
 ciations having some of the features of an ordinary common 
 law copartnership, and some of the features of a private cor- 
 poration. Their constitution varies greatly, and they may be 
 found of every possible variety, from an ordinary copartner- 
 ship to a corporation in the strictest sense of the word. 
 Their real organization and character must in each case be 
 determined by reference to the laws and articles of agreement 
 under which they are formed : whether they are to be called 
 copartnerships, or joint-stock companies, or corporations, is 
 solely a question of definition.^ 
 
 § 7. G-eneral Nature of a Private Business Corporation. — 
 This treatise will be confined to the law of private, civil cor- 
 porations. The various associations of this general descrip- 
 
 Johns. Ch. 320, 325; North Hemp- 
 stead V. Hempstead, 2 Wend. 109, 
 134 ; Jackson v. Hartwell, 8 Johns. 
 830; Rouse v. Moore, 18 Johns. 
 407; Jansen v. Ostrander, 1 Co wen, 
 670; Grant v. Fancher, 5 Co wen, 
 309 ; Riddle v. Proprietors of Locks, 
 &c., 7 Mass. 187; Damon v. Gran- 
 by, 2 Pick. 345, 352 ; School District 
 in Rumford v. Wood, 13 Mass. 193; 
 Trustees of Schools v. Tatman, 13 
 111. 27; Governor v. Gridley, Walker 
 Ch. (1 Miss.) 328; Carmichael v. 
 Trustees of School Lands, 3 How. 
 Ch. (4 Miss.) 84; Commis.sioners of 
 Roads V. McPherson, 1 Spear, 218; 
 Justices of Cumberland v. Arm- 
 strong, 3 Dev. L. 284 ; Dean v. Da- 
 vis, 51 Cal. 406; Levy Court v. 
 Coroner, 2 Wall. 501 ; Cole v. Fire 
 Engine Co., 12 R. I. 202 ; Slaughter 
 V. Mobile County, 73 Ala. 134; Law- 
 rence County V. Chattaroi R. R. Co., 
 81 Ky. 225. Compare Brown v. 
 South Kennebec Agricultural So- 
 ciety, 47 Me. 275; Weld v. May, 9 
 
 Cush. 181 ; Jefts v. York, 10 Cush. 
 392; Commonwealth v. Green, 4 
 Whart. 531; State v. Towers, 38 
 Ohio St. 54; Gardner ». Board of 
 Health, 10 N. Y. 409. 
 
 1 Jansen v. Ostrander, 1 Cowen, 
 670; The Governor v. Allen, 8 
 Humph. 176. 
 
 2 See Liverpool Insurance Co. v. 
 Massachusetts, 10 Wall. 566 ; Maltz 
 V. American Express Co., 1 Flip. 
 611; Dinsmore v. Philadelphia, &c. 
 R. R. Co. (U. S. C. C), 11 Phila. 483; 
 Leonardville Bank v. Willard, 25 
 N. Y. 574 ; Waterbury v. Merchants' 
 Union Express Co., 50 Barb. 157; 
 8. c. 3 Abb. Pr. n. s. 163; Thomas 
 V. Dakin, 22 Wend. 9 ; De Bow v. 
 People, 1 Denio, 9; School District 
 V. Insurance Co., 103 U. S. 707; 
 National Bank of Schuylerville v. 
 Van Dewarker, 74 N. Y. 234; Woods 
 V. Figaniere, 3 Roberts, 609 ; Oakes 
 V. Turquand, L. R. 2 H. L. 325. See 
 infra, §§ 18, 969. 
 
§ 7 THE LAW OF PEIVATB COKPOEATIONS. 8 
 
 tion vary greatly in character and constitution. Hence it 
 follows that no detailed description can be framed which 
 would apply to all such companies with accuracy. But the 
 general nature of an ordinary business corporation may be 
 ascertained by comparing such an association with an associ- 
 ation formed for similar purposes, but not incorporated, — 
 namely, an ordinary business copartnership. ^ ' 
 
 A trading corporation and a trading copartnership are in 
 many respects alike. Each is an association formed by agree- 
 ment of its members for the sake of pecuniary gain. In the 
 one case, the objects of the company and the amount of its 
 capital are set forth in a charter or articles of association ; 
 in the other case, the same purposes are attained by means of 
 articles of copartnership.^ But, while a copartnership is the 
 result of an agreement resting wholly upon the general laws 
 of contracts and agency for its validity, the agreement by 
 which a private corporation is formed is of such a nature 
 that it cannot be entered into and carried into effect lawfully, 
 unless authorized by an act of the legislature.^ The forma- 
 tion of a corporation is prohibited by the common law in the 
 absence of an enabling act of the legislature, or, in England, 
 a charter from the King. 
 
 Partnerships, as well as joint-stock companies and corpora- 
 tions, are treated as collective bodies in ordinary business 
 transactions. By the common law, however, an unincorpor- 
 ated association like a firm is not recognized as a united body 
 having collective rights and duties, but only the individual 
 members of the association and their individual rights and 
 duties are considered. A corporation, on the other hand, is 
 recognized by its corporate name, as an association having 
 
 1 See Thomas r. Dakin, 22 Wend, difference consists in this: the for- 
 
 88, 89, 'per Co wen J. mer are authorized by the general 
 
 ^ Infra, Chapters II., VI. law among natural persons, exercis- 
 
 8 Infra, Chapter IX. § 715. See ing their ordinary powers; the latter, 
 
 also § 628 et seq. In Thomas v. Dar by a special authority, usually, if 
 
 kin, 22 Wend. 109, Cowen, J., said: not necessarily, emanating from the 
 
 "Both partnerships and private cor- legislature, and confemng extraor- 
 
 porations are conventional, so far as dinary privileges." See also Pratt 
 
 the members are concerned. The ». Pratt, 33 Conn. 456. 
 
9 THE FORMATION OF A COEPOEATION. § 7 
 
 collective or corporate rights and duties. The courts of law 
 (as distinguished from the courts of equity) recognize an 
 incorporated association in its corporate capacity only : they 
 ignore the fact that a corporation is composed of shareholders 
 having rights and duties as between themselves. For these 
 reasons a corporation can sue its members and be sued by 
 them at law as a collective body ; but the rights of the sev- 
 eral shareholders growing out of their membership in the 
 company can, as a rule, be enforced only in the courts of 
 equity.^ It is true that in equity also a corporation is ordi- 
 narily treated as an entity, without regard to the several 
 members who compose it ; for this, under ordinary circum- 
 stances, is a just as well as convenient method of enfor- 
 cing and adjusting the rights of the real parties interested. 
 But this is not always the case ; and it may be stated 
 as a general rule, that a court of equity will recognize the 
 true nature and constitution of a corporation whenever this 
 becomes necessary in order that full justice may be done 
 to the members of the company, or those who have rights' 
 against it.^ '' 
 
 The members of a partnership, as a rule, are jointly liable 
 for the debts of the firm. The members of a corporation are 
 ordinarily not liable to creditors at all. At law the creditors 
 of a corporation can proceed against the association only in 
 its corporate capacity, and can reach only such assets as stand 
 legally in the corporate name ; in equity, however, all the 
 assets of a corporation, whether legal or equitable, are con- 
 sidered to be impliedly pledged to creditors as security for 
 their claims.^ 
 
 It is a general rule applicable to all associations, whether 
 incorporated or not, that a majority of the shareholders or 
 members are impliedly authorized to bind the whole associa- 
 tion by their vote while acting in the manner and for the 
 purposes originally agreed upon.* The ordinary business of 
 
 1 Infra, § 227 et seq. ; also §§ 1011, « Infra, Chapter X. § 759 et seq. 
 1012. * Infra, Chapter VII. Part I., 
 
 2 Infra, Chapter V. §227 et seq., beginning § 454. See also § 621 
 Chapter X. § 798 et seq. et seq. 
 
§ 8 THE LAW OF PEIVATE COEPOEATIONS. 10 
 
 a corporation is managed on its behalf, and in its name, by 
 particular agents, selected by vote of the shareholders. On 
 the other hand, every act and every contract of a copartner- 
 ship is, in legal contemplation, the act or contract of the 
 individual members of the firm. 
 
 Partnerships are ordinarily composed of comparatively few 
 members, and the relationship existing between the several 
 partners is one of special trust and confidence. Each indi- 
 vidual member of an ordinary copartnership is impliedly 
 constituted agent of the other members in carrying on the 
 common business, and the rights and powers of the several 
 members cannot be transferred without the consent of all. 
 This is not the rule in case of a corporation. Corporations 
 are often composed of a large number of shareholders, who 
 have no acquaintance with each other, and each shareholdcF 
 is entitled to transfer his shares, together with the rights of 
 membership which they represent, without first obtaining the 
 consent of the other members. ^ The several shareholders in 
 a corporation have no implied authority to act as agents for 
 each other, or for the corporation; but certain officers or 
 agents are selected, by vote, to act on behalf, of the whole 
 association and in the corporate name.^ 
 
 § 8. By 'VT'hat Authority Corporations may be formed. — 
 Under the common law of England and the United States a 
 corporation cannot be formed, like a partnership, merely by 
 a contract between the individuals composing it. The right 
 of forming a corporation and of acting in a corporate capacity 
 must be treated as a franchise, or special privilege, which 
 may not be assumed without a grant of authority from some 
 governing power.^ 
 
 In England tlie right of forming a corporation may be 
 granted either bv the King alone or by act of Parliament. 
 The authority of the King to charter a corporation rests on 
 prescription ; * and in former times the same power seems to 
 
 1 Infra, §§ 163-165. 472; State v. Bradford, 32 Vt. 50, 
 
 s Infra, § 483. 53, jier Kedfield, J. ; Stowe t'. Flagge, 
 
 8 Infra, §§ 628-634; also Chapter 72 111. 397, 401. 
 IX., beginning § 715; 1 Bl. Com. < Kyd on Corp. 44. 
 
tl 
 
 THE FOEMATION OF A COEPORATION. § 9 
 
 have been exercised by the lesser feudal lords within their 
 respective demesnes.^ 
 
 In the United States, where written constitutions define the 
 powers of the several branches of the government, the power 
 of chartering corporations belongs to the legislature only.^ It 
 is a power which belongs to the legislature, unless expressly 
 taken away by the Constitution, and is incidental to the 
 general power of making laws for the welfare of the State.^ 
 
 § 9. Of the Power of Congress to charter Corporations. — 
 Congress has power to grant a charter of incorporation when- 
 ever this is an appropriate measure for carrying out any of the 
 authorized purposes of the Federal government.'* The power 
 of granting corporate franchises is not given to Congress in 
 express terms by the Constitution, but it belongs to Congress 
 as an incident to the powers expressly granted. Whether 
 Congress can charter a corporation in any particular case, 
 therefore, depends wholly upon the constitutionality of the 
 ultimate object to be attained, and the fact that the forma- 
 tion of a corporation is really adapted to effect this object. 
 If the object to be attained is within the authorized purposes 
 of the Federal government, and the formation of a corporation 
 is really a means of attaining this object, it is clear that the 
 courts cannot presume to inquire into the necessity or the 
 policy of the action of the legislature.^ 
 
 1 Kyd on Corp. 42. ality of the charter of the Bank of 
 
 2 McKim V. Odom, 3 Bland Ch. North America, in McCullough v. 
 407, 417 ; Franklin Bridge Co. v. Maryland, supra ; for example, the 
 Wood, 14 Ga. 80. National Banking Acts, and the acts 
 
 * Briscoe v. Bank of Kentucky, incorporating the Pacific Railroad 
 11 Pet. 257; Bell v. Bank of Nash- Companies. See irifra, §§964-967; 
 ville. Peck (Tenn.), 269; Bank of Congress may charter a savings 
 Chenango v. Brown, 26 N. Y. 467. bank in the District of Columbia, 
 
 * McCullough V. Maryland, 4 and the corporation so formed may 
 Wheat. 316; Osborn v. Bank of by the comity of the States trans- 
 United States, 9 Wheat. 738; Thorn- act business throughout the Union, 
 son V. Pacific R. R. Co., 9 Wall. Hadley w. Freedman's Saving Bank, 
 579, 588; Farmers', &c. Nat. Bank 2 Tenn. Ch. 122, 126; Williams v. 
 V. Bearing, 91 U. S. 29. Cresswell, 51 Miss. 817, 822. 
 
 Congress has passed incorporation 6 McCullough v. Maryland, 4 
 laws of great importance since the Wheat. 316, 423. Compare Thom- 
 decision in favor of the constitution- son v. Pacific R. R. Co. , 9 WaU. 588. 
 
§ 10 THE LAW OP PEIVATB CORPORATIONS. 12 
 
 § 10. Constitutional Limitations upon the Fo-wers of the State 
 Legislatures. — In many of the States the legislature is pro- 
 hibited by constitutional provision from granting corporate 
 franchises except in accordance with certain prescribed rules. 
 Thus, it is provided, in many instances, that no charter of incor- 
 poration shall be granted by special act, and that corporations 
 shall be formed only in accordance with general laws.^ It is 
 clear that, under a constitutional limitation of this description, 
 the legislature would have no power to legalize the existence 
 of a corporation formed without proper authority, by passing 
 a special act ratifying the claim of corporate franchises.^ 
 
 In Ohio the Supreme Court held, under a constitutional pro- 
 vision that " the General Assembly shall pass no special act 
 conferring corporate powers," that a special act, giving the 
 purchasers under a foreclosure sale of the property of a railroad 
 company authority to organize and form a corporation with 
 the same rights and franchises as belonged to the corporation 
 whose property was taken, was unconstitutional and void.^ 
 Under a similar provision of the Constitution of Nebraska, it 
 was held that an act authorizing a particular school district to 
 issue bonds for building a schoolhouse was unconstitutional.* 
 
 Under a provision of the Constitution of Iowa prohibiting 
 the legislature from passing any special or local law " for the 
 incorporation of cities and towns," it was decided that the 
 legislature could not enact a special law amending the charter 
 of a city.^ A similar rule has been applied in other States.^ 
 
 1 Under the Constitution of New be cured. Central, &o. Ass. v. Gold 
 York the legislature has discre- Life Ins. Co., 70 Ala. 120. 
 tionary power to charter certain ' Atkinson v. Marietta, &c. K. R. 
 classes of corporations by special Co., 15 Ohio St. 21. See infra, 
 act, although general incorporation § 904. 
 
 laws for that purpose be in force. * School Districts. Insurance Co., 
 
 People V. Bowen, 21 N. Y. 517; 30 103 U. S. 707; Clegg v. School Dis- 
 
 Barb. 24; United States Trust Co. trict, 8 Neb. 178; State v. Cincin- 
 
 V. Brady, 20 Barb. 119; Hosier v. nati, 20 Ohio St. 18. 
 Hilton, 15 Barb. 657. ^ Ex parte Fritz, 9 Iowa, 30; 
 
 2 Oroville, &c. R. R. Co, v. Via- Town of McGregor v. Baylis, 19 
 mas County, 37 Cal. 354. But an Iowa, 43. 
 
 irregularity in the organization of a ' San Francisco v. Spring Valley 
 corporation under a general law may W. W. Co., 48 Cal. 493. 
 
13 THE FORMATION OF A COEPOKATION. § 12 
 
 § 11. On the other hand, it was held by the Supreme Court 
 of Minnesota that a provision of the Constitution declaring 
 that " no corporations shall be formed under special acts ex- 
 cept for municipal purposes " would not prevent the legisla- 
 ture from extending the duration of corporate franchises 
 previously granted to a company for a limited period of time,^ 
 or from altering the charter of a company incorporated as a 
 mutual insurance company with authority to issue stock poli- 
 cies, so as to render it a stock company exclusively.^ In a case 
 before the Supreme Court of the United States it was held 
 that a similar prohibition of the Constitution of Alabama 
 would not prevent the legislature of that State from passing 
 an act authorizing a railroad company to change its name and 
 to purchase the railroad and franchises of another company.* 
 
 § 12. The line of distinction between an alteration of the 
 charter of a corporation and a change involving an entire re- 
 organization and the formation of a new company, is entirely 
 conventional. Strictly speaking, every alteration implies the 
 formation of a corporation differing from that which existed 
 before ; but it would not be termed the formation or creation 
 of a corporation in the ordinary use of language. A grant of 
 property to a corporation, or of franchises which may be ac- 
 cepted and exercised without altering the contract of the 
 shareholders,* could certainly not with propriety be called 
 the creation of a corporation. Hence in Southern Pacific 
 Railroad Co. v. Orton,^ Sawyer, J., said : " The only pro- 
 hibitory words are, that corporations of the class in question 
 ' shall not be ceeated by special act.' The word ' create ' 
 has a clear, well-settled, and well-understood signification. 
 It means to bring into being, to cause to exist, to produce, to 
 make, etc. To my apprehension, it appears to be one thing to 
 create or bring into being a corporation, and quite another 
 to deal with it as an existing entity, a person, after it is 
 
 1 Colton ». Mississippi, &o. Boom 146. Compare Jones w. Habersham, 
 Co., 22 Minn. 372. 107 U. S. 175, 188; Hazlett v. But- 
 
 2 St. Paul Fire, &c. Ins. Co. v. ler, 84 Ind. 230. 
 Allis, 24 Minn. 75. * Infra, §§ 399, 407. 
 
 3 Wallace v. Loomis, 97 U. S. « 6 Sawyer, 157, 186. 
 
§ 12 THE LAW OF PKIVATE CORPORATIONS. 14 
 
 created, by regulating its intercourse, relations, and acts as to 
 other existing persons, natural and artificial. . . . The crea- 
 tion of the being with capacity to receive grants is one thing ; 
 the granting of other privileges and immunities which it has 
 the capacity to receive when created, is another." 
 
 The question under consideration is simply as to the pur- 
 pose and meaning of a constitutional prohibition ; it is a 
 question of fact, and cannot be determined by abstract rea- 
 soning. The purpose of a constitutional prohibition against 
 the creation of corporations by special law is evidently to 
 render the formation of corporations convenient and speedy, 
 to secure uniformity in the law and equality of rights, and 
 also to prevent the legislature from corruptly or improvi- 
 dently granting special franchises to particular individuals 
 at the expense of the community in general. A prohibi- 
 tion from creating corporations by special act, undoubtedly, 
 does not in terms prohibit the legislature from passing a 
 special law altering the charter of an existing corporation. 
 But it is plain that a constitutional provision cannot be 
 avoided and practically annulled by a subterfuge. A spe- 
 cial law altering the charter of an existing corporation, and 
 practically changing it, must therefore be deemed in violation 
 of a constitutional prohibition against the creation of cor- 
 porations by special act. If this were not so, organizations 
 formed under the general laws might be treated merely as 
 the rough material out of which corporations might after- 
 wards be fashioned at pleasure, under special acts of the 
 legislature, and the constitutional prohibition would become 
 an empty form.^ However, a special act of the legislature 
 regulating an existing corporation, or granting to it new 
 privileges, without altering its character or affecting the 
 charter contract, would not be in violation of the letter nor of 
 the spirit of a constitutional prohibition of this description.^ 
 
 1 See Ex parte Fritz, 9 Iowa, 30; pare Southern Pacific R. R. Co. i;. 
 
 San Francisco v. Spring Valley Orton, 6 Sawy. 157, 186. 
 
 W. W. Co., 48 Cal. 493, 515; over- 2 Southern Pacific R. R. Co. v. 
 
 ruling California State Tel. Co. v. Orton, 6 Sawy. 157. 
 Alta Tel. Co., 22 Cal. 398. Com- 
 
15 THE FOEMATION OP A COEPOEATION. § 12 
 
 Accordingly, it was held by the Court of Appeals of New 
 York that a law authorizing a certain insurance company 
 to deposit with the superintendent of the insurance depart- 
 ment a fund for the security of a certain class of policy- 
 holders was valid, notwithstanding a prohibition against the 
 creatioi^ of corporations by special act ; it was nothing more 
 than a law regulating an existing corporation.^ It is impos- 
 sible to lay down a definite rule for determining what laws 
 are within a prohibition of this description, and what not. 
 Each case depends on its own peculiar circumstances. 
 
 Similar considerations apply in determining the effect of a 
 constitutional provision against a " grant of corporate powers " 
 by special act. Every grant of franchises to an incorporated 
 association is, strictly speaking, a grant of corporate powers ; 
 for the .franchises thus granted must be exercised by the 
 grantees in a corporate capacity, and therefore enlarge their 
 corporate powers. On the other hand, no grant of franchises 
 to an unincorporated association constitutes a grant of corpo- 
 rate powers, unless the franchises are to be exercised by the 
 grantees in a corporate capacity, that is, by the association as 
 a body, without regard to the particular members for the time 
 being composing it.^ The purpose of a constitutional prohi- 
 bition against " grants of corporate powers " by special acts 
 is evidently similar to that of a provision against the creation 
 of corporations by special acts. It means that the legislature 
 shall not grant the power to form a corporation by special act, 
 and this includes a prohibition against practically forming a 
 new corporation by altering a corporation previously in ex- 
 istence. But it does not mean that the legislature shall not 
 pass special laws regulating the affairs of corporations, or 
 graiit rights and privileges which may be exercised without 
 a departure from their existing charters. 
 
 1 Atty.-Gen. ». North America ^ Compare State v. Stormont, 24 
 Life Ins. Co., 82 N. Y. 172. An Kans. 686; Gilmore v. Norton, 10 
 act changing the name of a corpora- Kans. 504; Ex parte Frazer, 54 Cal. 
 tion is not the grant of a private 94 ; San Francisco v. Spring Valley- 
 charter or special privilege. Wells, W. W. Co., 48 Cal. 493, 515. 
 Fargo, & Co. v. Oregon Ry., &o. 
 Co., 8 Sawy. 600. 
 
§ 14 THE LAW OF PRIVATE COEPOEATIONS. 16 
 
 § 13. Prohibitions against Special and Local Laws. — Whether 
 an act of incorporation be a special or local act, or a general 
 law within the meaning of a constitutional prohibition against 
 special legislation, depends in part upon the purposes which 
 the act is intended to accomplish. A law is not necessarily 
 within the prohibition because its application is to a limited 
 class, or to portions only of the State, provided there be no 
 discrimination in favor of any part of the community, and 
 the act be general in its application so far as the circum- 
 stances of the case permit. Thus, a law regulating a certain 
 class of corporations would be general, although corpora- 
 tions of that class could carry on their business only in a 
 particular place in the State.^ In lie New York Elevated 
 R. R. Co.,^ it was held that a law applicable to existing ele- 
 vated railroad companies was not a prohibited private or local 
 law, although there was but one elevated railroad company 
 in existence at the passage of the act. 
 
 Under a constitution providing that every act of the legis- 
 lature shall embrace but one subject, which shall be described 
 in the title, an act incorporating a company and providing 
 various regulations for its government is valid, although en- 
 titled merely as an act to incorporate the company.^ 
 
 § 14. In some of the States, it has been provided by 
 constitution that the legislature shall pass no act of incor- 
 poration unless with the consent of at least two thirds of 
 each house of the legislature. Under a provision of this de- 
 scription, the Supreme Court of Michigan held that a gen- 
 eral incorporation law was unconstitutional, although passed 
 with the assent of two thirds of each house, because it was 
 the intention of the framers of the Constitution that the legis- 
 lature should remain directly responsible to the people for 
 each and every act of incorporation.* This view, however, 
 
 ^ Atty.-Gen. v. McArthur, 38 ^ Green v. Graves, 1 Douglas 
 
 Mich. 204. (Mich.), 351; Southworth v. Pal- 
 
 2 Re New York Elevated R. R. myra, &c. R. R. Co., 2 Mich. 287; 
 
 Co., 70 N. Y. 327; s. c. 8 Abb. contra. Falconer v. Campbell, 2 Mc- 
 
 N. C. 434; 9 Hun, 303. Lean, 195. In Green v. Graves, the 
 
 ^ Montgomery Mutual, &c. Ass. Supreme Court of Michigan con- 
 
 V. Robinson, 69 Ala. 413. curred in the opinion expressed by 
 
17 THE FOKMATION OF A COBPORATIOIT. § 15 
 
 seems not to be based upon sound reasoning, and a different 
 conclusion was reached in New York in the construction of 
 a similar constitutional prohibition.^ 
 
 The legislature of a State cannot incorporate an association 
 formed for a purpose prohibited by the Constitution of the 
 United States. Thus, it has been held that a grant of cor- 
 porate franchises by a State to an association formed for 
 the purpose of aiding the rebellion was in violation of the 
 Constitution, and therefore invalid.^ 
 
 § 15. Delegation of the Power to charter Corporations. — 
 Power to grant charters of incorporation may be conferred 
 by Parliament upon any person, since Parliament is not re- 
 strained by constitutional limitations. It is held also that the 
 King alone can license another to grant corporate franchises, 
 the grant in such case being considered the King's own act, 
 upon the principle that quifacitper aliumfaeit per se? 
 
 In the United States, other considerations must be borne 
 in mind. " One of the settled maxims of constitutional law 
 is, that the power conferred upon the legislature to make 
 laws cannot be delegated by that department to any other 
 body or authority. Where the sovereign power of the State 
 has located the authority, there it must remain." * The prin- 
 ciple that delegata potestas non potest delegari applies in all 
 cases where the special fitness of the trustee or agent exer- 
 cising the power is material, or where a discretion must be 
 used. It seems, therefore, that a general power to confer 
 corporate franchises cannot be delegated by the legislature 
 to any other agent.^ 
 
 McLean, J., in Falconer v. Camp- ruling People ». Morris, 13 Wend. 
 
 bell, that the legislature might char- 325. 
 
 ter any number of corporations by ^ Trustees of Endowment Fund 
 
 a single act. v. Satchwell, 71 N. C. Ill ; Cbicora 
 
 I Thomas v. Datin, 22 Wend. 9, Co. v. Crews, 6 Rich. (S. C.) 243. 
 76, 111, per Nelson, C. J.,, and » Bl. Com. 474 ; Kyd on Corp. 
 
 Cowen, J.; Warner v. Beers, 28 50 ; Angell & Ames on Corp. 74. 
 Wend. 103, 125. As to the con- * Cooley's Constitutional Limita- 
 
 struction of this provision of the tions, 116. 
 
 Constitution of New York, see De * Compare Franklin Bridge Co. 
 
 Bow!). People, IDenio, 9; Purdy j;. v. Wood, 14 Ga. 80, 83; Bank of 
 
 People, 4 Hill, 384; 2 Hill, 31, over- Chenango v. Brown, 26 N. Y. 467. 
 
 VOL. I. — 2 
 
§ 16 THE LAW OF PEIVATE COEPOKATIONS. 18 
 
 However, -where the legislature has enacted that corpora- 
 tions may be formed upon compliance with certain conditions, 
 it is no objection that ministerial duties, such as the issuing 
 of a certificate or charter, must be performed by some officer 
 before the incorporation takes effect.^ Such officer may be 
 required first to exercise his judgment whether the corpora- 
 tion proposed to be formed falls within the provisions of the 
 general law or not ; but he has no right to refuse an applica- 
 tion made in compliance with the provisions of the statute ; ^ 
 and if he should refuse to act when called upon in a proper 
 case, a writ of mandamus may be obtained to compel him to 
 perform his duty.* 
 
 § 16. In the case of the New York Elevated Railroad Com- 
 pany, the Court of Appeals of New York held that an act for 
 the incorporation of elevated and underground railroad's was 
 not unconstitutional because it conferred on certain commis- 
 sioners the power to determine the necessity of such rail- 
 ways, to fix the routes upon which they should be located, 
 and to prescribe the plans for their construction. Earl, J., de- 
 livering the opinion, said : " The act rests upon the legislative 
 will, and in no way depends for its vitality upon the action 
 of the commissioners. Corporations organized under the act 
 derive their franchises from the legislature, and in no proper 
 sense from the commissioners. The commissioners perform 
 
 The Kegents of the University of 16 Mo. 88; In re Medical College, 
 New York are invested by law with 3 Whart. 445, 456 ; In re Deveaux, 
 a discretionary power to establish 54 Ga, 673. The provision of the 
 colleges according to certain pre- New York statute requiring the ap- 
 scribed rules. - This law has been proval of a justice of the Supreme 
 frequently acted upon, and has been Court before filing certain certifl- 
 recognized as valid. Per Cowen, J. , cates of incorporation, does not make 
 in Thomas v. Dakin, 22 Wend. 110. such approval, when obtained, con- 
 Neither Columbia College, nor any elusive, but the Secretary of State 
 of the colleges incorporated by the may still refuse to file the certificate 
 regents, have authority to charter if it is not in accordance with the 
 other colleges. Medical Institution requirements of the law. People v. 
 V. Patterson, 1 Denio, 61. Nelson, 46 N. Y. 477; 11 Abb. Pr. 
 
 1 Franklin Bridge Co. v. Wood, n. 8. 106; 10 Id. 200. 
 
 14Ga. 80, 84; Greeneville, &c. R. R. » In re Spring Valley W. W. 
 Co. V. Johnson, 8 Baxter, 332. Co., 17 Cal. 136; Franklin Bridge 
 
 2 Keyser v. Trustees of Bremen, Co. v. Wood, 14 Ga. 80, 84. 
 
19 THE FOKMATION OF A COEPOEATION. § 18 
 
 no legislative acts ; they enact no laws ; they simply perform 
 administrative acts in carrying the law into effect and apply- 
 ing it."' The powers of the commissioners in this case were 
 in the nature of police powers ; the right of the legislature 
 to confer these powers was based upon the same ground as 
 the right to invest overseers and other executive officers with 
 discretionary powers in guarding public interests and watch- 
 ing over the safety and welfare of the State. 
 
 § 17. The maxim that the legislature cannot delegate its 
 authority must not be understood as prohibiting the formation 
 of municipal corporations with powers of local government. 
 Usage in this country and in England, from time immemorial, 
 has established this practice so firmly, that the constitutional 
 maxim must be taken as impliedly qualified to this extent.^ 
 However, the powers delegated to municipalities under this 
 custom relate to matters of local government only, and do 
 not include the power to grant charters of incorporation to 
 private companies. This power could certainly not be exer- 
 cised in the absence of an express grant of authority.^ 
 
 Congress has authority, under Article TV- of the Constitu- 
 tion, to make all needful rules and regulations respecting the 
 Territories. This clause authorizes Congress to organize 
 Territorial governments having full legislative powers, in- 
 cluding the power to charter corporations.* 
 
 § 18. What constitutes a Grant of Corporate Franchises. — 
 No certain forms are necessary to a grant of corporate fran- 
 chises, unless required by the Constitution. Any expression 
 showing an intention on the part of the legislature to confer 
 the right to exercise corporate powers is sufficient, and this 
 intention may be deduced from the whole of the legislative 
 act. The use of the word " incorporate," or a similar expres- 
 sion, is not necessary. Thus, the statute chartering the Ar- 
 
 1 Re New York Elevated R. R. * Vincennes University v. Indi- 
 
 Go.,70N. Y. 327, 343. ana, 14 How. 270; Williams v. 
 
 * Cooley's Constitutional Limita- Bank of Michigan, 7 Wend. 539. 
 tions, 118. By act of Congress, Territorial gov- 
 
 * Kyd on Corp. 46, 47; Grant ernments can charter corporations 
 on Corp. 12; Cuddon v. Eastwick, only through general laws. R. S. 
 1 Salk. 192. U. S. (1874), § 1889. 
 
§ 18 THE LAW OF PRITATE GOEPOEATIONS. 20 
 
 kansas State Bank contained no express words incorporating 
 any particular persons, but provided that tlie management 
 of the bank should be under a given number of directors, to 
 be chosen by the legislature, and conferred the usual banking 
 powers upon them. This was held to incorporate the di- 
 rectors, inasmuch as they could exercise the powers conferred 
 npon them only in a corporate capacity. ^ 
 
 The real character of an association does not depend upon 
 the name by which it is called. In Thomas v. Dakin,^ Cowen, 
 J., said : " It has been impossible for me to see the force of 
 the argument, that, because the legislature have constantly 
 avoided to call these associations, or any of their machinery, 
 a oorporation, therefore we cannot adjudge them to be so. If 
 they have the attributes of corporations, if they are so in the 
 nature of things, we can no more refuse to regard them as 
 such than we could refuse to acknowledge John or George 
 to be natural persons, because the legislature may, in making 
 provisions for their benefit, have been pleased to designate 
 them as belonging to some other species." 
 
 For this reason it was decided by the Supreme Courts of 
 the United States and of the State of Massachusetts that a 
 company formed in England under acts of Parliament invest- 
 ing it with corporate franchises was a corporation within the 
 meaning of a law enacted in Massachusetts, although the acts 
 of Parliament expressly provided that they should not be 
 construed to incorporate the company. The provision in the 
 acts of Parliament declaring that they should not be con- 
 strued to incorporate the company was contradictory to the 
 other provisions, which actually did invest the company with 
 
 1 Mahoney o. Bank of Arkansas, York, &c. Bridge, 96 K Y. 427 ; 
 
 4 Ark. 620. See also Western Kyd on Corp. 62; Conservators of 
 
 Union Tel. Co. v. Union Pacific River Tone v. AsU, 10 B. & C. 349; 
 
 Ry. Co., 1 McCrary, 581; Common- Denton v. Jackson, 2 Johns. Ch. 
 
 wealth V. West Chester R. R. Co., 320 ; North Hempstead v. Hemp- 
 
 3 Grant's Cas. 200; Delaware Di- stead, 2 Wend. 109; Commissioners 
 
 vision Canal Co. v. Commonwealth, of Bath v. Boyd, 1 Ired. L. 194; 
 
 50 Pa. St. 399 ; Dean v. Davis, 51 Bow v. Allentown, 34 N. H. 351. 
 Cal. 406 ; Dunn v. University, 9 Or. ^ Thomas v. Dakin, 22 Wend. 9, 
 
 357; Walsh v. Trustees of New 103. 
 
21 THE POEMATION OF A COKPOEATION. § 20 
 
 the attributes of a corporation. The effect of this provisioa 
 might perhaps be to alter the meauing of the word " incorpo- 
 rate" in English law, but it did not change the real nature 
 of the company. It certainly could not impose a rule for the 
 construction of statutes passed by a foreign state.^ 
 
 § 19. The intention of the legislature to confer corporate 
 franchises is essential to an act of incorporation, and no pre- 
 sumption should be allowed in favor of the grant. Thus, 
 where a statute provided that, if any association of citizens 
 should thereafter be formed for the purpose of banking, every 
 member thereof should be individually and personally liable 
 for the debts of the association, it was held that this did 
 not constitute an association formed under the act a corT 
 poration ; and that the only effect of the act was to guard 
 against associations, the members of which attempted to pro- 
 tect themselves against personal liability by expressly stipu- 
 lating against it.^ So, a grant of the privilege to raise money 
 by lottery was held not to incorporate the grantees for that 
 purpose.^ 
 
 § 20. Ratification by the Legislature of a Claim of Corporate 
 Franchises. — ■- The existence of a corporation formed without 
 legislative authority may be legalized by the subsequent ab- 
 sent of the legislature. For this purpose it is not necessary 
 that an act be passed investing the association with corpo- 
 rate franchises by express terms ; but it is sufficient if the 
 legislature by statute recognizes, and thereby ratifies, the 
 franchises which have been claimed.* Thus a statute an- 
 nexing other territory " to the town of A," by implication 
 makes it a town if it was not a town before.^ A statute 
 
 ' Liverpool Ins. Co. v. Massa- Hill, 501; Shelton v. Banks, 10 
 
 Ghusetts, 10 Wall. 566; 100 Mass. Gray, 401. 
 
 531 ; see also People v. Assessors of * Kanawha Coal Co. v. Eanawha, 
 
 Watertown, 1 Hill, 620; Thomas v. &e. Coal Co., 7 Blatohf. 391; Peo- 
 
 Dakin, 22 Wend. 9, 69; Warner v. pie v. Farnham, 35 111. 562; Wil- 
 
 Beers, 23 Wend. 103. liams ». Union Bank, 2 Humph. 
 
 2 Myers v. Irwin, 2 S. & K. 339 ; Society for the Propagation of 
 
 368. the Gospel v. Pawlet, 4 Pet. 480; 
 
 ' Gregory v. Shelby County, 2 McDougald v. Bellamy, 18 Ga. 412; 
 
 Met. (Ky.) 589. See also Proprie- People v. Perrin, 56 Cal. 345. 
 tors of Southold, &e. v. Horton, 6 * Bowv. AUentown,34N. H.351. 
 
§ 21 THE LAW OP PBIVATB COBPOEATIONS. 22 
 
 amending the charter of a railroad company legalizes the sub- 
 sequent existence of the company, though it had originally 
 been formed in violation of the law.^ 
 
 However, no greater effect can be attributed to a statute 
 than appears to have been intended by the legislature en- 
 acting it. A mere recital in an act of the existence of a 
 company claiming the right to exercise corporate franchises 
 cannot be construed to legalize the claim, unless the context 
 shows that this was intended.^ It must appear that the 
 legislature intended that the association should have the right 
 of acting in a corporate capacity. 
 
 Such subsequent ratification may not only legalize the 
 existence of a corporation formed without authority of law, 
 and authorize the association to act in a corporate capacity 
 thereafter, but it may also cure the illegality of corporate 
 acts performed before the act of ratification was passed, and 
 render such acts as valid and binding as if authority to 
 perform them had been previously granted by the legis- 
 lature.^ 
 
 § 21. Acceptance of the Charter. — A charter of incorpora- 
 tion is not merely an enabling law passed by the legislature ; 
 it has been held that a charter or act of incorporation is 
 intended to operate as a grant of franchises in the same man- 
 ner as a grant from a private individual. For these rea- 
 sons, it follows that a grant of corporate franchises does not 
 \become effective and binding until accepted by the grantees. 
 No rights can be claimed under a charter until after it has 
 been accepted by the grantees.* If the grantees of a charter 
 refuse to accept it, and still undertake to exercise corporate 
 powers, a proceeding of quo warranto will lie.^ The offer of 
 a charter of incorporation by the State remains open for a 
 
 1 McAuley v. Columbus, &c. R. 503; Illinois Grand Trunk R. R. Co. 
 R. Co. , 83 111. 848. v. Cook, 29 HI. 287 ; Goodrich ». Rey- 
 
 2 Green v. Seymour, 3 Sandf. Ch. nolds, 81 111. 490. See infra, § 631. 
 285; Thornton v. Marginal Freight * Green v. Seymour, 3 Sandf. Ch. 
 Co., 123 Mass. 82. 285, 291 ; compare Lyons ». Orange, 
 
 8 St. Louis R. R. Co. v. North- &c. R. R. Co., 82 Md. 18, 29. 
 western St. Louis Ry. Co., 2 Mo. ^ Thompson ». New York, &c. 
 App. 69; Basshor v. Dressell, 34 Md. R. R. Co., 3 Sandf. Ch. 626. 
 
23 THE POKMATION OF A CORPOBATION, § 23 
 
 reasonable time only, and if not accepted within a reasonable 
 time its legal effect expires.^ 
 
 After a charter has been accepted by the grantees, it is in 
 many instances treated as embodying an irrevocable grant 
 or contract under the protection of the Constitution of the 
 United States.^ 
 
 § 22. A charter must be accepted as it is offered by the 
 legislature, and no terms can be imposed.^ The rule was 
 stated by Lord Tenterden as follows : "A charter must be 
 accepted or rejected in toto, unless there should appear an 
 intention on the part of the crown that the body to whom 
 the charter was given should have the liberty and power to 
 accept in part and reject in part." * 
 
 Upon the same principle, a charter can be accepted only by 
 those to whom it is offered. If it appears to be the intention 
 of the legislature that all the grantees shall accept, a part 
 only of the grantees can acquire no rights by accepting. 
 Thus, where a charter was granted to the mayor, aldermen, 
 and common-councilmen, it was held that the mayor and 
 aldermen alone could not accept the charter.^ 
 
 § 23. 'What is a sufficient Acceptance. — No particular form 
 of acceptance is necessary ; but any act unequivocally show- 
 ing an intention to accept the charter is sufficient.® Thus, if 
 the grantees of a charter proceed to form a corporation, and 
 exercise corporate powers, that will in general be sufficient ; 
 for the assumption of corporate powers would be unauthor- 
 ized if there were no intention to accept the franchises 
 granted. Upon the same principle, it has been held that 
 corporate action under an amendment to a charter is pre- 
 sumptive evidence that the amendment was accepted.'' If a 
 
 1 State V. Bull, 16 Conn. 179, « Bank of United States v. Dan- 
 191. dridge, 12 Wheat. 64,71; Coving- 
 
 2 Infra, § 1025. ton v. Covington, &c. Bridge Co., 
 ' Lyons v. Orange, &c. R. R. Co., 10 Bush, 69 ; Smead v. Indianapo- 
 
 32 Md. 18, 29; Rex v. Ameiy, 1 T. Us, &o. R. R. Co., 11 Ind. 104. 
 
 R. 589. ' Bank of United States v. Dan- 
 
 * Rex V. Westwood, 2 Dow & CI. dridge, 12 Wheat. 64, 71; Penobscot 
 
 21; s. c. 7 Bing. 1, 90. Boom Co. v. Lamson, 16 Me. 224; 
 
 6 Rex V. Amery, 1 T. R. 589. School District v. Gibbs, 2 Cush. 
 
§■ 24 THE LAW OP PRIVATE COEPOEATIONS. 24 
 
 particular charter is granted after having been applied for, 
 acceptance may be presumed from such previous applica- 
 tion.^ It would seem that no acceptance would be required 
 in such case, since the consent of the grantees was given in 
 advance. 
 
 § 24. The Necessity of an Agreement between the Corpora- 
 tors. — The acceptance of the franchises conferred by a 
 charter of incorporation is not alone sufficient to consti- 
 tute the grantees of the charter a corporation. The for- 
 mation of a private corporation involves the creation of a 
 contractual relation between the individuals composing it 
 The agreement out of which this contractual relation arises 
 may in many cases be implied, but it is in all cases essen- 
 tial to the existence of a private corporation or joint-stock 
 company.* 
 
 It is therefore not strictly correct to say that a private 
 corporation is " created " by an act of the legislature. It is 
 impossible in the nature of things to form a private corpora- 
 tion without the consent of the corporators, and the legisla- 
 ture has not the power to create that consent.^ Nor does 
 the legislature intend, by granting a charter, to constitute 
 the grantees a corporation without their concurrence. The 
 object of a charter is merely to confer upon the grantees the 
 right or franchise of forming a corporation, and of acting in 
 
 39; Middlesex Husbandmen, &c. v. Husbandmen, etc. v. Davis, 3 Mete. 
 
 Davis, 3 Mete. (Mass.) 133, 137; (Mass.) 138; Smead v. Indianapolis, 
 
 Ameriscoggin Bridge Co. v. Bragg, &c. R. R. Co., 11 Ind. 104; Newton 
 
 11 N. H. 102; Wetumpka & C. R.R. v. Carbery, 5 Cranch C. C. 632 ; Per- 
 
 Co. V. Bingham, 5 Ala. 657 ; Palfrey kins v. Sanders, 56 Miss. 733. 
 V. Paulding, 7 La. Ann. 363 ; Ban- " The character of this contract- 
 
 gor, O. &M. R. R. Co. v. Smith, 47 ual relation between the shareholders 
 
 Me. 34 ; Sampson v. Bowdoinham of a corporation and the agreement 
 
 Mill Co., 36 Me. 78, 81 ; Bank of out of which it arises will be consid- 
 
 Manchester v. Allen, 11 Vt. 302, ered in detail hereafter. See Chapter 
 
 307; Bank of United States v. Ly- II., beginning with § 43. 
 man, 20 Vt. 666; 8. c. 1 Blatchf. * Lauman v. Lebanon Valley R. 
 
 297; McKay v. Beard, 20 S. Car. R. Co., 30 Pa. St. 46; Richmond 
 
 156. Compare Lyons t). Orange, &c. Factory Ass^ v. Clarke, 61 Me. 358; 
 
 R. R. Co., 32 Md. 18. Union Hotel Co. ». Hersee, 15 Hun, 
 
 ' Atlanta v. Gate City Gaslight 871 ; Gardner v. Hamilton Mut. Ins. 
 
 Co., 71 Ga. 106, 117; Middlesex Co., 33 N. Y. 42L /»i^a, § 716. 
 
25 THE FORMATION OP A CORPORATION. § 25 
 
 a corporate capacity, or, in other words, to legalize the sub- 
 sequent acts of the corporators.^ 
 
 These principles have no application to public or municipal 
 corporations. Municipalities are not voluntary associations ; 
 they are political subdivisions created by the legislature in 
 the exercise of its powers of civil government, for the con- 
 venient administration of the affairs of the community. No 
 agreement or consent of the inhabitants of a district is 
 necessary in order to constitute it a township, or county, 
 and its government remains entirely subject to legislative 
 control.* 
 
 § 25. How this Agreement may be entered into. — The 
 agreement by which a private corporation is created may 
 be entered into in various ways. No particular form is re- 
 quired unless expressly prescribed by statute. Ordinarily a 
 simple acceptance of the charter is sufficient to indicate an 
 agreement on tlie part of the grantees to form a corporation, 
 according to its provisions; under the general incorpora- 
 tion laws, a subscription for shares is ordinarily all that is 
 required.^ 
 
 While no person can be made a member of a private 
 corporation without his consent, the necessary consent may 
 often be implied. Thus, the majority of an unincorporated 
 association, whose purpose is the formation of a corporation, 
 are impliedly authorized to accept a grant of corporate fran- 
 chises, and form a corporation under it, in the name of all the 
 associates.* So it has been held that a majority of share- 
 holders in an existing corporation may, in some instances, 
 
 ' "That a man may refuse a corporations, see in/ra, Chapter XV., 
 grant, whether from the government beginning with § 1024. 
 or an individual, seems a principle ^ 1 Dillon on Municipal Corpora- 
 too clear to requi' e the support of tions, § 29 et seq. ; Dartmouth Col- 
 authorities." Per Parker, C. J. , in lege ». Woodward, 4 Wheat. 518, 
 Ellis V. Marshall, 2 Mass. 269, 277. 668, 669; supra, § 3; infra, § 1026. 
 See also Dartmouth College v. Wood- * Infra, §§ 43-55. 
 ward, 4 Wheat. 518, 683, 684; Beaty * St. Paul Division v. Brown, 11 
 V. Knowler, 4 Pet. 152, 167 ; Grant on Minn. 356, 360 ; and compare Shortz 
 Corporations, 18. With regard to v. Unangst, 3 W. & S. 45, 52, 53 ; 
 the legislative powers which the Commonwealth v. CuUen, 13 Pa. St. 
 States may exercise over private 133. Compare infra, §§ 47-50. 
 
§ 26 THE LAW OF PEIVATB COEPOEATIONS. 26 
 
 adopt an amendment to tlie charter under which the com- 
 pany was formed.! 
 
 It is to be observed, also, that after a charter has been ac- 
 cepted by the majority of an association, or if it was granted 
 in pursuance of an application publicly made by the majority 
 on behalf of the whole company, a presumption often arises 
 that all acquiesce who do not express their dissent.^ If the 
 majority have acted without authority under these circum- 
 stances, the dissenting members should, without delay, make 
 known their dissent, and restrain eveiy attempt to act under 
 the charter.^ 
 
 § 26. Conditions Precedent to Incorporation under a Special 
 Charter. — Whether the grantees of a charter shall be entitled 
 to form a corporation and exercise corporate powers, after a 
 simple acceptance of their charter, or only after the perform- 
 ance of certain conditions precedent, necessarily depends 
 upon the term^ of the grant.* If not provided to the con- 
 trary, the incorporation will take effect as soon as the charter 
 has been accepted ; and it has been held that, even though 
 a particular mode of acceptance be directed, as by filing a 
 certificate, a failure to comply is not decisive. "It is the 
 fact of acceptance that binds the company, and the certifi- 
 cate is merely evidence of the fact." ^ 
 
 Accordingly, it has been held that, under a charter pro- 
 viding that the grantees, and such other persons as may be 
 associated with them, " shall be, and they are hereby, incor- 
 porated," the grantees are authorized to form a corporation, 
 and exercise corporate powers, without having taken associ- 
 ates or appointed officers.^ So, a grant of a charter to one, 
 
 1 See infra, § 407. 24 How. 278; Hughes v. Parker, 20 
 
 " Infra, § 603. N. H. 58; Stoops v. Greensburgh 
 
 » Ferris B. Strong, 3 Edw. Ch. PlankRoadCo., lOInd.47; Judahw. 
 
 127; Owen b. Purdy, 12 Ohio St. 73, American Live Stock Ins. Co.,4 Ind. 
 
 79. Infra, § 610. 333; Rathbone v. Tioga Nav. Co., 
 
 * See Fire Department ». Kip, 2 W. & S. 74, 79 ; Vermont Central 
 
 10 Wend. 267. R. R. Co. v. Clayes, 21 Vt. 30. See 
 
 5 Cincinnati, H. & D. R. R. Co. Minor v. Mechanics' Bank, 1 Pet. 46, 
 
 V. Cole, 29 Ohio St. 126. 63; Perkins v. Sanders, 56 Miss. 733, 
 
 « Frost V. Frostburg Coal Co., 739; State v. Sibley, 25 Minn. 387. 
 
27 THE FORMATION OF A OOEPORATION. § 27 
 
 with liberty to take associates, will invest the sole grantee 
 with all the corporate franchises, if this appear to be the in- 
 tention of the legislature ; and even if it were the duty of 
 the grantee to take associates, this would only be a condition 
 to be performed before the corporation would be authorized 
 to begin to carry on its business.^ 
 
 However, where a charter declared that the grantees, and 
 such other persons as should afterwards become stockholders, 
 " are hereby constituted a body politic," and by another 
 provision of the act a discretion was vested in certain com- 
 missioners to distribute the whole number of shares into 
 which the company's capital was divided among the sub- 
 scribers, in case more than the amount limited had been 
 applied for, the distribution of shares was held to be a con- 
 dition precedent to the formation of a corporation. For, in 
 this case, the grantees of the franchises and the members of 
 the company could not be ascertained until after the shares 
 had been apportioned. ^ 
 
 § 27. Incorporation under General Laws. — Conditions Pre- 
 cedent. — General incorporation laws are now in force in 
 nearly every State in the Union.^ By virtue of these laws 
 the right to form a corporation and to exercise corporate 
 powers is extended to all persons who comply with certain 
 prescribed conditions ; an association which has satisfied the 
 statutory requirements becomes invested with corporate 
 franchises as fully as if it had been incorporated under a 
 special charter. 
 
 It is frequently provided that the parties wishing to form 
 a corporation under a general law shall file articles detailing 
 the purposes of their association with the Secretary of State, 
 or some other officer whose duty it is then to issue a certifi- 
 
 1 Penobscot Boom Co. v. Lamson, ». Hart, 31 Md. 59. See infra, 
 16 Me. 224; Days. Stetson, 8 Greenl. § 66. 
 
 (Me.) 365, 371 ; Brouwer v. Appleby, » The formation of corporations 
 
 1 Sandf. 158. under general laws will be consid- 
 
 2 Crocker v. Crane, 21 Wend, ered in detail in the following chap- 
 211; Walker ». Devereaux, 4 Paige, ter, in treating of the contract of 
 229; Franklin Fire Insurance Co. membership. 
 
§ 27 THE LAW OP PEIVATB COEPOBATIONS. 28 
 
 Gate or charter. This officer may be required to decide in 
 the first place whether the proposed corporation be within 
 the purview of the general law or not ; but the ultimate de- 
 cision rests always with the courts.^ 
 
 A substantial compliance with all the terms of a general 
 incorporation law is a prerequisite of the right of forming a 
 corporation under it. Thus, where it is provided that a cer- 
 tificate or articles of association, setting forth the purposes 
 of the corporation about to be formed, the amount of its 
 capital, and other details, shall be filed with some public 
 officer, a performance of this requirement is essential ; and 
 until it has been performed, the association will have no 
 right whatever to assume corporate franchises.^ So, under 
 some statutes, a license or certificate must be issued by a 
 specified public officer before the corporation can be legally 
 formed.' 
 
 The articles of incorporation must contain everything in 
 substance that the laws under which the corporation is organ- 
 ized prescribe. Thus, if it is prescribed that the number or 
 the names of the first directors of the corporation shall be set 
 forth, a compliance with this provision is essential.* A pro- 
 vision, requiring the articles of incorporation to set forth that 
 a majority of the members of the association voted at the 
 first election of directors, is obligatory ; and if the articles 
 omit the required statement, proof cannot he admitted to show 
 
 1 See supra, § 15. Compare v. Cram, 43 N. H. 636; Childs v. 
 Litchfield Bank v. Church, 29 Smith, 55 Barb. 45; s. c. 46 N. Y. 
 Conn. 137, 148; Society for Vis- 34; Harrod i'. Hamer, 32 Wis. 162; 
 itation of the Sick v. Common- In re Deveaux, 54 Ga. 673. Corn- 
 wealth, 52 Pa. St. 125. pare infra, §§ 29, 41. As to what 
 
 » Stowe V. Flagg, 72 111. 397; is a suflBloient signature of the arti- 
 
 Bigelow 0. Gregory, 73 111. 197; cles of association, see State v. Beck, 
 
 Harris v. McGregor, 29 Cal. 124; 81 Ind. 500. 
 
 Abbott V. Omaha Smelting Co., 4 » Richmond Factory Ass. c. 
 
 Neb. 416 ; Doyle v. Mizner, 42 Mich. Clarke, 61 Me. 351 ; Stowe ». Flagg, 
 
 332; Utley v. Union Tool Co., 11 72 111. 397; Field v. Cooks, 16 La. 
 
 Gray, 139; Mclntire v. McLain Ann. 153. 
 
 Ditching Ass'n, 40 Ind. 104; In- * Reed ». Richmond Street E. R. 
 
 dianapolis Furnace, &o. Co. v. Her- Co., 50 Ind. 342. 
 kimer, 46 Ind. 142; Unity Ins. Co. 
 
29 THE FOEMATION OF A COEPOEATION. § 29 
 
 that a majority were in fact present and voted.* Under a 
 law requiring a certificate to be filed showing the manner 
 of carrying on the business of the association, it is not suffi- 
 cient to state merely that " the manner of carrying on the 
 business shall be such as the association may from tirae to 
 time prescribe by rules, regulations, and by-laws." ^ 
 
 § 28. Any other conditions precedent imposed by the 
 express terms of the law must of course be complied with 
 before the corporators can lawfully form a corporation.^ It 
 has often been held, for like reasons, that a person cannot be- 
 come a member of an existing corporation, and as such entitled 
 to participate in the corporate franchises, through a transfer 
 of shares from a prior member, except by complying with the 
 formalities of a transfer prescribed by law.* 
 
 Upon the same general principle, it follows that a cor- 
 poration cannot lawfully act in a foreign State, and carry on 
 business there, until all conditions precedent prescribed by 
 the laws of such State have been performed.^ 
 
 § 29. What are Conditions Precedent to Legal Incorpora- 
 tion. — There is a plain distinction between conditions which 
 must be complied with before the grantees of a charter are 
 entitled to form a corporate association, and conditions the 
 performance of which is merely a prerequisite of the right 
 to carry on business after the corporation has been formed. 
 A failure to» comply with a condition of the latter kind does 
 not invalidate the contract of membership entered into 
 by the shareholder, or affect the rightful existence of the 
 corporation.* 
 
 Thus, if the capital of a corporation is fixed by its charter 
 at a certain sum, this would prima fade indicate that the 
 company would have no right to begin to carrj' on business 
 until the whole amount of capital prescribed by the char- 
 
 1 People V. Selfridge, 52 Cal. Mich. 332 ; Unity Ins. Co. v. Cram, 
 331. 43 N. H. 63S. 
 
 2 State o. Central Ohio Relief < Infra, §§ 169-171. 
 
 Ass., 29 Ohio St. 399. 6 See infra, §§ 641-645, 939. 
 
 8 Atty.-Gen. «. Hanchett, 42 « See Harrod o. Hamer, 32 Wis. 
 Mich. 436; Doyle v. Mizner, 42 162. 
 
§ 30 THE LAW OP PRIVATE COKPOBATIONS. 30 
 
 ter has been obtained ; the subscription of the whole capital 
 would be a condition precedent to the right of carrying on the 
 corporate business, and to the liability of the shareholders 
 to contribute their respective shares of capital.^ To begin 
 business and incur debts before the whole capital has been 
 subscribed would be an unauthorized exercise of corporate 
 power, and a violation of the contract of everj' individual 
 shareholder.'"' But it does not follow that the subscribers 
 would be unable to form an incorporated association until the 
 whole amount of the shares had been taken. In many instan- 
 ces, the subscribers of a portion of the stock would be au- 
 thorized to form a corporation among themselves, and would 
 have full authority to do all corporate acts necessary to a 
 complete organization of the company, though they would 
 have no right to begin to carry on its regular business.^ 
 
 § 30. The proper authentication and recording of the arti- 
 cles of association of a corporation have for obvious reasons 
 been held to be conditions precedent to the right of forming 
 a corporation under the general incorporation laws;* but a 
 compliance with a provision requiring a copy of the articles 
 so recorded to be filed with a specified public officer, has 
 ordinarily not been considered a condition precedent to the 
 incorporation of the company.^ It would merely be a condi- 
 tion precedent to the right of carrying on business.^ 
 
 In People v. Chambers,^ it was held that a provision in an 
 act for the incorporation of railroad companies, requiring the 
 payment in cash of ten per cent of the amount of the capital 
 subscribed, imposed a condition precedent to the right of the 
 
 1 Seein/»-a,§§137,408. This rule, * Supra, § 27. 
 
 ofoouTsejhasiioapplicationwherethe ^ Mokelumne Hill Mining Co. v. 
 
 charter expressly authorizes the com- Woodbury, 14 Cal. 424; Humphreys 
 
 pany to begin the prosecution of its v. Mooney, 5 Col. 283 ; Hyde v. 
 
 enterprise before the capital has been Doe, 4 Sawy. 133; Cross v. Pinck- 
 
 fully subscribed. See infra, § 140. neyville Mill Co., 17 111. 54. Com- 
 
 * Infra, §§ 717-720. pare Indianapolis Furnace, &c. Co. 
 
 » Central Turnpike Co. v. Val- v. Herkimer, 46 Ind. 142. 
 
 entine, 10 Pick. 142 ; City Hotel v. « Hurt e. Salisbury, 55 Mo. 
 
 Dickinson, 6 Gray, 586, 593, 594; 310. 
 
 Perkins v. Sanders, 56 Miss. 733; ' People w. Chambers, 42 Cal. 
 
 and see infra, § 140. 201. See infra, § 71. 
 
31 THE FORMATION OF A COKPOKATION. § 31 
 
 subscribers to form a corporation. On the other hand, it was 
 decided in Maryland that a clause in a bank charter,' reciting 
 that the company should be entitled to the benefits and priv- 
 ileges of the act when a certain percentage of the capital of 
 the corporation should be paid in, and the fact certified in the 
 manner prescribed, and not before, did not impose a condition 
 precedent to the incorporation of the company.^ This was 
 merely a condition precedent to the right of carrying on 
 business. So it has been held that a failure to comply with 
 a provision requiring a fee of one hundred dollars to be paid 
 to the State before the corporation " shall be organized," did 
 not prevent the legal incorporation of a company .^ 
 
 Under a charter purporting to incorporate the grantees 
 immediately, but subject to a proviso, that, " when one hun- 
 dred thousand dollars shall have been subscribed and one 
 dollar per share shall have been paid in, the said company 
 may organize and proceed to work," it was held that the 
 provision did not impose a condition precedent, and the 
 grantees were entitled to form a corporation immediately.^ 
 
 § 31. Effect of Violation of Charter after Incorporation. — If 
 the charter of a corporation prescribes a duty to be performed 
 by the company after it has been incorporated, a failure to 
 perform the prescribed duty will not of itself render the con- 
 tinued existence of the association unauthorized.* Nor is 
 the legal existence of a corporation terminated by the fact 
 that it has violated its charter, as by carrying on business 
 before conditions precedent imposed by the charter have 
 been complied with.^ Only the State, proceeding by quo 
 
 1 Elammond «. Straus, 53 Md. 1. tained," superseded a provision of 
 
 " HughesdaleManuf. Co. v. Van- the general law requiring the organ- 
 
 ner, 12 R. I. 491. ization to be perfected within one 
 
 « Spartanburg & A. R. R. Co. v. year. People v. Bowen, 30 Barb. 
 
 Ezell, li S. C. 281. 24, 40, affirmed 21 N. Y. 517. 
 
 A provision in a charter, that the < Charles River Bridge v. Warren 
 
 corporation "shall be deemed organ- Bridge, 7 Pick. 344, 371; Lyons ». 
 
 ized when the president shall be Orange, &c. R. R. Co., 32 Md. 18; 
 
 elected, and shall be deemed in Boise City Canal Co. v. Pinkham, 1 
 
 practical operation from the time Idaho, n. s. 790. 
 the permission and authority pro- ^ Harrod v. Hamer, 32 Wis. 162, 
 
 vided in the first section is ob- 166. 
 
§ 32 THE LAW OF PEIVATE COEPORATIONS. S2 
 
 warranto, can object to the existence of an association under 
 corporate organization, after the right to its continuance has 
 been forfeited.^ 
 
 In Mokelumne Hill Mining Co. v. Woodbury ,2 Cope, J., 
 said : " There is a broad and obvious distinction between 
 such acts as are declared to be necessary steps in the process 
 of incorporation, and such as are required of the individuals 
 seeking to become incorporated, but which are not made pre- 
 requisites to the assumption of corporate powers. In respect 
 to the former any material omission will be fatal to the 
 existence of the corporation, and may be taken advantage of 
 collaterally in any form in which the fact of incorporation can 
 properly be called in question. In respect to the latter, the 
 corporation is responsible only to the government, and in a 
 direct proceeding to forfeit its charter." 
 
 § 82. Substantial compliance with Conditions sufficient. — 
 Acts of incorporation should not receive a technical con- 
 struction, and a substantial performance of the requirements 
 of the law is sufficient ; mere informalities or immaterial va- 
 riations in matters of detail do not affect the legality of an 
 incorporation.* 
 
 In Eastern Plank Road Co. v. Vaughan,* it was held that a 
 corporation was not illegally organized merely because the 
 articles of association contained a provision which was un- 
 authorized by the general law under which the corporation 
 
 1 Jn^a, §995. ton, &c. R. R. Co., 45 Cal. 306; 
 
 * 14 Cal. 424, 426. See also Lord Roman Catholic Orphan Asylum v. 
 
 V. Essex Building Ass., 37 Md. 320, Abrams, 49 Cal. 455; Eakright v. 
 
 825-327; First National Bank v. Logansport, &o. R. R. Co., 13 Ind. 
 
 Davies, 43 Iowa, 424; State v. Real 404; Rogers v. Danby, &o. Society, 
 
 Estate Bank, 5 Ark. 595; Sears- 19 Vt. 187; Walworth v. Brackett, 
 
 burgh Turnpike Co. v. Cutler, 6 98 Mass. 98; People v. Cheeseman, 
 
 Vt. 315; Holmes v. Gilliland, 41 7 Col. 376. 
 
 Barb. 568; Narragansett Bank u. At- * Eastern Plank Road Co. v. 
 
 lantic Silk Co., 3 Mete. (Mass.) 282, Vaughan, 14 N. Y. 546, 551 ; Becket 
 
 287; Hurt v. Salisbury, 55 Mo. v. TJniontown Building, &c. Ass., 
 
 310. Compare Utleyp. Union Tool 88 Pa. St. 211; Albright v. Lafay- 
 
 Co., 11 Gray, 139. ette, &c. Ass., 102 Pa. St. 411. 
 
 8 In re Spring Valley W. W. Compare Heckti. McEweii, 12 Lea 
 
 Co., 17 Cal. 132; People v. Stock- (Tenn.), 97. 
 
83 THE FORMATION OF A COEPOEATION. § 33 
 
 was formed. The unauthorized provision was treated as 
 surplusage. 
 
 In Indiana it was held that, under a general law authoriz- 
 ing the incorporation of associations for the encouragement 
 of agriculture, corporations might be formed in order to pur- 
 chase land to be used for fairs and horse shows, and for ex- 
 hibiting the speed of horses in races and distributing prizes.^ 
 Under a general law authorizing the organization of corpora- 
 tions for "the conversion and disposal of agricultural pro- 
 ducts by means of mills, . elevators, markets, and stores, or 
 otherwise," a corporation may be created " to build and 
 maintain a flouring-mill." ^ The question in each case is to 
 determine the substantial purpose of the law.^ 
 
 A general act authorizing the formation of corporations for 
 any purpose is always subject to the implied limitation that 
 no corporation shall be formed for a purpose which would 
 be contrary to public policy or any established rule of law.* 
 
 § 33. Shareholders are Necessary. — It is plain that a joint- 
 stock company or trading corporation cannot possibly exist 
 without stockholders or members. It would be a contra- 
 diction in terms to speak of an association existing without 
 associates composing it. 
 
 There are, however, instances in which a corporation or 
 joint-stock companj'- may, by the use of a fiction, be deemed 
 in existence, although there be no members or shareholders 
 composing it, and hence in reality no corporation or com- 
 pany. Thus, some of the general incorporation laws in force 
 in the United States provide that, whenever a specified num- 
 ber of persons shall desire to form a corporation, they may 
 do so by signing and filing a certificate of association, set- 
 ting forth the purposes of the companj-, the amount of its 
 
 1 Mullen V. Beech Grove Driving N. Y. 477; 10 Abb. Pr. n. s. 200; 
 
 Park Ass., 64 Ind. 202. . 11 Id. 106; State v. Monitor Fire 
 
 ^ Ginrich ». Patrons' Mill Co., Ins. Co., 42 Ohio St. 555. Compare 
 
 21 Kans. 61. infra, § 362. 
 
 ' For instances see Wisconsin * Re Mutual Aid Ass. , 15 Phila. 
 
 Telephone Co. v. Oshkosh, 62 Wis. 625; Be Helping Hand Marriage 
 
 32; People v. Troy House Co., 44 Ass., Id. 644. 
 Barb. 626, 632; People v. Nelson, 46 
 
 VOL. I. — 3 
 
§ 34 THE LA"W OF PRIVATE CORPOEATIONS. 34 
 
 capital, and other particulars. Upon filing the prescribed 
 instrument, the persons who have signed the same and their 
 successors are declared by the statute to become a body 
 politic or corporate, and to become invested with all the 
 powers conferred by the act.^ Under a statute of this de- 
 scription, the corporation must be deemed in existence for 
 certain purposes from the time when the certificate of in- 
 corporation is filed, although there be no shareholders in the 
 company. The directors named in the certificate are author- 
 ized to act in the corporate name in doing all acts which 
 are necessary to obtain subscriptions for shares and to per- 
 fect the company's organization ; and it has been held that 
 property may be held in the corporate name for future use.^ 
 It is evident, however, that the shareholders, and not the 
 signers of the certificate of incorporation, in reality constitute 
 the corporation to be formed under the statute. The signers 
 of the certificate have no authority to carry on business in 
 the corporate name ; they have no interest in the corporate 
 estate, and no rights in its management or in the election of 
 officers. They are at the most a quasi corporation, whose 
 sole function is to bring into existence the corporation con- 
 sisting of the real body of shareholders. The fact, that the 
 statute expressly declares that the signers of the certificate 
 and their successors shall be a body corporate, can make no 
 difference. The statute does not intend that they shall be a 
 corporation except in name. Mere names do not alter facts, 
 and no amount of legislation can make a reality out of a 
 fiction. 
 
 § 34. Under some charters a board of directors or trustees 
 is constituted a body corporate by law, while the shareholders 
 are the parties really interested in the corporate estate. A 
 corporation of this description differs from an ordinary corpo- 
 ration only in form. The shareholders are practically and in 
 
 1 See the act of New York, of Co., 11 Kans. 412 ; Willamette 
 
 1848, for the incorporation of man- Freighting Co. v. Stannus, 4 Ore. 
 
 ufacturing and other corporations. 261. 
 
 See also the general laws of Kansas. ^ Coyote, &o. Mining Co. v. Ru- 
 
 Compare Hunt v. Kansas, &c. Bridge ble, 8 Ore. 284, 293. ^ 
 
35 THE FOEMATION OP A COEPORATION. § 35 
 
 reality the corporate association, and the directors or trustees 
 are the agents of the association. It is only in dealing with 
 the technical rules relating to legal procedure and the title to 
 property, that the trustees or directors are to be regarded as 
 themselves constituting the corporation. 
 
 Charitable corporations differ essentially from ordinary 
 business corporations and joint-stock companies in this re- 
 spect. A charitable corporation is not an association of share- 
 holders, like a business "corporation or joint-stock company ; 
 but is merely an agent or trustee for the administration of 
 trust funds, and the beneficiaries of the trust are the donees 
 of the charity, and not the members of the corporation. 
 
 § 35. Who can form a Corporation. — Kyd said: "A cor- 
 poration is usually composed of natural persons, merely in 
 their natural capacity ; but it may also be composed of per- 
 sons in their political capacity of members of other corpo- 
 rations." ^ Thus the " mayor, citizens, and commonalty," or 
 the " mayor, aldermen, and common-councilmen," may be 
 incorporated.^ 
 
 Any person capable of contracting may become an original 
 shareholder in a private corporation, unless the contrary is 
 provided by the charter or act of incorporation.^ Even wo- 
 men and children, and persons non compos mentis, may be- 
 come corporators by transfer or inheritance of the shares of 
 a prior holder. The members of an ordinary trading cor- 
 poration do not occupy positions of confidence and trust 
 toward each other, as partners do j but the interest of each 
 shareholder, and all tJie rights pertaining thereto, may be 
 assigned like personal property.* 
 
 If a general law purports to authorize " any number of per- 
 sons not less than seven " to organize a corporation for the 
 construction of a railroad, citizens or residents of another 
 State or country are entitled to organize under the law.^ 
 
 Several distinct and independent corporations may together 
 
 1 Kyd on Corp. 32, 33, 35. * Infra, §§ 163, 164, 224. 
 
 = Ibid. 33; Rex v. Amery, 1 6 Central R. R. Co. v. Pennsyl- 
 T. R. 575, 589. vania R. R. Co., 31 N. J. Eq. 475; 
 
 • Infra, § 66. Humphreys tf. Mooney, 5 Col. 282. 
 
§ 36 THE LAW OF PRIVATE COEPOEATIONS. 36 
 
 form one general corporate body.^ It is a matter of common 
 occurrence for one business corporation to hold shares in 
 another corporation of a similar description.^ 
 
 A State or municipality may become a shareholder in a 
 private corporation ; and the fact that a State is a share- 
 holder, or even the sole shareholder, does not alter the legal 
 status of the company as a private corporation.^ 
 
 The right of membership in a corporation may, however, 
 be restricted by express provision of the charter. Thus, a 
 corporation may be limited to a certain class of people or 
 tradesmen.* So right of membership in societies and clubs 
 is often restricted to persons of a particular class or 
 description. 
 
 § 36. Corporations by FreBciiption. — " Corporations by the 
 common law " are those corporations of a political character 
 which have existed with the universal assent of the commu- 
 nity from time immemorial ; as the King, bishops, and other 
 church officers.^ A corporation is said to exist by prescrip- 
 tion if its commencement cannot be shown, but a grant of a 
 charter may be presumed from long-continued user of the 
 corporate franchises.^ 
 
 The same doctrine has been frequently asserted in the 
 United States with regard to public corporations. "Muni- 
 cipal corporations are created for the public good, — are 
 demanded by the wants of the community; and the law, 
 after long-continued user of corporate powers, and the public 
 acquiescence, will indulge in presumptions in fa 7or of their 
 legal existence."'^ 
 
 1 Kyd on Corp. 34. The United States held shares 
 
 2 See infra, §§ 411-413. Ex in the United States Bank incor- 
 parte Fisher, 20 S. Car. 180. porated in 1791. 
 
 8 Bank of United States v. Plant- * Kyd on Corp. 85 ; Milford v. 
 
 ers' Bank, 9 Wheat. 904; Briscoe Godfrey, 1 Pick. 98. 
 V. Bank of Kentucky, 11 Pet. 257 ; As to limitations of the number 
 
 Bank of S. Car. v. Gibbs, 3 McCord, of shares which may be held by 
 
 377; State Bank w. Clark, 1 Hawks, any shareholder, see O'Brien v. 
 
 36; Moore v. Schoppert, 22 W. Va. Cummings, 13 Mo. App. 197. 
 282; Marshall ». Western, &c. K. R. ' Kyd on Corp. 40. 
 Co., 92 N. Car. 322. See supra, • Ibid. 41. 
 § 3. ' Jameson v. People, 16 HI. 257, 
 
87 THE FORMATION OP A COEPOEATION. § 37 
 
 General reputation and a long-continued user of corporate 
 powers have been held sufficient to establish the franchises 
 of a municipal corporation, without first showing a loss of its 
 charter, or that it ever had one.^ And this may be sustained 
 upon the ground that the general consent of the public makes 
 a customary or common law. 
 
 But the acquiescence of the public cannot upon the same 
 principle be held to legalize a private corporation ; for the 
 public are ordinarily not concerned in the existence of a pri- 
 vate corporation, and acquiescence can have no weight where 
 there is no cause for objecting. 
 
 Long-continued user of corporate franchises may undoubt- 
 edly be presumptive evidence that a charter was granted, 
 in the United States as well as in England 5^ but in the 
 United States all franchises must be derived from an act 
 of the legislature, and it is generally possible to ascertain 
 with certainty whether or not a corporation was chartered, 
 by reference to the statute-books or the record of the articles 
 of incorporation. 
 
 § 37. Proof of Incorporation, — ■when necessary. — The ne- 
 cessity of proving the lawful formation and existence of a 
 corporation, necessarily depends in every case upon the issues 
 presented by the pleadings; the materiality of these issues 
 is governed by the rules of substantive law. 
 
 In a suit brought by or against a corporation, the existence 
 of the corporation de facto is always an essential allegation, 
 and may therefore be put in issue ; ^ but the legality of the 
 existence of the corporation is often not material. There are 
 numerous instances in which it is of no legal consequence 
 whether the corporation was formed lawfully, under a grant 
 of authority from the legislature, or unlawfully, without the 
 
 259, per Skinner, J. ; 1 Dillon on Andover, 28 Vt. 416 ; Bobie v. Sedg- 
 Mun. Corp., § 37 (17). wick, 35 Barb. 319, 326. 
 
 1 People V. Maynard, 15 Mich. ^ Greene v. Dennis, 6 Conn. 293, 
 463, 470; Bow v. AUenstown, 34 _ 302; All Saints' Church v. Lovett, 
 N. H. 351; Dillingham v. Snow, 5 ' 1 HaU, 191; White v. State, 69 
 Mass. 547 ; New Boston v. Dunbar- Ind. 273. 
 ton, 15 N. H. 201; Sherwin v. Bug- « Infra, § 750. 
 bee, 16 Vt. 439; * Londonderry v. 
 
§ 38 THE LAW OF PEIVATE COEPOEATIONS. 38 
 
 proper authority.^ In some cases, also, the existence of the 
 corporation de facto, as well as de Jure, may be presumed 
 without any evidence, or may be proven by evidence of an 
 admission of the opposing party .^ Cases of this character 
 should be carefully distinguished from those cases in which 
 the lawful formation and existence of the corporation are 
 material, as upon a proceeding of quo warranto brought by 
 the State on account of an unauthorized assumption of cor- 
 porate franchises. Under these circumstances, it becomes 
 necessary to establish, first, a grant of franchises by the 
 State; secondly, acceptance of the franchises by the gran- 
 tees; and thirdly, the formation of a corporate association 
 by the grantees. 
 
 § 38. Proof of Charter. — Public and Private Acts. — General 
 incorporation laws are now in force in every State in the 
 Union. They are public statutes, and must therefore be 
 judicially recognized, without the production of evidence 
 to prove them, by every court within the State enacting 
 them. The same rule applies to special charters confer- 
 ring corporate franchises, where they are granted by public 
 statute ; but a charter granted by a private act must be 
 proven. 
 
 No certain rule can be laid down, showing which laws are 
 public and which are private. Charters of incorporation 
 granted to a plank-road company,^ a railroad company,* and 
 an academy,^ were held to be private acts, which could not 
 be judicially noticed. On the other hand, it was held that 
 the charter of a bank was a public law, which required no 
 proof.® 
 
 The line of distinction has been sometimes drawn between 
 those corporations which were created to subserve a public 
 
 1 Infra, § 724 et seq. ^ Bailey v. Trustees of Lincola 
 
 2 Infra, § 754. Academy, 12 Mo. 174. 
 
 « City Council of Montgomery « Stribblingw. Bank of the Valley, 
 V. Montgomery, &o. Plank R. Co., 5 Rand. 132; Hays «. Northwestern 
 31 Ala. 76. Bank, 9 Gratt. 127 ; Williams ». 
 
 * Ohio, &c. R. R. Co. v. Ridge, Union Bank, 2 Humph. 389; Tow- 
 5 Blackf. 78. son v. Havre-de-Grace Bank, 6 H. 
 
 & J. 47. 
 
39 THE FOEMATION OP A CORPORATION. § 39 
 
 purpose, and those which were chartered for the benefit of^ 
 the corporators only. It has been held, that in the former 
 case the courts will take judicial notice of the charter, but 
 not in the latter case.^ The distinction itself has, however, 
 been strongly condemned, and in the opinion of Carr, J., 
 it is "founded much more in technical reasoning than in 
 common sense." ^ 
 
 Charters of incorporation often provide expressly that 
 they shall be considered public acts. Under these circum- 
 stances no question as to the public or private character of 
 the acts can arise. If the grant of a charter is referred to, 
 or recognized in a public law, the courts will thereafter take 
 judicial notice of its existence.^ And an act conferring new 
 franchises upon a corporation already formed, under a public 
 law, will be regarded as a public law also.* 
 
 § 39. Foreign Charters. — A charter of incorporation granted 
 by a foreign country or a sister State must be proven like any 
 other foreign law.* 
 
 The different States of the Union have provided conve- 
 nient methods of proving the laws and enactments of the 
 other States ; as by authenticated copy, or by the printed 
 volumes purporting to be issued by authority. But this does 
 not exclude the common law proof of a charter by a witness 
 testifying to the accuracy of a copy.^ 
 
 The United States courts held within a State must take 
 judicial notice of a charter enacted by the State legislature 
 in a public law.^ And under the act of Congress of May 26, 
 
 1 State V. Vincennes University, 5 ^ Chapman v. Colby, 47 Mich. 
 
 Ind. 77, 91 ; White Water, &c. Canal 46 ; United States Bank v. Stearns, 
 
 Co. t). Boden, 8 Blackf. 130; Wil- 15 Wend. 314; Society, &c. v. 
 
 liamsu. Union Bank, 2 Humph. 339. Young, 2 N. H. 310; State v. Carr, 
 
 ^ StribblingD.Bankof the Valley, 5 N. H. 867; Hah nemannian Life 
 
 5 Rand. 138. Ins. Co. v. Beebe, 48 LI. 88. 
 
 8 Beaty v. Kuowler, 4 Pet. 152; « Society, &c. v. Young,, 2 N. H. 
 
 Young V. Bank of Alexandria, 4 310, 312 ; National Bank v. De Ber- 
 
 Cranch, 384; Stribbling v. Bank of nales, 1 Car. & P. 569. 
 the Valley, 5 Band. 132, 138; and ' Covington Drawbridge Co. v. 
 
 see supra, i 20. Shepherd, 20 How. 227. 
 
 * Bank of Utica v.. Magher, 18 
 Johns. 341. 
 
§ 40 THE LAW OF PRIVATE COBPOKATIONS. 40 
 
 1790, subsequently re-enacted, a charter granted by the 
 legislature of one State may be proven in another State, 
 by the production of a certified copy having the seal of the 
 State affixed.i 
 
 § 40. Proof of Acceptance. — The general rule is, that no 
 particular form need be followed in accepting a charter of 
 incorporation. Any acts indicating an intention to accept 
 are sufficient.^ It follows, therefore, that proof of any acts of 
 the grantees of a charter, such as a user of the franchises, or 
 of any circumstances from which an intention to accept the 
 franchises may be inferred, is sufficient to establish accept- 
 ance.^ It has been held that grants of franchises beneficial 
 to a corporation may be presumed to have been accepted, in 
 the absence of evidence to the contrary.* 
 
 In case of a corporation formed under a general law, it is 
 apparent that proof that the corporation was organized in 
 accordance with the forms prescribed by the law is sufficient 
 to establish that the corporators have accepted the franchises 
 conferred by the law. 
 
 It has been held that the books of a corporation are the 
 best evidence that its charter has been accepted, and that evi- 
 dence of user of the corporate franchises should be admitted 
 only after the absence of the records has been accounted for.^ 
 
 The books of a corporation are admissible against the com- 
 pany and its members only on the principle that they are 
 admissions ; they are not evidence against strangers.^ And 
 no reason is obvious why an entry on the private records of 
 a cpmpany should be deemed better evidence of the accept- 
 ance of a grant of franchises than public user of the rights 
 conferred. 
 
 1 United States v. Johns, 4 Dal- * Bank of United States v. Dan- 
 las, 412; 8. c. 1 Wash. C. C. 363. dridge, 12 Wheat. 64, 70; Bangor, 
 
 2 Supra, § 23. O. & M. R. R. Co. v. Smith, 47 Me. 
 8 Russell V. McLellan, 14 Pick. 34; Owen v. Purdy, 12 Ohio St. 73; 
 
 63; School District v. Gibbs, 2 Stirling u. Vaughan, 11 East, 623; 
 
 Cush. 39; Sumrall ». Sun Mutual Talladega Ins. Co. v. Landers, 43 
 
 Ins. Co., 40 Mo. 27; Hammond v. Ala. 115, 136. 
 Straus, 53 Md. 1 ; State v. Sibley, ^ Hudson v. Carman, 41 Me. 84. 
 25 Minn. 387. « 1 Wharton on Ev. § 661. 
 
41 THE FORMATION OP A CORPOBATION. § 42 
 
 The question whether or not an act of incorporation has 
 been accepted, is a question of fact, to be passed upon by the 
 jury.i 
 
 § 41. Proof of Performance of Conditions Precedent. — In 
 order to prove the legal existence of a corporation it is neces- 
 sary to show that every condition precedent, subject to 
 which the franchise of forming the corporation was conferred, 
 has been complied with. Thus, it is essential, in order to 
 establish the incorporation of a company under a general 
 law, to show that all formalities prescribed by the law have 
 been followed. 
 
 In Mokelumne Hill Mining Co. v. Woodbury ,2 Cope, J., 
 said : " The general rule is that the existence of a corpora- 
 tion may be proved by producing its charter and showing 
 acts of user under it ; but this rule has no application to a 
 corporation formed under the provisions of a general statute 
 requiring certain acts to be performed before the corporation 
 can be considered in esse, or its transactions possess any va- 
 lidity. The existence of a corporation thus formed must be 
 proved, by showing at least a substantial compliance with 
 the requirements of the statute." 
 
 § 42. Proof of Formation of Corporation. — Proof of the 
 grant of a charter and its acceptance by the grantees merely 
 establishes the right of the grantees to form a corporation ; 
 it does not establish that the grantees have actually formed 
 a corporation under the charter. The formation of a corpo- 
 ration results from an agreement between the corporators, 
 and this must be proven as an independent fact.^ 
 
 Any evidence showing an intention to form a corporation, 
 as, for example, a user of a corporate name or corporate fran- 
 chises, is sufficient to establish the formation of a corporation 
 by the grantees of a charter. A vote of the grantees accept- 
 ing the charter is ordinarily in itself sufficient to indicate an 
 
 1 Hammond v. Straus, 53 Md. 1. International Bank, 21 N. Y. 542 ; 
 
 * 14 Cal. 424; and see cases Eagle Works v. Churchill, 2 Bosw. 
 
 supra, §§ 27-30. Compare Metho- 166; Barrett u. Mead, 10 Allen, 337; 
 
 dist Episcopal Church v. Pickett, Marsh v. Astoria Lodge, 27 111. 421. 
 
 19 N. Y. 482; Bank of Toledo v. « See «upra, § 24. 
 
§ 42 THE LAW OF PBIVATE COBPOBATIONS. 42 
 
 intention on the part of the grantees to organize themselves 
 as a corporation. 
 
 Under a general incorporation law, proof of a subscription 
 for shares upon the stock-books, and a compliance with the 
 conditions prescribed by the law, establishes clearly that the 
 subscribers have undertaken to form a corporation under 
 the law. The formation of corporations under general laws 
 will be considered in detail in the following cha^jter. 
 
43 THE CONTRACT OF MBMBBKSHIP. § 44 
 
 CHAPTER II. 
 
 THE CONTRACT OF MEMBERSHIP. 
 
 PART I. 
 
 HOW THIS CONTEACT MAY BE CREATED, 
 
 § 43. General Nature of the Contract of Membership. — A 
 corporation aggregate consists of a number of individuals 
 who have agreed between themselves to form a corporate as- 
 sociation. The members of a corporation formed for pecuni- 
 ary profit are ordinarily called shareholders, or stockholders, 
 and the contract by whicli they are bound together is set 
 forth in a charter, or in articles of association agreed to in 
 pursuance of a general incorporation law. The contract of 
 membership in a corporation is not an ordinary common law 
 contract. The formation of this contract is prohibited and 
 illegal, under the common law in force throughout the 
 United States, in the absence of an enabling act or charter. 
 The liberty of forming a corporation is treated as a special 
 privilege, or franchise, which can be conferred only by legis- 
 lative act. It is clear, therefore, that the validity of this 
 contract, and the methods by which it may be formed, must 
 depend upon the provisions of the statutory law. 
 
 § 44. Every element which is essential, in the nature of 
 things, to the existence of a contract, must of course be 
 present in the contract of membership in a corporation. 
 There must be contracting parties, and these parties must 
 by their mutual agreement create an obligation between 
 them. Without these elements no true contract is possible. 
 But it is not necessary to bring the contract of membership 
 
§ 45 THE LAW OP PRIVATE CORPORATIONS. 44 
 
 in a corporation within any technical classification of common 
 law contracts ; nor does the validity of this contract depend 
 upon a compliance with any form or condition precedent 
 which the common law requires as a prerequisite to the legal 
 recognition and enforceability of a contract, such as the rule 
 requiring a consideration. The proper form of entering into 
 the contract of membership, and its legal force and effect, 
 depend entirely upon the statute under which it is created. 
 
 Whether an undertaking to form a corporation without 
 statutory authority, or without fulfilling the requirements 
 of the law, shall or shall not be recognized and given effect 
 by the courts according to the intention of the parties, de- 
 pends upon the consequences of the common law prohibition 
 against unauthorized corporate associations. This question 
 will be discussed fully in a subsequent chapter.^ The gen- 
 eral rule is, that, if a body of individuals assume to form a 
 corporation and in fact act in a separate capacity, the bind- 
 ing force of their transactions cannot be assailed on the sole 
 ground that they have acted in a corporate capacity without 
 legal authority, if this would work injustice to either of the 
 parties.^ And the same principle has been applied as be- 
 tween the shareholders themselves in enforcing their mutual 
 agreement.^ 
 
 § 45. It has been pointed out in the preceding chapter 
 that the contract of membership in a corporation is similar 
 in many respects to the contract of membership in a partner- 
 ship. Each contract creates a kind of status, — that of part- 
 ner in the one case and that of shareholder in the other, — 
 and from this status devolve certain well-defined rights and 
 obligations, as will be shown hereafter. 
 
 A person may become a member of an incorporated asso- 
 ciation, either by an original contract with the other members 
 of the company, or by substitution in the place of an existing 
 member through a transfer of shares. In the latter case, a 
 complete novation occurs, and the transferee becomes a party 
 
 1 Infra, Chapter IX. §§ 715- « Infra, §§ 730-734. 
 758. » Infra, §§ 721-723. 
 
45 THE CONTRACT OP MEMBEESHIP. § 46 
 
 to the contract of incorporation, while the member whose 
 shares he takes is discharged.^ 
 
 § 46. Contract to become a Shareholder distinguished. — It 
 is important to distinguish between the contract of member- 
 ship actually existing between the shareholders or members 
 of a corporation, and a contract to become a shareholder at 
 a future time ; and a contract to become a shareholder at a 
 future time must again be distinguished from a contract to 
 purchase shares which have already been issued. 
 
 The contract which exists between the members of a cor- 
 poration, and which constitutes them a corporate association, 
 is the contract of membership. This contract gives the con- 
 tracting parties the status of shareholders ; it invests them 
 with the continuing rights of shareholders, together with the 
 corresponding liabilities ; and the performance of this con- 
 tract will always be specifically enforced, though a failure 
 to perform rarely presents a ground for an action for dam- 
 ages.''' On the other hand, a contract to become a share- 
 holder, or to subscribe for shares in a company at a future 
 day, does not give the contracting party the status of share- 
 holder until after the contract has been fully executed by 
 taking the shares or actually subscribing upon the books 'r- 
 and, upon a failure to perform the contract, the corporation 
 would be entitled to recover only the damages suffered,''^ 
 that is, the difference between the amount which the defend- 
 ant agreed to pay or contribute on account of the shares, and 
 the value of an equal number of shares in the market.^ 
 
 A similar distinction exists between a contract of partner- 
 ship and a contract to form a partnership at a subsequent 
 time. The contract of partnership constitutes the contracting 
 parties partners ; but a contract between several persons to 
 become partners thereafter does not of itself make them 
 
 1 Infray § 159. burg, &c. Plank Road Co., 27 Pa. 
 
 2 Infra, §§ 227, 235. Compare St. 261; Mt. Sterling Coal Road 
 §§212-217. Co. V. Little, 14 Bush, 429; Lake 
 
 ' Thrasher v. Pike County R. R. Ontario Shore R. R. Co. v. Curtiss, 
 Co., 25 111. 393; Stowe w. Flagg, 80 N. Y. 219, 223 ^ Quick d. Lemon, 
 72 111. 397, 402; Rhey v. Ebens- 105111.578; and see in/ro. § 61. 
 
§ 47 THE LAW OF PEIVATB COEPOKATIONS. 46 
 
 partners ; and for a failure to carry out the agreement an 
 action at law for damages is the only remedy.^ 
 
 A contract to sell shares is a contract between a member 
 of a corporation and a person wishing to become a member, 
 whereby the former agrees that the purchaser shall be sub- 
 stituted in his place. A sale of shares is consummated by 
 a legal transfer of the shares to the purchaser, involving a 
 novation of the contract of membership. The consent of 
 all the members of a corporation is undoubtedly essential to 
 a novation of the contract of any member ; but this consent 
 is ordinarily impliedly given in advance through the origi- 
 nal contract ; or the authority to assent to a substitution of 
 members may be vested in the agents of the company .^ 
 
 An offer to become a shareholder, when accepted by or on 
 behalf of the other members of the company, constitutes the 
 offerer a shareholder. Thus, where an allotment of shares is 
 required before an applicant can become a shareholder, an 
 application for shares is a mere offer ; and this offer ripens 
 into a contract as soon as an allotment has been made and 
 notice thereof sent to the applicant.^ 
 
 § 47. Common Lav7 Agreements to form a Corporation. — If 
 a number of persons mutually agree to become shareholders 
 in a corporation to be formed by them subsequently, either 
 under a special charter or under some general law, the agree- 
 ment between the parties is originally made up of a series of 
 ordinary common law contracts. If the parties intend to 
 become shareholders, without further act on their part, imme- 
 diately after the incorporation of the company, their agree- 
 ment may very properly be held to include a continuing 
 offer to become shareholders as soon as the corporation shall 
 be formed. This offer may be accepted by the corpora- 
 tion, through its regular agents, after organization, unless 
 previously revoked ; by such acceptance the contract of 
 
 1 Gale V. Leokie, 2 Stark. 107; ' Harris's Case, L. R. 7 Ch. App. 
 
 Figes u. Cutler, 3 Stark. N. P. 139 ; 587; Household Fire Ins. Co. v. 
 
 Andrewes v. Garstin, 10 C. B. n. s. Grant, L. R. 4 Exoh. D. 216. See 
 
 444; Goldsmith v. Sachs, 8 Sawy. infra, § 164. 
 110; 8. c. 17 Fed. Rep. 726. » Infra, § 70. 
 
47 THE CONTEAOT OF MEMBEESHIP. § 47 
 
 membership is consummated, and the parties become stock- 
 holders in the corporation, with all the resulting rights and 
 liabilities. 
 
 Thus, in Athol Music Hall Co. v. Carey,i a number of 
 persons had mutually agreed to form a corporation, and to 
 contribute a certain amount of capital each. An act x»f in- 
 corporation having been subsequently passed, it was held that 
 the subscribers thereupon became shareholders, and, as such, 
 were liable to pay in the capital which they had agreed to con- 
 tribute. Wells, J., delivering the'opinion of the court, said: 
 " In agreements of this nature, entered into before the organ- 
 ization is formed, or the agent constituted to receive the 
 amounts subscribed, the difiSculty is to ascertain the promisee, 
 in whose name alone suit can be brought. The promise of 
 each subscriber ' to and with each other' is not a contract 
 capable of being enforced, or intended to operate literally as 
 a contract to be enforced between each subscriber and each 
 other who may have signed previously, or who should sign 
 afterwards, nor between each subscriber and all the others 
 collectively as individuals. The undertaking is inchoate and 
 incomplete as a contract until the contemplated organization is 
 effected, or the mutual agent constituted to represent the as- 
 sociation of individual rights in accepting and acting upon the 
 propositions offered by the several subscriptions. When thus 
 accepted, the promise may be construed to have legal effect 
 according to its purpose and intent, and the practical ne- 
 cessity of the case ; to wit, as a contract with the common 
 representative of the several associates. . . . Although this 
 promise was originally voluntary, or in the nature of a mere 
 open proposition, yet, having been accepted and acted on by 
 the party authorized so to do before he attempted to retract 
 it, he has lost the right to revoke. His proposition has 
 become an accepted mutual contract, and is binding upon 
 
 1 Athol Music Hall Co. v. Carey, 40 Me. 172 ; Haskell v. Sells, 14 
 
 116 Mass. 473; Ashuelot Boot, &o. Mo. App. 91; Buffalo & J. R. K. 
 
 Co. V. Holt, 56 N. H. 548; Cross Co. v. GifEord, 87 N. Y. 294, 299. 
 
 ». Pinckneyville Mill Co., 17 111. 54; See infra, § 78 et seq. 
 . Penobscot B. B. Co. v. Dummer, 
 
§ 49 THE LAW OF PRIVATE CORPORATIONS. 48 
 
 him as well as the corporation. The votes of the corporation 
 indicate sufficient authority for the institution of this suit in 
 the corporate name and behalf." 
 
 § 48. A subscription for shares in a corporation thereafter 
 to be formed, under a general law, may be accepted by the 
 board, of directors of the company after organization.^ In 
 McClure v. People's Freight Ry. Co.,^ three existing compa- 
 nies had entered into an agreement of consolidation. Be- 
 fore this agreement had been filed with the Secretary of 
 State, as required by law, the defendant subscribed for 
 shares. It appeared that the united corporation subsequently 
 accepted the subscription, and made calls, and that the first 
 call was paid by the defendant. The court held that the de- 
 fendant was liable as a stockholder, saying, " The subscrip- 
 tion was at least a valid proposition to the plaintiff, which 
 became irrevocable the instant of its acceptance." 
 
 No particular form of acceptance is essential in order to 
 constitute this proposition to become a shareholder a binding 
 contract. But there must be some unequivocal act on the 
 part of the agents having authority to accept the offer, so 
 that there can be no doubt as to the obligation of the 
 corporation as well as of the subscriber.^ 
 
 § 49. Agreements to subscribe for Shares in a Future Cor- 
 poration. — A different case is presented where the parties 
 mutually agree to subscribe for shares in a corporation to be 
 formed thereafter. Here there is no unconditional agreement 
 to become shareholders as soon as the corporation shall be 
 formed, but it is contemplated that the parties shall them- 
 selves perform an additional act before becoming sharehold- 
 ers; namely, execute the statutory contract of membership 
 by subscription upon the stock-books. It is plain, therefore, 
 that in this case there is no offer which the corporation can 
 
 1 Red Wing Hotel Co. ». Fried- » Parker v. Northern Central, 
 
 rich, 26 Minn. 112j Buffalo & J. &o. R. R. Co., 33 Mioh. 23; North- 
 
 R. R. Co. V. Clark, 22 Hun, 359. ern Central Mich. R. R. Co. v. Es- 
 
 See infra, § 86. low, 40 Mioh. 222. 
 
 * McClure v. People's Freight 
 Ky. Co., 90 Pa. St. 269. 
 
49 THE CONTEACT OF MEMBERSHIP. § 50 
 
 accept, and the parties do not become stockholders, and can- 
 not be charged as such, unless they subsequently carry out 
 their agreement by subscribing for the shares.^ 
 
 § 50. Enforcement of a Mutual Agreement to become Share- 
 holders in a Future Corporation. — An offer to become a 
 shareholder in a corporation to be formed thereafter may 
 undoubtedly be revoked at any time before acceptance, 
 whether the offer accompany a contract to take shares or 
 not.2 But a mutual agreement to become shareholders, or 
 to subscribe for shares, is binding between the parties as a 
 contract, and cannot be revoked. 
 
 There is, however, a difficulty in enforcing the execution of 
 a contract of this description. It is evidently the intention 
 of the parties that the promise of each of them shall inure to 
 the benefit of the corporation when formed, and not to the 
 benefit of the individual parties themselves. Justice would 
 therefore be best attained by enforcing a specific performance 
 of the contract on behalf of the corporation, or by allowing 
 the corporation to sue upon it. There is a serious objection 
 to this course, on the ground that the corporation was not 
 itself a party to the contract.^ But this objection would 
 seem to be of no force in those jurisdictions where a person is 
 allowed, to sue on an agreement made for his benefit, though 
 he may not be a party to it. It has repeatedly been held, 
 that, where parties have entered into mutual agreements to 
 make donations to a corporation to be formed thereafter, the 
 corporation when formed may sue for and recover the amount 
 of the donations.* 
 
 1 Lake Ontario Shore R. R. Co. chaster College, 6 Bush, 443, and 
 
 V. Curtiss, 80 N. Y. 219 ; Thrasher v. cases supra, § 47. 
 Pike County R. R. Co., 25 111. 393; « Lake Ontario Shore R. R. Co. 
 
 Strasburg R. R. Co. v. Echternacht, v. Curtiss, SO N. Y. 219. 
 21 Pa. St. 220; Mt. Sterling Coal * Griswold v. Peoria University, 
 
 RoadCo.w. Little, 14 Bush, 429. See 26 111. 41; Robinson v. Edinboro 
 
 supra, § 46. Compare Twin Creek, Academy, 3 Grant's Cas. 107; Ed- 
 
 &c. Road Co. V. Lancaster, 79 Ky. inboro Academy v. Robinson, 37 
 
 552; Quicks. Lemon, 105111. 578. Pa. St. 210; Reformed Protestant 
 
 ^ Compare Stuart v. Valley R. R. Dutch Church v. Brown, 17 How. 
 
 Co., 32 Gratt. 147; GofE u. Win- Pr. 287; Hutchinsu. Smith, 46 Barb. 
 
 VOL. I. — 4 
 
§ 61 THE LAW OF PKIVATB COEPOBATIONS. 50 
 
 It is to be observed, that an agreement to become a share- 
 holder thereafter, or to subscribe for shares, would not of itself 
 constitute the party agreeing to subscribe a shareholder, even 
 if made with the corporation directly. And upon a breach 
 of such an agreement by a refusal to take shares or subscribe, 
 the corporation would not be entitled to recover the amount 
 of the shares as a debt, but only the damages actually suffered 
 through the breach of contract.^ It would be extremely diffi- 
 cult to estimate the amount of damages in a case of this 
 description. If shares have a market value, the measure of 
 damages for a breach of a contract to purchase them is the 
 difference between the market value and the amount agreed 
 to be paid. But when a corporation has been newly organ- 
 ized, its unissued shares have no market value, and the meas- 
 ure of damages resulting to the remaining subscribers or 
 associates from the loss of a subscription would be altogether 
 a matter of speculative opinion.^ 
 
 § 51. In Kidwelly Canal Co. v. Raby,^ a number of persons 
 agreed to form a canal company, and application was made 
 to Parliament for an act of incorporation. The defendant 
 made an attempt to withdraw before the incorporation had 
 taken place ; but the court held that he could not withdraw, 
 and that he became liable to contribute as a shareholder. 
 Whether the decision in this case be based upon the force of 
 the act of Parliament, or upon common law principles, it evi- 
 dently effected substantial justice by practically enforcing a 
 specific performance of the agreement which the defendant 
 had entered into. 
 
 In Marseilles Land Co. v. Aldrich,^ the plaintiff had entered 
 into a contract with a number of persons to form a water- 
 power and land company. It was' agreed that the company 
 should carry on business as a partnership or joint-stock com- 
 
 235; Ashuelot Boot, &c. Co. v. Co., 25111. 393; Lake Ontario Shore 
 
 Hoit, 56 N. H. 548 ; Eastern Plank R. R.Co. v. CurtLss, 80 N. Y. 219, 223. 
 
 Road Co. V. Vaughan, 14 N. Y. 546; « 2 Price (Exch.) 93. 
 
 Ives!). Sterling, 6 Meto. (Mass.) 310; ' Marseilles Land Co. v. Aldrich, 
 
 Thompson v. Page, 1 Meto. (Mass.) 86 111. 504. Compare. Stowe v. 
 
 565. Flagg, 72 111. 397; Batty v. Adams 
 
 1 Thrasher v. Pike County R. R. County, 16 Neb. 44. 
 
51 THE CONTKACT OF MEMBERSHIP. § 52 
 
 pany until a charter could be obtained from the legislature, 
 and that as soon as a corporation was organized the entire 
 property should be transferred to it, and the stock distributed 
 among the parties in certain fixed proportions. The plaintiff 
 contributed certain machinery as his share of the capital of 
 the association, on these terms, and also paid several assess- 
 ments for the purpose of carrying on the business. About a 
 year after the company had been formed, a corporation was 
 properly organized, and the entire property transferred to it, 
 in pursuance of the agreement. The plaintiff, however, re- 
 fused to take the shares which were allotted to him, and filed 
 a bill for an accounting, and to have his undivided share of 
 the property transferred to him. The court decided that 
 the plaintiff was not entitled to this relief, and that he never 
 became entitled to a share in the property in specie, but only 
 acquired an equitable right to be treated as a shareholder 
 in the company until a corporation was organized, and there- 
 upon to have his proportionate share of the stock. It was 
 held that the contract would be enforced in equity accord- 
 ing to the intention of the parties, and that neither party had 
 a right to terminate his connection with the company and 
 close out the business : that the parties could sell their shares 
 in the concern only subject to the terms of the agreement, 
 and that the secretary of the association was authorized to sub- 
 scribe the name of each shareholder for his proportionate part 
 of the stock of the corporation at the time of its organization. 
 § 52. Conditions Precedent. — An offer or contract to be- 
 come a shareholder in a corporation, or to subscribe for shares 
 thereafter, does not become binding or create a liability until 
 all conditions precedent, upon which the offer or contract was 
 made, have been performed.^ It is plain that no liability is 
 incurred, unless the corporation which is organized is the 
 specific corporation which was contemplated at the time of 
 the agreement.^ 
 
 ^ Lake Ontario Shore R. R. Co. 6 Bush, 443 ; Edinboro Academy v. 
 
 V. Cnrtiss, 80 N. Y. 219; People's Robinson, 37 Pa. St. 210. 
 Ferry Ck). o. Balch, 8 Gray, 810, ^ Machias Hotel Co. v. Coyle, 35 
 
 311; GofE V. Winchester College, Me. 405; Wallingford Manuf . Co. ». 
 
§ 53 THE LAW OP PEIVATE COEPOEATIONS. 52 
 
 § 53. Preliminary Subsoripttons under Statutes. — In some 
 instances the general incorporation laws provide for a pre- 
 liminary agreement to take shares, to be signed by those who 
 intend to become shareholders, before any corporation is 
 formed or organized. The effect of an agreement of this 
 character was considered in Poughkeepsie, &c. Plank Road 
 Co. V. Griffin.^ The defendant and others had signed a pa- 
 per by which each agreed to take a certain number of shares 
 in a corporation, thereafter to be formed under the general 
 law of 1847, and to pay the amount of the shares at such 
 time and place as the trustees might direct. The precise 
 character of the corporation, and the number and amount of 
 the shares of its capital stock, were also set forth in the 
 paper. The process of incorporation, prescribed by the law 
 under which the company was organized, was as follows. 
 A notice was first to be published, pointing out where books 
 for subscribing to the stock would be opened. After stock 
 of a certain amount had been subscribed for, in good faith, 
 and five per cent paid thereon, the subscribers were to elect 
 directors, and then were required severally to subscribe arti- 
 cles of association, setting forth a description of the company, 
 and the name and residence of each subscriber, and the num- 
 ber of shares taken by him. The articles of association 
 were to be filed in the office of the Secretary of State, and 
 thereupon, according to the terms of the act, " the persons 
 who have so subscribed, and all persons who shall, from time 
 to time, become stockholders in such company," should be a 
 body corporate, etc. 
 
 The court held that the defendant, who had merely signed 
 the preliminary subscription, and not the articles of associa- 
 tion, as required by the terms of the act, did not become 
 a stockholder, and was not liable as a shareholder to contrib- 
 
 Fox, 12 Vt. 304; California Sugar R. R. Co. v. Tibbits, IS Barb. 297; 
 Manuf. Co. v. Schafer, 57 Cal. 396. Same v. Warren, Id. 310. Corn- 
 Compare Edinboro Academy v. Rob- pare, however, Heaston v. Cinein- 
 inson, 37 Pa. St. 210. nati, Sec. R. R. Co., 16 Ind. 282; 
 1 Poughkeepsie & S. P. Plank Johnson v. Wabash, &o. R. P. Co., 
 Road Co. V. Griffin, 24 N. Y. 150, 16 Ind. 389. 
 reversing 21 Barb. 454; Troy & B. 
 
53 THE CONTEACT OF MEMBERSHIP. § 55 
 
 ute the amount of his shares. The question whether the 
 defendant incurred any liability by reason of his agreement 
 to take shares when the corporation should be formed, was 
 not considered. 
 
 § 54. The Contract of Membership. — How formed. — It may 
 be stated as a general rule, that, in the absence of an ex- 
 press provision in the statute authorizing a corporation to be 
 formed, the presumption is that it may be formed by a simple, 
 voluntary association of its members; in such case, the inten- 
 tion of the shareholders to assume their relationship to each 
 other is the only essential, and no formalities are required. 
 Thus, where a charter of incorporation is granted to a num- 
 ber of individuals unconditionally, their intention to form 
 themselves into a corporation may be manifested by a simple 
 acceptance of the charter ; or it may be shown by their acts, 
 in exercising the authority conferred upon them.^ 
 
 The same rule applies to the adoption of an amended char- 
 ter or constitution by an existing corporation. No special 
 forms are required to give validity to the intentions of the 
 parties, unless expressly prescribed by law.^ 
 
 A failure to comply with the prescribed formalities in form- 
 ing a corporation under a general law or charter, does not 
 necessarily render the acts of the parties wholly ineffective. 
 It does not prevent the existence of a corporation de facto, 
 but only affects the legal validity of the organization, and the 
 enforceability of the contract of membership.^ 
 
 § 55. statutory Subscriptions for Shares. — General incor- 
 poration laws and special charters usually prescribe in detail 
 the methods by which corporations shall be formed under 
 them. In these cases, of course, the statutory method must 
 be followed, and the common law rules governing the forma- 
 tion of ordinary contracts have no application. 
 
 The point of time at which a corporation is formed, and 
 the contract of membership between the shareholders con- 
 summated, necessarily depends, in each case, upon the provis- 
 ions of the statute under which the parties have acted. In 
 
 1 Supra, § 25. Bates County v. ^ Infra, § 603. 
 Winters, 112 U. S. 325. » Infra, § 721. 
 
§ 56 THE LAW OF PRIVATE COEPORATIONS. 54 
 
 some instances, it is provided by law that persons wishing to 
 form a corporation shall sign articles of association, setting 
 forth the character and purposes of the company to be 
 formed, the amount of its capital stock, and the number of 
 shares taken by each of the subscribers, and shall file the 
 articles with the Secretary of State or some other public offi- 
 cer ; and that, upon filing the articles, the subscribers shall 
 become a body corporate, and shall organize a company by 
 calling a meeting and electing ofScers. Here the contract 
 of membership between the subscribers is consummated, and 
 they become stockholders in a corporation from the time of 
 filing the articles of association. 
 
 In other instances, the formation of the corporation is not 
 complete until the subscribers have organized, or other con- 
 ditions precedent have been complied with. Thus, under 
 some statutes, the persons desiring to form a corporation 
 must first file a certificate setting forth a description of the 
 corporation ; after having obtained a license, they are author- 
 ized to act as statutory commissioners, and to open subscrip- 
 tion-books for shares in the company. After the whole or a 
 specified portion of the capital has been thus subscribed, the 
 commissioners must call a meeting of the subscribers for the 
 purpose of adopting a corporate organization. A record of 
 the stock subscriptions and the organization proceedings must 
 then be filed with the Secretary of State, or some public ofii- 
 cer whose duty it is to issue a certificate of incorporation or 
 license to the company, if the provisions of the law have 
 been complied with. In this case, the subscribers for shares 
 become stockholders, and the incorporation is complete as 
 soon as the certificate or license has been issued to the 
 company. 
 
 § 66. Effect of a Statutory Subscription for Shares. — A 
 vague notion appears to have been entertained in some cases 
 that a statutory subscription for shares is a mere offer or com- 
 mon law agreement to take shares and pay for them there- 
 after, or, in other words, an executory contract of sale. This 
 idea is entirely erroneous. The statutory subscription itself 
 constitutes the subscriber a shareholder, and the liability to 
 
55 THE CONTEACT OP MEMBEESHIP. § 56 
 
 pay the amount of the shares is merely an incident to the 
 contract of membership ; it is like the liability of a partner 
 to contribute his share of capital as fixed by the partnership 
 articles. The contract of the shareholders of an incorporated 
 association is in reality, though not in form, a mutual con- 
 tract, like that between the members of an unincorporated 
 association, and the existence of the association is in each 
 case but a result of this contract. Where the stock subscrip- 
 tions are made before incorporation, the contract of member- 
 ship is consummated at the moment at which all conditions 
 precedent prescribed by law have been complied with. At 
 this moment the subscribers assume the status of sharehold- 
 ers.^ They become entitled to all the rights and privileges 
 of members of the corporation ; they may vote at corporate 
 meetings,^ claim a share in the profits of the common ven- 
 ture, and generally may compel a specific performance of the 
 contract of membership.^ They also become liable to all the 
 obligations of stockholders, and must contribute the amount 
 of capital subscribed by them for the common good.* 
 
 The issuing of a certificate of shares is never essential to 
 constitute a subscriber or a transferee of shares a stock- 
 holder; it is merely evidence of his right, and may be 
 demanded by the stockholder by virtue of his rights of 
 membership.^ 
 
 1 SeeWaukon & M. E. R. Co, v. 16 K Y. 451-463; Phoenix Ware- 
 Dwyer, 49 Iowa, 121; Burrall v. housing Co. u. Badger, 67 N. Y. 298; 
 Bushwiok R. R. Co., 75 N.Y. 211, Northern R. R. Co. v. Miller, 10 
 217; United Society w. Eagle Bank, Barb. 260; Spear ». Crawford, 11 
 7 Conn. 457; Selma & T. R. R. Co. Wend. 20. 
 
 V. Tipton, 5 Ala. 809; Buffalo & « Rutter v. Kilpatrick, 63 N. Y. 
 
 N. Y. City R. R. Co. w. Dudley, 14 604; Wheeler v. Millar, 90 N. Y. 
 
 N. Y. 387; and cases in the follow- 353; Burr v. Wilcox, 22 N. Y. 551; 
 
 ing notes. Thorp v. Woodhull, 1 Sandf. Ch. 
 
 2 Beckett v. Houston, 32 Ind. 893. 411 ; Johnson v. Albany, &c. R. R. 
 » Fry V. Lexington, &c. R. R. Co., 40 How. Pr. 198; Chaffin v. 
 
 Co., 2 Mete. (Ky.) 322, 323; Pa- Cummings, 37 Me. 83; Schaeffer v. 
 
 cifio R. R. Co. V. Hughes, 22 Mo. Missouri Home Ins. Co., 46 Mo. 
 
 291; and see infra, §§ 109, 116. 248; Chester Glass Co. v. Dewey, 16 
 
 *, Buffalo & N. Y. City R. R. Co. Mass. 94 ; Boston & Albany R. R. Co. 
 
 V. Dudley, 14 ¥. Y. 337; Lake Onta- v. Pearson, 128 Mass. 445; Beckett 
 
 rio, A. & N. Y. R. R. Co. w. Mason, v. Houston, 32 Ind. 393; Slipher 
 
§ 58 THE LAW OF PKIVATE COEPOEATIONS. 66 
 
 § 57. 'Whether Subscription of entire Capital a Condition 
 Precedent. — The subscription of the entire capital provided 
 by the articles of association or charter of a corporation is 
 ordinarily not a condition precedent to the consummation of 
 the contract of membership and the formation of a corporation.^ 
 The provisions of the charter or law of incorporation must, 
 however, prevail ; and if it appears to be the intention of the 
 legislature that the entire stock shall be subscribed before 
 the incorporation shall take effect, the subscribers will not 
 become shareholders in a corporation until that time.^ It is 
 to be observed, that there is a plain distinction between the 
 completion of the contract of membership resulting in the 
 formation of a corporation, and the right of the company to 
 begin to carry on business and levy assessments on its share- 
 holders. Corporations that have been formed and fully or- 
 ganized frequently have no right to begin the prosecution of 
 their main enterprises, or levy assessments for that purpose, 
 until after the whole capital has been subscribed.^ 
 
 § 58. Excessive Subscriptions. — Allotment. — Where shares 
 in excess of the amount allowed by the charter of a corpora-* 
 tion are subscribed after the corporation has been formed, it 
 is evident that the additional subscriptions do not alter the 
 contract between the existing members; the subscriptions 
 made after the full amount has been subscribed are void, and 
 the subscribers do not become members of the corporation.* 
 But if the law provides for an apportionment or allotment of 
 shares among all the subscribers, and if the amount of shares 
 is not sufficient to satisfy all the subscriptions, it is evident 
 that the contract between the subscribers remains incomplete 
 until after an apportionment or allotment has been made.® 
 
 V. Earhart, 83 Ind. 173 ; Haynes v. New Hampshire Cent. R. R. Co. v. 
 
 Brown, 36 N. H. 545, 563; Fulgam v. Johnson, 30 N. H. 390, 407. 
 Macon, &c. R. R. Co., 44 Ga. 597; " Franklin Fire Insurance Co. 
 
 South Georgia & F. R. R. Co. v. v. Hart, 31 Md. 60. 
 Ayres, 56 Ga. 230 ; Minneapolis ' Infra, §§ 137-156. 
 Harvester Works v. Libby, 24 Minn. * Infra, §§ 741-746. 
 327 ; Mitchell v. Beckman, 64 Cal. * Walker v. Devereaux, 4 Paige, 
 
 117 ; and see cases infra, §§ 148, 453. 229 ; Crocker v. Crane, 21 Wend. 211 ; 
 
 1 Supra, § 29 ; Hughes v. Antie- Buffalo & N. Y. City R. R. Co. v. Dud- 
 
 tam Manuf. Co., 34 Md. 328, 329; ley, 14 N. Y. 346. See infra, § 70. 
 
57 THE CONTEACT OP MEMBERSHIP. § 59 
 
 The effect of a provision in a charter for the distribution of 
 shares, in case of an excess of subscriptions over the amount 
 of the company's capital stock, was considered in Buffalo, &c. 
 R. R. Co. V. Dudley .1 The court said : " If no more than 
 the amount was subscribed, the commissioners had no power 
 to distribute, and the several subscribers would be stock- 
 holders holding the number of shares respectively taken. 
 Had it been shown that the amount subscribed before the 
 books were closed was greater than the whole capital, the 
 plaintiff would have been compelled to prove, in order to fix 
 the defendant's liability, that the amount subscribed, or some 
 other amount, had been awarded to him in the distribution ; 
 because, in such a case, as the amount of stock cannot be in- 
 creased, a distribution becomes necessary in order to deter- 
 mine who are the stockholders, and the number of shares 
 each is entitled to, and the subscriptions are made subject 
 to such right or power of distiibution, if the state of the sub- 
 scription shall render its exercise necessary. The presump- 
 tion of law, however, must be, I think, that the books were 
 closed the moment the stock was all taken by subscription, 
 and thus the title of the several subscribers to the number of 
 shares respectively taken, subject to forfeiture by the direc- 
 tors for nonpayment, became perfect the moment the books 
 were closed." 
 
 § 59. Subscriptions are binding from the Time they are made. 
 — Although the contract by which stock subscribers become 
 members of a corporation does not go into effect until all 
 conditions precedent have been complied with, and the corpo- 
 ration is created, yet it does not follow that the subscribers 
 are not bound by their subscriptions from the time they are 
 made.. The contract of the subscribers is not a contract with 
 the corporation, but a contract between themselves. It has 
 been held that a mutual contract to become shareholders in 
 a corporation to be formed thereafter is binding, even at com- 
 mon law.2 The contract between the statutory subscribers, 
 
 » Buffalo & New York City R. R. R. Co. .;. Wilson, 22 Conn. 436, 
 R. Co. u. Dudley, 14 N. Y. 336, 453. 
 346. See also Danbury & Norwalk « Supra, §§ 47-50. 
 
§ 60 THE LAW OF PEIVATB COEPOKATIONS. 58 
 
 however, depends for its validity upon the statute under 
 which the corporation is formed, and not merely upon the 
 common law; and it seems but a reasonable inference, 
 that the intention of the legislature in providing for the 
 opening of stock-books was to make a subscription binding 
 from the time it was made. Otherwise, the greatest facility 
 would be given for practising frauds upon innocent sub- 
 scribers, by means of subscriptions intended merely as a 
 decoy.^ 
 
 In Lake Ontario, &c. R. R. Co. v. Mason,^ Brown, J., said: 
 "If the contract to pay for and take the stock was a valid 
 contract, made upon a sufficient consideration, then his sub- 
 scription was not open to revocation. Until the incorporation 
 of the company was perfected, the other subscribers had an 
 interest in its execution and performance, of which they could 
 not be deprived by the act of the defendant ; and after the 
 articles were filed and recorded in the secretary's office, and 
 the corporation had a legal existence, it acquired a vested 
 interest in the defendant's agreement." 
 
 Certain incorporation laws in New York made provision 
 for a preliminary subscription for shares before the articles 
 of association were signed, yet only those who signed the 
 articles became stockholders in the corporation. It was 
 held that the preliminary subscription was intended merely 
 to bring the parties together, and was not binding.? A dif- 
 ferent conclusion was reached in Indiana, under a similar 
 statute.* 
 
 § 60. Subscriptions after Organization. — Where shares in a 
 corporation are subscribed for pursuant to a statute, before 
 the company has been organized, the engagement between 
 the subscribers is created directly by the act of subscrip- 
 tion. But this method of creating the contract of mem- 
 
 1 See infra, § 107. Connecticut Dillsburg, &e. R. R. Co., 78 Pa. St. 
 
 & P. R. R. R. Co. V. Bailey, 24 Vt. 465. See also Hughes v. Antietam 
 
 476-478. See Greer v. Chartiers Manuf. Co., 34 Md. 328, 829. 
 Ry. Co., 96 Pa. St. 391. » See supra, § 53. 
 
 ^ Lake Ontario, &o. R. R. Co. o. * Heaston i». Cincinnati, &c. R. R. 
 
 Mason, 16 ISr.Y. 451, 463, conira Burt Co., 16 Ind. 282; Johnson v. Wa- 
 
 & Farrar, 24 Barb. 518; Garrett v. bash, &c. R. R. Co., 16 Ind. 389. 
 
69 THE CONTEACT OP MEMBERSHIP. § 61 
 
 bership is ordinarily not applicable after the company has 
 been fully formed and organized. The statutory subscription 
 is provided merely as a means of bringing the association into 
 being ; after the association has been organized, there is ob- 
 vious propriety in treating the admission of new members as 
 a matter to be regulated by the association itself, through its 
 regular agents. 
 
 Accordingly, it has been held that a subscription for shares 
 made after the organization of a corporation does not be- 
 come binding, or constitute the subscriber a shareholder, 
 until it has been accepted by the company through its proper 
 agents.^ 
 
 § 61. Difference between Sales of Shares and Subscriptions. — 
 The issue of new shares by a corporation may take the form 
 either of a sale and purchase of the shares, or of an ordinary 
 subscription. There is an important difference between the 
 two classes of contracts. When a person agrees " to take " 
 or " to purchase " shares, the intention is to buy the certificates 
 representing the shares, as salable securities. In this case, 
 therefore, the delivery of the certificates and the payment of 
 the amount of the shares are intended by the parties to be 
 concurrent acts ; and, upon a failure to carry out the contract, 
 neither party can charge the other without averring a tender 
 of performance.^ As the purchaser does not become a share- 
 holder until he has received the certificates, a breach of the 
 agreement will render him liable only to the extent of the 
 damages which the company has actually suffered.^ On 
 the other hand, the effect of an ordinary subscription is to 
 constitute the subscriber a shareholder immediately, with the 
 right to vote at meetings and share in dividends, and subject 
 to a liability to contribute the amount of the shares when 
 called upon or assessed by the directors. The subscriber 
 
 1 Carlisle ». Saginaw Valley, &c. ment Co., 57 Ind. 138; Weiss v. 
 
 R. R. Co., 27 Mich. 318; Parker Mauch Chunk Iron Co., 58 Pa. St. 
 
 V. Northern Central, &c. R. R. Co., 295, 301; Quick v. Lemon, 105 111. 
 
 33 Mich. 23; Northern Central 578. 
 
 Mich. R. R. Co. v. Eslow, 40 Mich. » Thrasher v. Pike County R. R. 
 
 222. Co., 25 111. 393, 405; and see supra, 
 
 * Clark V. Continental Improve- § 46. 
 
§61 
 
 THE LAW OF PKIVATB CORPORATIONS. 
 
 60 
 
 upon becoming a shareholder would in each case be invested 
 with the resulting rights and liabilities. The delivery or ten- 
 der of a certificate of shares is never a condition precedent to 
 the liability of a shareholder to contribute the amount of his 
 shares after a proper call has been made.^ 
 
 In St. Paul, &c. R. R. Co. v. Robbins,^ an agreement, 
 purporting on its face to be a subscription for shares in a 
 corporation already organized, was construed by the court as 
 an agreement to buy certificates of shares, and it was held 
 that the delivery of the certificates and payment of the pur- 
 chase price should be concurrent acts. 
 
 In Minneapolis Harvester Works v. Libby,^ the defendant 
 had in terms subscribed for shares and agreed to pay the 
 amount of the same in four equal annual instalments ; and it 
 was held that the corporation was under no obligation to 
 aver a tender to the defendant of a certificate of shares in 
 order to maintain a suit to recover the first three instalments, 
 which had matured. 
 
 1 Supra, § 58. 
 
 2 St. Paul, S. & T. F. R. K. Co. v. 
 Kobbins, 23 Minn. 440. Gilfillan, 
 C. J., delivering the opinion of the 
 court, said: "It appears from the 
 complaint, that at the time of this 
 subscription the company was fully 
 organized, so that it does not stand 
 upon precisely the same footing as 
 a subscription made prior to, and 
 for the purpose of effecting, the 
 organization. Such a subscription 
 gives to the subscriber an interest 
 in the corporation, and the right to 
 take part in organizing it, and this 
 interest and right are a sufficient 
 consideration to support his promise. 
 But the subscription in this case 
 does not appear to have been to the 
 original stock; on the contrary, it 
 appears that, after the company 
 was fully organized, its board of 
 directors authorized and directed 
 the issuance of what, in the amended 
 complaint, is called ' preferred capi- 
 
 tal stock,' and also directed that the 
 company's books should be opened 
 to receive subscriptions for the same. 
 The mere subscription to this stock, 
 while it constitutes a valid contract 
 on the part of the company to issue 
 the stock to the defendant upon his 
 paying for it, and, on his part, to 
 receive and pay for it, does not give 
 him an interest in the company, nor 
 vest in him the title to the stock. 
 It can be sustained as a contract 
 only on the implied contract of the 
 company to issue the stock to him. 
 . . . We regard the two promises as 
 concurrent and dependent, and that 
 neither party could require the other 
 to perform without performing or 
 offering to perform the promise on 
 his part. As plaintiff has neither 
 issued the stock, nor offered to is- 
 sue it, the action is prematurely 
 brought.'' 
 
 ' Minneapolis Harvester Works 
 V. Libby, 24 Minn. 327. 
 
61 THE CONTRACT OP MEMBERSHIP. § 62 
 
 In the latter case the court said : " If the action were 
 brought to recover the full price of the shares, or the whole 
 or so much of the price as remained unpaid, such averments 
 would, we think, be necessary, upon the principle of the- 
 case of St. Paul, &c. R. R. Co. v. Robbins. The obligation 
 to issue and deliver the stock would probably be regarded as 
 concurrent with the obligation to make full payment there- 
 for ; but the present action is brought to recover, not the full 
 price, or so much thereof as is unpaid, but three fourths of 
 such price only, — the remaining fourth not having fallen 
 due." The view here expressed appears to be based on a 
 misapprehension of the nature of the defendant's liability. 
 The defendant had not merely agreed to become a stock- 
 holder after paying four annual instalments, but he had actu- 
 ally become a stockholder. By virtue of his membership 
 in the company, he was liable absolutely to contribute the 
 amount of his shares as agreed upon, and was entitled to 
 have certificates representing his shares (paid up or par- 
 tially paid up, according to circumstances) issued to him 
 by the corporation.^ 
 
 Whether a contract with a corporation is a contract to pur- 
 chase shares, or a contract of present membership, depends 
 on the intention of the parties. If payment of the price and 
 delivery of the certificates are intended to be concurrent acts, 
 the transaction will clearly be a purchase and sale. But if 
 it is contemplated that the party contracting with the com- 
 pa,nj shall have any of the rights of the shareholder before 
 the whole amount of the shares has been paid, the contract 
 must be treated as a contract of membership. 
 
 § 62. Mutual Assent is Necessary. — It is clear that the 
 contract of membership in a corporation, like any other con- 
 tract, cannot be created without the mutual consent of the 
 parties. Hence, if a person's name is placed upon the sub- 
 scription-books of a corporation without his authority or 
 consent, the subscription will not bind him.^ 
 
 1 Infra, §453. Lang, 63 Me. 480; McClelland i-. 
 
 2 Ticonio Water Power Co. v. Whiteley, 15 Fed. Kep. 322. 
 
§ 63 THE LAW OP PRIVATE COBPOEATIONS. 62 
 
 So, if articles of association are signed in an incomplete 
 state, the subscriber will not be liable unless he has given 
 authority to complete the instrument afterwards. Thus, the 
 Court of Appeals of New York held that a subscriber to 
 articles of association of a railroad company, in which the 
 place for the names of the directors of the company had 
 been left blank, was not bound by his subscription, he having 
 given no consent, either express or implied, to the comple- 
 tion of the instrument.! Johnson, J., said : " When articles 
 in an incomplete state are circulated in order to procure 
 subscriptions, the mere signing of them cannot be regarded 
 as binding the signer to abide by such filling up of blanks 
 and supplying of wanting provisions as any one may choose 
 to insert. In such case, the signing is merely preliminary in 
 character, and can only become binding upon the signer by 
 his assent to the completion of the paper. . . . The findings in 
 this case negative anj'' consent in any form, express or implied, 
 and of course we must treat the question on that basis. . . . 
 Whether the preliminarj' consent is given upon a separate 
 and different paper from that which is to become the articles 
 of association, or whether the paper signed is that which, when 
 completed, is to be the actual articles of association spoken 
 of in the statute, can make no difference. The principle is 
 only, that consent is necessary to the making of a contract, 
 and that the statute does not introduce any different rule." ^ 
 
 § 63. The same principle applies where a number of per- 
 sons agree to unite in the formation of a corporation, have 
 specified purposes, and a portion of the subscribers after- 
 wards organize a corporation with other purposes. In this 
 case, an original subscriber who has not united in organizing 
 the companj"^ cannot be treated as a shareholder, or held lia- 
 ble on his agreement, for the reason that he never agreed 
 
 1 The law of New York under Mabbett, 58 N. Y. 397; Bucher v. 
 which the company was formed ex- Dillsburg, &c. R. R. Co., 76 Pa. 
 pressly provided that the names of St. 306. Compare Eakright v. Lo- 
 the first directors should appear in gansport & N. R. R. Co., 13 Ind. 
 the articles. Laws of 1850, ch. 140. 404; and Reed i). Richmond Street 
 
 2 Dutchess & C. C. R. R. Co. v. R. R. Co., 50 Ind. 342. 
 
63 THE CONTRACT OP MEMBEESHIP. § 63 
 
 to become a shareholder in the company which is actually 
 formed .1 
 
 In Southern Hotel Co. v. Newman,^ it was held that the 
 defendant in a suit brought by a corporation upon a sub- 
 scription for shares was entitled to show as a defence that 
 the subscription list which he had signed, and upon which 
 suit was brought, had been annulled and abandoned by 
 mutual consent of the parties, and that another subscription 
 list had been subsequently opened and made the basis of the 
 corporate organization. 
 
 A person subscribing for shares as agent for another, but 
 without authority, does not become a shareholder in place of 
 the principal whose name he subscribed ; the unauthorized 
 subscription will merely subject him to an action for dam- 
 ages.^ However, if a person acts as agent for another with- 
 out his authority, the want of authority may generally be 
 cured by a subsequent ratification ; and therefore, although 
 a subscription for shares in a corporation may have been 
 made originally without the consent or authority of the per- 
 son whose name was subscribed, he will nevertheless be held 
 a shareholder, if he afterwards ratified or adopted the sub- 
 scription.* So where the articles of association are altered, 
 or where an attempt is made to transfer a subscription to a 
 new company, the subscriber will be liable if he has con- 
 sented to the change, either by word or by act indicating 
 acquiescence.^ 
 
 1 Dorris v. Sweeney, 60 N. Y. * McCullyu. Pittsburgh, &C.R.R. 
 463; Burrows v. Smith, 10 N. Y. Co., 32 Pa. St. 25; Diman v. Provi- 
 550; Mahan v. Wood, 44 Cal. 462; dence, &c. R. R. Co., 5 R. I. 130; 
 Richmond Factory Ass. v. Clarke, Musgrave v. Morrison, 54 Md. 161, 
 61 Me. 351; Katama Land Co. v. 165; Philadelphia, W. & B. R. R. 
 Jernegan, 126 Mass. 155 ; Richmond Co. v. Cowell, 28 Pa. St. 329 ; Mis- 
 Street R. R. Co. V. Reed, 83 Ind. 9. sissippi & T. R. R. Co. v. Harris, 36 
 
 2 Southern Hotel Co. v. New- Miss. 17. See Putnam t'. New Al- 
 man, 30 Mo. 118. bany, 4 Biss. 365. Compare Rut- 
 
 * Salem Mill Dam Co. v. Ropes, land & B. R. R. Co. «. Lincoln, 29 
 
 9 Pick. 187; contra, State v. Smith, Vt. 206, and cases in the preceding 
 
 48 Vt. 266. Compare Burr v. Wil- notes. See also infra, § 823. 
 cox, 22 N. Y. 551 ; Troy & B. R. R. « Hammond v. Straus, 53 Md. 
 
 Co. V. Warren, 18 Barb. 310. See 1, 16. 
 infra, § 885. 
 
§ 65 THE LAW OF PRIVATE COEPOEATIONS. 64 
 
 § 64. What Agents can receive Subscriptions. — If the gen- 
 eral law or charter under which a corporation is formed pro- 
 vides that subscriptions for shares shall be received by agents 
 of a particular class, no other agents can bind the company 
 or the other subscribers by receiving subscriptions on their 
 behalf. Upon this principle, it has been held that, if the 
 power of allotting shares to applicants is conferred upon the 
 board of directors, they cannot delegate this power to a com- 
 mittee of three of their number, and no valid allotment can 
 be made except by the board. ^ 
 
 The general railroad law of Michigan provided that, after 
 a company had been formed by subscriptions for shares to 
 a certain amount per mile of the proposed road, and after 
 articles of association had been adopted and the corporation 
 organized, the commissioners named in the articles of asso- 
 ciation should open books for subscriptions and keep the 
 same open until all the capital had been subscribed, and in 
 case of an excess of subscriptions should make a distribution 
 among the subscribers. It was held by the Supreme Court, 
 that only the commissioners could receive subscriptions under 
 this law, and that a subscription received by an agent ap- 
 pointed by the directors was not binding. The court said : 
 " The commissioners act as a statutory board, and derive 
 their powers from the law, and not from the corporation. 
 They are expressly required to give notice of the times and 
 places fixed by them for receiving subscriptions, and to keep 
 their subscription books open. The design of the law was 
 to enable all persons to subscribe upon equal terms. No one 
 else was authorized to receive subscriptions, and they were 
 not required to recognize and protect, in their distributions of 
 stock, any stock not subscribed for on their own lists." " 
 
 § 65. If a subscription is not binding because it was 
 received by an agent having no authority to receive it on 
 
 1 Howard's Case, L. K. 1 Ch. Mich. 23; Northern Central Mich. 
 App. 561. R. K. Co. V. Eslow, 40 Mich. 222; 
 
 2 Shurtz V. Schoolcraft, &o. R. R. Essex Turnpike Co. v. Collins, 8 
 Co., 9 Mich. 269, 272; Parker v. Mass. 292; contra, Railroad Co. v. 
 Northern Central, &c. R. R. Co., 33 Rodrigues, 10 Rich. Law, 278. 
 
65 THE CONTRACT OF MEMBEESHIP. § €6 
 
 behalf of the corporation, the want of authority may be cured' 
 by subsequent ratification through the proper agents ; ^ and 
 an irregular subscription, made before the complete incorpo- 
 ration of the company, may be treated as an open offer, which 
 may be accepted by the corporation after organization.^ 
 
 The directors of a corporation have usually implied author- 
 ity to dispose of any unsubscribed shares in the company, for 
 cash. Whether they are bound to observe the same forms 
 and conditions which limit the powers of commissioners be- 
 fore organization in receiving subscriptions, depends upon 
 the terms of the company's charter. But the general rule 
 is that they are not so limited, unless the contrary appears to 
 be intended.^ 
 
 § 66. Powers of Agents receiving Subscriptions. — The au- 
 thority of agents or commissioners appointed by law to re- 
 ceive subscriptions for shares is limited strictly to the duties 
 which they are required to perform.* They cannot, unless 
 specially authorized, refuse to receive a subscription made by 
 a competent person,^ or release a subscription when once 
 made,^ nor can they accept subscriptions made upon special 
 conditions.' But they may very properly require a person 
 offering to subscribe in the name of another to produce satis- 
 factory evidence of his authority to do so ; ^ and they are 
 authorized to take measures to make sure that the subscrip- 
 tions are made in good faith, and in proper form, by competent 
 parties. 
 
 If an act of incorporation appoints certain commissioners 
 to receive subscriptions and to apportion the stock among the 
 subscribers, the commissioners act ministerially in receiving 
 
 1 Walker v. Mobile, &c. K. R. 1 Head (Tenn.), 659, 665, and cases 
 Co., 34 Miss. 245; Mobile & O. below. 
 
 K. R. Co. V. Yandal, 5 Sneed, 294. ^ Crocker v. Crane, 21 Wend. 
 
 2 Infra, § 86. Buffalo & J. R. R. 211 ; Carlisle v. Saginaw Valley, 
 Co. V. Gifford, 87 N. Y. 294, 299. &c. R. R. Co., 27 Mich. 318. 
 
 8 Philadelphia &W.C.R.R. Co. ». « Lowe v. E. & K. R. R. Co., 1 
 
 Hickman, 28 Pa. St. 318, 327; Erie Head (Tenn.), 659; and see supra, 
 
 & W. Plank Road Co. v. Brown, 25 § 59; infra, § 109. 
 Pa. St. 158; Pittsburgh & C. R. R. ' Infra, § 83. 
 Co. I'. Stewart, 41 Pa. St. 54, 58. * State v. Lehre, 7 Rich. Law, 
 
 * See Lowe v. E. & K. R. R. Co., 234. 
 
 VOL. 1. — 5 
 
§ 67 THE LAW OP PRIVATE COEPOEATIONS. 66 
 
 the subscriptions, and any one may act though no majority be 
 present ; but in apportioning the stock among the subscribers 
 they act judicially, and must meet to hear and consult as a 
 board.^ 
 
 Under a law investing the commissioners with authority to 
 distribute the stock in such a manner as they shall deem most 
 advantageous to the corporation, they are not obliged to 
 make a ratable distribution among all the subscribers, but it 
 is contemplated that they shall use their discretion in select- 
 ing the best men.^ 
 
 § 67. Formalities prescribed by Law. — If the charter or 
 general law under which a corporation is about to be formed 
 requires certain formalities to be observed in becoming an 
 original member of the company by a subscription for shares, 
 a subscription made without complying with the prescribed 
 formalities does not constitute a binding contract. This fol- 
 lows, both because the association of the subscribers, if not 
 made in the manner prescribed by law, would be unauthor- 
 ized and therefore illegal at common law, and also because 
 the mutual assent of the associates would in such case be 
 wanting.'* Every subscription by implication refers to and 
 incorporates the terms of the charter or general law under 
 which the corporation is to be formed ; and every subscriber 
 agrees to become associated with the others only upon con- 
 dition that the formalities prescribed by the charter shall be 
 observed in making the mutual contract. Thus, if certain 
 preliminaries, such as the filing of a certificate, are required 
 to be performed after the articles of association have been 
 subscribed, but before the corporation shall be in existence, 
 the contract of membership does not go into effect until these 
 formalities are complied with ; and a subscriber to the articles 
 cannot until then be made to contribute the amount of his 
 subscription.* 
 
 1 Crocker V.Crane, 21 Wend. 211. » /nfra, § 717. With regard to 
 
 * Perkins v. Savage, 15 Wend, formalities in becoming a stock- 
 
 412 ; Walker v. Devereaux, 4 Paige, holder in a corporation by transfer 
 
 229; Clarke v. Brooklyn Bank, 1 of shares, see in/m, § 169 e< sej. 
 
 Edw. Ch. 361. Compare Meads v. * Monterey & S. V. R. R. Co. v. 
 
 Walker, Hopk. Ch. 587. Hildreth, 53 Cal. 123; De Witt v. 
 
67 THE CONTEACT OP MEMBERSHIP. § 69 
 
 § 68. After Incorporation. — The same principles apply 
 where a subscription for shares in a corporation already in 
 existence is made without complying with the formalities 
 prescribed by its constitution. The irregular subscription 
 will not bind the company nor the subscriber.^ Thus, it was 
 decided by the Supreme Court of Michigan, that, under a law 
 providing that the members of a corporation should consist 
 of the original subscribers and such other persons as should 
 subscribe or become shareholders in the company, " in the 
 manner to be provided by its bj'-laws," there could be no 
 further subscriptions after a corporation had been formed 
 until by-laws had been enacted ; and that a subscription 
 made before the enactment of by-laws was not binding.^ 
 
 A contract of membership in a corporation will be held 
 valid, if the requirements of the charter or act of incorpora- 
 tion have been substantially complied with.' And where no 
 formalities are prescribed, any agreement by which a person 
 shows an intention to become a shareholder, upon the terms 
 set forth in the company's charter, is sufficient.* If the 
 charter contains no provision regulating the admission of new 
 shareholders, nor any restriction, the whole matter is left 
 within the control of the corporation, and regulations may be 
 provided through by-laws.^ 
 
 § 69. Form of Subscriptions upon Books. — If the charter 
 under which a corporation is formed provides that persons 
 wishing to become members of the company shall subscribe 
 for shares upon stock-books, this evidently contemplates that 
 the contract between the shareholders shall be made iu writ- 
 Hastings, 69 N. Y. 518; Childs See Kansas City Hotel Co. v. Hunt, 
 V. Smith, 55 Barb. 45, 57; Dorris 57 Ma 126; Galvanized Iron Co. «. 
 V. Sweeney, 60 N. Y. 463; Katama Westoby, 8 Exch. 17; Wilkinson v. 
 Land Co. v. Holley, 129 Mass. 540; Gold Mining Co., 18 Q. B. 728. In- 
 EikhofE V. Brown's, &c. Machine fra, § 719. 
 Co., 68 Ind. 388; Indianapolis Fur- i Infra, §§ 717-719. 
 nace, &c. Co. v. Herkimer, 46 Ind. ^ Carlisle v. Saginaw Valley, &c. 
 142; Nelson v. Blakey, 47 Ind. 38; R. R. Co., 27 Mich. 315. 
 Reed v. Richmond, &c. R. R. Co., »• Supra, § 32. 
 50 Ind. 342; Mclntire v. McLain, * Supra, § 54. 
 &c. Ass., 40 Ind. 104; Richmond ^ ggg State v. Sibley, 25 Minn. 
 Factory Ass. i>. Clarke, 61 Me 351. 387. 
 
§ 69 THE LAW OF PRIVATE COBPOBATIONS. 68 
 
 ing, and according to the forms provided ; and hence an oral 
 agreement will not under these circumstances be sufficient to 
 constitute the contractor a shareholder.^ This, however, has 
 no application to a contract to purchase certificates of shares, 
 and to become a shareholder in a corporation, after it has 
 been fully organized. It has been pointed out that a contract 
 of this description does not constitute the person dealing with 
 the company a shareholder, until a certificate has been deliv- 
 ered to him, and his name entered upon the stock-books.^ A 
 contract for the sale of stock certificates is governed by the 
 same rules and statutes which govern contracts for the sale 
 of other transferable securities.^ 
 
 No particular form of subscription is essential. The sub- 
 scription paper must be read in connection with the charter 
 or articles of association to which it refers, and it is sufficient 
 if it indicates that the subscriber intended to become a share- 
 holder in the corporation and fixes the amount of his shares.* 
 
 Under a statute providing for subscriptions upon books, sub- 
 scriptions are valid if made upon unbound sheets of paper.^ 
 In Brownie e v. Ohio, &c. R. R. Co.,^ it was held that a sub- 
 scription obtained by an agent in a small blank book, and 
 afterwards accepted by the company, was binding, and that it 
 was not necessary to transfer it to the stock-books, inasmuch 
 as its acceptance by the company would make the book in 
 which it was made the stock -book to that extent. 
 
 In Iowa & Minn. R. R. Co. v. Perkins,^ the defendant was 
 held liable under the following circumstances. At a meet- 
 ing held for the purpose of obtaining subscriptions, a num- 
 
 1 Vreeland v. N. J. Stone Co., 29 15 Ohio St. 328. Compare Gran- 
 N. J. Eq. 188, 191; Pittsburgh, &o. gers' Market Co. v. Vinson, 6 Oreg. 
 R. R. Co. V. Gazzam, 32 Pa. St. 840; 174. 
 
 Fanning v. Insurance Co., 37 Ohio * Hamilton, &c. Plank Road Co. 
 
 St. 339; Thames Tunnel Co. j). u. Rice, 7 Barb. 157; Ashtabula, &o. 
 
 Sheldon, 6 B. & C 341. Compare R. R. Co. v. Smith, 15 Ohio St. 328. 
 
 Bates County v. Winters, 112 U. S. See Buffalo, &c. R. R. Co. v. Gifiord, 
 
 325. 87 N. Y. 294. 
 
 2 Supra, § 61. « 18 Ind. 68. 
 
 » Infra, § 226. ' 28 Iowa, 283. See also Stuart 
 
 « Nultonu. Clayton, 54 Iowa, 425; v. Valley R. R. Co., 32 Gratt. 146; 
 
 Ashtabula, &c. R. R. Co. v. Smith, Woodruff v. McDonald, 33 Ark. 97. 
 
69 THE CONTEACT OF MEMBERSHIP. § 70 
 
 ber of persons agreed to take shares, and authorized the 
 parties soliciting the subscriptions to write their names and 
 the amounts taken upon slips of paper. The subscriptions 
 thus obtained were afterwards transcribed by an oflScer 
 of the company upon the stock-book. The court held that 
 this book was the primary evidence of the subscriptions. 
 Beck, J., said : " The book and slips of paper upon which the 
 names and amounts were written at the meeting were but 
 memoranda of the authority conferred upon the officer of the 
 company to make subscriptions in the name of the different 
 parties agreeing to take stock in the corporation. The book 
 admitted in evidence thus became the original contract or 
 subscription, and was properly admitted without proof of the 
 loss, as claimed by defendant." 
 
 Under an act providing that each subscriber to the arti- 
 cles shall subscribe thereto " his name, place of residence, and 
 amount by him subscribed," a subscription in a partnership 
 name is valid, and the members of the firm are jointly liable.^ 
 
 It has been held that a subscription given in escrow to the 
 commissioners authorized to receive it is binding uncondition- 
 ally from delivery .2 
 
 § 70. Allotment of Shares. — If the constitution of a com- 
 pany requires an allotment of shares before an applicant can 
 become a member, the contract between the applicant and 
 the other shareholders in the company does not become 
 binding until after an allotment has been made, and notice 
 thereof sent to the applicant. 
 
 This is the rule in England under the Companies Act of 
 1862. An application for shares is a mere offer, which does 
 not become binding as a contract until an allotment is made 
 to the applicant by the directors of the company. The 
 application may therefore be revoked at any time before it 
 lias been accepted.^ 
 
 ' Ogdensburgh, &o. R. R. Co. v. 16 B. Monr. 4. Compare Ca?8 v. 
 
 Frost, 2J. Barb. 541. Compare Troy, Pittsburg, &o. Ey. Co., 80 Pa. St. 
 
 &c. R. R. Co. V. Warren, 18 Barb. 31. 
 310. » Ward's Case, L. R. 10 Eq. 659 ; 
 
 ' Wight V. Shelby R. K. Co., Best's Case, 2 De G., J. & S. 650; 
 
§ 70 THE LAW OP PKIVATB COEPOEATIONS. 70 
 
 But an allotment is not necessary to conclude an agree- 
 ment to become a shareholder in the company when shares 
 shall be allotted ; it is only necessary in order to constitute 
 the applicant a present shareholder in the company.^ 
 
 The offer of an applicant for shares will be deemed open 
 for acceptance only for a reasonable length of time.^ The 
 acceptance of this offer requires both an allotment and notice 
 thereof to the applicant. An allotment without notice is 
 not sufficient.^ The notice may be sent by post, and the 
 allottee becomes bound from the time of posting the notice.* 
 If the allottee in fact knew of the allotment, a formal notifi- 
 cation may be dispensed with.^ 
 
 It is evident that an allotment of shares must be made in 
 strict conformity with the application;^ and where the appli- 
 cation is made conditionally, or upon special terms, a plain 
 acceptance of the conditions or special terms is necessary.'^ 
 
 Under the Companies Act of 1862 the original subscribers 
 of the memorandum are, by the twenty-third section of the 
 act, to be deemed to have agreed to become members, and 
 must be entered upon the register of shareholders. They 
 must be treated as shareholders, although no shares have 
 been allotted to them, and although they have never been 
 
 Eamsgate, &c. Co. v. Montefiore, son, L. R. 6 Ex. 108; andsee Town- 
 
 L. R. 1 Ex. 109 ; Chapman's Case, send's Case, L. R. 13 Eq. 148. 
 
 L. R. 2 Eq. 567; Ritso's Case, L. R. ^ Levita's Case, L. R. 3 Ch. 36; 
 
 4 Ch. D. 774. Ci-awley's Case, L. R. 4 Ch. 322; 
 
 1 Adams's Case, L. R. 13 Eq. Richards v. Home Assur. Ass., L. R. 
 474; compare «upra, § 61 6 C. P. 591. Compare Pellatt's Case, 
 
 2 Eamsgate, &c. Co. v. Monte- L. R. 2 Ch. 527. 
 
 flora, L. R. 1 Ex. 109; Bailey's ° Gustard's Case, L. R. 8 Eq. 
 
 Case, L. R. 5 Eq. 428, and 3 Ch. 438; Roberts's Case, 1 Drew. 201; 
 
 App. 592. Jackson v. Turquand, L. R. 4 H. L. 
 
 » Hebb's Case, L. R. 4 Eq. 9; 805;. Oriental, &c. Steam Co. v. 
 
 Gunn's Case, L. R. 3 Ch. App. 40; Biiggs, 4 De G., F. & J. 191; Duke 
 
 Crawley's Case, L. R. 4 Ch. 322 ; v. Andrews, 2 -Exch. 290. Compare 
 
 Wallis's Case, Id. 325, note; Pel- Harris's Case, L. R. 7 Ch. App. 
 
 latt's Case, L. R. 2 Ch. 528; Ward's 587. 
 Case, L. R. 10 Eq. 659. ' Shackleford's Case, L. R. 1 Ch. 
 
 4 Harris's Case, L. R. 7 Ch. 587. App. 567; Rogers's Case, L. R. 3 
 
 Compare Hebb's Case, L. R. 4 Eq. Ch. App. 683. See also Lindley on 
 
 9; British & Amer. Tel. Co. v. Col- Partnership (4th ed,), 100-106. 
 
71 THE CONTRACT OP MBMBBESHIP. § 71 
 
 registered as shareholders.^ But if all the shares in the 
 company have been duly allotted to other persons, so that 
 none are left which a subscriber of the memorandum can be 
 treated as holding, he must be treated as having transferred 
 his shares.^ 
 
 § 71. When Payment of Deposit is essential to the Validity 
 of a Subscription. — Charters and general incorporation laws, 
 in many instances, have provided that the subscribers for 
 shares in a company formed under them shall make a certain 
 deposit in money for each share subscribed. In construing 
 some of the statutes containing provisions of this description, 
 it has been held that the payment of the deposit was required 
 for purposes of general public policy, as a safeguard against 
 fictitious and fraudulent subscriptions, and to insure to cred- 
 itors a portion, at least, of the security they were entitled to 
 expect.^ In these cases, therefore, it was considered that 
 actual payment of the deposit upon the prescribed portion of 
 the capital of the corporation was intended as a condition 
 precedent to the right of the company to exercise corporate 
 powers at all,* and that a subscription made without the pay- 
 ment of the deposit must be treated as absolutely null and 
 void.^ 
 
 1 Re London, &c. Coal Co., L. R. s. c. 58 How. Pr. 273. Compare 
 5 Ch. D. 525; Hall's Case, L. K. 5 Goshen Turnpike Co. v. Hurtin, 9 
 Ch. App. 707; Evans's Case, L. K. Johns. 218; Highland Turnpike Co. 
 2Ch. App. 427; Sidney's Case, L. R. ». McKean, 11 Johns. 98; Ogdens- 
 13 Eq. 228. burgh, &c. R. R. Co. v. WoUey, 34 
 
 2 Maokley's Case, L. R. 1 Ch. D. How. Pr. 65; Ogdensburgh, &c. 
 247; Drummond's Case, L. R. 4 Ch. R. R. Co. v. Frost, 21 Barb. 542. 
 App. 772, 776; and see Lindley on See also State Insurance Co. v. Red- 
 Partnership (4th ed.), 1338. mond, 1 McCrary C. C. 308; Fiser 
 
 * As to the rights of the creditors v. Mississippi & Tenu. R. R. Co., 32 
 of a coi-poration, see infra, Chap- Miss. 359; Taggart u. Western Md. 
 ter X. R. R. Co. , 24 Md. 588, 592 ; Busey w. 
 
 * People V. Chambers, 42 Cal. Hooper, 35 Md. 15; Charlotte, &c. 
 201, supra, § 30. Compare Napier R. R. Co. v. Blakely, 3 Strobh. 245; 
 .,. Poe, 12 Ga. 170, 184; Common- Wood v. Coosa, &o. R. R. Co., 32 Ga. 
 wealth V. West Chester R. R. Co., 3 273; Hibernia Turnpike Co. o Hen- 
 Grant's Cas. 200. derson, 8 S. & R. 219 ; Bucher v. 
 
 6 Jenkins v. Union Turnpike Co., Dillsburg, &c. R. R. Co., 76 Pa. St. 
 1 Caines Cas. 86; Excelsior Grain 306, per Sharswood and Williams, 
 Binder Co. v. Stayner, 25 Hun, 91; JJ. ; Boydt". Peach Bottom By. Co., 
 
§ 71 THE LA"W OF PEIVATB COEPOBATIONS. 72 
 
 But even where this construction has been placed on a 
 statute, the payment must not necessarily be made at the 
 outset. If made at a subsequent time, it will inure to the 
 benefit of the subscriber, and his contract will become valid, 
 and binding.^ Under a law requiring a payment of a certain 
 percentage to be made upon each subscription in cash or 
 money, a payment by promissory note,^ or by check,^ is not 
 sufficient until the note or check has actually been paid. 
 Hence it has been held, that, where a subscriber gives his 
 check for the required ten per cent, but countermanded the 
 check before it was presented for payment, his subscription 
 would never become binding.* If, however, a company 
 should negotiate a note or check received in payment of a 
 required deposit, and thus obtain the amount in money, this 
 would probably be considered a sufficient payment to satisfy 
 the statute. In Beach v. Smith,^ the defendant, after having 
 subscribed for shares, presented an account against the com- 
 pany for services, and credited the company with the amount 
 which the statute required to be paid on making the sub- 
 scription. The account was allowed by the company, and a 
 balance due the defendant was paid. It was held that this 
 was a sufficient compliance with a statute requiring payment 
 to be made in cash on subscribing, to render the defendant's 
 subscription binding. 
 
 Under a statute providing that the articles of association 
 of a proposed railroad company " shall not be filed . . . until 
 
 90 Pa. St. 169; and compare Com- * Leighty v. Susquehanna, &c. 
 
 monwealth v. West Chester K. R. Turnp. Co., 14 S. & R. 434; Boyd 
 
 Co., 3 Grant's Cas. 200; Garrett v. v. Peach Bottom Ry. Co., 90 Pa. St. 
 
 Dillsburg, &o. R. R. Co., 78 Pa. St. 169. 
 
 465; Philadelphia & W. C. R. R. « Excelsior Grain Binder Co. v. 
 
 Co. V. Hickman, 28 Pa. St. 318. Stayner, 25 Hun, 91. Compare 
 
 1 Black River, &c. R. R. Co. v. People v. Stockton, &c. R. R. Co., 
 
 Clarke, 25 N. Y. 208; Beach v. 45 Cal. 306; Thorp v. WoodhuU, 1 
 
 Smith, 80 N. T. 116; 28 Barb. 258. Sandf. Ch. 411. 
 
 See also Fiser v. Mississippi & Tenn. * Excelsior Grain Binder Co. v. 
 
 R. R. Co., 32 Miss. 359; Barrington Stayner, 61 How. Pr. 456; s. c. 25 
 
 V. Mississippi Central R. R. Co., Id. Hun, 91. 
 
 370; Kleinu. Alton, &c. R. R. Co., 13 « Beach v. Smith, 30 N. Y. 116; 
 
 111. 514; Hall v. Selma, &c. R. R. 28 Barb. 258. Compare People v. 
 
 Co., 6 Ala. 742. Troy House Co., 44 Barb. 626, 634. 
 
73 THE CONTEACT OF MEMBEBSHIP. § 72 
 
 at least $1,000 of stock for every mile of the road proposed 
 to be made is subscribed thereto, and ten per cent paid 
 thereon in good faith, in cash, to the directors named in said 
 articles of association," it is not necessary that ten per cent 
 be paid on each subscription, but it is sufficient if the cash 
 payments, bj^ whomsoever made, amount in the aggregate to 
 ten per cent of one thousand dollars for each mile of road.^ 
 
 § 72. 'When Payment of Deposit is not essential. — In other 
 cases, however, it has been held that a provision in an act of 
 incorporation, requiring the payment of a deposit upon each 
 share subscribed, did not impose a condition precedent to the 
 incorporation of the company, but that it was intended solely 
 for the benefit of the company and its creditors, and for the 
 purpose of providing a fund out of which the expenses of the 
 preliminary organization might be paid. Under a law of' this 
 character, a subscription made without the payment of the de- 
 posit would not be void. It might be refused by the other sub- 
 scribers, or the corporation acting on their behalf, on account 
 of the non-performance of a condition upon which membership 
 was offered; but if the corporation should accept the sub- 
 scription without the payment of the deposit, the subscriber 
 would not be entitled to deny the validity of his contract. 
 
 There are strong arguments in favor of this view. To 
 permit subscribers to repudiate their subscriptions after the 
 company has been organized, on the ground that they ne- 
 glected to pay the prescribed deposit, would in many in- 
 stances defeat the very purposes for which the statute was 
 enacted. The subscribers would commit a fraud upon the 
 State by forming and organizing a corporation on the strength 
 of worthless subscriptions ; they would be guilty of a fraud 
 upon other subscribers, by inducing them to take shares on 
 the faith of the genuineness of their subscriptions, and they 
 would be guilty of a fraud upon creditors by obtaining credit 
 on fictitious capital stock.^ 
 
 1 Lake' Ontario, &c. R. K. Co. t. ^ In Illinois River R. R. Co. v. 
 
 Mason, 16 N. Y. 451; Spartanburg, Zimmer, 20 111. 654, 6.57, Caton, 
 
 &c. R. R. Co. V. Ezell, 14 S. Car. C. J., said: " Good faith to other 
 
 281. subscribers, who may have been in- 
 
§ 73 THE LAW OF PRIVATE COKPOKATIONS. 74 
 
 In Mitchell v. Rome R. R. Co.,^ the charter of the rail- 
 road company contained a provision that, " upon the sub- 
 scription for shares in said stock, the subscribers shall pay 
 the sum of five dollars on each share subscribed for by such 
 subscriber ; provided that said company may commence the 
 construction of their railroad and boating so soon as three 
 thousand shares shall be subscribed ; " and it was held by 
 the Supreme Court of Georgia that the payment of five dol- 
 lars on each share at the time of subscription was not a con- 
 dition precedent either to the existence of the company as a 
 corporation, or to its right to commence business, and that a 
 failure to pay did not render the subscription void.^ 
 
 Upon the same principle, it was held in New Hampshire 
 that, where the by-laws of a corporation provided that " ten 
 per cent shall be payable upon subscription, or the subscrip- 
 tion shall be void," a subscription made without the required 
 payment was at most only voidable, at the election of the 
 corporation, and if accepted by the company was binding 
 upon the subscriber.^ 
 
 § 73. Irregular Contracts of Membership. — A failure to 
 comply with the forms prescribed by law in entering into 
 
 duced to take stock on the strength mont Central R. R. Co. v. Clayes, 
 of these very subscriptions, requires 21 Vt. 30; Smith v. Tallassee, &o. 
 that the defendants shall go on with Plank Road Co. , 30 Ala. 650 ; Wight 
 them in the execution of the enter- v. Shelby R. R. Co., 16 B. Monr. 4; 
 prise. Good faith to the creditors Vicksburg, &c. R. R. Co. v. Mc- 
 of the company, who had a right to Kean, 12 La. Ann. 638; Henry v. 
 look to the list of subscribers to Vermillion, &c. R. R. Co., 17 Ohio, 
 determine whether the company was 191 ; Chamberlain v. Painesville, &c. 
 worthy of credit, imperiously de- R. R. Co., 15 Ohio St. 225. Com- 
 mands that those who by their sub- pare Napier v. Poe, 12 Ga. 170, 184; 
 scriptions induced the credit shall Ryder v. Alton & Sangamon R. R. 
 be compelled to contribute to the Co., 13 111. 516; Klein v. Alton & 
 fund from which they are to receive Sangamon R. R. Co., Id. 514; Com- 
 their pay." Compare Garrett v. mon wealth v. West Chester R. R. 
 Dillsburg, &c. R. R. Co., 78 Pa. St. Co., 3 Grant's Cas. 200; Ogdens- 
 465. burgh, &c. R. R. Co. v. Wolley, 34 
 
 1 Mitchell V. Rome R. R. Co., 17 How. Pr. 54; Home Stock Ins. Co. 
 Ga. 574. Compare Wood v. Coosa, v. Sherwood, 72 Mo. 461. 
 
 &c. R. R. Co., 32 Ga. 273. » Piscataqua Ferry Co. v. Jones, 
 
 2 See also Illinois River R. R. 39 N. H. 491. 
 Co. V. Zimmer, 20 111. 656; Ver- 
 
75 THE CONTEAOT 01" MEMBERSHIP. § 74 
 
 the contract of membership does not necessarily prevent a 
 person from becoming a shareholder de facto, with all the 
 rights and liabilities of a shareholder. The authority of the 
 ordinary agents receiving subscriptions for shares, on behalf 
 of the corporation or the other shareholders, is undoubtedly 
 limited b}' the prescribed conditions, and any irregular con- 
 tract would be contrary to the implied prohibition of the law. 
 But the want of authority in the agent may be cured by the 
 subsequent act of the principal, and the legal prohibition 
 does not necessarily render the contract null and void. The 
 mutual relationship existing between the shareholders in a 
 corporation, and the equitable rights of creditors, must be 
 considered. It is an established rule of general application, 
 that a person who has been recognized as a shareholder, and 
 has acted as a shareholder, will be held liable as a shareholder 
 both to the company and its creditors.^ 
 
 § 74. Proof of Membership. — Evidence that a person sub- 
 scribed for shares in a corporation before it had been fully 
 incorporated, would not be sufficient to establish that he be- 
 came a shareholder, in the absence of proof that all conditions 
 precedent to the incorporation of the company have been 
 performed.^ Evidence that a subscription was made after 
 the organization of the company, and that it was accepted by 
 the proper agents, would, however, be sufficient.^ In order 
 to establish that a person became a shareholder in a corpora- 
 tion, it must, of course, be made to appear that the company 
 had a capital stock, and that it had the power to issue the 
 shares.* 
 
 Proof of facts or circumstances which would constitute a 
 person a shareholder, or which would estop a person from 
 denying that he became a shareholder, would clearly be 
 sufficient evidence of membership. Hence it would ordina- 
 rily be sufficient, in a suit to charge a defendant as a share- 
 
 1 Infra, §§ 721, 723, 728. » Supra, §§ 60, 61. 
 
 2 Supra, § 67. Infra, § 717. * Minneapolis Harvester Works 
 Compare Cheraw, &c. R. R. Co. v. v. Libby, 24 Minn. 327. 
 
 White, 14 S. C. 51; Same v. Gar- 
 land, 14 S. C. 63. 
 
§ 75 THE LAW OF PEIVATB COEPOEATIONS. 76 
 
 holder, to prove that he has acted as a stockholder, and that 
 he was received as a shareholder by the company .^ 
 
 It should be observed, however, that the liability of share- 
 holders to contribute the amount of their shares may fre- 
 quently depend upon conditions precedent. In a suit to 
 enforce the liability of a shareholder to contribute the amount 
 of his shares, it is not only necessary to show that he became 
 a shareholder, but it must also be shown that all conditions 
 precedent to his liability have been fulfilled.^ 
 
 § 75. Stock-Books admissible as Evidence for the Company. 
 — It has been held that the books of a corporation are admis- 
 sible in evidence .to prove that all things necessary to the 
 legal incorporation and organization of the company have 
 been performed,^ and that the commissioner's book of sub- 
 scriptions is prima facie evidence that the subscriptions were 
 genuine, and made by persons duly authorized.* " WJiere the 
 name of an individual appears on the stock-book of a corpora- 
 tion as a stockholder, the prima facie presumption is that he 
 is the owner of the stock, in a case where there is nothing to 
 rebut that presumption ; and, in an action against him as a 
 stockholder, the burden of proving that he is not a stock- 
 holder, or of rebutting that presumption, is cast upon the 
 defendant."^ Where a certain amount of stock must be 
 
 1 Infra, § 721. The admissions v. Carey, 5 Ga. 239, and cases in 
 of a defendant are sufficient prima following notes. See also supra, 
 facie evidence that he became a §§ 40-42. 
 
 shareholder. Dows v. Naper, 91 * Kockville, &c. Turnpike Co. 
 
 III. 44. The authenticity of sub- v. Van Ness, 2 Cranch C. C, 449, 
 
 scriptions may be established by 451. 
 
 proof that calls made upon the sub- ' TurnbuU v. Payson, 95 U. S. 
 
 scribers have been paid. Union 421, per Justice Clifford, citing 
 
 Hotel Co. V. Hersee, 79 N. Y. 454, Hoagland «. Bell, 36 Barb. 57 ; 
 
 460. Hamilton, &c. Plank Road v. Rice, 
 
 2 Infra, §§ 136-146. 7 Barb. 162; Rockville, &c. Turh- 
 8 Grant v. Henry Clay Coal Co., pike Co. v. "Van Ness, 2 Cranch C. 
 
 80 Pa. St. 208; Wood v. Jefferson C. 449, 451; Mudgett v. Horrell, 33 
 
 Co. Bank, 9 Cow. 194; Penobscot, Cal. 25; Coffin v. Collins, 17 Me. 
 
 &c. R. R. Co. V. Dunn, 39 Me. 587, 440; Merrill v. Walker, 24 Me. 237; 
 
 596; Ryder v. Alton, &c. R. R. Hammond v. Straus, 53 Md. 1, 16; 
 
 Co., 13 111. 516, 523; Duke v. Car Pittsburgh, &c. R. R. Co. v. Ap- 
 
 hawba Nav.' Co., 10 Ala. 82; HaU plegate, 21 W. Va. 172. See also 
 
77 THE CONTEACT OF MEMBERSHIP, § 76 
 
 subscribed before a shareholder can be required to pay as- 
 sessments, the stock-books are prima facie evidence that the 
 required amount has been subscribed.^ 
 
 The stock-books are not merely received in evidence as 
 explanatory entries made contemporaneously with the' trans- 
 action which they record, but they are admitted as inde- 
 pendent evidence. It has been held that a stock ledger and 
 shareholders' list were admissible to prove who were the 
 stockholders of a company, although compiled by copying' 
 the original subscription paper which had been circulated 
 and signed.^ 
 
 § 76. While the rule stated in the preceding section ap- 
 pears to be well established by authority, it is difficult to 
 support it by any principle of the common law. The stock- 
 books of a corporation are undoubtedly evidence against it, 
 as admissions ; but they cannot be admitted on this ground 
 for the company, against a person who denies that he is a 
 shareholder.-^ 
 
 In England, by the Companies Clauses Consolidation Act 
 of 8 & 9 Vict. c. 17, § 29, the register of shareholders was ex- 
 pressly made prima facie evidence that a person whose name 
 was on the books was a shareholder, and of the amount and 
 number of his shares. In an action brought by a company to 
 recover calls, Lord Brougham said : " A great privilege is 
 bestowed by the act upon the company, neither more nor less 
 than that of making evidence for itself. The books of the 
 company are made evidence for the company, and, unless 
 
 Wood V. Coosa, &c. R. K. Co., 32 9 Gray, 159: Central Turnpike Co. 
 
 Ga. 273. i>. Valentine,' 10 Pick. 142. Contra, 
 
 The fact that the stock-books Philadelphia, &c. R. R. Co. v. Hick- 
 show a transfer to the defendant, man, 28 Pa. St. 318; and compare 
 and no subsequent re-transfer, is Chase v. Sycamore, &c. R. R. Co., 
 prima facie evidence that the de- 38 111. 215, 218. 
 fendant is still a stockholder. Til- " Stuart v. Valley R. R. Co., 32 
 den V. Young, 39 Mich. 58. Gratt. 146; Hayden v. Atlanta Cot- 
 
 1 Penobscot R. R. Co. v. Dum- ton Factory, 61 Ga. 234. 
 mer, 40 Me. 172; Penobscot R. R. » See Wheeler v. Walker, 45 
 
 Co. V. White, 41 Me. 512; Lane v. N. H. 355, 358; Chase v. Sycamore, 
 
 Brainerd, 30 Conn. 565; Marlbor &c. R. R. Co., 38 111. 215, 218; 
 
 ough, &c. R. R. Co. V. Arnold, Wharton on Evidence, § 661. 
 
§ 77 THE LAW OF PRIVATE COEPOEATIONS. 78 
 
 rebutted by counter evidence, will be sufficient to warrant 
 a verdict in each case. It must be admitted that this is a 
 very great privilege, and an exception to the ordinary rules 
 of evidence. By those rules, and the rules of common sense 
 and justice, what a man writes is evidence against him, but 
 not evidence in his favor ; but here the proposition is re- 
 versed. So that the company, by writing in the books that 
 ' A. B. holds ' a certain number of shares, can go into court 
 and make A. B. answerable for them, and can produce the 
 entry as evidence against him. This is a great privilege, and, 
 in order to justify the exercise of it, the conditions on which it 
 is given, namely, the provisions of the statute as to the mak- 
 ing of these entries, must be strictly complied with ; and I 
 hold that it is much safer to consider each of those provisions 
 as a condition precedent, as a condition imperative, and not 
 merely directory, on account of the great importance of the 
 privilege itself, and on account of its being an exception to 
 all ordinary rules of evidence." ^ 
 
 § 77. Subscriptions are Contracts in Writing. — A subscrip- 
 tion for- shares in a corporation is a contract in writing, and 
 therefore cannot be proven by parol evidence until the ab- 
 sence of the original has been accounted for.^ Nor can the 
 terms of the contract entered into by a subscriber be varied 
 by parol evidence of a special agreement or condition made 
 prior to or contemporaneous with the subscription.^ 
 
 1 Bain v. Whitehaven, &c. Ry. v. Hamlin, 24 Hun, 390; Greer v. 
 Co., 3 H. L. C. 1, 22. See also Chavtiers Ry. Co., 96 Pa. St. 391. 
 Birkenhead, &c. Ry. Co. v. Brown- ^ McClure v. People's Freight 
 rigg, 4 Exch. 426. Ry. Co., 90 Pa. St. 271 ; Mississippi, 
 
 2 Vreeland v. JST. J. Stone Co., 29 &c. R. R. Co. v. Cross, 20 Ark. 443; 
 N. J. Eq. 188, 191; Pittsburgh, &o. Piscataqua Ferry Co. v. Jones, 39 
 R. R. Co. V. Gazzam,32 Pa. St. 340; N. H. 491; Wight v. Shelby R. R. 
 Pittsburgh, &c. R. R. Co. u. Clarke, Co., 16 B. Monr. 4; Connecticut, 
 29Pa.St. 146, 152; Fairfield County &c. R. R. Co. v. Bailey, 24 Vt. 
 Turnpike Co. v. Thorp, 13 Conn. 465; Methodist Episcopal Church 
 173. The erasure or alteration of a v. Town, 49 Vt. 29; New Albany, 
 subscription does not per se prevent &c. R. R. Co. v. Fields, 10 Ind. 187; 
 a suit upon it. Explanatory parol Evansville, &o. R. R. Co. v. Posey, 
 evidence is admissible. Johnson v. 12 Ind. 363; Eakright v. Logansport, 
 Wabash, &o. Plank Road Co., 16 &C.R.R. Co. 13 Ind. 404, 407; Roche 
 Ind. 389; Sodus Bay, &o. R. R. Co, v. Roanoke Seminary, 56 Ind. 198; 
 
79 THE CONTRACT OF MEMBERSHIP. § 78 
 
 PART II. 
 
 SUBSCRIPTIONS UPON CONDITIONS PRECEDENT AND UPON 
 SPECIAL TEEMS. 
 
 § 78. Subscriptions upon Conditions Precedent. — A sub- 
 scription for shares may, by its express terms, be made con- 
 tingent in its operation upon the performance of certain 
 conditions precedent. In this case the subscriber does not 
 become a shareholder in the corporation, together with those 
 who subscribed unconditionally ; but his subscription is 
 merely an offer to become a shareholder after the prescribed 
 conditions have been performed. The performance of the 
 stipulated conditions is necessary to an acceptance of the 
 offer to become a shareholder ; and before the conditions 
 have been performed the subscriber does not, by virtue of 
 his subscription, become a member of the company at all. 
 It follows, that he does not, until then, become entitled to 
 the privileges nor subject to any of the liabilities attaching 
 to the status of a shareholder. 
 
 Thus, in Ticonic Water Power Co. v. Lang,^ it appeared 
 that the defendant had subscribed for shares upon condition 
 " that 175,000 be subscribed for before June 14, 1867." The 
 full amount was subscribed within the time stipulated, but a 
 considerable portion of the subscriptions were made upon 
 condition that the balance of the shares should be taken "by 
 citizens of Waterville and Winslow." This latter condition 
 was not fulfilled. The Supreme Court of Maine held that the 
 defendant was not liable, because there was not, on June 14, 
 1867, a binding subscription of $75,000, as required by the 
 
 Haskell v. Sells, 14 Mo. App. 91 ; White Hall, &o. R. R. Co. v. Myers, 
 
 Smith V. Tallassee, &c. Plank Road 16 Abb. Pr. n. s. 34; Noble v. Cal- 
 
 Cc, 30 Ala. 650; North Carolina lender, 20 Ohio St. 199. Compare 
 
 R. R. Co. V. Leach, 4 Jones (Law), Tonioa, &c. R. R. Co. v. Stein, 21 
 
 340; Thigpen v. Mississippi Cent. 111. 96. 
 
 R. R. Co.,32Miss. 347; Ridgefleld, i Ticonic Water Power Co. v. 
 
 &c. R. R. Co. V. Brush, 43 Conn. 98; Lang, 63 Me. 480. ^ 
 
§ 79 THE LAW OF PRIVATE COEPORATIONS. 80 
 
 terms of his subscription. Danforth, J., said: "Whatever 
 might be the condition of the stock-book subsequent to 
 June 14, 1867, at that time the conditions upon which the 
 defendants subscribed had not been fulfilled, their propo- 
 sition to take stock had not been accepted, and they were 
 released from any obligation which before that might have 
 rested upon them. After such release their obligation could 
 not be restored by any act of the other parties to the contract 
 without their consent."^ 
 
 § 79. Condition as to Location of a Railroad. — Upon the 
 same principle, it has been decided that, if a subscription for 
 shares in a railroad company is made upon the condition that 
 the road shall be located upon a certain route, the subscriber 
 does not become a shareholder, or incur any liability upon 
 his subscription, until the road has been located "in accordance 
 with the terms of his offer; but if the road is located by the 
 corporation in the manner required, before the offer is with- 
 drawn, the subscriber will become bound as a member of the 
 company, and invested with all the rights and obligations 
 attaching to that position.^ 
 
 In McMillan v. Maysville, &c. Railroad Co.,^ the Supreme 
 
 1 See also Philadelphia, &c. E. R. Wis. 512; Martin v. Pensacola, &c. 
 Co. y. Hickman, 28 Pa. St. 318; Cass R. R. Co., 8 Fla. 370; O'Neal ». 
 V. Pittsburg, &c. Ry. Co., 80 Pa. King, 3 Jones (Law), 517; Wear ». 
 St. 31; Troy, &o. R. R. Co. v. New- Jacksonville, &o. R. R. Co., 24 111. 
 ton, 8 Gray, 596; People's Ferry 595; Mansfield, &c. R. R. Co. v. 
 Co. V. Balch, 8 Gray, 312; Cabot, Brown, 26 Ohio St. 224; Mansfield, 
 &c. Bridge Co. v. Chapin, 6 Cush. &o. R. R. Co. v. Stout, Id. 241 ; 
 53; Santa Cruz R. R. Co. v. Chamberlain v. Painesville, &c. R. 
 Schwartz, 53 Cal. 106; Oskaloosa R. Co., 15 Ohio St. 225; Lowe w. E. 
 Agricultural Works v. Parkhurst, & K. R. R. Co., 1 Head, 659; North 
 54 Iowa, 357; Monadnock R. R. Co. Missouri R. R. Co. v. Winkler, 29 
 V. Felt, 52 N. H. 379. Mo. 318; Connecticut, &c. R. R. Co. 
 
 2 Swartout v. Michigan Air Line ». Baxter, 32 Vt. 805; Spartanburg, 
 R. R. Co., 24 Mich. 405; Evansville, &o. R. R. Co. v. De Graffenried, 12 
 &o. R. R.Co. V. Shearer, 10 Ind. 246 ; Rich. L. 675; Freeman v. Matlock, 
 Jewett V. Lawrenceburgh, &o. R. R. 67 Ind. 99 ; Des Moines Valley R. R. 
 Co., 10 Ind. 539; Taggart v. West- Co. v. Graff, 27 Iowa, 99. See inji-a, 
 ern Md. R. R. Co., 24 Md. 563; § 90. 
 
 McMillan v. Maysville, &c. R. R. ' McMillan v. Maysville, &c. 
 Co.,15B. Monr. 218, 235. See also R. R. Co., 15 B. Monr. 218, 235, 
 Racine County Bank v. Ayera, 12 per Simpson, J. 
 
81 THE CONTRACT OF MEMBERSHIP. § 80 
 
 Court of Kentucky, in referring to a subscription of this 
 character, said : " The substance of the agreement of the 
 company and the signers of the instrument of writing sued 
 upon was, that, if the former would locate the road so as to 
 make the town of Carlisle a point, the latter would take the 
 amount of stock subscribed by them. When the road was 
 thus located, the signers became unconditional stockholders, 
 and as such were entitled to all the corporate rights and 
 privileges of members of the company. The stock itself was 
 not conditional ; it was only the agreement to take it that 
 was conditional. The subscribers were not stockholders until 
 the company had performed the condition upon which their 
 undertaking depended ; and when that was done, they became 
 stockholders by force of the agreement of the parties." 
 
 In order to fulfil a condition of this character, it is neces- 
 sary that the line of road be finally located in the statutory 
 manner, but it is not necessary that the road be built and 
 equipped.^ 
 
 § 80. It has been held in New York, that it is contrary to 
 public policy to allow subscriptions to a plank road or turn- 
 pike company to be made upon condition that the road be 
 located in a certain line ; and that such subscriptions do 
 not constitute the subscribers members of the corporation, 
 although the condition may have been performed. " If the 
 general subscription should contain a condition of this kind, 
 there would be no stockholders till the road should be laid 
 out accordingly ; and separate subscriptions containing vari- 
 ous conditions might work a fraud upon those who subscribe 
 absolutely." ^ 
 
 This view is contrary to the weight of authority, and has 
 not generally been followed. Subscriptions upon conditions 
 precedent are nowhere regarded as anything more than offers 
 
 1 As to what constitutes the Fort Edward, &c. Plant Road Co. 
 
 location of a road, see Evansville, v. Payne, 15 N. Y. 583, overruling 
 
 &c. R. R. Co. V. Dunn, 17 Ind. 17 Barb. 567. Compare Holladay v. 
 
 603. Patterson, 5 Oreg. 177, and Cumber- 
 
 * Butternuts, &c. Turnpike Co. land Valley R. R. Co. v. Baab, 9 
 
 V. North, 1 Hill, 51S,per Cowen, J. ; Watts, 458. 
 
 VOL. I. — 6 
 
§ 82 THE LAW OF PKIVATB COEPOKATIONS. 82 
 
 to become shareholders, or to take shares, when the condi- 
 tions shall be performed. It is difficult to perceive what 
 fraud or possible injury to others would result from an 
 offer to take shares in a railroad company if the line of road 
 shall be located in a certain way.^ 
 
 § 81. Effect of Subscriptions upon Conditions Precedent. — 
 As a subscription for shares in a corporation, made upon con- 
 dition precedent, is merely an offer to take shares after the 
 condition has been performed, and is not binding on the sub- 
 scriber as a statutory subscription, it follows that subscrip- 
 tions of this nature, when made before the incorporation of a 
 company, do not entitle tte subscribers to enjoy the corporate 
 franchises offered by tlarS^^te ; it would be a fraud upon the 
 State to obtain letters patent, and organize as a corporation, 
 by representing such conditional subscribers to be members 
 of the association to be incorporated.^ It is clear, also, that 
 subscriptions for shares, made upon condition precedent, can- 
 not be counted in determining whether the amount of capital 
 required by law to authorize a corporation to begin to carry 
 on business, and to call on its members for the payment of 
 their shares of the capital, has been subscribed.^ Nor are such 
 conditional subscribers liable as shareholders to the company, 
 or to its creditors, until the conditions upon which they have 
 agreed to become shareholders have been performed.* 
 
 § 82. Subscriptions upon Special Terms. — Subscriptions 
 which are conditional upon the happening of a future event 
 must not be confounded with subscriptions made subject to 
 special terms or stipulations varying the usual contract of 
 membership. In the former case, the subscribers do not be- 
 come stockholders until the prescribed condition has been 
 
 ' McMillan v. Maysville, &c. ° Infra, § 141. Oskaloosa Agi-i- 
 
 R. R. Co., 15 B. Monr. 218, 235; cultural Works v. Parkhurst, 54 
 
 Henderson, &c. R. R. Co. v. Leavell, Iowa, 357. 
 
 16 B. Monr. 358, 864; and cases * Pifcchford v. Davis, 5 M. & W. 
 
 cited in the preceding sections. 2; Roberts's Case, 3 De G. & S. 205; 
 
 " Bavington v. Pittsburgh, &c. Wood's Case, 3 De G. & J. 85; and 
 
 R. R. Co., 34 Pa. St. 358; Pitts- cases cited in the preceding sec- 
 
 bargh, &c. R. R. Co. v. Biggar, Id. tions. 
 455. Infra, § 92. 
 
83 THE CONTRACT OP MEMBERSHIP. § 83 
 
 fulfilled ; but after fulfilment of the condition they become 
 shareholders upon the same terms as other members. In the 
 latter case, the subscribers become shareholders as soon as 
 their subscriptions are accepted by the company, but their 
 rights and liabilities as shareholders are governed by the 
 special terms for which they have stipulated. 
 
 Thus, if a subscription for shares in a railroad company is 
 made upon the condition that the road be located upon a cer- 
 tain line, the subscriber does not become a shareholder in the 
 company until the road has been located accordingly.^ On 
 the other hand, a subscription made subject to a special pro- 
 viso, that the company shall undertake to build its railroad to 
 a certain point, or that the subscriber shall be entitled to 
 contribute the amount of his shares at a particular time, or in 
 property of a certain kind, may constitute the subscriber a 
 shareholder immediately, if accepted by the corporation, and 
 the proviso of the subscription would merely affect the terms 
 of his contract of membership.^ A subscription of this kind 
 is not, properly speaking, a conditional subscription ; it is an 
 absolute subscription with special or unusual terms, and is 
 similar to a subscription for preferred shares. • 
 
 § 83. Agents before Organization cannot make Special Agree- 
 ments. — The agents or commissioners appointed, under a char- 
 ter or general law, to receive subscriptions to the stock of a 
 corporation about to be formed, have no authority to make 
 special contracts on behalf of the company, with regard to 
 the liability of its members. They are not agents selected 
 by the shareholders themselves, and for the most obvious 
 reasons their powers should not be extended beyond those 
 expressly conferred. They are authorized to receive subscrip- 
 tions upon the terms expressly or impliedly set forth in the 
 charter or the articles of association and general laws, and 
 their authority extends no further.* A subscription for shares 
 made upon special terms, prior to the organization of the 
 company, is at most an offer to become a shareholder upon 
 
 1 McMillan v. Maysville, &o. « Tnfra, §§ 84, 90. 
 R. R. Co., 15 B. Monr. 218, 235; » Supra, § 66. 
 supra, § 79. 
 
§ 85 THE LAW OF PRIVATE CORPOEATIONS. 84 
 
 the terms indicated, and this offer can be accepted only by 
 the managing agents of the company after organization .^ 
 
 § 84. Managing Agents may receive Subscriptions on Special 
 Terms. — The directors or managing agent of a corporation 
 have a limited power to vary the usual contract of member- 
 ship by issuing shares upon special terms. If the special 
 agreement is favorable to the company as a body, it is clear 
 that there can be no objection to its validity. Thus, if the 
 contract of membership does not imply a personal obligation 
 to pay assessments, a subscription containing a promise to 
 pay will make the subscriber liable ; ^ and the obligations of 
 a subscriber for shares may be increased in many other 
 respects by the express terms of his contract.* 
 
 § 85. Special agreements by which the liability of share- 
 holders to contribute the amount of their shares has been 
 varied with respect to the time, place, or manner of making 
 the payments, have been sustained. Thus, in Pittsburgh, &c. 
 R. R. Co. V. Stewart,* the Supreme Court of Pennsylvania 
 held that a special contract making a subscription to the 
 stock of a railroad company, payable in cross-ties, was valid. 
 Strong, J., said : " It is no longer to be doubted that an in- 
 corporated company, after it has obtained its letters patent 
 and effected its organization, may receive conditional sub- 
 scriptions to its stock. It may stipulate with subscribers 
 that they may pay in any manner mutually agreed on, and 
 it can enforce a subscription only according to its conditions. 
 Not so with subscriptions made before a company is organ- 
 ized. They must be unconditional. There is no authority 
 existing anywhere to receive them upon terms, or to vary the 
 mode of payment. This difference is a well-recognized one 
 in our law, as well as in the law of other States. Clearly, 
 
 1 Pittsburgh, &c. R. R. Co. v. burgh, &c. R. R. Co. v. Biggar, Id. 
 
 Stewart, 41 Pa. St. 54, 58; Erie, 455; Syracuse, &c. R. R. Co. v. 
 
 &c. Plank Road Co. v. Brown, 25 Gere, 4 Hun, 392; Burrows u. Smith, 
 
 Pa. St. 158; Trott v. Sarchett, 10 10 N. Y. 550, 566. Supra, § 47. 
 Ohio St. 241. See Caley v. Phila- ^ See infra, §§ 129, 130. 
 delphia, &c. R. R. Co., 80 Pa. St. » See infra, §§ 144, 149. 
 363; Bavington v. Pittsburgh, &c. * Pittsburgh, &o. R. R. Co. v. 
 
 R. R. Co., 34 Pa. St. 358; Pitts- Stewart, 41' Pa. St. 54, 58. 
 
85 THE CONTRACT OP MEMBERSHIP. § 86 
 
 then,4he plaintiffs, who were an organized company in No- 
 vember, 1847, with letters patent already obtained, could 
 engage with the defendant, that, if he would hold on to his 
 subscription, or renew it (it having ceased to be binding), 
 lie might pay it by furnishing materials for their road, and 
 pay it when the road should be extended to his land. And 
 if the plaintiffs did thus engage, they cannot enforce pay- 
 ment in cash, nor payment before the time appointed." ^ 
 
 Where a subscription was by its terms made payable in 
 instalments after twenty days' notice of the calls had been 
 given, it was held that the giving of the notice as stipulated 
 was a condition precedent to liability on the part of the sub- 
 scriber.2 
 
 § 86. Acceptance of Subscriptions made upon Special Terms 
 before Organization. — A subscription for shares made upon 
 special terms, prior to the organization of a corporation, may 
 be treated as a continuing offer to become a shareholder upon 
 the terms indicated ; and if such offer is not withdrawn, it 
 may be accepted by the proper agents of the corporation 
 appointed after its organization, provided the terms of the 
 subscription be of such a nature that the agents of the com- 
 pany have authority to accede to them. 
 
 The same rule applies to a subscription on special terms 
 received after organization of the company by an ordinary 
 subscription agent, who would have no authority to bind the 
 company by any special contract. The subscription would 
 be an open offer until accepted by the board of directors.^ 
 
 It is clear that a subscription made upon special terms 
 must be accepted precisely as offered or not at all. An ac- 
 
 1 See also Roberts v. Mobile, &c. Co. v. Reeve, 15 Ind. 238; Nichols 
 
 R. R. Co. 32 Miss. 373; Hanover v. Burlington, &c. Plank Road Co., 
 
 Junction R. R. Co. v. Haldeman, 4 Greene (Iowa), 42; Cass ». Pitts- 
 
 82 Pa. St. 36; Junction R. R. Co. burg, &c. Ry. Co., 80 Pa. St. 31; 
 
 ». Reeve, 15 Ind. 236; Magee v. Northern Central, &c. R. R. Co. v. 
 
 Badger, 30 Barb. 246. Eslow, 40 Mich. 222 ; and see cases 
 
 ^ Cole w. Joliet Opera House Co., cited in the preceding sections. 
 
 79 111. 96. Compare Boston, &c. R. R. Co. v. 
 
 » Red Wing Hotel Co. v. Fried- Bartlett, 3 Cush. 224. 
 rich, 26 Minn. 112; Junction R. R. 
 
§ 87 THE LAW OP PETVATE COKPOKATIONS. 86 
 
 ceptance varying the terms of the subscription would at most 
 constitute a counter proposition.^ 
 
 § 87. Special Terms which cannot be accepted. — Even the 
 managing agents of a corporation have only a very limited 
 authority to make special agreements varying the rights and 
 duties of the several shareholders. This follows from the 
 relationship between the shareholders and the character of 
 their contract. The subscribers for shares have agreed to 
 associate for the purposes and upon the terms expressed in 
 their charter or articles of association. The rights of every 
 shareholder in the management of the company and the dis- 
 tribution of its profits are equal to the rights of every other 
 shareholder in respect of every share ; and it is clearly 
 contemplated by the subscribers that the burdens shall be 
 distributed equally also. An agreement giving one sub- 
 scriber greater privileges, or making his obligations lighter, 
 than those of the other subscribers, would be unfair to those 
 members who had subscribed upon less favorable terms. 
 Hence it is very difficult to imply any authority in the agents 
 of a company to vary the ordinary contract of membership, 
 in any substantial particular, by assenting to a subscription 
 upon special terms. An agreement giving a person the 
 rights of a shareholder, without requiring him to contrib- 
 ute a proportionate amount of capital, would clearly be un- 
 authorized. Such an agreement would be a fraud upon the 
 creditors of the company, as well as upon the other share- 
 holders.^ 
 
 In Burke v. Smith,^ Justice Strong said : " If the subscrip- 
 tions to the stock can be clogged with such conditions as to 
 render it impossible to collect the fund which the State re- 
 quired to be provided before it would assent to the grant of 
 corporate powers, a charter might be obtained without any 
 available capital. Conditions attached to subscriptions which, 
 if valid, lessen the capital of the company, thus depriving the 
 
 1 Rogers's Case, L. R. 3 Ch. App. 397. See also Syracuse, &c. R. R. 
 633; supra, §§ 62, 63. Co. v. Gere, 4 Hun, 392; Upton v. 
 
 2 In/ra, §§ 302, 804, 822. Hansbrough, 3 Biss. 423; and cases 
 8 Burke v. Smith, 16 WaU. 390, cited infra, §§ 307, 804. 
 
87 THE CONTRACT OF MEMBEESHIP. § 88 
 
 State of the security it exacted that the railroad would be 
 built, and diminishing the means intended for the protection 
 of creditors, are therefore a fraud upon the grantor of the 
 franchise, and upon those who may become creditors of the 
 corporation. They are also a fraud upon unconditional stock- 
 holders who subscribed to the stock in the faith that capital 
 sufficient would be obtained to complete the projected work, 
 and who may be compelled to pay their subscriptions, though 
 the enterprise has failed and their whole investment has been 
 lost. It is for these reasons that such conditions are denied 
 effect."! 
 
 § 88. 'Where all the Subscriptions are upon the same Terms. 
 — The rule stated in the preceding section has no applicar 
 tion where all the shareholders in a corporation have sub- 
 scribed upon the same terms. In this case, it is clear that 
 the terms of the subscriptions cannot result in unfair discrimi- 
 nation against any portion of the shareholders ; all have the 
 same rights and liabilities.^ Nor can creditors complain even 
 though the entire capital of a corporation be made payable 
 only on the happening of a contingent event ; because a cor- 
 poration is never impliedly authorized to engage in business 
 and incur debts until its capital has become payable,^ and, if 
 debts should be incurred, the special terms of the subscrip- 
 tions could not be set up against bona fide creditors.* 
 
 The decision in Ridgefield, &c. R. R. Co. v. Brush^ is in 
 accordance with this view. The charter of a railroad com- 
 pany provided that the corporation might be organized, and 
 proceed to construct its road, whenever $200,000 had been 
 subscribed, and that the corporators should have authority to 
 open books and receive stock subscriptions, under such regu- 
 
 1 The case of Hinton ». Morris surrendering his shares, and this 
 
 County Co-operative Soc, 21 Kans. agreement was sustained. 
 663, cannot be reconciled with these ^ The same doctrine has been 
 
 principles. The board of directors been applied to an issue of preferred 
 
 of a company had entered into an shares. See infra, § 440. 
 agreement with a purchaser of shares ' Infra, §§ 137, 408. 
 that he should have the privilege of * Infra, §§ 801-803. 
 withdrawing his money at any time, ^ Ridgefield, &o. R. R. Co. v. 
 
 on giving thirty days' notice and Brush, 43 Conn. 86, 95. 
 
§ 89 THE LAW OF PKIVATE CORPOKATIOKS. 88 
 
 lations as they might deem proper. Subscription-books were 
 opened, and the subscriptions were all made subject to the 
 terms of a resolution, that no assessment beyond three per 
 cent should be laid until the whole amount estimated to be 
 necessary to complete the road, to wit, $535,000, had been 
 subscribed. It was held by the Supreme Court of Connecti- 
 cut that the subscriptions were valid and binding, subject to 
 the terms of the resolution. Carpenter, J., said : " The reso- 
 lution adopted by the corporators, although it imposed a 
 condition which is not in the charter, nevertheless is not re- 
 pugnant to the charter, violates none of its provisions, and 
 does not in any sense contravene any principle of law or of 
 public policy. It is simply a declaration in the contract 
 to which all the subscribers are parties, and therefore it 
 amounts to an agreement that the corporation will not avail 
 itself of the privilege of commencing the construction of the 
 road until all the necessary funds to complete it are sub- 
 scribed." 
 
 § 89. Construction of Subscriptiona. — It is frequently diffi- 
 cult to determine whether a subscription was intended as an 
 agreement to become a shareholder after a condition prece- 
 dent has been performed, or an agreement to become a share- 
 holder upon special terms. 
 
 If it appears that the subscriber intended to become a 
 member of the corporation, and as such entitled to vote at 
 meetings and otherwise enjoy the privileges of membership, 
 it is clear that the subscription cannot be deemed a subscrip- 
 tion upon condition precedent. 
 
 On the other hand, if a subscription is made subject to a 
 proviso that the liability to pay the amount of a subscription 
 shall be conditional upon the happening of an uncertain 
 event, the subscription would be invalid as a subscription 
 upon special terms ; for if it were given effect the subscriber 
 would become a member in the company, and entitled to the 
 attending privileges, while he might never become liable to 
 contribute his proportion of the capital. Hence, subscrip- 
 tions for shares in a railroad company on condition that 
 the road be located in a certain direction have properly been 
 
89 THE CONTRACT OF MEMBERSHIP. § 90 
 
 construed as subscriptions upon condition precedent ; ^ they 
 would be wholly nugatory if intended to constitute the sub- 
 scriber a member of the company, with the special privilege 
 of not contributing to the capital in case the road should not 
 be located in the direction specified. 
 
 § 90. The intention of the parties is of course the control- 
 ling question in construing a subscription for shares, or any 
 other contract. In Chamberlain v. Paiuesville, &c. R. R. 
 Co.,^ a subscription for shares in a railroad company upon 
 condition that the road should be permanently/ located on a 
 certain route, and that a freight-house and depot be built 
 at a certain place, was construed as an offer on the part of 
 the subscriber to become a shareholder if the company would 
 permanently locate its road in the manner prescribed, and 
 undertake to build the freight-house and depot at the place 
 named ; and it was held, that, after the corporation had ac- 
 cepted this offer, by locating its road upon the route specified, 
 the subscriber became a member of the company, and, as 
 such, liable to contribute his proportion of the capital, while 
 the provision with regard to building a freight-house and 
 depot remained as a valid executory contract to be performed 
 by the company. The court considered that it was clearly 
 not the intention that the freight-house and depot should be 
 built before the road itself ; and that, while the location of 
 the road was a matter to be settled at the outset, and upon 
 which the intention of the subscriber to become a shareholder 
 evidently depended, yet it was not intended that the road 
 should be built and equipped, as well as located, before the 
 subscriber became a shareholder, and liable to contribute the 
 amount of his shares. On the contrary, the main object of 
 the subscription was to raise the capital required for the pur- 
 pose of building the road and its equipments.^ 
 
 1 Supra, §79; and see cases cited 15 B. Monr. 218, 235; Swartout v. 
 
 in the next section. Michigan Air Line R. R. Co., 24 
 
 '^ Chamberlain v. Painesville, &o. Mich. 405; Miller v. Pittsburgh, &c. 
 
 R. R. Co., 15 Ohio St. 225, 243. R. R. Co., 40 Pa. St. 237; North 
 
 * See also Ashtabula, &c. R. R. Missouri R. R. Co. v. Winkler, 29 
 
 Co. V. Smith, 15 Ohio St. 328; Mc- Mo. 318; Wear v. Jacksonville, &c. 
 
 Millan v. Maysville, &o. R. R. Co., R. R. Co., 24 III. 595; Pittsburgh, 
 
§ 91 THE LAW OP PKIVATB CORPORATIONS. 90 
 
 Upon tlie same principle, it was held that, although a sub- 
 scription for shares in a hotel company was expressed to be 
 on condition that the hotel be built at a certain point, the 
 building of the hotel was not a condition precedent to the 
 subscriber's liability to contribute the amount of his shares.^ 
 
 In Jewett v. Lavvrenceburgh, &c. R. R. Co. ,2 the sub- 
 scription was on condition that the road should be located 
 and constructed to a certain point. The road was located to 
 the required point, and the subscriber then paid the amount 
 of his subscription. Afterwards, a different location was 
 adopted, and the road was not constructed to the point named 
 in the subscription paper. In a suit brought by the sub- 
 scriber against the company, the court held that the plaintiff 
 was entitled to recover from the company the amount which 
 he had paid on his subscription. 
 
 § 91. When the Conditions or Special Terms of a Subscrip- 
 tion must be disregarded. — A person who has subscribed for 
 shares upon condition precedent may supersede his condi- 
 tional offer by an absolute and unconditional subscription 
 without making a new entry upon the books. This would 
 not, properly speaking, be a mere waiver of the condition of 
 the subscription. The subscriber would practically reaffirm 
 the subscription as a new and unconditional one, and an abso- 
 lute contract of membership would result in place of a naked 
 offer. 
 
 Thus, if a conditional subscriber should subsequently give 
 promissory notes or cash to the company, in payment of the 
 amount of his shares, this would evidently indicate an inten- 
 tion to become a shareholder immediately, irrespective of the 
 condition.^ 
 
 &c. R. E. Co. V. Biggar, 34 Pa. St. Roberts ». Mobile, 8eo. R. R. Co., 
 
 459. Compare Jewett !). Lawrence- 32 Miss. 373. 
 
 burgh, &c. R. R. Co., 10 Ind. 539; ^ Red Wing Hotel Co. v. Fried- 
 O'Neal V. King, 3 Jones (Law), rich, 26 Minn. 112. 
 517; Burlington, &o. R. R. Co. u. ° Jewett ». Lawrenoeburgh, &o. 
 Boestler, 15 Iowa, 555; Milwaukee, R. R. Co., 10 Ind. 539. 
 &c. R. R. Co. V. Field, 12 Wis. 341; « O'Donald v. Eransville, &c. 
 Lane v. Brainerd, 30 Conn. 578; R. R. Co., 14 Ind. 259; Evansville, 
 Shaffner ». Jeffries, 18 Mo. 512; &o. R. R. Co. ». Dunn, 17 Ind. 603; 
 
91 THE CONTRACT OF MBMBEESHIP. § 93 
 
 § 92. A person cannot have the benefits of membership in 
 a corporation without bearing its burdens also. If a person 
 undertakes to act as a member, he thereby assumes the liabili- 
 ties incidental to membership, both with regard to the other 
 shareholders ^ and the creditors of the company ; ^ and it will 
 be no defence to say, that he has subscribed for shares upon a 
 condition precedent, and that the condition has not been per- 
 formed ; or that his subscription was expressed to be upon 
 special terms, and was not accepted by the company, either 
 by reason of the want of power or the want of assent of it's 
 agents. The subscription may, in such case, go for nothing ; 
 but the subscriber will be treated as a shareholder, by reason 
 of his subsequent aets and the tacit consent of the company ; 
 and it is clear that he cannot, under these circumstances, 
 claim the benefit of any conditions or special terms which his 
 original subscription may have contained.^ 
 
 In Bavington v. Pittsburgh, &c. R. R. Co.,* it appeared 
 that a commissioner appointed to receive subscriptions to 
 the stock of a railroad company had himself subscribed for a 
 number of shares, upon condition that the road be located 
 upon a certain route. He afterwards certified to the Gov- 
 ernor that the subscriptions, including his own, were taken 
 in good faith, agreeably to the laws of the Commonwealth ; 
 and upon the faith of this certificate letters patent were issued 
 and the corporation was organized. The Supreme Court of 
 Pennsylvania decided that the subscriber was estopped from 
 denying that the subscription was an unconditional one ; for, 
 if it were a subscription upon condition, the subscriber would 
 have been guilty of a fraud upon the Commonwealth. 
 
 § 93. The same principle applies where subscriptions 
 are made, upon special terms, for the purpose of obtaining 
 
 Keller v. Johnson, 11 Ind. 337; » See Burke ». Smith, 16 Wall. 
 
 Parks V. Evansville, &o. R. R. Co., 397; Syracuse, &c. R. R. Co. v. 
 
 28 Ind. 567; Slipher v. Earhart, Gere, 4 Hun, 392; Dayton, &c. 
 
 83 Ind. 173. Compare Parker v. R. R. Co. v. Hatch, 1 Disney, 
 
 Thomas, 19 Ind. 214, 220; Taylor 97 ; Lane v. Brainerd, 30 Conn. 
 
 V. Fletcher, 15 Ind. 80. 579. 
 
 1 See infra, §§ 303, 308. * Bavington v. Pittsburgh, &c. 
 
 » Infra, §§ 824, 835. R. R. Co., 34 Pa. St. 358. 
 
§ 93 THE LAW OP PRIVATE COEPOEATIONS. 92 
 
 letters patent and organizing upon the strength of them. 
 Inasmuch as the statutory agents have no authority to re- 
 ceive such subscriptions, they must be treated as a nullity, 
 or the special terms must be disregarded. It has been held 
 that, where such subscriptions are made with the intention 
 of obtaining a patent and organizing a corporation upon 
 the faith of tliem, and a patent is actually obtained, the sub- 
 scription must be held binding, though the special terms be 
 denied efPect. In Pittsburgh, &c. R. R. Co. v. Biggar,i the 
 defendant had subscribed upon condition " that the road 
 goes within half a mile of Florence," and had paid the re- 
 quired deposit of five dollars on each share. It was held 
 that he was liable to pay assessments levied upon his shares. 
 Strong, J., said : " The law offers to the subscriber member- 
 ship and stock, as the consideration for his subscription, and 
 it offers no more. If he could secure more, it would be a 
 wrong to the other subscribers, not less than if the stipulation 
 were that he should have a certificate for two shares of stock 
 on payment for one. The rights of all subscribers are neces- 
 sarily equal ; nor can there be any such thing as conditional 
 membership ; either the defendant in error became a corpo- 
 rator on the issuing of the letters patent, by virtue of his 
 subscription, and the payment of five dollars for each, or the 
 subscription amounted to nothing. . . . Was, then, the sub- 
 scription a nullity? Certainly it was operative for some 
 purposes. It enabled the commissioners to receive and to 
 retain five dollars paid upon each share subscribed, and it 
 aided in obtaining the letters patent. On the faith of it the 
 Commonwealth parted with the franchise conferred upon the 
 company. If such subscriptions, with such conditions, are 
 invalid, then the whole capital of a company might be with- 
 held, even after charter granted, and the objects of the grant 
 entii'cly defeated. It is not for the defendant to say that his 
 subscription is a nullity ; that he assumed no liability, when 
 his act induced the grant of the charter, and fastened upon 
 his co-corporators the obligation to pay the amount of their 
 subscriptions. It is the condition of the subscription which 
 1 Pittsburgh, Sec. R. R. Co. o. Biggar, 34 Pa. St. 455. 
 
93 THE CONTEACT OP MEMBERSHIP. § 94 
 
 is the illegal part ; it is that which is repugnant to the nature 
 of a subscription, and which is in conflict with the policy of 
 the law, and therefore the defendant cannot assert it." ^ 
 
 It seems clear, however, that" if a subscription was made 
 subject to special terms, or upon condition precedent, with 
 the intention that it should not go into effect or be used 
 until the terms had been accepted or the condition performed 
 by the company after organization, it would be impossible to 
 hold the subscriber liable as if he had subscribed absolutely, 
 or upon the usual terms, except, by making a contract be- 
 tween the parties where none was intended by themselves. 
 If the subscriber should act as a shareholder before the sub- 
 scription had gone into effect according to its terms, he 
 would become a shareholder by virtue of his acts, and not by 
 virtue of the original subscription. 
 
 PART III. 
 
 SUBSCRIPTIONS OBTAINED BY FEATJD. 
 
 § 94. Subscriptions obtained by Fraud are voidable. — It is 
 a general rule of law, that, if a person is induced to enter 
 into a contract by false representations, fraudulently made 
 by the other contracting party or his agent, the contract is 
 
 1 34 Pa. St. 459. The learned able the road to go anywhere; no 
 
 judge added: "At most, also, the other means was provided for either 
 
 stipulation in the contract of sub- the location or construction of the 
 
 scription was a condition subse- road ; payment was therefore neces- 
 
 quent; certainly subsequent to sarily antecedent to a compliance 
 
 membership in the company, and with the condition. But if it is a 
 
 subsequent also to the liability to condition subsequent, and illegal, 
 
 pay. The thing provided for could as we have endeavored to show, 
 
 only be determined after the organi- then it is void, and the subscrip- 
 
 zation of the company. The words tion is in law absolute." See also 
 
 of the condition show this. The Syracuse, &c. R. R. Co. v. Gere, 
 
 defendantpromised to pay 'provided 4 Hun, 392; Bedford R. R. Co. v. 
 
 the road goes within half a mile of Bowser, 48 Pa. St. 29, 37; Boyd v. 
 
 Florence.' The payment of the Peach Bottom Ry. Co., 90 Pa. St, 
 
 subscriptions was necessary to en- 169. 
 
§ 95 THE LAW OP PKIVATE COEPOEATIONS. 94 
 
 voidable at the option of the innocent party. This rule ap- 
 plies with full force both to contracts of membership and to 
 contracts to purchase or to take shares in a corporation at a 
 future time. It may be stated as a general rule, that, if a 
 subscription for shares was obtained by fraudulent represen- 
 tations, it may be annulled by the subscriber at any time 
 before other equities have intervened. Lord Romilly said, in 
 considering the right of a person to be relieved of shares 
 which he had taken upon the faith of a fraudulent prospectus 
 issued by the company : " Contracts of this description be- 
 tween an individual and a company, so far as misrepresentar 
 tion or suppression of the truth is concerned, are to be treated 
 like contracts between any two individuals. If one man 
 makes a false statement which misleads another, the way in 
 which that is to be treated affords the example for the way 
 in which a contract is to be treated where a company makes 
 a false statement which misleads an individual." '■ 
 
 It is important, however, in consideriiig the effect of fraud 
 upon the contract of membership in a corporation, to bear in 
 mind the peculiar character of this contract, and the equi- 
 table relations which it creates as between the shareholders 
 and creditors, and between the shareholders themselves.* 
 
 § 95. Representations concerning Matters of Public Iia'w. — 
 A contract is not rendered voidable by a false representation, 
 unless it be a representation of facts which the party imposed 
 upon was not under an obligation to learn for himself. 
 Every person must at his peril acquaint himself with the 
 general laws of the land. Hence it follows that false rep- 
 resentations as to matters of public law do not vitiate the 
 contract of a subscriber. 
 
 Accordingly, it was held to be no defence to an action 
 upon notes given to a railroad company, in payment of a 
 
 ' Central Ry. Co. v. Kisch, L. K. on Subscriptions to Stock," in the 
 
 2 H. L. 99, 125; Vreeland v. N. J. American Law Kev., March, 1880, 
 
 Stone Co., 29 N. J. Eq. 190; Upton Vol. XIV. p. 177. 
 V. Englehart, 3 Dill. 499 ; City Bank " As to the rights of creditors, see 
 
 V. Bartlett, 71 Ga. 797, 808. See infra, § 819, Chapter X. 
 an essay entitled "Effect of Fraud 
 
95 THE CONTEACT OP MEMBERSHIP. § 96 
 
 subscription for shares, that the company has fraudulently- 
 represented that it had a right to construct a line of road 
 between two given points. The court said : " That repre- 
 sentation was upon matter of law. Whether the company 
 had such right depended upon its charter, which was a public 
 law, and of which the defendant was bound to take notice." ^ 
 
 § 96. Representations -with Regard to the Contract of the 
 Subscriber. — For the same reasons, it follows that false rep- 
 resentations as to the legal effect of a subscription for shares 
 in a corporation, or as to the contents of its charter, do not 
 render the contract of the subscriber voidable. If a person 
 makes a contract, he must at his peril inform himself as 
 to the legal consequences of his undertaking ; a simple mis- 
 understanding about the legal effect of a contract, though 
 brought about by the fraud of the other party, is not a 
 ground of avoidance. If this were not the rule, it is obvious 
 that niutual dealings would not be possible. 
 
 A person taking shares in a corporation necessarily under- 
 takes to become a member of a particular corporation, and to 
 become invested with the privileges and duties which are 
 incidental to that position. The terms of this contract are 
 written in the charter or articles of association, and the gen- 
 eral laws of the land. Every subscription for shares must 
 necessarily refei; to these, and incorporate their provisions ; 
 for they are the constitution of the association of which the 
 subscriber agrees to become a member. And hence it follows 
 that a subscriber for shares must, at his peril, not only ascer- 
 tain the contents of the subscription paper which he signs, 
 but also the provisions of the charter of the company, or 
 its articles of association, and the general laws. A fraudu- 
 lent representation relating to either of these matters, or 
 to the rights and duties resulting from membership in the 
 company, does not give the subscriber a right to avoid his 
 contract.^ 
 
 1 Parker ». Thomas, 19 Ind. 213; Albany, &c. R. R. Co. v. Fields, 
 Upton V. Tribilcock, 91 U. S. 45. 10 Ind. 187, 190, Davison, J., said: 
 
 2 Ellison V. Mobile, &c. R. R. "A party is presumed to know the 
 Co., 86 Miss. 572-588. In New contents of the instruments which 
 
§ 98 THE LAW OF PRIVATE COEPOEATIONS. 96 
 
 § 97. However, a fraudulent representation about the 
 actual contents of a subscription paper or articles of associa- 
 tion may, when there is no negligence on the part of the sub- 
 scriber, be a good ground for avoiding the contract, as in case 
 of a false representation about any other existing fact. Thus, 
 where a person who was unable to read, and who did not 
 know the contents of the articles of association of a company, 
 was induced to become a shareholder by means of a false 
 representation that, according to the conditions contained in 
 the articles, he would not be required to pay for his stock 
 until the amount of 120,000 had been subscribed, it was 
 held that the subscriber was entitled to repudiate his sub- 
 scription on account of the fraud.^ 
 
 So, if a person signs a subscription paper, entirely misun- 
 derstanding the nature of the instrument which he is signing, 
 his subscription must be treated as null and void for want 
 of mutual consent. In this case the question of fraud is not 
 material.^ 
 
 § 98. Representations must not amount to Promises, nor 
 relate to Matters of Opinion. — A contract is voidable for a 
 
 he signs, and has, therefore, no right K. R. Co., 14 Ind. 499; Wight v. 
 
 to rely upon the statement of the Shelby R. R. Co., 16 B. Monr. 5; 
 
 other party as to its legal effect. In Smith v. Reese River Co., L. R. 
 
 this instance the agreement is very 2 Eq. 269 ; Viciksburg, &c. R. R. 
 
 explicit. It binds the defendant Co. v. McKean, 12 La. Ann. 638. 
 unconditionally to pay each instal- ^ Wert v. Crawfordsville, &c. 
 
 ment at a stated period. Hence the Turnpike Co., 19 Ind. 242. Davi- 
 
 'verbal statement of the agent, that son, J., said: " The representations 
 
 the defendant's signature would not thus made were not mere opinions, 
 
 be binding unless he attended the but referred to a material fact as 
 
 meeting and signed his name to the to the contents of the articles of 
 
 stock-books, must be held a mere association." 
 
 representation as to the legal effect of " gee Thoroughgood's Case, 2 
 the subscription, and, though false, Co. Rep. 9 b; Foster v. Mackinnon, 
 it could not deceive the defendant, L. R. 4 C. P. 704, 711 ; Kennedy v. 
 because the agreement to which he Green, 3 M. & K. 699, 717; Ogil- 
 then subscribed his name binds him vie v. Jeaffreson, 2 Gift. 353; Rook- 
 absolutely to pay in instalments." ford, &o. R. R. Co. v. Shunick, 65 
 See also Clem v. Newcastle, &c. 111. 223; Jackson v. Hayner, 12 
 R. R. Co., 9 Ind. 488; Selma, &c. Johns. 469; County of Schuylkill i>. 
 R. R. Co. V. Anderson, 51 Miss. Copley, 67 Pa. St. 386. 
 829 ; Thornburgh v. Newcastle, &o. 
 
97 THE CONTRACT OP MEMBEKSHIP. § 98 
 
 fraudulent representation of faets, but not for a breach of 
 agreement by either of the contracting parties. Hence a 
 failure on the part of a corporation to comply with the special 
 terms of a subscription for shares does not render the contract 
 of the shareholder Toidable", but is merely a cause for an ac- 
 tion against the company. 
 
 Subscriptions obtained by an agent of a corporation, by 
 means of false and fraudulent statements concerning the hap- 
 pening of a future event or the doing of a future act, cannot 
 as a rule be avoided. Considered as promises, such state- 
 ments would not be admissible in evidence, for the reason 
 that a written contract cannot be varied by proof of a con- 
 temporaneous verbal agreement; and even if proven they 
 would be wholly immaterial. Regarded as representations, 
 they would be immaterial because relating to matters of 
 opinion merely, — concerning the probability or improba- 
 bility of the happening of the future event or the doing of 
 the future act. 
 
 Thus, for example, a statement made by an agent obtaining 
 subscriptions for shares in a railroad company, to the effect 
 that the proposed road would be built upon a certain route 
 or within a certain period of time, would not render a sub- 
 scription made upon the faith of it voidable, though the state- 
 ment be made with the intention to deceive, and the road 
 be not built upon the route or within the time indicated.^ 
 
 1 Chouteau Ins. Co. v. Floyd, 74 mon, 5 Sneed, 567; Walker v. Mo- 
 Mo. 286; New Albany, &c. R. R. bile, &c. R. R. Co., 34 Miss. 246; 
 Co. V. Fields, 10 Ind. 187; Bish v. Crossman v. Penrose Ferry Bridge 
 Bradford, 17 Ind. 490; Johnson v. Co., 26 Pa. St. 69; Kelsey v. North- 
 Crawfordsville, &c. R. R. Co., 11 em Light Oil Co., 54 Barb. Ill, 
 Ind. 280; Evansville, Stc. R. R. Co. see dissenting opinion of Mullin, 
 V. Posey, 12 Ind. 363 ; Mississippi, J. ; Safiold v. Barnes, 39 Miss. 399. 
 &c. R. R. Co. V. Cross, 20 Ark. 454; Compare Miller r. Hanover June- 
 Martin V. Pensacola, &o. R. R. Co., tion, &c. R. R. Co., 87 Pa. St. 95; 
 8 Fla..370; Eakrightr. Logansport, Smith v. Tallassee Plank Road Co., 
 &o. R. R. Co., 13 Ind. 404; Parker 30 Ala. 650. 
 
 V. Thomas, 19 Ind. 214; Ellison v. It has been assumed in various 
 Mobile, &c, R. R. Co., 36 Miss, cases, that, if the subscription agents 
 572. Compare Piscataqua Ferry of a railroad company obtain sub- 
 Co. ». Jones, 39 N. H. 491; East scriptions for shares by fraudulently 
 Tennessee, &c. R. R. Co. v. Gam- stating to the subscribers that the 
 
 VOL. I. — 7 
 
§ 100 THE LAW OF PRIVATE CORPOEATIONS. 98 
 
 § 99. The same principle applies with regard to representa- 
 tions concerning existing facts, where it is known that such 
 representations are merely expressions of opinion or judg- 
 ment. A subscriber for shares cannot be supposed to rely upon 
 the judgment of an agent who is endeavoring to procure sub- 
 scriptions on behalf of the company ; and hence false state- 
 ments made by such agent with regard merely to matters of 
 opinion or belief will not, as a rule, be a ground for avoiding 
 the subscriber's contract. Thus, it was held in Bish v. Brad- 
 fordji that representations fraudulently made to a subscriber 
 for shares in a railroad company, to the effect that sufficient 
 stock had already been subscribed to complete the road in 
 eighteen months, would not render the subscription voidable. 
 The court said : " They are but mere expressions of opinion 
 upon an existing fact, and its connection with a future event. 
 It will be observed that no particular amount of means were 
 represented to have been possessed by the company. . . . 
 How much it would cost to build the road, or whether the 
 means would hold out, depended upon events which probably 
 neither the corporation nor the defendant could foresee." 
 
 So representations as to the value of a thing are usually 
 considered mere statements of opinion.^ 
 
 § 100. The Subscriber must have been imposed upon. — In 
 order that a person may avoid his contract, on account of 
 false representations, it is necessary, of course, that he should 
 have been imposed upon, and the imposition must not have 
 occurred through his own fault. In Hallows v. Fernie,^ Lord 
 
 company's railroad would thereafter 493 ; Hardy v. Merriweather, 14 
 
 be built upon a certain line or in a Ind. 203 ; Walker v. Mobile, &o. 
 
 certain manner, the subscribers may R. R. Co., 34 Miss. 245; Brownlee 
 
 rescind their subscriptions if the rail- v. Ohio, &c. R. R. Co., 18 Ind. 68; 
 
 road is not so built. Henderson v. Selma, &c. R. R. Co. v. Anderson, 51 
 
 Railroad Co., 17 Tex. 560, 580; At- Miss. 829; Colli). Pittsburgh Female 
 
 lanta, &c. R. R. Co. v. Hodnett, 36 Ga. College, 40 Pa. St. 439; Oregon Cent. 
 
 669; Rives u. Montgomery, &c. Plank R. R. Co. v. Scoggin, 3 Oreg. 161. 
 Road Co., 30 Ala. 92. These cases ^ Union Nat. Bank v. Hunt, 76 
 
 are, however, contrary to elementary Mo. 430. 
 
 principles of the law of contracts, ' Hallows v. Fernie, L. R. 3 Ch. 
 
 and ought not to be followed. 477; Jennings v. Broughton, 22 
 
 I Bish V. Bradford, 17 Ind. 490, L. J. Ch. 585. 
 
99 THE CONTKACT OF MEMBERSHIP. § 100 
 
 Chelmsford, L. C, said : " If a person purchases shares in a 
 company upon the faith of a prospectus, and is referred to 
 any document which will show the untruth or inaccuracy 
 of any of its statements, and chooses not to make use of his 
 means of knowledge, but to continue in a state of wilful igno- 
 rance of the facts, he cannot afterwards be heard to complain 
 that he has been deceived by the alleged misstatements. In 
 considering the question of knowledge, or means of knowl- 
 edge, it is important to see whether the plaintiff was a person 
 likely, through inexperience, to be misled by a prospectus, or 
 to place implicit reliance upon all that it contains." 
 
 Yet a person is not required to use more than ordinary 
 caution in dealing with the directors of a company ; and it is 
 not a want of ordinary caution to trust that their statements 
 upon matters of fact are honestly made. Hence it was said 
 by the same Lord Chancellor, in the House of Lords : " It 
 appears to me, that, when once it is established that there has 
 been any fraudulent misrepresentation or wilful concealment 
 by which a person has been induced to enter into a contract, 
 it is no answer to his claim to be relieved from it, to tell him 
 that he might have known the truth by proper inquiry. He 
 has a right to retort upon his objector, ' You at least, who 
 have stated what is untrue, or have concealed the truth, for 
 the purpose of drawing me into a contract, cannot accuse 
 me of want of caution because I relied implicitly upon your 
 fairness and honesty.' " ^ 
 
 It is but fair to assume that a person who reads a prospec- 
 .tus knows that its statements are probably highly colored, 
 and that he has taken that fact into consideration. Lord 
 Romilly said : " Anybody who looks at a prospectus under- 
 stands that the thing is colored, in this sense, that everything 
 is put forward in the most favorable view it can be." ^ 
 
 1 Central Ey. Co. ». Kisch, L. R. F. 947; New Brunswick, &e. Ry. 
 
 2 H. L. 120 ; Smith v. Reese Co. v. Muggeridge, 1 Dr. & Sm. 
 
 River Co., L. R. 2 Eq. 264, and 4 381, 382. See also Mead ». Bunn, 
 
 H. L. 64; Waterhouse v. Jamieson, 32 N. Y. 280; McClellan v. Scott, 
 
 L. R. 2 H. L. Sc. 29; Upton v. 24 Wis. 87. 
 
 Englehart, 3 Dill. 501; Glamorgan- " Denton v. Macneil, L. R. 2 
 
 shire Iron, &c. Co. v. Irvine, 4 F. & Eq. 355; Kisoh v. Central Ry. Go., 
 
§ 102 THE LAW OF PEIVATB COEPOEATIONS. 100 
 
 § 101. The Representations must have been a Material In- 
 ducement. — The contract of a shareholder will not be ren- 
 dered voidable by a fraudulent representation, unless it can 
 be reasonably inferred that the representation was a material 
 inducement to the shareholder to enter into his contract. In 
 Pulsford V. Richards,^ which was a bill in chancery to rescind 
 a contract for shares, on account of false representations in 
 the prospectus, upon the faith of which the shares had been 
 taken, Lord Romilly said : " It is almost needless to add, that 
 it must appear that the person deceived entered into the con- 
 tract on the faith of it. To use the expression of the Roman 
 law (much commented on in the argument before me), it must 
 be a representation dans locum contractui, that is, a representa- 
 tion giving occasion to the contract : the proper interpretation 
 of which appears to me to be the assertion of a fact on which 
 the person entering into the contract relied, and in the ab- 
 sence of which it is reasonable to infer that he would not 
 have entered into it ; or the suppression of a fact, the knowl- 
 edge of which, it is reasonable to infer, would have made him 
 abstain from the contract altogether." 
 
 It was accordingly held by the Supreme Court of Indiana, 
 that fraudulent representations made by an agent soliciting 
 subscriptions for shares in a railroad company, to the effect 
 that the persons having the contract to construct and equip 
 the road were able to complete the same out of their own 
 resources, would not enable a subscriber to repudiate his 
 contract. The court said : " We cannot see how either the 
 truth or falsity of such statement should have influenced the ■ 
 action of the defendant in subscribing." ^ 
 
 § 102. The Representations must have been within the Scope 
 of the Powers of the Agents making them. — It is clear that a 
 corporation is in no case bound by fraudulent representations 
 
 34 L. J. Ch. 545, per Lord Justice Walker v. Mobile, &c. K. R. Co., 
 
 Turner; Hughes w. AntietamManuf. 34 Miss. 246; Jennings v. Brough- 
 
 Co., 34 Md. 316. ton, 22 L. J. Ch. 585. See Mcol's 
 
 1 Pulsford V. Richards, 17 Bea- Case, 3 De G. & J. 387; and com- 
 van, 96. pare Watson v. Earl Charlemont, 
 
 2 Andrews v. Ohio, &c. R. R. 12 Q. B. 856. 
 Co., 14 Ind. 169, 173. See also 
 
101 THE CONTRACT OF MEMBBE8HIP. § 102 
 
 made by a mere stranger. The rule is well settled, that a 
 principal is bound by the fraudulent representations of his 
 agents only when made within the scope of the authority 
 with which the agent has apparently been invested. In 
 applying this rule to representations made by the agents 
 authorized to procure subscriptions for shares, it is important 
 to distinguish between agents appointed before the organiza- 
 tion of a company, and such agents as were appointed by an 
 organized corporate body. The powers of agents appointed 
 pursuant to a statute, for the purpose of opening stock-books 
 before the formation of a company, are of a ministerial char- 
 acter only. They cannot be presumed to have any authority 
 to make representations, except with regard to the powers 
 expressly conferred upon them by law ; and these do not 
 extend beyond the mere act of receiving unconditional sub- 
 scriptions for shares.^ 
 
 It has been held that fraudulent representations made by 
 commissioners prior to the organization of a company in order 
 to induce subscriptions are not a ground for avoiding the 
 subscriptions, because the commissioners are not agents for 
 the company.^ This reasoning seems to carry too far, and 
 makes the rights of parties depend on a barren technicality. 
 The commissioners do, in fact, act on behalf of all the share- 
 holders constituting the corporation, and it would be evident 
 injustice to allow the corporation to take the benefit of their 
 contracts if induced by fraud in the exercise of their statutory 
 powers. Thus, the commissioners have authority under the 
 statute to keep the subscription-books and receive valid 
 subscriptions only. It would be their duty to exclude ficti- 
 tious or forged subscriptions from the books; and if they 
 should fraudulently allow fictitious or forged subscriptions to 
 be made, and fraudulently represent them to be valid, any 
 subsequent subscriber relying on the representation would 
 clearly be entitled to avoid his contract on the ground of 
 fraud. 
 
 1 Supra, §§ 66, 83. 
 
 '^ See Rutz v. Esler, &c. Manuf. Co., 3 Bradw. 83. 
 
§ 103 THE LAW OP PRIVATE COBPOEATIOKS. 102 
 
 § 103. Representations by Agents of the Company. — The 
 general rule is, that representations made by an agent of a 
 corporation do not bind the company or constitute a ground 
 for avoiding a subscription for shares, unless the agent was of 
 such a character as to have apparent authority to make the 
 statements.^ Thus, it was held, in Burnes v. Pennell,^ that a 
 purchaser of shares could not relieve himself of his contract by 
 reason of false representations made by the law agent of the 
 company concerning its financial condition. The purchaser 
 was not entitled to trust to such representations, inasmuch as 
 they were wholly outside of the agent's apparent powers. 
 
 The directors of a company are invested with a general au- 
 thority to manage its affairs. And therefore, if a prospectus 
 issued by the directors of a company, or by their authority, 
 contains any false statement with regard to the condition of 
 the company's affairs, or its business arrangements, the com- 
 pany will be bound by them.^ 
 
 In Waldo v. Chicago, &c. R. R. Co.,* a subscription was 
 voidable on the ground that it had been induced by false rep- 
 resentations as to the company's financial condition. The 
 agents receiving the subscriptions were a committee appointed 
 by the directors for that purpose. The court said : " It is 
 very clear that those representations as to the pecuniary con- 
 dition of the company and the earnings of the road were 
 material, and were such as the respondent had a right to rely 
 upon when he sold his land for the stock of the corporation. 
 He could not know what the road was earning, or that the 
 company, instead of being in a sound financial condition, was 
 just upon the eve of bankruptcy. It is evident that these 
 matters, which fixed the value of the stock, could only be 
 
 • Custar V. Titusville Gas, &c. gomery, &c. Plank Road Co., 30 
 
 Co., 63 Pa. St. 381 ; First Nat. Bank Ala. 92. 
 
 V. Hurford, 29 Iowa, 579 : Goodrich ^ Burnes v. Pennell, 2 H. L. Cas. 
 
 V. Reynolds, 31 111. 490; Ayre's 497. 
 
 Case, 25 Beav. 513; Nicol's Case, 3 » Ayre's Case, 25 Beav. 513; 
 
 De G. & J. 387; Western Bank v. Smith ». Reese River Co., L. R. 2Eq. 
 
 Addie, L. R. 1 H. L. So. 145; 264; Er jaarte Worth, 4 Dr. 529. 
 
 Smith V. Tallassee Plank Road ^ Waldo v. Chicago, &c. R. R. 
 
 Co., 30 Ala. 650; Rives v. Mont- Co., 14 Wis. 575. 
 
103 THE CONTRACT OP MBMBEESHIP. § 104 
 
 known to the agents and officers of the road. They had ac- 
 cess to the books and records of the company, knew what the 
 road was earning, and whether the company was solvent, and 
 nothing was more reasonable or natural than that a party about 
 to subscribe for stock should rely on the statements of its 
 officers and agents, who were around soliciting subscriptions. 
 It is said that the company ought not to be held responsible 
 for the misrepresentations of its agents, but we think other- 
 wise. They were going about the country obtaining sub- 
 scriptions, and whatever fraudulent representations they made 
 as to the condition of the road and the value of the stock 
 while doing this must be deemed to be made by them in the 
 execution of their agency, and for which the company is 
 liable. This, we think, is very clear from the authorities." ^ 
 
 § 104. The Representations must have been made fraudu- 
 lently. — False representations do not render a contract made 
 on the faith of them voidable, unless they were made fraudu- 
 lently. But it is not essential that there be actual knowledge 
 of the falsity of the statements, if they were made recklessly, 
 in ignorance of their truth or falsity. This principle applies 
 forcibly iu case of statements made by the directors or other 
 managing agents of a company, with regard to its internal 
 affairs. The managing agents of a company should be pre- 
 sumed to be acquainted with the affairs of the company within 
 their charge ; for such acquaintance is necessary to enable 
 them to perform their ordinary duties properly. And if 
 statements concerning the affairs of a company are put forth 
 in the prospectus issued by the directors, the public are 
 entitled to assume that such statements were made with 
 knowledge of their truth or falsity .^ 
 
 1 Citing Sandford v. Handy, 23 vine, 4 F. & F. 947, 955. See Good- 
 Wend. 260; Gibson v. D'Este, 21 rich ». Reynolds, 31111. 490 ; Nelson 
 Eng. Ch. R. 542; 2 Y. & C. N. R. v. Luling, 36 N. Y. Super. Ct. 544; 
 542, 570; Philadelphia, &c. R. R. Salem Mill Dam Co. v. Ropes, 9 
 Co. V. Quigley, 21 How. 202. Pick. 187 ; Coil v. Pittsburgh Female 
 
 2 See Smith v. Reese River Co., College, 40 Pa. St. 439; City Bank 
 L. R. 2 Eq. 268, 269, 4 H. L. 64; v. Bartlett, 71 Ga. 797, 808. 
 Glamorganshire Iron, &o. Co. v. Ir- 
 
§ 106 THE LAW OF PRIVATE COEPOEATIONS. 104 
 
 § 105. What Fraudulent Representations enable a Subscriber 
 to avoid his Contract. — It may be stated, as a general rule, 
 that any false representation which induces a person to be- 
 come a shareholder in a corporation, if made by an agent 
 acting within the general scope of his powers, will enable 
 the shareholder to repudiate his contract. Such represen- 
 tations may be made in writing or by parol, by word or act, or 
 even by mere silence. If a corporation, through its proper 
 agents, issues a prospectus to induce the public to subscribe 
 for shares, a person taking shares on the faith of it is entitled 
 to assume that the prospectus contains a fair representation 
 of the actual state of the company. Vice-Chancellor Kin- 
 dersley said: "It appears to me quite necessary to uphold 
 this as a principle, that those who issue a prospectus holding 
 out to the public the great advantages which will accrue to 
 persons who will take shares in a proposed undertaking, and 
 inviting them to take shares on the faith of the representa- 
 tions therein contained, are bound to state everything with 
 strict and scrupulous accuracy; and not only to abstain from 
 stating as facts 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." ^ 
 
 § 106. Whether or not the contract of a shareholder 
 be voidable for false representations must necessarily de- 
 pend, in each case, upon all the facts and circumstances. 
 It may, however, be stated as a general rule, that any 
 fraudulent representation with regard to the financial state 
 of a company,^ or its arrangements for carrying out its 
 
 * New Brunswick, &c. Ry. Co. man, 53 Miss. 655; City Bank v. 
 
 i>. Muggeridge, 1 Dr. & Sm. 363, Bartlett, 71 Ga. 797, 808; Waldo v. 
 
 381, cited with approval in Hender- Chicago, &o. K. R. Co., 14 Wis. 
 
 son V. Lacon, L. R. 5 Eq. 252; Cen- 575; Melendy v. Keen, 89 111. 395; 
 
 tral Ry. Co. v. Kisch, L. R. 2 H. L. Bradley v. Poole, 98 Mass. 169. See 
 
 113. Compare Pulsford v. Rich- McClellan v. Scott, 24 Wis. 87. 
 
 ards, 17 Beav. 87. Compare Selma, &c. R. R. Co. v. 
 
 ' Water Valley Manuf. Co. v. Sea- Anderson, 51 Miss. 829. 
 
105 THE CONTKACT OF MEMBEESHIP. § 108 
 
 enterprise,^ or with regard to any other fact which can reason- 
 ably be supposed to have been material in inducing a person to 
 become a shareholder, will enable the latter to avoid his con- 
 tract. If a person is induced to take shares by a false rep- 
 resentation that another person has become a shareholder,^ or 
 that certain persons have agreed to act as directors of the com- 
 pany,^ this will be a ground for avoiding the subscription ; but 
 it must appear in such case that the subscriber relied upon 
 the statement, and was induced thereby to take the shares.* 
 
 § 107. The fact that certain persons have subscribed for 
 shares, subject to a secret p,greement that their subscriptions 
 should be merely colorable, and for the purpose of inducing 
 others to subscribe, is not a ground for avoiding subsequent 
 subscriptions, though they were made in the belief that the 
 former were bona fide; for the secret agreements that the 
 subscriptions should be merely colorable would be void, and 
 the subscriptions made subject thereto be absolutely binding 
 upon the subscribers.^ A different principle would, however, 
 be applicable where the prior subscriptions, held out as de- 
 coys, were entirely fictitious, or were made by persons unable 
 to perform the obligations of shareholders by reason of insol- 
 vency or for any other cause.® 
 
 § 108. The Right to avoid a Subscription induced by Fraud 
 is barred by Laches. — If a person has been induced by fraud- 
 
 1 Vreeland v. N. J. Stone Co., 29 Bailey, 24 Vt. 465, 476; Jewett v. 
 
 N. J. Eq. 190 ; Smith u. Reese River Valley Ry. Co., 34 Ohio St. 601. 
 
 Co., L. R. 2 Eq. 264, and2 Ch. 604; See m/™i §§ 302, 303. Compare 
 
 Ross «. Estates Investment Co., L. R. Custar v. Titusville Gas, &c. Co., 
 
 3 Ch. 682; Central Ry. Co. r.Kisch, 63 Pa. St. 381; Hayden v. Atlanta 
 
 L. R. 2 H. L. 99, 119. Cotton Factory, 61 Ga. 234. 
 
 ^ Henderson v. Lacon, L. R. 5 Eq. » See Henderson v. Lacon, L. R. 
 
 249. Compare Ross ». Estates Inv. 5 Eq. 249; and compai-e Ross ». 
 
 Co., L. R. 3 Ch. 682; Cunningham Estates Inv. Co., L. R. 3 Ch. 682; 
 
 V. Edgefield, &e. R. R. Co., 2 Head, Cunningham v. Edgefield, &o. R. R. 
 
 23. Co., 2 Head, 23; Pulsford v. Rioh- 
 
 » Blake's Case, 34 Beav. 639. ards, 17 Beav. 87; Vane u. Cobbold, 
 
 Compare Hallows v. Fernie, L. R. 1 Exch. 798; Centre, &o. Turnpike 
 
 3 Ch. 467. Co. V. McConaby, 16 S. & R. 140; 
 
 * Walker t'. Mobile, &c. R. R. Co., Occidental Ins. Co. v. Ganzhorn, 2 
 
 34 Miss. 246. Mo. App. 205. 
 
 ° Connecticut, &c. R. R. Co. v. 
 
§ 108 THE LAW OP PRIVATE OOEPOEATIONS. 106 
 
 ulent representations to become a member of a corporation, 
 he must proceed with the utmost diligence if he desires to 
 annul his contract. This rule is founded upon the most ob- 
 vious principle of justice. A contract induced by fraud is 
 valid until avoided by the innocent party. And a person who 
 has been induced by fraud or deception to take shares in a 
 corporation is in every respect a shareholder, and entitled to 
 the benefits of membership, until he has elected to repudiate 
 his contract. If, then, he were permitted to delay declaring 
 his contract void on account of the fraud, injustice would be 
 done the other shareholders ; for the former would be enabled 
 to speculate upon the value of his shares, — to repudiate them 
 if the speculation should prove a failure, and to hold them 
 valid in case of success. Lord Romilly said : " The leading 
 principle in all these cases is this : a man must not play fast 
 and loose ; he must not say, ' I will abide by the company if 
 successful, and I will leave the company if it fails ' ; and 
 therefore, whenever a misrepresentation is made of which 
 any one of the shareholders has notice, and can take advan- 
 tage of to avoid his contract with the company, it is his duty 
 to determine at once whether he will depart from the com- 
 pany, or whether he will remain a member." ^ 
 
 Diligence is also required, lest other persons be misled by 
 the fact of his remaining a member of the association.^ 
 
 It is clear that, if a stockholder, with notice of facts ena- 
 bling him to repudiate his contract on account of fraudulent 
 representations, has elected to treat his contract as valid, he 
 cannot afterwards refuse to be bound by it. And there- 
 fore it is a rule that a person who was induced by fraud to 
 purchase shares in a corporation cannot avoid his contract, 
 if, after having acquired notice of the fraud, he has received 
 any benefit from his shares, or in any manner has acted as 
 stockholder.* 
 
 • Ashley's Case, L. R. 9 Eq. 263, 23 ; Upton v. Tribilcock, 91 TJ. S. 45, 
 
 268. 55, citing Smith's Case, L. R. 2 Ch. 
 
 2 See Central Ry. Co. v. Kisch, 613 ; Denton v. Macneil, L. R. 2 Eq. 
 
 L. R. 2 H. L. 99; Upton v. Engle- 352; Peel's Case, L. R. 2 Ch. 684. 
 
 hart, 3 Dill. 496, 502; Cunningham ' Ogilvie v. Knox Ins. Co., 22 
 
 V. Edgefield, &c. R. R. Co , 2 Head, How. 380; Chubb v. Upton, 95 U. S. 
 
107 THE CONTEACT OF MEMBERSHIP. § 109 
 
 PART IV. 
 
 RESCISSION OP THE CONTEACT OF MEMBERSHIP. 
 
 § 109. The General Rule. — The contract of membership in a 
 corporation is not impliedly terminable at the will of either of 
 the parties to it, as in case of an ordinary contract of partner- 
 ship ; the general rule is, that a shareholder in a corporation 
 has no power to dissolve his connection with the company of 
 which he is a member.^ Nor can the agents of a corporation 
 consent, on behalf of the company, to the withdrawal of any 
 shareholder.^ This follows from the intentions of the parties, 
 the character of their contract, and their obligations to credi- 
 tors and the State. 
 
 In Bedford Railroad Co. v. Bowser,^ the Supreme Court of 
 Pennsylvania decided that the directors of a railroad com- 
 pany had no power to consent to a cancellation of the shares 
 of a subscriber, although the company was fully solvent at the 
 time. Strong, J., delivering the opinion, said : " Directors of 
 a railroad companj'^ are trustees for all the stockholders, and, 
 in a very just sense, for the Commonwealth. It is an abuse of 
 their trust, wholly unauthorized, and at war with the design 
 of the charter, to single out some of the stock subscribers 
 and release them from their liability. No such authority in 
 them has ever been recognized. It is neither supported by 
 authority or reason." 
 
 The general rule is, that a shareholder in a corporation 
 can escape from the obligation of his contract only by one 
 
 665; Farrar v. Walker, 13 Bank. 7 Conn. 457; Bishop's Fund v. 
 
 Reg. 82; Litchfield Bank ». Church, Eagle Bank, 7 Conn. 476; Selma, 
 
 29 Conn. 137; Centre, &c. Turnpike &e. R. R. Co. v. Tipton, 5 Ala. 
 
 Co. V. MoConaby, 16 S. & R. 140; 809. 
 
 Parks V. Evansville, &c. R. R. Co., 2 Bedford R. R. Co. v. Bowser, 
 
 23 Ind. 567; Hamilton v. Grangers' 48 Pa. St. 29; Hughes v. Antietam 
 
 Life, &c. Ins. Co., 67 Ga. 145. Com- Mannf. Co., 34 Md. 318; Jewett v. 
 
 pare Wontner v. Shairp, 4 C. B. 404. Valley Ry. Co., 34 Ohio St. 601. 
 ■>■ United Society v. Eagle Bank, » 48 Pa. St. 34, 37. 
 
§ 111 THE LAW OF PRIVATE COEPOEATIONS. 108 
 
 of the following methods : (1.) by a transfer of his shares 
 and an acceptance of the transfer on the part of the cor- 
 poration, thus effecting a complete novation ; ^ (2.) by a for- 
 feiture and sale under authority expressly conferred upon 
 the company by its charter ; ^ (3.) dissolution of the com- 
 pany ; ^ (4.) by act of the majority in winding up the busi- 
 ness of the company and surrendering its charter ; * (5.) by 
 act of the shareholder, where permission to withdraw is ex- 
 pressly conferred by the charter;^ (6.) by unanimous con- 
 sent of the members of the company, under legislative 
 authority.® 
 
 § 110. Attention is again called to the essential difference 
 between the contract of membership in a corporation, and 
 a contract to buy shares or to subscribe for shares at a 
 future time. The former contract, being the bond of union 
 between all the^ shareholders, cannot be rescinded by any 
 shareholder even with the consent of the directors. The 
 latter contract is an ordinary executory contract between 
 the corporation, on the one side, and the party agreeing to 
 purchase shares or to become a shareholder, on the other 
 side.'^ There is no reason why the directors should not 
 have the power to agree to a rescission or alteration of a 
 contract of this description, as in case of any other con- 
 tract entered into by the corporation in the transaction of its 
 ordinary business. 
 
 § 111. The Nature and Effect of a Cancellation of Shares. — 
 A cancellation of shares, or the release of a shareholder, must 
 not be confounded with the cancellation of a certificate of 
 shares. A certificate of shares is merely evidence that the 
 holder is a shareholder, and to cancel it would not of itself 
 release him from membership in the company. If a certificate 
 of shares should be issued illegally, or to a wrong person, it 
 would not constitute the holder a shareholder, and its cancel- 
 
 1 Infra, § 159. ter must be strictly followed in this 
 
 * Infra, § 122. case. Greenville, &c. R. R. Co. v. 
 
 8 Infra, § 982. Smith, 6 Rich. L. 91. 
 
 < Infra, § 413. « Infra, § 119. 
 
 ' But the provisions of the char- ' Supra, § 61. 
 
109 THE CONTRACT OF MEMBERSHIP. § 112 
 
 lation would merely destroy an invalid instrument which had 
 been issued in the name of the corporation. 
 
 The withdrawal of a shareholder would, of course, reduce 
 the amount of the outstanding shares in the company to that 
 extent. Whether it would also reduce the amount of the 
 company's assets or capital would depend upon circumstances. 
 The cancellation of shares which have not been fully paid up 
 would deprive the corporation of the right to call upon the 
 holder who was discharged to contribute the amount of the 
 shares to the company's capital. This liability of a share- 
 holder to contribute his proportionate part of capital is for 
 the common benefit of all the shareholders. It constitutes a 
 portion of the company's capital or assets, and is pledged to 
 creditors as security for their claims. To release a subscriber 
 or holder of shares which have not been fully paid up would 
 therefore necessarily reduce the assets or capital of the cor- 
 poration, and would be in violation of the rights both of 
 creditors and of the remaining members.^ 
 
 The withdrawal of a shareholder whose shares have been 
 fully paid up would not be injurious to the corporation or to 
 creditors, if the departing shareholder does not take away 
 any portion of the company's assets, and if there is no indi- 
 vidual liability to creditors. It is obvious, however, that no 
 shareholder would be willing to withdraw upon any such' 
 conditions ; for he would thereby in effect make a gift to the 
 corporation of the full value of his shares. The withdrawal 
 of a shareholder whose shares have been paid up would 
 usually take the form of a purchase of the shares by the cor- 
 poration. In this way the departing member would give up 
 his interest in the whole concern, and would receive the value 
 thereof out of the company's assets. 
 
 § 112. Purchase by Corporation of Shares in itself. — A pur- 
 chase by a corporation of shares of its own stock, in effect, 
 amounts to a. withdrawal of the shareholder whose shares 
 
 1 Bedford R. R. Co. v. Bowser, holders, see infra, § 302. As to 
 48 Pa. St. 29 ; Gill v. Balis, 72 Mo. the rights of creditors, see infra, 
 424. As to the rights of the share- § 804. 
 
§ 112 THE LAW OF PRIVATE CORPORATIONS. 110 
 
 are purchased from membership in the company, and a re- 
 payment of his proportionate share of the company's assets. 
 There is no substitution of membership under these circum- 
 stances, as in case of a purchase and transfer of shares to a 
 third person, but the members of the company and the amount 
 of its capital are actually diminished. Whatever a transac- 
 tion of this character may be called in legal phraseology, it 
 is clear that it really involves an alteration of the company's 
 constitution, just as the withdrawal of a member of a co- 
 partnership, with his proportionate share of the joint funds, 
 involves an alteration of the constitution of a copartnership. 
 The amount of the company's assets and the number of its 
 shareholders are diminished. Every continuing shareholder 
 is injured by the reduction of the fund contributed for 
 the common venture ; and the creditors who have trusted 
 the company upon the security of the capital originally 
 subscribed, or who are entitled to expect that amount of 
 security, are entitled to complain. ^ 
 
 It is no answer to say that shares having a market value 
 must be regarded like any other personal property, and that 
 no person is injured if a solvent corporation in good faith 
 purchases shares in itself at their market value, inasmuch as 
 the shares so purchased are property in the hands of the 
 company, and may at any time be reissued or sold. No ver- 
 biage can disguise the fact, that a purchase by a corporation 
 of shares in itself really amounts to a reduction of the com- 
 pany's assets, and that the shares purchased do in fact remain 
 extinguished, at least until the reissue has taken place. The 
 fact that such a transaction may not necessarily be injurious 
 to any person is not a sufficient reason for supporting it. It 
 is contrary to the fundamental agreement of the shareholders, 
 and is condemned by the plainest dictates of sound policy. 
 To allow the directors to exercise such a power would be a 
 fruitful source of unfairness, mismanagement, and corruption. 
 It is for these reasons that a shareholder cannot be allowed 
 to withdraw from the corporation with his proportionate 
 
 I See infra, §§ 769, 804, 821. 
 
Ill 
 
 THB CONTKACT OP MEMBEESHIP. 
 
 §113 
 
 amount of capital, either by a release and cancellation before 
 the shares have been paid up, or by a purchase of the shares 
 with the company's funds.^ 
 
 § 118. The decisions of the courts are not all in accord 
 with the principles and authorities referred to in the pre- 
 ceding sections. 
 
 In City Bank of Columbus v. Bruce,^ it appeared that the 
 directors of a banking corporation had passed a resolution 
 authorizing all the shareholders who were indebted to the 
 corporation on account of stock notes to cancel their in- 
 debtedness by surrendering their shares to the company at a 
 specified rate, and that nearly one half of all the shares in 
 tiae company had been surrendered accordingly. The Court 
 of Appeals of New York held that this transaction was in 
 violation of no principle of the common law. 
 
 ^ German Savings Bank v. Wulfe- 
 kuhler, 19 Kans. 60; Abeles v. 
 Cochran, 22 Kans. 405; State v. 
 Oberlin Building Ass., 35 Ohio St. 
 258; Coppin v. Greenlees, &c. Co., 
 .38 Ohio St. 275; Carrier v. Lebanon 
 Slate Co., 56 N. H. 262; Johnson 
 V. Bush, 3 Barb. Ch. 207; Zulueta's 
 Claim, L. R. 5 Ch. 444; Ee Mar- 
 seilles Extension Ry. Co., L. R. 
 7 Ch. 161. Compare Jones v. Mor- 
 rison, 31 Minn. 140. See also infra 
 §484. 
 
 In Percy v. Millaudon, 3 La. 570, 
 585, Martin, J., delivering the opin- 
 ion of the court, said: " Creditors 
 and customers have a claim to the 
 preservation of the capital in its 
 original integrity; for it is the 
 pledge on the faith of which they 
 accept the notes of the institution, 
 deposit their money, and lodge paper 
 for collection. So has the public, on 
 account of the advantages which the 
 legislature has stipulated the bank 
 should afford, as a consideration for 
 the immunities and privileges which 
 the charter confers. So have the 
 
 stockholders, on account of the profits 
 which they have a right to expect 
 on the investments they have re- 
 spectively made. Thus, by the re- 
 duction oE the capital, the directors 
 of a bank violate their duties towards 
 its creditors and customers, the pub- 
 lic and the stockholders. The claim 
 of the first is the more sacred; for, 
 unless justice be done to these, the 
 public has a right to no advantage, 
 and the stockholders to no profit. 
 . . . The reduction of the capital, by 
 subjecting the shares of the remain- 
 ing stockholders to a greater portion 
 of the debts of the bank than they 
 had agreed to be bound for, works an 
 injury to them respectively. Each 
 had a right, which he had exercised 
 at the time of his subscription or of 
 his purchase of stock, to determine 
 what stake he should hold in the af- 
 fairs of the corporation, particularly 
 what part of its passive debts the 
 funds he invested would be liable for." 
 2 City Bank v. Bruce, 17 N. Y. 
 507; compare Hartridge v. Rock- 
 well, R. M. Charlton (Georgia), 
 
§ 113 THE LAW OF PRIVATE CORPOEATIONS. 112 
 
 In Chicago, &c. R. R. Co. v. Marseilles,^ the Supreme 
 Court of Illinois held that the directors of a railroad company 
 had a general authority to purchase shares in the company 
 on its behalf, unless expressly prohibited by the charter. 
 
 In Chetlain v. Republic Life Ins. Co.,^ the same court held 
 that a resolution authorizing those shareholders in a life in- 
 surance company who had paid twenty per cent on their sub- 
 scriptions to call for a like percentage of all of their shares 
 as fully paid up, upon consenting to have the remainder can- 
 celled, was valid. The court said : " This in no sense dimin- 
 ished the amount of the capital stock of the company. Where 
 a person had subscribed for, say, ten shares, and bad paid 
 $200, and was willing to receive a certificate for two shares 
 of $100 each, and cancel his subscription for the ten shares, 
 the other eight still belong to the company, and they could 
 sell them to whom they might choose. The subscription for 
 shares, and the twenty per cent thereon, did not vest any 
 title to the shares in the purchaser. That would only be a 
 contract to purchase and pay for the number of shares for 
 which the subscription was made. Until paid for, and the 
 purchaser received his certificate of stock, the title to the 
 shares was still in the company." This reasoning indicates 
 a complete misconception of the nature of a stock subscrip- 
 tion, and the resulting rights and obligations, as well as of 
 the real character and consequences of a purchase by a com- 
 pany of shares in itself. 
 
 In Iowa Lumber Co. v. Poster,^ the Supreme Court of 
 Iowa held that a company whose articles of association au- 
 thorized it to purchase and hold " any real estate or other 
 property that may be deemed desirable in the transaction 
 of its business," might purchase and hold shares of stock in 
 itself. 
 
 260; Verplanck v. Mercantile Ins. kel v. Joliet Opera House Co., 79 
 
 Co., 1 Edw. Ch. 84. 111. 334; Klein v. Alton, &c. R. R. 
 
 1 Chicago, &c. R. R. Co. v. Mar- Co., 13 111. 514; Ryder v. Alton, &c. 
 seilles, 84 111. 643. R. R. Co., Id. 516. See, however, 
 
 2 Chetlain v. Republic Life Ins. Clapp v. Peterson, 104 111. 26, 33. 
 Co., 86 111. 220. Compare Melvin » Iowa Lumber Co. v. Foster, 49 
 V. Lamar Ins. Co., 80 111. 446; Zir- Iowa, 25. 
 
113 THE CONTRACT OF MEMBEESHIP. § 114 
 
 If these decisions are carried to their logical results, it is 
 apparent that a corporation may, at any time, by an easy 
 process, be made to shrink away and finally vanish into noth- 
 ing. It would only be necessary to " purchase " shares from 
 its stockholders. And in the end, after the last stockholder 
 had " sold" his own shares to the company and withdrawn 
 with the proceeds, nothing material would remain to attest 
 the former existence of the corporation except an empty 
 treasury and cancelled stock certificates. 
 
 § 114. Exceptions to the Rule. — The directors of a corpo- 
 ration may, however, receive shares in the company by way of 
 gift or bequest,^ or in satisfaction of debts due the company 
 which cannot be collected in any other manner.^ In these 
 cases the objections which apply to a purchase of shares under 
 ordinary circumstances have no application, for the company's 
 actual capital is not thereby diminished. It has been held, for 
 similar reasons, that, where there is a bona fide dispute as to 
 the liability of a subscriber or the validity of his shares, the 
 directors may in good faith enter into a compromise by which 
 the subscriber is discharged and his shares are cancelled.^ 
 
 If the charter of a corporation expressly provides that it 
 may diminish the amount of its capital stock, this may be ac- 
 complished either by cancelling subscriptions before anything 
 has been paid upon them into the treasury, or by purchasing 
 the shares for their real value, if wholly or partly paid up. 
 It would be necessary, however, to follow strictly the forms 
 and methods prescribed by law. 
 
 If shares in a corporation are purchased by the company, 
 they may, unless the contrary be provided, be reissued at a 
 subsequent time. Under these circumstances, it is said, the 
 shares do not become merged, but remain temporarily in 
 abeyance, and may be sold again by the corporation.^ As a 
 
 1 Rivanna Navigation Co. v. son, &o. Plank Eoad Co., 17 Barb. 
 
 Dawsons, 3 Gratt. 19. 397; Cooper w. Frederick, 9 Ala. 738. 
 
 * Williams u. Savage Manuf. Co., ° State v. Oberlin Building Ass., 
 
 3Md.Ch.418; Lathropt). Kneeland, 35 Ohio St. 258; New Albany v. 
 
 46 Barb. 432 ; Taylor i-. Miami Exp. Burke, 11 Wall. 96 ; Lord Belhaven'a 
 
 Co.,6 0hio, 177; State Bank ». Fox, Case, 3 De G., J. & S. 41. 
 
 3 Blatchf. 431 ; Barton v. Port Jack- * See State v. Smith, 48 Vt. 266; 
 
 VOL. I. — 8 
 
§ IIG THE LAW OF PEIVATB COEPORATIONS. 114 
 
 matter of fact, however, the shares are extinguished, and new 
 shares are subsequently created in their place. By a fiction 
 these new shares are considered in all respects as if they 
 were the old shares and the corporation merely an interme- 
 diate transferee; but it would be an absurdity to say that 
 a corporation can really hold shares in itself.^ 
 
 § 115. Violation of the Charter no Cause for Rescission. — An 
 ordinary contract may be rescinded at any time, by mutual 
 agreement of the parties, and a voluntary rescission may in 
 some instances be implied from the acts of the parties with- 
 out any express agreement. Thus, if one of the parties to a 
 contract wholly fails to perform his part 6f it, the other party 
 will often be at liberty to consider the contract ended by 
 mutual consent. If a contract consists of mutual promises, 
 the due performance by the one party is in many instances 
 an implied condition precedent to the obligation of the other 
 party to perform the agreement on his side, though there be 
 no rescission of the contract. 
 
 These doctrines have but little application to the contract 
 between the members of a corporation. Every individual 
 shareholder assumes the duties of the status into which he 
 enters, and becomes entitled to have every other shareholder 
 perform a similar undertaking in return. A shareholder can- 
 not claim a release from the obligation of his contract, merely 
 because some of the other shareholders have violated the 
 charter and have failed to perform their engagements ; be- 
 cause, if one member were discharged, it is clear that the 
 contract of every other member would be impaired. It is 
 the right of each individual shareholder to insist upon a spe- 
 cific performance of the contract of membership by every 
 other member of the company. 
 
 § 116. Wrongful Acts of Agents no Ground for Rescission. — 
 It is evident that a wrongful act done by a third person, not 
 a party to the contract of membership, cannot release any 
 
 City Bank v. Bruce, 17 N. Y. 507; " See HoUaday v. EUiott, 8 Ore- 
 Williams V. Savage Manuf. Co., 3 gon, 84. 
 Md. Ch. 418; Taylor v. Miami Ex- 
 porting Co. , 6 Ohio, 177. 
 
115 THE CONTBACT OP MEMBERSHIP. § 116 
 
 of the parties to that contract from the performance of the 
 obligations which he has assumed. And therefore it is not a 
 defence to an action against a shareholder for calls, to say 
 that the agents of the company have exceeded their author- 
 ity and have done unauthorized acts. If a shareholder is 
 aggrieved by wrongful acts of the managing agents of the 
 company, he has his remedy in equity, to preserve his in- 
 terest in the common concern from harm, and to enforce a 
 specific performance of the contract of membership.^ 
 
 In Mississippi, &c. R. R. Co v. Cross,'^ Chief Justice Eng- 
 lish said : " It may be safely announced as a general rule, that 
 in a suit by a railroad company, or other corporation, against 
 a subscriber, for assessments upon his stock, he is not per- 
 mitted to show, by way of defence to the action, that the 
 corporation has, by mis-user or non-user, violated or failed to 
 comply with the provisions of its charter. . . . The charter 
 is the law of the subscriber's contract. If the directors 
 undertake to make an unwarrantable departure from the 
 provision of the charter in the location or construction of the 
 road, or in the appropriation of the funds of the company, 
 the stockholder has his remedy by injunction. Not to enjoin 
 the collection of calls due upon his stock, but to restrain the 
 corporation from the particular violation or abuse of its 
 charter complained of." 
 
 In Hannibal, &c. Plank Road Co. v. Menefee,^ a share- 
 holder set up as a defence to an action for calls upon his 
 stock, that the directors had violated the charter of the com- 
 pany, which required the construction of a plank road, by 
 causing three miles of the road to be made of gravel ; but 
 the Supreme Court of Missouri held that the unlawful act of 
 the directors did not release the shareholder from his obliga- 
 tion to the other shareholders. Richardson, J., said : " The 
 directors are merely agents of the corporation. They do not 
 own the stock subscribed, and cannot sue for it ; and there- 
 fore a defence that might be made to a suit, brought in their 
 
 1 Infra, §§ 237, 279. Central Plank Koad Co. v. Clemens, 
 
 2 20 Ark. 443, 451, 452. 16 Mo. 359. 
 « 25 Mo. 547, 648. See also 
 
§ 117 THE LAW OF PRIVATE CORPOEATIONS. 116 
 
 names and for their personal benefit, would not be responsive 
 to an action in the name of the corporation. This suit is in 
 the corporate name of the company that represents all the 
 stockholders, each one of whom is interested in the proper 
 administration of the assets of the company ; and the suit is 
 practically for their benefit. The real question is whether a 
 stockholder is discharged from the payment of his subscrip- 
 tion and from his duty to bear the part he has assumed of a 
 common burden with other stockholders, because his or their 
 agents in some particular may transcend their authority." ^ 
 
 § 117. Cases where Rescission ■was denied. — It has been 
 held, accordingly, that a failure on the part of the agents of 
 a corporation to manage its business in the manner required 
 by its charter is not a defence in an action against a share- 
 holder for the payment of his proportion of the capital. ^ 
 
 So, if the directors of a corporation attempt to release a 
 portion of the shareholders and cancel their shares, this will 
 not discharge the other shareholders from the obligation of 
 their contracts ; for such release and cancellation, being un- 
 authorized, would not bind the corporation, and would be wholly 
 void.3 Nor would it be a defence to an action for calls, that 
 the agents of the company have received payment of a por- 
 tion of the stock subscriptions in depreciated currency, or in an 
 unauthorized manner. An unauthorized receipt of payment 
 would not bind the corporation, and could not be set up as a 
 defence in an action to enforce the shareholder's liability.* 
 
 » See also Ex parte Booker, 18 332; Buffalo, &c. R. R. Co. v. Gif- 
 
 Ark. 338; Hammett v. Little Rock, ford. 87 N. Y. 294. 
 &c. R. R. Co., 20 Ark. 204; Ot- " Hornaday v. Indiana, &c. Ry. 
 
 tawa, &c. R. R. Co. I). Black, 79 111. Co., 9 Ind. 263; Illinois Grand 
 
 262; Hays J7. Ottawa, &c. R. R. Co., Trunk R. R. Co. v. Cook, 29 111. 
 
 61 111. 422; Chetlain v. Republic 237; Chetlain ». Republic Life Ins. 
 
 Life Ins. Co., 86 111. 220; First Mu- Co., 86 111. 220. 
 nicipality v. Orleans Theatre Co., « Whittlesey i'. Frantz, 74 N. Y. 
 
 2 Rob. (La.) 209; Little m. O'Brien, 456; Jewett v. Valley Ry. Co., 34 
 
 9 Mass. 423; Dorman v. Jackson- Ohio St. 601; Agriculturist Cattle 
 
 ville, &c. Plank Road Co., 7 Fla. Ins. Co. v. Fitzgerald, 15 Jur. 489. 
 
 265; Smith u. Tallassee Branch R. Compare Ren-sselaer, &e. Plank Road 
 
 R. Co., 30 Ala. 650; Greeneville, Co. d. Wetsel, 21 Barb. 56. 
 &c. R. R. Co. r. Johnson, 8 Baxter, * Phillips v. Covington, &c. Bridge 
 
117 THE CONTRACT OF MEMBERSHIP. § 118 
 
 An undue delay in the completion of the works of a com- 
 pany and in the prosecution of its business,^ or even an entire 
 failure of the enterprise for which the company was fonned,^ 
 would not necessarily discharge a shareholder from his obli- 
 gation to contribute a proportionate share of the company's 
 capital. Creditors would be entitled to have the unpaid cap- 
 ital called in to satisfy their claims; and every shareholder 
 would be entitled to have the losses suffered by the company 
 distributed equally among all the shareholders.^ 
 
 It is to be observed, however, that any failure of the en- 
 terprise of a corporation which would deprive the directors 
 of the power of making calls, there being no unpaid cred- 
 itors, might be a defence to an action against a shareholder, 
 on the ground that the directors would have no authority to 
 call in the capital of the company under those circumstances.* 
 
 §118. Contracts to purchase Shares. — In case of a con- 
 tract for the future purchase of shares, the payment of the 
 purchase money and delivery of certificates for paid up 
 shares are conditions concurrent, and the purchaser would 
 not become a shareholder until after the execution of the con- 
 tract. If a corporation, after entering into a contract of this 
 description, should, through the action of its agents, allow 
 itself to be placed in such a position as to be unable to carry 
 out substantially its part of the agreement, this would give 
 the purchaser a sufficient reason for declining to perfoi'm the 
 agreement on his part. Any serious mismanagement of the 
 company's business which would practically destroy the value 
 
 Co., 2 Mete. (Ky.) 219, 223; Ma^ Ind.490; Morgan County u. Thomas, 
 
 con, &c. R. R. Co. v. Vason, 57 76 111. 120; McMillan v. Maysville, 
 
 Ga. 314; Little v. O'Brien, 9 Mass. &c. R. R. Co., 15 B. Monr. 218; 
 
 423. Four Mile Valley R. R. Co. v. 
 
 1 Pickering v. Templeton, 2 Mo. Bailey, 18 Ohio St. 208. Compare 
 
 App. 424; Miller v. Pittsburgh, &c. Lake Ontario, &c. R. R. Co. v. 
 
 R. R. Co., 40 Pa. St. 237; Gibson Curtiss, 80 N. Y. 219. 
 V. Columbia, &c. Turnpike, &c. Co., « See infra, §§ 800, 311. 
 18 Ohio St. 396. * Infra, §§ 150-153. McCuUy r. 
 
 » Buffalo, &c. R. R. Co. V. Gif- Pittsburgh, Sra. R. R. Co., 32 Pa. 
 
 ford, 87 N.Y. 294; Smith ». Gower, St. 31; Macedon, &c. Plank Road 
 
 2 Duv. 17; Hardy v. Merriweather, Co. v. Lapham, 18 Barb. 315. 
 14 Ind. 203; Bish v. Bradford, 17 
 
§ 119 THE LAW OF PEIVATE COEPOEATIONS. 118 
 
 of its shares, as, for example, a large issue of fraudulent stock 
 certificates, which would become binding upon the company 
 in the hands of bona fide holders, would have this effect.^ 
 
 § 119. Rescission by Unanimous Consent under Legislative 
 Authority. — Under the prohibition of the Constitution of the 
 United States against State legislation impairing the obliga- 
 tion of contracts, no State has the power to rescind or alter the 
 contract existing between the shareholders of a corporation.^ 
 An attempted alteration of the charter of a corporation by a 
 State law is therefore a mere nullity, and does not prevent 
 a shareholder from obtaining an injunction to restrain the 
 other corporators, or their agents, from violating the original 
 contract.^ 
 
 It is clear, however, that the shareholders of a corporation 
 may by their unanimous agreement, with the consent of the 
 State, rescind their mutual engagements ; and any portion of 
 the members of the dissolved company may, by entering into 
 a new agreement between themselves, form a new corporate 
 association. If, then, a portion of the shareholders of an 
 existing corporation attempt to act under a new or altered 
 charter, thereby showing an intention to rescind their first 
 agreement, the other parties to the agreement may either en- 
 join them from violating their compact, or they may consent 
 to treat the original contract as rescinded, and withdraw from 
 the association altogether. Thus, in Fry v. Lexington, &c. 
 R. R. Co.,* it appeared that an amendment to the charter of a 
 railroad company had been passed by the legislature, author- 
 izing the company to consolidate with other corporations and 
 to purchase shares in other undertakings. The Supreme Court 
 of Kentucky held that, if the amendment was accepted by a 
 portion of the company, and acted upon, the remainder of 
 the shareholders might consider their membership at an end. 
 Chief Justice Simpson said : " The charter of this road con- 
 
 1 Merrill v. Gamble, 46 Iowa, 615 ; also Lake Ontario, &o. K. R. Co. v. 
 
 Merrill v. Beaver, 46 Iowa, 646 ; Mar- Curtiss, 80 N. Y. 219. 
 rill V. Reaver, 50 Iowa, 404; Court- ^ jnfra, § 1027. 
 right V. Deeds, 37 Iowa, 504. See » Infra, § 297. 
 
 4 
 
 2 Mete. (Ky.) 314, 322. 
 
119 THE CONTRACT OS MBMBEESHIP. § 120 
 
 tains no provision authorizing amendments to be made, nor 
 was there any general law in force at the time it was granted 
 by which they were authorized. The subscribers, therefore, 
 who do not assent to the amendment, have the right, if they 
 think proper to exercise it, to prevent the company from pro- 
 ceeding to act under the amended charter, and to compel it 
 to confine its operations solely to the promotion of the objects 
 designed to be accomplished by the original charter. Or they 
 may waive this right, permit the company to proceed under 
 the amended charter, and dissolve their connection with it 
 upon equitable terms." ^ 
 
 The right to restrain a violation of the charter agreement 
 does not exist where an alteration is imposed by the State in 
 the exercise of its power of eminent domain. In such case a 
 shareholder who does not consent to enter into the altered 
 agreement must withdraw from the company upon receiving 
 due compensation.^ What acts constitute an alteration or 
 violation of the charter agreement will be considered in 
 detail in a subsequent chapter.^ 
 
 § 120. The rescission of the contract of membership, like 
 its formation, can take place only through the agreement of 
 
 1 See also Middlesex Turnpike E. R. Co., 9 Ind. 358, 359; Booe v. 
 
 Co. V. Locke, 8 Mass. 268; Middle- Junction R. E. Co., 10 Ind. 93; As- 
 
 sex Turnpike Co. v. Swan, 10 Mass. pinwall v. Ohio, &c. R. R. Co., 20 
 
 384; Union Locks Co. v. Towne, 1 Ind. 492; Shelbyville, &c. Turnpike 
 
 N. H. 44; Indiana, &c. Turnpike Co. Co. v. Barnes, 42 Ind. 498; Hughes 
 
 II. Phillips, 2 P. & W. 196 ; Southern v. Antietam Manuf . Co., 34 Md. 318 ; 
 
 Penn. Iron, &c. Co. v. Stevens, 87 Marietta, &e. R. R. Co. v. Elliott, 10 
 
 Pa. St. 190; Ashton e. Burbank, 2 Ohio St. 57 ; Manheim, &o. Turnpike 
 
 Dill. (C. C.) 435; Nugent v. Super- Co. v. Arndt, 31 Pa. St. 317; Fulton 
 
 visors, 19 Wall. 241, 248; Buffalo, County w. Mississippi, &o. R. R. Co. , 
 
 &c. R. R. Co. V. Pottle, 23 Barb. 21; 21 LI. 338; Troy, &c. R. R. Co. v. 
 
 Champion!?. Memphis, &0.R. R. Co., Kerr, 17 Barb. 581; Illinois Grand 
 
 35 Miss. 692; Hartford, &c. E. R. Trunk R. R. Co. v. Cook, 29111. 237; 
 
 Co. V. Croswell, 5 Hill, 383; New Bank v. City of Charlotte, 85 N. C. 
 
 Orleans, &c. E. R. Co. v. Harris, 27 433; International, &o. R. R. Co. v. 
 
 Miss. 519; Hester v. Memphis, &c. Bremond, 53 Texas, 96. Compare 
 
 R. R. Co., 32 Miss. 380; Witter v. Pacific R. R. Co. v. Hughes, 22 Mo. 
 
 Mississippi, &c. R. R. Co., 20 Ark. 291. 
 
 485; Winters. Muscogee R. E Co., ^ Jnfra, § 1069. 
 
 11 Ga. 438; McCray v. Junction » in/ra, §§ 395-407. 
 
§ 121 THE LAW OF PKIVATB COEPOBATIONS. 120 
 
 the corporators ; the function of the legislature in altering a 
 charter previously granted, as in granting a new one, is merely 
 to legalize the voluntary acts of the corporators.^ Hence the 
 mere enactment of a law authorizing a corporation to act 
 under a new charter, or to exercise new franchises, is not of 
 itself an alteration or violation of the charter agreement which 
 will enable a shareholder to consider his contract rescinded. 
 It is merely a grant of authority to alter the charter, if the 
 corporators choose to do so. Nor is it material that the act 
 was passed at the request of a majority of the shareholders ; 
 for the latter may not desire to avail themselves of the new 
 franchises until after the consent of all the shareholders has 
 been obtained.^ 
 
 The exercise of new privileges or franchises conferred by 
 the State is not a ground for rescinding the contract of a 
 shareholder, so long as there is no departure from the origi- 
 nal charter agreement.* It is clear that a person, who has 
 subscribed for shares in a corporation after the company has 
 accepted an amendment to its charter, cannot say that the 
 amendment is in violation of his contract.* 
 
 § 121. Alteration effected by Iiegislatiou under a Reservation 
 of Power to alter. — If the power to alter or amend the char- 
 ter of a corporation is expressly reserved by the terms of the 
 grant, or by a general law under which the corporation was 
 organized, the shareholders must be considered to have given 
 their consent in advance to any alteration which the legisla- 
 ture may choose to impose. And it has been decided that, 
 
 1 Supra, § 24. aware, &o. R. R. Co. v. Irick, 3 
 
 2 Fry V. Lexington, &c. R. R. Zabr. 321. Infra, § 1063. 
 
 Co., 2 Mete. (Ky.) 314, 322; Haw- « Infra, § 399; Taggart t'. West- 
 kins V. Mississippi, &c. R. R. Co., em Md. R. R. Co., 24 Md. 564; 
 35 Miss. 688; Danbury, &c. R. R. Fry v. Lexington, &c. R. R. Co., 2 
 Co. V. Wilson, 22 Conn. 435; Agri- Mete. (Ky.) 321; Poughkeepsie, &e. 
 cultural, &c. R. R. Co. v. Winches- Plank Road Co. v. Griffin, 24 N. Y. 
 ter, 13 Allen, 32; Peoria, &o R. R. 150. 
 
 Co. V. Preston, 35 Iowa, 125; Rut- * Sparrow w. Evansville, &c. R. R. 
 
 land, &c. R. R. Co. u. Thrall, 35 Vt. Co., 7 Ind. 369; Hanna v. Cincin- 
 
 536; Clark v. Monongahela Nav. nati, 20 Ind. 30; Bish v. Johnson, 
 
 Co., 10 Watts, 364; State v. But- 21 Ind. 299; Eppes v. Mississippi, 
 
 ler, 13 Lea (Tenn.), 400, 404; Del- &c. R. K. Co., 35 Ala. 54. 
 
121 THE CONTBACT OP MBMBEESHIP. § 122 
 
 under a provision of this description, every shareholder must 
 be considered to have invested the majority with a discretion- 
 ary power to accept any alteration or amendment which may 
 be offered by the legislature.^ An alteration brought about 
 in either manner is not a violation of the contract of the 
 shareholders, and hence is not a ground for treating that 
 contract as rescinded.^ But the power to alter or amend 
 the charter of a corporation does not imply a power to make 
 a radical change in the company's purposes ; this would be 
 wholly unauthorized.^ 
 
 Any alteration in the constitution or purposes of a com- 
 pany, which may be made in pursuance of a provision of 
 the charter or general laws under which the company was 
 organized, is not a departure from the original agreement of 
 the shareholders, and hence is not a ground for rescinding the 
 contracts of dissenting members. Thus, if the charter under 
 which a railroad company was formed authorizes it to consoli- 
 date with other companies, no shareholder would have any 
 right to object to a consolidation made in pursuance of this 
 provision.* 
 
 § 122. The Power of declaring a Forfeiture of Shares. — The 
 members of a corporation may be compelled to contribute 
 their respective shares of the capital stock by an action at 
 law brought in the name of the corporation ; and, at common 
 law, this is the only remedy which can be resorted to. A cor- 
 poration has no lien upon the shares of its members to secure 
 the payment of assessments, unless it be expressly conferred 
 by provision of the charter, by general statute, or by special 
 
 1 Infra, §§ 404, 405, 1091. See also County of Scotland v. 
 
 2 New Haven, &c. R. R Co. v. Thomas, 94 U. S. 690; County of 
 Chapman, 38 Conn. 56; Bish v. Callaway ». Foster, 93 U. S. 567. 
 Johnson, 21 Ind. 299; Buffalo, &c. Compare Witter v. Mississippi, &c. 
 R. R. Co. V. Dudley, 14 N. Y. 336; R. R. Co., 20 Ark. 490; Mississippi, 
 Schenectady, &c. Plank Road Co. &c. R. R. Co. v. Gaster, 24 Ark. 96. 
 V. Thatcher, 11 N. Y. 102; North- » Infra, § 1076. 
 
 ern R. R. Co. v. Miller, 10 Barb. < Infra, § 407. Nugent v. Su- 
 
 260; Bucksport, &c. R. R. Co. v. pervisors, 19 Wall. 241; Atchison, 
 
 Buck, 68 Me. 81; Pacific R. R. &c. R. R. Co. v. Phillips County, 
 
 Co. V. Renshaw, 18 Mo. 210 ; South 25 Kans. 261. 
 Bay, &c. Co. v. Gray, 30 Me. 547. 
 
§ 123 THE LAW OF PRIVATE CORPORATIONS. 122 
 
 agreement between the parties.' Nor can the shares of a 
 member be declared forfeited and sold by the agents of the 
 company for non-payment of assessments, except by virtue of 
 an express grant of authority .^ Even the holders of a ma- 
 jority of shares in a corporation have no implied authority to 
 bind the minority through a by-law providing for a forfeiture 
 and sale of the shares of those members who fail to contrib- 
 ute their proportion of the capital ; there must be an express 
 grant of authority.^ 
 
 The power of forfeiture depends upon the consent of the 
 shareholders ; and therefore a forfeiture can be declared by 
 a corporation in a foreign State only if authorized by the 
 charter or the general laws under which the company was 
 formed.* 
 
 § 123. Provisions conferring the Power of Forfeiture. — In 
 many instances, however, it has been provided in charters 
 and general incorporation laws that the shares of a stock- 
 holder may be declared forfeited and sold for non-payment of 
 assessments. A power of this character must be construed 
 strictly, and the validity of a forfeiture and sale of the shares 
 of a member depends upon a strict compliance with the for- 
 malities prescribed.^ A valid forfeiture can take place only 
 by action of the legally appointed agents of the company 
 having the requisite authority under the charter. Thus, 
 where it was provided by statute that the shares of a member 
 
 1 Williams v. Lowe, 4 Neb. 398; Island E. K Co. v. Bolton, 48 Me. 
 Sargent u. Franklin Ins. Co., 8 Pick. 451; Mitchell v. Vermont Copper 
 90; infra, § 201. Mining Co., 40 N. Y. Super. Ct. 
 
 2 Williams !). Lowe, 4 Neb. 382 ; 406; Eastern Plank Road Co. v. 
 Ex parte Barton, 28 L. J. Ch. 687 ; Vaughan, 20 Barb. 157 ; Downing v. 
 8. c. 5 Jurist, N. s. 420; Perrin v. Potts, 3 Zab. 66,79; Garden Gully, 
 Granger, 30 Vt. 595. &c. Mining Co. v. McLister, L. R. 1 
 
 8 Re Long Island R. R. Co., 19 App. Cas. 39; Clarke v. Hart, 6 H. 
 
 Wend. 37; Perrin v. Granger, 30 L. C. 633. Compare Knight's Case, 
 
 Vt. 595. L. R. 2 Ch. 321 ; Woollaston's Case, 
 
 * Mitchell V. Vermont Copper 4 De G. & J. 437; Johnson B.Albany, 
 
 Mining Co., 40 N. Y. Super. Ct. &c. R. R. Co., 40 How. Pr. 193; 
 
 406 ; 67 N. Y. 280. Rutland, &o. R. R. Co. v. Thrall, 
 
 5 Germantown, &c. Ry. Co. v. 35 Vt. 536; Perrin v. Granger, 30 
 
 Fitler, 60 Pa. St. 124 ; Lewey's Vt. 595. 
 
123 THE CONTRACT OP MEMBBESHIP. § 124 
 
 might, upon failure to pay assessments, be sold at auction 
 under an order from the directors to the treasurer, it was held 
 that a sale made by the treasurer under the authority of a 
 committee appointed by the directors was unauthorized and 
 void ; nor could a sale be made validly under an order of the 
 directors giving the treasurer discretionary powers to sell or 
 to sue, but the order of the directors must be absolute.^ 
 
 If the charter of a corporation prescribes a certain notice 
 to be given to delinquent shareholders before declaring a 
 forfeiture of their shares, this requirement must be strictly 
 complied with ; 2. if a sale by public auction is required, a pri- 
 vate sale will be void ; ^ and it is essential that the sale take 
 place at the time and place indicated. A sale of the shares 
 of a stockholder for non-payment of assessments is void if 
 any one of the assessments was unauthorized;* and if the 
 amount due was tendered to the proper agent of the corpora- 
 tion before a sale for non-payment has actually taken place, a 
 sale made afterwards will be unauthorized and void.® 
 
 § 124. Bffect of Forfeiture on the Liability of the Share- 
 holder. — A grant of the power to declare a forfeiture of the 
 shares of a member for non-payment of calls does not, by im- 
 plication, exclude the conunon law remedy by suit at law ; 
 the remedy by forfeiture is cumulative, and the agents of the 
 company may, at their discretion, proceed either by suit at 
 law for the unpaid calls, or by forfeiture and sale of the 
 delinquent member's shares.® 
 
 1 York, &e. R. R. Co. «. Ritchie, N. Y. Super. Ct. 406; Sweny b. 
 40 Me. 425; Garden Gully, &c. Smith, L. R. 7 Eq. 324. 
 
 Mining Go. v. McLister, L. R. 1 ' Hughes v. Antietam Manuf. 
 
 App. Gas. 39. Co., 34 Md. 317; Northern R. R.Co. 
 
 2 Lewey's Island R. R. Co. v. v. Miller, 10 Barb. 268; Piscataqua 
 Bolton, 48 Me. 451; Hughes v. An- Perry Co. r. Jones, 39 N. H. 491; 
 tietamManuf.Go.,31Md.317. Cora- New Hampshire, &c. R. R. Co. v. 
 pare Knight's Case, L. R. 2 Gh. 321. Johnson, 30 N. H. 390 ; City Hotel 
 
 * Lewey's Island R. R. Co. v. v. Dickinson, 6 Gray, 586; Boston, 
 Bolton, 48 Me. 451. &c. R. R. Co. v. Wellington, 113 
 
 * Ibid. ; Stoneham Branch R. R. Mass. 79; Klein v. Alton, &o. R. R. 
 Co. V. Gould, 2 Gray, 277. Co., 13 111. 514. See Canal Co. v. 
 
 ^ Mitchell V. Vermont Copper Sansom, 1 Binney, 70 ; and see cases 
 Mining Co., 67 N. Y. 280, and 40 infra, § 128. 
 
§ 124 THE LAW OF PRIVATE CORPOKATIONS. 124 
 
 However, both remedies cannot consistently be pursued at 
 the same time. A forfeiture and sale of the shares of a stock- 
 holder operates as a rescission of the contract of membership, 
 and wholly dissolves the delinquent member's connection 
 with the company. He is not thereafter entitled to any of 
 the privileges of membership, and ought not to be compelled 
 to bear any of the burdens which are incidental to that 
 position.^ 
 
 Nor would it be just to compel a shareholder, whose shares 
 have been declared forfeited for non-payment of calls, to pay 
 any portion of such calls remaining unpaid after giving credit 
 for the amount realized by the sale of the shares. If the 
 charter of a corporation simply authorizes a forfeiture and 
 sale of the shares of a shareholder for non-payment of calls, 
 and the agents of the company elect to pursue that remedy, 
 the shareholder is discharged from liability for any calls re- 
 maining unpaid, although the shares may sell for less than 
 the amount of the calls.^ In Ashton v. Burbank^ it was held 
 that a corporation which had exercised its power to forfeit 
 the shares of a member for non-payment of a call could not 
 afterwards recover upon a promissory note given to it by such 
 member for a previous unpaid assessment upon his shares. 
 
 The liability of a shareholder ceases at the time when the 
 forfeiture is complete, and his connection with the com- 
 pany has been severed. If the charter provides for a sale 
 of the shares of a delinquent member, it is fair to presume 
 that the latter would remain a member of the company until 
 the shares have been finally disposed of ; hence his liability 
 would continue until that time, and he would have a corre- 
 sponding right of redeeming his default.* 
 
 ' Mills V. Stewart, 41 N. Y. 384; Foundry, &c. Co. v. Hall, 121 Mass. 
 
 Allen e. Montgomery R. K. Co., 11 272. 
 Ala. 437; and see the next section. ' Ashton v. Burbank, 2 Dill. 
 
 2 Small V. Herkimer Manuf., &c. (U. S. C. C.) 435, before Dillon and 
 
 Co., 2 N. Y. 330; Northern R. R. Nelson, J J. 
 
 Co. V. Miller, 10 Barb. 260, 277; * Instoneu. Frankfort Bridge Co., 
 
 Macon, &e. R. R. Co. v. Vason, 57 2 Bibb, 576. Compare Rutland, &e. 
 
 Ga. 314; Rutland, &c. R. R. Co. R. R. Co. v. Thrall, 35 Vt. 536; 
 
 V. Thrall, 35 Vt. 536 ; Mechanics' and see the following sections. 
 
125 THE CONTRACT OF MEMBEESHIP. § 125 
 
 § 125. The decisions of the courts are not all in harmony 
 with the views expressed in the preceding section. In various 
 cases ^ it has been held that a forfeiture and sale of shares for 
 non-payment of calls is similar to the foreclosure of a mort- 
 gage or pledge given as security for a debt ; and that the 
 corporation would be entitled to recover the amount of the 
 debt remaining unpaid after the security had been exhausted. 
 This view, however, is founded on a false analogy, and sub- 
 ordinates substantial justice to the requirements of a barren 
 technicality. The liability of a shareholder for unpaid calls 
 is not in fact an ordinary indebtedness, like that of a bor- 
 rower to his lender, though it is treated as a debt by the 
 courts of law. It is a liability to contribute to the company's 
 capital for the common benefit, and each shareholder retains 
 an equitable interest in the fund thus raised, in proportion to 
 the amount of his shares. A forfeiture and sale operate as 
 a rescission of the contract of membership, and the expelled 
 member is deprived both of his interest in the capital and of 
 his right to claim a performance of the contract by the other 
 members. It should be borne in mind, that the power of 
 declaring a forfeiture of the shares of a member is intended 
 as a remedy to be used against defaulting members, and not 
 in their favor ; and that, therefore, a forfeiture can take place 
 only provided the shares have some value, notwithstanding 
 the unpaid calls. The agents of a corporation are not au- 
 thorized to declare a forfeiture of shares when this would be 
 a benefit rather than a loss to the party in default ; as where 
 the debts of a corporation are in excess of its assets, exclud- 
 ing the capital not yet called in. In such case, the members 
 of the company must bear the loss equally, and both creditors 
 and shareholders are interested in preventing any member 
 from escaping from liis obligations through the formality of 
 a forfeiture of his shares.^ If, then, a valid forfeiture of 
 shares can be effected only when the forfeiture would be a 
 
 1 Herkimer Manuf., &c. Co. v. Northern Ry. Co. v. Kennedy, 4 
 
 Small, 21 Wend. 273, overruled Exch. 417. 
 
 2 N. Y. 330. See Carson v. Arctic » Infra, §§ 309, 837. See Stan- 
 Mining Co., 5 Mich. 288; Great hope's Case, L. R. ,1 Ch. 169. 
 
§ 125 THE LAW OF PEIVATB COEPORATIONS. 126 
 
 loss to the shareholder and a gain to the corporation, no in- 
 justice is done to the members of the company by holding 
 that a forfeiture extinguishes the liability of the shareholder 
 for unpaid calls. On the contrary, it would be unjust to the 
 expelled member to deprive him of his shares, which were 
 made valuable by his own contributions, and, in addition, to 
 compel him to increase the capital of the company after his 
 own interest in it has ceased. Thus, if a forfeiture were de- 
 clared for non-payment of a call of ninety per cent, after ten 
 per cent had been paid on the shares, the expelled share- 
 holder would lose his shares, and still be obliged to pay 
 ninety per cent of their amount into the company's treasury, 
 giving credit for the value of the shares with ten per cent 
 paid up.i 
 
 If the charter confers a naked power of forfeiture and sale 
 for non-payment of calls, the proper rule would seem to be 
 to sever the defaulting shareholder's connection with the 
 company upon such terms as are just and equitable both to 
 the shareholder and the company. This would be in one of 
 two ways : either the shares should be sold, paid up only to 
 the extent of the amount actually paid on them, and subject 
 to further calls for the remainder, and the whole proceeds of 
 the sale, less the incidental expense, should be turned over 
 to the former holder ; or the shares should be sold with all 
 the calls paid, and, after deducting from the price received 
 the amount of calls which the former holder neglected to 
 pay, the residue should be turned over to him. 
 
 Of course the equitable rule must yield to any express pro- 
 vision contained in the charter. In many instances the 
 object of a power of forfeiture and sale is not merely to bring 
 about a rescission of the contract of membership upon equi- 
 table terms, but to compel prompt payment of calls under 
 penalty of a forfeiture of the shareholder's interest. Thus, 
 the charter construed in the case of Small v. Herkimer Manu- 
 ,facturing Co.^ declared that the shareholders should be liable 
 to pay caUs " under penalty of forfeiture to the company of 
 
 1 See Small e. Herkimer Manuf., a Small v. Herkimer Manuf., &o. 
 &c. Co., 2 N. y. 330, 338. Co., 2 N. Y. 330. 
 
127 THE CONTRACT OP MEMBERSHIP. § 126 
 
 their shares and all previous payments made thereon." In 
 other cases, it has been expressly provided by law, or by 
 articles of agreement, that, if the shares of a delinquent 
 member should not sell for an amount sufi&cient to pay the 
 unpaid calls, he shall be liable to the corporation for the 
 deficiency.^ 
 
 § 126. The . Right of Redemption. — A shareholder may 
 satisfy overdue calls upon his shares, and prevent a forfeiture, 
 at any time before the proceedings to obtain a forfeiture are 
 complete, and he has ceased to be a member of the company. 
 Thus, if the charter provides that the shares of a defaulting 
 member shall be declared forfeited and be sold to pay the un- 
 paid calls, the holder's connection with the company would 
 not ordinarily be deemed severed and the forfeiture complete 
 until after a sale had taken place and a new party become 
 invested with the shares. Hence, the owner would be enti- 
 tled to pay the calls and discharge the default at any time 
 before the shares were actually sold ; ^ but after a sale had 
 taken place, it would be impossible to reinstate the owner in 
 his rights, and therefore no right of redemption could exist. 
 
 The right to redeem shares after a final forfeiture for non- 
 payment of calls has usually been denied, even where the 
 entire interest of the holder becomes vested in the company, 
 without regard to its value or the amount of the calls remain- 
 ing unpaid. Thus, in Sparks v. Liverpool Water Works Co. ,3 
 a member of an incorporated water-works company brought a 
 bill for relief against a forfeiture of his shares, which had oc- 
 curred without his knowledge through accidental circum- 
 stances, but relief was denied. The Master of the Rolls said : 
 " The parties might contract upon any terms they thought fit, 
 and might impose terms as arbitrary as they pleased. It is 
 essential to such transactions. This struck me as not like 
 
 1 See Danbuiy, &c. K. R. Co. v. Super. Ct. 406; Instone v. Frank- 
 Wilson, 22 Conn. 436, 456; Stock- fort Bridge Co., 2 Bibb, 576; Great 
 en's Case, L. R. 5 Eq. 6. Compare Northern Ry. Co. v. Kennedy, 4 
 Athol, &c. R. R. Co. V. Prescott, Exch. 417. 
 110 Mass. 213. » Sparks v. Liverpool Water 
 
 = Mitchell V. Vermont Copper Works Co.. 13 Ves. Jr. 428, 434. 
 Mining Co. , 67 N. Y. 280 ; 40 N. Y. 
 
§ 127 THE LA"W OF PRIVATE COEPOEATIONS. 128 
 
 the case of individuals. If this species of equity is open 
 to the parties engaged in these undertakings, they could not 
 be carried on. It is essential that the money should be paid, 
 and that they should know what is their situation. Interest 
 is not an adequate compensation, even among individuals ; 
 much less in these undertakings. In particular cases inter- 
 est might be compensation, but in the majority of cases it is 
 no compensation, from the uncertainty in which they may be 
 left. The effect is the same whether money has been paid or 
 not. They know the consequence. The party making de- 
 fault is no longer a member." 
 
 A similar rule has been laid down by other eminent au- 
 thorities.^ 
 
 § 127. In Walker v. Ogden,^ a former shareholder in a joint- 
 stock company sought to redeem his shares, which had been 
 declared forfeited for non-payment of calls. The articles of 
 agreement provided that, if any shareholder should fail to pay 
 assessments at the time specified, he should thereby forfeit 
 all his shares, right, and interest in the association, and such 
 forfeited shares should be distributed among the other share- 
 holders who were not in default. The court granted relief 
 by ordering that, upon payment of the whole amount due, 
 principal and interest, the complainant should be allowed to 
 redeem his stock, and certificates therefor should be executed 
 and delivered to him by the company. Drummond, J., said : 
 " The articles provide no express mode by which the forfeit- 
 ure is to be established. If they did, and such mode had 
 been pursued, and especially if any right had vested, in con- 
 sequence thereof, in third parties, the defendant's argument 
 would have had more force. But here is a mere naked dec- 
 laration that the stock is forfeited, which is all that stands in 
 the way of the relief sought by the bill. . . . The question is, 
 Can the mere declaration of the trustees have the effect to 
 foreclose all Walker's interest in this property? I think not. 
 
 1 Germantown, &c. Ky. Co. v. low v. Dutch Rhenish R. R. Co., 
 
 Fitler, 60 Pa. St. 124; Story on Eq. 21 Beav. 43. 
 
 Jur. § 1325; Piendergast ». Turton, = Walker v. Ogden, 1 Bisa. 287. 
 1 Y. & C. N. K. 98, 110-112; Sud- 
 
129 THE CONTRACT OP MBMBEESHIP. § 127 
 
 I am inclined to the opinion, (although I do not put my 
 decision of this case on that ground,) that a judicial decree 
 of foreclosure upon a bill filed by the trustees was neces- 
 sary in order to bar the rights of Walker to redeem his 
 stock." 
 
 It should be observed that Walker v. Ogden was a case of 
 a voluntary joint-stock company, and that the effect of a for- 
 feiture was considered solely in the light of the ordinary 
 rules of equity jurisprudence. Where the power of forfeiture 
 is conferred by charter, or by general law, the intention of 
 the legislature would be of paramount importance. 
 
 Any negligence or delay would in any case deprive a de- 
 linquent shareholder of the right to redeem his shares, and 
 this is especially true where the business of the company is 
 of a speculative character. 
 
 VOL. I. — 9 
 
§ 128 THE LAW OS PBIVATB OOKPOBATIONS. 180 
 
 CHAPTER III. 
 
 LIABILITY OF SHAREHOLDERS TO CONTRIBUTE CAPITAL. 
 
 § 128. The Character of the Liability. — Every person who 
 beeomes a shareholder in a corporation, by subscribing for 
 shares, agrees to associate with the other subscribers for the 
 purposes, and upon the terms and conditions, indicated in the 
 charter or constating instruments of the company.^ 
 
 If the charter or articles of association provide that each 
 member of the company shall contribute a certain share of 
 capital, this constitutes a part of the mutual agreement of 
 the subscribers ; and it is clear that every subscriber, in such 
 case, becomes liable to pay in the amount of capital agreed 
 upon. So, also, if the charter or constating instmments^of a 
 corporation provide that the capital stock of the company shall 
 consist of a certain amount, to be divided into a given num- 
 ber of shares of a certain sum each, it is evidently intended 
 that each shareholder shall contribute to the capital of the 
 company in proportion to the number of shares he has taken. 
 No other rational construction can be given to language of 
 this description. 
 
 Hence it has been held that a person subscribing for shares 
 in a corporation, whose charter or articles provide that each 
 share shall consist of a certain amount, becomes liable, by 
 virtue of his subscription, to contribute the amount of the 
 shares he has subscribed to. No express promise to pay is 
 required in the subscription itself, in order to create this lia- 
 bility. It is not a liability to pay /or the shares taken ; but it 
 is a liability arising by virtue of the contract of membership. 
 It is in many respects similar to the liability of a partner to 
 
 I Supra, §§ 43, 56. 
 
131 LIABILITY OP SHAEEHOLDEES. § 129 
 
 contribute his share of the company's capital, as provided in 
 the partnership articles.* 
 
 This personal liability is not negatived by a provision in 
 the charter authorizing the corporation to sell the stock of 
 delinquent shareholders ; the remedy by forfeiture is merely 
 cumulative. And the corporation may, notwithstanding such 
 provision, enforce the personal liability of its members to 
 contribute the amount of capital which they have impliedly 
 agreed to contribute.^ 
 
 § 129. The Rule in Maine, Massachusetts, and New Hamp- 
 shire. — It seems surprising that so obviously reasonable a 
 construction of the contract of a shareholder in a corporation 
 should ever have been doubted. But an entirely different 
 rule was established by judicial decisions in the States of 
 Maine, New Hampshire, and Massachusetts. It was decided 
 that a subscriber for shares of a specified amount each, in a 
 corporation whose capital was fixed by the charter at a 
 definite sum, did not impliedly undertake to contribute to the 
 capital the amount of the shares subscribed by him, although 
 he was constituted a shareholder in the corporation by virtue 
 
 1 See cases in next note, and also v. Clayton, 54 Iowa, 425; Waukon, 
 Upton tt. Tribiloock, 91 U. S. 45; &o. R. R. Co. v. Dwyer, 49 Iowa, 
 Webster v. Upton, Id. 67; Cole v. 121; Kirksey v. Florida, &c. Plank 
 Ryan, 52 Barb. 168; Fry v. Lexing- Road Co., 7 Fla. 23; Beene v. Ca- 
 ton, &c. R. R. Co., 2 Mete. (Ky.) hawba, &c. R. R. Co., 3 Ala. 660; 
 316, 317. Essex Bridge Co. v. Tuttle, 2 Vt. 
 
 2 Hartford & N. H. R. R. Co. v. 393; Hughes v. Antietam Manuf. 
 Kennedy, 12 Conn. 514-516, 523, Co., 34 Md. 326; Dexter, &c. Plank 
 524; Buffalo, &c. R. R. Co. «. Dud- Road Co. v. Millerd, 3 Mich. 91; 
 ley, 14 N. Y. 336 ; Lake Ontario, &c. Carson v. Arctic Mining Co., 5 
 R. R. Co. II. Mason, 16 N. Y. 451; Mich. 288; Instone v. Frankfort 
 Rensselaer, &c. Plank Road Co. v. Bridge Co., 2 Bibb, 577; Klein v. 
 Barton, Id. 457, note; Northern Alton & Sangamon R. R. Co., 13 
 R. R. Co. ». Miller, 10 Barb. 260, 111. 515; Peoria, &c. R. R. Co. ». 
 and cases cited; Troy, &c. R. R. Elting, 17 111. 429. Compare Union 
 Co. V. Tibbits, 18 Barb. 297; Dutch- Turnpike Co. v. Jenkins, 1 Caines's 
 ess Cotton Manuf. Co. v. Davis, 14 Cas. 381 ; Troy Turnpike, &c. Co. 
 Johns. 239 ; Goshen, &c. Turnpike v. McChesney, 21 Wend. 296 ; Sey- 
 Co; V. Hnrtiu, 9 Johns. 217; Che- mour ». Sturgess, 26 N. Y. 134; 
 raw, &e. R. R. Co. v. White, 14 S. C. Fort Edward, &c. Plank Road Co. v. 
 51;- Grosse Isle Hotel Co. v. Pan- Payne, 17 Barb. 573. 
 
 son's Exrs., 42 N. J. L. 10; Nulton 
 
§ 129 THE LAW OP PRIVATE OOEPOKATIONS. 132 
 
 cif his subscription ; and that, in the absence of an express 
 promise to pay for the shares, the subscriber incurred no per- 
 sonal liability, although the corporation was authorized by 
 the charter to declare a forfeiture and sell the shares for 
 non-payment of assessments.^ 
 
 In Atlantic Cotton Mills v. Abbott,^ an action was brought 
 by a corporation against one of its shareholders to recover 
 the amount of several assessments upon his shares. The com- 
 pany had been organized with a capital of 11,350,000, di- 
 vided into shares of |1,000 each, and the defendant had in his 
 subscription agreed to take five shares. In addition to this, 
 the defendant had, prior to the incorporation of the company, 
 agreed with other subscribers to take and fay for five shares 
 in the company, which was then about to be formed, and it 
 was provided that the capital of the company should be not 
 less than $1,500,000. The Supreme Court of Massachusetts 
 held that the defendant could not be held liable upon his 
 subscription made after organization, because it did not con- 
 tain a promise to pay for the shares; and that he was not 
 liable upon the promise to pay made before organization, 
 because that promise was upon condition that the whole 
 number of shares then agreed upon should be taken, while 
 the subscription in fact did not exceed $1,350,000.^ Chief 
 Justice Shaw said : " It is to be recollected that the promise 
 of the defendant to pay assessments on shares is collateral to 
 his subscription, and is relied on as creating an obligation 
 over and beyond that which arises by law from his taking 
 shares. If it imposes such obligation, it is by force of the 
 express promise only ; and if such promise is conditional, the 
 condition must be strictly complied with. . . . But it is 
 urged, that, by taking five shares after the capital was fixed 
 at 11,350,000, he waived the condition of making it depend 
 
 1 Belfast, &o. Ry. Co. v. Moore, Central R. R. Co. ». Johnson, 30 
 
 60 Me. 561 ; Same v. Cottrell, 66 N. H. 390. 
 
 Me. 185; Kennebec, &c. R. R. Co. ^ Atlantic Cotton Mills ». Abbott, 
 
 ». Kendall, 31 Me. 470. Compare 9 Cush. 423. 
 Buckfield Branch R. R. Co. .-. Irish, « See infra, § 137. 
 39 Me. 44. See also New Hampshire 
 
133 LIABILITY OF SHAKEHOLDEES. § 130 
 
 on $1,500,000. But let us ask, What condition ? So far as 
 the subscription paper operated as a promise, honorary or 
 otherwise, to take $5,000 in stock not less than $1,500,000, 
 his taking the same amount in a stock of $1,350,000 was a 
 waiver of the condition on which such engagement to take 
 was founded. But the promise to pay was collateral, and not 
 incident to the taking of shares ; and therefore taking shares 
 in another and smaller capital was not a waiver of the condi- 
 tion on which the promise to pay for shares in a larger stock 
 was made." ^ 
 
 This reasoning of the learned judge cannot be reconciled 
 with a proper conception of the nature of a subscription for 
 shares and the contract of a shareholder. A subscription for 
 shares is in no sense an agreement to buy shares and pay 
 for them.2 The subscriber becomes a shareholder immedi- 
 ately and is entitled to the rights of a shareholder ; it is a 
 necessary implication that he also assumes the obligations of 
 a shareholder. No reasonable man could expect to become a 
 member of a corporation, and share in the common enterprise, 
 without contributing, or undertaking to contribute, his pro- 
 portionate part of the capital; nor can it be supposed that 
 any reasonable man having shares in a corporation would 
 consent to become associated with other shareholders on 
 other terms. 
 
 It should be observed that the decisions above referred to 
 appear to have been based originally on the supposed authority 
 of Andover, &c. Turnpike Co. v. Gould, and similar cases, 
 which were not in point, because in those cases the capital 
 of the company and the amount of each share had not been 
 fixed by the charter. 
 
 § 130. The Liability of the Stockholders where no Capital 
 has been agreed upon. — If the charter of a corporation does 
 not expressly or impliedly provide that a certain amount of 
 capital shall be contributed by its members for their common 
 benefit, a person becoming a member of the association can- 
 
 ^ Atlantic Cotton Mills v. Abbott, tama Land Co. v. Jernegan, 126 
 9 Cush. 424; Mechanics' Foundry, Mass. 156. 
 &c. Co. V. Hall, 121 Mass. 272; Ka- » Supra, §§ 46, 61. 
 
I 130 THE LAW OF PEIVATB OORPOBATIONS. 134 
 
 not be held to undertake to contribute anything. In such 
 case, the majority or the directors of the company have ino 
 implied authority to make calls for capital upon the several 
 members, and a subscriber can be held liable only by virtue of 
 an express promise in the subscription itself. A provision in 
 the charter that any shareholder who should decline to pay 
 an assessment that was agreed upon by the majority should 
 forfeit his shares to the extent of the assessment, could not 
 reasonably be construed as imposing a personal liability. 
 
 This was the decision in Andover, &c. Turnpike Co. v. 
 Gould.i A charter had been granted, on June 15, 1805, in- 
 corporating six persons named, and such others as might 
 afterwards associate with them, for the purpose of building 
 a turnpike road. The corporators were invested with all the 
 powers and privileges of the general act of 1804, c. 125, 
 relating to turnpike corporations, and subjected to the regu- 
 lations prescribed by it. The capital of the company was not 
 limited by the charter or the general act to any certain sum, 
 nor were the shares fixed at a definite amount or value. 
 
 Nor was there any express provision giving the agents of 
 the company power to levy assessments upon the share- 
 holders. The only provision upon this subject was in the 
 tenth section of the general act, which provided, "that 
 whenever any proprietor of a share or shares in any turnpike 
 corporation hereafter established, shall neglect or refuse to 
 pay any tax or assessment, duly voted and agreed on hy sucli 
 corporation, to their treasurer, within sixty days after the 
 time set for the payment thereof, the treasurer of said corpo- 
 ration is hereby authorized to sell at public vendue the share 
 or shares of such delinquent proprietor, sufficient to defray 
 the said tax or assessment," &c. The defendant had sub- 
 scribed for shares in the corporation, but had made no promise 
 to pay assessments. An action of assumpsit having been 
 brought for unpaid assessments, the Supreme Court of Mas- 
 sachusetts held that the defendant was not liable.^ 
 
 1 Andover, &o. Turnpike Co. v. the opinion, delivered by Chief Jns- 
 
 Gould, 6 Mass. 40. tice Parsons, seems to have been 
 
 ' The decision, as appears from reached by the following course 
 
135 
 
 LIABILITY OP BHABEHOLDEKlS. 
 
 §132 
 
 § 131. Where the Iiiability has been exhausted. — Upon the 
 same principle, it follows that, after the liability of the share- 
 holders to contribute the amount of capital agreed upon at 
 the creation of the company has been exhausted, no further 
 power to make calls or levy assessments can exist, unless 
 provided by the express terms of the charter.^ 
 
 § 132, Where the Subscription contains an express Promise 
 to pay. — It has always been held that a subscriber for shares 
 
 of reasoning: The shareholders of a 
 corporation are not at common law 
 liable to pay assessments unless they 
 are made liable by the terms of their 
 charter. In the case before the court, 
 the power to levy assessments was 
 not expressly given, nor could such 
 a power be implied from the nature 
 and objects of the coi'poi-ation. The 
 only provision from which the power 
 to levy asse.ssments might be implied 
 was the tenth section of the general 
 act, which provided that the shares 
 of delinquent proprietors might be 
 sold, &c. "From this section," the 
 court said, " we must conclude that 
 the corporation have power to agree 
 on a tax on the shares of the proprie- 
 tors. But it is a rule, founded on 
 sound reason, that when a statute 
 gives a new power, and at the same 
 time provides the means of executing 
 it, those who claim the power can ex- 
 ecute it in no other way. When we 
 find a power in the plaintiffs to make 
 the assessment, they can enforce the 
 payment in the method directed by 
 the statute, and not otherwise ; and 
 that method is by sale of the delin- 
 quent's shares. This rule applies 
 to all taxes, public and private." 
 Having thus arrived at theconclnsion 
 that the defendant was not liable to 
 pay assessments by virtue of his 
 membership in the corporation, the 
 court held that the subscription pa- 
 per itself, in which the subscribers 
 
 merely agreed to take the number 
 of shares set against their names, 
 was not evidence of an agreement 
 to pay assessments levied on behalf 
 of the corporation. To the same 
 effect see New Bedford, &c. Turn- 
 pike Co. V. Adams, 8 Mass. 138. See 
 also Franklin Glass Co. v. White, 
 14 Mass. 286 ; Chester Glass Co. v. 
 Dewey, 16 Mass. 94; Franklin Glass 
 Co. V. Alexander, 2 N. H. 380; Odd 
 Fellows' Hall Co. v. Glazier, 5 Har- 
 ringt. 172; Bangor House Propri- 
 etary V. Hinckley, 12 Me. 385. 
 
 The above cases were commented 
 upon in Essex Bridge Co. v. Tuttle, 
 2"Vt. 893; New Hampshire Central 
 R. R. Co. V. Johnson, 30 N. H. 390; 
 Kirksey v. Florida, &c. Plank R. 
 Co., 7 Fla. 23; s. c. 68 Am. Dec. 
 426; Hartford, &c. R. R. Co. v. 
 Kennedy, 12 Conn. 519-525. 
 
 1 See Atlantic Delaine Co. ». 
 Mason, 5 R. I. 463; Great Falls, 
 &c. R. R. Co. V. Copp, 38 N. H. 
 124; Kennebec, &c. R. R. Co. v. 
 Kendall, 31 Me. 470; State v. Mor- 
 ristown Fire Ass., 3 Zabr. 195 ; 
 Lewey's Island R. R. Co. v. Bol- 
 ton, 48 Me.- 451. 
 
 In California, it was held by a 
 divided court that the Code gave a 
 right to assess shareholders after 
 their shares have been paid up. 
 Santa Cruz R. R. Go. v. Spreckles, 
 65 Cal. 193. Under a statute of 
 Pennsylvania making shareholders 
 
§ 133 THE LAW OF PRIVATE COEPOKATIONS. 136 
 
 will be liable in an action to recover calls, if the subscrip- 
 tion contains an express promise to pay the amount of the 
 shares, although the charter expressly provides that the cor- 
 poration may enforce payment by forfeiture and sale of the 
 shares.^ 
 
 § 133. No Consideration required. — It has sometimes been 
 supposed that a consideration is necessary to support the 
 promise of a shareholder to contribute the amount of his 
 shares to the company's capital. This supposition seems to 
 have its origin in the idea that a contract cannot, in the na- 
 ture of things, exist without a consideration. But this idea 
 is a mistaken one. The common law requirement of a con- 
 sideration is merely a prerequisite imposed by positive law 
 to the legal recognition and enforcement of an agreement 
 not under seal ; it is similar, in this respect, to the require- 
 ment of a deed to effect a conveyance of land, or of a writing 
 under the Statute of Frauds. A subscription for shares, how- 
 ever, is not a common law contract. Its validity depends 
 upon the charter or statute under which it is made ; ^ and if 
 the terms of the statute have been complied with, the sub- 
 scription will be binding, although it might not be bind- 
 ing considered as a common law contract, by reason of the 
 absence of legal consideration. 
 
 But if a consideration were necessarj', abundant considera- 
 tion may be found ; for every subscriber assumes the burdens 
 attaching to the position of shareholder, in consideration of 
 obtaining the rights of a shareholder, and of a similar under- 
 taking on the part of every other subscriber. In Instone v. 
 Frankfort Bridge Co.,^ the Supreme Court of Kentucky held, 
 that, in an action by a corporation against a subscriber for 
 
 ■ liable to the amount of their shares, Worcester Turnpike Co. v. Willard, 
 
 after they have been paid up at par, 5 Mass. 80; Salem Mill Dam Co. v. 
 
 see Price's Appeal, 106 Pa. St. 421. Ropes, 6 Pick. 23; Buckfleld Branch 
 
 » Boston, Barre, &c. R. R. Co. R. R. Co. b. Irish, 39 Me. 44; Stokes 
 
 V. Wellington, 113 Mass. 79; City v. Lebanon, &o. Turnpike Co., 6 
 
 Hotel V. Dickinson, 6 Gray, 586; Humph. 241. 
 Taunton, &c. Turnpike Co. v. Whit- s Supra, § 56. 
 ing, 10 Mass. 327; Andover, &c. ' Instone v. Frankfort Bridge 
 
 Turnpike Co. v. Gould, 6 Mass. 40; Co., 2 Bibb, 576. 
 
137 LIABILITY OP SHAEEHOLDEES. § 135 
 
 shares, it was sufficient to allege a subscription for shares 
 according to the terms of the charter, and failure to pay after 
 a call for payment had been made. Boyle, C. J., said : " By 
 the subscription he became ipso facto a member of the as- 
 sociation, and the rights and immunities which attached to 
 him in that capacity constitute a sufficient consideration to 
 impose upon him a legal obligation to pay according to the 
 terms upon which the shares were authorized to be sub- 
 scribed." ^ 
 
 § 184. This reasoning has no application in case of a 
 contract to purchase shares or to become a shareholder in 
 a corporation at a future time. A contract of this descrip- 
 tion is an ordinary common law contract, and is subject to all 
 the technical rules governing common law contracts. The 
 promise to pay for shares, and the corresponding promise to 
 deliver them, or to receive the purchaser as a shareholder 
 are concurrent, and each constitutes the consideration for 
 the other. Without a consideration, neither promise would 
 be binding.^ 
 
 § 185. Subscribers do not become liable to contribute Capi- 
 tal until the Corporation has been formed. — A subscription 
 for shares of a certain amount each implies an agreement to 
 contribute the amount of these shares to the capital of the 
 company, for the purpose of carrying on its business; but the 
 obligation to contribute the amount subscribed does not ma- 
 ture until the company has been incorporated, and invested 
 by law with authority to carry on business in a corporate ca- 
 pacity. Hence, even although a subscription be binding from 
 the time it was made,^ the subscriber cannot be called upon 
 
 1 See also Selma, &c. R. R. Co. Co. v. Payne, 17 Bavb. 572; Mc- 
 
 V. Tipton, 5 Ala. 787; Kennebec, Cully v. Pittsburgh, &c. R. R. Co., 
 
 &c. R. R. Co. V. Palmer, 34 Me. 366 ; 32 Pa. St. 31. Compare Haskell v. 
 
 Hamilton, &c. Plank Road Co. v. Oak, 75 Me. 519 ; Conrad v. La Rue, 
 
 Rice, 7 Barb. 157 ; Lake Ontario, 52 Mich. 83. 
 
 &o. R. R. Co. V. Mason, 16 N. Y. ^ Parker v. Northern Central, &c. 
 
 463; Ohio, &o. Female College v. R. R. Co., 33 Micb. 23; and see 
 
 Love's Exr., 16 Ohio St. 20; Har- supra, § 61. 
 lem Canal Co. v. Seixas, 2 Hall, * Supra, § 59. 
 504; Fort Edward, &o. Plank Road 
 
§ 136 THE LAW OF PBiyATE COEPORATIONS. 138 
 
 to contribute his share of the capital until the corporation 
 has actually been formed. 
 
 Thus, where the capital of a corporation is fixed by law at 
 a certain sum, and the subscribers for shares do not become 
 a corporate association until the whole capital has been sub- 
 scribed, they cannot until then be compelled to contribute 
 the amount of their shares.^ So, also, where the performance 
 of formalities is prescribed by law as a condition precedent 
 to the right of the subscribers to form a corporation, they do 
 not become liable to contribute the amount of their shares 
 until these formalities have been performed.^ 
 
 § 136. Conditions e^ressly prescribed by Charter. — The 
 contract between the members of a corporation is contained 
 in the charter under which they have united themselves ; 
 and therefore, if any acts are required by the charter to be 
 performed before the shareholders can be called upon to con- 
 tribute the amount of capital agreed upon, the performance 
 of these acts is a condition precedent to the liability of the 
 shareholders upon their stock subscriptions. Thus, in an 
 action against a subscriber for shares in a corporation whose 
 charter provided that the president and directors (who were 
 incorporated) should be authorized to make assessments upon 
 the shareholders " when they shall have organized agreeably 
 to this act," it was held by the Supreme Court of Alabama 
 that an organization as provided by the act was a condition 
 precedent to the liability of the shareholders to contribute 
 any portion of the capital agreed upon. The court said : 
 " The defendant, by his subscription of stock, admits noth- 
 ing more than the charter of the company asserts ; and if 
 that contemplates some further act to be done before a requi- 
 sition may be made upon the subscribers for payments upon 
 their stock, or before they are liable to suit, that act must 
 be shown to have been done. ... To entitle the plaintiff to 
 maintain an action against the defendant, and to recover the 
 amount of calls made upon his stock, it should be shown 
 
 1 Franklin Fire Ins. Co. v. Hart, « See supra, § 67.; and infra, 
 81 Md. 60. §§ 717-719. 
 
139 LIABILITY OF SHAEEHOLDEES. § 137 
 
 that the meeting and election provided for by the charter did 
 take place." ^ 
 
 § 137. Implied Conditions Precedent — The Capital agreed 
 upon must be subsoribed. — The undertaking of the members 
 of a corporation to contribute the amount of capital agreed 
 upon is frequently, by its implied terms, subject to conditions 
 precedent, which cannot be dispensed with except by mutual 
 consent. Thus, it is a general principle that the members 
 of a corporation cannot be required to pay assessments upon 
 their shares until the company is authorized by law to begin 
 the prosecution of its enterprise. Until that time the com- 
 pany can have no use for its capital, nor can there be any 
 assurance that it will ever be required. 
 
 If the capital of a corporation is fixed by its charter at a 
 certain amount, the company has no authority by law to 
 begin the prosecution of its enterprise until the whole amount 
 of capital has been subscribed ;2 and therefore a shareholder 
 cannot be compelled to contribute his proportion of the capi- 
 tal before that time. In Stoneham Branch R. R. Co. v. 
 Gould,^ Chief Justice Shaw said : " It is a rule of law too 
 well settled to be now questioned, that when the capital 
 stock and number of shares are fixed by the act of incorpora- 
 tion, or by any vote or by-law passed conformably to the act 
 of incorporation, no assessment can be lawfully made on the 
 share of any subscriber until the whole number of shares has 
 been taken. This is no arbitrary rule ; it is founded on a 
 plain dictate of justice, and the strict principles regulating 
 the obligation of contracts. When a man subscribes a share 
 to a stock, to consist of one thousand shares, in order to 
 carry on some designated enterprise, he binds himself to pay 
 a thousandth part of the cost of such enterprise. If only 
 five hundred are subscribed for, and he can have no assur- 
 ance which he is bound to accept that the remainder will 
 be taken, he would be held, if liable to assessment, to pay a 
 
 1 Carlisle w. Cahawba, &o. R. R. * Infra, § 408. 
 Co., 4 Ala. 76, per Collier, C. J. » Stoneham Branch E. R. Co. ». 
 
 Compare White Mountains R. R. Gould, 2 Gray, 278. 
 Co. V. Eastman, 31 N. H. 124. 
 
§ 138 THE LAW OF PEIVATB CORPORATIONS. 140 
 
 five-hundredth part of the cost of the enterprise, besides in- 
 curring the risk of an entire failure of the enterprise itself, 
 and the loss of the amount advanced towards it." 
 
 The same rule has been laid down in equally emphatic 
 terms by the highest authorities throughout the United States 
 and in England.^ 
 
 § 138, The Amount of Capital must be fixed. — Under an 
 act of incorporation providing that the capital of the company 
 shall not exceed a certain amount, and shall be determined 
 from time to time by the board of directors, no assessments 
 can be laid upon a subscriber until the amount of the capital 
 has been fixed.^ If the charter of a corporation provides 
 that its capital shall be not less than a certain amount nor 
 exceed a given limit, but does not otherwise determine the 
 exact amount, it is to be presumed that the legislature in- 
 tended that the stockholders or the directors should fix the 
 amount by their vote ; and in such case it is indispensable that 
 the amount be determined before any assessment can be lev- 
 ied.^ After the stockholders of a corporation have fixed the 
 
 1 See Bray v. Farwell, 81 N. Y. Norwich, &c. Nav. Co. v. Theobald, 
 
 600, and Peoria, &c. R. R. Co. v. 1 Moody & M. 151; Pitchford v. 
 
 Preston, 35 Iowa, 118, 121, where Davis, 5 M. & W. 2; Fox v. Clifton, 
 
 the authorities are fully collected. 6 Bing. 776; Wordsworth on Joint 
 
 Also Salem Mill Dam Co. v. Ropes, Stock Companies, 318; Lindley on 
 
 6 Pick. 23, and 9 Pick. 187; Cabot, Partnership (4th ed.), 626. Com- 
 
 &c. Bridge Co. v. Chapin, 6 Gush, pare Waterford, &c. Ey. Co. v. Dal- 
 
 50; Hoagland v. Cincinnati, &c. R. biac, 6 Eng. Ry. Cas. 753. 
 
 R. Co., 18 Ind. 452; Selma, &c. R. " Troy & Greenfield R. R. Co. v. 
 
 R. Co. K. Anderson, 51 Miss. 829; Newton, 8 Gray, 596; Worcester, 
 
 Hughes V. Antietam Manuf . Co. , 34 &c. R. R. Co. v. Hinds, 8 Cush. 
 
 Md. 332; Livesey v. Omaha Hotel 110. 
 
 Co., 5 Neb. 50; Topeka Bridge Co. After the amount has been fixed 
 
 V. Cummings, 3 Kans. 55; Shurtz v. and subscribed, an assessment may 
 
 Schoolcraft, &c. R. R. Co., 9 Mich, be made. City Hotel v. Dickinson, 
 
 269; Swartwout v. Michigan Air 6 Gray, 586, 588; Lexington, &c. 
 
 Line R. R. Co., 24 Mich. 390; New R. R. Co. v. Chandler, 13 Mete. 
 
 York, &o. R. R. Co. v. Hunt, 39 (Mass.) 311. 
 
 Conn. 75; AUman v. Havana, &c. » Somerset, &c. R. R. Co. u. Cush- 
 
 R. R. Co., 88 111. 521; Santa Cruz ing, 45Me. 524; Somerset R. R. Co. 
 
 R. R. Co. V. Schwartz, 53 Cal. 106 ; u. Clarke, 61 Me. 384. Compare 
 
 Hale V. Sanborn, 16 Neb. 1. See White Mountains R. R. Co. v. East- 
 
 Wontner v. Shairp, 4 C. B. 404, 441 ; man, 34 N. H. 124. 
 
141 LIABILITY OF SHAEEHOLDEES. § 139 
 
 amount of its capital in pursuance of the provisions of their 
 charter, it is clear that no assessment for the general purposes 
 of the company can be made until the whole amount agreed 
 upon has been subscribed.^ 
 
 A vote of the directors that the subscription books be 
 closed on a certain day in effect fixes the company's capital at 
 the amount then subscribed ; ^ and if the time during which 
 subscriptions may be received is limited by the charter, the 
 amount of the company's capital becomes fixed through lapse 
 of time prescribed.' 
 
 It is clear, however, that if a corporation is authorized by 
 its charter to begin the prosecution of its main enterprise 
 before the amount of its capital has been fixed at a sum cer- 
 tain, it may also make calls upon its shareholders to contrib- 
 ute the requisite capital for that purpose.* 
 
 § 139. Capital required to pay Preliminary Expenses. — The 
 general rule is, that whenever a corporation is authorized by 
 its charter to enter into engagements or incur expenses, it 
 may also call in from its shareholders the necessary amount of 
 the capital which they have agreed to contribute. Hence, if 
 a corporation has authority to organize and incur expenses 
 for preliminary preparations before the whole amount of its 
 capital has been subscribed, and before it may begin to carry 
 on its business, the shareholders will be liable to pay calls 
 made for that purpose, though they would not be liable to 
 pay calls made for any other purpose. Thus, in Central 
 Turnpike Co. v. Valentine,* it was held that the directors of 
 a turnpike company might properly make a call of two dollars 
 on each share before the whole capital had been subscribed, 
 
 1 Littleton Manuf. Co. v. Parker, * Bucksport, &o. R. R. Co. v. 
 
 14 N. H. 543; Contoooook Valley Buck, 65 Me. 536; Penobscot, &c. 
 
 R. R. Co. V. Barker, 32 N. H. 363; R. R. Co. v. Dunn, 89 Me. 587; 
 
 Cabot, &c. Bridge Co. v. Chapin, Penobscot, &c. R. R. Co. v. Bart- 
 
 6 Cush. 50; Read v. Memphis Gay- lett, 12 Gray, 244. See the next 
 
 oso Gas Co., 9 Heisk. (Tenn.) 545. two sections. 
 
 ^ Lexington, &c. R. R. Co. v. ^ Central Turnpike Co. v. Val- 
 
 Chandler, 13 Meto. (Mass.) 311. entine, 10 Pick. 142; Salem Mill 
 
 8 Bucksport, &c. R. R. Co. ». Dam Co. v. Ropes, 6 Pick. 23, 43 ; 
 
 Buck, 65 Me. 536. and see infra, § 409. 
 
§ 1:40 THE LAW OP PRIVATE COEPORATIONS. 142 
 
 in order to provide for preliminary expenses in getting the 
 company started, and in surveying and locating the road, but 
 that a call of thirteen dollars per share for general purposes 
 was unauthorized. 
 
 § 140. "Where Corporation has Authority to begin Business 
 ■with Part of Capital. — The capital of a corporation is sub- 
 scribed for the purpose of prosecuting the enterprise for which 
 the company was formed. And therefore, if the company is 
 authorized by the terms of its charter to begin operations 
 after a certain amount of capital has been subsciibed, this 
 necessarily implies that the shareholders may from that lime 
 be required to pay the amount they have agreed to contribute 
 for that purpose. Accordingly in Boston, Barre, &c. R. R. 
 Co. V. Wellington,^ it was decided that a subscriber for shares 
 in a railroad corporation which was authorized by its charter 
 to begin the construction of its road whenever a given num- 
 ber of shares had been taken, became liable to pay assess-' 
 ments as soon as the subscriptions had reached the prescribed 
 number. Morton, J., said : " The provision that the corpora- 
 tion may commence the construction of the first section when 
 two thousand shares are subscribed, by necessary implication 
 gives the corporation the right to assess the shares when they 
 reach the number thus fixed." 
 
 The rule applicable to corporations formed under the general 
 incorporation act of New York, passed in 1848,^ is peculiar. 
 A corporation formed under this act is deemed in existence 
 as soon as the certificate of incorporation has been filed by 
 the incorporators, although there are no shareholders and no 
 shares have been subscribed. The trustees named in the 
 certificate of incorporation have authority to receive subscrip- 
 tions for shares, or to sell the shares for money or property, 
 
 1 Boston, Barre, &o. K. R. Co. r. Road Co. v. Rice, 7 Barb. 166; 
 
 Wellington, 113 Mass. 79, 85. See Willamette Freighting Co. v. Stan- 
 
 also Boston, &c. R. R. Co. v. Pear- nus, 4 Oreg. 261; Oregon Central 
 
 son, 128 Mass. 445; White Moun- R. R. Co. ». Sooggin, 3 'Oreg. 161; 
 
 tains R. R. Co. v. Eastman, 34 Hunt ». Kansas, &c. Bridge Co., 11 
 
 N. H. 124, 145; Schenectady, &c. Kans. 412; Railroad Co. v. White, 
 
 Plank Road Co. v. Thatcher, 11 10 S. Car. 155. Infra, § 410. 
 N. Y. 107; Hamilton, &o. Plank " Laws of 1848, chap. 40. 
 
143 LIABILITY OP SHAEBHOLDERS. § 141 
 
 and to begin to carry on the company's business as soon as 
 the company has been organized. The act, however, provides 
 that one half the capital stock, fixed and limited, of a com- 
 pany formed under the act, shall be paid in within one year, 
 and the other half within two years, from the incorporation of 
 such company, or such corporation shall be dissolved.^ 
 
 § 141. The Capital must be subscribed in Good Faith and XTn- 
 conditionally. — Where it is necessary that a certain amount 
 of capital shall be subscribed before the stockholders of a 
 corporation can be called upon to pay assessments, the re- 
 quired amount must be subscribed absolutely, and not con- 
 ditionally. A subscription on condition precedent is a mere 
 offer, and the subscriber does not become a shareholder, or 
 incur any liability, until after the condition has been per- 
 formed, and the subscription accepted by the company.^ 
 
 In Central Turnpike Co. v. Valentine,^ the Supreme Court 
 of Massachusetts held that a corporation whose capital was 
 fixed at a certain amount could not recover assessments from 
 its members, without showing that the whole amount of 
 its capital had been unconditionally subscribed. The court 
 said : " The main ground on which we proceed in the present 
 case is, that the subscriptions of several persons were upon a 
 condition precedent : one subscribes if the road shall be made 
 in such a place ; another, if in another place. The plaintiffs 
 must show that the conditions have either been complied 
 with or waived. This has been suggested, but the burden is 
 on the plaintiffs to prove it. We may suppose two' different 
 subscriptions which are contradictory. It is clear that both 
 conditions cannot be performed, and that both subscribers 
 should not be counted as shareholders." * 
 
 It is necessary, also, that the required amount of capital be 
 subscribed by persons apparently able to pay the assessments 
 which may be made upon their shares. Fictitious subscrip- 
 
 1 Laws of 1848, ch. 40, § 10. Ridgefield, &c. R. R. Co. v. Brush, 
 
 2 Supra, §78. 43 Conn. 86, 96; and see Ticonic 
 » Central Turnpike Co. v. Valen- Water Power, &c. Co. v. Lang, 63 
 
 tine, 10 Pick. 142. Me. 480; Troy, &c. R. R. Co. v. 
 
 * See also New York, &c. R. R. Newton, 8 Gray, 596. 
 Co. V. Hunt, 39 Conn. 75. Compare 
 
§ 143 THE LAW OF PEIVATB COEPOEATIONS. 144 
 
 tions, or subscriptions made by persons unable to contribute 
 their proportion of the capital, do not satisfy the requirement 
 that the whole capital of a corporation shall be subscribed 
 before its members can be assessed.^ But if the required 
 number of subscriptions has been obtained in good faith from 
 persons apparently able to perform their duties as sharehold- 
 ers, it is no defence to an action against a shareholder that 
 some of the subscribers have proved to be insolvent. ^ 
 
 § 142. Liability where Capital is increased. — If a corpora- 
 tion is authorized by its charter to increase the amount of its 
 capital stock, and an increase is voted, a subscriber for new 
 shares will be liable to pay calls without regard to the amount 
 of the new shares that have been taken. The reason of this 
 is obvious. The corporation, having already begun business, 
 would be entitled to continue its business whether the whole 
 or only part of the new issue should be taken, and a subscriber 
 would become a shareholder in a going concern immediately. 
 The contribution of the new capital would therefore be re- 
 quired for the company's authorized business purposes.^ 
 
 § 143. The Necessity of Calls. — If the charter of a corpora- 
 tion provides that the shareholders shall pay in their shares 
 of the capital when required by vote of the board of directors 
 or other agents of the company, it is clear that the share- 
 holders cannot be held liable until after a call or assessment 
 has been made. This is the rule even where there is no 
 express provision in the charter or contract of subscription. 
 It is an implied condition precedent to the liability of a sub- 
 scriber to contribute to the company's capital, that a regular 
 call or assessment shall have been made upon all the share- 
 holders. The subscriber's liability does not mature until a 
 call or assessment has been made. Until that time he can- 
 
 1 Lewey's Island R. R. Co. v. 187; Kidgefleld, &c. R. R. Co. v. 
 
 Bolton, 48 Me. 451 ; Phillips v. Cov- Brush, 43 Conn. 87. 
 ington, &o. Bridge Co., 2 Meto. ' Nutter v. Lexington, &c. R. R. 
 
 (Ky.) 219. Co., 6 Gray, 85; Clarke ii. Thomas, 
 
 " Penobscot R. R. Co. v. Dum- 34 Ohio St. 46. Compare, however, 
 
 mer, 40 Me. 172; Penobscot R. R. Read v. Memphis Gayoso Gas Co., 
 
 Co. V. White, 41 Me. 512; Salem 9 Heisk. (Tenn.) 545. 
 Mill Dam Co. v. Ropes, 9 Pick. 
 
145 LIABILITY OP SHABEHOLDEES. § 144 
 
 not be sued by the company,^ nor can he be garnisheed at 
 the suit of a creditor of the company.^ Whatever the credi- 
 tor's rights may be in equity, he cannot treat the stockhold- 
 er's liability as a debt until after a call has been made. It 
 follows, for the same reason, that a corporation cannot in a 
 suit brought by a shareholder set off any portion of his stock 
 liability until after a regular call has been voted.^ After a 
 regular call has been made, the liability of the shareholder 
 becomes a legal debt, and may be assigned by the corpora- 
 tion, like any other debt.* 
 
 § 144. However, as a subscriber for shares impliedly agrees 
 to pay the amount of his shares according to the charter or 
 articles of association of the company, it is evident that, if the 
 charter or articles provide that the shares shall be payable at 
 certain settled periods, no call is required, and the subscriber 
 is liable absolutely to pay at the times indicated.* Upon this 
 principle it has been held that a subscriber for shares in a 
 corporation organized under a law which provided that the 
 whole capital should be paid in within two j^ears, or the com- 
 pany be dissolved, became liable to pay absolutely within 
 two years, or at such previous time as the directors might 
 require, and that after two years had elapsed an action might 
 be brought against a stockholder without averring that a call 
 had been made.® 
 
 If a shareholder has, by the express terms of his subscrip- 
 tion, agreed to pay the amount of his shares immediately, or 
 at certain stated times, it is clear that no further call is neces- 
 sary, and he will be liable to pay according to the terms of 
 the subscription.^ 
 
 1 Grosse Isle Hotel Co i'. Fanson's ' Phoenix Warehousing Co. v. 
 Exrs., 42 N. J. L. 10. Badger, 67 N. Y. 294, 300; and 
 
 2 Parks V. Heman, 7 Mo. App. see Andrews v. Ohio & Miss. R. R. 
 14; Pike v. Bangor, &c. R. R. Co. Co., 14 lud. 169. 
 
 68 Me. 445; i«/ra. §799. ' Estell v. Knightstown, &c. 
 
 3 Bouton V. Dry Dock, &c. Stage Turnpike Co., 41 Ind. 174; New- 
 Co., 4 E. D. Smith, 420. Albany, &c. R. R. Go. v. Pickens, 
 
 * Wells V. Rodgers, 50 Mich. 5 Ind. 247. Compare Cheraw, &c. 
 
 294. Infra, § 799. R. R. Co. ». Garland, 14 S. C. 63; 
 
 » Waukon, &c. R. R. Co. v. Iowa, &c. R. R. Co. v. Perkins, 28 
 
 Dwyer, 49 Iowa, 121. Iowa, 281. 
 
 VOL. I. — 10 
 
§ 145 
 
 THE LAW OF PRIVATE COEPOEATIONS. 
 
 146 
 
 § 145. Who can make Calls. — If the power of levying as- 
 sessments is vested by the charter or articles of association of 
 a company in particular agents, no other agents are impliedly 
 authorized to exercise the power, and an assessment by the 
 proper agents is a condition precedent to the liability of a 
 shareholder. Thus, under a charter providing that calls 
 shall be made by the board of directors, neither the presi- 
 dent of the company nor a minority of the directors can 
 make a valid call.^ 
 
 Nor can the power of making calls be delegated by the 
 agents in whom it is vested by the charter. In Silver Hook 
 Road V. Greene,^ the court decided that the directors of a 
 company could not delegate to the treasurer the power of 
 making calls in such instalments as should be needed. It 
 was held that the making of calls was a matter involving the 
 exercise of judgment and discretion on the part of the direc- 
 tors themselves.^ A provision in a charter declaring that the 
 corporation shall be authorized to levy assessments by vote. 
 
 1 Banet v. Alton «& Sangamon 
 R. R. Co., 13 111. 513; Silver Hook 
 Road V. Greene, 12 R. I. 164; Span- 
 gler V. Indiana, &c. Ry. Co., 21 
 111. 276; Price v. Grand Rapids, &c. 
 R. R. Co., 13 Ind. 58; Hamilton v. 
 Grand Rapids, &c. R. R. Co., Id. 
 347; Macon, &c. R. R. Co. v. Vason, 
 57 Ga. 314; Rutland, &c. R. R. Co. 
 V. Thrall, 35 Vt. 536; Monmouth 
 Mut. Fire Ins. Co. v. Lowell, 59 
 Me. 504; People's Mutual Ins. Co. 
 V. Westoott, 14 Gray, 440. Com- 
 pare Hays V. Pittsburgh, &c. R. R. 
 Co., 38 Pa. St. 81. 
 
 " Silver Hook Road v. Greene, 12 
 R. I. 164; Farmers' Mut. Fire Ins. 
 Co. V. Chase, 56 N. H. 341. Cora- 
 pare, however. Rives v. Montgom- 
 ery, &c. Plank Road Co. 30 Ala. 92. 
 
 * Matteson, J., said: "If the 
 mating of calls involves the exer- 
 cise of judgment and discretion, it 
 follows that the vote of the directors 
 authorizing the treasurer to call upon 
 
 the subscribers for the amounts sub- 
 scribed, in such instalments as might 
 be needed, — or, in other words, to ex- 
 ercise the discretion conferred upon 
 them, — was a delegation of author- 
 ity beyond their power to make; 
 and the calls by the treasurer, in 
 accordance with this vote, were in- 
 valid, and imposed no liability upon 
 the defendant. Did the making of 
 calls involve the exercise of judg- 
 ment and discretion? We think so. 
 It was the duty of the directors to 
 make no calls till the interests of ■ 
 the corporation i-equired it, to call 
 for no greater instalments than 
 might be needed, and to adjust the 
 times of payment so as to cause 
 as little inconvenience as possible 
 to the subscribers. Certainly the 
 proper determination of these va- 
 rious matters called for the exercise 
 of judgment and discretion in a 
 greater or less degree." 12 R. I. 
 164, 165. 
 
147 LIABILITY OF SHABEHOLDBES. § 147 
 
 places the power in the hands of the majority in stockhold- 
 ers' meeting ; under such a provision, the directors and other 
 agents of the company have no original authority to make 
 assessments, and it seems that the power cannot be delegated 
 to them by vote of the majority.^ 
 
 § 146. If the directors of a corporation are authorized to 
 require payments from the subscribers, at such times and in 
 such proportions and on such conditions as they may see fit, 
 they may either call at once for the whole amount of capital 
 subscribed, or may divide it into instalments.^ And it seems 
 that, although it be expressly provided that assessments shall 
 not exceed a certain sum on each share at one time, it is no 
 objection that several assessments to the amount limited are 
 voted at the same time, provided the shareholders be not re- 
 quired to pay more, at any one time, than the amount limited.^ 
 
 § 147. Notice of CaUs. — The general rule is, that, in the 
 absence of an express provision in the charter or articles of 
 association of a corporation, requiring notice to be given to 
 the shareholders after a call has been voted, no notice is ne- 
 cessary in order to hold the shareholders liable to pay the 
 amount of the call ; and it has been held that no demand 
 is required before the institution of a suit.* 
 ' If the charter or articles of association provide that notice 
 shall be given to the shareholders after a call has been voted, 
 the giving of the prescribed notice is a condition precedent to 
 
 1 Ex parte Winsor, 3 Story, 411. Co., 35 Ala. 33; Lake Ontario, &c. 
 See Louisiana Paper Co. v. Waples, Co. ». Mason, 16 N. Y. 451 ; WilsoU' 
 3 Woods, 34 ; infra, § 516. v. Wills Valley R. R. Co., 33 Ga. 
 
 2 Hann v. Mulberry, &c. Gravel 466; Grubb u. Mahoning Nav. Co. 
 R. Co. 33 Ind. 103. ' 14 Pa. St. 302; Smith v. Indiana, 
 
 ' See Penobscot R. R. Co. v. &c. Ry. Co., 12 Ind. 61; Eakright 
 
 Dummer, 40 Me. 172 ; Penobscot, v. Logansport, &c. R. R. Co., 13 
 
 &c. R. R. Co. V. Dunn, 39 Me. 587; Ind. 404; Fisher v. Evansville, &c. 
 
 Ambergate Ry. Co. v. NorclifEe, 20 R. R. Co., 7 Ind. 407; Ross v. La- 
 
 L. J. Ex. 234; Ambergate Ry. Co. fayette, &c. R. R. Co., 6 Ind. 297; 
 
 V. Mitchell, 6 Eng. Ry. Cas. 234; Peake v. Wabash R. R. Co., 18 111. 
 
 Rutland, &c. R. R. Co. v. Thrall, 88; Breedlove v. Martinsville, &c. 
 
 35 Vt. 536. Compare, however, R. R. Co., 12 Ind. 114; Harlem 
 
 Spangler ». Indiana, &c. Ry. Co., Canal Co, v. Seixas, 2 HaU, 504, 
 
 21 111. 276. 510. 
 
 * Eppes V. Mississippi, &c. R. R. 
 
§148 
 
 THE LAW OP PEIVATE COEPOEATIONS. 
 
 148 
 
 the liability of the shareholders to pay the call.^ But a pro- 
 vision directing notice to be given in a particular manner, as 
 by letter or by publication, is not obligatory with respect to 
 the particular method of giving the notice ; actual notice, 
 whether verbal or written, is in all cases sufficient, provided 
 the shareholder be informed of the facts at the prescribed 
 time.^ Verbal notice is in all cases sufficient where no written 
 notice is expressly required by the charter,^ and it has been 
 held in Maryland that notice by publication in a newspaper 
 is sufficient, where no particular kind of notice has been 
 specified.* 
 
 § 148. Tender of Certificate unnecessary. — A certificate of 
 shares is not necessary in order to constitute a subscriber 
 
 1 Macon, &o. R. R. Co. v. Vason, 
 57 Ga. 314; Tomlin b. Tonica, ^c. 
 R. R. Co., 23 111. 429; Lewey's 
 Island R. R. Co. v. Bolton, 48 Me. 
 451, Miles v. Bough, 3 Q. B. 845; 
 Newry, &c. Ry. Co.w. Edmunds, 5 
 Eng. Ry. Cas. 275; Cole v. .Toliet 
 Opera House Co., 79 111. 96; Scar- 
 lett V. Academy of Music, 43 Md. 
 203 ; and compare Grubbs v. Vicks- 
 burg, &o. R. R. Co., 50 Ala. 898; 
 Mississippi, &c. R. R. Co. v. Gaster, 
 20 Ark. 455; Rutland, &c. R. R. 
 Co. V. Thrall, 35 Vt. 536. 
 
 ^ Mississippi, &c. R. R. Co. v. 
 Gaster, 20 Ark. 455; Lexington, &c. 
 R. R. Co. V. Chandler, 13 Mete. 
 (Mass.) 311; Jones v. Sisson, 6 
 Gray, 288; Danbuiy, &c. R. R. Co. 
 V. Wilson, 22 Conn" 485. 
 
 * Smith V. Tallassee Plank Road 
 Co., 30 Ala. 650. 
 
 < Hall V. U. S. Ins. Co., 5 Gill, 
 484, 501. Dorsey, J., said: "The 
 act of Assembly provides for the 
 subscription of ten thousand shares 
 of stock. Amongst how many per- 
 sons they may be distributed, not 
 even a conjecture could be formed: 
 they may have amounted to thou- 
 sands. Of their respective resi- 
 
 dences there is equal, if not greater, 
 uncertainty, the law making no pro- 
 vision for a registry thereof, which 
 it certainly ought to have done, had 
 such personal notice been deemed 
 necessary. And there is no pro- 
 portionate object attained for the 
 great inconvenience, labor, and ex- 
 pense incident to such a notification, 
 conceding it to be practicable. Per- 
 sons who are stockholders in such a 
 corporation are not inattentive to 
 the concerns thereof, and obtain 
 information in relation to its pro- 
 ceedings either through their own 
 inquiries or the communications of 
 friends resident at or near its oifice 
 of business, or from publications in 
 newspapers edited in its vicinity. 
 The substitution of such newspaper 
 publications in lieu of personal no- 
 tice has so long been a universal 
 usage, and of notoriety equal to that 
 of the publication of newspapers 
 themselves, that the custom of do- 
 ing so has become a part of the law 
 of the land." Louisville, &o. Turn- 
 pike Co. V. Meriwether, 5 B. Monr. 
 13; contra, Lake Ontario, &c. R. R. 
 Co. f. Mason , 16 N. Y. 463 ; Alabama, 
 &c. R. R. Co. V. Rowley, 9 Fla. 508. 
 
149 LIABILITY OF SHAREHOLDERS. § 149 
 
 upon the stock-books a shareholder and member of the cor- 
 poration ; ^ nor is the tender of a certificate necessary in order 
 to enable a company to recover from its shareholders the 
 amount of their subscriptions.^ 
 
 § 149. Agreements to pay unconditionally. — A shareholder 
 may, by the express terms of his subscription, undertake to 
 contribute the amount of his shares before the capital re- 
 quired to authorize the company to begin its operations and 
 assess the other shareholders has been subscribed. Under 
 these circumstances, the condition which would be implied 
 in an ordinary subscription is superseded by the express 
 terms of the subscriber's contract.' 
 
 The reasoning upon which some of the decisions cited in 
 support of this obvious doctrine are based, is extremely un- 
 satisfactory. The courts in Maine and Massachusetts start 
 with the mistaken view that a subscriber does not become 
 liable to contribute the amount of his shares by the terms of 
 his contract of membership, but is liable, if at all, by reason 
 of an express promise to pay for his shares.* And in some 
 cases, the radical difference between subscription upon a con- 
 dition precedent, (being a mere offer to take shares,) and an 
 absolute subscription upon special terms, appears to have been 
 ignored.^ Thus, in Bucksport, &c. R. R. Co. v. Buck,* a sub- 
 scription was by its terms not to be binding " until the sum 
 of one hundred thousand dollars shall have been subscribed 
 by good and responsible parties." The court held that this, 
 
 » Supra, § 56. Co. v. Britton, 2 Mo. App. 290; 
 
 ^ Fulgam V. Macon, &o. R. R. Penobscot, &c. R. R. Co. v. Dunn, 
 
 Co., 44 Ga. 597; South Georgia, 39 Me. 587; Bucksport, &c. R. R. 
 
 &c. R. R. Co. V. Ayres, 56 Ga. 234; Co. v. Buck, 65 Me. 536; Kennebec, 
 
 New Albany, &c. B. R. Co. «. Mc- &c. R. R. Co. v. Jarvis, 84 Me. 360; 
 
 Cormick, 10 Ihd. 499 ; Vawter i*. Penobscot, &c. R. R. Co. v. Bartlett, 
 
 Ohio, &c. R. R. Co., 14 Ind. 174; 12 Gray, 244; Emmitt i>. Spring- 
 
 Heaston v. Cincinnati, &c. R. R. field, &c. R. R. Co., 31 Ohio St. 23; 
 
 Co., 16 Ind. 275; Smith v. Gower, Lail v. Mt. Sterling Coal Road Co., 
 
 2 Duv. (Ky.) 17; Slipher v. Ear- 13 Bush, 32. Compare People's 
 
 hart, 83 Ind. 173 ; and see cases Ferry Co. o. Balch, 8 Gray, 303. 
 supra, § 56. ' * Supra, § 129. 
 
 » Iowa, &o. R. R. Co. v. Perkins, « Supra, §§ 78, 82. 
 28 Iowa, 281; St. Charles Manuf. « 65 Me. 536, 539. 
 
f 160 THE LAW OF PBIVATE COEPOEATIONS. ISO 
 
 by necessary implication, meant that the subscription should 
 be binding as soon as that amount should be obtained ; and 
 that, if the subscription was "binding," its payment could 
 from that time be enforced. 
 
 The principles which are applicable to cases of this kind 
 are in reality very simple. A subscriber in becoming a mem- 
 ber of a corporation undertakes to contribute his proportion- 
 ate part of the company's capital ; but not immediately and 
 at all events. He impliedly agrees to contribute his part 
 only when the company shall have a use for its capital. If 
 the company is not authorized to begin its main business un- 
 til after a certain amount of capital has been subscribed, it 
 would have no use for the bulk of its capital until that 
 time. Hence in this case the subscription of the capital 
 would be a condition precedent to the liability of the share- 
 holder to contribute the amount of his shares. But it would 
 not be a condition precedent to the subscriber's member- 
 ship in the company, or the binding force of his contract. 
 If a subscriber chooses to waive this condition to his 
 liability, he may do so ; ^ or he may bind himself by the 
 express terms of his subscription to pay at a time fixed at 
 all events. 
 
 § 150. Liability of Shareholders to pay unauthorized Calls. — 
 It is the duty of the directors of a corporation to call in its 
 capital in such sums and at such times as they deem the in- 
 terests of the whole association to require. The performance 
 of this duty involves the exercise of a free discretionary 
 power; and this power cannot be impaired by the share- 
 holders, or restrained by a court, except in a clear case of 
 bad faith on the part of the directors, or misapprehension of 
 the principles which should govern their action. It is clear 
 that a shareholder cannot refuse to pay a call upon the sole 
 ground that it is injudicious, in his opinion, to require the 
 company's capital to be paid in at that particular time.^ 
 
 Opinions have been intimated that even where the making 
 of a call is clearly unauthorized, and where the shareholders 
 
 1 Infra, § 156. 
 
 2 Infra, § 243. Chouteau Ins. Co. v. Floyd, 74 Mo. 286. 
 
151 LTABILITr OF SHAEEHOLDEES. § 150 
 
 by the implied terms of their agreement are not liable to 
 contribute the amount of their shares, — as, for example, 
 where the prosecution of the enterprise in the manner agreed 
 upon has become wholly impossible, — a shareholder cannot 
 defend upon this ground in an action at law, but must seek 
 relief in a court of chancery by injunction.^ And it has been 
 held by the Supreme Court of Indiana, that, in an action 
 brought in the name of a corporation against its shareholders 
 for payment of the amount of their shares, any irregularity 
 or illegalitj' in the election of the directors by ■whom calls 
 wei'e made is no ground on which the payment of the sub- 
 scription for stock can be resisted, though it might be a 
 ground for a quo warranto to oust the directors.^ 
 
 These views cannot be supported upon sound principle. 
 If the directors of a corporation threaten to make an un- 
 authorized call, they may probably be restrained by injunc- 
 tion ; 3 and if the directors have not been regularly elected, 
 quo warranto may be a proper remedy. But this is no rea- 
 son why the shareholders should be compelled to contribute 
 to the company's capital irrespective of the terms of their 
 contract. The shareholders have agreed to contribute the 
 amount of their shares only after an authorized call has been 
 made by properly elected agents; and until such a call has 
 been made, a condition precedent to their liability remains 
 unperformed. 
 
 It has never been decided that shareholders are obliged 
 to seek a remedy by injunction where a call is made before 
 the required amount of capital has Taeen subscribed;^ and 
 numerous authorities hold that a call made by unauthorized 
 parties, or in an unauthorized manner, may be disregarded 
 by the shareholders.^ There is no reason why a different 
 
 1 Salem Mill Dam Co. v. Ropes, Moore, 3 Ind. 510 ; contra, People's, 
 
 9 Pick. 196. &c. Ins. Co. v. Westcott, 14 Gray, 
 
 " Steinmetz ». Versailles, &c. 440; and see in/ra, §§ 155, 620. 
 
 Turnpike Co. , 57 Ind. 457 ; John- » Illinois Grand Trunk E. E. Co. 
 
 son V. Crawfordsville, &c. E. R. Co. , v. Cook, 29 111. 237. 
 
 11 Ind. 280 ; Eakright v. Logatis- * Supra, § 137. 
 
 port, &c. R. R. Co., 18 Ind. 404; « Supra, § 145. 
 Covington, &c. Plank Road Co. v. 
 
§ 161 THE LAW OF PRIVATE COEPOEATIONS. 152 
 
 rule should be applied in any case where a call is clearly 
 unauthorized. 
 
 However, if the invalidity of a call does not appear clearly, 
 there would be obvious advantage in requiring a shareholder 
 to seek his remedy by injunction. Fairness demands that all 
 shareholders should contribute in proportion to the amount of 
 their shares, and if each shareholder were allowed to make 
 his defence separately, there might be inconsistent decisions 
 in a case of doubt. In a' suit for an injunction it would be 
 necessary to make the corporation a party, and the decision 
 would determine the validity of the call as to all the share- 
 holders, once for all. 
 
 § 151. Uability of the Shareholders after Abandonment of 
 the Company's Enterprise. — If the shareholders in a corpora- 
 tion have voluntarily abandoned the enterprise for the prose- 
 cution of which they agreed to unite, or if the further 
 prosecution of the enterprise in the manner originally agreed 
 upon has become impossible for any reason whatever, it is 
 the duty of the company to its creditors to call in whatever 
 capital may be required to settle up its affairs. And in such 
 case every shareholder of the company, when called upon by 
 the corporate agents, will be liable to contribute his propor- 
 tionate part.^ 
 
 Thus, if a railroad company should become insolvent, and 
 a mortgage upon its road be foreclosed, the shareholders 
 would nevertheless remain to pay calls for the purpose of 
 satisfying creditors.^ The fact that a company's funds have 
 been misappropriated and wasted, is no defence to a subse- 
 quent assessment, although the misappropriation may have 
 caused the necessity of making a further assessment.^ 
 
 § 152. But after the enterprise of a corporation has been 
 wholly abandoned, there can be no further use for its capital, 
 
 1 Phcenix Warehousing Co. v., Chouteau Ins. Co. v. Floyd, 74 Mo. 
 
 Badger, 67 N. Y. 294; 6 Hun, 286. 
 
 293; Smith v. Gower, 2 Dnv. 17; ^ Buffalo, &c. R. R. Co. ». Gif- 
 
 Hardy v. Merriweather, 14 Ind. ford, 87 N. Y. 294. 
 
 203 ; McMillan v. Maysville, ' Marshall v. Goldea Fleece Min- 
 
 &c. R. R. Co., 15 B. Monr. 218; ing Co., 16 Nev. 156. 
 
153 LABILITY OF SHARBHOLDEKS. § 152 
 
 except for the purpose of winding up the company's business ; 
 and if there are no unpaid creditors, the liability of a member 
 of the company to contribute his share of the capital would, 
 by the implied terius of his contract, have ceased. A share- 
 holder undertakes to contribute the amount of his shares for 
 no other purpose than to carry on the business for which the 
 company was originally formed. 
 
 A by-law requiring the members of a corporation to pay 
 assessments which are not necessary for any lawful or author- 
 ized purpose of the company is in excess of the powers of the 
 directors, and therefore void.^ 
 
 Upon this principle, it was held by the Supreme Court of 
 Pennsylvania, that, after a railroad company had wholly 
 abandoned the construction of its road, and had released some 
 of its members and refunded the money they had paid, every 
 member was thereby discharged from liability to pay further 
 calls. Woodwai'd, J., said : " Not to say that the charter was 
 forfeited by such inaction, it is very clear that subscribers 
 were released. McCully's undertaking was not only to the 
 company, but with the other subscribers. His subscription 
 and theirs were mutual considerations for each other, and to 
 let them off and hold him is to enforce a contract he never 
 made. He has a right to insist that the company shall perform 
 its charter duties in the time and manner prescribed, and that 
 other subscriptions shall be enforced in the same manner as 
 his own. And when the company let off part of its subscribers 
 and returned them their money, without the consent of the de- 
 fendant, actual or implied, they discharged him from all liability 
 growing out of his original subscription. It was like a dissolu- 
 tion of a partnership, or an alteration in the fundamental law 
 of an unincorporated society, "or the substitution of new and 
 incongruous objects of a corporation ; in all of which cases the 
 responsibilities of an original partner or subscriber cease." ^ 
 
 1 Hibernia Five Engine Co. v. amount of capital shall be called in 
 
 Commonwealth, 93 Pa. St. 264; for use in the company's business, 
 
 London Tobacco Pipe Makers Co. v. or to accomplish any purpose au- 
 
 Woodroffe, 7 B. & C. 838. But the thorized by the charter, 
 managing agents have a wide dis- ^ McCully v. Pittsburgh, &o. R. R. 
 
 cretionary power to determine what Co., 32 Pa. St. 32. 
 
§ 153 THE LAW OF PKIVATB OOEPOBATIONS. 154 
 
 § 153. Distinction bet^iveen Rescission of Contract and Cessa- 
 tion of LiabiUty. — There is a plain distinction between a re- 
 scission of the contract of membership and a cessation of the 
 liability to contribute capital by reason of an implied condi- 
 tion in the shareholder's contract. A rescission implies a 
 cancellation of the member's shares, and his complete with- 
 drawal from the company. He thereby loses his entire inter- 
 est in the company's assets, and becomes discharged from all 
 further liability. This can take place only by agreement of 
 the parties, with the consent of the legislature.^ A departure 
 from the charter without the consent of the legislature, or 
 even an entire failure of the enterprise for which the company 
 was formed, would not dissolve the corporation, or enable any 
 shareholder to withdraw.^ Every shareholder would retain 
 his interest in the company's assets, and in the charter con- 
 tract, and would be liable to contribute his share of capital, if 
 needed for the payment of debts or for any legitimate pur- 
 pose. The departure from the charter, or abandonment of 
 the company's enterprise, would be a defence against calls 
 only provided the shareholders' liability to contribute capital 
 ceased, assuming their contract to be still in force. 
 
 Thus, if a railroad company should materially alter the 
 line of its road, or consolidate with another company under a 
 grant of legislative authority obtained for that purpose, any 
 shareholde]' would be entitled to rescind his contract, and 
 withdraw from the company. But if the alteration should be 
 made without the consent of a shareholder, or in the absence 
 of authority from the legislature, it would be in excess of the 
 powers of the majority, or any of the agents of the company, 
 and would not bind the company. A dissenting shareholder 
 would be entitled to enjoin the unauthorized action, and he 
 would have a right to refuse to pay calls made solely for the 
 purpose of accomplishing the unauthorized alteration, for the 
 reason that such calls would be in excess of the authority of 
 the directors making them. But he would remain liable to 
 pay calls made for authorized purposes. If the unlawful 
 alteration or consolidation should be actually accomplished, 
 1 Supra, §§ 109, 119. « Su'pra, §§ 115, 116. 
 
155 LIABILITY OP SHAEEHOLBEES. § 155 
 
 and the affairs of the corporation be placed thereby in such a 
 position that it would be impossible to go back to the charter 
 and carry on the company's business as originally contem- 
 plated, the only legal and proper course would be to wind 
 up the company's business. Under these circumstances 
 there would be no further use for contributions of capital by 
 the shareholders, and the directors would have no authority 
 to make further calls.-*^ 
 
 § 154. Calla must be Fair to all the Shareholders. — Justice 
 between the shareholders of a corporation requires that all 
 the shareholders should contribute in respect of their shares 
 at the same time and in ratable amounts; a call requiring 
 some shareholders to pay in more than others would there- 
 fore be invalid.^ But if some shareholders have already con- 
 tributed more than others, it would be not only the right, 
 but the duty, of the directors to make calls upon the other 
 shareholders in such amounts as to equalize the contributions 
 of all. 
 
 An accidental failure on the part of the directors to render 
 a call binding upon every shareholder, by neglecting to send 
 the required notices in individual cases, would not vitiate the 
 entire call, but those who were properly notified would be 
 liable. If, however, the directors should in bad faith neglect 
 to notify some of the shareholders, or if for any reason the 
 call should be unenforceable as against a large portion of the 
 shareholders, and substantial injustice thus result, the entire 
 call should be declared void, and a new one be made. 
 
 § 155. Unauthorized Calls cannot be ratified. — The general 
 rule is, that acts performed on behalf of a corporation without 
 authority may be ratified and adopted by the company. By 
 a fiction, the ratification of an act is held to cure the want of 
 authority in the agent who performed it, and the act becomes 
 binding upon the corporation to the same extent as if it had 
 been originally authorized. 
 
 1 See South Georgia, &c. R. R. ^ Infra, §§ 302-315. Pike v. 
 
 Co. y. Ayres, 56Ga. 230, 234; Mace- Bangor, &c. R. R. Co., 68 Me. 
 
 don, &c. Plank Road Co. v. Lap- 445. 
 ham, 18 Barb. 315. 
 
§ 156 THE LAW OF PEIVATE COEPOEATIONS. 156 
 
 This rule has no application to unauthorized calls upon the 
 shareholders. The necessity of making a call bj-^ the proper 
 parties, and in the manner prescribed, arises from the terms 
 of the shareholders' contract, and not from a limitation of the 
 power delegated by the corporation to the parties making the 
 call. The making of calls is not strictly speaking a corporate 
 act. The shareholders have mutually agreed to contribute 
 capital when certain persons shall have made a call in a cer- 
 tain manner and not before. The necessity of making a call 
 as agreed upon cannot be obviated by the use of a fiction.^ 
 
 These views are in accordance with the principle acted 
 upon in Right v. Cuthell,^ and similar cases, in which it was 
 held that a notice to quit given to a tenant of land, without 
 authority, could not be ratified and adopted by the landlord. 
 The tenant was entitled to a valid and binding notice, upon 
 which he could act with certainty from the outset. 
 
 § 156. 'Waiver of Conditions Precedent. — A stockholder 
 may waive the performance of a condition precedent to his 
 liability to contribute his proportionate share of the capital 
 of the company ; and after such waiver he will be liable as 
 if the condition had been performed. Thus, it is an implied 
 provision in the undertaking of a shareholder to contribute 
 the amount of his shares, that the corporation shall liave 
 obtained the requisite amount of subscriptions, and shall have 
 done all things required by law to authorize it to begin to 
 carry on business.^ Yet if a subscriber, knowing that the 
 requisite subscriptions had not been obtained, should attend 
 meetings of the corporation and co-operate in votes for ex- 
 pending money and for making contracts, or take part in any 
 
 ^ In Price b. Grand Kapids, &c. The court held that the order of the 
 
 R. R. Co., 13 Ind. 58, an action was minority was absohitely void, be- 
 
 brought against a shareholder for cause there was a defect of power; 
 
 non-payment of a call made by order and that, being void, it was not sus- 
 
 of less than a quorum of the direc- ceptible of ratification. Compare 
 
 tors. An attempt was made to show Silver Hook Road v. Greene; 12 
 
 that the order had been ratified " by R. I. 164; Rutland, &o. R. R. Co. 
 
 the whole board and by the corpora- v. Thrall, 35 Vt. 536. 
 tion in publishing the notice, bring- ^ 5 East, 491. 
 ing the suit, and by special demand." " Supra, § 137. 
 
157 LIABILITY OF SHAEEHOLDERS. § 168 
 
 other acts which could be properly done only upon the 
 assumption that the capital of the company had been fully 
 subscribed, he would not be permitted to refuse to contribute 
 his proportion of capital, upon the ground that the amount 
 required by the charter had not been subscribed.^ 
 
 § 157. For similar reasons, it follows that, if a share- 
 holder should concur in the making of a call, he would not 
 be allowed afterwards to object that the call was made in a 
 manner or at a time not authorized by the charter of the asso- 
 ciation.2 In Cass v. Pittsburg, &c. Ry. Co.,^ a shareholder 
 was sued for the amount of ten calls, and endeavored to 
 escape liability on the ground that he had not received the 
 proper notice as prescribed by the charter. It appeared that, 
 upon reaeiving notice of the second call, the defendant ad- 
 dressed a note to the secretary of the company, in which, after 
 denying notice of the first, call, he said: "I am not aware 
 of being a stockholder, or of having subscribed to the stock 
 of this corporation, and therefore your notice to me is in 
 error." The Supreme Court of Pennsylvania held that the 
 defendant was liable. M*. Justice Sharswood said : " After 
 this distinct and unequivocal repudiation of his subscription, 
 it was no longer necessary to give him notice of the calls. It 
 was a waiver of all notice, and operated in all respects as if 
 the notices had been regularly given." 
 
 § 153. Proceedings to recover Calls. — In an action brought 
 by a corporation against a shareholder to recover the amount 
 of a call, the plaintiff must allege and prove, both that the 
 
 1 Cabot, &c. Bridge Co. o. Cha- Schenectady, &c. Plank Road Co. v. 
 pin, 6 Cush. .53; Hughes i). Antietam Thatcher, 11 N. Y. 102; Danbury, 
 Manuf. Co.,34Md. 328, 329; Hager &c. R. R. Co. v. Wilson, 22 Conn. 
 V. Cleveland, 36 Md. 476; Bucks- 436; Macon, &c. R. R. Co. r. Vason, 
 port, &c. R. R. Co. V. Buck, 68 57Ga. 314; Kansas City Hotel Co. 
 Me. 81 ; New Hampshire Central v. Harris, 51 Mo. 464 ; Willamette 
 R. R. Co. !'. Johnson, 30 N. H. Freighting Co. v. Stannua, 4 Oreg. 
 407. Compare Oldtown, &c. R. R. 261. Compare Rutland, &c. R. R. 
 Co. V. Veazie, 39 Me. 571; Hale v. Co. v. Thrall, 35 Vt. 548; Ossipee, 
 Sanborn, 16 Neb. 1. &c. Manuf. Co. v. Canney, 54 N. H. 
 
 2 Hays V. Pittsburgh, &c. R. R. 295. 
 
 Co., 38 Pa. St. 90, 91 ; Winter v. « Cass v. Pittsburg, &c. Ry. Co , 
 Muscogee R. R. Co., 11 Ga. 438; 80 Pa. St. 31, 38. 
 
§ 158 THE LAW OF PRIVATE COEPOEATIONS. 158 
 
 defendant is a shareholder, and that all conditions precedent 
 to his liability have been performed.^ . 
 
 The fact that the defendant is a shareholder may be proven 
 by the company's stock-books,^ or by evidence of admissions 
 of the defendant, or of acts estopping him from denying his 
 membership. The subscription of the amount of capita! ne- 
 cessary to be subscribed before the making of a call may be 
 proven by the company's stock-books, properly identified ; it 
 is not necessary to prove the validity of the subscriptions by 
 extrinsic evidence.'^ 
 
 The making of a proper call upon the shareholders may be 
 proven in the usual manner of proving the proceedings of 
 the board of directors, — by production of the minutes in 
 connection with evidence showing that they are entries of 
 the facts which happened. 
 
 Proof that notice of a call was given to the shareholders by 
 publication,* or by letter,^ may be made by any evidence, ad- 
 missible according to established principles, from which the 
 fact may be presumed. 
 
 The liability of the shareholders of a corporation to pay in 
 the amount of capital subscribed by them is several and not 
 joint ; ^ and where the same person subscribes more than 
 once upon the subscription lists, it has been held that he 
 may be sued separately upon each subscription.'' 
 
 1 Fry V. Lexington, &o. R. R. Co., 14 Ind. 169 ; Rutland, &c. R. R. Co. 
 
 2 Mete. (Ky.) 314, 323, 324. v. Thrall, 35 Vt. 536. 
 
 ^ Supra, § 75. Washer v. Aliens- « Jones v. Sisson, 6 Gray, 288. 
 ville, &o. Turnpike Co., 81 Ind. 78. « Price v. Grand Rapids, &c. R. R. 
 
 8 Supra, § 75. Co., 18 Ind. 137; Herron v. Vance, 
 
 4 Tomlin v. Tonica, &c. R. R. 17 Ind. 595. 
 Co., 28 111. 429; Unthank v. Henry ' Erie, &c. R. R. Co. v. Patrick, 
 
 County Turnpike Co., 6 Ind. 125; 2 Keyes, 256. 
 Andrews v. Ohio & Miss. R. R. Co., 
 
169 TBAUSPEE OF SHAKES. § 159 
 
 CHAPTER IV. 
 
 TRANSFER OF SHARES. 
 
 § 159. The Effect of a Transfer of Shares. — A transfer of 
 shares in a corporation means the substitution of a new 
 shareholder in place of an outgoing shareholder in the com- 
 pany, and an assumption by the former of all the rights and 
 obligations which attached to the transferring shareholder by 
 reason of his ownership of the shares. This involves a nova- 
 tion of the contract of membership. The transferor ceases 
 to be a shareholder in the company. Unless the contrary be 
 expressly provided in the company's charter, he is thus dis- 
 charged from all further liability to contribute capital,^ and 
 loses all right to share in the company's profits and to par- 
 ticipate in the management of its affairs.^ 
 
 The transferee, on the other hand, becomes a shareholder 
 in place of the retiring member. He impliedly assumes all 
 the obligations which rested upon the former holder as mem- 
 ber of the company, and is liable for calls to the same extent 
 
 1 Isham o. Buckingham, 49 N. Y. 6 Ch. 286; Murray v. Bush, L. R. 
 
 216; Cole v. Ryan, 52 Barb. 169; 6 H. L. 37; 6 Ch. 246; Rivington's 
 
 Cowles V. Cromwell, 25 Barb. 413; Case, L. R. 3 Ch. Div. 10. Com- 
 
 Johnson v. Laflin, 5 Dill. 65 ; Chou- pare Seymour v. Sturgess, 26 N. Y. 
 
 teau Spring Co. v. Harris, 20 Mo. 134; Gafi v. Flesher, 33 Ohio St. 
 
 382; Miller v. Great Republic Ins. 107; and see cases in the following 
 
 Co., 50 Mo. 55; Allen o. Montgom- notes, and infra, §§ 161, 838. 
 ery R. R. Co., 11 Ala. 451 ; Haynes The transferor is discharged from 
 
 V. Palmer, 13 La. Ann. 240; Hud- liability to creditors as well as from 
 
 dersfield Canal Co. v. Buckley, 7 liability to the company itself, unless 
 
 T. R. 36 ; Aylesbury Ry. Co. v. the contrary be expressly provided. 
 
 Mount, 5 Scott's N. R. 127 ; Wes- As to the liability of past members 
 
 ton's Case, L. R. 4 Ch. 20; Gil- to creditors, under statutory provis- 
 
 bert's Case, L. R. 5 Ch. 559; Wilson ions, see infra, §§ 839, 870. 
 B. Birkenhead, &c. Ry. Co., 20 L. J. ^ See cases in note 2, p. 160, and 
 
 Exch. 306; Harrison's Case, L. R. infra, §§ 162, 463. 
 
§160 
 
 THE LAW OF PRIVATE COEPOKATIONS. 
 
 160 
 
 as the former holder before the transfer was made.^ He , 
 also becomes entitled to all the privileges of membership, and 
 may claim all dividends declared while he is a shareholder 
 in the company.^ 
 
 § 160. In those jurisdictions iu which it is held that share- 
 holders are not liable by the implied terms of their contracts 
 of membership, and can be charged only if they have entered 
 into a common law contract to pay for their shares, it would 
 probably also be held that an assignee does not become liable 
 to the company in the absence of an express agreement to that 
 effect.^ 
 
 In Pennsylvania, the rule appears to be established, by re- 
 peated decisions, that a transferor of shares does not become 
 discharged from liability,* and that the transferee assumes no 
 liability to the company for subsequent calls.® 
 
 1 Webster v. Upton, 91 U. S. 65; 
 Pullman v. Upton, 96 U. S. 328; 
 Moore v. Jones, 3 Woods, 53 ; Hart- 
 ford, &c. K. R. Co. u. Boorman, 12 
 Conn. 530; Bend v. Susquehanna 
 Bridge, &c. Co., 6 H. & J. 128; Hall 
 V. U. S. Ins. Co., 5 Gill, 484 ; Mann 
 !,. Currie, 2 Barb. 294; Cole v. Ry- 
 an, 52 Barb. 168; Merrimac Mining 
 Co. V. Bagley, 14 Mich. 501 ; Hud- 
 dersfleld Canal Co. v. Buckley, 7 
 T. R. 36 ; Cape's Ex'rs' Case, 2 De G., 
 M. & G. 562; Holme's Case, 2 De G., 
 M. & G. 113. 
 
 An assignee in bankruptcy of a 
 shareholder does not become liable 
 as a shareholder by force of the as- 
 signment in bankruptcy, nor does 
 the estate become liable; but the 
 assignee may become liable if he 
 acts as a shareholder. American 
 File Co. V. Garrett, 110 U. S. 295. 
 
 2 March v. Eastern R. R. Co., 
 43 N. H. 515, 520 ; and see Good- 
 win V. Hardy, 57 Me. 143; Central 
 R. R., &o. Co. V. Papot, 59 Ga. 
 342; Brundage v. Brundage, 65 
 Barb. 397; Hill v. Newichawanick 
 Co., 48 How. Pr. 427; Kane v. 
 
 Bloodgood, 7 Johns. Ch. 90; Hague 
 V. Dandeson, 2 Exch. 741; Jones v. 
 Terre Haute, &c. R. R. Co., 57 
 N. Y. 196; 29 Barb. 353; Ryan 
 V. Leavenworth, &c. Ry. Co., 21 
 Kans. 365, 403; GifEord v. Thomp- 
 son, 115 Mass. 478; Boston, &c. 
 R. R. Co. V. Commonwealth, 100 
 Mass. 399; Heath v. Erie Ry. Co., 
 8 Blatchf. C. C. 347; and see infra, 
 §162. 
 
 ' Supra, § 129. 
 
 * Messersmith v. Sharon Savings 
 Bank, 96 Pa. St. 440. Compare 
 Merrimac Mining Co. v. Levy, 54 
 Pa. St. 227. 
 
 In Pittsburgh, &c. R. R. Co. v. 
 Clarke, 29 Pa. St. 146, and Grafi o. 
 Pittsburgh, &c. R. R. Co., 31 Pa. 
 St. 489, it was held that an original 
 subscriber to the capital stock of a 
 corporation formed under the gen- 
 eral railroad act of Feb. 19, 1849, 
 of the State of Pennsylvania, was 
 not discharged from liability for 
 the amount remaining unpaid upon 
 his shares by transferring them to 
 another. 
 
 * Palmer v. Ridge Mining Co., 
 
161 TRANSFER OF SHAKES. § 161 
 
 § 161. The Liability for Calls as against the Corporation. — 
 In determining who is liable for unpaid calls upon shares 
 which have been transferred, it is important to distinguish 
 between the rights of the corporation as against the parties 
 to the transfer, and the rights and liabilities of the transferor 
 and transferee as between each other. 
 
 The general rule is, that, as between a company and its 
 shareholdere, a transferor is discharged from all liability on 
 account of calls made after the execution of the transfer, and 
 that the obligation to pay these calls falls upon the trans- 
 feree.^ It is usual to provide in the articles of association or 
 by-laws of a corporation, that no transfer of shares shall be 
 allowed until all unpaid calls shall have been satisfied.^ But 
 even where there is no provision of this kind, a shareholder 
 cannot, by simply transferring his shares, deprive the com- 
 pany of its claim for overdue calls. After a call has been 
 made, the company has a cause of action against the share- 
 holder, and this cause of action cannot be extinguished ex- 
 cept with the company's express consent. In Schenectady, 
 &c. Plank Road Co. v. Thatcher,^ it was held that a share- 
 holder who had transferred his shares to a solvent party 
 was liable upon a call made before the transfer had been 
 executed, although it did not become due and payable until 
 afterwards. 
 
 It seems that a transferee of shares cannot be held liable 
 upon a call made before he became a shareholder in the com- 
 pany.* But a corporation is never obliged to treat shares as 
 paid up until they have in fact been paid up. If shares are 
 ti-ansferred after a call has been made, but before it has been 
 paid, the transferor remains liable to the corporation, and the 
 transferee cannot be chai"ged upon that call. If the trans- 
 feror should subsequently pay the call, the corporation would 
 
 34 Pa. St 288; Franks Oil Co. v. » Schenectady, &c. Plank Road 
 
 McCleary, 63 Pa. St 317; Dela- Co. v. Thatcher, 11 N. T. 102. 
 
 ware, &c. Canal Co. v. Sansom, 1 Compare North American, &o. Ass. 
 
 Biun. 70; Messersmith c. Sharon o. Bentley, 15 Jur. 187. 
 Savings Bank, 96 Pa. St. 440. * See Aylesbury Ry. Co. c. Mount, 
 
 1 Supra, § 159. 4 Man. & Gr. 651 ; Aylesbury Ry. 
 
 » Infra, § 201. Co. r. Thompson, 2 Ry. Cas. 668. 
 vol. I. — 11 
 
§ 162 THE LAW OF PRIVATE COKPOBATIONS. 162 
 
 be obliged to credit the shares with the amount paid, who- 
 ever may have become the holder of the shares. But if the 
 call should remain unsatisfied and the shares not be paid up, 
 the corporation would be entitled to make a new call upon 
 the subsequent holder. These terms may undoubtedly be 
 altered by express agreement with the corporation ; and if 
 the corporation should issue certificates declaring the shares 
 to be paid up, a bona fide purchaser of the certificates would 
 be entitled to become a shareholder, free from any further 
 liability, whether the shares were in fact paid up or not.^ 
 
 The liability for unpaid calls as between the transferor 
 and transferee of the shares depends wholly upon the agree- 
 ment of the pavties.2 
 
 § 162. The Right to Dividends. — The right of a transferee 
 of shares to dividends declared after the transfer was exe- 
 cuted, but payable out of profits earned before that time, 
 must be considered separately, as against the corporation and 
 as against the transferor or vendor of the shares. 
 
 The general rule is, that, as between a corporation and its 
 shareholders, those persons are entitled to dividends who are 
 shareholders at the time the dividends are declared, irre- 
 spective of the time at which they were earned. This rule is 
 based on reasons of convenience amounting almost to a ne- 
 cessity. It would be practically impossible to apportion the 
 earnings of a corporation, whose shares are constantly chan- 
 ging hands, so as to give each holder a proportionate part of 
 the profits earned while he was owner of the shares.* 
 
 It is important that the agents of a company should be 
 able to determine, once for all, to whom they are under obli- 
 gations to pay dividends which have been declared. Ordi- 
 narily, stock-books, showing who are the legal holders of 
 shares, are provided for this purpose. And it is a general 
 rule that a corporation may safely pay dividends to those 
 
 1 Infra, § 816. Co., 84 N. Y. 157; Manning v. 
 
 » See in/m, §§ 175, 176. Quicksilver Mining Co., 24 Hun, 
 
 * Cases supra, § 159; and see 360 ; and cases cited in the following 
 
 Hyatt V. Allen, 56 N. Y. 553; sections. 
 
 Boardman ti. Lake Shore, &c. Ry. 
 
163 TBANSPEE OF SHAKES. § 163 
 
 persons who are the legal holders of shares on the books of 
 the company, at the time at which the dividends are declared, 
 unless the company has notice of prior equities in third 
 persons.^ 
 
 This rule applies whether the dividend be payable after the 
 time at which the transfer is made or before. The persons 
 who were shareholders at the time when the dividend was 
 declared are entitled to receive it, at least as against the 
 company, although they may have transferred the shares to 
 other persons before the time at which payment became due. 
 A corporation cannot require a person, who was a shareholder 
 on the books when a dividend was declared, to produce his 
 certificate before obtaining payment.^ 
 
 It is to be observed, however, that the rule above stated 
 does not determine the right to dividends as between the 
 transferor and transferee of shares.^ A shareholder may un- 
 doubtedly sell his shares with or without accrued dividends ; 
 and there is no reason why he should not also by agreement 
 retain a right to a dividend to be declared thereafter. A 
 right thus obtained would be merely an equitable right, as 
 against the company, like that of an assignee of a chose in 
 action, and the company would therefore not be bound to 
 recognize the assignee's rights unless notified thereof. But 
 if notified of the assignee's rights, the dividend could not 
 safely be paid to any other person.* 
 
 § 163. The Right to transfer Shares at Common Law. — A 
 contract or personal claim cannot, in the nature of things, be 
 transferred like tangible property ; the transfer of a contract 
 right implies a novation, or, in other words, a release of the 
 parties to the original agreement, and the formation of an 
 exactly similar contract substituting a new party in place 
 of one who retires. It is obvious that a transaction of this 
 
 1 See infra, §§ 177, 181; Bris- Hun, 459 ; affirmed 71 N. Y. 593. 
 
 bane v. Delaware, &c. R. E. Co., See infra, § 170. 
 25 Hun, 438; 94 N. Y. 204; Cleve- » See infra, §§ 175, 177. 
 land, &c. R. R. Co. v. Robbing, 35 * See Manning v. Quicksilver 
 
 Ohio St. 483; and cases cited in the Mining Co., 24 Hun, 360; and see 
 
 following sections. infra, § 181. 
 
 * Hill V. Newichawanick Co., 8 
 
§ 163 THE LAW OF PEIVATB COEPOKATIONS. 164 
 
 description cannot take place without the mutual consent of 
 the parties to the first agreement, as well as of those who 
 enter into the new. 
 
 At common law, a novation can be effected only by means 
 of an agreement directly between the parties themselves ; 
 and the obligation of a contract cannot be made transferable 
 at the will of the obligee, even by express stipulation, except, 
 by the custom of merchants, in case of negotiable paper. 
 Hence shares in a copartnership or a joint-stock company 
 cannot be made transferable without statutory authority ; 
 for a transfer of the shares would involve a novation of the 
 contract between the shareholders. 
 
 It should be borne in mind, that a contract is binding at 
 common law only between the parties who entered into it ; 
 and that an unaccepted offer is not binding at all, and may be 
 withdrawn. The members of a partnership may undoubtedly 
 enter into a contract, binding at common law as between 
 themselves, that any member shall be entitled to transfer his 
 shares, and that the transferee shall be received as a member 
 in place of the outgoing member ; but a contract of this kind 
 would only be binding between the parties to it, and would 
 not, at law, confer any rights or impose any obligations upon 
 the transferee, or affect the legal rights of creditors. 
 
 It may perhaps be assumed that a contract between part- 
 ners that their shares shall be transferable includes a continu- 
 ing offer on the part of every partner to receive any transferee 
 as partner upon the same terms as his transferor ; and that 
 the transferee accepts the offer by taking the shares, and 
 thus enters into a contract directly with the other partners. 
 This continuing offer to all purchasers of shares would, liow- 
 ever, be revocable at any time before acceptance. Even if 
 a novation of the contract between the partners could be 
 brought about in this way, it would be impossible, upon any 
 known principle of the common law, to substitute the trans- 
 feree in the place of the outgoing partner with respect to 
 third persons who have previously contracted with the com- 
 pany, except by obtaining their consent; and although all 
 persons contracting with the company with notice of the 
 
165 TEANSPER OF SHAKES. § 163 
 
 terms of the partnership articles might be held to have im- 
 pliedly consented to any subsequent substitution of partners, 
 this consent would create no privity with subsequent trans- 
 ferees of shares until accepted, and would' be revocable until 
 that time. The further objection arises, that the title to real 
 estate held by the partners jointly could not be transferred 
 to new parties by a simple transfer of shares.-^ 
 
 These technical objections apply only to a transfer of the 
 legal as distinguished from the equitable rights of partners. 
 In equity any contract rights (unless of such a nature that 
 they cannot possibly be enjoyed by any party except the 
 party in whose favor they were created) may be assigned, in 
 the absence of a statute. The legal right in this case re- 
 mains in the transferor, but the beneficial interest is enforced 
 in favor of the transferee as a trust. 
 
 The rights of the members of an ordinary business part- 
 nership are of a strictly personal nature ; each partner con- 
 tracts with the others in view of their character and special 
 fitness or ability, and no member is authorized to withdraw 
 in favor of a stranger. Hence shares in a partnership of this 
 kind are not transferable at law or in equity .^ If, however, 
 the members of a common law partnership or company have 
 agreed among themselves that their shares shall be transfer- 
 able at will, only the technical reasons which have been 
 pointed out would prevent a transfer from being recognized 
 and given effect at law ; * and in this case a court of equity 
 would enforce the transfer as a trust, according to the true 
 intent of the parties.* 
 
 1 See Duvergier v. Fellows, 5 not considered here. Such creditors 
 
 Bing. 248, 267 ; Blundell v. Win- would be entitled to hold the out- 
 
 sor, 8 Sim. 601, 612, 613. going partners liable, both at law 
 
 ' This refers to a transfer operat- and in equity, 
 ing as a novation of the partnership * See Lovegrove v. Nelson, 3 
 
 contract, and not to a mere trans- M. & K. 20 ; Page v. Cox, 10 Hare, 
 
 fer of the partner's interest in the 163. 
 assets. A somewhat different view is 
 
 » The rights of creditors who expressed in Lindley on Partner- 
 have dealt with the company with- ship (4th Lond. ed.), 191, 699. 
 oat notice of the agreement that The learned author says: "If part- 
 shares should be transferable, are ners choose to agree that any of 
 
§ 165 THE LAW OF PEIVATB COEPOKATIONS. 166 
 
 § 164. Shaies in Corporations impliedly transferable by Stat- 
 ute. — Corporations and joint stock companies organized un- 
 der statutory provisions are governed by other rules. It is 
 implied in the charter or articles of association of every com- 
 pany of this description, that the shareholders may transfer 
 their shares at will, by simply giving notice of the transfer 
 to the company, unless the contrary be expressly provided.^ 
 In this case, the consent of all the members of the company 
 to the novation effected by the transfer is impliedly given in 
 advance, and the objections vi^hich would apply at common 
 law are obviated by force of the statute. 
 
 The managing agents of a corporation are impliedly au- 
 thorized to make reasonable rules regulating the method of 
 transferring shares. Thus, a by-law requiring a transfer to 
 be entered upon the books of the company is valid.^ But 
 they cannot prohibit transfers entirely ; and any unreasona- 
 ble restriction upon the right of transfer will not be allowed. 
 Thus, a majority of the shareholders of a corporation cannot, 
 without express authority by the charter, pass a by-law, mak- 
 ing the right to transfer shares depend upon the approval of 
 the board of directors, or any other agent of the company.^ 
 
 § 166. Agents of Corporation cannot prevent a Transfer. — 
 A provision in the charter of a corporation authorizing the 
 board of directors " to regulate " transfers, does not give the 
 directors the power to restrain transfers at their discretion, 
 or to prescribe to whom they shall be made ; it merely em- 
 
 them shall be at liberty to intro- does not apply to the strictly legal 
 
 duce any other persons into the rights. 
 
 partnership, there is no reason why ^ Burrall w. Bushwick R. R. Co., 
 they should not; nor why, having 75 N. Y. 219; Cole v. Ryan, 52 
 so agreed, they should not be bound Barb. 168; Bank of Attica v. Man- 
 by the agreement. Persons who en- ufacturers', &c. Bank, 20 N. Y. 
 ter into such an agreement consent 501. 
 
 prospectively and once for all to ^ Farmers', &c. Bank «. Wasson, 
 
 admit into partnership any person 48 Iowa, 339 ; Chouteau Spring Co. 
 
 who is willing to take advantage «. Harris, 20 Mo. 383 ; and see in/ra, 
 
 of their agreement." This is quite § 472. 
 
 true so far as the beneficial or ' Farmers', &c. Bank v. Wasson, 
 
 equitable right goes, but, for tech- 48 Iowa, 339; Sargent v. Franklin 
 
 'nical reasons of the common law, Ins. Co., 8 Pick. 90. 
 
167 TEANSFBR OP SHAKES. § 165 
 
 powers them to prescribe reasonable formalities to be observed 
 in executing transfers. The same rule of construction applies 
 to a provision in a charter that all transfers shall be registered 
 by the board of directors, or that shares shall " be transferable 
 only on the books of the company." A provision of this de- 
 scription does not confer upon the directors or transfer agents 
 of the company a discretionary power to refuse to register a 
 proposed transfer, although they should consider their refusal 
 to be in the interest of the corporation. In Johnson v. Laflin,^ 
 a case arising under the national banking act, Dillon, J., said : 
 " The purpose of requiring a transfer on the books of the bank 
 is, that the bank may know who are the shareholders, and as 
 such entitled to vote, receive dividends, etc., and for the pro- 
 tection of bona fide purchasers of the shares, and of creditors 
 and persons dealing with the bank. That such is the mean- 
 ing of the provision in question, and that it does not restrict 
 the right of the owner to transfer his stock, or clothe the 
 corporation with the power to refuse to register bona fide 
 transfers, is settled beyond all question by numerous decis- 
 ions in the English and the Federal and State courts. . . . 
 No such power over the right of transfer has been given 
 in the national banking act. 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." 
 
 If the charter or articles of association of a company ex- 
 pressly invest the directors with a discretionary power to 
 approve or disapprove of transfers, they are not bound to 
 state their reasons for disallowing a transfer ; and if there is 
 no evidence that the directors acted capriciously or unfairly, 
 a court of equity will not interfere.^ But the directors can- 
 not withhold their consent to a transfer capriciously, and 
 
 » Johnson v. Laflin, 5 Dill. 75- " Taftw. Harrison, 10 Hare, 489; 
 
 78; Chouteau Spring Co. v. Harris, Bermingham v. Sheridan, 33 Bear. 
 
 20 Mo. 382; Moore ». Bank of 660; Shepherd's Case, L. R. 2 Eq. 
 
 Commerce, 52 Mo. 377; Weston's 564 j 2 Ch. 16. 
 Case, L. R. 4 Ch. 20; GUbert's 
 Case, L. R. 5 Ch. 559. 
 
§ 166 THE LAW OP PRIVATE OOBPOEATIONS. 168 
 
 without a sufficient reason ; the power of vetoing a transfer 
 is reposed in the directors for the benefit of the whole asso- 
 ciation, and must be exercised by them fairly and in good 
 faith, in accordance with their duty as trustees.' 
 
 § 166. Transfer after Insolvency. — Rule in the tTnited States. 
 — One of the most important features of a corporation, or 
 statutory joint stock company, is the transferability of its 
 shares. This power practically enables a person investing 
 in a company of this kind to convert his shares into cash, 
 and to withdraw at any time, without dissolving the com- 
 pany or reducing the amount of its capital. 
 
 But the right of transfer is agreed upon by the sharehold- 
 ers in a company solely for the purposes indicated ; it is not 
 intended as a means of enabling particular shareholders to 
 escape from bearing a share in the loss, if the enterprise 
 should prove a failure, and to cast the entire loss upon the 
 other associates. After a corporation has failed, every share- 
 holder may claim that every other shareholder who was a 
 party to the speculation and shared in the chances of success 
 shall bear a proportionate part of the loss ; and a transfer of 
 shares to an insolvent, or any other person unable to perform 
 the obligations which rested upon the transferor, is unauthor- 
 ized, and will not be allowed to prevail.^ 
 
 This is the American rule, and, it is conceived, the correct 
 one. To allow a shareholder to transfer his shares to an in- 
 solvent, for the purpose of escaping the liability to contribute 
 in paying losses, after the company has failed, is not only 
 unjust, but it extends the right of transfer entirely beyond 
 the purposes for which it was conferred. After a corpora- 
 tion has become insolvent, it is the duty of the company to 
 wind up its business, call in the outstanding capital, and sat- 
 isfy creditors. The shares have ceased to be the subject 
 
 * Robinson i'. Chartered Bank, ^ Everhart v. West Chester, &c. 
 
 L. R. 1 Eq. 32; Poole v. Middleton, R. R. Co., 28 Pa. St. 339; Chouteau 
 
 29 Beav. 646 ; Re Stranton Iron, &c. Spring Co. v. Harris, 20 Mo. 382, 
 
 Co., L. R. 16 Eq. 559; Pender v. 390; Johnson v. Laflin, 6 Cent. L. 
 
 Lushington, L. R. 6 Ch. D. 70 ; Pen- J. 131 ; 5 Dill. 76. As to the rights 
 
 ney's Case, L. R. 8 Ch. Ap. 446. of creditors, see injra, § 838. 
 
169 TEANSPEE OP SHARES. § 169 
 
 matter of legitimate traffic. They are a burden to the owner, 
 and a transfer would be merely a subterfuge to avoid liabil- 
 ity. Furthermore, it is the duty of the directors, the common 
 agents of the shareholders, to call in whatever capital may 
 be required to satisfy creditors, and to distribute the losses 
 equally among the shareholders. If the directors neglect 
 to perform this duty, no shareholder should be allowed to 
 profit by it. 
 
 § 167. The Rule in England. — A different rule has, how- 
 ever, been established in England under the Companies Acts. 
 It is settled under these acts, that a shareholder may transfer 
 his shares to an insolvent — a mere man of straw — for a 
 nominal consideration, and with the sole purpose of escaping 
 liability ; and if such transfer was out and out, and not merely 
 colorable, the transferor is discharged from all liability as a 
 contributory, except under certain conditions to creditors as 
 a past member.! 
 
 § 168. Transfers after Dissolution. — The right of a share- 
 holder to transfer his shares necessarily ceases upon a dissolu- 
 tion of the corporation ; for, after a dissolution, the contract of 
 membership is at an end, and no further novation is possible. 
 The interest of a shareholder in the assets of a corporation 
 after its dissolution is a purely equitable claim, and an as- 
 signment of this interest will be recognized only by a court 
 having jurisdiction in equity.^ 
 
 § 169. Formalities must be observed. — The articles of 
 agreement, or laws, by which a corporation is formed, usually 
 provide that shares in the company shall be transferable only 
 in a particular manner, or upon particular conditions. A 
 provision of this description constitutes a part of the agree- 
 
 1 De Pass's Case, 4 De G. & J. Id. 296, note. Compare King's 
 
 544; Costello's Case, 2 De G., F. & Case, L. R. 6 Ch. 196; and see 
 
 J. 302; Slater's Case, 35 Beav. 391; infra, § 839. 
 
 Garstin's Case, 10 W. R. 457: Hat- " James v. Woodruff, 10 Paige, 
 
 ton's Case, 8 Jur. n. s. 380; Wes- 541; affirmed 2 Denio, 574. See 
 
 ton'sCase,L.R.4Ch.20; Harrison's Chappell's Case, L. R. 6 Cli. 902, 
 
 Case, L. R. 6 Ch. 286; Masters's 905; Allin's Case, L. R. 16 Eq. 449, 
 
 Case, L. R. 7 Ch. 292; Hakim's 455. See i»i/rOi § 1011. 
 Case, Id. 296, note; Bishop's Case, 
 
§ 170 THE LAW OF PKIVATB CORPORATIONS. 170 
 
 ment between the shareholders; and the mutual consent 
 necessary to a novation of this agreement cannot be implied 
 unless the prescribed conditions have been fulfilled. A com- 
 plete transfer of shares in a corporation, involving a novation 
 of the contract of membership, can therefore be effected only 
 in the manner prescribed by the charter or articles of associ- 
 ation. ^ It follows, for this reason, that a transfer of shares in 
 a foreign State must be made in accordance with the charter 
 or general laws under which the corporation was formed.^ 
 
 The rule above stated applies only to a transfer of existing 
 shares, or substitution of shareholders, and not to a substitu- 
 tion of parties to a contract for the purchase of shares from 
 the company issuing them, or, in other words, a contract to 
 become a shareholder thereafter. A novation or alteration 
 or rescission of a contract of this latter class may be accom- 
 plished in the same way as in case of any other common law 
 contract.^ 
 
 § 170. Registry of Transfers. — The incorporating statutes, 
 or articles of agreement, or by-laws, of corporations having 
 transferable shares, in almost every instance provide that the 
 shares shall be transferable only by entry upon the books 
 of the company, and that a new certificate shall be issued to 
 the transferee upon surrender of the outstanding certificate. 
 The purpose of a provision of this kind is manifest. It is to 
 provide the company and persons dealing with the company 
 with the means of ascertaining who are its shareholders. If 
 a transfer could be executed without an entry of the transfer 
 upon the company's books, it would be practically impossi- 
 ble to know who are entitled to vote at meetings, to whom 
 
 1 See Northrop v. Newton, &c. v. St. Louis Mercantile Co., 9 Mo. 
 
 Turnpike Co., 3 Conn. 544, per App. 133 ; Fisher v. Essex Bank, 
 
 Hosmer, J.; Union Bank v. Laird, 5 Gray, 373; Corden v. Universal 
 
 2 Wheat. 390, ;jer Story, J. ; Hibble- Gas Light Co., 6 Dowl. & L. 379; 
 
 white V. McMorine, 6 M. & W. State v. Pettineli, 10 Nev. 141. 
 200; Merrill v. Call, 15 Me. 428; = Black w. Zacharie. 3 How. 483. 
 Weyer v. Second Nat. Bank, 57 ' Compares«/)j-a,§ 110; Morton's 
 
 Ind. 198; Bishop v. Globe Co., 135 Case, L. R. 16 Eq. 105; Beresford's 
 
 Mass. 132; Bates v. Boston, &c. Case, 2 McN. & G. 197. 
 R. R. Co., 10 Allen, 251; Stockwell 
 
171 TEANSPEE OF SHAEES. § 170 
 
 dividends can be paid, and who are liable, as shareholders, to 
 the company and to creditors. By requiring transfers to be 
 registered, the company's books become a record showing 
 who are its shareholders at any given time. 
 
 It follows, therefore, that a transfer upon the books is 
 essential to a novation of the contract of membership, 
 where there is a provision of this description. An as- 
 signment of shares, although valid as between assignor and 
 assignee, would not affect their legal relationship to the 
 company until after a transfer was entered upon the books, 
 and the company would be entitled to treat the assignor as 
 the absolute owner of the shares until notified of the rights 
 of the assignee. 
 
 Accordingly, it has been held that an assignee of shares 
 is not liable for calls until after a transfer has been executed 
 in the manner prescribed, although the company have notice 
 of the assignment ; ^ nor is the assignor discharged from 
 liability.^ 
 
 Under similar circumstances, "it was held that the assignee 
 cannot, at law, recover dividends which had been declared 
 by the company ; for the assignee was not legally a share- 
 holder in the company.^ Nor can a merely equitable as- 
 signee vote at corporate meetings ; a regular transfer on 
 the books is essential.* A corporation is entirely justified in 
 paying dividends to the persons standing on its books as 
 
 1 Marlborough Manuf. Co. v. amount of payments which he has 
 Smith, 2 Conn. 579. been compelled to make, see infra, 
 
 2 Dane v. Young, 61 Me. 160 ; §§ 175, 836, note. 
 
 Worrall v. Judson, 5 Barb. 210; ' Northrop ». Newton, &c. Turn- 
 
 Shellington v. Rowland, 53 N. Y. pike Co., 3 Conn. 544; Oxford Turn- 
 
 371; Humble v. Langston, 7 M. pike Co. v. Bunnel, 6 Conn. 552. 
 
 & W. 517 ; London, &o. Ky. Co. v. Compare Cleveland, &c. R. R. Co. 
 
 Fairclough, 2 Man. & Gr. 674; Mo- v. Robbins, 35 Ohio St. 483; Hall 
 
 Euen «. West London Wharves, &c. v. Rose Hill, &c. Road Co., 70 
 
 Co., L. R. 6 Ch. 655; Midland, &o. 111. 673; Chambersbm-g Ins. Co. v. 
 
 Ry. Co. V. Gordon, 16 M. & W. 804; Smith, 11 Pa. St. 120; Northrop v. 
 
 8. c. 5 Eng. Ry. Cas. 76; Sayles v. Curtis, 5 Conn. 246. Infra, § 449. 
 Blane, 19 L. J. Q. B. 19; 8. c. * Infra, § 463. Becher v. Wells 
 
 6 Eng. Ry. Cas. 79. Flouring Mill Co., 1 McCrary C. C. 
 
 As to the right of the assignor 62; People v. Robinson, 64 Cal. 
 
 to recover from the assignee the 373. 
 
§ 171 THE LAW OF PRIVATE COBPOEATIONS. 172 
 
 shareholders, unless it has notice of prior equities in other 
 persons ; and it cannot, in the absence of a provision to the 
 contrary in the charter or by-laws, require the persons who 
 are shareholders by regular entry upon the books to produce 
 their certificates before according them the rights of share- 
 holders.^ 
 
 So, upon the dissolution of a corporation, its assets may 
 safely be distributed among those who appear on the books 
 to be shareholders in the company, unless certificate holders 
 or merely equitable owners of shares have given notice of 
 their rights.^ 
 
 § 171. Assignment without Registry does not discharge Lien 
 of Corporation. — In Union Bank v. Laird,* the Supreme 
 Court of the United States held that a banking corporation, 
 which by the terms of its charter had a lien upon the shares 
 of its shareholders for debts due the bank, could not be de- 
 prived of this lien by an assignment which was not entered 
 upon the books in the manner required by law. Justice 
 Story said : " No person can acquire a legal title to any shares 
 except under a regular transfer, according to the rules of the 
 bank; and if any person takes an equitable assignment, it 
 must be subject to the rights of the bank under the act of in- 
 corporation, of which he is bound to take notice." For simi- 
 lar reasons, it was held in Indiana that a corporation, could 
 not claim a lien upon shares, on account of an indebtedness 
 of a mere assignee, no transfer having been executed on the 
 books, where the charter of the company gave it a lien for 
 debts of its shareholders only. The court said : " Ownership, 
 simply, of a certificate of stock in the bank, did not consti- 
 tute the owner a stockholder. It required a transfer of the 
 stock to him upon the books of the bank." * 
 
 1 Brisbane v. Delaware, &c. R. R. * Helm v. Swiggett, 12 Ind. 194. 
 Co., 25 Hun, 438; Cleveland, &c. But in Planters', &c. Mutual Ins. 
 R. R. Co. V. Robbins, 35 Ohio St. Co. v. Selma Savings Bank, 63 Ala. 
 483. Supra, § 162. 585, it was held that the corporation 
 
 2 Bank of Commerce's Appeal, would have an equitable lien as 
 73 Fa. St. 69. against the equitable holder. 
 
 ' Union Bank v. Laird, 2 Wheat. 
 390. 
 
173 , TRANSFER OP SHARES. § 173 
 
 § 172. How Transfer on Books executed. — An assignment 
 of shares, and power of attorney to execute a transfer on the 
 books, need not be made under seal.^ It seems that a sale or 
 assignment of shares, which is intended by the parties to pass 
 a complete title, is of itself an implied delegation of authority 
 to both the vendor and the vendee to execute a complete 
 transfer npon the books.^ Where shares are transferable only 
 " in person or by attorney " on the books of the company 
 upon surrender of the certificate, the corporation is not bound 
 to allow a transfer to be made, except by the owner in person 
 or his duly authorized attorney .^ But under a provision re- 
 quiring transfers to be executed on the company's books, it 
 is not necessary that the assignor should himself enter the 
 transfer ; the entry upon the books may be made by the 
 officers of the company, on receiving proper evidence of 
 the assignee's right, and a surrender of the certificate issued 
 to the assignor.* 
 
 A mere request upon the officers of a company to enter a 
 transfer is not sufficient to constitute the transferee a share- 
 holder, in the absence of an entry upon the books.^ But if 
 a corporation is bound to receive a transferee, and the agents 
 of the company in violation of their duty refuse or neglect to ' 
 register the transfer, it is equitable to consider that done 
 which ought to be done, and to regard the transfer as com- 
 plete as against all persons except lona fide purchasers for 
 value. It should certainly be so regarded as against the cor- 
 poration.8 
 
 § 173. No new Certificate necessary to complete Transfer. — 
 A transfer of shares upon the books constitutes the transferee 
 a shareholder, although no new certificate is issued. The 
 certificate is merely the evidence of the holder's rights.^ 
 
 'Atkinson ».. Atkinson, 8 Al- * Green Mount, &c. Turnpike Co. 
 
 len, 15. V. Bulla, 45 Ind. 1; Northrop o. 
 
 2 Webster v. Upton, 91 U. S. Curtis, 5 Conn. 246. 
 65; Johnson ». Laflin, 5 Dill. 79, ^ Brown v. Adams, 5 Biss. 181. 
 80; 103 U. S. 800. ' Infra, § 222. 
 
 ' Mechanics' Banking Ass. v. ' First National Bank v. Gifford, 
 
 Mariposa Co., 3 Roberts. (N. Y.) 47 Iowa, 575, 583; Hawley ». Upton, 
 
 895; Purchase v. New York Ex- 102 U. S. 314. 
 change Bank, Id. 164. 
 
§ 175 THE LAW OF PRIVATE CORPORATIONS. 174 
 
 §174. Eqmtable Assignments of Shares. — While the con- 
 sent of both of the parties to a contract is necessary in order 
 to effect a novation, yet either party may, without the consent 
 of the other, assign to a stranger the right of enjoying his 
 claims under the contract ; and the interest of the assignee 
 will be protected in equity as a trust, and may be enforced 
 through the assignor. 
 
 This principle has been applied in case of an assignment of 
 shares in a corporation. A novation of the contract of the 
 shareholders can be effected only in the manner prescribed 
 by the charter or by-laws, and an assignment of shares not 
 executed in the manner required does not alter the relations 
 existing between the assignor and the other members of the 
 company. But the beneficial interest of a shareholder may 
 be transferred by any agreement which is binding between 
 the parties to the assignment. A trust is thus created, and 
 the equitable rights of the beneficiary will be protected and 
 enforced by a court of equity. The right of an assignee of 
 shares to receive payment of dividends declared hy the com- 
 pany is governed by the same principles as the rights of an 
 assignee of any other liquidated claim.^ 
 
 § 175. Sales of Shares. — Rights and Liabilities as between 
 Vendor and Purchaser. — When shares are sold in the ordi- 
 nary manner, the intention of the parties is that they shall be 
 transferred in the condition in which they are at the time 
 of the sale, and that the vendee shall be substituted in all re- 
 spects in place of the vendor. The vendee becomes entitled, 
 as against the vendor, to all subsequent dividends, and un- 
 
 1 See Fitchburg Savings Bank «. 6 Pick. 324; Brigham b. Mead, 10 
 
 Torrey, 134 Mass. 239; Quiner v. Allen, 245; Sabin u. Bank of Wood- 
 
 Marblehead, &c. Ins. Co., 10 Mass. stock, 21 Vt. 353; Conant v. Reed, 
 
 476; Sargent v. Franklin Ins. Co., 8 1 Ohio St. 298; Baltimore, &c. Ry. 
 
 Pick. 90; Planters', &c. Mutual Ins. Co. v. Sewell, 35 Md. 252; Duke.w. 
 
 Co. V. Selma Savings Bank, 63 Ala. Cahawba Nav. Co., 10 Ala. 82; St. 
 
 585; United States t). Cutts, 1 Sum- Louis, &c. Ins. Co. v. Goodfellow, 
 
 ner, 133; £a:;)art(2Dobson, 2Mont., 9 Mo. 149; Tuttle v. Walton, 1 Ga. 
 
 D. & D. 685; Stebbins v. Phenix 43; McCready w. Rumsey, 6 Duer, 
 
 Fire Ins. Co. , 3 Paige, 350; Gilbert v. 574. See Johnson v. Laflin, 5 Dill. 
 
 Manchester Iron, &c. Co., 11 Wend. 79, and cases cited. 
 627; Nesmith v. Washington Bank, 
 
175 TRANSFER OP SHARES. § 176 
 
 dei'takes to pay all subsequent calls. If the outstanding 
 certificate of shares is delivered by the vendor to the vendee, 
 it becomes the duty of the latter to surrender it, and cause 
 a transfer to be executed on the boots. 
 
 A vendor of shares may, by bill in equity, compel the pur- 
 chaser to do all things necessary to be doile on his part to 
 obtain a complete transfer of the shares, and to indemnify 
 the vendor on account of his liability to the corporation and 
 its creditors.! The right of a vendor of shares to be indem- 
 nified by the purchaser on account of any liability to the 
 corporation or to its creditors, may be enforced, either at 
 law, by reason of the implied contract,^ or in equity where 
 the relation of trustee and cestui que trust exists between the 
 parties.^ 
 
 § 176. Liability for unpaid Calls. — Shares are generally 
 bought and sold, like tangible property, by delivery of the 
 certificates issued by the corporation to the holder. These 
 certificates indicate on their face to what extent the shares 
 have been paid up. 
 
 If shares are sold by delivery of the certificates, it is rea- 
 sonable to suppose that they are sold in the condition in 
 which they fippear to be at the time of the sale. If the cer- 
 tificates show that the shares have been paid up only partially, 
 it is a fair implication that they are sold as partly paid up 
 shares, and that the purchaser, and not the seller, is to be re- 
 sponsible for the amount remaining unpaid. It would seem to 
 
 1 Wynne v. Price, 3 De G. & » Wynne v. Price, 3 De G. & 
 Sm. 310; Cheale v. Kenward, 3 De Sm. 310; Kellogg v. Stockwell, 75 
 G. & J. 27; Kellogg v. Stockwell, 111. 68; Johnson v. Underbill, 52 
 75111. 68. N. Y. 203; Cheale v. Kenward, 3 
 
 2 Walker v. Bartlett, 18 C. B. De G. & J. 27; Morris v. Cannan, 
 845,overruling Humble K. Langston, 4 De G., F. & J. 581; Hawkins v. 
 7 M. & W. 517; Chapman v. Shep- Maltby, L. R. 4 Ch. 200; Evans v. 
 herd, L. R. 2 C. P. 228; Grissell ». Wood, L. R. 5 Eq. 9; Shaw v. 
 Bristowe, L. R. 3 C. P. 112; Bow- Fisher, 5 De G., M. & G. 596; 2 
 ring V. Shepherd, L. R. 6 Q. B. De G. & Sm. 11; Cruse v. Paine, 
 309; Kellock u. Enthoven, L. R. L. R. 6 Eq. 641; 4 Ch. 441; James 
 9 Q. B. 241, affirming L. R 8 Q. B. v. May, L. R. 6 H. L. 328; Butler 
 458; Davis v. Haj'cock, L. R. 4 «. Cumpston, L. R. 7 Eq. 16. 
 Exch. 373; Brigbam v. Mead, 10 
 
 Allen, 245. 
 
§ 177 THE LAW OF PRIVATE CORPOEATIONS. 176 
 
 be immaterial in this respect whether a call was made before 
 the sale or not. In the absence of an express agreement, 
 the fair implication appears to be that the purchaser assumes 
 the payment of whatever amount the certificates show to be 
 due upon the shares. If the vendor should afterwards be 
 compelled by the corporation to pay a call made before the 
 sale,^ he would have a claim for indemnity against the 
 purchaser. 
 
 An agreement to sell and transfer shares, where there is 
 no delivery of certificates and no reference to the amount 
 paid upon the shares, would ordinarily be held to imply an 
 agreement to sell and transfer fully paid up shares.^ 
 
 These rules, however, are merely rules of construction. 
 The rights and liabilities of a vendor or a purchaser of shares, 
 as between each other, depend, in each case, upon the terms 
 of their agreement. 
 
 § 177. Rigbt to Dividends as bet'ween Assignor and As- 
 signee. — In determining the right to dividends as between 
 the vendor and purchaser of shares, it is a well settled rule 
 of construction that the vendor retains the right to all divi- 
 dends declared before the sale, and the vendee is entitled 
 to all declared thereafter, unless the contrary be expressly 
 agreed upon by the parties. This is the rule, whether the 
 dividend be payable before or after the sale, and whether 
 the sale be private, or at the stock exchange, or in the open 
 market.^ 
 
 ' See supra, § 161. 741 ; contra, Burroughs v. North 
 
 2 Compare Barnes v. Brown, 80 Carolina K. R. Co., 67 N. C. 376. 
 
 N. Y. 527. In Hill v. Newichawanick Co., 
 
 8 Currie v. White, 45 N. Y. 822; 8 Hun, 459, 463, affirmed 71 N. Y. 
 
 Hyatt V. Allen, 56 N. Y. 553 ; Spear 593, the custom with respect to sales 
 
 V. Hart, 3 Roberts. (N. Y.) 420; at the board of brokers in New 
 
 Lombardo v. Case, 45 Barb. 95; York was stated as follows: "It is 
 
 People V. Assessors, 76 N. Y. 202 ; understood that sales of stock made 
 
 Brundage v. Brundage, 1 T. & C. at the board of brokers in this city 
 
 (N. Y.) 82; Hopper v. Sage, 47 at any time before the day fixed for 
 
 N. Y. Super. Ct. 77; Bright ». Lord, the closing of the books of transfer 
 
 51 Ind. 272; Ohio v. Cleveland, &c. of the corporation or company de- 
 
 R. R. Co., 6 Ohio St. 489; Black d. daring a dividend payable at a 
 
 Homersham, L. R. 4 Exch. Div. future day, carry with them the 
 
 24; Hague v. Dandeson, 2 Exch. dividend so declared, and the price 
 
177 TRANSFER OP SHARES. § 178 
 
 Hill V. Newichawanick Co.^ is an illustration of one branch 
 of this rule. The board of directors of the company in the 
 month of January declared two dividends of four per cent 
 each, the one payable immediately, and the other at a time 
 to be fixed thereafter by the company's agent. The plaintiff 
 was a shareholder in the company in January, and until the 
 month of July, when his shares were sold at private sale to 
 satisfy a debt for which they had been pledged. It was not 
 until the month of November afterwards that the agent of the 
 company declared the second instalment of four per cent to be 
 payable. The court held that this belonged to the original 
 owner of the shares, and not to the purchaser at the sale. 
 
 The other branch of the rule was applied in Hyatt v. 
 Allen.^ The plaintiffs had transferred certain shares to the 
 defendant, under an agreement by which " all profits and 
 dividends of and upon such stock" up to January 1, 1872, 
 should be paid to the plaintiffs. No dividend was declared 
 until April 9, 1872, but it was found that the greater part 
 of the dividend declared on that day had been earned prior 
 to the 1st of January. The court said: " The words 'profits 
 and dividends,' in the contract in question, related to profits 
 or dividends realized by the defendant as a stockholder, or 
 declared by the company, prior to January 1, 1872, and, as 
 no division of profits or declaration of dividends was made, 
 the plaintiffs are not entitled to recover." 
 
 § 178. The Rule not affected by a Failure to transfer the 
 Shares. — The right to dividends upon shares, as between the 
 vendor and vendee of the shares, does not depend upon 
 the registration of the transfer, but solely upon the contract 
 between the parties. The sale of a certificate for shares im- 
 pliedly confers upon the purchaser the right to all dividends 
 declared after the sale, although the purchaser would have 
 no legal (as distinguished from equitable) claim to such 
 
 paid is regulated accordingly. Af- retains and is to collect the divi- 
 
 ter the books are closed, the sales dend." 
 
 are understood to be ex-dividend, i 8 Hun, 459, affirmed 71 N. T. 
 
 and the price is correspondingly 593. 
 
 affected by the fact that the seller " 56 N. Y. 553. 
 
 VOL. I. — 12 
 
']§ 180 THE LAW OP PRIVATE COEPOEATIONS. 178 
 
 dividends, as against the company, unless the transfer was 
 registered as upon the books.^ 
 
 In Currie v. White,^ it was held that a contract for the 
 purchase and sale of shares at a specified price, " payable 
 and deliverable, seller's option, in this year, with interest 
 at the rate of six pei: cent per annum," must be treated as a 
 sale in presentt, the vendor becoming a quasi trustee for the 
 purchaser, and the latter is entitled to all dividends accruing 
 on such shares thereafter. This construction evidently car- 
 ries out the intention of the parties, whether the transaction 
 was in reality a sale in presenti or not. But the seller under 
 a contract of this description would be entitled to dividends 
 declared before the contract was entered into, though not 
 payable until after the shares were to be delivered.^ 
 
 § 179. Rights of Tenant for Life of Shares. — If the use of 
 shares is transferred or bequeathed to one person for life, 
 with remainder to another person, the tenant for life or for 
 years is entitled to all dividends declared during the tenancy 
 for life, in the absence of anything indicating a contrary 
 intention, and the remainderman to all dividends declared 
 thereafter, irrespective of the time during which they were 
 earned.* The presumption is that a legatee of shares is en- 
 titled to all dividends declared after the testator's death.^ 
 
 § 180. Sales of Preferred Shares. — The same rules apply 
 to sales of preferred shares as to sales of common shares. 
 Boardman v. Lake Shore, &c. Ry. Co.^ was a suit against a 
 railway companj' to recover the amount of dividends paya- 
 ble from the year 1857 to 1863 upon certain preferred shares, 
 
 1 Manning v. Quicksilver Min- With regard to stock dividends, 
 ing Co., 24 Hun, 360; Jermain v. see in/ra, § 448. 
 
 Lake Shore, &c. Ry. Co., 91 N. Y. ^ Jones ». Ogle, L. R. 8 Ch. 192 ; 
 
 484. Ibbotson v. Elam, L. R. 1 Eq. 188; 
 
 2 Currie i>. White, 45 N. Y. 822. Browne v. Collins, L. R. 12 Eq. 
 8 Spear W.Hart, 3 Roberts. (N.Y.) 586; but see statute of 33 & 34 
 
 420. Vict. ch. 35. 
 
 '* See Minot v. Paine, 99 Mass. * Boardman v. Lake Shore, &c. 
 
 101; Chicago, &c R. R. Co. w. Page, Ry. Co., 84 N. Y. 157, 178. See 
 
 1 Biss. 461 ; Harris v. San Francisco, also Manning v. Quicksilver Mining 
 
 &c. Co., 41 Cal. 393; and cases cited Co., 24 Hun, 360; Jermain i'. Lake 
 
 infra, §§ 445-447. Shore, &o. Ry. Co., 91 N. Y. 484. 
 
179 TRANSFBE OP SHARES. § 181 
 
 whitjh, according to the terms of the certificate, were en- 
 titled to annual dividends of ten per cent, payable out of net 
 earnings, payment being guaranteed by the company. The 
 plaintiff had purchased his shares in 1862, aud no dividend 
 was declared until 1863 ; but at the time when the suit was 
 begun, the company had earned the whole amount of the 
 lanpaid instalments. The court held that the plaintiff was 
 entitled to recover the entire sum. Miller, J., delivering the 
 opinion, said : " Although usually there is no special contract 
 of the company with the holders of stock to declare dividends, 
 yet that does not alter or change the effect of the contract by 
 which the plaintiffs hold their stock and become entitled to 
 dividends thereon ; for in both cases the dividends follow the 
 stock itself, and belong to the owner. We think it cannot 
 be maintained, upon any sound principle, that the contract 
 for the payment of dividends continues to each stockholder 
 only during the time he holds the stock and accrues only to 
 his benefit during that period, and that a separate and dis- 
 tinct assignment of the dividends was essential in order to 
 ■confer title upon the owner. Such a conclusion is adverse 
 to the general rule which is upheld by authority, that a 
 transfer of stock of a corporation carries with it to the trans- 
 feree its proportionate share of the assets of the company, 
 including dividends which have not been declared, and all 
 the incidents and advantages which appertain to the rights 
 of a shareholder." 
 
 § 181. What is Notice of the Sights of Equitable Owners. — 
 The rights of an equitable owner of shares will be protected 
 by the courts against all persons except bona fide purchasers 
 for value ; and if the agents of the corporation should, with 
 notice of the rights of the equitable owner, assist the legal 
 holder to transfer the shares in violation of the trust, the 
 company would be liable therefor.^ 
 
 1 In Parrott v. Byers, 40 Cal. 614, court of chancery, in order to pro- 
 
 625, it was held that an assignee of tect his rights under the assignment 
 
 shares whose title had not been per- from being impaired by the wrong- 
 
 fected by a transfer on the books ful acts of the trustees, 
 
 was entitled to the assistance of a In Pennsylvania K. R. Co.'s a^p- 
 
§ 181 THE LAW OF PRIVATE COEPOEATIONS. 180 
 
 The law upon this subject was stated clearly by Chief 
 Justice Gray in Loring v. Salisbury Mills Co.^ The learned 
 judge said : " When the holder of a certificate of shares in a 
 corporation is the absolute owner, his assignment and de- 
 livery thereof will pass the title to the assignee ; and the 
 latter, upon surrendering the former certificate, may obtain 
 a new one in his own name. If the holder appears on the 
 face of the old certificate to be the absolute owner, and the 
 corporation has no notice that the fact is otherwise, it may 
 safely issue a new certificate to the assignee, which, if taken 
 in good faith and for a valuable consideration, will vest a 
 perfect title in him.^ But, for the protection of the rights of 
 the lawful owner of the shares, the corporation is bound to 
 use reasonable care in the issue of certificates ; if, by the 
 form of the certificate or otherwise, the corporation has no- 
 tice that the present holder is not the absolute owner, but 
 holds the shares by such a title that he may not have au- 
 thority to transfer them, the corporation is not obliged, with- 
 out evidence of such authority, to issue a certificate to his 
 assignee ; and if, without making any inquiry, it does issue 
 a new certificate, and the rightful owner is injured by its 
 negligent and wrongful act, the corporation is liable to 
 him, without proof of fraud or collusion. All the authori- 
 ties affirm such liability where the corporation has notice that 
 the present holder is a trustee and of the name of his cestui 
 que trust, and issues the new certificate without making 
 any inquiry whether his trust authorizes him to make the 
 transfer." ^ 
 
 peal, 86 Pa. St. 81, it was held that " Citing Salisbury Mills Co. v. 
 
 the circumstance that the signature Townsend, 109 Mass. 115; Pratt v. 
 
 of the assignor of a certificate of Taunton Copper Manuf. Co., 123 
 
 shares was thirteen years old was Mass. 110. 
 
 enough to arouse suspicion, and put * Citing Lowry ». Commercial, 
 
 the transfer agent on inquiry. Low- &c. Bank, Taney's Dec. 310; Bay- 
 
 ry V. Commercial, &c. Bank, Taney's ard v. Farmers', &c. Bank, 52 Pa. 
 
 Dec. 310. Compare Friedlander v. St. 232; Atkinson v. Atkinson, 8 
 
 Slaughter House Co., 31 La. Ann. Allen, 15; Shaw o. Spencer, 100 
 
 523. Mass. 382; Fisher v. Brown, 104 
 
 1 Loring v. Salisbury Mills Co., Mass. 259; Duncan v. Jaudon, 15 
 
 125 Mass. 150. Wall. 165; Shropshire Union Ky., 
 
181 TEANSFEE OF SHAEES. § 184 
 
 § 182. Transfer by Ezecutors. — The fact that shares are 
 held or transferred by a person as executor is notice that 
 there is a will open to inspection upon the public records; and 
 the corporation and persons taking a transfer of the shares are 
 bound, at their peril, to take notice of the contents of the will.* 
 
 § 183. Effect of Notice that Shares are held in Trust. — In 
 Shaw V. Spencer,^ the Supreme Court of Massachusetts held, 
 in a carefully considered opinion, that the mere fact that a 
 certificate of shares indicated upon its face that the holder 
 was a trustee was sufficient to put the corporation and trans- 
 ferees of the shares upon inquiry, although neither the name 
 of the cestui que trust nor the character of the trust was dis- 
 closed. It was decided that a person receiving such a cer- 
 tificate as a pledge to secure a debt of the holder could not 
 hold the shares as against the cestui que trust, if the pledge 
 was in violation of his rights. 
 
 A different conclusion was reached by the Supreme Court 
 of California, in a case involving a similar state of facts ; and 
 the opinion, delivered by Crockett, J., shows a just appre- 
 ciation of the principles which should govern the decision in 
 this class of cases.^ 
 
 § 184. If a certificate for shares states on its face that the 
 holder is a trustee, this would undoubtedly be notice to all 
 persons receiving the certificate that the holder is not the 
 absolute owner of the shares. Any person dealing with the 
 trustee, in respect of the shares, would be bound to use rea- 
 sonable care to ascertain the character of the trust, and to 
 protect the rights of the beneficial owner.* 
 
 &c. Co. V. The Queen, L. R. 7 H. L. 53 Md. 564; Lowry v. Commercial, 
 
 496. See also Magwood c. Raih-oad &c. Bank, Taney's Dec. 310; Albert 
 
 Bank, 5 S. C. 379. v. Savings Bank, 2 Md. 159. Com- 
 
 The corporation may use reason- pare Crocker v. Old Colony R. R. 
 
 able precautions to ascertain the Co., 137 Mass. 417. 
 
 authority of the trustee before per- ^ Shaw b. Spencer, 100 Mass. 382. 
 
 mitting a transfer. Bird e. Chi- * Brewster u. Sime, 42 Cal. 139. 
 
 cago, &c. R. R. Co., 137 Mass. 428. See also Albert v. Savings Bank, 
 
 Compare lasigi v. Chicago, &o. 2 Md. 159 ; 1 Md. Ch. 407. 
 
 R. R. Co., 129 Mass. 46; and see * Badd v. Munroe, 18 Hun, 316; 
 
 infra, § 211. Webb ». Graniteville Manuf. Co., 
 
 I Stewart v. Firemen's Ins. Co., 11 S. Car. 396. 
 
§ 185 THE LAW OF PRIVATE CORPOBATIONS. 182 
 
 But a person dealing with the trustee of an active trust is 
 aot, in all cases, under obligation to look after the interests 
 of the cestui que trust. The rule in cases of this kind is the 
 same as in cases of agency. If an agent or trustee is author- 
 ized by his principal, or cestui que trust, to perform certain 
 acts, this is a representation that he will be liable, to all per- 
 sons dealing with the agent or trustee in good faith, for suoh 
 acts as are apparently within the scope of the agency or 
 trust. Thus, if a trustee or agent is invested with a general 
 authority to sell or pledge the property placed in his care, a 
 purchaser in good faith, within the apparent scope of the trus- 
 tee's or agent's powers, and in the usual course of business, 
 would be safe, though the sale or pledge was in fact unau- 
 thorized and fraudulent. If a trustee or agent has authority 
 to sell at all, the secret purpose of the sale would be wholly 
 immaterial, and the purchaser would be under no obligation 
 to see to the application of the purchase price.^ 
 
 These rules apply to transfers of shares held in trust.^ If 
 a trustee, or executor, or agent, has authority to sell or trans- 
 fer shares under ordinary circumstances, any sale or transfer 
 within the apparent scope of the authority conferred would 
 bind the real owner.^ 
 
 Whether a pledge of certificates for shares by a trustee can 
 be received in safety depends upon circumstances. If the 
 trustee has, by the terms of the trust, a general authority to 
 pledge, a bona fide pledgee would be safe. If the terms of 
 the trust are not disclosed, and the certificate merely shows 
 that the holder is a trustee, a pledgee or purchaser in good 
 faith would be protected only provided it could be shown to 
 be a custom that trustees of shares have authority to sell or 
 pledge the shares, where the terms of the trust are not in- 
 dicated in the certificate.* 
 
 § 185. Assignment by Indorsement of Certificates. — By 
 general mercantile usage, shares in a corporation are assign- 
 
 1 Infra, § 577 et seq. ' Lowry v. Commercial, &o. 
 
 2 Lowry v. Commercial, &c. Bank, Taney's Dec. 310. 
 
 Bank, Taney's Deo. 310 ; Albert v. * Brewster v. Sime, 42 Oal. 139. 
 Savines Bank, 2 Md. 159; 1 Md. 
 Ch. 407. 
 
183 TRANSFER OP SHARES. § 185 
 
 able by indorsement, and delivery of the certificate issued tp 
 the owner as evidence of his rights. It is well settled t,hat« 
 after a certificate for shares has been indorsed by the holder, 
 with an assignment and power of attorney to execute a 
 transfer upon the stock-books, the name of the transfe,ree 
 and attorney being left blank, the certificate thus indorsed 
 may be passed from hand to hand, and the last holde;' will 
 be entitled to fill up the assignment and power of attprney, 
 and complete the transfer by entry upon the books of t)^e 
 company.^ 
 
 In Bank v. Lanier,^ Mr. Justice Davis said : " Stock ce^r- 
 tificates of all kinds have been constructed in a way to invitp 
 the confidence of business men, so that they have become 
 the basis of commercial transactions in all the large citifjs 
 of the country, and are sold in open market, the same as| 
 other securities. Although neither in form or character ne- 
 gotiable paper, they approximate to it as nearly as practica,- 
 ble. If we assume that the certificates in question are not 
 different from those in general use by corporations, and the 
 assumption is a safe one, it is easj'' to see why investments 
 of this character are sought after and relied upon. No bet- 
 ter form coqld be devised to assure the purchaser that he 
 can buy with safety. He is told, under the seal of tl^e cor- 
 poration, that the shareholder is entitled to so much stock, 
 which can be transferred on the books of the corporation ift 
 person or by attorney, when the certificates are surrendered, 
 but not otherwise. This is a notification to all persons in- 
 terested to know, that whoever in good faith buys the sljock, 
 and produces to the corporation the certificate, regularly 
 
 ' Kortright v. Buffalo, &e. Bank, Barden, 49 N. Y. 286 ; Holbrook 
 
 20 Wevid. 91 J affirmed 22 Wend. v. N. J. Zinc Co., 57 N. Y. 616; 
 
 348; Matthews v. Massachusetts Leitchu. Wells, 48 N. Y. 586; First 
 
 Nat. Bank, 1 Holmes, 396 ; Broadway Nat. Bank v. Gifford, 47 Iowa, 575. 
 Bank v. McElrath, 2 Beasley, 24; ? Bank v. Lanier, 11 Wall. 377; 
 
 Bridgeport Bank v. New York, &o. Johnston v. Laflin, 103 U. S. 800. ■ 
 R. R. Co., 30 Conn. 231 ; Winter v. A similar rule has been applied tq 
 
 Belmont Mining Co. , 53 Cal. 428 ; other classes of certificates issued in 
 
 New York, &c. R. R. Co. v. Schuyler, the form of negotiable instrumenl^. 
 
 34 N. Y. 30; McNeil v. Tenth Nat. See Chaffee v. Rutland R. R. Qq., 
 
 Bank, 46 N. Y. 324; Weaver v. 55 Vt. 110. 
 
§ 186 THE LAW OF PEIVATE COEPOKATIONS. 184 
 
 assigned, with power to transfer, is entitled to have the stock 
 transferred to him. And the notification goes further, for 
 it assures the holder that the corporation will not transfer the 
 stock to any one not in possession of the certificate." 
 
 § 186. The Liability of a Corporation to the Holder of a Cer- 
 tificate for Shares. — It is clear, therefore, that the agents of a 
 corporation should not issue certificates for a greater number 
 of shares than the charter empowers them to create ; for in- 
 nocent purchasers, having no means of distinguishing the 
 unauthorized from authorized shares, would be misled by the 
 false representations contained in the certificates purporting 
 to represent them. If the agents of a corporation, acting 
 within the scope of their apparent powers, issue certificates 
 for shares of stock in excess of the amount allowed by the 
 company's charter, and an innocent purchaser is misled by 
 the false certificates, the corporation will be liable to make 
 compensation for any loss which he has suffered thereby.^ 
 
 It is the duty of a corporation which has issued a nego- 
 tiable certificate for shares, and whose shares are transferable 
 upon the books, not to permit a transfer to be executed upon 
 the books, or to issue a new certificate, until the outstanding 
 certificate has been surrendered. Both the corporation and 
 the transferee would be chargeable with notice of the rights 
 of the holder of the outstanding certificate, and if the latter 
 was equitably entitled to the shares, he would have a right 
 to set the transfer aside. If the corporation should recog- 
 nize the transfer as valid, and refuse to accord to the holder 
 of the certificate his legal rights, it would become liable to 
 make good his damages ; and if it should issue a new certifi- 
 cate to the transferee, it would become liable upon both the 
 outstanding certificates to innocent purchasers for value.^ It 
 
 1 New York, &c. R. R. Co. v. &o. R. R. Co., 30 Conn. 231, 
 
 Schuyler, 34 N. Y. 30; Holbrook ». 270; New York, &o. R. R. Co. 
 
 New Jersey Zinc Co., 57 N. Y. v. Schuyler, 34 N. Y. 30; Lee v. 
 
 618; and see in/ra, § 586. Citizens' Nat. Bank, 2 Cin. 298; 
 
 * Bank v. Lanier, 11 Wall. 369; Smith v. American Coal Co., 7 
 
 Factors', &c. Ins. Co. v. Marine Dry Lansing, 317; Cleveland, &c. R. R. 
 
 Docks, &c. Co., 31 La. Ann. 149; Co. v. Tappett, 22 A. L. J. 117; 
 
 Bridgeport Bank v. New York, Strange v. H. &. T. C. R. R. Co., 
 
185 TRANSFER OP SHAKES. § 189 
 
 is not necessary that the certificate should state upon its face 
 that the stock is transferable on the books " upon surrender 
 of this certificate." For it is implied that the certificate 
 must be surrendered before a transfer can be made.-^ 
 
 § 187. Liability of Agents issuing void Certificates. — Upon 
 a similar principle, it follows that, if the agents of a corpora- 
 tion fraudulently issue stock certificates which are void for 
 any reason to an innocent purchaser for value, the latter is 
 entitled to hold such agents personally liable for any damages 
 which he suffers through their fraud. As certificates issued 
 in tlie usual form are intended to pass from hand to hand 
 like negotiable instruments, it is evident that the implied 
 representation that they are valid extends to every purchaser 
 from the first holder ; and if this representation is false and 
 fraudulent, any purchaser who is deceived has a cause of 
 action for his damages.^ 
 
 § 188. Lost or destroyed Certificates. — A by-law requiring 
 the outstanding certificates to be surrendered or proven to 
 be lost before the issue of new ones in their place, is clearly 
 binding upon all the stockholders, their representatives and 
 assignees.^ Where a certificate has been lost, and a bill is 
 brought to obtain a new certificate and a transfer on the 
 books, the decree must provide ample security to the corpo- 
 ration against loss in case the certificates should afterwards 
 come into the hands of a bona fide purchaser.* If a new cer- 
 tificate should be issued by a corporation, in pursuance of a 
 provision in its charter, in place of a certificate supposed to 
 be lost, the corporation would nevertheless remain liable to 
 a bona fide holder of the first certificate.* 
 
 § 189. Purchasers of Certificates. — It has been pointed out, 
 that, if the charter of a corporation requires a transfer of 
 shares to be executed upon the books, the mere assignment 
 of a certificate for shares cannot constitute the assignee a 
 
 53 Tex. 162. Compare National ^ State ». New Orleans, &o. E. R. 
 
 Bank v. Lake Shore, &o. Ry. Co., Co., 30 La. Ann. 308. 
 
 21 Ohio St. 221. ■• Galveston City Co. v. Sibley, 
 
 1 Factors', &o. Ins. Co. o. Marine 58 Texas, 269. 
 
 DryDock,&c. Co.,31La. Ann.149. ^ Cleveland, &c. R. R. Co. v. 
 
 2 See cases infra, § 554. Robbins, 35 Ohio St. 483. 
 
§ 190 THE LAW OF PEIVATB OQRPOKATIONS. 186 
 
 shareholder as against the corporation. An assignment, in 
 such ease, does not operate as a novation of the contract of 
 membership. The assignor is not discharged from his con- 
 tract, nor does the assignee become subject to any liability 
 to the corporation or its creditors, until a complete transfer 
 or novation has been effected. An assignee of shares can 
 claim no interest in the corporation except through the as- 
 signor ; and hence he is not entitled to vote or enjoy any 
 other privileges which belong only to regular members of the 
 company. 
 
 But while a transfer of shares by assignment of the certifi- 
 cate can be effective only between the parties to the assign- 
 ment, yet it has been held, in accordance with the usages of 
 trade, that the indorsement of the certificate invests the as- 
 signee with the legal title to the interest so assigned, as against 
 all persons except the corporation. Certificates for shares are ■ 
 dealt with in the market like negotiable paper or chattels. 
 The certificates are considered as representing the shares 
 themselves, and, when properly indorsed, are passed from 
 hand to hand like tangible property. The ownership of a 
 certificate for shares therefore confers an apparent right to the 
 ownership of the shares which they represent, and of a power 
 to complete the title as aga,inst the company hj executing a 
 transfer upon the books. 
 
 § 190. Rights of bona fide Furoliasers. — Accordingly it was 
 held, in McNeil v. Tenth Na,tional Baiuk,^ that where the 
 owner of certain shares of stock had pledged his certificate, 
 indorsed with an assignment and power of attornej' in blank, 
 and the pledgee wrongfully assigned the certificate to a bona 
 fide purchaser without notice, the title of such purchaser was 
 superior to that of the prior owner. Rapallo, J., said : " Thq 
 holder of such a certificate and power possesses all the exter- 
 nal indicia of title to the stock, and an apparently unlimited 
 power of disposition over it. He does not appear to have, 
 as is said in some of the authorities cited concerning the as- 
 signee of a chose in action, a mere equitable interest, which 
 is said to be notice to all persons dealing with him that they 
 
 1 McNeil v.. Tenth Nat. Bank, 46 N. Y. 325, 
 
187 TKANSPBR OF SHARES. § 190 
 
 take subject to all equities, latent or otherwise, of third par- 
 ties ; but, apparently, the legal title and the means of trans^ 
 ferring such title in the most effectual manner." ' 
 
 Upon the same principle, it has been held that the doctrine of 
 constructive notice by lis pendens has no application to certifi- 
 cates for shares which pass from hand to hand by delivery and 
 indorsement of the certificate, like negotiable instruments.^ 
 
 It has likewise been held, that, if certificates for shares 
 which have been indorsed in blank are wrongfully taken from 
 the possession of the rightful owner, and afterwards come into 
 the hands of a bona fide purchaser, the latter will obtain a 
 valid title to the shares.^ This doctrine is based upon the 
 same reasons as the similar doctrine applicable to negotiable 
 bills and notes indorsed or signed in blank. Instruments of 
 this description are intended to pass from hand to hand, and 
 purchasers have no means of ascertaining the rights of the 
 holder ; they look merely to the genuineness of the signa- 
 tures. It is this circumstance that gives such instruments 
 their character and value. In view of the custom by which 
 certificates indorsed in blank are transferable from hand to 
 hand, like negotiable paper, the owners of such certificates 
 should be required to use the utmost care and diligence in 
 
 1 McNeil V. Tenth Nat. Bank, Rumball v. Metropolitan Bank, L. R 
 
 46 N. Y. 325, 332; Moore v. Metro- 2 Q. B. Div. 194. Compare Crocker 
 
 politan Nat. Bank, 55 N. Y. 41; v. Crocker, 81 N. Y. 507; Weaver 
 
 Dickinson v. Dudley, 17 Hun, 569; v. Barden, 49 N. Y. 286; and see 
 
 Garvin v. Wiswell, 83 111. 215; Otis Shropshire Union Ry., &o. Co. ». 
 
 V. Gardner, 105 111. 436; Lowry v. Regina, L. R. 7 H. L. 496, and 
 
 Commercial, &o. Bank, Taney's L. R. 8 Q. B. 420. 
 
 Dec. 310, 327, 328; Holbrook v. 2 Lgitch v. Wells, 48 N. Y. 586; 
 
 New Jersey Zinc Co., 57 N. Y. 616; Holbrook v. New Jersey Zinc Co., 
 
 Cherry v. Frost, 7 Lea, 1 ; Moodie 57 N. Y. 616. 
 
 V. Seventh Nat. Bank, 11 Phila. * Winter w. Belmont Mining Co., 
 
 368; Burton v. Peterson, 12 Phila. 53 Cal. 428, explaining Sherwood v. 
 
 397; Burton's Appeal, 93 Pa. St. Meadow Valley Mining Co. , 50 Cal. 
 
 214; West Branch, &c. Canal Co.'s 412. But see Barstow v. Savage 
 
 Appeal, 81* Pa. St. 19; Baldwin v. Mining Co., 64 Cal. 388; Sprague 
 
 Canfield, 26 Minn. 43; Strange v. v. Cooheco Manuf. Co., 10 Blatchf . 
 
 H. & T. C. R. R. Co., 53 Tex. 162; 173; Pennsylvania R. R. Co.'s Ap- 
 
 Baker v. Wasson, Id. 150, Goodwin peal, 86 Pa. St. 80. 
 V. Robarts, L. R. 1 App. Cas. 476; 
 
§191 THE LAW OF PRIVATE CORPORATIONS. 188 
 
 their safe keeping ; if a bona fide purchaser should be deceived 
 through any negligence or want of diligence in this respect, 
 justice requires that the owner should suffer the loss.^ Thus, 
 if the holder of certificates indorsed in blank should intrust 
 them to an agent or servant, who proves faithless and fraud- 
 ulently sells them, the owner who selected the custodian of 
 the certificates should be made to suffer, and not an innocent 
 purchaser.^ 
 
 § 191. Indorsement of Certificate held to be a Warranty of 
 Genuineness. — It has been held, that the execution of an as- 
 signment in blank and power of transfer upon the back of a 
 certificate for shares is a warranty of its genuineness, and 
 that this warranty may be enforced by any bona fide purchaser 
 of the certificate who fills up the assignment with his name. 
 A purchaser of a forged certificate indorsed with an assign- 
 ment in blank may therefore hold the person who made the 
 indorsement liable to make good the loss.^ 
 
 It has been held, however, that, while the vendor of a cer- 
 tificate for shares impliedly warrants the genuineness of the 
 certificate sold, or, in other words, that the certificate was 
 in fact issued by the officers of the corporation, he does not 
 impliedly warrant that the certificate represents valid shares. 
 If the certificate was issued to represent shares which the 
 corporation had no power to create, the purchaser would ac- 
 cording to this rule have a remedy against the corporation, 
 but not against the vendor of the certificate on an implied 
 warranty.* 
 
 It is clear, however, that a contract to sell and deliver 
 shares, or a certificate for shaves, in a corporation, is not ful- 
 
 1 Upon this question see Davis v. Wickersham, 63 Pa. St. 87. The 
 
 V. Bank of England, 2 Bing. 393; question of negligence is for the jury, 
 
 Ex parte Swan, 7 C. B. n. s. 400; under the necessary explanations and 
 
 Swan V- North British Australasian instructions of the court. AuU v. 
 
 Co., 7 H. & N. 603; 2 H. & C. Colket, 33 Leg. Int. 44. 
 
 175; Tayler v. Great Indian, &c. * See cases in the preceding 
 
 Ry. Co., 4 De G. & J. 559; John- notes. 
 
 ston V. Renton, L. E. 9 Eq. 181 ; ' Matthews v. Massachusetts Nat. 
 
 Taylor v. Midland Ry. Co. , 28 Bank, 1 Holmes, 396. 
 
 Beav. 287; 8 H. L. C. 751; Biddle * People's Bank v. Kurtz, 99 Pa. 
 
 „. Bayard, 13 Pa. St. 150; MundorfE St. 344. 
 
189 TEANSFEE OP SHARES. § 193 
 
 filled by the delivery of a certificate representing, not shares, 
 but a claim for false representations.^ 
 
 § 192. Whether Power of Attorney is necessary. — The 
 execution of a power of attorney to complete a transfer upon 
 the books is probably not essential where there is an absolute 
 sale of the shares. The sale itself implies a delegation of 
 authority to the vendee, or person entitled to the shares, to 
 make the necessary transfer.^ 
 
 Certificates indorsed in blank are intended to pass from 
 hand to hand, like negotiable paper, and there is generally no 
 real privity between the original holder of the certificate and 
 the last owner, who registers the transfer. Although the 
 transfer upon the books must be made by some one who, 
 in the eye of the law, acts as agent of the transferor, this 
 agency is usually a fiction. The entry of the transfer is a 
 mere form, and the transferor has usually no privity whatever 
 .with the person who actually makes the entry. Under these 
 circumstances, the transferor ought not to suffer by reason of 
 any fraud of the party executing the transfer, or to be charged 
 with his guilty knowledge.^ It has also been held, very 
 justly, that a blank assignment and power of attorney to 
 transfer shares of stock may be filled up after the death of the 
 transferor, and the stock transferred under it.* 
 
 § 193. Rights of an Assignee of a Certificate against Creditors 
 of the Assignor. — The authorities relating to the validity 
 of an assignment of shares by delivery of the certificate, as 
 against creditors of the person in whose name the shares 
 appear on the company's books, are conflicting, but the prin- 
 ciples which should govern cases of this description are very 
 simple. 
 
 It is certain that shares in a corporation are not in reality 
 tangible property ; ^ they are contract rights, or " choses in 
 action " according to legal terminology. Shares are usuallj'^ 
 represented by certificates. Although these certificates are, 
 
 * See Barnes v. Brown, 80 N. Y. * Fraser». Charleston, 11 S. Car. 
 
 527. 486. 
 
 ' Supra, §§ 175-177. ^ This refers to shares in a oon- 
 
 8 Johnson v. Laflin, 5 Dill. 65; tinuing company, not shares in the 
 
 103 U. S. 800. assets after dissolution. 
 
§ 194 THE LAW OF PEIVATB COBPOBATIONS. 190 
 
 in their origin, merely evidences of the holder's rights, they 
 are really something more. They are treated in many re- 
 spects as if they were the shares themselves, and when passed 
 from hand to hand are considered as passing to the assignee 
 all the equitable rights of the holder, and a legal right against 
 the corporation to be admitted as a shareholder on the books. 
 The certificates thus have a value in themselves, and may 
 rightly be treated as property. They are similar in this re- 
 spect to negotiable paper. The debt of the maker of a 
 negotiable note is a mere contract right, or chose in action, 
 belonging to the payee, but the note itself may properly be 
 treated as a chattel or thing in the hands of the holder. So 
 shares in a corporation are mere contract rights, or choses 
 in action, while the certificates are treated as the embodi- 
 ment of these rights, and may be considered as chattels. The 
 assignment of a certificate for shares ought, therefore, to have 
 the same effect as to the creditors of the assignor as the in- 
 dorsement and delivery of a bill or note. 
 
 § 194. The assignment of an ordinary debt or chose in 
 action confers upon the assignee all the equitable rights of 
 the assignor. The general rule is, that the rights of an equi- 
 table assignee will be protected as against all persons except 
 those who have prior equities, or who have equal equities in 
 addition to the legal title. Thus, an assignee in bankruptcy, 
 or under a voluntary assignment for the benefit of creditors, 
 acquires no greater estate than belonged to the bankrupt at 
 the time of the filing of the petition or execution of the deed ; 
 he therefore takes all legal claims and titles vested in the 
 bankrupt, subject to the rights of equitable assignees. 
 
 This rule applies to shares in corporations, as well as other 
 species of property. If a bankrupt has transferred the equi- 
 table ownership of shares before the filing of the petition or 
 execution of the deed, the rights of the equitable assignee 
 will be protected, although the bankrupt remained the legal 
 owner of the shares upon the books of the company .^ 
 
 1 Dickinson v. Central Nat. Bank, Sibley v. Quinsigamond Nat. Bank, 
 129 Mass. 279; Blouin v. Liqui- 133 Mass. 515. 
 dators of Hart, 30 La. Ann. 714; 
 
l91 TEANSFBE OF SHARES, § 196 
 
 § 195. It should be observed, however, that the case of a 
 purchaser of a certificate for shares issued by a corporation in 
 the usual form is much stronger than the case of an assignee 
 of an ordinary chose in action. The purchaser of a certificate 
 for shares acquires, not merely an equitable claim against the 
 company, as assignee of the rights of the original holder, but 
 also a legal right, under the agreement set out in the certifi- 
 cate, to become a shareholder on the company's books upon 
 surrendering the certificate for cancellation.^ 
 
 Certificates for shares are known to be transferable like 
 negotiable paper, and there can be but one certificate out- 
 standing representing the same shares. The possessor of a 
 certificate for shares, properly indorsed, has an almost abso- 
 lute control over the shares. He can confer a valid title, 
 although having no title in himself, by selling the certificates 
 to a bona fide purchaser for value.^ 
 
 It is clear, therefore, that the possession of certificates for 
 shares carries with it the indicia of ownership to a greater ex- 
 tent even than the possession of ordinary tangible property .^ 
 
 § 196. Rights of Attaching Creditors of the Shareholder on 
 the Books against a prior equitable Assignee. — A creditor does 
 not, by levying an attachment or execution upon property, 
 occupy the position of a bona fide purchaser for value. A 
 creditor is entitled only to step into the place of the debtor 
 in respect to the latter's property and contract rights. He is 
 not entitled, upon any principle of justice or common hon- 
 esty, to pay his debt out of property which does not in truth 
 belong to the debtor. A creditor, therefore, ought not to 
 be allowed to levy upon shares after the real, substantial, 
 and equitable ownership has been transferred to "a purchaser 
 for value. It is wholly immaterial, for this purpose, whether 
 the shares have been transferred on the company's books or 
 not. A transfer on the books is required merely to perfect 
 the strictly legal title as against the corporation ; the equita- 
 ble rights of the shareholder pass by a simple assignment. 
 After the assignment the debtor would retain at most a 
 
 1 Infra, § 216. 8 gee Walker v. Detroit, &c. Ry. 
 
 2 Supra, § 189. Co., 47 Mich. 338. 
 
§ 196 THE LAW OF PRIVATE COEPOBATIONS. 192 
 
 naked legal claim as against the corporation, and this is all 
 that the creditor would be entitled to take. 
 
 But even the strictly legal title of the shareholder would 
 cease to be transferable after an assignment of the certificate. 
 By the terms of the certificate, the corporation certifies 
 that the holder is entitled to a specified number of shares, 
 and that these shares are transferable upon a surrender of 
 the certificate bj'' the holder or his assignee. By the contract 
 of the parties, the corporation is liable to the assignee of the 
 certificates to receive him as shareholder upon a compliance 
 with the forms of a transfer, and it is not liable to receive 
 any assignee until the certificate is surrendered. To hold 
 that a creditor of a person appearing as shareholder upon the 
 company's books can obtain a valid title to the shares by 
 levying an attachment or judgment, after the holder has as- 
 signed the certificates to a purchaser for value, would there- 
 fore not only be in violation of the rights of the equitable 
 owner of the shares, but would be in violation of the contract 
 entered into by the corporation.^ 
 
 Statutes authorizing shares in a corporation to be attached 
 usually provide that the attachment may be levied by serving 
 a notice or copy of the writ upon the corporation. Under 
 such a statute, the lieu of an attaching creditor of the holder 
 of shares on the books of the company would not be divested 
 by a subsequent sale of the outstanding certificates, although 
 the purchaser should be an innocent purchaser without no- 
 tice.2 
 
 1 Broadway Bank v. McElrath, 2 Oil Co., 3 Daly, 218; Robinson v. 
 
 Beasley (13 N. J. Eq.), 24; Hunter- National Bank," 95 N. Y. 637; Scott 
 
 don County Bank v. Nassau Bank, v. Pequonnock Nat. Bank, 15 Fed. 
 
 17 N. J. Eq. 496; Beckwith v. Bur- Kep 494. 
 
 rough, 13 R. I. 294 ; Black v. Zacha- If, however, certificates for shares 
 
 rie, 3 How. 483; Smith v. Crescent are merely pledged as security for 
 
 City Live Stock, &c. Co., 30 La. a debt, an attaching creditor of the 
 
 Ann. 1378; Eraser v. Charleston, 11 pledgor would be entitled to claim 
 
 S. Car. 486, 519; Farmers', &c. Bank any surplus remaining after satis- 
 
 V. Wasson, 48 Iowa, 336 ; Cornick v. faction of the debt. Seeligson ». 
 
 Richards, 3 Lea (Tenn.), 1; Mer- Brown, 61 Tex. 114. 
 chants' Nat. Bank v. Richards, 74 ^ Shenandoah Valley R. R. Co. 
 
 Mo. 77; De Comeau v. Guild Farm v. Griffith, 76 Va. 913. 
 
193 TEANSFEK OF SHAEES. § 197 
 
 § 197. Conflicting Authorities. — In Massachusetts, it is 
 held that shares in a corporation whose charter provides that 
 they shall " be transferable only on its books," cannot be ef- 
 fectually assigned by delivery of the certificates indorsed with 
 an assignment and blank power of attorney to transfer, as 
 against a creditor of the vendor who attaches without notice 
 of the sale, even if notice of the assignment be given to the 
 corporation before the attachment.^ But it is also held in 
 the same State, that where the provision requiring a transfer 
 to be executed on the books is not contained in the charter 
 or an enactment of the legislature, but merely in the by-laws 
 adopted by the company, the purchaser would obtain a valid 
 title as against the attaching creditor.^ 
 
 This distinction, in the writer's opinion, is an arbitrary one. 
 Provisions requiring transfers of shares to be executed on the 
 stock-books are evidently intended to accomplish precisely 
 the same purposes, whether such provisions be contained in 
 charters, or general incorporation laws, or by-laws adopted 
 by the corporators after organization. In each case the ob- 
 ject is to regulate and determine the rights and liabilities of 
 the shareholders as between each other, — to provide the 
 
 • Fisher v. Essex Bank, 5 Gray, Pequonnock Nat. Bank, 15 Fed. 
 
 373; Blanchard v. Dedham, &c. Co., Rep. 494. 
 
 12 Gray, 213; Rock v. Nichols, 3 In 1881 the rule laid down by 
 
 Allen, 342; Dickinson v. Central the courts in Massachusetts appears 
 
 Nat. Bank, 129 Mass. 281; Central to have been reaffirmed by legisla- 
 
 Nat. Bank v. Williston, 138 Mass. tive enactment. See Laws of 1881, 
 
 244. See also Application of Mur- chap. 302; Public Sts. c. 105, § 24. 
 phy, 51 Wis. 519; Skowhegan But in 1884 it was enacted that 
 Bank v. Cutler, 49 Me. 315; Peo- "the delivery of a stock certificate 
 pie's Bank v. Gridley, 91 111. 457; of a corporation to a bona Jide pur- 
 Shipmanu. ^tnalns. Co.,29Conn. chaser or pledgee, for value, to- 
 
 245. gether with a written transfer of the 
 The rale as to national banks is same, or a written power of attor- 
 
 otherwise. Sibley ». Qainsigamond ney to sell, assign, and transfer the 
 
 Nat. Bank, 133 Mass. 515; Scott v. same, signed by the owner of the 
 
 Pequonnock Nat. Bank, 15 Fed. Rep. certificate, shall be sufficient deliv- 
 
 494. ery to transfer the title as against 
 
 ^ Sargent v. Essex Marine Ry. all parties." Laws of 1884, chap. 
 
 Co. , 9 Pick. 202 ; Boston Music Hall 229. As to these acts, see Newell v. 
 
 Ass. ». Cory, 129 Mass. 435. As to Williston, 138 Mass. 240. 
 the rule in Connecticut, see Scott ». 
 
 VOL. I. — 13 
 
§ 197 THE LAW OF PRIVATE COBPOBATIONS. 194 
 
 company with the means of ascertaining who are liable for 
 calls, who are entitled to vote, and to whom dividends may 
 be paid. 
 
 Perhaps a provision of this description, when contained in 
 the charter, is also intended in part to provide creditors of 
 the corporation with a record of those whom they may charge 
 with individual liability in case of the insolvency of the com- 
 pany. But it would be absurd to claim that the object of 
 such an enactment is to provide the public with a registry of 
 the owners of shares. The public have no right whatever to 
 examine the books of a corporation in order to ascertain who 
 are its shareholders ; and even if such a right were conferred 
 by statute, it is not likely that creditors would examine the 
 stock-books of the various corporations throughout the coun- 
 try in order to find shares registered in the names of their 
 debtors. 
 
 Nor can it reasonably be contended that the object of a 
 provision of this character is to abolish altogether ordinary 
 assignments by indorsement of the certificates. The prac- 
 tice of buying and selling shares by assignment of the certifi- 
 cates is so firmly established by the universal custom of 
 business men, and is so useful and convenient in itself, that 
 it would take a very clear expression of the legislative will to 
 abolish it. Moreover, this custom has been recognized and 
 approved by legislative enactments in almost every State in 
 the Union. 
 
 There is no inconsistency between a law requiring trans- 
 fers to be executed on the stock-books, and a custom by which 
 assignments of shares are made by indorsement and delivery 
 of the certificates. A transfer of shares means a complete 
 substitution of shareholders, and novation of the contract of 
 membership, as against the corporation, as well as the parties 
 to the transfer ; an assignment means a transfer of the equi- 
 table ownership, together with a right to obtain a complete 
 transfer upon complying with the forms prescribed by the 
 charter. To hold that a provision requiring all transfers to 
 be executed on the books implies a prohibition against as- 
 signments by delivery of the certificates, is to place a strained 
 
195 TKANSFEK OF SHARES. § 199 
 
 and unnecessary construction upon the statute in order to 
 reach a very undesirable result.^ 
 
 § 198. Rights of Assignee against Creditors of the Assignor 
 further considered. — It has sometimes been argued, that, in- 
 asmuch as the legal title to shares can be transferred only on 
 the books, in the manner prescribed by the charter, an as- 
 signment without the proper entry on the books is evidence 
 of a secret trust, and, if unexplained, is to be deemed fraudu- 
 lent and void as against creditors of the assignor, like an 
 assignment of personal property without delivery of posses- 
 sion.2 This argument shows a singular ignorance of the true 
 state of affairs. It has already been pointed out that pos- 
 session of the certificates confers the apparent ownership of 
 shares, and that the stock-books of a corporation are not a 
 record provided for the public. In a centre of business 
 activity like New York, the fact that a person's name ap- 
 pears on the stock-books of a corporation whose shares are 
 in the market, would hardly raise a presumption that he is 
 the real owner. 
 
 § 199. In other cases it has been held that a bona fide 
 purchaser of certificates of shares obtains a valid title to the 
 shares as against an attaching creditor, who has notice of 
 the assignment, but not as against a creditor who attaches 
 without notice.* It is not apparent upon what principle this 
 distinction is made. An attaching creditor is not a pur- 
 
 1 See the lucid opinion of Chan- Co. , 6 Cal. 425 ; Fisher v. Essex 
 cellor Green in Broadway Bank v. Bank, 5 Gray, 373. 
 
 McElrath, 2 Beasley (13 N. J. Eq.), It has been held that the pur- 
 
 24; Black o. Zacharie, 3 How. 483, chaser of a certificate must give 
 
 513 ; Baldwin v. Canfield, 26 Minn, notice of his rights to the corpora- 
 
 43. tion, in order to protect himself from 
 
 2 See Pinkerton v. Manchester, attaching creditors of the vendor. 
 &c. K. R. Co.,42N. H. 424. Com- Williams v. Mechanics' Bank, 5 
 pare Scripture v. Francestown Soap- Blatchf . 59 ; State Insurance Co. 
 stone Co., 50 IST. H. 571. v. Sax, 2 Tenn. Ch. 507. See also 
 
 « Cheever v. Meyer, 52 Vt. 66. First Nat. Bank of Hartford v. 
 See Sabin t>. Bank of Woodstock, Hartford, &c. Ins. Co., 45 Conn. 22; 
 21 Vt. 353; Scripture v. Frances- Colt v. Ives, 31 Conn. 25. Corn- 
 town Soapstone Co., 50 N. H. 571; pare also Friedlander v. Slaughter- 
 Weston V. Bear River, &c. Mining house Co., 31 La. Ann. 523. 
 
§ 200 THE LAW OP PRIVATE COBPOBATIONS. 196 
 
 chaser for value. He has no equitable right to be paid out 
 of property of which the debtor is not the beneficial owner. 
 If, however, the right of an attachment creditor to take shares 
 appearing in the debtor's name upon the company's books 
 is derived from the arbitrary enactment of the legislature, 
 whether in the attachment laws or the charter of the com- 
 pany, upon what principle can the courts deprive a creditor 
 of this right merely because he had notice of an assignment, 
 if no such exception is made by the statute ? 
 
 § 200. In some instances, it has been held that a purchaser 
 at an execution sale of shares appearing in the name of the 
 execution debtor on the books of the company obtains a 
 valid title against an assignee of the certificates, unless the 
 purchaser has notice of the assignment.^ This view proceeds 
 upon a supposed analogy between a purchase of chattels 
 taken on execution against the holder of the legal title, and 
 a purchase of shares of which the debtor appears to be the 
 holder on the company's books. There is, however, an im- 
 portant difference between the two cases. Shares are not in 
 fact chattels, while the certificates are ; the shares are merely 
 contract rights. These rights are, by agreement between the 
 corporation and the shareholder, made assignable by delivery 
 of the certificates. After such assignment, the holder on 
 the books ceases to have the equitable ownership, and does 
 not, properly speaking, retain the legal title either. By the 
 terms of the certificate the purchaser is entitled to be ad- 
 mitted as shareholder by simply going through the form of 
 a transfer, 
 
 A purchaser at an execution sale of shares, where the 
 outstanding certificates have not been taken, must know 
 that the holder of the certificates is, by agreement of the par- 
 ties, the real owner of the shares. He cannot be a bona fide 
 
 1 Farmers' National Gold Bank not obtain priority over the assignee 
 
 V. Wilson, 58 Cal. 600; Naglee v. of the certificates. Newberry v. 
 
 Pacific Wharf Co., 20 Cal. 529; Detroit, &c. Iron Co., 17 Mich. 141 ; 
 
 Weston V. Bear River, &c. Mining Weston v. Bear Eiver, &c. Mining 
 
 Co., 5 Cal. 186. Co., 6 Cal. 425. 
 
 A purchaser with notice would 
 
197 TEANSPBR OP SHAEBS. § 201 
 
 purchaser without notice. The case would be similar to a 
 sale under statutory process of the debt represented by a 
 promissory note, under an execution against the payee, after 
 the note itself had been negotiated by the payee. It could not 
 be contended that the purchaser at the execution sale would 
 obtain title against the indorsee, even though not notified of 
 the latter's rights. 
 
 § 201. When a Corporatioii has a Lien upon the Shares of its 
 Members. — By the common law, a corporation has no lien 
 upon the shares of its members for calls, or for other debts 
 which they owe to the company, unless a lien has been created 
 bj"^ agreement of the parties ; and, in the absence of an ex- 
 press provision limiting the right of transfer, a corporation 
 cannot refuse to permit a transfer of shares to be executed 
 upon the stock-books, merely because the existing holder is 
 indebted to the company.^ But a lien may be reserved by 
 a special agreement with the shareholder,^ and this agree- 
 ment may be shown by evidence of a general usage or course 
 of business on the part of the company.^ 
 
 It seems that the majority in a shareholders' meeting have 
 implied authority to enact a by-law giving the company a 
 lien upon the shares of its members, and to prohibit a trans- 
 fer of shares from being executed upon the books while the 
 holder is indebted to the corporation.* A by-law of this 
 
 1 Williams ». Lowe, 4 Neb. 398 ; County Bank, 26 Conn. 144; People 
 
 Case V. Bank, 100 U. S. 446; Mer- v. Crockett, 9 Cal. 112. 
 chants' Bank v. Shouse, 102 Pa. St. But dividends declared by the 
 
 488; Steamship Dock Co. «. Heron, company may be retained as a set- 
 
 52 Pa. St. 280; DriscoU v. West off. Sargent v. Franklin Ins. Co., 
 
 Bradley, &c. Manuf. Co., 59 N. Y. 8 Pick. 90; Hagar v. Union Nat. 
 
 102; Bank of Holly Springs v. Pin- Bank, 63 Me. 509; Bates v. N. Y. 
 
 son, 58 Miss. 421, 435; Farmers', Ins. Co., 3 Johns. Cas. 238. 
 &c. Bank v. Wasson, 48 Iowa, 340; " Vansands o. Middlesex County 
 
 Carroll v. MuUanphy Savings Bank, Bank, 26 Conn. 144. 
 8 Mo. App. 249, 252; Sargent v. ' Morgan ». Bank of North Amer- 
 
 Fi-anklin Ins. Co., 8 Pick. 90; Massa- ica, 8 S. & R. 73. 
 chusetts Iron Co. v. Hooper, 7 Cush. * In re Bachman, 12 Nat. B. Reg. 
 
 188; Heart o. State Bank, 2 Dev. 223; Tuttle v. Walton, 1 Ga. 43; 
 
 Eq. Ill; Nealer. Janney, 2 Cranch, McDowell v. Bank of Wilmington, 
 
 C. C. 188; Bryon v. Carter, 22 La. 1 Harringt. 27; Lockwood v. Me- 
 
 Ann. 98; Vansands v. Middlesex chanics' Nat. Bank, 9 R. I. 308; 
 
§202 
 
 THE LAW OP PRIVATE COEPOEATIONS. 
 
 198 
 
 description would undoubtedly be valid under a charter ex- 
 pressly providing that the shares of the shareholders shall 
 be transferable upon the books of the company, according 
 to such rules and subject to such limitations as the share- 
 holders may from time to time establish.^ But the by-law 
 must be adopted by vote of the majority, and not merely by 
 the board of directors.^ 
 
 § 202. Where it is provided by the charter of a corpora- 
 tion, or a by-law enacted under it, that debts or calls due to 
 the company by a shareholder shall be discharged before he 
 shall be entitled to transfer his shares, an assignee of the 
 shares cannot compel the company to receive him as a mem- 
 ber, or to enter a transfer upon the books, until the lien of 
 the company has been discharged, ^ Under a provision re- 
 quiring all calls made upon shares to be paid before any 
 transfer shall be deemed valid, a call will be considered as 
 
 Cunningham v. Alabama L. Ins., &c. 
 Co., 4 Ala. 652; Geyer v. Western 
 Ins. Co., 3 Pittsb. 41; Morgan ». 
 Bank of North America, 8 S. & R. 
 73; Child v. Hudson's Bay Co., 2 
 P. Wms. 207; Brent v. Bank of 
 Washington, 10 Pet. 616. Compare 
 Bryon v. Carter, 22 La. Ann. 98; 
 and see .contra, DriscoU v. West 
 Bradley, «ec. Manuf. Co., 59 N. Y. 
 102, 106; Carroll ». Mullanphy Sav- 
 ings Bank, 8 Mo. App. 249, 252; 
 senible, Steamship Dock Co. v. 
 Heron, 52 Pa. St. 280; Nesmith v. 
 Washington Bank, 6 Pick. 324. 
 
 A national bank is prohibited by 
 the provisions of the National Bank- 
 ing Acts from reserving a lien on 
 the shares of its shareholders. Dela- 
 ware, &c. R. R. Co. V. Oxford Iron 
 Co., 38 N. J. Eq. 340 and notes; 
 Bank v. Lanier, 11 Wall. 369 ; Bul- 
 lard V. Bank, 18 Wall. 589 ; Evans- 
 ville Nat. Bank v. Metropolitan Nat. 
 Bank, 2 Biss. 527; Hagar v. Union 
 Nat. Bank, 63 Me. 509; Rosenback 
 V. Salt Springs Nat. Bank, 53 Barb. 
 
 495; Conklin v. Second Nat. Bank, 
 45 N. Y. 655; Lee v. Citizens' Nat. 
 Bank, 2 Cin. 298, 806. See infra, 
 § 384. 
 
 1 Pendergast v. Bank of Stockton, 
 2 Sawy. 108 ; Geyer v. Western Ins. 
 Co., 3 Pittsb. 41; Brent v. Bank of 
 Washington, 10 Pet. 616; St. Louis, 
 &c. Ins. Co. V. Goodfellow, 9 Mo. 
 149 ; Mechanics' Bank v. Merchants' 
 Bank, 45 Mo. 513; Cunningham v. 
 Alabama L. Ins., &c. Co., 4 Ala. 
 652 ; Bank of Holly Springs v. Pin- 
 son, 58 Miss. 421, 435. 
 
 ^ Carroll v. Mullanphy Savings 
 Bank, 8 Mo. App. 249, 252; Bank 
 of Attica V. Manufacturers', &c. 
 Bank, 20 N. Y. 501. 
 
 " Brent v. Bank of Washington, 
 10 Pet. 596 ; Farmers' Bank v. Igle- 
 hart, 6 GiU, 50; Reese v. Bank of 
 Commerce, 14 Md. 271; Sabin v. 
 Bank of Woodstock, 21 Vt. 353; 
 Tuttle V. Walton, 1 Ga. 43; Mc- 
 Cready v. Rumsey, 6 Duer, 574; 
 Rogers v. Huntingdon Bank, 12 S. 
 & R. 77. 
 
199 TRANSFER OB" SHARES. § 204 
 
 having been made from the time that the resolution of the 
 directors making the call has been notified to the sharehold- 
 ers ; and the company cannot be required to accept a trans- 
 fer until every such call has been paid.^ 
 
 § 203. Rights of Purchasers of Shares 'virhere Lien is re- 
 served. — If the lien is provided by the company's charter or 
 articles of association, or by a general law, all persons pur- 
 chasing shares are bound thereby, and must at their peril 
 inquire of the company's officers whether the holder of the 
 shares is indebted to it or not. But if the lien is conferred 
 through a by-law, a purchaser without notice of the by-law 
 is not bound. It is therefore advisable, in this case, to refer 
 to the by-law in the certificates issued by the company, so as 
 to notify all purchasers of shares.^ 
 
 § 204. Character of the Lien. — Its Application. — The char- 
 acter and extent of the lien of a corporation upon the shares of 
 its members necessarily depends in each case upon the terms 
 of the provision in the charter or by-laws conferring it.^ 
 
 It has been held that a note not due is a " debt," within 
 the meaning of a provision in the charter of a corporation 
 creating a lien upon the shares of a shareholder, and restrict- 
 ing the right of transfer until all debts due the company by 
 such shareholder have been paid.* And the word " indebted " 
 
 1 Shaw V. Kowley, 5 Eiig. Ey. The same rule applies whether 
 Cas. 47; Ex parte Tooke, 6 Eng. Ry. the corporation is a domestic or for- 
 Cas. 1. Compare Newry, &o. Ry. eign corporation. A purchaser of 
 Co. V. Edmunds, 5 Eng. Ry. Cas. shares in a foreign corporation must 
 275; s. c. 2 Exch. 118 ; Ambergate, take notice of its charter. Bishop 
 &c. Ry. Co. V. Mitchell, 6 Eng. Ey. v. Globe Co., 135 Mass. 132; infra, 
 Cas. 235; s. c. 4 Exch. 540; Great § 571. 
 
 North of England Ry. Co v. Bid- ' Petersburg Savings, &c. Co. w. 
 
 dulph, 7 M. & W. 243; Regina v. Lumsden, 75 Va. 327; Shenandoah 
 
 Wing, 33 Eng. L. & Eq. 80. Valley R. R. Co. v. Griffith, 76 Va. 
 
 2 Driscoll 17. West Bradley, etc., 913. 
 
 Manuf. Co., 59 N. Y. 109; Bank of * Grant v. Mechanics' Bank, 15 
 
 Holly Springs v. Pinson, 58 Miss. S. & R. 140; Sewall v. Lancaster 
 
 421; Planters', &c. Mutual Ins. Co. Bank, 17 S. & R. 285; Pittsburgh, 
 
 V. Selma Savings Bank, 63 Ala. 585; &c. E. E. Co. v. Clarke, 29 Pa. St. 
 
 Mount Holly Paper Co.'s Appeal, 146; Cunningham v. Alabama L. 
 
 99 Pa. St. 513; Anglo-Californian Ins., &c. Co., 4 Ala. 652; McCready 
 
 Bank v. Grangers' Bank, 63 Cal. 359. v. Eumsey, 6 Duer, 574. 
 
§ 204 THE LAW OP PEIVATB COKPOBATIONS. 200 
 
 has been held to include even the collateral liability of a 
 surety. Thus, in St. Louis Perpetual Insurance Co. v. Good- 
 fellow,^ Scott, J., said : " The word indebted, when employed 
 in a by-law or charter, restraining a stockholder from trans- 
 ferring his stock while indebted to the company, applies as 
 well to debts to become due as to those which are actually 
 due, and as well to those owing by the stockholder as surety 
 or indorser as to those in which he is the principal debtor. 
 The time of negotiating a loan is the period the directors 
 must look out for security ; the fact that a borrower or his 
 indorser is a stockholder may induce them to be less atten- 
 tive in taking security than they would otherwise be." 
 
 But it is clear that a provision that no transfer of shares 
 shall be allowed so long as the holder is in arrears to the 
 company, " or in any form indebted to it," would not prevent 
 a shareholder from transferring his shares merely because 
 they have not been fully paid up, if all calls that have been 
 made upon the shares are paid.^ 
 
 The lien of a company, under a provision that " no share- 
 holder shall be entitled to transfer any share after any call 
 shall have been made in respect thereof, until he shall have 
 paid such call, nor until he shall have paid all calls for the 
 time being due upon every share held by him," is not a gen- 
 eral lien attaching upon all the shares held by a member, but 
 applies merely to shares upon which calls remain unpaid ; 
 and therefore a shareholder may transfer shares upon which 
 nothing is due, though he may be liable for calls upon others.^ 
 A lien of this description attaches upon dividends declared,* 
 
 1 9 Mo. 1.'53; Leggett v. Bank of " Kahn v. Bank of St. Joseph, 70 
 
 Sing Sing, 24 N. Y. 283. Compare, Mo. 262. Compare Pittsburgh, &c. 
 
 however, the dissenting opinion of R. R. Co. v. Clarke, 29 Pa. St. 146 ; 
 
 Allen, J.; Selden, C. J., and Suth- supra, § 143. 
 
 eriand, J., also dissenting. Reese * Hubbersty v. Manchester, &o. 
 
 V. Bank of Commerce, 14 Md. 271. Ry. Co., L. R. 2 Q. B. 472, in the 
 
 The lien of a corporation for debts Exchequer Chamber, 
 due by its shareholders has been held * Bates v. N. Y. Ins. Co., 8 Johns, 
 
 to extend to debts due by a partner- Gas. 238; Hague ». Dandeson, 2 
 
 ship of -which a shareholder was a Exch. 741 ; Hagar v. Union Nat. 
 
 member. Arnold v. Suffolk Bank, Bank, 63 Me. 509. 
 27 Barb. 425. Re Bigelow, 1 Nat. 
 B. R. 667. 
 
201 TEANSFEE OF SHARES. § 206 
 
 and adheres to the proceeds of the shares after a liquidation 
 or dissolution of th« company .^ 
 
 § 205. In German Security Bank v. Jefferson,^ a lien was 
 claimed by a banking corporation, under a provision of its 
 charter that " said bank shall hold a lien on the shares of any 
 stockholder who may be indebted to it, and such shares shall 
 not be assigned nor transferred until the debt shall be paid or 
 discharged." The stockholder who was indebted to the com- 
 pany had become insolvent, and made an assignment for the 
 benefit of creditors. The Supreme Court of Kentucky held 
 that the lien of the bank was " similar to the preference al- 
 lowed to partnership creditors of having their debts paid out 
 of the partnership fund before the private creditors of either 
 of the partners can assert their claims. In the one case, the 
 preference is given by a statutory provision, and in the other 
 it grows out of a well-established and inexorable rule of equity 
 practice. . . . Where such preferences are claimed, the un- 
 secured creditors may demand that the assets shall be mar- 
 shalled, and when the bank shall have applied the whole of 
 the proceeds of the bank stock to the payment of their 
 debts, equity demands that they shall be postponed until the 
 general creditors have been indemnified out of the general 
 and unencumbered estate ; and when this is done, the bal- 
 ance will then be distributed pari passu among all the 
 creditors." ^ 
 
 It has been held that a surety for an indebtedness which 
 a shareholder owes to the corporation is. entitled to be subro- 
 gated in place of the corporation, and to enforce its lien upon 
 the stock, after paying the indebtedness to the company.* 
 
 § 206. When the Lien does not hold. — The agents of a 
 corporation cannot create a lien on the shares of its members 
 for any purpose unauthorized by the company's charter. Thus 
 
 1 In re General Exchange Bank, * Klopp v. Lebanon Bank, 46 Pa. 
 
 L. E. 6 Ch. 818. St. 88. Compare Cross v. Phenix 
 
 * German Security Bank v. Jet- Bank, 1 R. I. 39 ; and see Kuhns v. 
 
 ferson, 10 Bush, 328. Westmoreland Bank, 2 Watts, 136 ; 
 
 » Ibjd.,330, 331, ;)er Lindsay, J.; Perrine «. Fireman's Ins. Co., 22 
 
 and compare Northern Bank of Ken- Ala. 575. 
 tucky V. Keizer, 2 Duv. 169. 
 
§ 207 THE LAW OP PRIVATE C0EP0EATI0N3. 202 
 
 it would not be within the chartered purposes. of an ordinary 
 corporation to take a nominal assignment of a negotiable note 
 made by a shareholder, merely for the purpose of enforcing 
 the company's lien on behalf of the real owner of the note ; 
 and no lien can be claimed by the corporation under these 
 circumstances.^ 
 
 A provision in a charter prohibiting transfers of shares un- 
 til all debts due by the holder to the company have been dis- 
 charged, does not prevent an assignment of the equitable 
 interest in the shares, subject to the rights of the corpora- 
 tion.2 It is clear that, an existing lien cannot be devested by 
 a mere assignment of the shares ; but the corporation cannot, 
 after having notice of the assignment, create a lien at the 
 expense of the assignee by giving further credit to the holder 
 upon the books.^ 
 
 § 207. Waiver of the Lien. — A corporation may waive its 
 lien upon the shares of a stockholder, and the right to refuse 
 a legal transfer of the shares until debts due the company 
 have been discharged. Thus, if a transfer is allowed to be 
 executed on the books, this is sufficient to indicate a waiver 
 of any lien which the company may have upon the shares.* 
 So it has been held that, if a person is induced to advance 
 money upon the security of shares by reason of representa- 
 tions made by the officers of the company that the shares 
 are unencumbered, the company will be estopped from after- 
 wards claiming a lien for loans made to the shareholder.^ 
 
 In National Bank v. Watsontown Bank,^ a shareholder in a 
 company, whose charter contained a provision that no share- 
 
 > White's Bank v. Toledo Fire, Nesmith v. "Washington Bank, 6 
 
 &c. Ins. Co., 12 Ohio St. 601. Pick. 324. 
 
 ^ National Bank v. Watsontown * Hill v. Pine River Bank, 45 
 Bank, 105 U. S. 217; St. Louis, &c. N. H. 300; and see Higgs v. North- 
 Ins. Co. V. Goodfellow, 9 Mo. 149; ern Assam Tea Co., L. B,. 4Ex. 387; 
 Duke V. Cahawba Nav. Co. , 10 Ala. In re Northern Assam Tea Co. , L. R. 
 82. 10 Eq. 458. 
 
 8 Bank of America v. McNeil, 10 ^ Moore v. Bank of Commerce, 
 
 Bush, 54; Conant v. Reed, 1 Ohio 52 Mo. 377. 
 
 St. 298. See Mechanics' Bank u. ° National Bank v. Watsontown 
 
 Seton, 1 Pet. 300; and compare Bank, 105 U. S. 217. Compare 
 
 People V. Crockett, 9 Cal. 112; Bishop i>. Globe Co., 135 Mass. 132. 
 
203 TBANSFEE OP SHARES. § 208 
 
 holder should be allowed to transfer his shares while indebted 
 to the company, had pledged the certificates of his shares as 
 security for a loan. On default of payment, the pledgee sent 
 the certificates with a power of attorney to transfer on the 
 books to the cashier of the company, instructing him to sell 
 the shares. The cashier replied, making no claim of a lien 
 on behalf of the company, and agreed to sell the shares as 
 requested. After some further delay a portion of the shares 
 were sold. The pledgor then became bankrupt, and the di- 
 rectors of the company refused to allow a transfer to be exe- 
 cuted on the books, on the ground that he was indebted to the 
 company. The Supreme Court of the United States held 
 that the cashier's acts constituted a waiver of the lien, and 
 the corporation was estopped from claiming lien upon the 
 shares against the pledgee. 
 
 § 208. Liability of the Corporation to the Owner of Shares for 
 unauthorized Transfers. — The contract of a shareholder in a 
 corporation cannot be rescinded without his consent, either 
 expressed or implied ; hence, if a corporation allows a trans- 
 fer of shares to be executed upon its books without the 
 consent of the owner, the latter will nevertheless remain a 
 shareholder. Thus, in Dewing v. Perdicaries,^ the shares of 
 a shareholder in a corporation of the State of South Carolina 
 had been confiscated during the civil war, by order of the 
 Confederate government, and had passed into the hands of 
 bona fide purchasers. Upon a bill in equity, brought by the 
 original holder against the corporation and the purchasers of 
 the certificates, the Supreme Court of the United States held 
 that the confiscation and sale were illegal and void, that the 
 complainant remained a shareholder, and that the outstanding 
 certificates should be delivered up and cancelled. 
 
 Upon the same principle, it has been held repeatedly that, 
 if shares in" a corporation are transferred upon the books, 
 without the consent of the holder, under a forged assign- 
 
 1 Dewing v. Perdicaries, 96 U. S. Admrs. v. Petersburg K. R. Co., 
 193. See also Chew v. Bank of Chase's Dec. 167. 
 Baltimore, 14 Md. 300; Keppel's 
 
§ 209 THE LAW OF PKIVATB CORPORATIONS. 204 
 
 ment or power of attorney, the real owner is not thereby 
 devested of his rights as shareholder, and is entitled to have 
 his shares replaced upon the books, and to recover any divi- 
 dends which have accrued upon them. If the corporation 
 refuses to recognize the real owner as a shareholder, or re- 
 fuses to deliver him a new certificate of shares when entitled 
 thereto, he may obtain specific relief by bill in equity, or may 
 sue the company for the value of the shares.^ 
 
 § 209. 'When the Corporation may repudiate a Transfer under 
 a forged Power. — The agents of a corporation, in executing 
 a transfer of shares upon the stock-books, act on behalf of 
 all the parties to the transfer. And if a transfer is regis- 
 tered by such agents without the consent of the owner of 
 the shares, the transferee cannot on that ground alone hold 
 the company liable. Thus, where a party who had become 
 a hona fide purchaser of a certificate of shares under a forged 
 assignment obtained from the agents of the company a trans- 
 fer upon the books and a new certificate, it was held that 
 the company was entitled to repudiate the transfer upon dis- 
 covering the forgery, and that the transferee had no claim 
 against the company for damages. The mere fact that the 
 agents of the company had registered the transfer and had 
 issued a new certificate, did not create an estoppel on the part 
 of the company. The company was under no obligation to 
 inquire into the validity of the assignment on behalf of the 
 
 ' Telegraph Co. v. Davenport, 751; Davis v. Bank of England, 2 
 
 97 U. S. 369, and cases cited; Sim- Bing. 393; Swan v. North British, 
 
 mons V. Camp, 71 Ga. 54; Pratt «. &o. Co., 7 H. & N. 603; Hambleton 
 
 Taunton Copper Manuf. Co., 123 ». Central Ohio R. E. Co., 44 Md. 
 
 Mass. 110; Sewall v. Boston Water 551; Sloman o. Bank of England, 
 
 Power Co., 4 Allen, 277; Machinists' 14 Sim. 475. 
 
 Nat. Bank v. Field, 126 Mass. 345; But the real owner may be es- 
 
 Mosesr. Watson, 65 Ga. 196; Baker topped from asserting his rights 
 
 «. Wasson, 53 Texas, 150; Pollock w. through negligence. See Coles v. 
 
 National Bank, 7 N. Y. 274; Wood- Bank of England, 10 Ad. & El. 437. 
 
 house V. Crescent Mat. Ins. Co., 35 Compare, however, Davis v. Bank 
 
 La. Ann. 238 ; Johnston v. Benton, of England, 2 Bing. 393 ; Swan v. 
 
 L. R. 9 Eq. 181, 188; Cottam v. North British, &c. Co., 7 H. & N. 
 
 Eastern Counties Ry. Co., 1 J. &H. 603; Telegraph Co. v. Davenport, 
 
 243; Taylor v. Midland Ry. Co., 97 U. S. 369. 
 29 L. J. Ch. 731; and 8,H. L. C. 
 
205 TBANSFEE OP SHAEBS. § 210 
 
 assignee, nor had the latter been deceived or misled in any 
 manner by the acts of the company's agents ; every element 
 of an estoppel was therefore wanting.^ 
 
 § 210. Transfers under forged Powers. — If the agents of a 
 corporation have erroneously issued a certificate of shares to 
 a person not entitled to it, it may be repudiated by the cor- 
 poration, and cancelled, unless it has come into the hands of 
 a hona fide purchaser.^ 
 
 In Machinists' National Bank v. Field,^ a bill in equity 
 was brought by a corporation to obtain the surrender and 
 cancellation of a certificate of shares which it had been in- 
 duced to issue upon the faith of a forged assignment and 
 power of attorney. The facts of the case were as follows. A 
 certificate of shares, with a forged assignment and power to 
 transfer indorsed upon it, was brought to Field, a broker, for 
 sale. Field employed Hawes & Henshaw to sell the shares 
 at auction. Dean became the purchaser, but did not see the 
 certificates, or know who had been the owner of the shares. 
 Field thereupon took the certificate to the bank, and under 
 the forged power of attorney procured a transfer to be made 
 to Hawes & Henshaw, and a new certificate was issued in 
 their names. Hawes & Henshaw then delivered this certifi- 
 cate to Dean, properly indorsed with an assignment and 
 power to transfer, and Dean completed the purchase by pay- 
 ing the money for the shares, which was turned over to the 
 party for whom they had been sold. Neither Dean, nor 
 Field, nor Hawes & Henshaw had notice of the forgery, and 
 all three were made defendants by the company. The Su- 
 preme Court of Massachusetts held that the company was not 
 entitled to relief. Chief Justice Gray said: "Dean cannot 
 be ordered to return his certificate, because he purchased the 
 
 1 Simm V. Anglo-American Tele- Co., L. R. 5 Ex. Ill; In re Bahia, 
 
 graph Co., L. R. 5 Q. B. D. 188; &c. Ry. Co., L. R. 3 Q. B. 584; 
 
 Brown v. Howard Fire Ins. Co., 42 Knights e. Wiffen, L. R. 5 Q. B. 
 
 Md. 384 ; and see Dewing v. Perdi- 660. 
 
 caries, 96 U. S. 193; Central R. R., » Houston, &c. Ry. Co. v. Van 
 
 &c. Co. V. Ward, 37 Ga. 515; Nut- Alstyne, 56 Texas, 440. 
 ting V. Thomason, 46 Ga. 34. Com- » Machinists' Nat. Bank v. Field, 
 
 pare Hart v. Frontino, &o. Mining 126 Mass. 345. 
 
§ 210 THE LAW OF PRIVATE COEPOEATIONS. 206 
 
 shares in good faith and for valuable consideration, and the 
 certificate issued to him is, as against the bank, conclusive 
 evidence of his title. The bank has no right to compel him, 
 rather than any other stockholder, to give up his certificate, 
 and thereby assume the responsibility of its own illegal act 
 in issuing a greater number of shares than the law authorized. 
 . . . Hawes & Henshaw claim no title to the stock, and are 
 protected, equally with Dean, by the certificates issued to 
 them by the plaintiff. Field also has and claims no title in 
 the stock, and if, by reason of his having presented to the 
 bank the forged power of attorney upon which the new cer- 
 tificates were issued, he is liable to the bank in any form (of 
 which we give no opinion), the bank has an adequate remedy 
 against him alone by action at law." ^ 
 
 This decision was clearly right. The purchase by Dean 
 at the auction sale was a contract to take so many shares in 
 the corporation ; and when he afterwards accepted a certifi- 
 cate of shares issued by the proper oificers of the bank, and 
 paid the price in pursuance of his agreement, he was in 
 every sense a hona fide purchaser for value of this certificate. 
 As such he was entitled to recover damages from the cor- 
 poration for having misled him by the false representation 
 contained in the certificate that the holder was entitled to 
 the shares.^ 
 
 A different case would have been presented if Dean had 
 first purchased the shares upon the faith of the original cer- 
 tificate, and had afterwards procured a transfer to be regis- 
 tered under the forged power. In that case, he would have 
 been misled by the forged assignment, but not by the act of 
 the company or its agents. And, having obtained a new cer- 
 tificate from the company by merely surrendering another to 
 which he had no title, there would be no reason, legal or 
 equitable, why he should be accorded any rights under the 
 
 ^ Machinists' Nat. Bank v. Field, name had been forged. Pratt v. 
 
 126 Mass. 348, 349. Taunton Copper Manuf. Co., 123 
 
 The corporation had been previ- Mass. 110. 
 ously compelled to issue a new cer- ^ New York, &c. R. R. Co. v. 
 
 tificate to the real owner, whose Schuyler, 34 N, Y. 30 ; infra, § 585. 
 
207 TEANSPBR OP SHARES. § 212 
 
 new certificate which he did not possess under the old. 
 The corporation would therefore have been entitled to have 
 the new certificate cancelled, lest it should pass into the 
 hands of a bona fide purchaser for value. 
 
 § 210 a. The Corporation may recover Damages. — In a sub- 
 sequent case, the Supreme Court of Massachusetts held that 
 a corporation, which had been induced to issue a new certifi- 
 cate for shares upon the faith of the surrender of the certifi- 
 cate indorsed with a forged power of attorney to execute a 
 transfer, was entitled to recover its full damages resulting 
 from the transfer and the issue of a new certificate, in an 
 action against the ^person who had presented the forged 
 power and caused the transfer to be executed to himself, 
 although he had acted in good faith and without notice of 
 the forgery.^ 
 
 § 211. The Corporation may require Evidence of the Trans- 
 feree's Right. — A corporation is not required to execute a 
 transfer on demand, without having reasonable evidence of 
 the right of the party demanding the transfer. In Telegraph 
 Company v. Davenport,^ Chief Justice Waite said : " The 
 officers of the company are the custodians of its stock-books, 
 and it is their duty to see that all transfers of shares are 
 property made, either by the stockholders themselves, or per- 
 sons 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 satis- 
 fied of the genuineness of a power of attorney produced, they 
 can require the identity of the party in the one case, and the 
 genuineness of the document in the other, to be satisfactorily 
 established before allowing the transfer to be made." 
 
 § 212. Remedies against a Corporation for a wrongful Refusal 
 to execute a Transfer. — It is not difficult to determine, upon 
 principle, what remedies should be available against a corpo- 
 
 1 Boston, &c. R. R Co. v. Rich- ers', &c. Bank, 52 Pa. St. 232; and 
 
 ardson, 135 Mass. 473. see Loring v. Salisbury Mills, 125 
 
 i* Telegraph Co. v. Davenport, 97 Mass. 138 ; Bird v. Chicago, &c. 
 
 U. S. 371; Chew v. Bank of Baiti- R. R. Co., 137 Mass. 428. 
 more, 14 Md. 300 ; Bayard v. Farm- 
 
§ 213 THE LAW OF PEIVATE COEPOEATIONS. 208 
 
 ration which has wrongfully refused to allow a transfer to 
 be executed on its books, but the rules established by the 
 authorities upon this subject are not always in accordance 
 with principle. 
 
 The right of a shareholder to transfer his shares is founded 
 upon the implied terms of the contract of membership. 
 Where a certificate has been issued to a shareholder in the 
 ordinary form, his right to a transfer is also founded upon 
 tlie contract set forth in the certificate, by the terms of 
 which the corporation agrees to allow a transfer to be ex- 
 ecuted by the holder or his attorney. In either case, the 
 shareholder's right to transfer his shares appears to be a 
 legal right based upon contract. 
 
 An equitable assignee of shares is not a party to the con- 
 tract between the shareholders, and, if no certificate for shares 
 has been delivered to him, is not in any way in privity with 
 the corporation. He has merely an equitable right against 
 the corporation, by reason of his contract with the assignor 
 and the trust created in his favor. If, however, the assignee 
 is the purchaser of a certificate issued in the usual form, he 
 comes in privity with the corporation, by reason of the con- 
 tract contained in this certificate. The certificate is an offer 
 by the corporation to receive any person as a shareholder 
 who shall present the certificate properly indorsed with an 
 assignment and power of attorney to execute a transfer. 
 
 § 213. Remedies of the Shareholder. — A wrongful refusal 
 by the agent of a corporation to allow a transfer of shares 
 does not cancel the shares and put an end to the contract of 
 membership ; and if the shares were sold by the owner in the 
 usual way, by delivery of the certificates, such refusal would 
 not be a ground for rescinding the sale as between the vendor 
 and vendee. An ordinary sale of shares is complete upon a 
 delivery of the certificates properly indorsed, and the vendor 
 is not responsible to the vendee for a wrongful refusal on the 
 part of the agents of the corporation to allow a transfer on 
 the books. It follows, therefore, that a shareholder on the 
 books, after a sale upon the usual terms, would suffer no 
 damages by reason of the refusal of the company to allow a 
 
209 TBANSPEE OP SHABE9. § 214 
 
 transfer on the books. His claim Would at most be fctr 
 nominal damages for a technical breach of contract. 
 
 But this rule would not apply under all circumstances. 
 If, by the terms of the contract between the vendor and 
 vendee, the sale was conditional upon the execution of a 
 complete transfer, or if the vendor agreed with the vendee 
 to procure a transfer of the shares, the vendor would suffer 
 material injury, through the wrongful refusal of the ageilts 
 of the company to allow a transfer. If the sale should fail 
 by reason of this refusal, the vendor's damages would be the 
 loss of the sale, and if he should be held liable in damages by 
 the purchaser, he would have a claim for indemnity against 
 the corporation. 
 
 Another case in which a shareholder would be materially 
 injured by a refusal to allow a transfer is where the shares 
 are not fully paid up, or where the shareholders on the books 
 are individually liable to creditors. To allow the vendor's 
 name to remain on the books under these circumstances 
 may subject him to serious liability. 
 
 § 214. A shareholder's claim against a corporation for a 
 refusal to allow a transfer of his shares to another person 
 appears to be a legal claim for damages, by reason of the 
 company's breach of its express or implied contract. In 
 some instances, however, a suit for damages would not 
 be an adequate remedy ; as, for example, where the share- 
 holder would continue liable to creditors or to the other 
 shareholders, while his name remained upon the company's 
 stock-books. In a case of this kind it would ordinarily be 
 impossible to ascertain the amount of the plaintiff's damages 
 until after the company had become insolvent, and a judg- 
 ment for damages would then be worthless. The proper 
 remedy would therefore be a bill in equity for a specific per- 
 formance of the company's contract to allow a transfer, or a 
 bill to restrain the company's agents from violating the com- 
 plainant's equitable rights as a member of the corporation.* 
 The vendor's right to obtain a specific performance of the 
 
 ^ Compare infra, § 235 et sei}.; 30, 39, 41; and see the cases cited 
 Freon v. Carriage Co., 42 Ohio St. in the following note. 
 
 VOL. I. — 14 
 
§ 215 THE LAW OF PBIVATB CORPORATIONS. 210 
 
 vendee's contract to procure himself to be registered as share- 
 holder in the vendor's place, rests upon similar principles.^ 
 
 § 215. Mandamus not the proper Remedy. — It has been held 
 in some cases that mandamus is a proper remedy to compel 
 the officers of a corporation to execute a transfer ;2 but the 
 weight of authority is the other way.^ 
 
 Mandamus, being a legal remedy, ought certainly not to be 
 granted at the suit of a merely equitable assignee ; and there 
 seems to be no good reason for granting this remedy even 
 where a legal right to a transfer is clear. The writ of man- 
 damus is not issued as a matter of course ; as a rule, it ought 
 not to be granted where there is another sufficient remedy, 
 and where no public interest is involved.* 
 
 In Rex V. Bank of England,^ the legal owner of certain 
 bank stock applied for a mandamus to compel the governors 
 of the bank to permit him to execute a transfer. The appli- 
 cation was refused, Lord Mansfield saying : " When there is no 
 specific remedy the court will grant a mandamus, that jus- 
 tice may be done. But where (as in this case) ah action will 
 
 * Paine v. Hutchinson, L. K. 3 Lamphere v. United Workmen, 47 
 Eq. 257, affirmed L. R. 3 Ch. 388; Mich. 429; Freon v. Carriage Co., 
 Shepherd v. Gillespie, L. R. 5 Eq. 42 Ohio St. 30, 39 ; Ex parte Fire- 
 293, L. R. 3 Ch. 764; Shaw v. man's Ins. Co., 6 Hill, 243; Wilkin- 
 Fisher, 2 De G. & Sm. 11; Mus- son v. Providence Bank, 3 R. I. 22; 
 grave and Hart's Case, L. R. 5 Eq. People i>. Parker Vein Coal Co., 10 
 198 ; Cheale v. Kenward, 3 De G. How. Pr. 543 ; American Asylum v. 
 & J. 27. Compare Sheppard v. Phoenix Bank, 4 Conn. 172; Stack- 
 Murphy, Ir. Rep. 1 Eq. 490; Haw- pole r.Seymour, 127 Mass. 104; Mur- 
 kins V. Maltby, L. R. 3 Ch. 188. ray v. Stevens, 110 Mass. 95; State 
 
 2 People V. Crockett, 9 Cal. 112; v. Guerrero, 12 Nev. 105; Durham 
 
 Green Mount, &c. Turnpike Co. v. Monumental Silver Mining Co., 
 
 1). Bulla, 45 Ind. 1; Townsend v. 9 Oreg. 41; Shipley v. Mechanics' 
 
 Mclver, 2 S. C. 25; Campbell v. Bank, 10 Johns. 484. Compare Rex 
 
 Morgan, 4 Bradw. (HI.) 105; Cooper v. London Ins. Co. 5 B. & Aid. 899; 
 
 V. Dismal Swamp Canal Co., 2 Rex v. Bank of England, 2 Dougl. 
 
 Murph. (N. C.) 195. Compare 524; Regina v. Liverpool, &c. Ry. 
 
 State V. Warren Foundry, &c. Co., Co., 21 L. J. Q. B. 284. 
 32 N. J. L. 439; and see Swan v. * Lamphere u. United Workmen, 
 
 North British, &c. Co., 7 H. & N. 47 Mich. 429; Staokpolei). Seymour, 
 
 603. 127 Mass. 104. 
 
 * Baker v. Marshall, 15 Minn. ' Rex v. Bank of England, 2 
 177 ; State v. Bombauer, 46 Mo. 155; Dougl. 524. 
 
211 TEANSPBB OF SHAKES. § 217 
 
 lie for complete satisfaction equivalent to specific relief, and 
 the right of the party applying is not clear, the court will not 
 interpose the extraordinary remedy of a mandamus. I do not 
 think this a clear case." 
 
 § 216. Remedies of an Assignee of Shares. — There is no 
 contract relation between an assignee of shares and the cor- 
 poration, where no certificates have been issued and no trans- 
 fer has been made upon the books. The assignee's rights 
 are of a purely equitable character, as cestui que trust of the 
 assignor. His only remedy, therefore, is in equity, to protect 
 his equitable rights.^ 
 
 If, however, a certificate issued by the corporation was de- 
 livered to the assignee, he would have a legal claim against the 
 corporation, by reason of its contract, contained in the certifi- 
 cate, to allow a transfer to be executed; and for a breach of this 
 contract an action for damages would be the proper remedy. 
 This would not, however, exclude the right of the assignee to 
 sue in equity for the protection of his equitable rights. 
 
 The wrongful refusal of the agents of the corporation would 
 not cancel the shares or destroy the trust. Every shareholder 
 in the corporation, and every creditor, in case of insolvency, 
 would have a right to object to a cancellation of shares and 
 a rescission of the contract of membership.^ It is clear, there- 
 fore, that the plaintiff, in an action for a refusal to transfer, 
 ought not to recover the value of the shares and be allowed 
 to withdraw, but is entitled only to his actual damages. 
 
 § 217. The Authorities. — An Assignee may recover the Value 
 of the Shares. — The decided cases are wholly at variance with 
 these principles. Upon the supposed authority of the dictum 
 of Lord Mansfield in Rex v. Bank of England, — a dictum 
 apparently applicable only to the legal owner of shares, — it 
 was held, both in the Supreme Court and the Court of Errors 
 of New York, that an assignee of shares might maintain an 
 action of assumpsit against the corporation for refusing to 
 permit the shares to be transferred upon its books ; and that 
 the measure of damages in such case would be the full value 
 
 » See Mechanics' Bank v. Seton, » Supra, §§109, 302-310, 821. 
 1 Pet. 299; and see infra, § 218. 
 
§ 217 THE LAW OF PRIVATE COEPOBATIONS. 212 
 
 of the shares at theix highest price at any time between the 
 refusal and the commencement of the suit.^ This decision 
 has been generally followed, except with regard to the meas- 
 ure of damages ; and it may be stated as a rule, that, where 
 a corporation refuses to allow a transfer of shares upon its 
 books, the assignee may treat this as a conversion of his 
 shares, and sue the company for their value.^ 
 
 The objections to this doctrine have already been indicated. 
 An equitable assignee of shares, no novation having taken 
 place, is not in privity with the corporation, nor is the assignor 
 discharged from his contract. A wrongful refusal to allow a 
 transfer may be a violation of the legal rights of the assignor, 
 who is a party to the charter contract, but it is difficult to per- 
 ceive upon what principle the assignee can maintain an action 
 of assumpsit. In Rex v. Bank of England,^ the application 
 for a mandamus was made by the legal owner of the shares, 
 and the dictum of Lord Mansfield seems to indicate that an 
 action at law might have been brought by the assignor for the 
 refusal of the company to allow a transfer. The assignor 
 would, in such case, have continued to be a shareholder, and 
 the damages would have consisted of compensation merely 
 for whatever loss he may have suffered.* There is no objec- 
 tion to allowing the assignee of certificates to obtain similar 
 
 1 Commercial Bank v. Kortright, 461; West Branch, &c. Canal Co.'s 
 
 22 Wend. 348; 20 Wend. 91. See, Appeal, 81* Pa. St. 19; German 
 
 however, the strong dissenting opin- Union Building, &c. Ass. v. Send- 
 
 ion of Chancellor Walworth, 22 meyer, 50 Pa. St. 67; North America 
 
 Wend. 350-360. Building Ass. v. Sutton, 35 Pa. St. 
 
 ^ Baltimore, &c. Ry. Co. v. Sew- 463; Protection Life Ins. Co. v. Os- 
 ell, 35 Md. 238; Scripture v. Fran- good, 93 111. 69. Compare National 
 cestown Soapstone Co., 50 N. H. Bank of New London u. Lake Shore, 
 571 ; De Comeau v. Guild Farm Oil &c. Ry. Co., 21 Ohio St. 221 ; Town- 
 Co., 3 Daly, 218; Arnold v. Suffolk send v. Mclver, 2 S. C. 25; Mor- 
 Bank, 27 Barb. 424; Bankof Amer- rison v. Gold Mt. Mining Co., 52 
 ica ». McNeil, 10 Bush, 54 ; Pinker- Cal. 307; Hawkins v. Mansfield 
 ton V. Manchester, 8h5. R. R. Co., 42 Mining Co., Id. 513. 
 N. H. 424; Sargent v. Franklin Ins. » 2 Dougl. 524-526. 
 Co., 8 Pick. 90; Wymanw. American * See per Chancellor Walworth 
 Powder Co., 8 Cush. 168; Helm v. in Commercial Bank v. Kortright, 
 Swiggett, 12 Ind. 194; Merchants' 22 Wend. 355, 356. 
 Nat. Bank v. Richards, 6 Mo. App. 
 
213 TBAKSFBB Of SHARES. § 218 
 
 relief.^ But according to the decision in Kortright v. Com- 
 mercial Bank, and similar cases, the refusal of the agents of a 
 corporation to allow a transfer to be executed seems to oper- 
 ate as a cancellation of the shares, and the equitable assignee 
 becomes entitled to withdraw from the capital of the company 
 the full amount of the shares. The agents of a corporation 
 are thus enabled to accomplish indirectly what they certainly 
 cannot do directly ; namely, to diminish the capital stock of 
 the company, by allowing individual members to withdraw 
 with their ratable shares of the company's assets.^ 
 
 § 218. Jurisdiction in Equity to enforce Sales and Transfers 
 of Shares. — Several distinctions must be observed in deter- 
 mining the jurisdiction of a court of equity to enforce the 
 right of a purchaser or equitable owner of shares. 
 
 It is first to be observed, that a contract to buy and sell 
 shares, or any other kind of property, cannot be specifically 
 enforced, if an action at law for damages would give ade- 
 quate relief. This rule applies equally to an agreement made 
 by a shareholder to sell and transfer his shares, and an agree- 
 ment by a corporation to issue shares to an applicant, or to 
 receive him as a shareholder thereafter.^ In either case, the 
 purchaser has a legal remedy against the vendor upon his 
 contract to sell and deliver.* But a court of equity will grant 
 
 1 Supra, §'216. recover back the amount paid. His 
 
 2 See supra, § 109 et seg. , and also only remedy is an action on the case 
 Burrall v. Bushwick R. R. Co., 75 for the value of the shares. Thorp 
 N. Y. 216. V. WoodhuU, 1 Sandf . Ch. 411 ; Bat- 
 
 An assignee of shares who has tershall v. Davis, 31 Barb. 323 ; Ar- 
 
 elected to treat the refusal of the cor- nold v. Suffolk Bank, 27 Barb. 424. 
 poration to allow a transfer as a con- ' See supra, § 61. 
 version of the shares cannot there- * See Ross v. Union Pacific Ry. 
 
 after sue for dividends. Hughes Co., 1 Woolw. 26, 32; Cud ». Rut- 
 
 V. Vermont Copper Mining Co., 72 ter, 1 P. Wms. 570; s. c. 1 White & 
 
 N. Y. 207. Tudor's Leading Cases, 786; Mason 
 
 The wrongful refusal of the agents v. Armitage, 13 Ves.. 37. See also 
 
 ot a corporation to issue to a share- Foil's Appeal, 91 Pa. St. 434; Noyes 
 
 holder a certificate of shares, and to e. Marsh, 123 Mass. 287 ; Strasburg 
 
 permit him to execute a transfer on R. R. Co. v. Echternacht, 21 Pa. St. 
 
 the books, is not a ground for rescind- 220; Ferguson v. Paschall, 11 Mo. 
 
 ing a bond and mortgage given to the 267. Compare the cases cited in the 
 
 company for the shares, nor can he following note. 
 
§ 220 THE LAW OF PRIVATE COKPOBATIONS. 214 
 
 specific performance of a contract to sell and deliver prop- 
 erty, if the legal remedy would not be adequate. If a cor- 
 poration or a shareholder has entered into a contract to sell 
 and deliver shares, and these shares are of such a character 
 that similar shares cannot be procured elsewhere, a court of 
 equity will ordinarily enforce a specific performance of the 
 contract at the suit of the purchaser.^ 
 
 § 219. Equity will protect the Rights of an equitable Owner; 
 — A bill in equity brought by an equitable owner of shares 
 against the holder of the legal title must be distinguished from 
 a bill for the specific performance of a contract. If shares are 
 held by a corporation or individual upon an express or im- 
 plied trust for another, a court of equity will always furnish 
 a remedy to the cestui que trust against the trustee, to protect 
 his equitable right and to obtain a transfer of the legal title. 
 Under these circumstances, the jurisdiction in equity does not 
 depend upon special circumstances, as where specific perform- 
 ance of a legal obligation is sought, but upon the ground that 
 the plaintiffs rights are cognizable only in equity.^ 
 
 § 220. Remedy of an equitable Assignee against the Corpora- 
 tion. — There is no contract between a mere assignee of a 
 certificate of shares and the corporation, except perhaps the 
 contract contained in the certificate by which the corporation 
 
 ' Ashe V. Johnson, 2 Jones Eq. A decree of specific performance is 
 
 (N. C.) 155; Austin, &c. R. R. Co. «. of course improper if performance is 
 
 Gillaspie, 1 Jones Eq. (N. C.) 261; impossible, as where the defendant 
 
 White V. Schuyler, 1 Abb. Pr. n. s. has no shares to deliver. Ferguson 
 
 300; s.c. 31 How. Pr. 38; Gardener v. Wilson, L. R. 2 Ch. App. 87; 
 
 V. PuUen, 2 Vern. 394; Doloret v. Columbine v. Chichester, 2 Phil. 27. 
 
 Rothschild, 1 Sim. & St. 598; Dun- Compare Poole v. Middleton, 29 
 
 cuft V. Albrecht, 12 Sim. 198, 199; Beav. 646. 
 
 Adderley t?. Dixon, 1 Sim. & St. 610; ^ Cowles v. Whitman, 10 Conn. 
 
 Poole V. Middleton, 29 Beav. 646; 121; Johnson v. Brooks, 46 N. Y. 
 
 Parish v. Parish, 32 Beav. 207 ; Beck- Super. Ct. 13, affirmed 93 N. Y. 337 ; 
 
 ittu. Bilbrough, 8Hare, 188;Fruef. Weaver v. Barden, 49 N. Y. 286; 
 
 Houghton, 4 Leg. Adv. 108; Treas- Draper v. Stone, 71 Me. 175; Todd 
 
 urer ». Commercial Mining Co., 23 ». Taft, 7 AUen, 371; Forrest v. 
 
 Cal. 390. Compare Wonson v. Fen- Elwes, 4 Ves. 497. Compare Won- 
 
 no, 129 Mass. 405; Leach v. Fobes, son v. Fenno, 129 Mass. 405; Fowle 
 
 11 Gray, 506; Baldwins. Common- v. Ward, 113 Mass. 548. See also 
 
 wealth, 11 Bush (Ky.), 417. cases supra, §§ 175, 181. 
 
215 TEANSFBR OF SHARES. § 220 
 
 agrees to allow a transfer on the books to be executed by any 
 person who shall surrender the certificate, duly indorsed. In 
 the absence of this contract, the assignee would, upon princi- 
 ple, have no legal rights against the corporation, and his only 
 remedy would be in equity. Accordingly, in Mechanics' Bank 
 V. Seton,^ a bill in equity, brought by a cestui que trust of 
 shares to compel the corporation to allow a transfer on the 
 books to be executed by the trustee to the complainant, was 
 sustained. 
 
 It has often been held that a legal owner of shares may 
 maintain a bill in equity to compel the corporation to issue a 
 certificate, and accord to him the rights of membership, where 
 an attempt has been made to deprive him of his shares through 
 an unauthorized transfer.^ There seems to be even greater 
 propriety in sustaining a proceeding of this description at the 
 suit of a merely equitable assignee of shares. It should be 
 observed, however, that inasmuch as it has been decided that 
 an assignee of a certificate for shares has a right to proceed 
 at law against the corporation, and recover the value of his 
 shares, upon a refusal of the corporation to allow a transfer on 
 the books, it cannot now be denied that he has in fact a remedy 
 at law, although perhaps not in all cases an adequate one.^ 
 
 1 Mechanics' Bank v. Seton, 1 laws of the bank, such transfer could 
 
 Pet. 299, 304. Mr. Justice Thomp- only be made on the books of the 
 
 son said: "If this had been a bill, bank; and it was by their consent 
 
 filed against the bank, to compel a alone that this could be done. Al- 
 
 specific performance of any contract though it might be the duty of the 
 
 entered into with it for the sale of bank to permit such transfer, it would 
 
 stock, it might then be urged that be difficult to sustain an action at 
 
 compensation for a breach of the law for refusing to open its books 
 
 contractmight be made in damages, and permit a transfer." Compare 
 
 and that the remedy was properly to Iron R. R. Co. v. Fink, 41 Ohio St. 
 
 be sought in a court of law. But 321. 
 
 the bill does not set up any contract ^ See cases supra, § 208. 
 
 between the complainants and the * See Cushman w. Thayer Man uf., 
 
 bank; nor does it seek a specific &c. Co., 76 N. Y. 365, affirming 7 
 
 performance of any express contract Daly, 330; lasigi ». Chicago, &o. 
 
 whatever, entered into with the bank. R. R. Co.,129 Mass. 46; American 
 
 It only asks that the bank may be Asylum v. Phoenix Bank, 4 Conn, 
 
 compelled to open its transfer-book, 172. Compare Walker v. Detroit, 
 
 and permit Adam Lynn to transfer &c. Ry. Co., 47 Mich. 338. 
 the stock. By the charter and by- 
 
§ 222 THE LAW OF PRIVATE COEPOEATIONS. 216 
 
 § 221. If a purchaser or equitable owner of shares is enti- 
 tled in equity to compel the corporation to receive him as a 
 shareholder, and the agents of the corporation wrongfully 
 refuse to allow a complete transfer to be executed, or if any 
 formalities remain unperformed through their fault, the pur- 
 chaser or equitable owner may, nevertheless, compel the 
 corporation to accord to him all the rights of a shareholder. 
 Under these circumstances, the corporation would be respon- 
 sible for the wrongful acts of its agents,^ and justice is best 
 served by considering that done which ought to have been 
 done, and settling the rights of the parties accordingly .^ 
 
 § 222. Irregular Transfers. — Ratification. — A provision in 
 the charter or general laws under which a corporation was 
 fornied, prescribing a particular method of executing trans- 
 fers of shares, constitutes a part of the agreement between 
 the shareholders under the charter, and cannot be disregarded 
 without their consent ; a transfer made without the prescribed 
 formalities would be unauthorized, and, as a general rule, 
 would not bind the company.^ 
 
 But, as will be shown hereafter, the fact that a corporate 
 act is unauthorized, or is even in violation of the company's 
 charter, is not necessarily fatal to its validity.* A provision 
 directing transfers of shares to be executed in a particular 
 manner is intended merely for the convenient regulation of 
 the corporate affairs, for the benefit of the shareholders, and 
 the latter may waive compliance with a provision of this 
 kind, or render binding an irregular and unauthorized trans- 
 fer by their subsequent ratification. This rule applies equally 
 whether the forms of transfer are prescribed by the company's 
 charter or by the by-laws adopted by vote of the majority. 
 
 If a particular method of transfer has been adopted by cus- 
 tom and the general acquiescence of the shareholders, a 
 
 1 Supra, § 217, Nation's Case, L. R. 3 Eq. 77; Wes- 
 
 ' See Robinson ». National Bank, ton'? Case, L. R. 4 Ch. 20; Fyfe's 
 
 95 N. Y. 637 ; Isham v. Buckingham, Case, L. R. 4 Ch, 768 ; Lowe's Case, 
 
 49 N. Y. 216, 223; Chouteau Spring L. R. 9 Eq. 589. 
 
 Co. V. Harris, 20 Mo. 382, 390 ; John- » Infrci, § 719. 
 
 son t>. Laflin, 5 Dill. 65. Compare * Infra, § 723. 
 
217 TEANSFBB OF SHAKES. § 223 
 
 transfer executed according to the customary method is bind- 
 ing, although not in strict accordance with the charter and 
 by-laws.^ And it may be laid down as a rule, that any trans- 
 fer is binding, after it has been acted upon by the transferor 
 and transferee, and ratified by the shareholders by receiv- 
 ing the transferee as a shareholder in place of the former 
 member.^ 
 
 § 223. When irregular Transfer binds Transferee. — It is clear 
 that a person cannot be constituted a shareholder in a cor- 
 poration by a transfer of shares, without his consent. A 
 transfer of shares to a person who does not consent to accept 
 them, or who is unable to become a shareholder, is simply 
 null and void, and the transferor remains the holder of the 
 shares.^ 
 
 But a person who has voluntarily accepted a transfer can- 
 not afterwards impeach its validity upon the sole ground that 
 the formalities prescribed by the company's charter have not 
 been observed. The formalities of a transfer are of no im- 
 portance except as conditions precedent to the consent of the 
 corporation ; they merely indicate the methods by which 
 the shareholders have agreed to receive new members. If 
 the corporation has given its actual consent to a transfer 
 by the unanimous acquiescence or ratification of its share- 
 holders, it is immaterial whether the formalities indicated 
 by the charter have been observed or not. 
 
 Of course a transferee of shares is not bound by the trans- 
 fer unless the corporation is bound. A contract is not bind- 
 ing upon either party until both have consented to be bound. 
 If a transfer is unauthorized by reason of an informality, the 
 
 1 Compare Chambersburg Ins. Conn. 487; Home Stock Ins. Co. v. 
 
 Co. V. Smith, 11 Pa. St. 120; Isham Sherwood, 72 Mo. 461; Isham v. 
 
 V. Buckingham, 49 N. Y. 216; and Buckingham, 49 N. Y. 216. See 
 
 see infra, § 657. also Walters's Case, 3 De G-. & Sm. 
 
 " Laing V, Burley, 101 111. 591; 149; Bargate v. Shortridge, 5 H. h. 
 
 Cutting V. Damerel, 88 JT. Y- 410: Cas- 297. 
 
 Chambersburg Ins. Co. v. Smith, 11 ° Henessey's Executors' Case, 3 
 
 Pa. St. 120; Smock v. Henderson, De G. & Sm. 191; 2 Maon. & G. 
 
 IWils. (Ind.) 241; Weber u.Fjckey, 201; Custard's Case, L. K. 8 Eq. 
 
 52 Md. 501, 516, Compare Rich- 438; Cartmell's Case, L. R. 9 Ch. 
 
 mondville Manuf. Co. v. Prall, 9 691 ; Capper's Case, L. R. 3 Ch. 458. 
 
§ 224 THE LAW OF PEIVATB CORPOKATIONS. 218 
 
 transferee will be at liberty to withdraw at any time before 
 the corporation has ratified the transfer, or in some manner 
 consented to receive the transferee as shareholder. 
 
 § 224. The Legal Character of Shares. — Not Real Estate. — 
 Shares in a corporation are not real estate, even where the 
 corporation is the owner of real property. The rights of a 
 shareholder are rights of contract. The title to the com- 
 pany's property is vested in the corporation as a body ; the 
 right of each shareholder is merely an equitable right to have 
 the entire property managed in accordance with the charter, 
 and, after the dissolution of the company, to have the assets 
 reduced to cash and distributed.^ Hence it has been held 
 that shares are not real estate within the meaning of a mort- 
 main act ; ^ nor are they interests in land, within the Statute 
 of Frauds, even where the corporation owns land.^ Upon 
 the death of the owner, shares in a corporation pass to the 
 executor, and not to the heir,* and they are not subject to 
 the right of dower.^ 
 
 In most of the States it is provided by general law that 
 shares in a corporation shall be treated as personal property. 
 A provision of this description is merely declaratory of the 
 common law. It relates " merely to the nature or character 
 of the property which the stockholders are to be deemed to 
 have in the several shares of stock of the company as indi- 
 viduals, and not to the character of the property held by the 
 company in its corporate capacity for the benefit of such 
 stockholders." ^ 
 
 Shares in a corporation are not real estate within the mean- 
 ing of the statute prohibiting national banks from loaning 
 
 1 Infra, Chapter V. Mitchell, 11 A. & E. 205; Powell v. 
 
 2 Edwards v. Hall, 6 DeG., M. & Jessopp, 18 C. B. 336; Watson ». 
 G. 74; Thompson v. Thompson, 13 Spratley.lO Ex. 222; Blighv.Brent, 
 L. J. Ch. 455; Ashton v. Langdale, 2 Y. & C. Ex. 268. 
 
 20L. J. Ch. 234; Hilton t. Giraud, « Hutchins v. State Bank, 12 
 
 1 De G. & Sm. 183; Baker u. Sutton, Meto. (Mass.) 426; Bligh v. Brent, 
 
 '1 Keen, 234; March v. Atty-Gen., 2 Y. & C. Ex. 268, 294. Contra, 
 
 5 Beav. 433; Hayter v. Tucker, 4 K. Welles v. Cowles, 2 Conn. 567. 
 
 6 J. 243. 6 Johns v. Johns, 1 Ohio St. 350. 
 
 » Bradley v. Holdsworth, 'S M. & « Mohawk, &c. E. R. Co. ». Clute, 
 W. 422. See also Humble o. 4 Paige, 384, 393. 
 
219 TEANSFBK OF SHARES. § 226 
 
 money on real estate security, although the entire property of 
 the corporation be real estate.^ 
 
 § 225. Shares are Choses in Action and Personal Property. — 
 It has been pointed out that shares in a corporation are mere 
 contract rights, or, in technical language, choses in action.^ 
 Hence it has been held that, at common law, a husband must 
 reduce shares standing in his wife's name into possession, in 
 order to obtain an absolute title thereto.^ And, for the same 
 reason, shares cannot be levied upon as chattel property, under 
 an execution directed against the holder, in the absence of a 
 statute authorizing this procedure.* 
 
 But shares are clearly " property," within the broad mean- 
 ing of that term. They have been held to be "personal 
 property " subject to tax laws,^ and to pass as " personal 
 property " under a will.® 
 
 § 226. The Legal Character of a Certificate for Shares. — Stat- 
 ute of Frauds. — A distinction must be observed between 
 shares, considered abstractly, as the sum of the shareholder's 
 rights, and the transferable certificates which represent these 
 rights. The rights of a shareholder are mere contract rights, 
 or choses in action, but the certificates are something more. 
 They are constantly treated as tangible property in commer- 
 cial transactions, and, by reason of their negotiable character, 
 are in fact tangible property of great value, just as negotiable 
 notes and bills are.^ An action of trover may be brought for 
 the conversion of a certificate of shares, as for the conversion 
 of a promissory note,* and it has been rightly held that shares 
 may be the subject of a gift causa mortis by delivery of the 
 certificates.^ 
 
 1 Baldwin v. Canfield, 26 Minn. = Griffith v. Watson, 19 Kans. 23; 
 
 43. Union Bank v. State, 9 Yerger, 490; 
 
 *" Supra, Chapter 11. Waltham Bank v. Waltham, 10 Mete. 
 
 » Arnold v. Haggles, 1 R. I. 165; (Mass.) 334. 
 
 Slaymaker v. Bank, 10 Pa. St. 373. » Cadman v. Cadman, L. R. 13 
 
 See King v. Capper, 5 Price, 217. Eq. 470. 
 
 * Van Norman v. Circuit Judge, ' Supra, §§ 186-190. 
 
 45 Mich.204 ; Howe v. Starkweather, » Kuhn v. McAllister, 1 Utah Ter. 
 
 17 Mass. 240; Denton w.Livingston, 273. 
 
 9 Johns. 96 ; Planters', &c. Bank » G-rymes v. Hone, 49 N. Y. 17; 
 
 V. Leavens, 4 Ala. 753. Walsh v. Sexton, 55 Barb. 251. 
 
§ 226 THE LAW OP PRIVATE COEPORATIONS. 220 
 
 The authorities are not clear as to the application of the 
 seventeenth section of the Statute of Frauds, relating to con- 
 tracts for the sale of "goods, wares, and merchandise," to con- 
 tracts for the sale of shares. The distinction between shares 
 and certificates of shares appears to have been overlooked. 
 Shares, independently of the certificates, can certainly not 
 properly be considered either " goods," or " wares," or " mer- 
 chandise," within the meaning of the statute, as these terms 
 are intended to apply only to property capable of physical de- 
 livery. But certificates for shares are tangible property, and 
 are the subject of barter and sale, like other property capable 
 of delivery. They ought therefore to be considered " goods " 
 and "merchandise," within the meaning of the statute. The 
 proper rule would seem to be that a contract for the assign- 
 ment of shares (not meaning certificates of shares) is not 
 subject to the statute ; ^ but a contract for the sale and 
 delivery of a certificate of shares, in the ordinary form, is 
 governed by the same rule as a contract for the sale of other 
 goods, wares, or merchandise.^ 
 
 1 Humble v. Mitchell, 11 A. & 400; Fine v. Hornsby, 2 Mo. App. 
 E. 205; Watson v. Spratley, 10 61 ; Pray u. Mitchell, 60 Me. 430. 
 Exch. 222; Bowlby v. Bell, 3 C. B. The same rule should apply to 
 284; Duncuft v. Albrecht, 12 Sim. contracts for the sale of negotiable 
 198; and see Pickering i). Appleby, paper. Baldwinti. Williams, 3 Mete. 
 Comyn, 354. Compare also Knight (Mass.) 365. 
 
 V. Barber, 16 M. & W. 66 ; Lawton In the United States a contract 
 
 V. Hickman, 9 Q. B. 563; Somerby i>. for the sale of " sharfes " is usually 
 
 Buntin, 118 Mass. 279 ; Whittemore understood to mean a contract for 
 
 V. Gibbs, 24 N. H. 484. the sale of certificates, properly is- 
 
 2 Compare Tisdale v. Harris, 20 sued and indorsed, with an assign- 
 Pick. 18 ; Boardman v. Cutter, 128 ment and power of attorney. 
 Mass. 888; North v. Forest, 15 Conn. 
 
221 EIGHTS AND REMEDIES OF SHARBHOLDEES. § 227 
 
 CHAPTER V. 
 
 RIGHTS AND EEMEDIES OF SHAREHOLDERS. 
 
 PART I. 
 
 THE EELATION BETWEEN A COEPOEATIOK AND ITS SHAEB- 
 
 HOLDEES. 
 
 § 227. The Uses of the Fiction of a Separate Corporate 
 Entity. — A clear perception of the real nature and consti- 
 tution of an incorporated association is of the utmost im- 
 portance in considering the rights and obligations of the 
 individual shareholders, and their relation to the associa- 
 tion as a body. It is especially necessary that the legal 
 fiction by which a corporation is regarded as a person, or 
 entity, apart from its several members, be correctly under- 
 stood and applied. 
 
 The statement that a corporation is an artificial person, or 
 entity, apart from its members, is merely a description, in 
 figurative language, of a corporation viewed as a collective 
 body : a corporation is really an association of persons, and 
 no judicial dictum or legislative enactment can alter this 
 fact.^ It is true that the courts of law, as distinguished 
 from the courts of equity, do not, as a rule, look beyond the 
 fiction of a separate corporate entity. The individual share- 
 holders are not, in contemplation of law, parties to obligations 
 entered into by the association in a corporate capacity, nor 
 have they any legal right or interest in the property vested 
 in the corporation as a body. At law, a corporation and its 
 shareholders are considered as entirely distinct from each 
 other, and the contractual relation between the shareholders 
 
 1 Supra, § 1. 
 
§ 227 THE LAW OP PKIVATB CORPORATIONS. 222 
 
 is ignored ; only the corporate rights and obligations are 
 recognized. It follows for this reason that the courts of 
 law are in many instances unable to protect the rights of the 
 shareholders in a corporation, and that the assistance of the 
 courts of equity is necessary to the attainment of justice.^ 
 
 It is not to be understood that the courts of equity do not 
 also regard a corporation as a collective body. On the con- 
 trary, a corporation is ordinarily viewed as a distinct entity 
 in equity as well as at law, and in the dealings of business 
 men. It would be absolutely impossible to conceive of cor- 
 porate rights and obligations except by means of the abstrac- 
 tion of a corporate entity, and the use of the corporate name 
 as a. symbol representing this abstraction. The corporate 
 or collective rights and obligations of an association must, in 
 the nature of things, be treated as rights and obligations of 
 the association taken collectively. So, although the rights 
 and obligations attaching to the individual shareholders, 
 by reason of their contract of association, are in reality 
 rights and obligations between the shareholders, yet they 
 can be measured and enforced only by regarding them as 
 rights and obligations between the individual shareholders 
 and the association as an entity. In this respect the same 
 rule applies in equity and at law. 
 
 But there is this difference. In equity the conception of 
 a corporate entity is used merely as a formula for working 
 out the rights and equities of the real parties in interest; 
 while at law this figurative conception takes the shape of 
 a dogma, and is often applied rigorously, without regard to 
 its true purpose and meaning. In equity the relationship 
 between the shareholders is recognized whenever this be- 
 comes necessary to the attainment of justice ; at law this 
 relationship is not recognized at all. 
 
 It is interesting, in this connection, to compare the legal 
 status of a partnership with that of a corporation. The 
 rights and obligations of partners are in many respects col- 
 lective, and can be measured and enforced only by viewing 
 them collectively. But the courts of law recognize the 
 * See, for example, infra, § 237. 
 
223 EIGHTS AND REMEDIES OP SHAEBHOLDEES. § 228 
 
 members of a partnership only as individuals, standing in a 
 contractual relation to each other ; they do not recognize 
 the partners as a firm or collective body. The converse is 
 true in the case of a corporation, and in both instances the 
 machinery of the courts of law is frequently inadequate to 
 the attainment of justice. 
 
 § 228. Instances 'when the Relation has been recognized. — 
 It will be instructive, before considering the rights and ob- 
 ligations of the individual shareholders of a corporation with 
 regard to their mutual relationship, to refer to some of the 
 instances in which the real character and constitution of a 
 corporation must be considered in determining the rights 
 and obligations of persons who are not members of the cor- 
 poration. 
 
 It is well settled that, after an unauthorized act of the 
 agents of a corporation has been ratified by the unanimous 
 consent of the shareholders, it will be binding to the same 
 extent as if it had been fully authorized by the corporation.^ 
 In this instance the identity of a corporation and the whole 
 number of its shareholders is recognized even by the courts 
 of law. 
 
 The previous assent of all the shareholders of a corpora- 
 tion has the same consequences as a subsequent ratification ; 
 it is in fact and in law the assent of the company. Thus in 
 Des Moines Gas Co. v. West,^ a corporation sought to pro- 
 
 ' Infra, § 603. erty of the corporation, which you 
 
 * Des Moines Gas Co. v. West, own through your shares of stock, 
 
 50 Iowa, 16, 25. Beck, J., deliver- from responding to the claims of 
 
 ing the opinion, said : " Can it be men whom you have attempted to 
 
 doubted that Allen [the president] defraud. If the deed of trust is not 
 
 would not be heard should he come enforced, you will hold the property, 
 
 into a court of equity, asking that and thus gain by your dishonest acts 
 
 the bonds and deed of trust be set what you led others to believe you 
 
 aside and held for naught, on the had secured to them.' Equity will 
 
 ground that they were executed not be bound by the technical rules 
 
 through his own fraud, that the of law, when these rules will permit 
 
 gas company possessed no authority fraud to triumph. The legal rules 
 
 to execute the instruments, and that, which regard a corporation as an 
 
 under the doctrine of ufe*a wires, they artificial person, to be bound only 
 
 are void ? Equity would say to by acts done in accord with its 
 
 him, ' You cannot protect the prop- charter, which permit it to hold 
 
§ 229 THE LAW OF PRIVATE CORPORATIONS. 234 
 
 cure the cancellation of certain bonds which had been issued 
 by the president of the company, in direct violation of its 
 charter. It appeared that a very large part of the company's 
 shares were held by the president himself at the time when 
 the bonds were issued, and that the holders of all the re- 
 maining shares knowingly acquiesced in his unlawful transac- 
 tions. The Supreme Court of Iowa held that the securities 
 were binding upon the Company for this reason. 
 
 § 229. As a general rule, a corporation is not affected by 
 the personal rights and obligations and transactions of the 
 shareholders who form the corporation. Yet this rule can- 
 not be applied blindly ; a court of equity will look beyond 
 the technical doctrine whenever this becomes necessary to 
 do justice between the parties.^ 
 
 Notice to all the shareholders in a corporation should un- 
 der ordinary circumstances be held binding upon the associa- 
 tion in its corporate capacitj'.^ 
 
 If an association of persons owning property subject to 
 equitable claims obtains an act of incorporation, the prop:- 
 erty will remain subject to these claims after it is vested ifi 
 the corporate name ; and if the company should afterwards 
 consolidate with another corporation, the consolidated com- 
 pany will take the property subject to the same equities.' 
 
 property as a natural person, and ners by calling themselves stock- 
 limit the interest of the shareholder holders or directors. Where such a 
 therein to his shares, must all go , concern is formed, a court of equity 
 down when they are attempted to might treat the associates as part- 
 be used as instruments of fraud by ners in fact, disregard the fiction of 
 the dishonest, and stand in the way a corporate relation between them, 
 of equity." and subject the title of the property 
 
 1 Compare Appeal of Third Ke- transferred to it by the pi-omoters 
 
 formed Dutch Church, 88 Pa. St. to any equities which might have 
 
 503. existed as against them . ' ' See infra, 
 
 In Davis, &c. Wheel Co. v. Davis, § 234. 
 
 &c. Wagon Co., 20 Fed. R. 699, ^ Compare, however. Merchants' 
 
 700, Wallace, J., said: "The lib- Steam Navigation Co. v. Eastern 
 
 eral facilities offered by the statutes Steamboat Co. (U. S. D. C), 8 
 
 of many of our States for organizing Monthly Law Eep. 91, 94; and see 
 
 such corporations are undoubtedly infra, § 234. 
 
 often utilized by those whose only « Schuttew. Florida Central K.R. 
 
 object is to escape liability as part- Co., 3 Woods, 692. 
 
225 EIGHTS AND REMEDIES OP SHAEEHOLDEES. § 231 
 
 § 230. Other instances in which the courts are obliged to 
 take cognizance of the real nature of corporations, and to 
 treat them as associations of persons, may be found in cases 
 involving the constitutionality of legislation affecting corpo- 
 rations,^ and the law relating to the dissolution^ and consoli- 
 dation* of companies. The law upon these subjects is quite 
 unintelligible, unless the real character and constitution of a 
 corporation are clearly understood. 
 
 § 231. Even in those cases in which only corporate rights 
 and obligations are involved, and the corporation is nominally 
 interested only as an entity, the courts are constantly obliged 
 to consider that the real persons in interest are the individual 
 shareholders.* This is especially true in dealing with the rights 
 of creditors,^ and the obligations existing between a corporation 
 and its shareholders by reason of their contract of membership.^ 
 
 The courts of equity will often take notice of the real 
 character and constitution of a corporation in applying the 
 doctrine of laches against persons asserting equitable claims 
 against the company's property or assets. The shareholders 
 in a corporation are undoubtedly bound by the corporate 
 acts, and cannot set up their several equities against persons 
 who have claims against the corporation ; but the fact that 
 shares represent undivided interests in the corporate concern, 
 and are freely transferable in the open market, passing from 
 day to day into the hands of innocent purchasers, may be a 
 good reason why persons having equitable claims, the en- 
 forcement of which would impair the value of the company's 
 shares, should be diligent to assert their rights. Thus, if a 
 corporation should obtain title to property through a fraud 
 
 1 Infra, Chapter XV. man v. Enterprise, &o. Ins. Co., 
 
 2 /n/m, Chapter XIV. SeeShorb 18 Fed. R. 250; contra, Riggs ». 
 
 V. Beaudry, 56 Cal. 446; Bailey's Commercial Mut. Ins. Co., 51 N. Y. 
 
 Appeal, 96 Pa. St. 2.53. Super. Ct. 466. 
 
 8 Infra, Chapter XII. Under the former law a share- 
 
 * A shareholder in a corporation holder was disqualified from testify- 
 
 organized for pecuniary profit has an ing in favor of the corporation by 
 
 insurable interest in the corporate reason of interest. 
 
 property. Warren «. Davenport ' See infra, § 798 et seq. 
 
 Fire Ins. Co., 31 Iowa, 464; Sea- • See infra, §§ 302-315. 
 
 VOL. I. — 15 
 
§ 232 THE LAW OF PEIVATE COEPOEATIONS. 226 
 
 on the part of its agents, the rightful owner of the property 
 would certainly be entitled to set aside the transfer, although 
 innocent shareholders and creditors should suffer thereby, 
 provided he was not guilty of inexcusable delay in asserting 
 his rights ; ^ but any negligent or unexcused delay until inno- 
 cent persons have acquired an equitable interest in the prop- 
 erty, as shareholders or creditors of the corporation, would be 
 a sufficient reason for refusing relief in a court of equity .^ 
 
 § 232. Instances when the Corporation must be treated as a 
 separate Entity. — It has been pointed out, that the fiction by 
 which a corporation is treated as an entity distinct from its 
 shareholders has its important uses. In many instances, the 
 application of this fiction is absolutely essential ; and it may 
 be laid down as a general rule, that the convenient adminis- 
 tration of justice is best served by treating a corporation as a 
 collective entity, without regard to its individual shareholders, 
 in all cases except those in which the equitable rights and 
 liabilities of the shareholders cannot be ascertained and en- 
 forced without considering the real relation existing between 
 the parties. 
 
 Liabilities incurred by parties in a corporate capacity are 
 materially different in their scope and effect from liabilities 
 incurred in a personal capacity, whether severally or jointly, 
 or as partners. It is a question of intention whether the 
 parties have incurred a liability of the one class or the other, 
 and the intention of the parties is indicated by the form in 
 which they have contracted or acted. If persons use a cor- 
 porate name or form in entering into a contract, this indicates 
 that they intend to contract as a corporation, and not person- 
 ally ; ^ and if they enter into a contract under a firm name, 
 or individually, this is prima facie evidence that they intend 
 to be bound personally. This distinction must be observed 
 
 1 Pacific R. R. Co. v. Missouri v. New York, &c. R. R. Co., 13 
 Pacific Ry. Co., Ill D. S. 505. R. I. 260; Peabody v. Flint, 6 Al- 
 
 2 See Wetmoi-e v. St. Paul, &c. len, 52, 57. Compare Knoxville v. 
 R. R. Co., 3 Fed. R. 177; United Knoxville, &c. R. R. Co., 22 Fed. 
 States V. San Jacinto Tin Co., 23 R. 758; and see infra, § 610. 
 
 Fed. R. 279; Boston, &c. R. R. Co. « Compare infra, § 728. 
 
227 EIGHTS AND REMEDIES OP SHAREHOLDERS. § 234 
 
 even where all the shares in a corporation are held by a 
 single person ; his transactions in the corporate name would 
 differ in substance and legal effect, as well as in form, from 
 those entered into personally. Ih all cases it is indispensable 
 that the fiction of a corporate entity apart from the indi- 
 vidual shareholders be preserved unimpaired, in measuring 
 and enforcing those rights and obligations which are of a 
 corporate character.^ 
 
 § 233. It is of great importance that the title to property 
 be kept free from complication or uncertainty. The title to 
 property vested in a corporation should therefore not be af- 
 fected by acts of the shareholders, except when acting in the 
 corporate name. Although all the shares in a corporation 
 belong to a single person, and there are no creditors, a convey- 
 ance or transfer by the sole shareholder, in his own name, of 
 property vested in the corporate name, would not affect the 
 legal title. The title would in legal contemplation remain 
 in the fictitious entity called the corporation, irrespective of 
 the equities which the transaction might give rise to.^ 
 
 § 234. A corporation consists of the whole number of its 
 shareholders, and it would clearly be inequitable to charge 
 the company as a body with the wrongful acts of a portion 
 merely of the shareholders.^ It would likewise be impossible 
 to do justice by partitioning the rights of the shareholders, 
 and separating the interests of the guilty from those of the 
 innocent. The interest of each shareholder is in the concern 
 as a whole, and can be protected only by preserving the cor- 
 porate rights in their entirety. 
 
 The transferable nature of shares is also a good reason why 
 the fiction of a corporate entity should be preserved, and 
 why it is necessary, as a rule, to define sharply between 
 the corporate rights and obligations, and those of the share- 
 
 1 Compare New York Iron Mine 262; Murphy ». Hanrahan, 50 Wis. 
 
 V. First Nat. Bank of Negaunee, 485; Bundy u. Iron Co. , 38 Ohio St. 
 
 39 Mich. 644; Bristol Milling, &c. 800;Frank».Drenkhahn,76Mo..508. 
 Co. V. Probasco, 64 Ind. 406. ' The above statement presup- 
 
 " Baldwin v. Canfleld, 26 Minn, poses that the wrong-doers have not 
 
 43 ; Button v. Hoffman, 61 Wis. been authorized to bind the com- 
 
 20 ; Durant v. Kennett, L. R. 5 C. P. pany as agents. 
 
§ 234 THE LAW OF PEIVATB COEPOEATIONS. 228 
 
 holders personally. A purchaser of shares in a corporation 
 looks upon the corporation as an institution having separate 
 interests and rights, and managed according to certain pre- 
 scribed rules. In many instances, the purchaser would have 
 no knowledge of the other shareholders, and to allow the 
 corporate interests to be affected by personal acts and obli- 
 gations of the shareholders would defeat his just expecta- 
 tions. The corporate affairs should therefore be managed 
 without regard to the particular individuals who for the 
 time being compose the company; and this is true even 
 where no immediate injustice would be caused by treat- 
 ing the corporation and its shareholders as identical. Thus, 
 the shareholders of a corporation have no right, even by 
 unanimous consent, to divide the company's capital among 
 themselves, with the intention of continuing business with a 
 fictitious capital.; such action would be a fruitful source of 
 frauds thereafter, and would be in violation of the established 
 rules for the government of corporate affairs, even though no 
 person should be wronged thereby immediatel3^^ 
 
 It is for similar reasons that a corporation ought not as a 
 rule to be charged with wrongs done or liabilities incurred 
 before the company was formed, by the persons who after- 
 wards became its promoters and shareholders.^ 
 
 So it is a well settled rule, that notice to the promoters and 
 shareholders of a corporation is not necessarily notice to the 
 corporation as a body. The individual promoters and share- 
 holders are not agents of the company, and it would be unjust 
 to innocent members present and future to allow their rights 
 to be prejudiced by notice to those who have received no au- 
 thority to represent them, or to bind them by their acts.^ 
 
 1 The nature of the rights and Co., 52 Cal. 513; Burt v. Batavia 
 
 causes of action arising from a trans- Paper Manuf . Co. , 86 111. 66 ; Mer- 
 
 action of this description will be chants' Steam Nav. Co. v. Eastern 
 
 considered hereafter. Infra, %% 288- Steamboat Co., 8 Monthly Law 
 
 291. As to the rights of creditors, Rep. 91; Gent v. Manufacturers', 
 
 see infra, § 798 et seq. &c. Ins. Co., 107 III. 652; and see 
 
 ^ See Morrison v. Gold Mountain infra, § 525. 
 Gold Mining Co., 52 Cal. 306; » In Davis, &c. Wheel Co. v. 
 
 Hawkins v. Mansfield Gold Mining Davis, &c. Wagon Co., 20 Fed. R. 
 
229 EIGHTS AND EBMEDIBS OB" SHABEHOLDEES. § 235 
 
 PART 11. 
 
 RIGHTS AND EBMBDIES OP SHARBHOLDEES. 
 
 § 235. Distinction between Individual and Collective Rights 
 of Shareholders. — There is an important distinction between 
 those rights which belong to the shareholders individually or 
 severally, and those which belong to them collectively or in 
 their corporate capacity. Rights of the former class are 
 treated as rights against the corporation, and maj' be enforced 
 by each shareholder separately. Rights of the latter class are 
 not severable ; they are rights in the corporate concern rather 
 than rights against the corporation, and can be enforced only 
 through the corporate organization. 
 
 Thus, after a dividend has been declared by the agents 
 of a corporation, each shareholder has a separate individual 
 right to the amount payable on his shares ; and this right may 
 be enforced by an action against the company for damages.^ 
 On the other hand, if the agents of the company should 
 wrongfully refuse to declare a dividend when it is their duty 
 to distribute the profits, this would infringe the collective 
 
 699, 700, Wallace, J., said: " A (Mass.) 294; Custer v. Tompkins 
 corporation can have no agents until County Bank, 9 Pa. St. 27 ; Bank 
 it is brought into existence, and of Pittsburgh v. Whitehead, 10 
 after that it acts and becomes obli- Watts, 402 ; Union Canal Co. ». 
 gated only through the instrumental- Loyd, 4 Watts & S. 393; Fairfield 
 ity of its authorized representatives. County Turnpike Co. v. Thorp, 13 
 Stockholders cannot bind it except Conn. 182; In re Carew's Estate 
 by their action at corporate meet- Act, 31 Beav. 39. 
 ings ; and it is undoubted law that Service of process on a share- 
 notice to individual stockholders is holder does not make the corpora- 
 not notice to the corporation, and tion a party to a proceeding unless 
 their knowledge of facts is not notice the shareholder be an agent of the 
 of them to the corporation." Mer- company. Bache v. Nashville, &c. 
 chants' Steam Nav. Co. v. East- Soc, 10 Lea (Tenn.), 436; Lillard 
 em Steamboat Co. (D. C. U. S.), 8 v. Porter, 2 Head, 178. 
 Monthly Law Rep. 91 ; Burt v. Ba- ^ Infra, § 430. Jackson v. New- 
 tavia Paper Manuf. Co., 86 111. 66; ark Plank Road Co., 31 N. J. Law, 
 Housatonic Bank v. Martin, 1 Mete. 277, 280. 
 
§ 236 THE LAW OF PRIVATE COKPOEATIONS. 230 
 
 rights of the shareholders, but not their individual rights. 
 No shareholder could sue for any particular portion of the 
 undivided profits. The remedy for a failure to divide the 
 profits when they ought to be divided must be obtained 
 through the corporate organization.^ 
 
 § 236. The right of a shareholder to obtain from the agents 
 of the company a certificate showing the number of shares 
 held by him, and the extent to which they have been paid up, 
 is an individual right ; and so also is the right of a share- 
 holder to transfer his shares to another person. These 
 rights may be protected and enforced by each shareholder 
 separately, either through an action for damages or a pro- 
 ceeding for specific relief.^ 
 
 The right of a shareholder to be present and vote at meet- 
 ings,^ and the right to inspect the books of the company 
 where that right exists,* are of a similar character. They 
 are rights belonging to each shareholder severally, and may 
 be enforced by a proceeding of mandamus, or a bill in equity 
 for specific relief, or by an action for damages, as the case 
 may be. 
 
 § 236 a. A shareholder cannot sue individually for dama- 
 ges caused by wrongful acts impairing the value of his shares 
 through an invasion of the corporate or collective rights ; 
 under these circumstances, the remedy must be obtained by 
 the corporation or through the corporation.^ On the other 
 hand, if the individual rights of a shareholder are impaired by 
 any person, whether he be a shareholder or not, the remedy 
 
 » Infra, §§ 276-278. Jackson v. timore, &c. R. K. Co. v. Fifth Bap- 
 Newark Plank Koad Co., 31 N. J. tist Church, 108 U. S.-317, it was 
 Law, 277, 280. held that a religious corporation 
 
 2 Supra, § 212 et seq. Infra, owning a church was entitled to 
 
 § 453. For a further instance of relief against a railroad company 
 
 such a right see O'Connor v. North for causing its members discomfort 
 
 Truckee Ditch Co., 17 Nev. 245. and annoyance while at church, 
 
 * Infra, § 463. through noise, smoke, and cinders. 
 
 * See infra, § 454. The right to The cause of complaint was a cor- 
 inspect the transfer-books is often porate one, because the nuisance 
 provided by statute, and gaarded by rendered the church property less 
 statutory penalties. valuable for the uses to which it 
 
 s Infra, §§ 291, 545. In Bal- was devoted. 
 
231 EIGHTS AND EEMEDIBS OF SHAREHOLDERS. § 237 
 
 must be obtained by the shareholder suing individually, and 
 the corporation cannot sue on his behalf.^ 
 
 § 237. The CoUective Rights of Shareholders. — In deter- 
 mining whether individual shareholders can sue for the pro- 
 tection of their collective interests in the company, it is 
 necessary to consider, firstly, the exact nature of the rights 
 of the shareholders, and, secondly, the rules of procedure 
 which have been established by law for reasons of conve- 
 nience or necessity. 
 
 The relation between a corporation and its several mem- 
 bers may, for practical purposes, be treated as that of trustee 
 and cestui que trust. In contemplation of law, the property 
 and rights of an incorporated association belong to the corpo- 
 ration as an entity, and not to the shareholders. The latter, 
 however, are the real parties in interest, each shareholder 
 having an interest which may be defined, in general terms, 
 as a right to have the corporate property and affairs managed 
 in accordance with the charter and articles of agreement ; 
 and this right will be protected and enforced by the courts 
 of equity, by treating the corporate entity as their trustee. 
 The nature of the trust is declared in the charter, to which 
 the stockholders have unanimously agreed : " As the share- 
 holders are in substance partners in a trading corporation, 
 the management of which is intrusted to the body corporate, 
 a trust is by implication created in favor of the shareholders, 
 that the corporation will manage the corporate affairs and ap- 
 ply the corporate funds for the purpose of carrying out the 
 original speculation." ^ 
 
 1 Infra, §§ 545-547. A corpora- Bennett said : " The plaintiff, by 
 
 tion cannot restrain the levy of an his subscription, assumed to pay to 
 
 unlawful tax upon the shares held the corporation, and only for the 
 
 by its shareholders individually, purposes specified in the charter, its 
 
 Waseca County Bank v. McKenna, amount, according to the assess- 
 
 32 Minn. 468. ments; and there was at the same 
 
 " Per Blackburn, J., in Taylor time a trust created, and an im- 
 
 V. Chichester, &o. Ry. Co., L. R. 2 plied assumption on the part of the 
 
 Exch. 378. corporation to apply it to that object 
 
 In Stevens v. Rutland, &c. R. R. and no other." See also Russell v. 
 
 Co., 29 Vt. 549, 550, Chancellor Wakefield W. W. Co., L. R. 20 Eq. 
 
§ 238 THE LAW OP PRIVATE CORPORATIONS. 232 
 
 § 238. When a Shareholder may sue. — General Rule. — The 
 right of a shareholder to bring a suit on account of anything 
 affecting his interest in the property or affairs of the corpora- 
 tion depends to a great extent upon the peculiar character 
 of the corporate organization. The entire management of 
 the affairs of a corporation is delegated by its shareholders 
 to the care of the corporate agents. These agents are of 
 various classes, and differ both in the duties which they have 
 to perform and the powers with which they are intrusted. 
 Within the scope of the charter, the majority is supreme ; 
 and ordinarily the active management of the corporate affairs 
 is delegated to a president and directors, who have authority 
 to appoint other inferior agents.^ 
 
 Only the regular officers and agents whose appointment 
 was provided for, expressly or impliedly, by the charter or 
 articles of association of a corporation, have authority to 
 act for it ; the individual shareholders, as such, have no 
 power either to represent the body corporate, or to bring suit 
 in its behalf, or to interfere in any way with its manage- 
 ment.^ It is only by consent of all the shareholders that 
 any agent can derive his authority to represent the whole 
 body corporate. It follows, therefore, that a corporation can 
 obtain redress for a wrong committed against it only through 
 the action of its regular officers ; and if these are either un- 
 willing or unable to act, the corporation as an entity has no 
 means of obtaining a remedy. Under these circumstances it 
 becomes necessary to take cognizance of the equitable inter- 
 
 479, per Jessel, M. R. ; Thompson v. ^ Infra, §§ 454, 483. 
 Page, 1 Mete. (Mass.) 570,;)«r Shaw, ^ Bronson v. La Crosse E. R. 
 
 C. J.; Peabody v. Flint, 6 Allen, Co., 2 Wall. 301; Peabodyr. Flint, 
 
 56, per Chapman, J.; Sawyer v. 6 Allen, 55, 56; Forbes ». Memphis, 
 
 Hoag, 17 Wall. 623, per Justice &c. R. R. Co., 2 Woods, 381; Allen 
 
 Miller; Taylor v. Miami Exporting v. Curtis, 26 Conn. 461; Blaokman 
 
 Co., 5 Ohio, 162, per Wright, J.; v. Central R. R., &o. Co., 58 Ga. 
 
 Dodge V. Woolsey, 18 How. 331; 189; Silk Manuf. Co. v. Campbell, 
 
 Hardy v. Metropolitan Land, &o. 3 Butcher, 539 ; Union Agricultural 
 
 Co., L. R. 7 Ch. 427; Kean v. Society v. Gamble, 52 Iowa, 524; 
 
 Johnson, 9 N. J. Eq. 407; State Henry v. Elder, 63 Ga. 347; Park 
 
 V. Bank of Louisiana, 6 La. 745, v. Petroleum Co., 25 W. Va. 108. 
 759. See infra, § 1012. 
 
233 RIGHTS AND REMEDIES OP SHAKEHOLDEES. § 239 
 
 ests of the individual shareholders, and to allow them to sue 
 for the protection of their rights.^ 
 
 § 239. A Shareholder cannot sue if the Corporation is able to 
 protect itself. — It is a general rule, founded on convenience 
 and the implied agreement of the parties, that where a trustee 
 is invested with active duties and represents numerous bene- 
 ficiaries, no portion of these beneficiaries are entitled to bring 
 a suit for the protection of the trust, unless the trustee has 
 refused, or is unable, to take the necessary steps to protect it 
 on their behalf.^ 
 
 This rule applies with peculiar force to the trust deemed to 
 exist between a corporation and its individual shareholders. 
 It is obvious that it would be exceedingly inconvenient if the 
 numerous shareholders in a corporation were allowed to pro- 
 ceed in equity for relief, on account of every injury to the 
 corporate rights or property. Redress could be obtained far 
 more conveniently, and with less expense, by a suit brought 
 in the name of the corporation as an entity on behalf of all 
 the shareholders. And in those cases iu which the courts of 
 law provide an adequate remedy for a wrong against the cor- 
 poration, the propriety of seeking redress in the name of the 
 corporation and by means of the legal remedy becomes still fur- 
 ther apparent. Moreover, it is part of the agreement between 
 the shareholders of a corporation, that the entire management 
 of the corporate affairs shall be intrusted to certain specified 
 
 1 It has been held that, if a re- ^ Western R. R. Co. v. Nolan, 
 ceiver appointed by the Comptroller 48 N. Y. 513 ; Weetjen v. Vibbard, 
 of the Currency to take charge of the 5 Hun, 265 ; Skiddy v. Atlantic, &c. 
 assets of a national bank refuses to R. R. Co., 3 Hughes, 350; Alex- 
 bring suit against the directors of ander v. Central R. R. Co., 3 Dill, 
 the bank to recover assets which 487; Knapp». Railroad Co., 20 Wall, 
 have been misapplied or lost by 117; Sturges v. Knapp, 31 Vt. 55, 
 .misconduct of the directors, a share- 58; Shaw v. Norfolk County R. R. 
 holder may bring the suit, by mak- Co., 5 Gray, 162; Coe v. Colum- 
 ing the corporation and the receiver bus, &c. R. R. Co., 10 Ohio St. 410; 
 parties, together with the direc- New Jersey Franklinite Co. v. Ames, 
 tors against whom relief is sought. 1 Beas. 511 ; Williamson v. New Jer- 
 BrinckerhofE v. Bostwick, 88 N. Y. sey, &c. R. R. Co., 10 C. E. Green, 
 52; 8. C. 23 Hun, 237; 99 N. Y. 13; Robinson v. Smith, 3 Paige, 
 185. 225, and cases cited. 
 
§ 240 THE LAW OF PEIVATE COEPOEATIONS. 234 
 
 agents ; and this includes a delegation of the power of protect- 
 ing the company from injuries, and enforcing its collective 
 rights. Each shareholder must be held to have agreed that 
 all proceedings for the protection of the corporate property 
 and rights shall be brought by the corporation as an entity, 
 acting through its regular agents. It may therefore be stated 
 as a rule, that redress for a wrong against a corporation should 
 be obtained by the corporation itself, through its regularly 
 appointed agents ; and it is only in case the corporation has 
 been dissolved or disabled from proceeding on its own behalf, 
 by reason of the misconduct or disability of its agents, that the 
 shareholders may themselves proceed in chancery for the pro- 
 tection of their equitable rights.^ 
 
 § 240. It must appear that no Agent of the Corporation is 
 willing and able to act. — In order to maintain a suit for the 
 protection of his equitable rights in the corporation, a share- 
 holder must allege and prove that no agent of the company 
 having the requisite authority is willing and able to act on its 
 behalf. Ordinarily, the directors of a corporation have com- 
 plete power to control its action, and to decide whether it 
 shall enter into a litigation or not. In such case, therefore, a 
 shareholder cannot obtain the interposition of the courts 
 without showing that the directors are either unwilling or 
 unable to bring suit on behalf of the corporation.^ And even 
 where the directors or ordinary managing officers of a corpo- 
 ration are at fault, it does not necessarily follow that the cor- 
 poration is disabled from procuring justice for itself. For the 
 majority of shareholders in corporate meeting have supreme 
 authoritj' under the charter to manage the corporate affairs ; 
 
 1 In Russell v. "Wakefield W. W. proper plaintiff, and the only proper 
 
 Co., L. R. 20 Eq. 479, Sir G. Jessel, plaintiff.' " Gray v. Lewis, L. R. 
 
 M. R., said: "I entirely agree that 8 Ch. 1035; Hersey v. Veazie, 24 
 
 the general rule, if I may say so Me. 9; Robinson v. Smith, 3 Paige, 
 
 respectfully, is correctly stated by 233; Allen v. New Jersey, &c. R. R. 
 
 LordJustice James in Gray U.Lewis: Co., 49 How. Pr. 14; Lafond o. 
 
 ' Where there is a corporate body Deems, 81 N. Y. 507. 
 capable of filing a bill for itself to " Hersey v. Veazie, 24 Me. 9; 
 
 recover property either from its di- Cogswell v. Bull, 39 Cal. 324; Mc- 
 
 rectors or officers, or from any other Murray v. Northern Ry. Co., 22 
 
 person, that corporate body is the Grant (U. C), Ch. 476. 
 
235 
 
 RIGHTS AND REMEDIES OF SHAREHOLDERS. § 241 
 
 and whenever it is possible to obtain justice by calling a 
 meeting of the shareholders, and removing the offending offi- 
 cers and electing new ones, this remedy must be pursued. In 
 such case, a shareholder cannot obtain relief in equity, since 
 the ground for relief fails ; namely, that the corporation, his 
 trustee, is unable to protect the trust.^ 
 
 §241. 'When a Demand is necessary. — If the governing 
 agents of a corporation are able to act on its behalf, a share- 
 holder cannot sue without showing that they are unwilling 
 to act ; and it is but reasonable to require that a shareholder 
 should make a request upon the proper agents to act for the 
 corporation, where he bases his claim for relief upon their 
 failure. A shareholder asking the courts to interfere with 
 the management of the corporation, or to grant relief on ac- 
 count of an infringement of its rights, must therefore usually 
 show that the directors or managing officers having control 
 of the corporation have refused to act on its behalf.^ 
 
 » Bill ». Western Union Tel. Co., 
 16 Fed. Rep. 14; Hersey v. Veazie, 
 24 Me. 11; Foss v. Harbottle, 2 
 Hare, 495; Re London, &c. Discount 
 Co., L. R. I Eq. 277. 
 
 In Hawes v. Oakland, 104 U. S. 
 450, 460, Mr. Justice Miller stated 
 the rule as follows: "The plaintiff 
 should show to the satisfaction of 
 the court that he has exhausted all 
 the means within his reach to ob- 
 tain, within the corporation itself, 
 the redress of his grievances, or 
 action in conformity to his wishes. 
 He must make an earnest, not a 
 simulated effort, with the managing 
 body of the corporation, to induce 
 remedial action on their part, and 
 this must be made apparent to the 
 court. If time permits, or has per- 
 mitted, he must show, if he fails 
 with the directors, that he has made 
 an honest effort to obtain action by 
 the stockholders as a body in the 
 matter of which he complains. And 
 he must show a case, if this is not 
 
 done, where it could not be done, or 
 it was not reasonable to require it." 
 
 ^ " This refusal of the board of 
 directors is essential in order to give 
 the stockholder any standing in 
 court, as the charter confers upon 
 the directors representing the body 
 of stockholders the general manage- 
 ment of the business of the com- 
 pany. There must be a clear default, 
 therefore, on their part, involving a 
 breach of duty, within the rule es- 
 tablished in equity, to authorize a 
 stockholder to institute a suit in 
 his own behalf, or for himself and 
 other stockholders who may choose 
 to join." Memphis City v. Dean, 8 
 Wall. 73. 
 
 To the same effect, see Hawes 
 V. Oakland, 104 U. S. 450; Mor- 
 gan V. Railroad Co., 1 Woods, 15; 
 Samuel v. Holladay, 1 Woolw. 414; 
 Newby v. Oregon, &c. Ry. Co., 1 
 Sawyer, 63; Wilkie v. Rochester, 
 &c. Ry. Co., 12 Hun, 242; Greaves 
 V. Gouge, 69 N. Y. 154; Black v. 
 
§ 242 THE LAW OF PBIVATE COEPOEATIONS. 236 
 
 § 242. WTien a Demand is not necessary. — But a demand 
 upon the proper agents, and their refusal to act, are material 
 only because they show that the corporation itself is unable 
 to protect the rights of its members ; for a corporation has no 
 means of acting except by its agents. And therefore, if any 
 sufficient reason is shown why the corporation cannot safely be 
 left to obtain relief through the action of its agents, a court of 
 equity will interfere, at the suit of a shareholder, without proof 
 of a demand upon the managing agents and their wrongful 
 refusal or neglect to proceed on behalf of the company. 
 
 Thus, if the agents of a corporation in whom the authority 
 to direct its litigation is vested, are themselves guilty of a 
 wrong against the corporation, a court of equity will interfere 
 at the suit of a shareholder to protect his interest in the cor- 
 poration, without requiring him first to request the guilty 
 agents to proceed in the name of the corporation against 
 themselves. For a demand would ordinarily be nugatory 
 under these circumstances ; and it would be wholly contrary 
 to established principles of justice to permit the authors of a 
 wrong to conduct a litigation against themselves as agents of 
 the injured complainant.^ 
 
 It is evident that a demand is not necessary before bring- 
 ing suit, if it is impossible to make a demand ; as where the 
 directors have all resigned, or cannot be found.^ 
 
 Huggins, 2 Tenn. Ch. 780; Ware v. 52; Brewer v. Boston Theatre Co., 
 
 Bazemore, 58 Ga. 316; Talbot v. 104 Mass. 378, 387; Mussina v. 
 
 Scripps, 31 Mich. 268; Lothrop v. Goldthwaite, 34 Tex. 125; Pond 
 
 Stedman, 42 Conn. 583. v. Veimont Valley R. R. Co., 12 
 
 It must be shown that a majority Blatchf. 280; Hardon v. Newton, 
 
 of the directors holding office at the 14 Blatchf. 376 ; Hazard v. Durant, 
 
 time of bringing suit are unwilling 11 R. I. 195; Salomons ?>. Laing, 
 
 or unable to act, where the wrong 12 Beav. 377; Heath v. Erie Ry. 
 
 was committed by a prior board of Co., 8 Blatchf. 410; Robinson v. 
 
 directors. Cogswell v. Bull, 39 Cal. Smith, 3 Paige, 222 ; Currier v. New 
 
 320. York, &c. R. R. Co., 35 Hun, 355; 
 
 As to the time of raising the Rogers v. Lafayette Agricultural 
 
 objection that the petition of a share- Works, 52 Ind. 296; Deaderiok 
 
 holder does not show a previous de- v. Wilson, 8 Baxter (Tenn.), 108; 
 
 mand upon the directors, see Bulkley Moore v. Schoppert, 22 W. Va. 282, 
 
 V. Big Muddy Iron Co., 77 Mo. 105. 290. 
 
 1 Peabody v. Flint, 6 Allen, " Wilcox v. Bickel, 11 Neb. 154. 
 
237 EIGHTS AND EBMEDIES OF SHAKEHOLDBES. § 243 
 
 § 248. The Discretionary Fo'wers of the Company's Agents 
 cannot be impaired. — The managing agents of ordinary 
 private corporations are invested with wide discretionary 
 powers ; if this were not so, it would be impossible to carry 
 on the business of such companies successfully. 
 
 So long as the agents of a corporation act honestly within 
 the powers conferred upon them by the charter, they cannot 
 be controlled. The individual shareholders have no author- 
 ity to dictate to the company's agents what policy they shall 
 pursue, or to impair that discretion which was conferred upon 
 them by the charter. If shareholders are dissatisfied with 
 the agents, whom they have elected, their remedy is to elect 
 other agents, in the manner and at the time provided by the 
 charter. It would be a violation of the charter contract, and 
 a wrong to every dissenting member, to permit any por- 
 tion of the shareholders to interfere with the discretionary 
 powers which were intrusted to the agents of the corporation 
 alone. 
 
 It may therefore be stated as a rule, that no shareholder 
 can interfere with the management of the corporation, or 
 complain of a wrong, so long as its regular authorities are 
 acting honestly within the discretionary powers which have 
 been intrusted to them.^ 
 
 1 No shareholder can complain of Durfee v. Old Colony, &o. R. R. 
 the acts of the majority within the Co., 5 Allen, 231 ; Fareira v. Riter, 
 powers allotted to them. "Each 15 Phila. 58; Sprague v. Illinois 
 and every stockholder contracts that River R. R. Co., 19 111. 174; East 
 the will of the majority shall gov- Tennessee, &c. R. R. Co. v. Gam- 
 em in all matters coming within mon, 5 Sneed, 567; Bailey u. Power 
 the limits of the act of incorpo- Street, &c. Church, 6 R. I. 491; Peo- 
 ration ; and in cases involving no pie v. Chicago Board of Trade, 80 
 breach of trust, but only error or 111. 134; and compare State v. Mil- 
 mistake of judgment on the part of waukee Chamber of Commerce, 47 
 the directors who represent the com- Wis. 670 ; Becher v. Wells Flouring 
 pany, individual stockholders have Mill Co., 1 McCrary, 62. 
 no right to appeal to the courts to Nor can the board of directors or 
 decide the line of policy to be pur- other agents be controlled in the 
 sued by the corporation." Dudley exercise of the discretionary powers 
 V. Kentucky High School, 9 Bush, conferred upon them. Oglesby v. 
 578. See also Lord v. Copper Min- Attrill, 105 U. S. 605 ; Sims v. Street 
 ers' Co., 2 Phill. 751; Treadwell». Railroad Co., 37 Ohio St. 557; 
 Salisbury Manuf. Co., 7 Gray, 393; Elkins v. Camden, &c. R. R. Co., 
 
§ 244 THE LAW OF PRIVATE CORPOKATIONS. 238 
 
 § 244. Discretion as to Propriety of Suing. — It is often a 
 matter involving the exercise of much judgment, whether or 
 not it be expedient, in a given case, to begin a litigation on 
 account of an actionable injury. It is not the duty of the 
 managing agents of a corporation to go to law immediately, 
 whenever a wrong has been done to the corporation. The 
 advisability of suing for redress, and the time and manner 
 of proceeding, are largely intrusted to their judgment; and 
 it is their duty to give the corporation the benefit of their 
 best judgment in this respect. The refusal of the agents of 
 a corporation to institute legal proceedings on its behalf, 
 even when requested by its shareholders, may possibly be a 
 judicious exercise of the discretion which was conferred upon 
 them by the charter. This discretionary power confided to 
 the agents of a corporation cannot be usurped by its share- 
 holders; and therefore the courts will not interfere at the suit 
 of a shareholder to redress an injury suffered by the corpora- 
 tion, merely because its managing agents have in good faith 
 refused to begin a suit in the name of the corporation.^ 
 
 36 N. J. Eq. 241 ; Tuscaloosa Manuf . by every other, and use the court of 
 Co. V. Cox, 68 Ala. 71 ; Hedges v. equity to enforce his views, regard- 
 Paquett, 3 Oreg. 77 ; State v. Bank less of its duly constituted officers 
 of Louisiana, 6 La. 745, 763; Gra- and all other parties having inter- 
 venstine's Appeal, 49 Pa. St. 310; ests, rights, and powers equal to his 
 Dudley v. Kentucky High School, own. In such a struggle the real 
 9 Bush, 578; Banet v. Alton, &c. interests of the corporation might 
 K. R. Co., 13 111. 504; Karnes v. be entirely sacrificed. If such a 
 Eoohester, &c. R. R. Co., 4 Abb. doctrine should obtain, it would be 
 Pr. K. 8. 110; Pratt v. Pratt, 33 dangerous to deal with a corpora- 
 Conn. 446 ; Smith v. Prattville tion, for, whatever the understand- 
 Manuf. Co., 29 Ala. 503. ing had with its lawful representa- 
 1 In Samuel v. Holladay, 1 tives, no one could be protected 
 Woolw. (U. S. C. Ct.) 400, Jus- from the individual shareholders, 
 tice Miller said: "It would be a If a stockholder is aggrieved by 
 doctrine attended with very serious the refusal of the board of directors 
 consequences if every individual to accept his views, his remedy is 
 shareholder, assuming the place of to unite with other stockholders and 
 the corporation, could decide for it change those directors. But if ir- 
 when action should be brought to reparable mischief to his interests 
 vindicate its supposed right. Each may ensue in the mean time, equity 
 one of the shareholders might elect will administer preventive justice 
 to claim a remedy, and resort to a until such time as the will of the 
 tribunal different from those chosen body of stockholders can be ascer- 
 
239 EIGHTS AND EEMEDIES OP SHAREHOLDERS. § 247 
 
 § 245. A Shareholder may sue where the Directors have 
 committed a Breach of Duty. — A different case is presented 
 where the managing agents of a corporation' are themselves 
 the authors of a wrong, or where their refusal to bring suit 
 in the name of the corporation is in excess of their discretion- 
 ary powers. Here there is an injury to the corporate trust 
 which should be redressed, and the corporation itself is unable 
 to seek redress by reason of the default of its agents. Under 
 these circumstances a shareholder can base his claim to the 
 assistance of the courts of equity upon the common ground 
 of equity jurisdiction ; namely, that the complainant's equi- 
 table rights have been infringed, and that no other remedy 
 is available. 
 
 Yet, even in this case, there are two considerations which 
 may limit the right of a shareholder to obtain relief, as will 
 be shown in the following sections. 
 
 § 246. Exception 1. Where the Majority may ratify the Un- 
 authorized Act. — The managing agents of a corporation are 
 generally inferior, in authority, to the majority at a share- 
 holders' meeting. Hence an act of the managing agents 
 may be in excess of their powers, and consequentlj' a wrong 
 to the corporation, and yet may be within the powers of the 
 majority ; and the majority may have power to ratify the act 
 on behalf of the corporation.^ It would obviousty be im- 
 proper, under these circumstances, to interfere at the suit 
 of a shareholder. For the majority, acting, within the pow- 
 ers conferred upon them, on behalf of the whole associa- 
 tion, might afterwards ratify the unauthorized act, and thus 
 destroy all claim for relief. 
 
 § 247. Foss V. Harbottle. — The leading authority upon 
 this point is Foss v. Harbottle,^ decided by Vice-Chancellor 
 Wigram in 1843. It was alleged by the complainants, that 
 the defendants, who were directors of the corporation, had 
 
 ■tained." iJe London, &c. Discount 637; Abbott v. Merriam, 8 Cush. 
 
 Co., L. R. 1 Eq. 277; MoMurray e. 588; Dodge v. Woolsey, 18 How. 
 
 NorthemRy. Co.,22Grant (U. C), 344,345. /n/ra, § 248. 
 
 Ch. 503; Newby «. Oregon Central i Infra, § 606. 
 
 Ry. Co., 1 Sawy. 63. Compare ' 2 Hare, 461. , 
 Belmont v. Erie Ry. Co., 52 Barb. 
 
§ 248 THE LAW OP PRIVATE COEPOEATIONS. 240 
 
 purchased their own lands of themselves for the use of the 
 company, and had paid for them, or rather taken to them- 
 selves out of the funds of the company, a price exceeding 
 the value of the lands. The learned judge held that the 
 transaction was unauthorized, and might be set aside by the 
 company, but that the majority at a meeting of the share- 
 holders might ratify it on behalf of the corporation, and that 
 therefore the court would not interfere. " Whilst the court 
 may be declaring the acts complained of to be void at the 
 suit of the present plaintiffs, who in fact may be the only 
 proprietors who disapprove of them, the governing body of 
 proprietors may defeat the decree, by lawfully resolving 
 upon the confirmation of the very acts which are the subject 
 of the suit. The very fact that the governing body of pro- 
 prietors, assembled at the special general meeting, may so 
 bind even a reluctant minority, is decisive to show that the 
 frame of this suit cannot be sustained whilst that body re- 
 tains its functions. In order, then, that this suit may be 
 sustained, it must be shown, either that there is no such 
 power as I have supposed remaining in the proprietors, or, 
 at least, that all means have been resorted to and found in- 
 effectual to set that body in motion." ^ 
 
 § 248. When the Majority have a Discretionary Power to 
 determine the Propriety of bringing Suit. — Even in those 
 cases where a clearly actionable wrong has been committed 
 against the corporation, the majority as well as the board of 
 directors are invested to a certain extent with authority to 
 use their discretion in deciding whether or not it would be 
 judicious to prosecute a suit on behalf of the company, and 
 at its expense. Under these circumstances, it would clearly 
 be improper to infringe upon this power at the suit of any 
 of the shareholders. 
 
 Thus, in Re Mercantile Discount Co.,^ Vice-Chancellor 
 Page-Wood declined to interfere at the suit of a minority of 
 
 1 Foss V. Harbottle, 2 Hare, 493, MacDougall v. Gardiner, L. R. 1 
 
 494; Lord v. Copper Miners' Co., Ch. D. 13. 
 
 2 Phill. 751 1 Wallace v. Long * Re London, &o. Discount Co., 
 
 Island R. R. Co., 12 Hun, 460; L. R. 1 Eq. 277,283; MacDougall 
 
241 EIGHTS AND REMEDIES OF SHAEEHOLDEES. § 250 
 
 the shareholders of a company, upon the ground that the 
 advisability of proceeding to a litigation on account of the 
 alleged wrongs to the company was a matter which the ma- 
 jority had discretionary power to decide, and it had not been 
 shown that the majority had abused their powers. 
 
 § 249. When the Rule in Foss v. Harbottle does not apply. — 
 When the Majority cannot ratify. — The principle acted upon 
 in the case of Foss v. Harbottle has no application where the 
 act complained of is wholly unauthorized by the charter of 
 the corporation, and therefore in excess of the powers of the 
 majority. In such case the act cannot be ratified without 
 the unanimous consent of the shareholders.^ 
 
 In Bagshaw v. Eastern Union Ry. Co.,^ the same judge 
 who decided the case of Foss ?;. ^Harbottle said : " I think the 
 plaintiff in this case has shown that the directors have mis- 
 applied, and are about to misapply, the £100,000 I have 
 adverted to; that is, the £100,000 raised under the Hadleigh 
 act. No majority of the shareholders, however large, could 
 sanction the misapplication of this portion of the capital. 
 A single dissenting vote would frustrate the wishes of the 
 majority. Indeed, in strictness, even unanimity would not 
 make the act lawful. This appears to take it out of the 
 case of Foss v. Harbottle, to which I was referred." ^ 
 
 § 250. When a preventive Remedy is asked against the Com- 
 pany's Agents. — It is to be observed that the rule in Foss v. 
 Harbottle has no application in those cases where merely a 
 
 V. Gardiner, L. R. 1 Ch. D. 13 ; and others to impeach that act cannot be 
 
 see supra, § 244. Compare Gregory sustained, because a general meeting 
 
 V. Patchett, 33 Beav. 606. of the company might immediately 
 
 1 Infra, § 602. confirm and give validity to the act 
 
 ' 7 Hare, 129. of which the bill complains." Bag- 
 
 * Referring to Foss v. Harbottle, shaw e. Eastern Union Ry. Co., 7 
 
 the learned Vice-Chancellor said: Hare, 130. See also Atwool «. Mer- 
 
 " That case does not, I apprehend, ryweather, L. R. 5 Eq. 464 n., 468; 
 
 upon this point go further than this: Salomons v. Laing, 12 Beav. 377; 
 
 that if the act, though it be the act Heath v. Erie Ry. Co., 8 Blatchf. 
 
 of the directors only, be one which 406 ; Hoole v. Great Western Ry. 
 
 a general meeting of the company Co., L. R. 8 Ch. 274; Hazard v. Du- 
 
 could sanction, a bill by some share- rant, 11 R. I. 207 ; Brewer v. Boston 
 
 holders on behalf of themselves and Theatre Co., 104 Mass. 394-397. 
 
 VOL. 1. — 16 
 
§ 251 THE LAW OP PRIVATE COEPOEATIONS. 242 
 
 preventive remedy against the commission of unauthorized 
 acts is asked.i The only reason for refusing affirmative re- 
 lief is that the action of the court might be nullified by the 
 subsequent vote of the majority. But every shareholder has 
 a right to insist that the agents of the company shall not ex- 
 ceed the authority delegated to them, and that the wishes 
 of the majority, upon matters resting in the discretion of the 
 majority alone, shall be consulted, in the proper manner 
 and at the proper time. To refuse to restrain the agents 
 of a corporation from doing acts in excess of their author- 
 ity merely because the majority might authorize these acts if 
 they chose to do so, would deprive the shareholders of an 
 important privilege, and practically leave them at the mercy 
 of their agents. 
 
 § 251. Ezceptlon 2. Where Delay until the Directors can be 
 removed is advisable. — Silozley v. Alston. — Wrongs against a 
 corporation can best be redressed by the corporation itself, 
 through its duly elected agents. The convenient admin- 
 istration of justice, and the ultimate interests of all parties, 
 require that the right of shareholders to sue for the pro- 
 tection of their collective interests in the corporate affairs be 
 restricted within the smallest possible limits. If one share- 
 holder is accorded such a right, every other shareholder in 
 the company may claim the same privilege. A large number 
 of suits might thus be brought by the various shareholders, 
 each in his own behalf, thereby entailing heavy expense upon 
 the corporation and the parties against whom the relief was 
 sought.^ 
 
 It is frequently in the power of the corporation, through a 
 majority vote of the shareholders, to remove the directors or 
 managing agents who have failed in their duty. Under these 
 circumstances, a delay of redress until the corporation can 
 itself take action through the agency of the majority is often 
 advisable ; and the courts will not interfere at the suit of a 
 
 * Railway Co. u.AIlerton,18Wall. * See per James, L. J., in 
 
 233; Exeter, &o. Ry. Co. u. BuUer, 5 Gray v. Lewis, L. R. 8 Ch. 1050, 
 
 Eng. Ry. Cas. 211; Re London, &c. 1051. 
 Discount Co., L. R. 1 Eq. 277. 
 
243 EIGHTS AND REMEDIES OF SHAREHOLDERS. § 252 
 
 shareholder, even though the managing agents be derelict in 
 their duty, unless it appear that a delay of the remedy until 
 a corporate meeting can be held, and the guilty agents be 
 removed, would unduly prejudice the rights of the complain- 
 ants. The leading case upon this point is Mozley v. Alston, 
 decided by Lord Chancellor Cottenham.^ 
 
 § 252. No Delay required -where it would be useless. — The 
 rule stated in the preceding section applies in all cases where 
 an actionable wrong has been committed against a corporation. 
 And it must be assumed for- this purpose that the corpora- 
 tion would be able to obtain relief through the agency of the 
 majority, if a short delay were had. However, if the ma- 
 jority are either unwilling or unable to move on behalf of 
 the company, there can be no reason for waiting until a 
 meeting of the shareholders can be convened ; under these 
 circumstances, the courts will grant relief at the suit of 
 a shareholder.^ 
 
 Thus, if the wrongful acts of the majority constitute the 
 cause of complaint, or if it can be shown that the majority, 
 have co-operated with the wrong-doers, or have prevented 
 suit from being brought in the name of the corporation, or if 
 the wrong-doers have obtained control of a majority of shares 
 in the corporation, or if it is impossible for any cause to have 
 a fair meeting, — in all these cases the courts will interfere 
 at the suit of a shareholder, and grant whatever relief may 
 be necessary to do complete justice.^ 
 
 1 Mozley v. Alston, 1 Phill. 800; Eq. 464n.,468; Russell u. Wakefield 
 Gray v. Lewis, L. R. 8 Ch. 1050; W. W. Co., L. R. 20 Eq. 482; Can- 
 Russell V. Wakefield W. W. Co., non u. Trask, L. R. 20 Eq. 669 ; Me- 
 L. R. 20 Eq. 474; McMurray v. nier v. Hooper's Telegraph Works, 
 Northern Ry. Co., 22 Grant (U. C), L. R. 9 Ch. 350; Davidson v. Grange, 
 Ch. 476; Baker v. Backus's Admr., 4 Grant (U. C.) Ch. 377; Brewer v. 
 32 111. 101-108; Samuel v. Holla- Boston Theatre Co., 104 Mass. 378; 
 day, 1 Woolw. (U. S. C. Ct.) 414; Neall ». Hill, 16 Cal. 151; Wright 
 Tuscaloosa Manuf. Co. v. Cox, 68 v. Oroville Mining Co., 40 Cal. 20; 
 Ala. 71; Hawes v. Oakland, 104 Taylor w. Miami Exp. Co., 5 Ohio, 
 D. S. 450; Karnes v. Rochester, 162; Sears v. Hotchkiss, 25 Conn. 
 &c. R. R. Co., 4 Abb, Pr. n. s. Ill, 171; Peabody v. Flint, 6 Allen, 54; 
 112. Hazard v. Durant, 11 R. I. 195; 
 
 2 See lupra, § 242. Beman v. RufEord, 1 Sim. n. s. 550; 
 ' Atwoolr. Merry weather, L.R. 5 Rogers v. Lafayette Agr. Works 
 
§ 254 THE LAW OF PKIVATE OOEPOEATIONS. 244 
 
 § 253. Ko Delay Dvhere Justice requires immediate Relief. — 
 The general rule is, that the courts will in all cases provide 
 the shareholders of a corporation with an adequate remedy 
 for the protection of their equitable rights. In applying this 
 rule it must be borne in mind that the primary and best means 
 of obtaining redress is in a suit brought by the corporation , 
 through its agents, and the courts will not interfere if a short 
 delay would enable the corporation to act for itself, provided 
 no irreparable injury be threatened in the mean time. If, 
 however, it appears that a delay of action until a meeting of 
 the shareholders can be convened may be productive of in- 
 justice, the courts will not hesitate to grant whatever relief 
 may be needed at the suit of the individual shareholders. 
 Thus there can be no doubt that the courts would decree 
 an accounting, or order property which has been wrongfully 
 taken away from a corporation to be restored, if a delay of 
 this redress until a meeting could be held might unduly pre- 
 judice the rights of the company, either through insolvency 
 9f the wrong-doers, or through any other cause. 
 
 The courts will also grant immediate relief where the 
 managing agents of a corporation wrongfully refuse to defend 
 suits brought against the corporation. In such case, a delay 
 until a meeting of the stockholders can be held would gener- 
 ally be fatal, by subjecting the corporation to a judgment by 
 default.^ 
 
 § 254. No Delay in granting preventive Remedies. — A cor- 
 poration, like an individual, can obtain an injunction for the 
 protection of its rights only upon showing that an injury is 
 threatened for which other remedies would not provide ade- 
 quate redress. It would seem to follow, therefore, that when- 
 ever a corporation is entitled to an injunction to protect itself, 
 and is not able to apply for the remedy, a shareholder may 
 obtain relief for the protection of his own interests ; whatever 
 would be an irreparable injury to a corporation would neces- 
 
 Co., 52 Ind. 297. Compare Foss v. i See Bronson v. La Crosse R. R. 
 
 Harbottle, 2 Hare, 495; MacDou- Co., 2 Wall. 302; DodgeB. Woolsey, 
 
 gall V. Gardiner, L. R. 20 Eq. 383; 18 How. 331; City of Wheeling v. 
 
 1 Ch. D. 18. Mayor, 1 Hughes, 90, 95. 
 
245 EIGHTS AND EEMEDIES OF SHAREHOLDERS. § 255 
 
 sarily also be an irreparable injury to the shareholders who 
 compose it.^ 
 
 § 255. A Court of Equity will fiilly dispose of a Case properly 
 before it. — Another rule which must be considered in con- 
 nection with this subject is the rule that a court of equity 
 will, under ordinary circumstances, fully dispose of a case 
 which is properly before it. If, therefore, shareholders are 
 entitled to an injunction for the protection of their rights 
 from future infringements, and all the necessary parties are 
 before the court, complete relief will usually be granted in 
 the same suit on account of past wrongs which form part of 
 the same cause of action. In Russell v. Wakefield Water 
 Works Co.,2 Sir George Jessel, M. R., said : " 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, as in the case of Salomons v. Laing,^ and you 
 may be entitled to have property returned, or other acts done. 
 If the detainer or holder of the money or property, that is, 
 the second corporation or other person, is already a party, 
 and a necessary party, to the suit, it would be indeed a lame 
 and halting conclusion if the court were to say it eould [not] 
 do justice in a suit so framed by ordering the money to be 
 returned or the property restored. It is a necessary incident 
 to the first part of the relief which can be obtained by indi- 
 vidual corporators, and will do complete justice on each side, 
 and that has always been the practice of the court. There- 
 fore, in a case so framed, there is no objection to a suit by an 
 individual corporator to recover from another corporator, or 
 from any other persons being strangers to this corporation, 
 
 * See Bloxam ». Metropolitan Eq. 322; Lyde ». Eastern Bengal 
 
 Ky. Co., L. R. 3 Ch. 337; Dodge o. Ry. Co., 36 Beav. 10; Leo v. Union 
 
 Woolsey, 18 How. 331; Eraser v. Pacific Ry. Co., 17 Eed. R. 273. 
 Whalley, 2 H. & M. 10; Manderson a L. R. 20 Eq. 474, 481. 
 ». Commercial Bank, 28 Pa. St. 379; » 12 Beav. 377. 
 Pickering v. Stephenson, L. R. 14 
 
256 
 
 THE LAW OF PRIVATE COEPOEATIONS. 
 
 246 
 
 the money or property so improperly obtained. But that is 
 not the only case. Any other case in which the claims of 
 justice require it is within the exception." ^ 
 
 § 256. Parties to a Shareholder's Bill. — Complainants. — 
 Any holder of a single share may bring suit to protect his in- 
 terest in the corporation.^ All the shareholders may properly 
 join as complainants, but this is not necessary.^ If a portion 
 only of the shareholders are complainants, the suit should 
 purport to be brought by the plaintiffs in behalf of themselves 
 and all other shareholders similarly interested.* But this is 
 merely a technical rule of practice ; the suit must, by reason 
 of the character of the relief prayed, be for the benefit of the 
 corporation, or all the shareholders, whether it purport to be 
 for their benefit or not. In some cases, the allegation that 
 the suit was brought by the plaintiff on behalf of all others 
 similarly interested has therefore been dispensed with.* 
 
 If any of the shareholders are parties to the wrong com- 
 plained of, they may be made defendants.® 
 
 1 Russell V. Wakefield W. W. 
 Co., L. R. 20 Eq. 474, 481; Gregory 
 V. Patchett, 33 Beav. 607. 
 
 2 Seaton v. Grant, L. R. 2 Ch. 
 462 ; Beman v. RufEord, 1 Sim. n. s. 
 564; Zabriskie v. Cleveland, &c. 
 R. R. Co., 23 How. 395; Samuel v. 
 HoUaday, 1 Woolw. 400 ; Dodge v. 
 Woolsey, 18 How. 331, 341; Kean 
 V. Johnson, 1 Stockt. 401 ; GifEord v. 
 N. J. R. R., &o. Co., 2 Stockt. 171, 
 174; Elkins v. Camden, &c. R. R. 
 Co., 36 N. J. Eq. 5, 14; Rogers v. 
 Lafayette Agr. Works, 52 Ind. 304; 
 Armstrong v. Chm-ch Soc, 13 Grant 
 (U. C), 556. 
 
 ' See Mozley v. Alston, 1 Phill. 
 798; Robinson v. Smith, 3 Paige, 
 282; Peabody v. Flint, 6 Allen, 57; 
 Whitney v. Mayo, 15 HI. 251; Rog- 
 ers V. Lafayette Agr. Works, 52 
 Ind. 297. 
 
 * Mozley v. Alston, 1 Phill. 798; 
 Robinson v. Smith, 3 Paige, 233; 
 White V. Carmarthen, &o. Ry. Co., 
 
 1 H. & M. 786; Smith v. Sworm- 
 stedt, 16 How. 302; Zabriskie v. 
 Cleveland, &c. R. R. Co., 23 How. 
 395; March v. Eastern R. R. Co., 
 40 N. H. 548; Peabody v. Flint, 6 
 Allen, 56; Whitney v. Mayo, 15 
 El. 251; Clinch v. Financial Co., 
 L. R. 4 Ch. 117. Compare Edwards 
 V. Shrewsbury, &c. Ry. Co., 2 De G. 
 & Sm. 537; Bailey ». Birkenhead, 
 &c. Ry. Co., 12 Beav. 433. 
 
 ^ See Hoole v. Great Western 
 Ry. Co., L. R. 3 Ch. 272; Russell 
 V. Wakefield W. W. Co., L. R. 20 
 Eq. 474, 481 ; Simpson v. Westmin- 
 ster Hotel Co., 8 H. L. C. 712. 
 
 ' Taylor v. Miami Exporting Co. , 
 5 Ohio, 162 ; Preston v. Grand 
 Collier Dock Co., 11 Sim. 327; 
 Brewer v. Boston Theatre Co., 104 
 Mass. 378; Burt v. British, &o. 
 Ass., 4 De G. & J. 158. Compare 
 Bailey's Appeal, 96 Pa. St. 253; 
 Becher v. Wells Flouring Mill Co., 
 1 McCrary, 62. 
 
247 EIGHTS AND EBMEDIES OP SHAEBHOLDEES. § 267 
 
 An equitable owner of shares may sue to protect his inter- 
 est, though the legal title be in a trustee ; ^ but in such case 
 the trustee is a necessary party .^ And it seems clear, on 
 principle, that a person to whom the corporation has agreed 
 to issue shares may pursue the same remedy, provided he be 
 entitled to enforce a specific performance of the contract.^ It 
 should be observed, however, that the rights of an equitable 
 owner or assignee of shares are in some respects different 
 from those of a legal owner. An equitable owner of shares 
 is not entitled to vote at meetings, or to receive a certificate, 
 or enjoy any of the personal rights which belong only to 
 shareholders on the books, until after a formal transfer has 
 been executed.* 
 
 § 257. The Corporation must be made a Defendant. — It is 
 manifest that, in a suit brought by a shareholder to protect his 
 equitable interest in the affairs of a corporation, the corpora- 
 tion is itself an indispensable party. The legal title to the cor- 
 porate property and rights is vested in the corporation ; and 
 each shareholder is beneficially interested only as member 
 of the company. It would be impossible to work out the 
 equities of the individual shareholders, except through the 
 corporate organization.® 
 
 In Davenport v. Dows,® Mr. Justice Davis said : " The 
 relief asked is on behalf of the corporation, not the individual 
 shareholder, and, if it be granted, the complainant derives 
 only an incidental benefit from it. It would be wrong, in 
 case the shareholder were successful, to allow the corporation 
 to renew the litigation in another suit involving precisely the 
 same subject matter. To avoid such a result a court of equity 
 will. not take cognizance of a bill brought to settle a question 
 in which the corporation is the essential party in interest, 
 unless it is made a party to the litigation." 
 
 1 Baldwin v. Canfield, 26 Minn, ever, Busey v. Hooper, 35 Md. 15; 
 
 43. See supra, §§ 183, 216 et seq. Walker v. Devereaux, 4 Paige, 229 ; 
 
 ' Great Western Ry. Co. v. Rush- Mills v. Northern Ey. Co. , L. K. 5 
 
 out, 5 De G. & S. 290. Ch. 621. 
 
 8 Bagshaw v. Eastern Union Ky. * See supra, §§ 169, 170. 
 
 Co., 7 Hare, 130; Baldwin v. Can- ^ gee supra, §§ 227, 235. 
 
 field, 26 Minn. 44. Compare, how- ' Davenport v. Dows, 18 Wall. 
 
§ 258 THE LAW OF PEIVATE COKPOEATIONS. 248 
 
 However, if it is impossible to make the corporation a 
 party to the proceeding, as where the corporate organization 
 has ceased or a legal dissolution has taken place, a court 
 of equity will appoint a receiver of the corporate estate, and, 
 after making an adjustment of the rights of creditors and 
 shareholders, will distribute the assets among those who are 
 equitably entitled to receive them.^ 
 
 § 258. Other Defendants. — All persons against whom relief 
 is sought, or whose rights may be affected by the relief which 
 is prayed, are necessary parties to the litigation. Thus, if a 
 shareholder seeks to impeach the validity of a contract made 
 by the agents of a corporation on its behalf, all parties to 
 that contract must be made defendants.^ And clearly it is 
 necessary to make all parties defendants whom it is intended 
 to charge with a misappropriation of corporate funds. 
 
 It has been held that the directors or managing agents of 
 a corporation are not necessary parties to a suit for an injunc- 
 tion to restrain a misapplication of corporate funds, or the 
 doing of any other unauthorized act in the name of the cor- 
 poration. In such case, an injunction directed against the 
 corporation on whose behalf the directors profess to act is 
 binding upon them, as upon all others professing to act 
 merely as agents on behalf of the company.^ But where an 
 
 626; Samuel v. Holladay, 1 Woolw. would have no power to control the 
 
 414; Cunningham v. Pell, 5 Paige, action of the company, and no means 
 
 613; Hersey v. Veazie, 24 Me. 9; of enforcing obedience to its decree. 
 
 Greaves v. Gouge, 69 N. Y. 154; ^ Infra, § 1012. See Ervin v. 
 
 (Dicotte V. Anciaux, 53 Mich. 228; Oregon Ky. & Nav. Co. 20 Fed. K. 
 
 Charleston Ins., &c. Co. ». Sebring, 577. 
 
 5 Rich. Eq. 342; Black v. Huggins, " Hare ». London, &e. Ry. Co., 
 
 2Tenn. Ch. 780; Robinson u. Smith, IJ. & H. 252. 
 
 3 Paige, 232. Compare Smith v. » Winch v. Birkenhead, &c. Ry. 
 
 Hurd, 12 Mete. (Mass.) 371; Wil- Co., 5 De G. & Sm. 562; Hatch ». 
 
 kinsv. Thorne, 60 Md. 253; Shaw- Chicago, &c. R. R. Co., 6 Blatchf. 
 
 han V. Zinn, 79 Ky. 300. 105; Heath v. Erie Ry. Co., 8 lb. 
 
 In Williston v. Michigan South- 412; People v. Sturtevant, 9 N. Y. 
 
 em, &c. R. R. Co., 13 Allen, 400, 263, affirming Davis v. Mayor, 1 
 
 it was held that a shareholders' bill Duer, 451, 484. Compare Ferguson 
 
 could not be maintained in a foreign v. Wilson, L. R. 2 Ch. 90, per Lord 
 
 State in which the company had no Cairns; Clinch v. Financial Co., L. 
 
 place of business and no officers. B. 4 Ch. 117; Karnes «. Rochester, 
 
 Under these circumstances, the court &c. R. R. Co., 4 Abb. Pr. N. s. 107. 
 
249 EIGHTS AND BEMEDIES OF SHAKEHOLDEES. § 260 
 
 injunction is asked in order to restrain the agents of a corpo- 
 ration from acting in their own behalf, and not merely as 
 agents on behalf of the corporation, or where their individual 
 rights or obligations, even though arising from their relation 
 to the company, are involved, they are necessary parties, and 
 should be made defendants.^ The directors are certainly 
 necessary defendants in all cases where relief is asked against 
 them individually. 
 
 § 259. The Motive in bringing Suit is immaterial. — If the 
 rights of a corporation have been infringed, or are threatened 
 with infringement, and the corporation is unable to apply to 
 the courts for relief, a shareholder is entitled to sue for the 
 protection of his equitable interest, whatever be his real mo- 
 tive in seeking redress ; the motive of a plaintiff in bringing 
 suit is immaterial.^ 
 
 § 260. Plaintiff must have a real Interest. — But the plain- 
 tiff must have a real interest. A suit instituted in the name 
 of a shareholder who has merely the nominal ownership of 
 shares, and who appears merely as a figure-head for the real 
 owner, being indemnified by the latter against costs, is an 
 imposition on the court, and cannot be maintained. Under 
 these circumstances the courts decline to entertain the case, 
 on account of the disqualification of the plaintiff, without 
 regard to the rights of bona fide shareholders.^ 
 
 This rule applies with peculiar force to those cases in 
 ■which the real instigator of the suit is a rival company. A 
 
 1 Compare Heath v. Erie Ry. Co., » Robson v. Dodds, L. R. 8 Eq: 
 8 Blatchf. 411, 412; Ferguson v. 301; Forrest v. Manchester, &c. 
 Wilson, L. R. 2 Ch. 90; Clinch v. Ry. Co., 4 De G., F. & J. 126; 
 Financial Co., L. R. 4 Ch. 117. Ffooks v. South Western Ry. Co., 
 
 2 Colman u. Eastern Counties Ry. 1 Sm. & G. 142; Burt v. British, 
 Co., 10 Beav. 1; Forrest v. Man- &c. Assur. Ass., 4 De G. & J. 158; 
 chaster, &c. Ry. Co., 4 De G., F. & Filder v. London, &c. By. Co., 
 J. 131 ; Central R. R. Co. v. Collins, 1 H. & M. 489 ; Waterbury v. 
 40 Ga. 582; Ramsey v. Gould, 57 Merchants', &c. Express Co., 50 
 Barb. 398; Occum Co. ». Sprague Barb. 168; Belmont v. Erie Ry. 
 Manuf. Co., 34 Conn. 529; Camden, Co., 52 Barb. 662; Sparhawfc v. 
 &c. R. R. Co. V. Elkins, 37 N. J. Union Passenger Ry. Co., 54 Pa. 
 Eq. 273; Pender v. Lushington, L. St. 401. 
 
 R. 6 Ch. Div. 70. 
 
§ 262 THE LAW OP PEIVATE CORPORATIONS. 250 
 
 corporation has no right to buy shares and enter upon a 
 litigation, either in its own name, or indirectly through a per- 
 son subservient to its interests, for the purpose of interfering 
 with the management of a rival company, or restraining its 
 operation ; the agents of a corporation would have no author- 
 ity to use its name or its funds for any such purpose.^ 
 
 There can be no doubt, however, that a suit brought by a 
 trustee of shares, in good faith, for the protection of the inter- 
 ests of his cestui que trust, either at the request of the latter 
 or in pursuance of the powers conferred by the trust, would 
 be sustained. The objection to a proceeding by a plaintiff 
 who has no interest, and is merely a puppet in the hands of 
 another, is that such a suit is a fraud upon the court. 
 
 § 261. Plaintiff cannot sue if Corporation is barred by acqui- 
 escence. — It is well settled that a corporation cannot repudi- 
 ate an unauthorized engagement entered into by its directors, 
 or other agents, after the shareholders have unanimously 
 acquiesced in the transaction, and allowed the company to 
 appropriate the resulting benefits.^ Nor can a corporation 
 maintain an action, either at law or in equity, on account of 
 a violation of its rights or a misapplication of the corporate 
 funds, after the acts complained of have been acquiesced in 
 and condoned by the whole body of shareholders.^ If the 
 corporation has no cause of action under these circumstances, 
 it follows a fortiori that a shareholder cannot sue on its 
 behalf.4 
 
 § 262. Individual Shareholders who have acquiesced are dis- 
 qualified. — The ratification of an unauthorized transaction 
 by merely a portion of the shareholders would not bind the 
 corporation, and would not bar a suit brought in its name for 
 the protection and enforcement of the corporate rights. Even 
 
 1 Infra, § 431. Terry v. Eagle Lock Co., 47 Conn. 
 
 2 Infra, §§ 603-610. 141; Kitchen v. St. Louis, &c. Ry. 
 » Infra, § 605; Hotel Co. v. Co., 69 Mo. 224, 264; Samuel v. 
 
 Wade, 97 U. S. 13. HoUaday, 1 Woolw. 416; Zabriskie 
 * Scott V. De Peyster, 1 Edw. v. Hackensack, &c. R. R. Co., 18 
 Ch. 513, 536; Kent v. Quicksilver N. J. Eq. 178, 194 ; Gray v. Chap- 
 Mining Co., 78 N. Y. 159, 184-186; lin, 2 Russ. 126; and see infra, 
 Watts's Appeal, 78 Pa. St. 870; § 271. 
 
251 EIGHTS AND EEMEDIES OP SHAREHOLDERS. § 262 
 
 although the majority were parties to the wrong complained 
 of, or have executed a legal release to the wrong-doers, this 
 would not preclude the corporation from maintaining a suit 
 on account of the wrong ; it would be the duty of the com- 
 pany's agents to proceed under these circumstances for the 
 protection of the rights of the innocent minority .^ 
 
 The benefit of an action brought by a corporation neces- 
 sarily results to all the shareholders equally, even where a 
 portion of them were parties to the wrong, or have, by ac- 
 quiescence, forfeited their equitable claims to redress. And 
 this result is not, as a rule, unfair. The only possible method 
 of working out the rights of the parties in a case of this kind 
 is to preserve the fiction of a separate corporate entity, and 
 to enforce the collective and the individual rights and obli- 
 gations. of the shareholders separately. 
 
 It is clear, therefore, that the acquiescence of a shareholder 
 in a violation of the corporate rights, or even a participation 
 in the wrong, would not deprive him of his interest in the 
 cause of action belonging to the corporation as an entity. 
 He would have a share in the benefits of a recovery, even al- 
 though his personal liabilities should be thereby increased. 
 
 There is, however, evident propriety in refusing to allow a 
 shareholder to sue on account of a wrong which he has vol- 
 untarily acquiesced in and condoned, even although the cor- 
 poration might sue for his benefit. The plaintiff under 
 these circumstances would have no meritorious cause of com- 
 plaint, and he would be allowed to share in the benefits of a 
 recovery by the corporation, merely because it would be im- 
 possible to separate his interest from the interests of the 
 other shareholders. If the remaining shareholders should 
 subsequently acquiesce in the transaction, the corporation it- 
 self would be bound, and the entire cause of complaint be 
 barred. Individual shareholders who have acquiesced should 
 at least be disqualified from suing where the other share- 
 holders and the company through its agents have taken no 
 steps to assert its rights.^ 
 
 » Supra, § 249. Co., 1 Sm. & 6. 142, 164; Burt v. 
 
 ' Ffooks V. South Western Ky. British, &c. Assur. Ass., 4 De G. 
 
§ 264 THE LAW OF PEIVATB COEPOEATIONS. 252 
 
 § 263. Where preventive Relief is applied for. — A share- 
 holder who has acquiesced in an unauthorized act is not 
 bound to submit to all future acts of a similar character.^ 
 Nor is a shareholder who has acquiesced in the making of an 
 unauthorized and illegal contract necessarily precluded from 
 applying to the courts to restrain its performance. If a con- 
 tract made on behalf of a corporation is unauthorized and 
 void, it is the duty of the agents of the company to refuse to 
 perform it. To proceed and perform the void agreement 
 would be a further wrong, and might result in a misapplica- 
 tion of the company's funds and a forfeiture of its franchises. 
 Under these circumstances it may not be unfair to allow those 
 shareholders who have acquiesced in the making of the un- 
 authorized agreement to withdraw their assent, and apply for 
 relief against the threatened violation of the company's char- 
 ter. But the courts are entitled to exercise a wide discretion 
 in cases of this description. They should certainly not allow 
 a shareholder to change his mind, and apply for an injunction 
 to restrain the performance of a contract to which he had pre- 
 viously consented, in any case in which this would be unfair 
 to other persons.^ Courts of equity have always exercised a 
 discretionary power to refuse relief to a plaintiff who has 
 acquiesced in the wrong complained of, or whose delay in 
 asserting his rights would make it unfair to others to grant 
 relief. 
 
 § 264. Where Plaintiff is disqualified, the Suit cannot proceed. 
 — If it appears in the progress of a suit that the complainant 
 is personally disqualified from suing, the suit cannot proceed, 
 though the other shareholders are entitled to relief. " As, 
 
 & J. 158; Samuel v. HoUaday, 1 to complain. iJe Syracuse, &o. E. K. 
 
 Woolw. 416; Watts's Appeal, 78 Pa. Co., 91 N. Y. 1 ; Weed v. Little Falls, 
 
 St. 370; Peabody v. Flint, 6 Allen, &o. R. R. Co., 31 Minn. 154. 
 57 ; Thompson v. Lambert, 44 Iowa, ^ Blozam v. Metropolitan Ry. 
 
 239 ; Kent v. Quicksilver Mining Co., L. R. 3 Ch. 337, 354. Infra, 
 
 Co., 78 N. Y. 159, 188; Kitchen v. § 268. 
 
 St. Louis, &c. Ry. Co., 69 Mo. 224, " Ffooks v. South Western Ry. 
 
 264. Co., 1 Sm. & G. 142, 164 ; Graham v. 
 
 It is evident that shareholders Birkenhead, &c. Ry. Co., 2 MaoN. 
 
 ■who were parties or privies to a & G. 146; Leo v. Union Pao. Ry. 
 
 wrong cannot afterwards be heard Co., 19 Fed. R. 283. 
 
253 BIGHTS AND EEMEDIES OF SHAREHOLDERS. § 266 
 
 on the one hand, a plaintiff, who has a right to complain of 
 an act done to a numerous society of which he is a member, 
 is entitled effectually to sue on behalf of himself and all 
 others similarly interested, though no other may wish to sue, 
 so, although there are a hundred who wish to institute a suit 
 and are entitled to sue, still if they sue by a plaintiff who has 
 personally precluded himself from suing, that suit cannot 
 proceed." ^ 
 
 § 265. A Transferee of Shares acquires the Rights of the for- 
 mer Holder. — A shareholder who has acquired his shares 
 after an unauthorized transaction has taken place certainly 
 cannot base his complaint on the ground that he has suffered 
 a wrong, or that his equitable rights have been infringed. 
 Under these circumstances, the plaintiff's cause of action, if 
 he have any, is derived by purchase and transfer from the 
 former holder of the shares. 
 
 It has been pointed out that the estate of a corporation is 
 to be treated as that of a continuing institution, irrespective 
 of the members at any particular time composing it. Each 
 share represents an interest in the entire concern, and the 
 several holders are entitled to equal rights irrespective of the 
 time when they acquired their shares. Causes of action be- 
 longing to the corporation increase the value of the corpo- 
 rate estate, and must be treated like any other assets ; when 
 enforced, they inure to the benefit of all the shareholders 
 without distinction. It is plain, therefore, that a shareholder 
 has an interest in all causes of action belonging to the cor- 
 poration, whether they arose before or after he purchased 
 his shares.^ If the courts decline to protect this interest in 
 any particular case, their refusal must be based upon some 
 principle of public policy, or the personal disqualification of 
 the plaintiff. 
 
 § 266. When a subsequent Transferee of Shares may sue. — 
 There seems to be no good reason why a shareholder should 
 
 1 Burt V. British, &o. Assur. Central R. R. Co. v. Collins, 40 Ga. 
 
 As3., 4 De G. & J. 158, 174; Bel- 616. 
 
 mont V. Erie Ry. Co., 52 Barb. 663; ^ Ervin v. Oregon Ry., &c. Co., 
 
 Hubbell V. Warren, 8 Allen, 173; 28 Hun, 269. 
 
§ 267 THE LAW OF PRIVATE COKPOKATIONS. 254 
 
 not, as a rule, be permitted to sue on account of causes of 
 action which arose before he purchased his shares, it being 
 assumed, of course, that the corporation ought to sue, but is 
 unable to act. If purchasers were disqualified from protect- 
 ing their interests under these circumstances, the transfera- 
 ble value of shares might be impaired, and the loss would fall 
 upon the innocent holders who were wronged. 
 
 It is not material that the plaintiff knew of the wrongs 
 complained of before purchasing the shares,^ or that he 
 purchased them with the intention of bringing suit in the 
 interest of a rival company, and not for the benefit of his 
 associates.^ Courts cannot investigate the secret intentions 
 of parties, or refuse to protect their apparent and substantial 
 rights by reason of some ulterior improper design. The pur- 
 pose with which a shareholder obtained his shares and began 
 the litigation should merely be considered as a circumstance 
 tending to discredit his case. 
 
 The general rule appears to be settled in accordance with 
 these views,^ but there are certain qualifications which must 
 not be overlooked. 
 
 § 267. Rights of a Transferee of a Shareholder who is dis- 
 qualified from suing. — A purchaser of shares acquires no 
 greater rights than the prior holder. If a violation of the 
 corporate rights is acquiesced in by all the shareholders, the 
 cause of action becomes extinguished thereby, and no share- 
 
 1 In Seaton v. Grant, L. R. 2 Ch. Pr. n. s. 174; Camblos v. Philadel- 
 
 459, 463, the plaintiff, who had lost phia, &o. R. R. Co., 4 Brewster, 
 
 large sums by speculating in the 563,591,592; Sandford p. Railroad 
 
 shares of a company, afterwards Co., 24 Pa. St. 378. 
 
 purchased a few shares for the pur- . ' See oases in the last two notes, 
 
 pose of bringing suit on account of The opinion of the court in Hawes 
 
 mismanagement of the company's v. Oakland, 104 U. S. 450, is not 
 
 affairs, and it was held that he was in conflict with this doctrine. The 
 
 not disqualified. See also Salisbury rule formulated in that case, and 
 
 V. Metropolitan Ry. Co., 38 L. J. subsequently promulgated as Equity 
 
 Ch. 249, 251; and see cases in the Rule94, wasdesignedtopreventsuits 
 
 following notes. from being brought in the Federal 
 
 ^ See Colman v. Eastern Counties courts by collusion, when they ought 
 
 Ry. Co., 10 Beavan, 1; Ramsey v. properly to be brought in the State 
 
 Gould, 57 Barb. 398 ; b. c. 8 Abb. courts. See infra, § 269. 
 
255 EIGHTS AND REMEDIES OP SHAREHOLDERS. § 268 
 
 holder, present or future, would be entitled to complain.^ 
 But where there has been no general acquiescence that binds 
 the corporation, individual shareholders who have acquiesced 
 retain their interest in the cause of complaint, although they 
 are personally disqualified from suing ;2 and this interest 
 would pass to a transferee of the shares. The latter would 
 not necessarily be disqualified as a suitor because the prior 
 holders were personally disqualified. If the transferee pur- 
 chased the shares in good faith, and without notice of the 
 fact that the prior holders had precluded themselves from 
 suing, he would have as just a title to relief as if he had pur- 
 chased from a shareholder who was under no disability. 
 
 It is eminently proper, however, that a purchaser of shares 
 who was aware that the prior holder had barred his right to 
 relief by acquiescence should also have no standing in court. 
 Neither immediate justice nor public policy would require 
 that the transferee, under these circumstances, should be 
 accorded any greater rights than the transferor.^ 
 
 § 268. Applications for preventive Relief. — A purchaser of 
 shares has at least as good a right as the prior holder to re- 
 strain the performance of an unauthorized contract made on 
 behalf of the corporation. The purchaser is certainly en- 
 titled to insist that the company's agents shall do their duty 
 after he has become a shareholder. He is entitled to insist 
 that they shall not misapply the company's funds, and place 
 its franchises in jeopardy, by doing unlawful acts under a 
 contract which was never binding. And if the agents of the 
 company do attempt, in violation of their duty, to carry out 
 the void agreement, he can in good faith come into court and 
 say that his rights are being infringed. Lord Chancellor 
 Chelmsford said : " It never ean be held that the acquies- 
 cence of the original holder of stock in illegal acts of the 
 directors of a company will bind a subsequent holder of that 
 stock to submit to all future acts of the same character." * 
 
 1 Infra, §§ 605-610. Kent v. Co., 1 Sm. & G. 142; Re Syracuse, 
 
 Quicksilver Mining Co., 78 N. Y. &o. R. R. Co., 91 N. Y. Ij Kent v. 
 
 159, 187, 188. Quicksilver Mining Co.,78 N.Y. 159. 
 
 => Supra, § 262. * Bloxam ». Metropolitan Ry. 
 
 « Ffooks V. South Western Ry. Co., L. R. 3 Ch. 337, 354. 
 
§ 269 THE LA-W OV PRIVATE COEPORATIONS. 256 
 
 But the courts exercise their discretion in granting or 
 withholding relief under these circumstances ; ^ and it is clear 
 that a purchaser of shares who has notice of equities affect- 
 ing the rights of the prior holder is in no better position 
 than the latter to ask for equitable relief.- 
 
 § 269. Practice in the Federal Courts. — The Circuit Courts 
 of the United States are authorized by act of Congress of 
 1875 to dismiss any suit in which it appears that the parties 
 have been improperly or collusively made or joined for the 
 purpose of creating a case cognizable under that act.^ 
 
 The following Equity rule,* was subsequently promulgated 
 by the Supreme Court in order to guard against suits brought 
 collusively by stockholders for the purpose of obtaining the 
 jurisdiction of the Federal courts by reason of the citizen- 
 ship of the parties: — 
 
 " Every bill brought by one or more stockholders in a cor- 
 poration 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 trans- 
 action of which he complains, or that his share had devolved 
 upon 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. It must also set forth with particularity the 
 efforts of the plaintiff to secure such action as he desires on 
 the part of the managing directors or trustees, and, if neces- 
 sary, of the shareholders, and the causes of his failure to 
 obtain such action." 
 
 1 Leo V. Union Pac. Ry. Co., v. Dean, 106 U. S. 537; Dimpfell 
 
 19 Fed. R. 283; and see supra, v. Ohio, &c. Ry. Co., 110 U. S. 
 
 § 263. 209 ; Greenwood v. Freight Co., 
 
 = Ffooks V. South Western Ry. 105 U. S. 13, 16 ; Dannmeyer v. 
 
 Co., 1 Sm. & G. 142. Compare Coleman, 11 Fed. R. 97 ; Leo i>. 
 
 Re Syracuse, &c. R. R. Co., 91 Union Pacific Ry. Co., 17 Fed. 
 
 N. Y. 1. R. 273 ; Foote v. Cunard Mining 
 
 » Act of March 3, 1875, sec. 5. Co., 17 Fed. R. 46 ; McHenry v. 
 
 « Equity Rule 94, Preface to 104 New York, &o. R. R. Co., 22 Fed. 
 
 U. S. Rep. With regard to the R. 180. 
 application of the rule, see Detroit 
 
257 EIGHTS AND REMEDIES OF SHAEBHOLDEES. § 271 
 
 The abuses which led to the enactment of this rule are 
 pointed out by Mr. Justice Miller, in delivering the opinion 
 of the Supreme Court in the case of Hawes v. Oakland.^ 
 
 The Supreme Court has authority under the Judiciary Act 
 to establish rules of practice, but not to alter the substantive 
 law. Equity Rule 94 is mainly declaratory of the existing 
 law ; the only material change which it makes is to require 
 the plaintiff to show that he was a shareholder at the time 
 of the transaction of which he complains, or that his share 
 has devolved upon him since by operation of law. This 
 requirement was evidently designed as a rule of practice 
 merely, and was deemed by the Supreme Court to be ne- 
 cessary in order to guard the courts from being imposed upon 
 by collusion of the parties. 
 
 § 270. When a Shareholder is entitled to Relief. — General 
 Rule. — In the preceding sections, various principles have 
 been discussed which determine the right of a shareholder to 
 obtain relief in a court of equity on account of wrongs affect- 
 ing his interest in the corporation. A general rule, applying 
 to all the cases, may be stated in the following words : — 
 
 A shareholder is entitled to relief in a court of equity on 
 account of any infringement of his equitable rights as member 
 and beneficiary of a corporation, provided, first, that the cor- 
 poration itself be unable, by reason of the default of its agents, 
 to obtain an adequate remedy within a reasonable time ; and, 
 secondly, that the right to obtain redress for the injury be not 
 impliedly relinquished by the shareholders to the discretion 
 of the regular agents of the corporation, as a mutual conces- 
 sion for the sake of peace and good government. 
 
 § 271. What constitutes an Infringement of the Equitable 
 Rights of a Shareholder.^ — The question what constitutes an 
 infringement of the equitable rights of a shareholder in the 
 corporate concerns presents no difficulties, in theory at least. 
 A corporation and its shareholders are identical ; it is a volun- 
 tary association, whose constitution is set forth in its charter or 
 articles of association, and the general laws. Obviously, then, 
 
 ' Hawes v. Oakland, 104 U. S. ^ This refers only to the collective 
 450. rights of shareholders. Supra, § 235. 
 
 VOL. I. — 17 
 
§ 272 THE LAW OF PEIVATE COEPOEATIONS. 258 
 
 any injury to a corporation must be an injury to its share- 
 holders ; and it follows, that, subject to the limitations which 
 have been pointed out, a shareholder is entitled to relief in 
 equity on account of any wrong constituting an infringement 
 of the corporate rights.^ 
 
 A suit of this character is brought to enforce the corporate 
 or collective rights, and not the individual rights of the share- 
 holders. It may therefore properly be regarded as a suit 
 brought on behalf of the corporation,^ and the shareholder 
 can enforce only such claims as the corporation itself could 
 enforce.^ Moreover, the essential character of a cause of ac- 
 tion belonging to a corporation remains the same, whether 
 the suit to enforce it be brought by the corporation or by 
 a shareholder. Thus a legal right of action would not be 
 treated as an equitable one, or become governed by the 
 rules applicable to equitable causes of action, as to limita- 
 tions, etc., because a shareholder has brought suit in equity 
 to enforce it on behalf of the company.* 
 
 A shareholder who successfully prosecutes such an action 
 on behalf of the corporation is ordinarily entitled to be reim- 
 bursed his reasonable expenses of the litigation, including at- 
 torney's fees, out of the corporate funds.^ 
 
 § 272. Wrongs committed \>y Individual Shareholders. — The 
 same rule applies where a portion of the shareholders were 
 parties to the wrong complained of. If some of the share- 
 holders of a corporation are guilty of a wrong affecting the 
 other shareholders only through their equitable interest in 
 the company, the proper means of redress is through the cor- 
 poration; and it is only when this remedy is not available 
 that a shareholder can sue in his own name. 
 
 It is true that an act committed by a portion of the mem- 
 bers of a corporation cannot, in the nature of things, be a 
 wrong against the whole company ; it can be a wrong only 
 
 1 See Dodge v. Woolsey, 18 How. * Pierson v. McCurdy, 33 Hun, 
 331 ; Pond v. Vermont Valley R. R. 520. Compare BrinokerhofE v. Bost- 
 Co., 12 Blatchf. 280. wick, 99 N. Y. 185. 
 
 2 Supra, § 257. » Meeker o. Winthrop Iron Co., 
 « Buford V. Keokuk, &o. Packet 17 Fed. R. 48. 
 
 Co., 69 Mo. 611 ; see also supra, § 261. 
 
259 EIGHTS AND KBMEDIES OF SHAKBHOLDERS. § 273 
 
 against those shareholders who were not parties to the act. 
 Ye~t it is impossible, under these circumstances, to work out 
 the exact rights of the individual shareholders, except by re- 
 garding the corporation as a separate entity, and by treating 
 the wrong as a wrong against the whole corporation. Bach 
 shareholder has an interest in the corporate concern as an en- 
 tirety, and his rights must be protected accordingly. A re- 
 covery by the corporation as an entirety against a portion of 
 its members would inure to the benefit of each shareholder 
 in proportion to his interest. Those shareholders who were 
 charged with liability irrespective of their membership in the 
 corporation would be recouped to the extent of their inter- 
 ests through the enhancement of the value of their shares, 
 and exact justice would thus be meted out to all the parties. 
 
 § 273. Acts causing a Forfeiture of Franchises or Stoppage of 
 Business. — Every shareholder has an interest in the continued 
 existence of the corporation of which he is a member, and the 
 preservation of the franchises which were granted to him and 
 his co-corporators. No better cause for the interference of a 
 court of equity at the suit of a shareholder can be stated, than 
 that the managing agents of a corporation, or the majority, 
 are about to do unauthorized acts, which would tend to bring 
 about the destruction of the corporation itself, by forfeiture of 
 its charter or otherwise. Such acts would cause irreparable 
 injury to every dissenting shareholder.^ 
 
 Upon the same principle, the courts will interfere whenever 
 the managing agents of a corporation cannot, or will not, prop- 
 erly carry on its business ; as where two boards of directors 
 both claim to be lawfully constituted, and neither will proceed 
 to litigation in order to test the question, or where disputes 
 have arisen between the properly constituted agents, causing 
 a deadlock in the management of the corporate affairs.^ 
 
 1 Bendall v. Crystal Palace Co., 3 Jones, Eq. 183; Stewart v. Erie, 
 
 4 K. & J. 326. See also Pond v. &c. Transp. Co., 17 Minn. 372, 400; 
 
 Vermont Valley K. K. Co., 12 Eogers v. Lafayette Agricultural 
 
 Blatehf. 280; Bliss v. Anderson, Works, 52 Ind. 304. 
 31 Ala. 613; Manderson«. Commer- ^ Pond v. Vermont Valley R. R. 
 
 cialBank, 28 Pa. St. 379; Wiswall Co., 12 Blatehf. 280; Featherstone 
 
 V. Greenville, &c. Flank Road Co. , v. Cooke, L. R. 16 Eq. 298 , Lehigh 
 
§ 274 THE LAW OF PEIVATE CORPOEATIONS. 260 
 
 A shareholder has a clear right to relief where the direc- 
 tors wrongfully refuse to call a meeting for the election of 
 new officers, and a meeting cannot be regularly called except 
 by action of the directors. The remedy under these circum- 
 stances is by bill in equity on behalf of the corporation,^ or, 
 when the obligation to call a meeting is imposed by statute or 
 the charter, by writ of mandamus.^ 
 
 § 274. Violations of the Charter Agreement. — Misapplication 
 of Funds. — The property of a corporation in equity belongs 
 to its shareholders. It is contributed by them for the uses 
 indicated in the charter, and no others. The agents of the 
 company are invested by the shareholders with authority to 
 manage the corporate affairs ; but they have no authority 
 beyond that which is conferred upon them by unanimous con- 
 sent through the charter. If any of the agents of a corpora- 
 tion deal with the property or use the credit of the company 
 for a purpose not authorized by the charter, this will be a 
 good cause for complaint by any dissenting shareholder. 
 
 Even the majority have no right to direct the affairs of a 
 corporation except in accordance with the provisions of its 
 charter ; for the powers of the majority are derived wholly 
 from the agreement of the shareholders, as set out in the 
 charter. Every individual shareholder has a right to stand 
 upon his contract, and forbid any departure from its terms.* 
 It may, accordingly, be stated as a rule, that any departure 
 from the chartered purposes of a corporation is an injury to 
 every individual shareholder, for which the courts will, under 
 proper circumstances, provide a remedy.* 
 
 Coal, &c. Co. V. Central R. R. Co., Woodrufe, 13 N. J. Law, 352 ; Re- 
 
 35N. J. Eq. 349. Compare Einstein gina v. Aldham, &c. Ins. Soc, 6 
 
 V. Rosenfeld, 38 N. J. Eq. 309. Eng. L. & Eq. 365 ; 8. c. 15 Jur. 
 
 1 Cases supra; Lehigh Coal, &o. 1035. 
 Co. V. Central R. R. Co., 35 N. J. » Infra, §§ 622-626; Sellers v. 
 
 Eq. 349 ; Elkins i-. Camden &c. R. R. Phoenix Iron Co., 14 Phila. 484. 
 Co., 36 N. J. Eq. 467, affirmed 37 * The principles above stated 
 
 N. J. Eq. 273. have been acted upon in a large 
 
 ^ People ». Cummings, 72 N. Y. number of cases. See Central R. R. 
 
 433; State v. Wright, 10 Nev. 167; Co. v. Collins, 40 Ga. 582, 617 
 
 People V. Governors of Albany Hos- Hazard v. Durant, 11 R. I. 195 
 
 pital, 61 Barb. 397; McNeely ». Dodge v. Woolsey, 18 How. 331 
 
261 EIGHTS AND EEMEDIES OF SHAREHOLDERS. § 275 
 
 § 275. Unauthorized Acta causing Liability. — It follows, for 
 the same reasons, that the agents of a corporation will be en- 
 joined, at the suit of a shareholder, from issuing negotiable 
 instruments in the name of the corporation for an unauthor- 
 ized purpose ; for negotiable instruments, though issued by 
 an agent in excess of his authority, may become binding upon 
 the company after they have passed into the hands of a bona 
 fide purchaser.^ The same principle and the same rule apply 
 in case of an unauthorized issue of certificates for shares.* 
 
 It is clearly a good cause for the interference of a court of 
 equity, that the managing agents of a corporation, or the ma- 
 jority of shareholders, in violation of their duty, refuse to 
 defend suits brought against the company .^ Where there is 
 
 March v. Eastern R. E.. Co., 40 
 N. H. 567; 43 N. H. 532; Sears ». 
 Hotohkiss, 25 Conn. 175 ; Pratt 
 V. Pratt, 33 Conn. 446; Kean v. 
 Johnson, 1 Stockt. 401; Lauman v. 
 Lebanon Valley R. R. Co., 30 Pa. 
 St. 46; Taylor v. Miami Exporting 
 Co., 5 Ohio, 162; Brewer v. Bos- 
 ton Theatre Co., 104 Mass. 378; 
 Platteville v. Galena, &c. R. R. 
 Co., 43 Wis. 493; Carpenter v. New 
 York, &c. R. R. Co., 5 Abb. Pr. 277 ; 
 Kelly V. Mariposa Land, &c. Co., 
 4 Hun, 632; Tippecanoe Co. v. La- 
 fayette, &c. R. R. Co., 50 Ind. 86; 
 Rogers v. Lafayette Agricultural 
 Works, 52 Ind. 297; Tipton Fire 
 Co. u. Barnheisel, 92 Ind. 88 ; Un- 
 derwood V. New York, &c. R. R. Co., 
 17 How. Pr. 537; Stewart v. Erie, 
 &c. Transp. Co., 17 Minn. 372, 398; 
 Faulds V. Yates, 57 111. 416; Terwilli- 
 ger V. Great Western Tel. Co., 59 111. 
 249 ; Chetlain v. Republic Life Ins. 
 Co., 86 111. 220, 222; Knoxville v. 
 Knoxville, &c. R. R. Co., 22 Fed. 
 R. 758 ; Natusch o. Irving, Gow on 
 Partn. 576 ; Beman v. Rufford, 1 
 Sim. N. s. 550; Winch v. Birken- 
 head, &c. Ry. Co., 5 De G. & Sm. 562 ; 
 Charlton v. New Castle, &c. Ry. Co., 
 
 5 Jur. N. s. 1096 ; Salomons «. Laing, 
 12 Beav. 339; Cohen v. Wilkinson, 
 Id. 125 ; Colman v. Eastern Counties 
 Ry. Co., 10 Beav. 1 ; Simpson v. 
 Denison, 10 Hare, 51 ; Bagshaw v. 
 Eastern Union Ry. Co., 7 Hare, 
 114; 2 MaoN. & G. 389; Pickering 
 V. Stephenson, L. R. 14 Eq. 322. 
 
 ^ Hoole V. Great Western Ry. Co., 
 L. R. 3 Ch. 262; White v. Carmar- 
 then, &c. Ry. Co., 1 H. & M. 786; 
 Central R. R. Co. v. Collins, 40 Ga. 
 582. Compare infra, § 577. 
 
 2 Fraser v. Whalley, 2 H. & M. 
 10 ; Hoole v. Great Western Ry. Co., 
 L. R. 3 Ch. 262; Button v. Scar- 
 borough ClifE Hotel Co., 2 Dr. & 
 Sm. 514, 521; Kent v. Quicksilver 
 Mining Co., 78 N. Y. 159; 12 Hun, 
 53 ; Hoyt u. Quicksilver Mining Co., 
 17 Hun, 169. Infra, § 585. 
 
 ' Bronson v. La Crosse, &c. R. R. 
 Co., 2 Wall. 302; Menierw. Hooper's 
 Telegraph Works, L. R. 9 Ch. 350; 
 Dodge V. Woolsey, 18 How. 331. 
 A shareholder cannot file an answer 
 and defend a suit in the name of 
 the corporation, though the com- 
 pany's agents wrongfully refuse to 
 make a defence; nor can he inter- 
 vene merely because he holds all 
 
§ 277 THE LAW OF PRIVATE COEPOEATIONS. 262 
 
 reason to suspect that the directors are in collusion with par- 
 ties who have brought suit against the corporation, the indi- 
 vidual shareholders should be allowed to intervene.^ 
 
 § 276. Payment of Dividends. — Every shareholder in a 
 corporation is entitled to have the capital preserved unim- 
 paired, for the purpose of carrying on the business for which 
 the company was formed. Dividends can be paid only out 
 of profits ; and any attempt to distribute capital in the shape 
 of dividends will be enjoined by a court of chancery, upon 
 application of a dissenting member.^ Profits earned by a 
 corporation may be distributed as dividends, but this is not 
 obligatory. The managing agents of the company have a 
 discretionary power to determine the time and manner of 
 making the payment ; and they are, in many instances, au- 
 thorized to reinvest the profits in the business of the com- 
 pany.^ This discretion cannot be impaired by the courts. 
 But it should be remembered, that the ultimate object for 
 which every ordinary trading corporation is formed is the 
 payment of dividends to its individual members. If the 
 agents of a company wrongfully refuse to distribute profits, 
 when it is their duty to do so, a court of equity will grant 
 relief at the suit of anj'' shareholder.* 
 
 § 277. Individual and Collective Rights. — If the agents of 
 a corporation attempt to make a distribution of assets among 
 the shareholders when they ought not to do so, or if they 
 refuse to distribute profits when it is their duty to make a 
 
 the stock in the company. To war- Co., 38 L. J. Ch. 249; Fawcett v. 
 
 rant intervention by a shareholder, Laurie, 1 Dr. & Sm. 192; Carlisle v. 
 
 a case for equitable relief on account Southeastern Ry. Co., 1 MacN. & G. 
 
 of the default of the company's 689; Browne u. Monmouthshire Ry., 
 
 agents must be shown. Bronson &o. Co., 13 Beav. 32; CoatesB. Not- 
 
 V. La Crosse, &c. R. R. Co., 2 Wall, tingham W. W. Co., 30 Beav. 86; 
 
 283, 301; Park «. Petroleum Co., Carpenter v. N. Y., &o. R. R. Co., 
 
 25 W. Va. 108. 5 Abb. Pr. 277. 
 
 1 Bayliss v. La Fayette, &c. Ry. » See infra, § 427. 
 
 Co., 8 Biss. 193. * Beers v. Bridgeport Spring Co., 
 
 '■' Macdougall v. Jersey Imperial 42 Conn. 17; Scott v. Eagle Fire 
 
 Hotel Co., 2 H. & M. 528; Bloxam Co., 7 Paige, 203. Compare Stevens 
 
 V. Metropolitan Ry. Co., L. R. 3 Ch. v. South Devon Ry. Co., 9 Hare, 313; 
 
 337; Salisbury v. Metropolitan Ry. Pratt v. Pratt, 33 Conn. 446. 
 
263 EIGHTS AND EEMEDIES OF SHAEEHOLDEES. § 277 
 
 distribution, this constitutes a violation of the collective 
 rights of the shareholders. Individual shareholders can 
 therefore sue only provided they have exhausted every 
 means of obtaining redress through the corporation. Their 
 claim would not be against the corporation, but through the 
 corporation and on its behalf.^ 
 
 A different case is presented where the agents of a corpo- 
 ration attempt, while acting in the name of the company, to 
 deprive individual shareholders of their rights of member- 
 ship. Under these circumstances, those shareholders who 
 are wronged may treat the wrong as one committed by the 
 corporation through its agents against themselves personally, 
 and may apply for relief accordingly. The plaintiffs' claim 
 would be against the corporation, and not through the cor- 
 poration against the parties who committed the wrong. 
 The suit would not be in the form of an ordinary share- 
 holders' suit, and it would not be necessary to show a pre- 
 vious demand upon the directors to proceed on behalf of the 
 corporation. 
 
 Thus, if the shares of a member are unlawfully declared 
 forfeited, it seems he may sue the corporation for the value 
 of his shares,^ or he may, by bill in equity annul the unau- 
 thorized forfeiture, and compel the agents of the company 
 to issue to him a certificate of shares, and accord to him 
 all the rights and privileges of membership.^ It has also been 
 held repeatedly, that, where a member of an incorporated 
 society or club has been wrongfully expelled, mandamus is a 
 proper remedy to compel the corporation to restore him to 
 membership.* 
 
 1 Supra, § 235. tarn v. Eastern Counties Ry. Co., 
 
 2 Supra, §§ 212-218. 1 J. & H. 243; Taylor ». Midland 
 8 Sweny v. Smith, L. R. 7 Eq. Ry. Co., 29 L. J. Ch. 731 ; 8H.L.C. 
 
 324; Adley v. Whitstable Co., 17 751; Sloman v. Bank of England, 
 
 Vesey, 315. Compare Naylor v. 14 Sim. 475 ; Telegraph Co. v. Day- 
 
 South Devon Ry. Co. , 1 De G. & Sm. enport, 97 U. S. 369. 
 32; Norman v. Mitchell, 5 De G., * State v. Georgia Med. Soc, 38 
 
 M. &G. 648. Ga. 608; Sibley v. Carteret Club, 
 
 See Pratt v. Taunton Copper, &c. 40 N. J. L. 295; Evans u. Philadel- 
 
 Cc, 123 Mass. 112; Johnston v. phia Club, 50 Pa. St. 107; People 
 
 Ronton, L. R. 9 Eq. 181-188; Cot- v. Mechanics' Aid Soc, 22 Mich. 
 
§ 279 THE LAW OF PKIVATB COEPOEATIONS. 264 
 
 § 278. An unauthorized act may be at the same time in 
 violation of the individual rights of particular shareholders 
 and of the collective rights of all the shareholders. In this 
 case those shareholders who are specially injured would have 
 a right to proceed individually against the company, while 
 any shareholder might proceed by shareholders' bill against 
 the wrong-doers, for the protection of the collective rights of 
 the company. Any wrongful invasion of the rights of indi- 
 vidual shareholders which might subject the corporation to a 
 claim for damages, or which might injuriously affect the col- 
 lective interests of all the shareholders, would seem to justify 
 a proceeding in either form.i 
 
 § 279. Unfair Discrimination among the Shareholders. — The 
 shareholders in a corporation are by the implied terms of 
 their charter entitled to equal rights, unless the contrary be 
 expressly provided.^ If the agents of the company attempt 
 to discriminate against individual shareholders, or to deprive 
 them of their rights of membership, the parties aggrieved 
 may sue for relief in equity. Under these circumstances, 
 the only remedy is in equity, since the courts of law do not, 
 as a rule, recognize the contractual relation between the 
 members of a corporation and the individual rights resulting 
 therefrom. 
 
 Thus, a bill in equity may be maintained by a shareholder 
 to prevent an unfair distribution of the profits of the com- 
 pany,* or an unfair distribution of a new issue of shares.* 
 
 86 ; State v. Chamber of Commerce, his shares. This form was probahly 
 20 Wis. 63; Delacy u. Neuse River not necessary, though entirely proper. 
 Nav. Co., 1 Hawks (N. C), 274; The complainant had an indepen- 
 Commonwealth ». St. Patrick's Be- dent cause of complaint beside that 
 nevolent Soc, 2 Binn. 442. which was common to all the share- 
 It has been held that a bill in holders, 
 equity to restrain the Board of Trade ' Infra, § 302 et seq. 
 of Chicago, and its officers, from ex- ' Harrison v. Mexican Ey. Co., 
 pelling one of its members, cannot L. R. 19 Eq. 358 ; Luling v. Atlantic 
 be maintained. Sturges v. Board Mut. Ins. Co., 45 Barb. 510; Ryan u. 
 of Trade of Chicago, 86 111. 441. Leavenworth, &c. Ey. Co., 21 Kans. 
 1 In Sweny v. Smith, L. R. 7 Eq. 366. But see Jackson v. Newark 
 324, the suit was brought by the com- Plank Road Co. , 31 N. J. Law, 277. 
 plainant on behalf of all the other * Dousman v. Wisconsin, &c. 
 shareholders to annul a forfeiture of Mining, &c. Co., 40 Wis. 418. 
 
265 KIGHTS AND EEMBDIES OP SHAKEHOLDBES. § 281 
 
 The same remedy may be obtained in order to prevent an 
 unequal and unfair assessment, and to redress any injustice 
 done to a portion of the shareholders in order, to favor 
 others.^ The suit might be either in the form of a share- 
 holders' bill, on account of the refusal of the company's 
 agents to proceed against the wrong-doers, or in the form of 
 a bill against the corporation for a specific performance of 
 the plaintiffs individual rights. Where the wrong is done, 
 or is threatened to be done, to a particular class of share- 
 holders, the suit may be brought by the plaintiff on behalf of 
 all those similarly interested. 
 
 § 280. Remedy of Holder of Preferred Shares, — Where cer- 
 tain shareholders are entitled to privileges which do not be- 
 long to the other members of the company, the courts will 
 provide a remedy for the infringement of these privileges by 
 the other shareholders or the company's agents. Thus, it 
 has been held repeatedly that a holder of shares, which con- 
 fer a preference to the other shareholders, in the payment of 
 dividends, is entitled to enforce his prior rights by bill in 
 equity.^ 
 
 § 281. The Courts will not interfere unnecessarily with the 
 Management of a Corporation. — A court of equity will grant 
 all relief to a shareholder which the nature of his case may 
 require. But it has always been a settled principle, that no 
 interference with the management of a corporation can be 
 justified, unless such interference be absolutely necessary to 
 the attainment of justice. 
 
 The reason of this rule is obvious. The officers of a cor- 
 poration are generally elected by vote of the shareholders. 
 Every shareholder has a voice in their appointment, and may 
 
 1 Preston v. Grand Collier Dock 356; Bailey v. Hannibal, &c. R. R. 
 Co., 11 Sim. 327; Bailey «. Birken- Co., 1 Dill. 174; 17 Wall. 96; 
 head, &o. Ry. Co., 12 Beav. 433; Prouty v. Michigan Southern, &c. 
 Macon, &c. R. R. Co. v. Vason, 57 R. R. Co., 1 Hun, 655; Thompson v. 
 Ga. 314, 316, 317. Erie Ry. Co., 45 N. Y. 468; Board- 
 
 2 Henry v. Great Northern Ry. man v. Lake Shore, &c. Ry. Co., 
 Co., 4 K. & J. 1; 1 De G. & J. 606; 84 N. Y. 157, 180. See also infra, 
 Sturge V. Eastern Union Ry. Co., § 442. 
 
 7 De G., M. & G. 158; Smith v. As to rights of holders of pre- 
 Cork, &o. Ry. Co., Ir. Rep. 3 Eq. ferred shares, see infra, §§ 436-441. 
 
§ 282 THE LAW OP PEIVATE CORPORATIONS. 266 
 
 insist that they shall represent the corporation when duly 
 appointed. If an officer is guilty of a breach of duty, he 
 may in many cases be removfed by act of the corporation ; 
 but no minority of the shareholders have any authority to 
 restrain his action, or remove him and appoint another officer 
 in his place. Nor can a court of chancery interfere at the 
 suit of a portion of the shareholders and remove an offend- 
 ing officer, or even enjoin him generally from acting for the 
 corporation, unless this be essential to the protection of the 
 corporate rights ; as, for example, where the directors have 
 conspired to defraud the corporation, or have otherwise shown 
 themselves to be totally unfit to be intrusted any longer 
 with the management of the company's affairs. The court 
 must ordinarily confine its remedy to the redress of the spe- 
 cific wrongs which have been charged.^ 
 
 The appointment of a receiver or manager of a solvent cor- 
 poration must therefore be considered a strong remedy, which 
 can be justified only in a strong case ; and the management 
 of the corporation should be restored to its shareholders as 
 soon as this can be done with safety. Thus, in Featherstone 
 V. Cooke,^ Vice-Chancellor Malins appointed a receiver for 
 a company because disputes had arisen between its mana- 
 ging agents, which caused a stoppage of the business and 
 threatened to entail great loss upon the shareholders; but 
 he discharged the receiver as soon as a general meeting of 
 the shareholders had been called and new officers had been 
 chosen. 
 
 § 282. Winding up a Corporation at the Suit of a Share- 
 holder. — There is a distinction between the legal dissolution 
 of a corporation by extinguishment of its franchises, and a 
 mere cessation of business and distribution of assets. In the 
 former case, the corporate association is wholly destroyed in 
 
 1 Converse v. Dimock, 22 Fed. Gratt. 819; Waterburyu. Merchants' 
 R. 573; Bayless v. Ome, 1 Freem. Union Exp. Co., 50 Barb. 158; s. c. 
 Ch. (Miss.) 161; Neall v. Hill, 16 3 Abb. Pr. n. s. 163; Belmont v. 
 Gal. 146, 148. See Hardon v. New- Erie Ky. Co., 52 Barb. 687. See 
 ton, 14 Blatchf. 876. Lawrence v. Greenwich Fire Ins. 
 
 2 Featherstone v. Cooke, L. R. 16 Co., 1 Paige, 587. Infra, § 523. 
 Eq. 298; Stevens v. Davison, 18 
 
267 EIGHTS AND BEMEDIES OP SHAEEHOLDBES. § 283 
 
 contemplation of law, in the latter case, it does not necessarily 
 cease to exist. 
 
 It is well settled that the shareholders in a corporation 
 have no power to extinguish its charter and dissolve it ; nor 
 can a court of chancery dissolve it at their request. In the 
 absence of a statutory provision, the franchises of a corpora- 
 tion can be declared forfeited and extinguished only at the 
 suit of the State in an appropriate proceeding at law ; and 
 chancery has no jurisdiction whatever to declare them for- 
 feited at the suit of a shareholder or of a stranger to the 
 company.^ 
 
 § 283. 'When the Court will refuse to wind up a Company. — 
 If the charter of a corporation fixes its duration at a definite 
 period of time, it is part of the agreement of the shareholders 
 that the company shall continue in operation at least during 
 the time limited ;2 and if no definite time is fixed, it is imphed 
 that the duration of the company shall be indefinite.^ In 
 some instances the majority of shareholders have a discretion- 
 ary power to wind up the company's business, whenever they 
 deem this to be desirable and in the interest of the whole as- 
 sociation.* But in no case have the minority any such power. 
 If shareholders in a corporation disapprove of the company's 
 management, or consider their speculation a bad one, their 
 remedy is to elect new officers, or to sell their shares and 
 withdraw. They cannot insist on having the company's busi- 
 ness closed, and the assets distributed, against the will of a 
 single shareholder, who wishes to have the business continued. 
 It is clear, therefore, that the courts cannot interfere at their 
 suit, and order the company to be wound up.^ 
 
 » Infra, §§ 982, 990. Strong v. Ry. Co., 52 Barb. 637; Denike v. 
 
 McCagg, 55 Wis. 624. New York, &c. Lime, &c. Co., 80 
 
 2 Infra, § 418. N. Y. 599 ; Bliven v. Peru Steel, &o. 
 
 » See in/ra, § 411. Co., 60 How. Pr. 280; Harden v. 
 
 * Infra, §§ 412, 413. Newton, 14 Blatchf. 376; Re Lou- 
 
 6 Bayless v. Orne, 1 Freem. Ch. isiana Savings Bank, &c. Co., 85 
 
 (Miss.) 161; Neall v. Hill, 16 Cal. La. Ann. 196 ; Baker v. Backus, 
 
 146; Howe v. Deuel, 43 Barb. 504; 32 111. 79; Fountain Ferry Turn- 
 
 Waterburyw. Merchants' Union Exp. pike Co. v. Jewell, 8 B. Monr. 
 
 Co., 50 Barb. 158; Belmont ». Erie 140. 
 
§ 285 THE LAW OF PRIVATE COKPOBATIONS. 268 
 
 § 284. When Relief granted. — The general rule stated in 
 the preceding section is not without exception. Whenever, 
 in the course of events, it proves impossible to attain the real 
 objects for which a corporation was formed, or when the fail- 
 ure of the company has become inevitable, it is the duty of 
 the company's agents to put an end to its operations, and to 
 wind up its affairs.^ Under these circumstances, the majority 
 would have no right to continue to use the common property 
 and credit for any purpose, because it would be impossible 
 to use them for any purpose authorized by the charter. If 
 the majority should attempt to continue the company's opera- 
 tions in violation of the charter, or should refuse to make a 
 distribution of the assets, any shareholder feeling aggrieved 
 would be entitled to the assistance of the courts ; and a de- 
 cree should be made ordering the directors to wind up the 
 company's business, and distribute the assets among those 
 who are equitably entitled.'^ 
 
 § 285. However, before the courts can thus interfere with 
 the management of a corporation, and order its business to be 
 wound up, it must be shown very plainly that the business 
 
 1 Infra, §411. If a corporation moneys are improperly retained, this 
 is formed to continue only for a def- court will make a decree in order 
 inite period of time, and the agents that they may be divided among 
 of the company neglect to wind it the various members." 
 
 up at the expiration of the time pre- See also cases cited in next sec- 
 scribed, any shareholder may file tion, and compare Baring v. Dix, 1 
 a bill in equity for that purpose. Cox, 213 ; Bailey v. Ford, 13 Sim. 
 Merchants', &c. Line v. Waganer, 71 495; Jennings <;. Baddeley, 3 K. & 
 Ala. 581. J. 78. 
 
 2 In Cramer v. Bird, L. R. 6 Eq. The court must take into consid- 
 143, a shareholder filed a bill to eration the whole state of affairs at 
 compel the directors of a corporation the time of the application. Neville 
 which had ceased to do business to v. Litchfield Carriage Co., 47 Conn, 
 make a distribution of the assets. 167. It has been held that all the 
 Lord Romilly, M. R. said (on page shareholders must be made parties 
 148): "I am of opinion that there to the suit. See Croft v. Lumpkin 
 cannot be a plainer equity than this: Chestatee Mining Co., 61 Ga. 465. 
 that where the functions of a cor- Upon winding up a corporation, 
 poration have ceased, the managers the shareholders have no claim at 
 of that corporation are bound to ac- law to a distribution of the assets ; 
 count for all moneys belonging to their rights are cognizable in equity 
 the corporation ; and when such only. Brown v. Adams, 5 Biss. 181. 
 
269 BIGHTS AND REMEDIES OF SHAEEHOLDEKS. § 286 
 
 cannot possibly be carried on any further without a departure 
 from the company's charter ; a court of chancery cannot impair 
 the discretionary powers conferred upon the majority by the 
 charter, and decide on their behalf whether the continuance 
 of the enterprise be advisable as a commercial speculation. 
 The rule was laid down by Lord Cairns, L. J., in the Subur- 
 ban Hotel Company's case, as follows : " If it were shown to 
 the court that the whole substratum of the partnership, the 
 whole of the business which the company was incorporated 
 to carry on, has become impossible, I apprehend the court 
 might, either under the act of Parliament or on general prin- 
 ciples, order the company to be wound up. But what I am 
 prepared to hold is this, that this court and the winding-up 
 process of the court cannot be used as the means of evoking 
 a judicial decision as to the probable success or non-success of 
 a company as a commercial speculation." ^ 
 
 Even where it is plain that the business of a company 
 ought to be wound up, the courts cannot appoint a receiver, 
 unless the agents of the company are unwilling or unable to 
 act; and where the charter provides particular agents to 
 act as liquidators on dissolution of the company, the agents 
 so appointed cannot be displaced unless they are guilty of 
 fraud.^ 
 
 § 286. The Effect of an unauthorized Issue of Certificates de- 
 claring Shares to be paid up. — Every shareholder in a corpo- 
 ration is entitled to insist that every other shareholder shall 
 contribute his ratable part of the company's capital for the 
 common benefit ; and the fund thus created must be adminis- 
 
 1 /n re Suburban Hotel Co., L.R. A suit to wind up the business 
 
 2 Ch. 737, 750; In re Joint Stock of a corporation will not as a rule 
 
 Coal Co., L. K. 8 Eq. 146; Pratt be entertiained outside of the State 
 
 V. Jewett, 9 Gray, 34. See also In where the corporation was formed. 
 
 re European Life Ass. Soc, L. R. The court must have jurisdiction 
 
 9 Eq. 122; Salem Mill Dam Co. v. over the parties, and have the power 
 
 Ropes, 6 Pick. 23 ; Redmond v. En- of distributing the assets of the 
 
 field Manuf. Co., 13 Abb. Pr. jsr. s. company, in order to do justice in 
 
 332; Lafond v. Deems, 81 N. Y. such a proceeding. Wilkins v. 
 
 507;Deniket>. New York, &c. Lime, Thome, 60 Md. 253. 
 &c.Co., SON. Y. 599; Blivent'. Peru * Follett v. Field, 30 La. Ann. 
 
 Steel, &c. Co., 60 How. Pr. 280. 161. 
 
§ 287 THE LAW OF PBIVATE COEPOBATIONS. 270 
 
 tered by the agents of the company with strict impartiality, 
 according to the terms of the charter, in the interest of all 
 the associates. It would be a plain violation of the equitable 
 rights of those shareholders who have contributed, or who 
 have incurred a liability to contribute, the amount of their 
 shares in full, to allow any person to have the benefits of 
 membership without adding the amount of their shares to 
 the company's capital.^ It follows, therefore, that directors 
 have no authority to declare shares to be paid up unless they 
 have in fact been paid up. If the directors of a company 
 wrongfully issue a certificate for paid-up shares on account 
 of shares which have not been paid up, their act will not bind 
 the company, and the certificate may be repudiated. 
 
 However, certificates of shares have a negotiable charac- 
 ter ; a bona fide purchaser of a certificate of shares, issued 
 by the proper agents of the company in regular form, is enti- 
 tled to assume that the certificate was issued rightfully. If 
 a certificate thus issued states that the shares which it rep- 
 resents are fully paid up, this statement will bind the corpo- 
 ration as against a bona fide purchaser without notice, and 
 no further calls can be made upon the shares.^ It is evident, 
 therefore, that an unauthorized issue of certificates for paid- 
 up shares, in the usual form, like an unauthorized issue of 
 negotiable paper, would threaten the corporation with irrepa- 
 rable injury. In either case, the corporation would have a 
 plain right to call upon the courts for the protection of its 
 rights by injunction. 
 
 It follows, for the same reasons, that, after certificates for 
 paid-up shares have been issued without authority, the cor- 
 poration may maintain a suit to procure their cancellation 
 before they have reached the hands of a bona fide purchaser ; 
 and if the corporation is unable to act, a shareholder may sue 
 in his own name for the protection of his equitable rights.' 
 
 § 287. It is to be observed that the unauthorized issue of 
 a certificate for paid-up shares to a person who has incurred 
 a liability to the corporation to pay up the shares, before he 
 
 1 Infra, § 305. » Supra, § 275. 
 
 * Infra, §§ 306, 816. 
 
271 BIGHTS AND BEMEDIES OF BHAEEHOLDEES. § 287 
 
 has fully paid them up, would ordinarily not injure the cor- 
 poration, unless the first taker of the certificate has become 
 insolvent, and has transferred the certificate to an innocent 
 purchaser. 
 
 A certificate for paid-up shares is merely a written state- 
 ment, in the name of the corporation, that the holder is a 
 shareholder, and that his shares have been paid up. If the 
 certificate is issued by the proper agents, the corporation is 
 estopped from denying the truth of the statements it con- 
 tains, as against innocent purchasers in due course of busi- 
 ness. But the corporation is not bound by a certificate 
 issued by its agents, without authority and in violation of 
 their duties, as against a person who has notice of the want 
 of authority. 
 
 If a certificate for shares is issued to a person who is not 
 a shareholder, or entitled to become a shareholder, it is void 
 in his hands, and the corporation is entitled to call it in for 
 cancellation, lest it should pass into the hands of an innocent 
 purchaser and thus become binding. The same is true where 
 a certificate for paid-up shares is wrongfully issued to a share- 
 holder who has not paid up his shares. The untrue statement 
 in the certificate that the shares are paid up would certainly 
 not discharge the shareholder from his liability, although it 
 would prevent a recovery against a bona fide transferee. It 
 would have no greater effect than the unauthorized issue of 
 a receipt to a person indebted to the corporation. In this 
 case the debtor would not be discharged, and the corporation 
 would lose nothing. 
 
 It follows, therefore, that if the agents of a corporation 
 without authority issue a certificate for paid-up shares to a 
 subscriber, or to a person liable to contribute the amount of 
 the shares, this alone does not render the agents who wrong- 
 fully issue the certificates liable to the corporation for the 
 amount of the shares. The corporation would suffer no loss, 
 as its rights against the debtor would remain unimpaired. If, 
 however, the certificates have passed into the hands of inno- 
 cent purchasers, and the person to whom they were wrong- 
 fully issued has become insolvent, the corporation would have 
 
§ 288 THE LAW OF PRIVATE COEPORATIONS. 272 
 
 a claim for damages against those who caused it to lose the 
 value of the shares by wrongfully issuing the certificates. 
 
 § 288. The real Character of an original Issue of Shares. — 
 A private business corporation means an association of share- 
 holders ; it can no more exist without shareholders, than the 
 whole body can exist without the parts which make it up. 
 In some instances a corporation may be deemed in existence 
 before it has any shareholders, but this must be by the use of 
 a fiction : neither the courts nor the legislature can create a 
 real association in the absence of associates.^ 
 
 Before shares in a corporation have been issued, the un- 
 issued shares are, strictly speaking, not shares at all ; there is 
 merely a power to issue shares. But, inasmuch as the shares 
 go into effect as shares at the moment of issue, they may be 
 dealt with and sold by those having the power to issue them 
 in the same manner as if they were things in existence. 
 Similarly, the maker of a promissory note may sell his note 
 for a large sum of money, although it be but a valueless piece 
 of paper in his own hands. The sale is merely a form by 
 which new rights and obligations are created. 
 
 Shares in a corporation represent fractional interests in the 
 entire corporate concern, and their value necessarily depends 
 upon the real capital which the company owns. The whole 
 and the sum of its parts must be equal. 
 
 The powerto issue the shares in a corporation, before any 
 have in fact been issued, is worth nothing more than the 
 value of the company's franchise, or, under the general laws, 
 the trouble of forming the company. It is as easy to form a 
 corporation with a nominal capital of a million of dollars as 
 with a nominal capital of a hundred dollars, and all the shares 
 in the one company, before issue, would be worth no more 
 than all the shares in the other. In either case they would 
 be worth neither more nor less than the purchaser put into 
 the treasury of the company.^ 
 
 1 See supra, § 33. Co., 75 N. Y. 216, per Folger, J.; 
 
 ^ These facts are recognized in Williams v. Western Union Tel. 
 
 the following cases: Sohenok v. Co., 93 N, Y. 162, 189, ;)er Earl, J.; 
 
 Andrews, 57 N. Y. 150, per Key- Sturges v. Stetson, 1 Biss. 246. 
 nolds, C. ; Burrall v. Bushwick R. R, 
 
273 EIGHTS AND BEMEDIES OF SHAEEHOLDEES. § 289 
 
 The case would be different where part of the shares in 
 the corporation have been issued, and the company is the 
 owner of something of value. The holders of the issued 
 shares would in reality constitute the corporation, and would 
 be the real owners of the whole concern. The corporation 
 would not in reality be the holder of the unissued shares, 
 for it is self-evident that the whole body cannot be a mem- 
 ber of itself.^ However, by a convenient if not necessary 
 fiction, the corporation may be regarded as the owner of its 
 unissued shares, dealing with them like an individual. The 
 issue of new shares usually takes the form of a sale by the 
 corporation to the incoming member.^ The latter, by becom- 
 ing a shareholder, would obtain a fractional interest in the 
 entire corporate concern at the expense of the existing share- 
 holders, and would add to the company's capital the amount 
 paid for his shares. Justice to the existing shareholders 
 would therefore require that the incoming shareholder should 
 contribute the full value of the fractional interest obtained. 
 Under ordinary circumstances, the value of this fractional in- 
 terest would be measured by the market value of the shares, 
 provided the shares have a fair market value. 
 
 § 289. Causes of Action arising from an unauthorized Issue of 
 Certificates declaring Shares to be paid up. — The general rule 
 is that shares in a corporation may not be issued as paid up 
 for less than their nominal value. To issue shares as paid up 
 without increasing the company's real capital to the amount 
 represented, would primarily be a violation of the law and a 
 public wrong. It would be a cause for dissolving the com- 
 pany at the suit of the State, and might subject those who 
 violated the law to proceedings of a criminal nature. But 
 the public wrong would not alone enable a private individual 
 to proceed in the courts of civil jurisdiction. A shareholder 
 cannot complain unless he can show that his equitable in- 
 terests have been infringed,^ nor can creditors sue without 
 showing some specific injury to themselves.* The rights of 
 creditors need not be considered in this connection. 
 
 1 Compare supra, § 112 et seq. ■ Supra, §§ 260-267. 
 
 2 Supra, § 61. * Existing creditors of a corpora- 
 
 VOL. I. — 18 
 
§ 289 THE LAW OF PRIVATE COEPOEATIONS. 274 
 
 However, any act of the directors of a corporation which 
 would subject the company to a forfeiture of its franchises 
 would evidently impair the private rights of the shareholders.^ 
 Shareholders are therefore clearly entitled to object to an ille- 
 gal issue of certificates of paid-up shares, and may restrain 
 such issue by injunction, or obtain a cancellation of certifi- 
 cates after they have been issued, provided they have not 
 passed into the hands of bona fide purchasers. 
 
 The right of a shareholder to sue on behalf of the corpora- 
 tion for compensation on account of an illegal issue of certifi- 
 cates of paid-up shares which cannot be cancelled, is based 
 on the ground that his fractional interest in the whole corpo- 
 rate concern has been thereby impaired. He may complain 
 because a right to share in the company has been given to 
 another party for less than its real or market value, and 
 without his consent.^ 
 
 The proper complainant under these circumstances would 
 primarily be the corporation, representing the collective rights 
 of all the shareholders, and it is only when the corporation is 
 disabled from suing that the shareholders can proceed in 
 their own names. The parties who caused the loss to the 
 company by wrongfully issuing and negotiating the certifi- 
 cates would be the proper defendants to the suit. 
 
 The measure of damages in a suit of this description would 
 be the actual loss suffered by the corporation, as representative 
 of the collective rights of all the shareholders. This would 
 not necessarily be the nominal amount of the shares; it would 
 be the difference between the amount received by the corpo- 
 ration and the real value of the shares represented by the 
 certificates. The damages to the company might exceed or 
 fall below the nominal amount of the shares, according to 
 their real value. ^ 
 
 tion are certainly not injured by the the company's capital as greater 
 
 issue of shares at less than their par than its real amount. Infra, §§ 804, 
 
 value, and it is plain that future 809-819. 
 creditors cannot justly say that they i Supra, § 273. 
 were injured by an issue of shares ' irifra, § 806. 
 which took place before their claims ' Continental Tel. Co. i/. Nebon, 
 
 arose. Their complaint must be 49 N. Y. Super. Ct. 197, 200. 
 based on the fraud in representing 
 
275 EIGHTS AND REMEDIES OP SHAEEHOLDEES. § 290 
 
 § 290. Ratification by Shareholders of an unauthorized Issue 
 of Certificates. — The rule that a corporation is bound by an 
 unauthorized act of its agents, after the act has been ratified 
 by all the shareholders, applies to an unauthorized issue of 
 certificates for shares. It is true that the unanimous consent 
 of the shareholders cannot cure the illegality of issuing cer- 
 tificates in violation of the law ; and where certificates are 
 issued in violation of a statutory prohibition, which renders 
 them absolutely void in legal effect, the corporation may be 
 entitled, or even be obliged, to repudiate them, though issued 
 with the unanimous consent of its members. But, under 
 these circumstances, the corporation cannot complain against 
 those who issued the certificates, inasmuch as it has suffered 
 DO injury, having consented to the unauthorized act. The 
 mere fact that the law has been violated, ^certainly cannot 
 be made the basis of a civil action for damages.^ It follows 
 a fortiori that a shareholder cannot sue on behalf of the cor- 
 poration. This was the decision in Parsons v. Hayes,^ a suit 
 brought by a shareholder in a mining corporation formed un- 
 der the general law of New York, of 1848. This law provides 
 that any three or more persons may form a corporation, by fil- 
 ing a certificate setting forth the objects of the company, 
 the amount of its capital stock, the names of the directors 
 for the first year, and other particulars. It declares that 
 the corporation should be deemed in existence from the time 
 of filing the certificate, and invests the directors with au- 
 thority to receive subscriptions, make calls, and issue certifi- 
 cates of shares; but it prohibits the directors from issuing 
 the shares as paid up, except for their par amount in money, 
 or property deemed in good faith to be of equal value. 
 
 In the case referred to, the directors named in the certifi- 
 
 1 Flagler Engraving, &c. Co. v. Co., L. R. 11 Ch. Div. 701. Com- 
 Flagler, 19 Fed. R. 468. pare Re British, &c. Box Co., L. K. 
 
 2 Parsons V. Hayes, 14 Abb. 17 Ch. Div. 467. See also Union 
 N. C. 419; s. c. 50 N. Y. Super. Pac. R. R. Co. v. Credit Mobilier, 
 Ct. 29; Langdon v. Fogg, 18 Fed. 135 Mass. 367; Scovill v. Thayer, 
 R. 5. To the same effect, see Re 105 U. S. 143, 153. Contra semble, 
 Ambrose Lake, &c. Mining Co., Society, &o. v. Abbott, 2 Beav. 
 L. R. 14 Ch. Div. 390; Re Gold 559. 
 
§ 290 THE LAW OF PEIVATE COEPOKATIONS. 276 
 
 cate of incorporation issued paid-up certificates for the entire 
 capital stock of the company, amounting nominally to two 
 millions of dollars, in payment for a mine which was known 
 to be worth less than one hundred and fifty thousand dollars. 
 The vendor of the property thereupon, in pursuance of a pre- 
 vious arrangement with the directors, turned over to them a 
 portion of the stock which had been issued to him, and the 
 shares were subsequently transferred to innocent purchasers. 
 
 The plaintiff, claiming to be a hona fide purchaser of his 
 shares, brought suit in the form of an ordinary shareholders' 
 bill, and made the corporation and the directors who had first 
 issued the stock defendants. The plaintiff's position was, 
 that the individual defendants were liable to account to the 
 corporation for the difference between the nominal amount 
 of the stock issued by them, viz. $2,000,000, and the real 
 value of the property received in payment, viz. f 150,000 ; or 
 at least that they were liable for the profits derived from the 
 sale of the stock which had been turned over to them in pur- 
 suance of their agreement with the vendor of the property. 
 The court however held, on demurrer, that the defendants 
 were not liable in either respect, and that the complaint did 
 not state a cause of action. The ground of the decision was, 
 that, inasmuch as the acts of the defendants were performed 
 with the consent and at the instance of the holders of the 
 entire capital stock, neither the corporation nor its stock- 
 holders suing on its behalf could complain. 
 
 This decision was clearly right. The absurdity of the 
 plaintiff's claim becomes apparent, when it is considered that 
 there was no corporation in existence until the issue of 
 shares which constituted the alleged injury to the corpora- 
 tion had taken place. It is true, the statute declared that 
 the signers of the certificate of incorporation should be a cor- 
 poration, but this at most constituted them a quasi corpora- 
 tion, to be succeeded by the real corporation, consisting of 
 the stockholders, when the stock was issued. ^ 
 
 The vendor of the property in truth took back what he 
 gave. He placed the property in the corporate name, and at 
 1 Supra, § 33. 
 
277 BIGHTS AND EEMBDIES OF SHABEHOLDBRS. § 291 
 
 the same time practically became the corporation by becom- 
 ing its sole stockholder. Evidently, therefore, no person was 
 injured by that transaction. If subsequent transferees of 
 shares were deceived by the false representations that the 
 amount of the shares had in fact been paid into the treasury 
 of the company, their claim should have been for the dama- 
 ges caused to themselves individually through the false rep- 
 resentations, and not for an infringement of the collective or 
 corporate rights of all the shareholders. 
 
 § 291. Frauds by Promoters. — New Sombrero Co. v. Er- 
 langer. — The case of Parsons v. Hayes, referred to in the 
 preceding section, must be carefully distinguished from a class 
 of cases involving the liability of promoters of companies, on 
 account of frauds practised by them upon persons who after- 
 wards form the company by subscribing for shares.^ 
 
 New Sombrero Phosphate Company v. Erlanger,^ is a lead- 
 ing case of this class. The defendants had purchased a lease 
 of an island containing phosphate deposits, and formed a plan 
 of disposing of the property at a large profit, by getting up a 
 company expressly to buy it. Accordingly, the memoran- 
 dum and articles of association of a limited company were 
 drawn up, and five directors were therein named to manage 
 the company. A contract was then submitted to the direc- 
 tors, and approved by them, by which the company agreed to 
 purchase the property, from an agent to whom the defendants 
 had transferred it, for a price which was in excess of the 
 value of the property, and much larger than the price previ- 
 ously paid by the defendants. The directors representing 
 the company were selected by the defendants, and entirely 
 under their control; thej' did not investigate the value of 
 the property before approving of the contract, and did not in 
 good faith look after the interests of the shareholders who 
 were to contribute the money, but allowed themselves to be 
 made the tools of the defendants. A prospectus having been 
 issued referring to this contract, subscriptions for shares 
 
 * As to the relation between a ^ New Sombrero Phosphate Co. 
 company and its promoters, see v Erlanger, L. R. 5 Ch. Div. 73; 
 infra, % 525. affirmed L. R. 3 App. Cas. 1218. 
 
§ 292 THE LAW OF PRIVATE COEPOEATIONS. 278 
 
 were solicited, and the purchase was carried out with the 
 money contributed by the subscribers. 
 
 When the true facts became known to the shareholders, 
 and it was discovered that the approval of the directors had 
 been a mere sham, a new board was elected, and a bill was 
 filed in the name of the company to set aside the sale, and to 
 recover the purchase money upon restoring the property to 
 the defendants. Both the court of appeal ^ and the House 
 of Lords 2 held that the company was entitled to the relief 
 prayed. The ground of the decision in each case was, that 
 the promoters occupied a fiduciary relation to the sharehold- 
 ers forming the company, and that they were responsible for 
 the fraud practised upon the company through the medium 
 of the board of directors. Lord Cairns, the Lord Chancellor, 
 said : " I do not say that the owner of property may not pro- 
 mote and form a joint-stock company, and then sell his prop- 
 erty to it, but I do say that, if he does, he is bound to take 
 care that he sells it to the company through the medium of a 
 board of directors, who can and do exercise an independent 
 and intelligent judgment on the transaction, and who are not 
 left under the belief that the property belongs, not to the 
 promoter, but to some other person." ^ 
 
 § 292. There can be no doubt that a gross fraud was per- 
 petrated in this case, and that the shareholders were entitled 
 to relief in some form. The only question requiring con- 
 sideration is whether the proper remedy was pursued in 
 bringing suit in the name of the company, or whether tlie 
 shareholders should have sued individually for the damages 
 caused by the deceit. It has been pointed out, that, where 
 the separate rights of shareholders have been infringed, they 
 
 1 L. R. 5 Ch. Div. 73. nail «. Carlton, L. R. 6 Ch. Div. 
 
 2 L. R. 3 App. Cas. 1218. The 371 ; Phosphate Sewage Co. v. 
 opinions delivered by Lord Black- Hartmont, L. R. 5 Ch. Div. 395; 
 bum (page 1264) and by Lord Beck v. Kantorowicz, 3 K. & J. 
 Cairns (page 1234) are particularly 230; Mason v. Harris, 11 Ch. Div. 
 instructive. 97 ; Lindsay Petroleum Co. v. Hurd, 
 
 8 L. R. 3 App. Cas. 1236. This L. R. 5 P. C. 221. Compare Al- 
 
 principle v^as acted upon in the fol- bion Steel, &o. Co. v. Martin, 1 Ch. 
 
 lowing cases: Simons v. Vulcan Div. 580. 
 Oil, &c. Co., 61 Pa. St. 202; Bag- 
 
279 EIGHTS AND REMEDIES OP SHAEEHOLDEES. § 292 
 
 must sue individually, and where their collective or corporate 
 rights have been infringed, the company is the proper plaintiff.^ 
 In the latter case, an individual shareholder cannot sue unless 
 the company is disabled. 
 
 It will be observed, that the original approval by the direc- 
 tors of the fraudulent contract which had been gotten up bj' 
 the promoters was not an injury to the company or its share- 
 holders, because there were no innocent shareholders at that 
 time. The fraud upon the shareholders was not consum- 
 mated until they were induced to subscribe for their shares, 
 and pay their money into the company's treasury, upon the 
 implied representation that the contract had been made in 
 good faith in their interest. 
 
 But it is necessary to look into the real nature of the trans- 
 action somewhat further. Before any shares had been issued, 
 the existence of the company was a fiction. The shareholders 
 really formed the company, each one becoming a member 
 when he took his shares. While the contract for the pur- 
 chase of the property was nominally in force from the time of 
 its approval by the board of directors, yet it really took effect 
 only after the shareholders had taken their shares. It then 
 became binding upon all the shareholders collectively, or, in 
 other words, on the company. The fraud really consisted in 
 inducing the shareholders to enter into this contract in their 
 collective capacity, and in using the funds belonging to the 
 shareliolders collectively in paying the purchase price. It is 
 evident, therefore, that the injury to the shareholders was an 
 injury to their collective or corporate interests, and that the 
 company was the proper complainant. 
 
 On the other hand, in Parsons v. Hayes, and Re Ambrose 
 Lake, &c. Mining Co. ,2 the collective rights of the shareholders 
 were not infringed. The charge made in these cases was, that 
 the directors had issued the entire stock of the company as 
 paid-up stock for property worth less than the par amount. 
 No person was injured in the least degree by these transac- 
 tions. If the persons to whom the stock was first issued 
 
 I Supra, § 235. See per Lord Vigers v. Pike, 8 CI. & F. 647. 
 Blackburn, L. E. 3 App. Cas. 1264; 2 Supra, § 290. 
 
§ 293 THE LAW OF PRIVATE CORPOEATIONS. 280 
 
 afterwards sold a portion of it, and deceived the purchasers 
 by a false representation that the par value of the shares had 
 been paid into the company's treasury, they would clearly 
 be liable to the purchasers for the fraud. And under these 
 circumstances the directors who issued the false certificates 
 representing that the company's capital had been paid up 
 according to law might perhaps be charged also by reason of 
 their complicity. But in a case of this kind the plaintiffs 
 claim would be merely for the damages caused by the decep- 
 tion, and the extent of the injury would depend in each case 
 upon the price paid by the plaintiff for the shares, and their 
 market value when the deception was discovered. 
 
 § 293. There is a class of cases differing in some respects 
 from either of the cases referred to in the preceding sections. 
 A person who induces others to join him in a partnership or 
 other joint transaction cannot obtain a secret profit out of the 
 transaction without giving his associates the benefit of it ; an 
 attempt to do so is an attempt to commit a fraud, and will not 
 be allowed to prevail. 
 
 Thus, if a person should induce others to join him in the 
 purchase of property, by representing that the property can 
 be bought for a certain price, and the price so paid really in- 
 cludes a commission or profit to himself, any of the associates 
 or joint purchasers may withdraw from the transaction on dis- 
 covering the fraud ; and if a rescission cannot be effected, he 
 may recover his share of the profits wrongfully appropriated 
 by the promoter of the scheme. The promoter would also be 
 liable for any damages caused by the deceit, if a positive mis- 
 representation was practised.^ 
 
 However, there is no rule of law prohibiting a person from 
 forming a company for the purpose of selling property to it 
 and making a profit by the sale. The law merely requires 
 that such a transaction be entirely open and free from decep- 
 tion upon the company and those who become its members. 
 This rule applies equally to corporations and to unincorpo- 
 rated associations. 
 
 1 See Short v. Stevenson, 63 Pa. 504; 9 Hun, 603; 8. o. 54 N. Y. 
 St. 95; Getty v. Devlin, 70 N. Y. 403. 
 
281 RIGHTS AND EBMBDIES OP SHAKBHOLDBES. § 295 
 
 § 294. Complicity of Fart of the Shareholders no Ground for 
 withholding Relief. — The right of a corporation to sue, on ac- 
 count of frauds of its promoters involving a misapplication of 
 corporate funds, is not affected by the complicity of individual 
 shareholders in the acts complained of. The remedy for an 
 infringement of the corporate or collective interests must ne- 
 cessarily be obtained by or through the corporation ; * if there 
 are collateral equities between the wrongdoers and part of 
 the shareholders, these must be adjusted by proceedings di- 
 rectly between them. But even if the law should not provide 
 a remedy for the adjustment of these collateral equities, it is 
 clear that the innocent shareholders ought not to be made to 
 suffer by refusing to permit the corporation to sue for the 
 protection of the corporate interests. 
 
 Accordingly, in New Sombrero Phosphate Co. v. Erlanger,^ 
 the corporation was allowed to recover against the promoters, 
 although some of the shareholders were parties to the acts 
 complained of. In reply to the argument that it would be 
 unfair to allow those shareholders who were not wronged to 
 benefit by a recovery in the name of the corporation. Sir 
 George Jessell, Master of the Rolls, said : " If the argument 
 were once allowed to prevail, it would only be necessary to 
 corrupt one single shareholder to prevent a company from 
 ever setting the contract aside. It may be said you give to 
 the shareholder who was a party to the fraud a profit, because 
 he will take it in respect of his shares, and since, as between 
 the conspirators there is no contribution, therefore his brother 
 conspirators who are made liable for the fraud cannot make 
 him repay his proportion. But the doctrine of this court has 
 never been to hold its hand, and avoid doing justice in favor 
 of the innocent, because it cannot apportion the punishment 
 fully amongst the guilty."^ 
 
 § 295. Restraining the Use of the Funds of a Corporation to 
 procure an Alteration of its Charter. — It is a clear case for the 
 interposition of a court of equity, at the suit of a shareholder, 
 if any portion of the property or funds of a corporation are 
 
 1 Supra, § 272. ' New Sombrero Phosphate Co. v. 
 
 " Supra, § 291. Eiianger, L. R. 5 Ch. Div. 114. 
 
§ 296 THE LAW OF PRIVATE COKPOEATIONS. 282 
 
 used without authority, by those having control of them, in 
 order to procure an act of the legislature altering the charter 
 of the corporation.^ 
 
 In the United States, the legislature has ordinarily no 
 power to alter the charter of a corporation without the consent 
 of its shareholders, and an attempted alteration of a charter 
 by statute would be wholly ineffective until unanimously 
 accepted by the company.^ Hence the use of corporate 
 funds in order to procure a statute authorizing an alteration 
 of a charter would, in the United States, be a naked mis- 
 application of corporate funds from the uses declared in the 
 charter. In England, Parliament is not restrained by con- 
 stitutional prohibition from impairing the obligation of con- 
 tracts ; and the use of the funds of a corporation without the 
 authority of the shareholders, in order to procure the passage 
 of an act of Parliament peremptorily changing its charter, 
 would involve, not merely a simple misapplication of trust 
 funds, but the use of trust funds for the purpose of attacking 
 the life and existence of the trust itself. 
 
 § 296. Restraining the Use of the Corporate Name for the 
 Purpose of procuring an Alteration. — A corporation, like an 
 individual, will be protected by the courts from an unauthor- 
 ized use of its name by a stranger.^ And if the managing 
 agents of the corporation refuse to interfere on its behalf, the 
 shareholders may apply directly to a court of equity for re- 
 lief. The same rule applies if the agents of a corporation 
 use its name without authority ; for the agents of a corpora- 
 tion, and even the majority of the shareholders, must ulti- 
 mately derive all their powers from the company's charter, 
 and they have no right to use the corporate name for any 
 purpose which the charter does not authorize. 
 
 Any shareholder may enjoin the managing agents of a cor- 
 poration from using the corporate name for an unauthorized 
 
 ^ Lyde v. Eastern Bengal Ry. u. Denison, 10 Hare, 51, 61; Stevens 
 
 Co., 36 Beav. 10; Munt v. Shrews- v. Rutland, &c. R. R. Co., 29 Vt. 548. 
 bury, &o. Ry. Co. , 13 Beav. 1 ; Ware ^ Infra, Chapter XV. 
 V. Grand Junction Water Co., 2 R. " Newby v. Oregon, &c. Ry. Co., 
 
 & M. 470; Maunsell v. Midland, &c. Deady, 609; Holmes v. Holmes, &o. 
 
 Ry. Co., 1 H. & M. 130; Simpson Manuf. Co., 37 Conn. 278. 
 
283 EIGHTS AND KBMEDIES OP SHAREHOLDERS. § 297 
 
 purpose, if material injury to the corporation might possibly 
 result therefrom ; as, for example, by signing the corporate 
 name to negotiable instruments for an improper purpose.^ 
 A still stronger case is presented if any person or persons, 
 without authority in that behalf, assume to apply to Parlia- 
 ment in the name of a corporation for a peremptory change 
 of its charter. And it matters not that such application was 
 sanctioned by the directors of the corporation, or a majority 
 vote of the shareholders ; for, unless the authority be con- 
 ferred by the charter, neither directors nor the majority can 
 represent a corporation against the will of any member. An 
 unauthorized assumption of authority to represent a corpo- 
 ration, for the purpose of destroying its charter, would not 
 only be a fraud upon the legislature, but an invasion of the 
 rights of the non-consenting stockholders, which a court of 
 equity would prevent by injunction.^ The question whether 
 or not the courts have jurisdiction to restrain an unjust appli- 
 cation to the legislature does not arise under these circum- 
 stances; the question is merely whether or not the courts 
 will enjoin an unauthorized and perhaps fraudulent use of 
 the corporate name. 
 
 In America, however, where the legislature cannot impair 
 the validity of a charter without the consent of all of its 
 shareholders, unless the right of making alterations was ex- 
 pressly reserved to the legislature, ordinarily no injury would 
 ensue from an attempted alteration by legislative act.^ 
 
 § 297. Restraining Action under an attempted Alteration. — 
 A majority of the shareholders in a corporation have no im- 
 plied authority to accept an alteration of the company's 
 charter, and an attempt to accept an alteration without au- 
 thority is wholly ineffective. A plain case for the interposi- 
 tion of a court of equity is established, where it is shown that 
 
 1 Supra, § 275. L. J. ; but see Ware v. Grand Junc- 
 
 2 Compare Ward v. The Society tion Water Co., 2 R. & M. 470, 
 of Attornies, 1 Coll. 370; CunlifE v. 484. 
 
 Manchester, &c. Canal Co., 2 R. & * Stevens v. Rutland, &c. R. R. 
 M. 480, note; Re London, &c. Ry. Co., 29 Vt. 560. 
 Act, L. R. 5 Ch. 671, per James, 
 
§ 298 THE LAW OP PEIVATE CORPORATIONS. 284 
 
 the managers of a corporation are about to use the company's 
 property or credit in pursuance of an alleged alteration of 
 the charter, accepted by agents having no authority to rep- 
 resent the company for that purpose ; such action under an 
 ineffectual alteration would be wholly unauthorized, and a 
 violation of the contract between the shareholders.^ 
 
 § 298. Restraining Applications to the Legislature in England. 
 — The question has been raised, whether or not the individ- 
 ual shareholders or the agents of a corporation can be en- 
 joined by a court of equity from applying for an alteration of 
 the company's charter in their own names. 
 
 In England, it has been asserted by high authority that 
 courts of equity have jurisdiction to restrain parties from 
 making applications to Parliament for private legislation, or 
 from opposing similar applications made by others. The 
 jurisdiction has sometimes been placed upon the same ground 
 as that upon which injunctions are granted to restrain par- 
 ties from proceeding at law; namely, that equity will not 
 permit parties to make an unjust use of the power of a tribu- 
 nal which is unable to take full cognizance of the rights of 
 the parties. Lord Cottenham said: "There is no question 
 whatever about the jurisdiction ; a party who comes to op- 
 pose a railway bill in Parliament does so solely in respect to 
 his private interest, not as representing any interest of the 
 public, or for the purpose of communicating any information 
 to Parliament. He is not even allowed to be heard as a pe- 
 titioner against the bill, unless he has a locus standi in respect 
 of some property or interest liable to be afPected by it if it 
 should pass into a law. This court, therefore, if it sees a 
 proper case connected with private property or interest, has 
 just the same jurisdiction to restrain a party from petitioning 
 against a bill in Parliament, as if he were bringing an action 
 at law or asserting any other right connected with the enjoy- 
 ment of the property or interest which he claims." ^ 
 
 1 Infra, § 625. People v. Canal '^ Stockton, &o. Ey. Co. v. Leeds, 
 Board, 55 N. Y. 395; Greenwood &o. Ky. Co., 2 Phill. 670. 
 V. Freight Co., 105 U. S. 13. 
 
285 EIGHTS AND REMEDIES OF SHAEEHOLDEBS.' § 300 
 
 In the United States. — In the United States a dif- 
 ferent view has been taken. It was held in a New Jersey 
 case, that the legislature in passing its laws, even when they 
 affect private interests, does not act as a court whose power 
 over individuals is greater than its ability to use its power 
 justly, but as the legislative branch of the government, with 
 which the courts cannot interfere. " It is no part of their 
 office to determine in advance what laws ought or ought not 
 to be enacted, or to interfere directly or indirectly with the 
 course of legislation." ^ Again, it is said : " Every citizen 
 has an unquestioned right to petition either branch of the 
 legislature upon any subject of legislation in which he is 
 interested. Every legislator has a right to be informed of 
 the views and wishes of all parties interested in the en- 
 actment of a law. This right to perfect freedom of inter- 
 course between the representative and his constituents is not 
 founded upon any constitutional provision or bill of rights, 
 but springs from the very structure of the government." ^ 
 
 § 300. The true Principle of the Jurisdiction to restrain Appli- 
 cations to the Legislature. — The jurisdiction of English courts 
 of chancery to interfere with applications to Parliament is 
 certainly conducive to justice in many cases. The power of 
 Parliament is not limited by any law, and if used without 
 judgment may inflict serious wrong to individuals. It will 
 be denied by no one that a court of equity, acting according 
 to well-established rules, is a tribunal far better adapted 
 to the protection of private interests than a committee of 
 legislators. 
 
 But this argument leads too far. If the jurisdiction to in- 
 terfere with applications to Parliament could be deduced 
 from the fact that Parliament has power to violate private 
 rights arbitrarily, and that it may be used by others as a tool 
 or dupe for unjust purposes, a court of equity might at any 
 time enjoin any person from petitioning Parliament merely 
 because some other person in the kingdom might be wronged 
 thereby, — an assumption of supervisory power which could 
 never be tolerated. In Heathcote v. North Staffordshire Ry. 
 
 1 Story V. Jersey City, &o. Plank R. Co. , 16 N. J. Eq. 13. ^ Ibid. 
 
§ 301 THE LAW OF PRIVATE CORPORATIONS. 286 
 
 Co.,^ Lord Cottenham said : " The case of Parliament dif- 
 fers widely from that of the courts of common law : the prov- 
 ince of the latter is to enforce legal rights, and the object of 
 the injunction is to prevent an inequitable use of such legal 
 rights ; but the ordinary province of Parliament in such bills 
 is to abrogate existing rights and to create new rights. To 
 hold, therefore, that no application should be made to Parlia- 
 ment because the object of such application was to interfere 
 with some right or interest of some other party, would be, in 
 effect, to hold that this court should by its injunction deprive 
 the subject of the benefit of parliamentary interference in all 
 such cases. . . . The injunction cannot be granted upon the 
 ground that the act applied for would interfere with existing 
 rights, it being the very object of it to do so." ^ 
 
 § 301. It will be found that, in all the cases in which the 
 jurisdiction to enjoin petitions to Parliament was asserted, 
 there were special obligations resting upon the parties not to 
 prefer the petitions complained of. In some of the cases the 
 question was whether an application to Parliament, or oppo- 
 sition to an application, should be enjoined because in vio- 
 lation of an express contract ; in others, the members of a 
 corporation were attempting to violate their duty to their 
 co-members ; and in some cases it was merely an unauthor- 
 ized use of the corporate name which was enjoined. The 
 correct view seems to be, that the jurisdiction of the courts 
 of equity to interfere with applications to Parliament is 
 merely a branch of the jurisdiction to compel parties to per- 
 form their engagements ; and that, when parties have volun- 
 tarily undertaken not to make an application or not to oppose 
 an application to Parliament, the courts may enforce specific 
 performance of this undertaking by process of injunction. 
 
 This view seems to have been entertained by Vice-Chan- 
 cellor Page-Wood. In a very instructive judgment delivered 
 by him, he held that a contract not to make an application to 
 Parliament was not against public policy, and void, but that 
 
 1 Heathcote v. North Stafford- * See Steele v. North Metropoli- 
 fehire Ry. Co., 2 MaoN. & G. 100, tan Ry. Co., L. R. 2 Ch. 240, 241, 
 110. per Lord Chelmsford. 
 
287 EIGHTS AND REMEDIES OP SHAEEHOLDEES. § 302 
 
 it ought not to be specifically enforced by injunction in the 
 particular case. The question, he said, was, " not whether 
 it may or may not be inconsistent with public policy to allow 
 such an agreement to be entered into at all, but whether 
 this court should interfere for the purpose of specifically 
 performing the agreement by preventing the application to 
 Parliament." ^ 
 
 PART iir. 
 
 THE MUTUAL EIGHTS AND OBLIGATIONS OF SHAEEHOLDEES 
 WITH EESPECT TO THE CONTEIBUTION OF CAPITAL. 
 
 § 302. The Contract between the Shareholders cannot be 
 impaired. — In considering the relation nominally existing be- 
 tween a corporation and its several shareholders, it is neces- 
 sary to bear in mind that this relationship results entirely 
 from the agreement entered into by the shareholders, for their 
 common benefit, in forming the company. The fact that the 
 rights and obligations created by this agreement must by its 
 terms, be enforced through the medium of the corporate 
 organization, does not prevent the contract of the share- 
 holders from being a mutual contract.^ 
 
 For this reason it is a rule that no shareholder in a corpo- 
 ration can be discharged by a rescission or cancellation of his 
 contract, except with the unanimous consent of the other 
 members ; every shareholder has a right to insist that every 
 other shareholder shall be held to a due performance of his 
 obligations.^ Under the Federal Constitution even a State 
 has no power to impair or alter the contract between the 
 shareholders in a corporation, by legislative enactment; nor 
 can it empower a majority to impair this contract against the 
 will of a single member.* 
 
 1 Lancaster & Carlisle Ey. Co. ' Supra, § 43 et seq. 
 V. Northwestern Ky. Co., 2 K. & ' Supra, § 109 et seq. Chouteau 
 
 J. 293, 302, 809 ; People v. Canal Ins. Co. «. Floyd, 74 Mo. 289. 
 Board, 55 N. Y. 390, 400. « Infra, § 1027. 
 
§ 303 THE LAW OF PRIVATE COEPOEATIONS. 288 
 
 It should be observed, however, that, if the validity of a 
 subscription is in dispute, the-directors may enter into a bona 
 fide compromise with the subscriber, by which his subscrip- 
 tion is cancelled.^ This power must be held to be included 
 in the general discretionary powers conferred upon the direc- 
 tors in the management of the affairs of the association. 
 
 § 303. Secret Agreements. — Colorable Subscriptions. — 
 Every person who subscribes for shares in a corporation is 
 entitled to assume that every other person whose name ap- 
 pears on the subscription-books of the company is in reality 
 a subscriber, and subject to the liabilities of membership. 
 Hence, if a subscriber causes his name to be placed upon 
 the stock-books as an apparent holder of shares, he will be 
 estopped from denying that he intended to become a share- 
 holder, and to pay assessments equally with the other mem- 
 bers. Any secret agreement between a subscriber for shares 
 and the agents acting on behalf of the company, to the effect 
 that the subscription shall be merely colorable and not bind- 
 ing upon the subscriber, would be a fraud upon all persons 
 subsequently taking shares in the company ; such agreement 
 should therefore be denied effect, and the subscription en- 
 forced unconditionally.^ 
 
 The same principle applies where shares are taken in a 
 fictitious name, or in the name of an irresponsible person, for 
 the purpose of swelling the apparent number of shareholders. 
 In this case, the real subscriber or owner should not be al- 
 lowed to impose upon the other shareholders with impunity. 
 
 1 New Albany v. Burke, 11 Wall. 124; Connecticut, &c. E. K. Co. v. 
 96; Lord Belhaven's Case, 3 De Bailey, 24 Vt. 465, 476; Jewett v. 
 G., J. & S. 41; Putnam v. New Valley Ry. Co., 34 Ohio St. 601; 
 Albany, 4 Biss. 365. Blodgett v. Morrill, 20 Vt. 509 ; 
 
 2 Melvin v. Lamar Ins. Co., 80 Minor v. Mechanics' Bank, 1 Pet. 
 111. 446, and cases cited; Graff v. 65; Mann v. Cooke, 20 Conn. 178; 
 Pittsburgh, &c. R. R. Co., 31 Pa. Swartwout v. Michigan Air Line 
 St. 489; Robinson v. Pittsburgh, &o. R. R. Co., 24 Mich. 390; Pickering 
 R. R. Co., 32 Pa. St. 334; MuUer v. Templeton, 2 Mo. App. 424; 
 V. Hanover Junction, &c. R. R. Co., Bates v. Lewis, 3 Ohio St. 459. 
 87 Pa. St. 99; White Mountains See Davidson's Case, 3 De G. & 
 R. R. Co. V. Eastman, 34 N. H. Sm. 21. 
 
289 BIGHTS AND BBMEDIES OF SHABBHOLDERS. § 304 
 
 and should be held liable personally under the name he has 
 assumed.^ 
 
 § 304. Collateral Agreements. — Trusts. — It is clear that 
 no engagement or relationship between a shareholder and a 
 stranger to the corporation can be allowed to affect the 
 mutual rights and obligations existing between the share- 
 holders by reason of their contract of membership. 
 
 In Kelt's Case,^ Robert Holt had signed the deed of set- 
 tlement of a joint-stock company for the benefit of his brother, 
 w^ho was the covenantee of the deed, and therefore could not 
 sign it himself. A motion having been made to place his name 
 on the list of contributaries, the Vice-Chancellor, Lord Cran- 
 worth, said : " I do not entertain a particle of doubt upon 
 this case. What Mr. Robert Holt's reason was for executing 
 the deed of settlement is a matter which it is too late to 
 speculate upon when he has executed it ; because, by ex- 
 ecuting it, he entered into engagements with persons who 
 were wholly ignorant as to the circumstances connected with 
 the shares in respect of which he executed the deed. Every 
 one of those individuals executed the df ed on the faith that 
 every other person who executed it should, to the extent 
 of the shares for which he executed it, bear the common 
 liability, and participate in the profits to be derived from the 
 undertaking." 
 
 It has accordingly been held that the legal owner of shares 
 in a corporation is liable to the company for calls made upon 
 the shares, though he be a trustee for another person ; and 
 the beneficiary cannot be made responsible, for he is not a 
 party to the contract from which the liability for calls arises.^ 
 For the same reason, it follows that only the legal owner of 
 shares is entitled to vote at corporate meetings ; * and the 
 leffal title to dividends belongs to him also.^ It is immaterial 
 
 1 See Cox's Case, 4 De G., J. & S. L. R. 1 Ch. D. 576; SicheU's Case, 
 
 53; Pugh & Sharman's Case, L. R. L. R. 3 Ch. 119; King's Case, L. R. 
 
 13 Eq. 566. 6 Ch. 196; Mitchell's Case, L. R. 
 
 " Holt's Case, 1 Sim. k. 8. 389. 9 Eq. 363. 
 
 « Supra, § 170. See Bugg's Case, < Tnfra, § 463. 
 2 Dr. & Sm. 452 ; Williams's Case, 6 gupra, § 170. 
 
 VOL. I. — 19 
 
§ 306 THE LAW OF PBIVATE CORPORATIONS. 290 
 
 for this purpose whether the legal owner be an original sub- 
 scriber, or a transferee of the shares ; for a transfer involves 
 a complete novation of the contract of membership, and the 
 transferee steps into the place of the prior owner.^ 
 
 § 305. Shareholders have Equal Rights, and must bear Equal 
 Burdens. — Every share in a corporation is equal to every 
 other share, unless otherwise provided in the charter. Hence 
 it follows that no special privilege or advantage can be given 
 to any member ; for every discrimination in favor of a partic- 
 ular member must be made at the expense of the others. 
 
 Accordingly, it has been held that the profits of a corpo- 
 ration must be divided evenly among its shareholders, each 
 member being entitled to a dividend in proportion to the 
 number of shares held by him.^ For the same reason, it is a 
 rule that every shareholder must contribute a proportionate 
 part of the capital of the company. Thus it was held by the 
 Supreme Court of Georgia that the directors of a corporation 
 had no power to authorize a portion of the shareholders to 
 pay up their shares during the war in depreciated Confed- 
 erate currency, befoi^ regular calls had been made.^ 
 
 § 306. The Issue of Certificates for paid-up Shares. — A bona 
 fide purchaser of certificates for shares issued by the regular 
 agents of a corporation is entitled to rely upon all statements 
 and representations which such certificates usually contain. 
 If the certificates state upon their face that the shares have 
 been fully paid up, the corporation will be estopped from 
 denying the truth of this representation, and cannot charge 
 the purchaser and transferee with further liability, although 
 the shares have never in fact been paid up.* The purchaser 
 
 1 Supra, Chapter IV. 363; Atlantic, &c. Tel. Co. v. Com- 
 
 2 Jackson v. Newark Plank Road mon wealth, 3 Brewster, 866; Harri- 
 Co., 31 N. J. L. 277; Stoddard v. son o. Mexican Ry. Co., L. R. 19 
 Shetucket Foundry Co., 34 Conn. Eq. 358; Coey ». Belfast, &c. Ry. 
 542; Jones ti. Terre Haute, &c. R. R. Co., Irish Rep. 2 C. L. 112. See 
 Co., 57 N. Y. 196; 29 Barb. 353; Chaffee v. Rutland R. R. Co., 55 
 Luling V. Atlantic Mutual Ins. Co., Vt. 110, 136. 
 
 45 Barb. 510; Ryder v. Alton, &c. « Macon, &c. R. R. Co. v. Vason, 
 R. R. Co., 13 111. 516; State v. 57 Ga. 314. 
 Baltimore & Ohio R. R. Co., 6 Gill, * Infra, §§ 585, 816. 
 
291 EIGHTS AND KBMBDIES OP SHAKEHOLDBES. § 307 
 
 would be entitled to enjoy all the rights of membership to 
 the same extent as the other shareholders, whose shares are 
 represented by contributions to the company's capital. It is 
 evident, therefore, that the issue of certificates for paid-up 
 shares to a shareholder whose shares have not in fact been 
 paid up, is unauthorized ; it would be a direct infringement 
 of the rights of all existing shareholders in the company, and 
 a source of fraud upon persons giving the company credit, or 
 dealing in its shares thereafter.' 
 
 However, after the capital of a corporation has been re- 
 duced by losses, it would not be a wrong against the existing 
 shareholders to issue certificates for paid-up shares on pay- 
 ment of less than their 'par value. Under these circum- 
 stances fairness and equality would merely require that the 
 new shares be issued at their actual or market value. If 
 shares in a corporation could in no case be issued at less than 
 their face value, it would be practically impossible to increase 
 the capital of a corporation by the sale of new shares after 
 the value of its shares had fallen below par.^ But the aug- 
 mentation of the capital should not be held out to the world 
 as amounting to the nominal value of the new shares issued, 
 unless this be really the case. It would be a fraud upon 
 those giving credit to the company to represent the fund 
 held out to them as their security at a greater amount than 
 was actually contributed, or promised to be contributed, by 
 the shareholders. 
 
 If shares in a corporation have once been fully paid up, and 
 are transferred back to the company, they may be reissued 
 and sold by the agents of the company at their actual or mar- 
 ket value.^ Neither creditors nor shareholders would have 
 any right to insist on having the shares disposed of at par. 
 
 § 307. Subscriptions upon Special Terms. — For the same 
 reason, it follows that the agents of a corporation have no 
 authority to receive particular shareholders upon more favor- 
 
 1 Sturges V. Stetson, 1 Biss. 246, ^ Compare Stein w. Howard, 65 
 
 250; Fosdicke. Sturges,! Biss. 255; Cal. 616; Continental Tel. Co. v. 
 
 Fisk «. Chicago, &c. R. R. Co., 53 Nelson, 49 N. Y. Super. Ct. 197, 200. 
 
 Barb. 513. Supra, § 286. Infra, ' Otter v. Brevoort Petroleum 
 
 § 804. Co., 50 Barb. 247. 
 
§ 309 THE LAW OF PEIVATE COBPOKATIONS. 292 
 
 able terms than the other members. An agreement made 
 with a subscriber for shares, whereby the latter is accorded 
 any special privilege or benefit at the expense of the corpo- 
 ration, is invalid.! Thus, a shareholder cannot be received on 
 condition that he shall contribute less than other members, 
 or that his share of the common capital shall not be payable 
 except on a certain contingency,^ or that he shall receive a 
 preference in the distribution of profits.^ The contract of 
 subscription- must in these cases be treated as wholly void, or 
 it must be enforced without regard to the special agreement.* 
 
 § 308. Those who act as Shareholders are liable as Share- 
 holders. — Justice to the shareholders in a corporation demands 
 that every person who enjoys the privileges of membership 
 must also bear its burdens. For this reason, it is a general 
 rule that every person who has acted as a shareholder, and 
 enjoyed the privileges of membership, may be held by the 
 company to all the liabilities of membership, although for- 
 malities prescribed by the charter have not been observed.^ 
 
 So, where a person is entitled to avoid his contract of mem- 
 bership in a corporation on account of fraud, he must act 
 promptly. He cannot have the benefit of the speculation in 
 which the corporation is engaged if it prove successful, and 
 throw the loss upon the other members in case of failure.^ 
 
 § 309. Release from Liability by Forfeiture of Shares. — The 
 directors of a corporation are often invested by the charter 
 with the power of declaring a forfeiture of shares for non- 
 payment of calls. '^ This power must be exercised by the 
 directors fairly, and without discrimination against any por- 
 tion of the company. " It was not intended to supply them 
 with machinery whereby, under the pretence of forfeiture, 
 they should be able to deprive the continuing shareholders 
 
 1 Compare Henry v. Vermillion, ^ Supra, § 87. 
 
 &c. R. R. Co., 17 Ohio, 187; New » Infra, § 443. 
 
 Albany, &c. R R. Co. v. Fields, 10 * Supra, §§ 91, 92. 
 
 Ind. 190; Anderson v. New Castle, ^ Infra, § 721. 
 
 &o. R. R. Co., 12 Ind. 376; Downie « Supra, § 108. 
 
 V. White, 12 Wis. 176; Bridger's ' Supra, I 122 et seq. 
 Case, L. R. 9 Eq. 74; Melvin v. 
 Lamar Ins. Co., 80 111. 446. 
 
29S BIGHTS AND EEMEDIES OP SHAEEHOLDBES. § 810 
 
 of the liability of all those foi* whose joiat liability with them- 
 selves they had originally stipulated." ^ 
 
 Hence a forfeiture for the purpose of escaping liability to 
 creditors is void. A continuing shareholder would be entitled 
 to say : " I became a shareholder, relying on the names of 
 those who were engaged with me in this partnership ; I dele- 
 gated the management to certain directors with defined pow- 
 ers and duties ; it was part of the stipulations of the deed of 
 partnership that none of my fellow shareholders should quit 
 the partnership, except by substituting in his place some 
 other person approved by the directors. This was, I thought, 
 a sufficient security to me that, in the event of my being 
 called on bj"^ a creditor who, having recovered judgment 
 against the company, should proceed to enforce payment 
 against me, I had solvent partners from whom I might obtain 
 contribution ; and now I find that, without any authority 
 from me, you, the directors, have taken on yourselves to 
 enable several of my partners to withdraw from the partner- 
 ship by a proceeding which I never authorized." ^ 
 
 For the same reasons, it follows that the directors can- 
 not use the power of forfeiture unfairly against the member 
 whose shares are declared forfeited.* 
 
 § 310. Release from Liability by Transfer of Shares. — A 
 shareholder in an English joint-stock company is entitled to 
 transfer his shares at any time before proceedings to wind up 
 the company have been begun. It is immaterial whether the 
 transferee be solvent or insolvent, and whether the company 
 be in pecuniary difficulties at the time the transfer is made 
 or not.* 
 
 A different rule prevails in America. Where the contri- 
 bution of a shareholder is necessary to satisfy creditors in 
 
 1 Per Lord Cranworth, in Stan- nalj 745; Gowers's Case, L. R. 6 
 
 hope's Case, L. R. 1 Ch. 169. Eq. 77; Dixon v. Evans, L. R. 5 
 
 * Per Lord Cranworth, in Spack- H. L. 606; Ex parte Jones, 27 L. J. 
 
 man t7. Evans, L. R. 3 H. L. 171, Ch. 666; Hall's Case, L. R. 5 Ch. 
 
 186, 190; Stanhope's Case, L. R. 707; Mills v. Stewart, 41 N. Y. 
 
 1 Ch. 161; 3 De G. & Sm. 198; Rich- 386, 390; 62 Barb. 444. 
 
 mend's Case, 4 K. & J. 305, 324; « Sweny ». Smith, L. R. 7 Eq. 324. 
 
 Manisty's Case, 17 Solicitor's Jour- * Supra, § 167. 
 
§ 311 THE LA^^ OP PEIVATB COEPOEATIONS. 294 
 
 full, it is well settled that a transfer cannot be made to an 
 insolvent for the purpose of escaping liability.^ And a trans- 
 fer would, under these circumstances, be held equally fraud- 
 ulent as against the other shareholders, upon whom the loss 
 must fall.^ 
 
 § 311. Equitable Sights of Shareholders on v^inding up the 
 Corporation. — On the dissolution of a corporation or joint- 
 stock company, it becomes necessary to make a final adjust- 
 ment of the equitable rights of its shareholders. If the 
 company has earned a surplus, each shareholder is entitled to 
 receive a ratable share of this surplus after the amounts con- 
 tributed by all the shareholders to the company's capital 
 have been restored to them. Each shareholder who has not 
 fully paid up his shares should be charged with the amount 
 remaining unpaid upon his shares, and then credited with a 
 dividend out of the entire capital and profits of the concern, 
 proportionate to his fractional part of all the outstanding 
 shares. Each shareholder is liable to the corporation for the 
 amount remaining unpaid upon his shares, and this amount 
 may be called in by the company for any proper purpose.' 
 It is just, therefore, to distribute the profits ratably among 
 all the shareholders, irrespective of the amounts actually paid 
 upon their shares ; the relative interests of the shareholders 
 in the corporate concern do not depend upon the amounts 
 which they have contributed in cash. 
 
 If the corporation has suffered losses, so that the amount 
 of its capital is impaired, the entire loss must be apportioned 
 among the shareholders in a manner similar to that indicated 
 for the distribution of profits. Each shareholder must, upon 
 final settlement, bear so much of the loss of the whole com- 
 pany as is proportionate to his fractional part in all the out- 
 standing shares.* 
 
 It is evident, therefore, that if a shareholder is indebted to 
 the corporation, and the latter becomes insolvent, he must 
 contribute the full amount of his debt into the treasury of 
 
 1 Infra, § 838. * Compare Hartman v. Ins. Co. 
 
 " Supra, § 166. of "Valley of Va., 32 Gratt. 242. 
 
 » Supra, §§151, 154. 
 
295 EIGHTS AND EEMEDIES OF SHAEEHOLDEES. § 313 
 
 the company, and take a dividend with all the other share- 
 holders on the final settlement.^ On the other hand, if a 
 shareholder has a claim against the corporation as creditor, 
 he must be paid the amount of his claim in full before any 
 distribution of assets can be made among the shareholders. 
 
 The above rules apply with equal force where the business 
 of a corporation is closed, and its affairs are wound up, vol- 
 untarily or involuntarily, before the company has been dis- 
 solved, and in those cases in which the company has ceased 
 to exist in legal contemplation. 
 
 § 312. Equity of Contribution between Shareholders where 
 the Liability is indefinite. — In winding up a partnership or a 
 corporation or joint-stock company, whose members are indi- 
 vidually liable to creditors to an indefinite extent, it is not 
 necessary to consider special equities which creditors may 
 have against particular shareholders, since they are fully se- 
 cured in any event ; every shareholder is liable to creditors 
 for the full amount of their claims ; only the equities existing 
 between the shareholders themselves need, therefore, be con- 
 sidered primarily. However, as between the shareholders 
 themselves, each shareholder is liable only to the extent of his 
 interest in the company, and has a clear right to contribution 
 from the other members. For these reasons, it has been held 
 that, in determining who shall be placed upon the list of con- 
 tributaries in winding up an ordinary English joint-stock com- 
 pany, the question must be decided between the shareholder 
 and the company, without regard to the claims of creditors.^ 
 
 § 318. No Equity where all must contribute to full Extent 
 of Liability. — The same principle is applicable where a cor- 
 poration or limited company, whose shareholders are not liable 
 beyond the amount of their shares, is wound up, provided 
 always that the capital of the company be not wholly con- 
 
 * Stockton V. Mechanics', &o. nies Acts has been treated of very 
 
 Bank, 32 N. J. Eq. 163, 167. fully in Lindley on Partnership (4th 
 
 '^ See per Lord St. Leonards, in ed., pp. 1223 to 1474). A large fund 
 
 Spackman v. Evans, L. R. 3 H. L. of cases may be found here, in 
 
 171, 197. which the equities existing between 
 
 The winding up of English joint- the shareholders of a company are 
 
 stock companies under the Compa- illustrated. 
 
§ 314 THE LAW OP PEIVATB JOOBPOBATIONS. 296 
 
 sumed by losses. Each shareholder is therefore entitled to 
 insist that the loss be equitably apportioned.^ 
 
 But after a company of this description has become wholly 
 bankrupt, so that the full liability of every member must 
 necessarily be exhausted in order to pay all outstanding 
 debts, only the rights of creditors need be considered. In 
 this case the shareholders are no longer interested in securing 
 an equal apportionment, and there are no equities to be ad- 
 justed between the company and individual members, since 
 every shareholder must, in any event, contribute to the full 
 extent of his liability in order to satisfy creditors. 
 
 § 814. Equity wliere the Liability is not fully exhausted. — 
 If it is not necessary to exhaust the entire liability of all the 
 shareholders to creditors, any shareholder who has contrib- 
 uted more than his ratable share in payment of the debts of 
 the company is entitled to recover contribution from the other 
 shareholders, until the' whole amount paid has been equitably 
 apportioned between them. This rule applies equally where 
 the payment is made on account' of the undertaking of the 
 shareholders to contribute the amount of their shares to 
 the working capital of the company, and where it is made 
 by reason of an individual liability, imposed for the security 
 of creditors alone. 
 
 Thus, in a suit brought to enforce the individual liability 
 of shareholders of a corporation, under a statute providing 
 that " all stockholders shall be held liable to an amount 
 equal to their stock subscribed, for the purpose of securing 
 the creditors of such company," the Supreme Court of Ohio 
 said : " The right of contribution grows out of the organic re- 
 lation existing among the stockholders. As between them 
 
 1 In Chandler v. Brown, 77 111. " Each stockholder had a vested 
 
 334, the Supreme Court of Illinois right in the contract for subscrip- 
 
 held that a decree closing up the tion of every other stockhoMer, and 
 
 affairs of a corporation and appoint- we think it beyond the power of a 
 
 ing a receiver, and giving him dis- court of equity to invest any person 
 
 cretionary power to compromise with with a discretionary right to release 
 
 Stockholders with regard to the pay- it; at all events, it cannot be done 
 
 ment of their subscriptions, was er- by a decree to which the stookhold- 
 
 roneous. Justice Scholfield said: ers are not parties." 
 
297 EIGHTS AND REMEDIES OP SHAREHOLDERS. § 315 
 
 and the creditors, each stockholder is severally liable to all 
 the creditors ; as between themselves, each stockholder is 
 bound to pay in proportion to his stock." ^ 
 
 § 315. Equity of Contribution in 'winding up a Corporation. 
 — Upon the same principle, it follows that, in winding up an 
 insolvent corporation whose shareholders are liable either 
 for unpaid capital or to the creditors directly, all the share- 
 holders who can be reached should be brought before the 
 court and assessed ratably.^ Every shareholder may un- 
 doubtedly be charged to the full extent of his liability, if 
 necessary to satisfy creditors. But if all the shareholders 
 who are liable have not been brought before the court, those 
 who are defendants ought not to be charged with the liabil- 
 ity which should fall upon those who are absent, unless it be 
 shown that the latter are either insolvent, or are outside of 
 the jurisdiction of the court.' 
 
 This rule, however, applies only where the corporation is 
 actually in process of liquidation, or where the shareholders 
 are entitled to have the company wound up. If the com- 
 pany is still a going concern, an ordinary creditors' bill may 
 be brought against any shareholder who has not paid up his 
 shares ; and suit may afterwards be maintained by the share- 
 holder against the company in its corporate capacity, to re- 
 cover the amount which he has been compelled to pay. 
 
 And even though the corporation be insolvent, a creditor 
 
 1 Uinsted v. Buskirk, 17 Ohio St. partnerships and joint-stock com- 
 
 113, 118; Matthews v. Albert, 24 panies, see Lindley on Partnership 
 
 Md. 527; Stewart ti. Lay, 45 Iowa, (4th ed.), 753, 1442. Compare 
 
 604, 614; Hadley v. Russell, 40 O'Reilly «. Bard, 105 Pa. St. 569; 
 
 N. H. lOft, 112; Erickson v. Nes- Ray u. Powers, 134 Mass. 22. 
 
 mith, 46 N. H. 371; Masters ». " See Adler v. Milwaukee, &c. 
 
 Rossie Mining Co., 2 Sandf. Ch. Brick Co., 13 Wis. 57, 63; Mann 
 
 301, 305; Aspinwall v. Torrance, «. Pentz, 3 N. Y. 415 ; Vick w. Lane, 
 
 1 Lans. 381 ; Farrow v. Bivings, 13 56 Miss. 681. 
 
 Rich. Eq. 25; Gray v. Coffin, 9 * See Wood «. Dummer, 3 Mason, 
 
 Cush. 192; Middletown Bank v. 308, 321; Marsh v. Burroughs, 1 
 
 Magill, 5 Conn. 61, per Hosmer, Woods, 463. Compare Erickson v. 
 
 C. J. ; Briuham v. Wellersburg Coal Nesmith, 46 N. H. 371 ; Vick v. 
 
 Co., 47 Pa. St. 49. Infra, §§ 846, 874. Lane, 56 Miss. 681 ; Bronson v. Wil- 
 
 Concerning the right of con- mington, &e. Life Ins. Co., 85 N. C. 
 
 tribution and indemnity in case of 411. 
 
§ 315 THE LAW OF PRIVATE COEPOEATIONS. 298 
 
 may proceed against a portion of the shareholders to enforce 
 their liability for unpaid capital, without making the other 
 shareholders parties. When a corporation becomes insol- 
 vent, it is the duty of the shareholders to wind it up, — to 
 collect the unpaid capital by assessment through the regular 
 agents, and distribute it amongst the creditors. If the share- 
 holders and their agents neglect to perform this duty, they 
 cannot compel a creditor to go to the trouble and expense of 
 performing it for them.^ Creditors may therefore proceed 
 against the shareholders without regai'd to the equities exist- 
 ing between them. Those shareholders who feel aggrieved 
 thereby must themselves take the proper steps to have the 
 company wound up, and their rights adjusted, either by hav- 
 ing a receiver appointed, or by filing a cross-bill and bringing 
 in the other shareholders for contribution. 
 
 Accordingly, in Hatch v. Dana,^ a creditors' bill, brought 
 against a portion of the stockholders of an insolvent corpo- 
 ration, was sustained by the Supreme Court of the United 
 States. The bill was not a bill to wind up the company. 
 It was brought simply to obtain payment of a debt out of 
 the unpaid stock liabilitj' of the defendants. The court said : 
 " We hold that the complainant was under no obligation to 
 make all the shareholders of the bank defendants in his bill. 
 It was not his duty to marshal the assets of the bank, or to 
 adjust the equities between the corporators. In all that, he 
 had no interest. The appellants may have had such an in- 
 terest, and, if so, it was quite in their power to secure its 
 protection. They might have moved for a receiver, or they 
 might have filed a cross-bill, obtained a discovery of the other 
 stockholders, brought them in, and enforced contribution 
 from all who had not paid their stock subscriptions. Their 
 equitable right to contribution is not yet lost."* 
 
 1 This does not apply where the per Justice Strong. See also Ogil- 
 shareholders are liable to creditors vie v. Knox Ins. Co., 22 How. 380; 
 directly. The individual liability of Marsh v. Burroughs, 1 Woods, 463; 
 the shareholders is not capital, and Bartlett v. Drew, 57 N. Y. 587. 
 cannot be collected by assessment. Compare Viok v. Lane, 56 Miss. 681 ; 
 
 2 101 U. S. 205. Phoenix Warehousing Co. v. Badger, 
 » Hatch V. Dana, 101 U. S. 214, 67 N. Y. 294. See infra, § 844. 
 
299 THK CONSTRUCTION OF OHAETEKS. § 316 
 
 CHAPTER VI. 
 
 THE CONSTRUCTION OF CHAETEKS. 
 
 PART I. 
 
 § 316. The General Rule governing the Construction of Char- 
 ters in the United States. — The charter of a corporation serves 
 a twofold purpose : it operates as a law conferring upon the 
 corporators the right or franchise of acting in a corporate 
 capacity, and furthermore it contains the terms of the funda- 
 mental agreement between the corporators themselves.^ 
 
 There is no reason why a charter should be construed dif- 
 ferently from other written instruments. The object should 
 be to discover the intention of the parties, and it would be 
 absurd to attempt to ascertain the intention of the parties 
 by the application of any technical or arbitrary rule. 
 
 Those who become members of a corporation for purposes 
 of pecuniary profit evidently intend that the object of their 
 company shall be to prosecute the enterprise expressly set 
 forth in their charter or articles of association ; and they evi- 
 dently do not intend to join in any speculation which is not 
 in pursuance of the purposes thus indicated. It is clear, 
 also, that the intention of the legislature in incorporating a 
 company is to enable the company to act in a corporate 
 capacity, so far, and so far only, as is necessary in order to 
 carry on the business for which the company was formed. 
 
 It follows, therefore, that every act of a corporation which 
 is not affirmatively authorized by its charter involves both 
 
 1 A charter may also contain and the State. See infra, Chap- 
 a contract between the corporators ter XV. 
 
§ 317 THE LAW OF PRIVATE CORPORATIONS. 300 
 
 an unauthorized exercise of corporate power and a depart- 
 ure from the original agreement between the members of the 
 company. 
 
 This rule of construction is well settled throughout the 
 United States. In Thomas v. Railroad Co.,^ the Supreme 
 Court of the United States said : " We take the general doc- 
 trine to be in this country, though there may be exceptional 
 cases and some authorities to the contrary, that the powers 
 of corporations organized under legislative statutes are such, 
 and such only, as those statutes confer. Conceding the rule 
 applicable to all statutes, that what is fairly implied is as 
 much granted as what is expressed, it remains that the char- 
 ter of a corporation is the measure of its powers, and that 
 the enumeration of these powers implies the exclusion of all 
 others." 2 
 
 § 317. The General Rule in Englana. — The practical result 
 of the English authorities relating to this point is necessarily 
 the same as that of the American authorities. A different 
 rule would have been intolerable. But it was found neces- 
 sary by some of the English judges to reach this result by 
 a highly artificial method of reasoning. 
 
 It was said that an act of Parliament incorporating an 
 association must be held to confer authority upon the cor- 
 poration to do all those acts which are lawful to individuals 
 
 1 101 U. S. 71. Straus v. Eagle Ins. Co., 5 Ohio 
 
 2 Per Mr. Justice Miller in St. 59; Commonwealth i". Erie, &c. 
 Thomas r. Railroad Co., 101 U. S. R. K. Co., 27 Pa. St. 339; City 
 82; Perrine v. Chesapeake, &c. Council v. Montgomery, &c. Plank 
 Canal Co., 9 How. 184; Dartmouth Road Co., 31 Ala. 76; New London 
 College V. Woodward, 4 Wheat, v. Brainard, 22 Conn. 552; Brady 
 636; Vandall v. South San Fran- d. The Mayor, 20 N. Y. 312 ; Brook- 
 cisco.Dock Co., 40 Cal. 83; Bell- lyn Gravel Road Co. v. Slaughter, 
 meyer v. Independent District, &c., 33 Ind. 185. 
 
 44 Iowa, 564; Weckler v. First There is no doctrine of tlie law 
 
 National Bank, 42 Md. 581 ; Mat- of corporations which has been more 
 
 thews V. Skinker, 62 Mo. 329; often affirmed by the American 
 
 Metropolitan Bank v. Godfrey, 23 judges than that stated in the text. 
 
 111. 579; Caldwell ». City of Alton, It has been expressed, or at least 
 
 33 111. 416 ; Pullan v. Cincinnati, assumed, to be the law, in most of 
 
 &c. R. R. Co., 4 Biss. 35; Over- the cases bearing upon the construc- 
 
 myer v. Williams, 15 Ohio, 31 ; tion of charters. 
 
301 THE CONSTRUCTION OP CHAETEES. § 317 
 
 and are not expressly or impliedly prohibited by the act; and 
 that this rule of construction rests upon the authority of a 
 resolution in Sutton's Hospital Case, reported in 10 Coke's 
 Reports, 30 6.i 
 
 The principle upon which this doctrine is based is not 
 very clear. Both in England and in America it is con- 
 ceded that corporate powers cannot be exercised lawfully 
 until authority has been granted by law ; all persons are 
 forbidden by the common law to exercise any corporate pow- 
 ers, except under authority conferred by statute or by royal 
 charter. Not one of the English judges has ever intimated 
 an opinion that the intention of Parliament may be disre- 
 garded in construing its grants of corporate franchises. To 
 say, then, that whenever Parliament undertakes to grant 
 the right of forming a corporation, and of acting in a cor- 
 porate capacity for any purpose, immediately it must be 
 construed as granting whatever it does not prohibit, is cer- 
 tainly an arbitrary method of construction. It -is a con- 
 struction which has never been applied in other classes of 
 grants or contracts, and is evidently contrary to the inten- 
 tions of the legislature and the shareholders forming the 
 company. 
 
 Mr. Pollock, in discussing the contrary doctrine, which is 
 the rule in America, says : " It is adopted by some of the 
 best English writers ; ^ and, in America, Kent stated it (long 
 before the subject had obtained its present development in 
 England) as the modern and even the obvious doctrine. It 
 also seems to have been taken for granted by those who 
 framed the modern statutes defining the powers of incorpo- 
 rated companies ; which, if the opposite view be correct, are 
 redundant in permission and defective in prohibition." ^ 
 
 1 See Pollock on Contracts, 88; tions like the modern joint-stock 
 
 per Blackburn, J., in Riche v. Ash- companies were unknown, 
 bury Ey., &c. Co., L. R. 9 Exch. ^ Citing Lindley on Partnership, 
 
 263, 264; Atty.-Gen. v. Great East- 263; Leake on Contracts, 258. 
 ern Ry. Co., L. R. 5 App. Cas. 481. " Pollock on Contracts, 89. See 
 
 Whatever the resolution in Sutton's per Bramwell, L. J., in Atty.-Gen. 
 
 Hospital Case may have meant, it is v. Great Eastern Ry. Co., L. R. 11 
 
 certain that at that time corpora- Ch. D. 501. 
 
§ 318 THE LAW OF PEIVATB COEPOEATlOKS. 302 
 
 The effect of the doctrine above criticised has, however, 
 been counteracted by another arbitrary rule of construction, 
 which also appears to be peculiar to the English courts. For 
 it must be held in England, that, when the legislature charters 
 a corporation for a particular purpose, and with special pow- 
 ers, (and corporations are never chartered otherwise,) then 
 the legislature intends to prohibit the company so formed 
 from exercising any powers except for the purposes for 
 which it was chartered.^ 
 
 The practical result is therefore as follows. In England, 
 a corporation has authority to do any act which is expressly 
 or impliedly authorized by its charter, and whatever acts are 
 not so authorized are impliedly prohibited by the act creat- 
 ing the corporation. In America, also, a corporation has 
 authority to do any act which is expressly or impliedly au- 
 thorized by its charter, and whatever acts are not so author- 
 ized are prohibited by the common law.^ 
 
 § 318. Construction of the Articles of Association of Compa- 
 nies organized under General Laws. — At the present day cor- 
 porations are usually formed by the adoption of articles of 
 association and the subscription of capital, in pursuance of 
 general incorporation laws enacted by the legislature. The 
 
 ' Shrewsbury, &c. Ry. Co. v. their corporate seal, does not bind 
 
 Northwestern Ey. Co., 6 H. L. C. them, if it appears by the express 
 
 113; Eastern Counties Ry. Co. v. provisions of the statute creating 
 
 Hawkes, 5 H. L. C. 348, per Lord the corporation, or by necessary or 
 
 Cran worth; National Manure Co. reasonable inference from its enact- 
 
 V. Donald, 28 L. J. Ex. 188, per ment, that the deed is ultra vires, 
 
 Pollock, C. B. ; Shrewsbury, &c. Ry. that is, that the legislature meant 
 
 Co. V. London, &c. Ry. Co., 22 that the deed should not be made.' 
 
 L. J. Ch. 682; Atty.-Gen. v. Great I think this is the more correct way 
 
 Northern Ry. Co., 1 Dr. & Sm. of enunciating the doctrine, though 
 
 154. practically it makes very little dif- 
 
 ^ In Shrewsbury, &c. Ry. Co. v. ference whether we say that the 
 Northwestern Ry. Co., 6 H. L. C. railway company has no authority 
 137, 138, Lord Cranworth, L. C, given to it by its incorporation to' 
 quoting the words of Mr. Baron enter into contracts as to matters 
 Parke, said: "'Where a corpora- not connected with its corporate 
 tion is created by act of Parliament duties, or that it is impliedly pre- 
 fer particular purposes with special hibited from so doing, because by 
 powers, their deed, though under necessary inference the legislature- 
 
303 THE CONSTKtJCTION OF CHAETERS. § 319 
 
 articles of association of a company thus organized, taken in 
 connection with the laws under which the organization takes 
 place, form the constitution of the association, and answer the 
 same purposes as a special charter. They contain the terms 
 of the agreement of association between the shareholders, 
 and indicate the character and extent of the business in 
 which the company shall engage ; they also contain a grant 
 from the State, to those organizing under the law, of the 
 franchise, or right of forming a corporation and attaining the 
 purposes agreed upon.^ 
 
 The same rules of construction apply to articles of incor- 
 poration adopted pursuant to general laws, as to charters of 
 incorporation granted by special acts of the legislature. In 
 considering the extent of the rights or franchises of a corpo- 
 ration, and the powers of its agents, substantially the same 
 implications must be made, whether the company was incor- 
 porated under a general law or by special act. The word 
 " charter," as used in this chapter, must be taken to mean 
 the instrument or instruments containing the fundamental 
 agreement between the members of the association and the 
 franchises granted by the State. 
 
 The articles of association of an unincorporated joint-stock 
 company serve substantially the same purposes, and are sub- 
 ject to the same rules of construction, as the articles of a cor- 
 poration in the technical sense of the term.'^ 
 
 § 319. Construction of Act legalizing an existing Corporation. 
 — Where the legislature, by statute, recognizes and acqui- 
 esces in the existence of a corporation which was formed by 
 the corporators without the proper authority, it thereby in- 
 vests the association with the right of continuing to act in a 
 corporate capacity for the purposes and in the manner that 
 it publicly assumed to act. And if rights or franchises are 
 conferred upon an association claiming to be incorporated, it 
 thereby becomes authorized to exercise the powers expressly 
 
 must be considered to have intended ing Ass., 29 Minn. 275, 282; Gran- 
 
 that no such contracts should be gers' Life, &c. Ins. Co. v. Kamper, 
 
 entered into." 73 Ala. 325, 342. 
 
 1 Bergman v. St. Paul, &c. Build- " Bray v. Farwell, 81 N. Y. 600. 
 
§ 320 THE LAW OP PRIVATE COEPORATIONS. 304 
 
 conferred, and such others as the legislature appears to have 
 imputed to it.^ 
 
 § 320. 'What may be implied in construing the Charter of a 
 Trading Corporation. — General Rule. — A trading corporation 
 is in many respects like a trading copartnership. It is an 
 association formed for the purpose of carrying on a particular 
 business or trade, for the pecuniary profit of its individual 
 members. 
 
 Charters of incorporation frequently prescribe only the 
 main objects of the companies formed under them. Author- 
 ity to use the means necessary to attain these objects must, 
 therefore, be supplied by implication. 
 
 It is apparent that a business corporation cannot carry on 
 its business successfully, unless it is able to act substantially 
 in the same manner as an individual or a copartnership would 
 act under similar circumstances ; and it is but reasonable to 
 suppose that, when the legislature incorporates a company 
 for the purpose of carrying on a particular business, the 
 intention is that the company shall carry on the business 
 in fhe usual manner, and that it shall have authority to 
 exercise all powers necessary to enable it to accomplish this 
 purpose. 
 
 The rule of construction is settled accordingly. It is held 
 that a corporation has implied authority to prosecute its le- 
 gitimate business in the same manner as an individual or an 
 unincorporated association engaged in a similar enterprise ; 
 but any act which is prohibited by the charter, or not within 
 the purposes for which the company was formed, remains 
 unauthorized.^ This rule applies equally to corporations 
 
 1 Supra, § 20. Thompson v. Lambert, 44 Iowa, 
 
 2 In Barry v. Merchants' Ex- 239 ; Old Colony R. R. Co. v. Evans, 
 change Co., 1 Sandf. Oh. 289, Vice- 6 Gray, 38; ClaVk v. Farrington, 11 
 Chancellor Sandford said : "A Wis. 333; Blunt v. Walker, Id. 
 corporation, in order to attain its 349; Willmarth v. Crawford, 10 
 legitimate objects, may deal pre- Wend. 342; Union Bank v. Jacobs, 
 cisely as an individual may who 6 Humph. 525; Ohio Life Ins. Co. w. 
 seeks to accomplish the same ends." Merchants' Ins. Co., 11 Humph. 22. 
 See also White Water Valley Ca- The same rule applies in Eng- 
 nal Co. V. Vallette, 21 How. 424; land. See Bostock v. North St?,f- 
 MoKiernan v. Lenzen, 56 Cal. 61; fordshire Ry. Co. 4 El. & Bl. 819; 
 
305 THE CONSTRUCTION OP CHAETEES. § 321 
 
 formed under general incorporation laws, and to corpora- 
 tions formed under special charters.^ 
 
 The rule of construction has frequently been stated by the 
 American judges more narrowly than by the English judges, 
 but it will be found upon an examination of the actual de- 
 cisions that charters are construed with at least as much 
 liberality in the United States as in England. 
 
 § 821. Construction of Express Limitations. — Prohibitions 
 from entering upon a Course of Dealing. — Authority to enter 
 into a contract which is in violation of an express prohibition 
 of the charter of a corporation, or a general rule of law, can 
 never be implied. But the provisions of a law or charter 
 should always be construed in such a manner as to attain 
 their purposes without interfering unnecessarily with the 
 usages of trade. 
 
 Accordingly, it has been held in various cases that a pro- 
 hibition from engaging in a particular course of dealing does 
 not include a prohibition from doing exceptional acts, al- 
 though the repetition of these acts would constitute the pro- 
 hibited course of dealing. A prohibition from dealing in a 
 certain kind of property does not take away the right of a 
 corporation to acquire such property for use or consumption 
 by the company, or in satisfaction of a valid debt, or by way 
 of security.^ A law forbidding certain corporations from 
 
 Ex parte Birmingham Banking Co., may exercise all the powers which 
 L. R. 6 Ch. 83; Scottish, &c. Ry. are conferred upon such corpora- 
 Co. V. Stewart, 3 Macq. 382, 415. tions by statute, and probably all 
 A similar principle of construction such powers as are usually exercised 
 must be applied to the constitution by similar corporations, and which 
 of a club or other society. Ingham ai'e necessary to accomplish the pur- 
 V. Reform Club, 12 Phila. 264. poses of such corporation, not in con- 
 1 In Wendel v. State, 62 Wis. flict with the laws of the State." See 
 304, Taylor, J., said: "It is not Richardson v. Massachusetts Chari- 
 necessary that the articles of asso- table, &c. Ass., 181 Mass. 174. 
 elation shall designate with particu- ^ Fleckner v. Bank of U. S. 8 
 larity all the powers which it may Wheat. 351 ; First National Bank 
 exercise when duly incorporated, v. National Exchange Bank, 92 
 It is sufficient if they designate in U. S. 128; Western Cottage Organ 
 general terms the purposes for which Co. v. Reddish, 51 Iowa, 55; Clark 
 the corporation is organized; and v. Farrington, 11 Wis. 306; Blunt 
 when organized, such corporation v. Walker, 11 Wis. 334; Ingraham 
 VOL. I. — 20 
 
§ 322 THE LAW OF PRIVATE COKPOKATIOKS. 306 
 
 issuing negotiable paper as a circulating medium, or from 
 dealing in commercial paper, does not affect the implied 
 right of issuing and receiving negotiable paper in ordinary 
 trading transactions, or for any purpose incidental to the 
 legitimate business for which the corporation was formed.^ 
 
 In Mechanics' Bank v. Bank of Columbia,^ it was held that 
 a section in the charter of a bank, providing " that all bills, 
 bonds, notes, and every other contract or engagement on 
 behalf of the corporation, shall be signed by the president 
 and countersigned by the cashier," was not intended to ex- 
 tend to contracts implied by law, or to transactions of a 
 common occurrence, such as drawing checks and issuing 
 certificates of deposit. 
 
 § 322. An express provision in the charter of a corpora- 
 tion authorizing it to act in a certain manner, in some instan- 
 ces, implies a prohibition from acting in any other manner. 
 Thus, it has been decided that a provision in the charter of 
 a safe-deposit company, expressly enumerating the kinds of 
 securities in which the corporation may invest its capital and 
 the funds deposited with it, by implication, prohibits the 
 
 V. Speed, 30 Miss. 410; Bates v. paper is not sufficient to enable a 
 
 Bank of Alabama, 2 Ala. 465; corporation to engage in the busi- 
 
 Graham v. Hendricks, 22 La. Ann. ness of banking, unless if be char- 
 
 523 ; Sacket's Hai-bor Bank v. Lewis tered to carry on a business of that 
 
 County Bank, 11 Barb. 213; Steam character. Sumner v. Marcy, 3 
 
 Nav. Co. V. Weed, 17 Barb. 383. Woodb. & M. 112, 113; Duncan v. 
 
 See also Cooper Manuf. Co. v. Fer- Maryland Sav. Inst., 10 G. & J. 
 
 guson, 113 U. S. 727. 299; Re Ohio Life Ins., &o. Co., 
 
 » Blair v. Perpetual Ins. Co., 10 9 Ohio, 291; State v. Granville, &c. 
 
 Mo. 561; Buckley w. Briggs, 30 Mo. Soc, 11 Ohio, 1. 
 
 452; Smith v. Eureka Flour Mills A prohibition from engaging in 
 
 Co., 6 Cal. 1; Atty.-Gen. v. Life & banking includes the discounting of 
 
 Fire Ins. Co. , 9 Paige, 470 ; Partridge notes or bills of exchange as a regu- 
 
 V. Badger, 25 Barb. 146; Potter ». lar business. New York, &c. Ins. Co. 
 
 Bank of Ithaca, 7 Hill, 530; Mum- v. Ely, 5 Conn. 560, 574; New York, 
 
 ford V. American L. Ins., &c. Co., 4 &c. Ins. Co. v. Sturges, 2 Cow. 664. 
 
 N. Y. 463; White's Bank v. Toledo, See Pratt ». Eaton, 18 Hun, 293; 
 
 &c. Ins. Co., 12 Ohio St. 601; West- Taylor u. Bruen, 2 Barb. Ch. 301. 
 
 ern Cottage Organ Co. v. Reddish, Compare People v. Loewenthal, 93 
 
 51 Iowa, 55. 111. 191. 
 
 On the other hand, an express * Mechanics' Bank v. Bank of 
 
 authority to buy and sell negotiable Columbia, 5 Wheat. 326. 
 
307 THE CONSTETTCTION Of CHAETEKS. § 323 
 
 company from lending money upon any other securities than 
 those named.^ But this method of construction cannot, as a 
 rule, be applied to the charters of ordinary business corpora- 
 tions. The charters of such companies often contain pro- 
 visions indicating in detail some of the kinds of transactions 
 in which the companies may engage. These provisions are 
 not designed to negative the existence of powers which might 
 otherwise be implied ; their object is to confer additional pow- 
 ers, or to remove possible doubts as to powers which may be 
 implied. In many instances they are mere surplusage. It 
 would defeat the object of provisions of this description to 
 treat them as restricting the powers which would ordinarily 
 be accorded to the corporation by implication. 
 
 § 328. Grants of Special Franchises. — The rule of con- 
 struction Stated in the preceding section has no application 
 to a grant of special privileges in derogation of common right, 
 or of an exemption from the operation of general laws gov- 
 erning other persons. It should always be presumed, that 
 the legislature does not intend to confer franchises of this 
 character, unless a contrary intention be expressed in unam- 
 biguous terms. 
 
 In Fertilizing Co. v. Hyde Park,^ Mr. Justice Swayne 
 said : " The rule of construction in this class of cases is, that 
 it shall be most strongly against the corporation. Every rea- 
 sonable doubt is to be resolved adversely. Nothing is to be 
 taken as conceded but what is given in unmistakable terms, 
 or by an implication equally clear. The affirmative must 
 be shown. Silence is negation, and doubt is fatal to the 
 claim. This doctrine is vital to the public welfare. It is 
 axiomatic in the jurisprudence of this court." 
 
 > Pratt V. Short, 79 N". Y. 437. Francisco, 52 Cal. 112; Bowling 
 
 See also New York, &c. Insurance Green, &c. R. R. Co. v. Warren 
 
 Co. V. Ely, 2 Cowen, 678. County Court, 10 Bush, 711 ; Brad- 
 
 2 97 U. S. 659, 666. See also ley v. New York, &c. R. R. Co., 
 
 Charles River Bridge Co. v. Warren 21 Conn. 294; Talmadge v. North 
 
 Bridge Co., 11 Pet. 420; Rice v. American Coal, &c. Co., 3 Head, 
 
 Railroad Co., 1 Black, 358; New 387; Thompson v. Androscoggin, 
 
 York, &c. R. R. Co. v. Kip, 46 N. Y. &c. Improvement Co., 58 N. H. 
 
 546 ; Spring Valley W. W. Co. v. San 108. 
 
§324 
 
 THE LAW OP PRIVATE CORPOKATIONS. 
 
 308 
 
 The distinction here pointed out is not an arbitrary one, 
 but is founded on evident reasons.^ Accordingly, it has 
 been held, that a law or charter granting a right to exercise 
 the power of eminent domain,^ or to create a nuisance,^ or to 
 hold a lottery, or to do any other act not lawful to the mem- 
 bers of the community generally, should be strictly construed.* 
 Every presumption will be made against the existence of an 
 exemption from taxation,^ or from the general laws relating 
 to usury ; ^ or of a right to a monopoly or special privilege, 
 to the exclusion of others, or at the public expenseJ 
 
 § 324. Fresumptions as to the Validity of Corporate Acts. — 
 It has been stated frequently, both in England and in Amer- 
 ica, that an act performed by a corporation should be pre- 
 
 » See infra, § 1032 et seq. 
 
 » New York, &o. R. R. Co. v. Kip, 
 46 N. Y. 546; Hannibal Bridge Co. 
 V. Schaubaoker, 49 Mo. 555; East 
 St. Louis V. St. John, 47 Dl. 463; 
 State V. Jersey City, 1 Dutch. 809; 
 Van Wickle v. Camden, &o. R. R. 
 Co., 2 Green (14 N. J. Law), 162; 
 Eward v. Lawrenceburgh, &c. R. R. 
 Co., 7 Ind. 711; Moorhead ii. Little 
 Miami R. R. Co., 17 Ohio, 340; 
 Blakemore v. Glamorganshire Canal 
 Co., 1 Myl. & K. 154; Webb v. Man- 
 chester, &c. Ry. Co., 4 Myl. Ss C. 116. 
 
 ' Fertilizing Co. v. Hyde Park, 
 97 U. S. 659; Babcock u. New Jer- 
 sey Stock Yard Co., 20 N. J. Eq. 
 296 ; Newark Plank R. Co. v. Elmer, 
 1 Stockt. 754 ; Jersey City v. Morris 
 Canal, &c. Co., 1 Beas. 547; Alle- 
 gheny w. Ohio, &c. R. R. Co., 26 Pa. 
 St. 355; Commonwealth v. Erie, &o. 
 R. R. Co., 27 Pa. St. 839; Wales v. 
 Stetson, 2 Mass. 146. Compare 
 Justices, &c. V. Griffin, &c. Plank 
 Road Co., 9 Ga.475, and Atty.-Gen. 
 V. Stevens, Saxt. (N. J.) 369. 
 
 * State V. Krebs, 64 N. C. 604; 
 Beaty v. Knowler, 4 Pet. 152; Mayor 
 V. Chorley W. W. Co., 2 De G., M. 
 & G. 852. 
 
 6 The Delaware R. R. Tax Case, 
 18 Wall. 206; Fertilizing Co. v. Hyde 
 Park, 97 U. S. 666, and cases cited. 
 
 * Tyng V. Commercial Ware- 
 house Co., 58 N. Y. 308; Johnson 
 V. Griffin Banking, &c. Co., 55 Ga. 
 691. See Reiser v. William Tell, 
 &c. Ass., 89 Pa. St. 137; Houser ». 
 Hermann Building Ass., 41 Pa. St. 
 478; and compare Franklin Build- 
 ing Ass. V. Marsh, 29 N. J. Law, 
 225. 
 
 ' Richmond, &c. R. R. Co. v. Lou- 
 i.sa R. R. Co., 13 How. 71; Charles 
 River Bridge Co. v. Warren Bridge 
 Co., 11 Pet. 420; Providence Bank 
 V. Billings, 4 Pet. 514; Ruggles v. 
 Illinois, 108 U. S. 526; Gaines v. 
 Coates, 51 Miss. 835; De Lancey v. 
 Insurance Co., 52 N. H. 5S1; Cay- 
 uga Bridge Co. o. Magee, 2 Paige, 
 116; Mohawk Bridge Co. v Utica, 
 &c. R. R. Co., 6 Paige, 554; Mc- 
 Cartee v. Orphan Asylum Soc, 9 
 Cow. 437; Bowen v. Lease, 5 Hill, 
 221; Hooker v. New Haven, &c. Co., 
 15 Conn. 312; Bennett's Branch 
 Imp. Co.'s Appeal, 65 Pa. St. 242; 
 Pratt V. Atlantic, &c. R. R. Co., 42 
 Me. 579 ; Isham v. Bennington Iron 
 Co., 19 Vt. 248. 
 
S09 THE CONSTRUCTION OF CHAETBKS. § 324 
 
 sumed to have been performed under authority of its charter 
 until the contrary shall have been shown; that an act is 
 prima fade intra vires, and that the burden of proving that 
 it is extra vires rests upon the party claiming that the com- 
 pany has violated its charter.^ These statements have no 
 definite meaning independently of the connection in which 
 they are used, and their vagueness does not recommend 
 them to general use. 
 
 It is well settled that, in determining the validity of an act 
 performed by an agent of a corporation, it may often be pre- 
 sumed that the agent acted within the scope of his authority; 
 if the act in question would be authorized under ordinary 
 circumstances, a person claiming that it was not authorized 
 must show why it was not authorized.^ This, however, is 
 merely a rule of the law of agency, and not, properly speak- 
 ing, a rule governing the construction of charters. 
 
 There can be no need of raising any presumption as to the 
 extent of the powers of a corporation, where its charter has 
 been proven or is judicially known to the court. The char- 
 ter of a corporation contains the terms upon which the share- 
 holders have associated, and gives the measure of the powers 
 which the company and its agents may lawfully exercise. It 
 has been pointed out that charters should be construed lib- 
 erally, like other instruments of a similar character. They 
 are usually expressed in very general terms, and do not pro- 
 vide all the details necessary to carry out the purposes of 
 the companies formed under them.^ 
 
 1 See cases in the following note. Iron Co., 7 Cow. 540; McFarlan 
 
 * Express Co. ». Railroad Co., v. Triton Ina. Co., 4 Denio, 392; 
 
 99 U. S. 199; Lorillard v. Clyde, 86 Dockery v. Miller, 9 Humph. 731; 
 
 N. Y. 384; Yates ». Van De Bogert, Mitchell v. Rome R. R. Co., 17 Ga. 
 
 56 N. Y. 526; De GrofE ». American 574; Dana v. Bank of St. Paul, 4 
 
 Linen Thread Co., 21 N.Y. 124; Cha- Minn. 385; Morris, &c. R. R. Co. 
 
 tauque Co. Bank v. Risley, 19 N. Y. v. Sussex R. R. Co., 20 N. J. Eq. 
 
 369; Farmers' L. k T. Co. v. Perry, 542; Blake ti. HoUey, 14 Ind. 383; 
 
 3 Sandf . Ch. 339 ; Same ». Clowes, Middlesex, &c. Co. v. Davis, 3 Mete. 
 
 3 N. Y. 470; Same v. Curtis, 7 (Mass.) 133. See Oxford Iron Co. 
 
 N. Y. 466; N. Y., &c. Ins. Co. r. v. Spradley, 46 Ala. 98, and cases 
 
 Sturges, 2 Cow. 664; Safford v. Wye- cited. Infra, § 577 et seq. 
 
 koff, 4 Hill, 442; Ex parte Peru » 5upra, § 320. 
 
§ 325 THE LAW OF PBIVATE COBPOBATIONS. 310 
 
 Where the court has no judicial knowledge of the charter of 
 a corporation, as in case of a foreign corporation or a corpo- 
 ration chartered by a private law, a party upon whom rests 
 the burden of proving the validity or invalidity of the com- 
 pany's acts must bring its charter to the knowledge of the 
 court; but where the existence of a company of a certain 
 general description is shown, it may be presumed to have 
 such powers as are usually incident to companies of a similar* 
 character.^ 
 
 § 325. Powers incidental to all Corporations. — Those pow- 
 ers and characteristics which are essential in order to bring an 
 association within the definition of the word " corporation " 
 may be said to be incidental to all corporations aggregate. 
 The word " corporation " has, however, been applied to asso- 
 ciations so widely dissimilar in their character and constitu- 
 tion, that it is impossible to name any one power or quality 
 which is inseparably incidental to all corporations.^ It is not 
 even true, that all corporations aggregate are voluntary as- 
 sociations ; the term " corporation " applies to government 
 institutions, like municipalities, and collective bodies of per- 
 sons, who are not bound together by any mutual agreement 
 or relationship.^ The most that can be said is, that all cor- 
 porations aggregate are bodies of persons viewed in a col- 
 lective capacity. 
 
 According to Blackstone,* the following five powers are in- 
 separably incident to every corporation aggregate : — 
 
 1. To have perpetual succession. 
 
 2. To sue or be sued, implead or be impleaded, grant or 
 receive, by its corporate name, and do all other acts as natu- 
 ral persons may. 
 
 3. To purchase lands, and hold them, for the benefit of 
 themselves and their successors. 
 
 4. To have a common seal. 
 
 5. To make by-laws or private statutes for the better gov- 
 ernment of the corporation. 
 
 1 Compare Charleston, &c. Turn- ' Supra, §§ 3, 6. 
 
 pike Co. V. Willey, 16 Ind. 34. * 1 Bl. Com. 475, 476. See also 
 
 2 Supra, §§ 2-6. Kyd on Corp. 69. 
 
311 THE CONSTKTJCTION OP OHABTBES. § 327 
 
 But this statement is not strictly accurate. It is true, that 
 the five powers which have been enumerated belong to most 
 corporations aggregate, and an association possessing these 
 powers would undoubtedly be termed a corporation ; ^ but it 
 does not follow that these powers belong to all corporations 
 aggregate. An association or collection of persons may prop- 
 erly be called a corporation, although not possessing any one 
 of the five powers which have been enumerated. 
 
 § 326. What Acts a Corporation may do. — The general 
 rule has been stated to be, that a corporation may prosecute 
 its legitimate business in the same manner as an individual 
 or copartnership engaged in a similar enterprise.^ In the fol- 
 lowing sections cases will be cited, showing in detail that 
 corporations have implied authority to acquire property and 
 dispose of it, to enter into contracts, defend their rights, and 
 generally do all acts which unincorporated companies or in- 
 dividuals may do, in attaining their authorized purposes. 
 
 The authorities referred to in the second and third parts of 
 this chapter relate to the management of the internal affairs 
 of corporations, and to the general policy to be pursued by 
 corporations in their business enterprises. 
 
 § 327. The Implied Right of acquiring Property. — A corpo- 
 ration has implied authority, in the absence of a prohibition 
 in its charter, to acquire and hold any property, whether real 
 or personal, which may be required in carrying on the busi- 
 ness for which the company was formed. This implied 
 authority extends not merely to the acquisition of such prop- 
 erty as is absolutely necessary in carrying on the company's 
 business ; a corporation may acquire and hold whatever prop- 
 
 1 In Liverpool Ins. Co. v. Massa- sue and be sued in one name, and 
 
 chusetts, 10 Wall. 566, the Supreme be bound by the judgment rendered 
 
 Court of the United States held that in such suit ; 3. The shares of its 
 
 a joint-stock association formed in members were transferable, so as to 
 
 England -was a corporation within secure a perpetual succession of 
 
 the meaning of laws in force in the membership ; and 4. It could sue its 
 
 United States, by reason of the fol- individual shareholders, and be sued 
 
 lowing attributes: 1. It had a dis- by them, as a distinct entity. Sea 
 
 tinctive and artificial name, by which supra , § 18. 
 it could make contracts ; 2. It could ' Supra, § 320. 
 
§ 328 THE LAW OF PEIVATB COEPOKATIOKS. 812 
 
 erty is reasonably useful and convenient in attaining its legit- 
 imate ends.^ 
 
 The implied right of a corporation to acquire and hold 
 property is merely incidental to the special business or enter- 
 prise for which the company was formed. A corporation has 
 no right to purchase land or any other property for any pur- 
 pose which is outside of the business indicated by its charter.^ 
 It is to be observed, however, that a purchase of property 
 which would be wholly unauthorized under ordinary circum- 
 stances may become proper upon the happening of peculiar 
 events, the rule being that a corporation may do all such 
 acts in the management of its business as an individual would 
 ordinarily do under similar circumstances.^ 
 
 § 328. statutes of Mortmain. — The implied right of cor- 
 porations to acquire and hold property for authorized pur- 
 poses has, in many cases, been restrained within definite 
 limits, either by general statutes or by the acts under which 
 the companies were formed. Thus, the English statutes of 
 mortmain were enacted at an early day, to prevent the ac- 
 cumulation of real estate in ecclesiastical corporations ; and 
 afterwards their operation was extended to lay corporations 
 also.* These statutes seem never to have been in force in 
 the United States.^ But provisions of a similar character 
 
 * 1 Bl. Com. 475, 478; 2 Kent's purpose, than to purchase a legal 
 
 Com. 227; Blanchard's Gun Stock, estate under similar circumstances. 
 
 &c. Factory v. Warner, 1 Blatchf . C. Coleman v. San Kafael Turnpike 
 
 Ct. 258; Page v. Heiueherg, 40 Vt. Co., 49 Cal. 517. 
 81 ; Old Colony R. R. Co. v. Evans, » Infi-a, § 362. 
 6 Gray, 38; Spear v. Crawford, 14 * See 1 Bl. Com. 479; 2 Bl. 
 
 Wend. 23 ; Thompson v. Waters, 25 Com. 268-273. 
 Mich. 222, 227; Moss v. Averell, 10 « 2 Kent's Com. 282; Lathrop v. 
 
 N. Y. 449. Commercial Bank of Scioto, 8 Dana 
 
 " Rensselaer, &c. R. R. Co. v. Da- (Ky.), 121 ; Perin v. Carey, 24 How. 
 
 vis, 43 N. Y. 137; Pacific R. R. Co. 465; Page v. Heineberg, 40 Vt. 81; 
 
 V. Seely, 45 Mo. 212; Occum Co', v. Downing v. Marshall, 23 N. Y. 392; 
 
 Sprague Manuf. Co., 34 Conn. 529, Odell v. Odell, 10 Allen, 1; First 
 
 541; Bank of Michigan v. Mies, Parish v. Cole, 3 Pick. 239. The 
 
 Walker (Mich.), 99. statutes of mortmain hare been held 
 
 It is clear that a corporation has to be in force in Pennsylvania, so 
 
 no more right to purchase an equita- far as they prohibit the dedication 
 
 ble estate in land for an unauthorized of lands to superstitious uses with- 
 
313 THK CONSTKUCTION OF CHABTERS. § 330 
 
 have been enacted by many of the States, and are not infre- 
 quently contained in special charters of incorporation. 
 
 § 329. Construction of Provisions limiting the Right to ac- 
 quire Property. — There is no arbitrary rule of law for the 
 construction of statutory provisions limiting the right of 
 corporations to acquire and hold property. The application 
 of such a provision to a particular case, and the effect of the 
 legal prohibition upon an unauthorized acquisition of prop- 
 erty, would depend upon the intention of the legislature ; 
 and this intention can ordinarily be ascertained only by con- 
 sidering the purpose for which the limitation was imposed.^ 
 
 If the right of a corporation to purchase lands is expressly 
 limited to a certain amount in value, and the value of lands 
 purchased by the company within its lawful powers is after- 
 wards increased, by good husbandry or otherwise, so as to 
 exceed the prescribed amount, the title of the corporation 
 will not be affected thereby.^ A prohibition from habitually 
 dealing in a particular kind of property does not render a 
 single purchase unauthorized.^ 
 
 The nominal amount of the. capital stock of a corporation, 
 as fixed by its charter, does not fer se limit the amount of 
 property which it may acquire and hold. Thus, it has been 
 held that a corporation whose capital was fixed at one million 
 dollars might expend two millions in the site and erection 
 of buildings, and, if necessary, contract debts for expenses 
 incurred after its capital had been exhausted.* 
 
 § 830. A corporation chartered to exist for a limited pe- 
 riod of time only may nevertheless acquire title in fee to 
 lands required for legitimate purposes.^ But it has been said 
 
 out statutory license. Methodist ity Church, 4 Sandf. Ch. 634; Hum- 
 Church V. Remington, 1 Watts, 218. bert «. Trinity Church, 24 Wend. 
 But they have been held not to be 587, 639; Harvard College v. Alder- 
 applicable to other corporations, men of Boston, 104 Mass. 470. 
 whether foreign or domestic. Run- ^ Supra, ^ S21. 
 yan v. Coster, 14 Pet. 122; Leazure * Barry v. Merchants' Exch. Co., 
 V. Hillegas, 7 S. & R. 313, 320; Mil- 1 Sandf. Ch. 280; State v. Morris- 
 ler V. Porter, 53 Pa. St. 292. town Fire Ass., 23 N. J. Law, 195. 
 
 1 See infra, § 636 et seq. ^ Nicoll v. New York, &c. R. R. 
 
 * 2 Inst. 722; Bogardus v. Trin- Co., 12 N. Y. 121; Rives v. Dud- 
 
§ 330 THE LAW OK PBIVATB COEPOKATIONS. 314 
 
 that "a grant to a corporation aggregate, limited as to the 
 duration of its existence, without words of perpetuity being 
 annexed to the grant, would only create an estate for the 
 life of the corporation." ^ This doctrine appears to be based 
 upon a technicality of somewhat doubtful application. It is 
 purely a question of intention whether a grant to a corpora- 
 tion whose duration is limited shall be a grant in fee or 
 during the existence of the corporation. A grant to a corpo- 
 ration for a special purpose, which ends with the existence of 
 the corporation, should be construed as a grantlor the life of 
 the corporation, and the same rule ought undoubtedly to be 
 applied to a grant of new franchises or rights by the State.^ 
 But where property is purchased by and granted to a pri- 
 vate joint-stock corporation in the course of its business, the 
 grant should be construed as an absolute grant, unless the 
 contrary be expressly provided. The fact that the charter 
 of the company was of limited duration would certainly not, 
 as a matter of law, prevent the company from receiving 
 a grant in fee ; nor would it raise a presumption that the 
 parties intended the grant to be merely a lease for the term 
 during which the charter was to be in force. 
 
 It has been doubted whether a corporation can execute 
 a lease of property, or other engagement, extending over a 
 period of time exceeding the duration of its charter ; ^ but 
 these doubts appear to be unfounded. There is no reason 
 why a different rule should be applied to corporations than 
 to partnerships and unincorporated joint-stock companies^ 
 The period of time for which an association was formed may 
 be an important element to be considered in determining 
 whether or not a particular lease or engagement is authorized 
 by the company's agreement of association or charter, but it 
 
 ley, 3 Jones, Eq. 126; People v. words "successors." 2 Bl. Com. 
 
 Mauran, 5 Denio, 389; Asheville 109; School District v. Everett, 52 
 
 Div. No. 15 V. Aston, 92 N. Car. Mich. 314. 
 578. 2 Turnpike Co. v. Illinois, 96 
 
 1 Turnpike Co. v. Illinois, 96 U. S. 68, 68. 
 U. S. 63, 68. Land may be granted ' Compare Northern Liberty Mar- 
 to a coi-poration in fee without the ket Co. v. Kelly, 113 U. S. 199. 
 use of words of inheritance or the 
 
315 THE CONSTRUCTION OP CHAETEES. § 331 
 
 would not determine absolutely whether the transaction was 
 authorized or not. 
 
 § 331. Devises to Corporations. — The Statute of Wills. — 
 At common law, corporations as well as individuals could 
 take personal property by bequest. But a devise of real 
 estate was not allowed by the feudal law, and could not be 
 made in England, except by way of use, until the Statutes 
 of Wills were passed.^ These statutes expressly excepted 
 corporations from their operation, and a devise to a corpo- 
 ration directly remained impossible by operation of the com- 
 mon law. 
 
 It had been the custom, for some time before the Statutes 
 of Wills had been passed, to avoid the rule of the feudal law 
 against devises of lands, by application of the doctrine of 
 uses ; it being held that, while the land was not devisable, 
 the use was not within the rule.^ 
 
 The exception contained in the Statute of Wills with 
 reference to devises to corporations does not specifically pre- 
 clude a devise of a use or beneficial estate to a corporation, 
 but refers merely to devises of lands, manors, &c. It there- 
 fore became a question whether, since the passage of the 
 Statute of Wills, a corporation may take by devise such uses 
 or trusts in lands as are not executed by the operation of the 
 Statute of Uses. In McCartee v. Orphan Asylum Society ,3 
 Chancellor Jones delivered an elaborate judgment, holding 
 that a devise of a trust to a corporation was valid, notwith- 
 standing the Statute of Wills ; and this construction of the 
 statute seems to be correct. It is to be observed, however, 
 that a new Statute of Wills has been passed in New York 
 since the decision last referred to. This statute provides that 
 " no devise to a corporation shall be valid, unless such corpo- 
 ration be expressly authorized by its charter or by statute to 
 take by devise " ; and it has been held that devises of all 
 kinds, whether directly or by way of use, are equally within 
 the prohibition.* 
 
 1 32 Hen. VIII. c. 1; 34 Hen. » 9 Cow. 437. See Downing v. 
 Vni. 0. 5. See 2 Bl. Com. 372. Marshall, 23 N. Y. 366, 384-386. 
 " 2 Bl. Com. 375. * Downing v. Marshall, 23 N. Y. 
 
§ 332 THE LAW OF PBIVATE COBPOKATIONS. 316 
 
 Devises to corporations for charitable uses have been held 
 valid by operation of the Statute of Charities where that 
 statute is in force.^ 
 
 § 332. Construction of Statutes regulating Devises to Corpo- 
 rations. — The right of corporations to take property by 
 devise is regulated by statute in many of the States. 
 
 A distinction should be observed between those laws whose 
 object is to regulate corporations in respect of their power of 
 acquiring and holding property, and laws whose object is 
 to restrict the power of testators to dispose of their property. 
 Laws of the former description are enacted in pursuance of 
 a general policy of preventing corporations from acquiring 
 the ownership of real estate in the absence of express author- 
 ity from the State. But laws prohibiting devises to corpora- 
 tions are intended to restrict the testamentary capacity of 
 testators, and their object, in many instances, is to prevent tes- 
 tators from being driven by the improper use of religious 
 influence to devise their property to religious institutions, and 
 thus disinherit their heirs. 
 
 Accordingly, it has been held that, under a law declaring 
 void all devises of lands to religious corporations, a devise of 
 land to be converted into personalty and then to be paid 
 over would be void also.^ But if the charter or general laws 
 governing a corpoi-ation prohibit the company from acquir- 
 ing real estate by devise, this would not render void a de- 
 vise of lands to be converted into personalty and then paid 
 over ; for the capacity of the corporation to take the property 
 at the time it shall vest should be considered.^ It would 
 seem equitable, that, if a devise of real estate to a corporation 
 would be invalid on account of a simple absence of authority 
 on the part of the corporation to receive it, the land should 
 
 366. See also State v. Wiltbank, 727; Atty.-Gren. v. Skinner's Co., 
 
 2 Harr. (Del.) 18, and cases in next 2 Russ. 407 ; McCartee v. Orphan 
 
 section. Asylum Soc, 9 Cow. 437. 
 
 1 2 Bl. Com. 376; Bene't Col- = gtate v. Wiltbank, 2 Harr. 
 
 lege V. Bishop of London, 2 Wm. (Del.) 18. 
 
 Bl. 1182; Atty.-Gen. v. Mayor, 7 " American Bible Soc. v. Noble, 
 
 Taunt. 546; Rolfs Case, F. Moore, 11 Rich. Eq. 156; Baker v. Clarke 
 
 888; Atty.-Gen. c. Bowyer, 3 Vesey, Institution, 110 Mass. 88. 
 
317 THE CONSTEUCTION OF OHARTEES. § 334 
 
 be converted into personalty, in order to carry out the inten- 
 tion of the testator.^ 
 
 § 838. A law regulating the right of corporations to re- 
 ceive property by devise or otherwise forms part of the 
 charter or constitution of every corporation formed under 
 the law, and will therefore be recognized and given effect in 
 foreign States.^ But a law restricting the testamentary ca- 
 pacity of testators declares a local policy merely, and can 
 have no force outside of the State by which it was passed.^ 
 Accordingly, , it has been held that a devise made in New 
 York to a foreign corporation is void by operation of the 
 Statute of Wills of New York, although the corporation had 
 authority by its charter to receive the devise.* But a New 
 York corporation can take by devise in Connecticut, although 
 the devise would be prohibited if made in New York ; and 
 the reason of this is, that the corporation carries with it its 
 charter, but not the law of devises of New York.^ 
 
 § 834. When a Corporation has implied Authority to hold 
 Property in Trust. — It seems to have been considered for- 
 merly that no corporation could hold property subject to a 
 
 1 Contra, Starkweather v. Ameri- shall be void, is analogous to the 
 
 can Bible Soc, 72 111. 50. British statutes of mortmain, and 
 
 ^ Chamberlain v. Chamberlain, is designed to protect the people 
 
 43 N. Y. 424 ; Starkweather v. Amer- of Maryland from the same evils 
 
 lean Bible Soc, 72 111. 50. Com- as those statutes; and the Supreme 
 
 pare Hoyt v. Thompson, 19 N". Y. Court concluded that for this reason 
 
 207; Farmers' L. & T. Co. v. Plar- it has no application to gifts or 
 
 mony Fire, &c. Ins. Co., 51 Barb. 33. devises of personal property to cor- 
 
 * See infra, § 944. porations chartered by other States. 
 
 * White V. Howard, 46 N. Y. Vansant v. Roberts, 3 Md. 119; 
 144, 165 ; United States v. Fox, Brown u. Thompkins, 49 Md. 423. 
 94 U. S. 315 ; s. c. 52 N". Y. 530 ; The correctness of this conclusion is 
 Boyce v. City of St. Louis, 29 Barb, certainly not beyond doubt. 
 
 650. « White v. Howard, 38 Conn. 
 It has been held in Maryland, 342; Thompson v. Swoope, 24 Pa. 
 that the provision of the bill of rights St. 474 ; American Bible Soc. v. 
 of that State declaring that every Marshall, 15 Ohio St. 537. Corn- 
 gift, sale, or devise of real or per- pare Kerr v. Dougherty, 79 N. Y. 
 soual property for religious purposes 328. See contra, semble, Stai'k- 
 to take effect after the death of the weather v. American Bible Soc, 
 seller or donor, without the prior or 72 111. 54, and compare Christian 
 subsequent assent of the legislature. Union v. Yount, 101 U. S. 352. 
 
§ 335 THE LAW OP PRIVATE COEPOEATIONS. 318 
 
 use or trust in favor of another ; but this view is now wholly 
 obsolete.-' Indeed, charitable corporations must necessarily 
 at all times have been able to hold property upon the chari- 
 table trusts which they were created to administer. 
 
 Whether a corporation may undertake the performance of 
 a trust in a particular case depends both upon the provisions 
 of the company's charter and upon the circumstances of the 
 case. It is not necessary that the authority to assume a trust 
 be conferred by express words, but it may be implied when- 
 ever the trust is in furtherance of the general objects of the 
 corporation.^ Thus, a banking corporation having authority 
 to hold land as mortgagee may undoubtedly take the title as 
 trustee with power of sale on non-payment of the debt. And 
 it has been held, that, " wherever property is devised or 
 granted to a corporation, partly for its own use and partly 
 for the use of others, the power of the corporation to take 
 and hold the property for its own use carries with it, as a 
 necessary incident, the power to execute that part of the 
 trust which relates to others." * 
 
 § 335. The Implied Right of transferring Property. — A cor- 
 poration has implied authority to dispose of any or all of its 
 property, whenever this is deemed expedient in carrying out 
 the purposes for which the company was chartered. Unless 
 expressly restrained by law, a corporation may deal with its 
 property in the same manner as an individual, in prosecuting 
 its legitimate business.* But this right of a corporation to 
 
 1 In Vidal v. Girard's Exrs., 2 estate, there it may take and hold 
 
 How. 187, Justice Story said : it upon trust in the same manner 
 
 "Although it was in early times and to the same extent as a private 
 
 held that a corporation could not individual may do." 
 
 take and hold real and personal ^ Compare Vidal «. Girard's Exrs., 
 
 estate in trust, upon the ground 2 How. 189; Chapin v. School Dis- 
 
 that there was a defect of one of trict, 35 N. H. 445 ; Phillips Acad- 
 
 the requisites to create a good trustee, emy v. King, 12 Mass. 546; Robert- 
 
 namely, the want of confidence in son v. Bullions, 11 N. Y. 243. 
 
 the person, yet that doctrine has ' Per Walworth, Chancellor, In 
 
 long since been exploded as unsound re Howe, 1 Paige, 214. 
 
 and too artificial ; and it is now held * White Water, &o. Canal Co. v. 
 
 that where a corporation has a legal Vallette, 21 How. 424; Barry v. 
 
 capacity to take real and personal Merchants' Exch. Co., 1 Sandf. Ch. 
 
319 THE CONSTRUCTION OP CHAKTEES. § 337 
 
 dispose of property held by it can be implied only provided 
 it would not conflict with any express provision of the com- 
 pany's charter, or with the rights of other persons or of the 
 public. Thus, a corporation having public duties to perform 
 cannot alienate any property which is required in order to 
 enable the company to perform these duties in a proper man- 
 ner.^ And a corporation cannot transfer property held by 
 it in trust, if this would be a violation of the rights of the 
 beneficiaries. 
 
 A conveyance of property by a corporation may be exe- 
 cuted like a conveyance by an individual, through any agent 
 having authority to represent the company for that purpose. 
 It has been held that a statutory provision that it " shall be 
 lawful for any corporation to convey lands by deed of bargain 
 and sale, sealed with the common seal of said corporation, 
 and signed by the president or presiding member or trus- 
 tee and two other members of the corporation, and attested 
 by a witness," did not prohibit other methods of execution 
 by authorized agents.^ 
 
 § 336. The Implied Right of entering into Contracts. — A 
 corporation has implied authority to act in the same manner 
 as a copartnership, in carrying on its legitimate business ; and 
 therefore it may enter into any contract which is reasonably 
 adapted to further the enterprise for which it was chartered, 
 unless it be restrained by the charter or by a general law.^ 
 
 § 337. Ho-w a Corporation may enter into Contracts. — Cor- 
 porations almost universally enter into contracts through 
 « 
 
 280 ; Dupee v. Boston Water Power to make an assignment for the bene- 
 
 Co., 114 Mass. 37; Burton's Appeal, fit of creditors, see infra, § 782. 
 57 Pa. St. 213; Miners' Ditch Co. i Infra, § 1020. f 
 
 V. Zellerbach, 37 Cal. 543; Reynolds ' Bason v. Mining Co., 90 N. Car. 
 
 V. Commissioners, 5 Ohio, 204; 417; Morris u. Keil, 20 Minn. 531. 
 Town Council v. Elliott, 5 Ohio St. » White Water, &o. Canal Co. 
 
 113; Buellu. Buckingham, 16 Iowa, v. Vallette, 21 How. 424; Barry 
 
 284; Binney's Case, 2 Bland's Ch. v. Merchants' Exch. Co., 1 Sandf. 
 
 142; Aurora Agr., &c. Soc. v. Pad- Ch. 289; Thompson v. Lambert, 44 
 
 dock, 80 111. 263; Re Patent File Iowa, 239; Old Colony R. R. Co. 
 
 Co., L. R. 6 Ch. 83; and see oases v. Evans, 6 Gray, 38, 39; Scottish, 
 
 in Part II. of this chapter. &c. Ry. Co. v. Stewart, 3 Maoq. 
 
 As to the right of a corporation 415. 
 
§ 338 THE LAW OF PRIVATE CORPORATIONS. 320 
 
 their duly accredited agents ; indeed, it would be practically 
 impossible, in most cases, for the whole body of corporators 
 to act directly. 
 
 It has always been held that a corporation may give its 
 assent to a contract by vote of its shareholders or members, 
 at a meeting duly convened.^ In such case the majority 
 speak as agent for the whole association ; and the powers of 
 the majority are derived directly from the unanimous agree- 
 ment of the corporators.^ As a rule, however, corporations 
 contract through a board of directors or inferior agents, 
 whose powers are fixed by the provisions of the charter, by 
 the terms of their appointment, or by custom.^ 
 
 § 338. The Use of a Seal is unnecessary. — In former times 
 it was held that a corporation could not express its will, or 
 enter into a contract, except through an instrument under 
 seal, executed by a duly constituted agent. This doctrine 
 certainly had no principle based upon reason to support it ; 
 on the contrary, it seems to have been a result pi the igno- 
 rance of the art of writing during the dark ages. It was 
 never rigorously applied in all cases, — which shows that it 
 did not result from the nature of a corporation ; and in 
 modern times the ancient rule has been wholly discarded.* 
 It is now a rule well settled throughout the United States, 
 that a corporation may make a contract without the use of a 
 seal, in all cases in which this may be done by an individual ; ^ 
 
 1 Maxwell v. Dulwich College, porations, §§ 215-219, 228, where 
 1 Fonbl. Eq. 306, note o ; Bank of the history of seals is very fully 
 U. S. V. Dandridge, 12 Wheat. 68; discussed. See also Baptist Church 
 Fleckner v. Bank of U.' S., 8 Wheat, o. Mulford, 3 Halst. L. 183. 
 
 338 ; Union Bank v. Ridgley, 1 ' Bank of Columbia v. Patterson, 
 
 H. & G. 425. 7 Cranch, 299 ; Fleckner v. Bank of 
 
 2 Infra, § 454. It has often been U. S. , 8 Wheat. 338 ; Bank of U. S. 
 decided that a corporation may rat- v. Dandridge, 12 Wheat. 64; Whit- 
 ify an unauthorized act, performed ford e. Laidler, 94 N. Y. 145 ; Bap- 
 on its behalf, by mere acquiescence, tist Church v. Mulford, 3 Halst. 
 or by the unanimous agreement of L. 185, and cases cited ; McCul- 
 its shareholders. See in/ra, § 603. lough v. Talladega Ins. Co., 46 
 Crook V. Corporation of Seaford, Ala. 376; Trustees of University 
 L. R. 6 Ch. 551. "• Moody, 62 Ala. 389; Christian 
 
 8 Infra, § 483 e( se?. Church v. Johnson, 53 Ind. 273; 
 
 * See Angell & Ames on Cor- Sheffield School Township v. An- 
 
321 THE CONSTRUCTION OP CHARTERS. § 338 
 
 and it is equally well settled that an agent of a corporation 
 may be appointed without the use of a seal, whatever may be 
 the purpose of the agency.^ 
 
 The English courts have held more firmly to the time- 
 honored doctrine ; ^ but even in England it is settled law 
 that a private corporation established for purposes of trade 
 or traffic has implied authority to make any contract in the 
 direct course of the business which it was chartered to carry 
 on, in the same manner as an individual, without the use of 
 the corporate seal.' 
 
 dress, 56 Ind. 157; Merrick v. Bur- v. Farrar, 32 Me. 225; Thayer v. 
 
 lington, &c.. Plank Road Co., 11 Middlesex, &c. Ins. Co., 10 Pick. 
 
 Iowa, 75; Town of New Athens 326; Sherman w. Fitch, 98 Mass. 59; 
 
 V. Thomas, 82 111. 259; Buckley t>. Narragansett Bank v. Atlantic Silk 
 
 Briggs, 30 Mo. 452. Numerous Co., 3 Mete. (Mass.) 282; Wolf ». 
 
 cases in which this rule was as- Goddard, 9 Watts, 544 ; Northern 
 
 sumed to he the law may be found Central Ky. Co. v. Bastian, 15 Md. 
 
 in the reports of every State of the 494 ; Covington v. Covington, &o. 
 
 Union. Bridge Co., 10 Bush, 69; Smiley v. 
 
 A certificate for shares in a cor- Mayor, &c. of Chattanooga, 6 Heisk. 
 
 poration requires no seal. Halstead 604 ; Santa Clara Mining Ass. v. 
 
 V. Dodge, 51 N. Y. Super. Ct. 169. Meredith, 49 Md. 389; Crowley v. 
 
 1 Fleckner v. Bank of U. S., 8 Genesee Mining Co., 55 Cal. 273. 
 
 Wheat. 357; Osborn v. Bank of * Mayor of Ludlow v. Charlton, 
 
 U. S., 9 Wheat. 738; Bank of U. S. 6 M. & W. 815; Mayor of Kidder- 
 
 V. Dandridge, 12 Wheat. 70; West- minster v. Hardwick, L. R. 9 Exch. 
 
 em Bank v. Gilstrap, 45 Mo. 419; 24; Arnold i;. Mayor of Poole, 4 
 
 Randall v. Van Vechten, 19 Johns. M. & G. 860; Diggle v. London, &c. 
 
 60; Perkins ». Washington Ins. Co., Ry. Co., 5 Exch. 442; Paine v. 
 
 4 Cow. 645; Mumford v. Hawkins, Strand Union, 8 Q. B. 326; Ho- 
 
 5 Denio, 355; Buncombe Turnpike mersham v. Wolverhampton W. W. 
 Co. V. McCarson, 1 Dev. & B. 306; Co., 6 Exch. 137; Dyte v. St. Pan- 
 Lathrop v. Commercial Bank, 8 eras Board of Guardians, 27 L. T. 
 Dana, 114; Garrison v. Combs, 7 n. s. 342 ; Austin v. Guardians of 
 J. J. Marsh. 85; Everett v. United Bethnal Green, L. R. 9 C. P. 91. 
 States, 6 Port. 166; Bates v. Bank ' Henderson i;. Australian, &c. 
 of Alabama, 2 Ala. 461; St. An- Nav. Co., 5 El. & Bl. 409; Aus- 
 drew's Bay Land Co. v. Mitchell, 4 tralian, &c. Nav. Co. v. Marzetti, 
 Fla. 192 ; Savings Bank v. Davis, 8 11 Exch. 228 ; Renter v. Electric 
 Conn. 191; Stamford Bank u. Ben- Telegraph Co., 6 El. & Bl. 341; 
 edict, 15 Conn. 445; Despatch Line South of Ireland CoUiei-y Co. v. 
 V. Bellamy Manuf. Co., 12 N. H. Waddle, L. R. 3 C. P. 463; L. R. 4 
 205; Goodwin B. Union Screw Co., C. P. 617; Brown w. Town of Belle- 
 34 N. H. 378; Badger v. Bank of ville, 30 U. C. Q. B. 373. Compare, 
 Cumberland, 26 Me. 428; Trundy however, Diggle v. London, &c. Ry. 
 
 VOL. I. — 21 
 
§ 389 THE LAW OF PEIVATB COEPOEATIONS. 322 
 
 If the charter of a corporation provides expressly that con- 
 tracts entered into by the company shall be sealed with the 
 corporate seal, it is clear that authority to enter into contracts 
 without the use of a seal cannot be presumed, under ordi- 
 nary circumstances ; ^ and the legal validity of a contract en- 
 tered into under these circumstances, without the application 
 of a seal, will be governed by the rules which determine the 
 liability of corporations for acts performed by their agents 
 in disregard of formalities prescribed by law. 
 
 It is still held that the answer of a corporation to a bill in 
 chancery must be under seal.^ But an attorney does not 
 need a power under seal in order to consent to a reference 
 on behalf of the corporation.^ 
 
 § 339. The Validity of Sealing. — The seal of a corporation 
 must necessarily be affixed by an agent acting on behalf of 
 the company; and, if used by an agent without authority, 
 the sealing will not bind the company. " The mere fact 
 that a deed has the corporate seal attached does not make 
 it the act of the corporation, unless the seal was placed to it 
 by some one duly authorized."* But the common law rule, 
 that an agent must have a power of attorney under seal in 
 order to bind his principal by a contract under seal, cannot 
 in the nature of things be applied to the agents of a corpo- 
 ration ; for they must ultimately derive their authority from 
 the vote of the corporators or board of directors.^ In those 
 cases in which a vote is sufficient authority to an agent to do 
 
 Co., 5 Exch. 442; London Dock Co. Iron Co., 2 Black, 716; Damon 
 
 V. Sinnott, 8 El. & Bl. 347. v. Granby, 2 Pick. 353; Jackson v. 
 
 1 Frend v. Dennett, 27 L. J. Campbell, 5 Wend. 572 ; Hoyt v. 
 (C. P.) 314; Crampton k. Varna Thompson, 5 N. Y. 320 ; D'Arcy 
 Ey. Co., L. R. 7 Ch. 562. v. Tamar, &c. Ry. Co., L. R. 2 
 
 2 1 Daniell's Ch. Pr. 146; Bron- Exch. 158. 
 
 son !). La Crosse R. R. Co., 2 Wall. « Howe v. Keeler, 27 Conn. 538; 
 
 302; French v. First Nat. Bank, Beckwithu. Windsor Manuf. Co., 14 
 
 11 N. B. R. 189; Ransom v. Stoning- Conn. 594; Savings Bank of N. H. 
 
 ton Sav. Bank, 2 Beasl. 212. ». Davis, 8 Conn. 191 ; Hopkins v. 
 
 ' Paret v. City of Bayonne, 39 Gallatin Tm-npike Co., 4 Humph. 
 
 N. J. Law, 559. Compare Cape Sa- 403; Burr v. McDonald, 3 Gratt. 
 
 ble Co.'s Case, 3 Bland, 606. 215; Hutohins v. Byrnes, 9 Gray, 
 
 * Koehler v. Black River, &c. 367. 
 
823 
 
 THE CONSTEUCTION OF CHAETBES. 
 
 §340 
 
 an act, it will be sufficient as a ratification of the act when 
 performed without authority.^ 
 
 A corporation, like an individual, may adopt any seal 
 which is convenient for the occasion ; ^ but the seal must be 
 affixed as the seal of the corporation.^ The seal of a corpo- 
 ration must be proven whenever that of an individual must 
 be proven ; it is only in case of public corporations, such as 
 the State, that all parties must at their peril take notice of 
 the official seal.* 
 
 § 340. The Necessity of Proving the Authority to execute 
 a. Contract under Seal. — It has sometimes been said, that, 
 if the seal of a corporation appears to be affixed to an instru- 
 ment, the presumption is that it was rightfully affixed, — 
 that the seal is itself prima facie evidence that it was affixed 
 by the proper authority.* The meaning of these state- 
 ments is not perfectly clear. The seal of a corporation 
 certainly has no mysterious virtue not possessed by other 
 seals; and a contract under seal executed by the agents 
 
 1 Howe V. Keeler, 27 Conn. 538, 
 554; Eureka Co. v. Bailey Co., 11 
 Wall. 488; Despatch Line v. Bel- 
 lamy Manuf. Co., 12 N. H. 205; 
 Fleckner v. Bank of U. S., 8 Wheat. 
 338; Chicago, &c. Ky. Co. v. James, 
 24 Wis. 388. 
 
 ^ Shep. Tonchst. 57; Kansom v. 
 Stonington Sav. Bank, 2 Beasl. 212; 
 Tenney w. East Warren Lumber Co., 
 43 N. H. 343; Bank of Middlebury 
 V. Rutland, &c. R. R. Co., 30 Vt. 159 ; 
 Porter v. Androscoggin, &c. R. R. 
 Co., 37 Me. 349; Reynolds v. Glas- 
 gow Academy, 6 Dana, 37 ; Mill Dam 
 Foundery v. Hovey, 21 Pick. 417; 
 Stebbins v. Merritt, 10 Cush. 27; 
 Johnston o. Crawley, 25 Ga. 316; 
 Eureka Co. v. Bailey Co., 11 Wall. 
 491 ; Taylor v. Heggie, 83 N. Car. 
 244; Kansas City v. Hannibal, &o. 
 R. R. Co., 77 Mo. 180. 
 
 ' Bank of Metropolis v. Gutt- 
 sohlick, 14 Pet. 29 ; Randall v. Van 
 
 Vechten, 19 Johns. 60 ; Brinley v. 
 Mann, 2 Cush. 337. Compare Sher- 
 man V. Fitch, 98 Mass. 59; Haven 
 V. Adams, 4 Allen, 80 ; Hutchins v. 
 Byrnes, 9 Gray, 367; Taylor v. 
 Heggie, 83 N. Car. 244. 
 
 * Foster v. Shaw, 7 S. & R. 156; 
 Leazure v. Hillegas, Id. 313; Farm- 
 ers', &o. Turnpike Co. v. McCul- 
 lough, 25 Pa. St. 304; Crossman v. 
 Hilltown Turnpike Co., 3 Grant's 
 Cas. 225 ; Jackson v. Pratt, 10 
 Johns. 381 ; Mann v. Pentz, 2 
 Sandf. Ch. 257; Den v. Vreelandt, 
 7 N. J. Law, 352 ; Doe v. Chambers, 
 4 Ad. & El. 412; City Council v. 
 Moorhead, 2 Rich. Law, 430. 
 
 ^ Mickey v. Stratton, 5 Sawy. 
 475; Southern Cal. Colony Ass. v. 
 Bustamente, 52 Cal. 192; Wood v. 
 Whelen, 93 111. 153, 162 ; Indian- 
 apolis, &c. R. R. Co. V. Morgan- 
 stern, 103 lU. 149; and see cases 
 infra, §§ 596, 597. 
 
§ 341 THE LAW OP PBIVATE COKPOEATIONS. 324 
 
 of a corporation is subject to the same rules of evidence, 
 and of law, as a similar contract executed by the agents 
 of an individual. 
 
 In order to prove the execution of a contract purporting to 
 have been executed under the corporate seal, two facts must 
 be shown. First, it must be shown that the agents by whom 
 the contract purports to have been, executed were in fact 
 agents of the corporation, having authority to execute the 
 contract in question, or contracts of that general descrip- 
 tion ; and, secondly, it must be shown that the signatures 
 are genuine, or, in other words, that these agents did actually 
 execute that particular contract. The mere circumstance 
 that a seal was affixed to the contract would evidently not 
 tend to establish either one of these facts. 
 
 The principles of the law of agency apply to contracts 
 under seal, as well as to other contracts. The general rule 
 is, that the authority of the agent executing a contract under 
 seal must be shown before the principal can be held.^ But 
 if it appears that the agent executing the contract had au- 
 thority to execute a contract of that description under ordi- 
 nary circumstances, it will be presumed that the agent acted 
 pursuant to his authority unless some evidence to the con- 
 trary is adduced.^ 
 
 These presumptions are founded on reason ; but there is 
 no rule of law which gives the seal of a corporation any 
 peculiar efficacy or virtue. At the present day the affixing 
 of the corporate seal to the contracts of a corporation is in 
 most instances superfluous. But where a seal is necessary 
 it must be proven, as in any other case of a contract signed 
 and sealed by an agent. 
 
 § 341. The Legal Effect of Sealing. — The Necessity of a Con- 
 sideration. — It is still the custom to affix the corporate seal 
 to many classes of contracts which were formerly required 
 to be under seal, but which may to-day be executed without 
 the use of a seal. It seems that a contract having the cor- 
 porate seal affixed must always be declared upon, at common 
 
 1 Infra, § 596. 
 
 2 Infra, § 577. See Bason ». Mining Co., 90 N. Car. 4l7. 
 
325 
 
 THE CONSTEUCTION OF CHAETBES. 
 
 §341 
 
 law, as a bond or contract under seal.^ But it is well settled 
 that promissory notes issued by corporations do not lose their 
 qualities as negotiable instruments merely because they were 
 sealed with the corporate seal. Bonds issued by corporations 
 in negotiable form have been treated as negotiable, by uni- 
 versal custom, for a long period of time, and this custom has 
 been fully sanctioned by judicial recognition.^ 
 
 Statements may be found in the books, to the effect that 
 the common law rule, that a contract under seal must be pre- 
 sumed to have a consideration, applies to contracts under seal 
 executed on behalf of corporations, as well as to similar con- 
 tracts executed by individuals.' These statements seem to 
 imply a misapprehension of the common law rule, and are not 
 strictly correct. By the common law a contract under seal 
 does not require a consideration to be binding ; it is immate- 
 
 1 Porter v. Androscoggin, &c. K. R. 
 Co., 37 Me. 349; Benoist v. Caronde- 
 let, 8 Mo. 250; Clark v. Farmers', 
 &o. Manuf. Co., 15 Wend. 256. 
 
 These cases do not state the law 
 of to-day so far as they hold that 
 promissory notes are not negotiable 
 because under the corporate seal. 
 
 ' White V. Vermont, &c. R. R. 
 Co., 21 How. 575; Moran v. Miami 
 County, 2 Black, 722 ; Mercer County 
 V. Hacket, 1 Wall. 95; Murray v. 
 Lardner, 2 Wall. 110; Clark v. Iowa 
 City, 20 Wall. 583; Brainerd v. 
 New York, &c. R. R. Co., 25 N. Y. 
 496 ; Haven v. Grand Junction R. R, 
 &c. Co., 109 Mass. 88; Miller ». Rut- 
 land, &o. R. R. Co., 40 Vt. 399; 
 National Exoh. Bank v. Hartford, 
 &o. R. R. Co., 8 R. I. 375; Morris 
 Canal, &o. Co. v. Fisher, 9 N. J. 
 Eq. 699; Beaver County v. Arm- 
 strong, 44 Pa. St. 63; Bunting's 
 Admr. v. Camden, &c. R. R. Co., 
 81 Pa. St. 254; Mason v. Frick, 
 105 Pa. St. 162; Philadelphia, &c. 
 R. R. Co. V. Smith, 105 Pa. St. 195; 
 Same v. Fidelity Co. , Id. 216 ; Morris 
 Canal, &c. Co. v. Lewis, 12 N. J. 
 
 Eq. 323; Winfield v. Hudson, 28 
 N. J. Law, 255 ; Barrett v. Schuyler 
 County Court, 44 Mo. 197; Smith 
 V. Clark County, 54 Mo. 58; Re 
 General Estates Co., L. R. 3 Ch. 
 758; Be Land Credit Co. of Ireland, 
 L. R. 4 Ch. 460; and see Jones on 
 Railroad Securities, §§ 197-210. 
 
 In White v. Vermont, &o. R. R. 
 Co., supra, Justice Nelson said, with 
 regard to railroad bonds: " As to 
 the negotiability of this class of se- 
 curities, when shown to be intended 
 that they should possess this char- 
 acter by the form in which issued, 
 and mode of giving them circula- 
 tion, we think the usage and prac- 
 tice of the companies themselves, 
 and of the capitalists and business 
 men of the country dealing in them, 
 as well as the repeated decisions or 
 recognition of the principle by courts 
 and judges of the highest respectar 
 bility, have settled the question." 
 See also cases cited. 
 
 ' Royal Bank of Liverpool v. 
 Grand Junction R. R., &c. Co., 100 
 Mass. 445; Sturtevants v. Alton, 
 3 McLean, 395. 
 
§ 342 THE LAW OF PRIVATE CORPOEATIONS. 326 
 
 rial whether there be a consideration or not. This rule was 
 not originally established by raising a supposed presumption; 
 nor does the presence of a seal in fact give rise to the slight- 
 est presumption that the contract really had a considera- 
 tion. The idea that a seal imports a consideration appears 
 to have resulted from a mistaken notion that every contract 
 must have or ought to have a technical consideration. 
 
 The contracts of a corporation must be executed by its 
 agents, and no agent of a corporation has authority to give 
 away the corporate funds, or to enter into contracts on be- 
 half of the corporation, except in managing its business under 
 the authority conferred by the charter. Contracts without 
 a valuable consideration or quid pro quo would, under ordi- 
 nary circumstances, be unauthorized, and in excess of the 
 powers conferred upon the company's agents. If then the 
 affixing of a seal to a contract raises no actual presumption 
 of a consideration, it cannot tend to prove that the agent 
 executing the contract acted within the scope of his author- 
 ity. It would seem to follow, that a plaintiff cannot recover 
 upon a bond or contract under seal purporting to have been 
 executed on behalf of a corporation, by merely proving its 
 execution, and without showing that it was executed for a 
 valuable consideration, and under circumstances under which 
 the agent had power to bind the company.^ 
 
 § 342. The Implied Kight of Borro'wing and incurring Debts. 
 — Corporations have implied authority to borrow money and 
 incur debts for the purpose of accomplishing their" legitimate 
 purposes, unless the contrary be expressly provided ; and 
 authority to borrow includes authority to give a written 
 acknowledgment of indebtedness in the usual form.^ 
 
 1 See per Lord Campbell, C. J., 274, 282; Comrs. of Craven v. At- 
 in Mayor of Norwich v. Norfolk lantio, &c. R.R. Co., 77N.Car. 289; 
 Ry . Co. , 4 El. & Bl. 448, 444. Tucker v. City of Raleigh, 75 N. Car. 
 
 2 Memphis, &c. R. R. Co. v. Dow, 267 ; Barry v. Merchants' Exch. Co. , 
 19 Fed. Rep. 388; Taylor v. Agri- 1 Sandf. Ch. 280; Beers v. Phoenix 
 cultural, &o. Ass., 68 Ala. 229; Glass Co., 14 Barb. 858; Partridge 
 Donnell v. Lewis County Savings v. Badger, 25 Barb. 146; Clark o. 
 Bank, 80 Mo. 165; Larwell w. Han- Titcomb, 42 Barb. 122; Curtis v. 
 oversavings Fund Soc.,40 Ohio St. Leavitt, 15 N. Y. 9; Barnes v. On- 
 
827 
 
 THE CONSTKUCTION OF CHAETEES. 
 
 §342 
 
 The borrowing of money is merely a means of arriving at 
 the ultimate purposes of a corporation ; and hence authority 
 to borrow can be implied only where the loan is made for a 
 purpose which was authorized by the company's charter. 
 Some kinds of corporations, like banks, must borrow money 
 daily, in carrying on their ordinary affairs ; ^ in other cases, 
 the business of a corporation -may not rec[uire it to borrow 
 except under extraordinary circumstances. But it may be 
 stated as a general rule, that every corporation has implied 
 authority to borrow money whenever the borrowing of money 
 is a reasonable method of carrying out the purposes for which 
 the company was chartered.^ 
 
 tario Bank, 19 N. Y. 152; Smith v. 
 Law, 21 N. Y. 296; Nelson v. Eaton, 
 26 N. Y. 410; Bradley v. Ballard, 
 55 111. 413; Lucas «. Pitney, 3 
 Dutch. 221; Mobile, &c. R. R. Co. 
 V. Talman, 15 Ala. 472 ; Moss v. 
 Harpeth Academy, 7 Heisk. 285; 
 Oxford L'on Co. v. Spradley, 48 
 Ala. 98; Alabama, &c. Ins. Co. v. 
 Central Agr., &c. Ass., 54 Ala. 73; 
 Bank of Chillicothe v. Chillicothe, 7 
 Ohio (Part 2), 31 ; Ridgway v. Farm- 
 ers' Bank, 12 S. k R. 256 ; Magee 
 V. Mokelumne Hill Canal, &o. Co., 
 
 5 Cal. 258; Union Mining Co. v. 
 Rocky Mt. Nat. Bank, 2 Col. 248; 
 Hamilton v. Newcastle, &c. R. R. 
 Co., 9 Ind. 359; Rockwell v. Elk- 
 horn Bank, 13 Wis. 653; Fay v. 
 Noble, 12 Cush. 1 ; Commercial 
 Bank ». Newport Manuf. Co., 1 B. 
 Monr. 14. 
 
 A corporation may raise money 
 by selling accommodation notes is- 
 sued to it tor that purpose. Hol- 
 brook V. Basset, 5 Bosw. 147; Fur- 
 niss 0. Gilchrist, 1 Sandf. (Super. 
 Ct.) 53. 
 
 1- Bank of Australasia v. Breillat, 
 
 6 Moore, P. C. 152, 193-195; Forbes 
 V. Marshall, 24 L. J. Exch. 305. 
 
 2 In Gibbs & West's Case, 
 L. R. 10 Eq. 311, Vice-Chanoellor 
 
 Malins said ; " It has been very 
 strongly urged in this case, that, 
 the company having no power to 
 borrow, the borrowing was ultra vires 
 and improper, and that therefore 
 no debt was created. I should say 
 — as, indeed, I have already said 
 on many occasions — that in the 
 ordinary course of transactions of 
 a mercantile concern, whether it be 
 an insurance office or anything else, 
 where the possession of money is es- 
 sential for the purpose of carrying 
 on the business, if the company 
 finds itself in temporary difficulties 
 for want of money, I cannot consider 
 it bej'ond the powers of the directors 
 to obtain money from their bankers, 
 or others who will temporarily lend 
 it to them, for the purpose of pre- 
 venting that which would be disas- 
 trous to all, — namely, the stoppage 
 of the company; that is to say, I 
 cannot consider it beyond their pow- 
 ers to prevent that disaster by means 
 of loans to a moderate extent, such 
 as would not be unreasonable, having 
 regard to the nature and extent of 
 the business in which the company 
 is engaged, for the purpose of carry- 
 ing on the business of the com- 
 pany." See also Australian, &o. 
 Co. ». Mounsey, 4 K. & J. 733. 
 
§ 344 THE LAW OF PRIVATE COEPOEATlOlilS. 328 
 
 In some cases, however, the borrowing of money would not 
 be required, under any circumstances, in carrying on the le- 
 gitimate business of a company ; as, for example, where other 
 means are provided for obtaining funds.^ 
 
 § 343. The right of a corporation to borrow money is ne- 
 cessarily subject to all express limitations contained in the 
 company's charter. If the right of borrowing is limited by 
 the charter to a definite sum, it is clear that the company and 
 its agents will not be authorized to borrow after the pre- 
 scribed limit has been reached.^ But it does not follow that 
 an unauthorized loan would necessarily be void. The validity 
 of an unauthorized loan would depend upon the established 
 rules of the law of agency, and the effect of the common law 
 rule prohibiting unauthorized corporate acts.^ 
 
 § 344. When a Limitation of the Right of Borrowing does not 
 restrict the Right of incurring Debts. — A limitation upon the 
 right of a corporation to borrow money does not necessarily 
 restrict the right of the company to incur debts in the course 
 of its usual business. A provision limiting the right of bor- 
 rowing is intended to protect the shareholders against loss 
 through any improper expansion of the company's business 
 beyond the limits contemplated by the charter. After the 
 capital of the company has been invested, and the borrowing 
 power has been exhausted, no new funds can be raised for 
 the development of the company's business, but it does not 
 follow that the company's business must be stopped and 
 wound up at that moment. The company would still be 
 authorized to continue its ordinary business, and take care 
 of its property, in the same manner as a prudent individual 
 under similar circumstances, and the right to incur debts for 
 necessary purposes would follow as a consequence. 
 
 Thus, it has been held that the right of a mining company 
 to incur debts for labor and supplies needed in the usual 
 
 1 See jEar/jarte Williamson, L. R. 2 Fountains v. Carmarthen Ey. 
 5 Ch. 312: Re German Mining Co., Co., L. R. 5 Eq. 316. 
 4 De G., M. & G. 19 ; Laing v. Reed, » Infra, §§ 580, 581. 
 L. R. 5 Ch. 4; State v. Oberlin 
 Building Ass., 35 Ohio St. 258. 
 
329 THE CONSTRUCTION OF CHARTEES. § 344 
 
 course of its operations ^ would not be limited by a restriction 
 upon the power of borrowing. 
 
 Be German Mining Company ^ is a leading authority upon 
 this point. A registered joint-stock company was formed in 
 England for working mines in Germany, subject to the terms 
 of a deed of settlement, which provided that the capital 
 should be £50,000, and gave no powers to the directors to 
 raise money except by the creation of new shares ; and the 
 power of borrowing may be held not to have existed. The 
 capital was paid up and proved insufficient for working the 
 mines. The wages of the miners being in arrear, and other 
 debts being due, the managing directors obtained advances 
 from some of the shareholders for the purpose of paying those 
 debts and preventing the mines from being seized under the 
 law of the country where they were situated. The direc- 
 tors also borrowed other sums, on their personal guaranty, 
 from the bankers of the company, not for payment of debts, 
 but for carrying on the business of the company in its 
 ordinary course, and afterwards repaid the bankers these 
 advances. Upon application of the directors and sharehold- 
 ers who had thus advanced funds for the use of the company 
 to be repaid the amount of these advances, the Lords Justices 
 held that the borrowing of money was not authorized by the 
 company's deed, and that the advances obtained by the direc- 
 tors did not constitute a debt due from the company ; but 
 they also held that, inasmuch as the money had been ap- 
 plied in paying off debts which the directors had authority 
 to contract, the lenders were entitled to recover.^ 
 
 1 Tredwen v. Bourne, 6 M. & W. Co., 22 Beav. 143; and see cases 
 464; Hawken B. Bourne, 8 M. & W. supra, § 123. These cases have 
 703. Compare Hawtayne v. Bourne, been very severely criticised in 1 
 7 M. & W. 595; and see i?e German Lindley on Partnership (4th ed.), 
 Mining Co. , 4 De G., M. & G. 40, per 761. 
 
 Turner, L. J. * Lord Justice Turner said, in 
 
 2 4 De G. M. & G. 19. See also delivering judgment: " It was said 
 Lowndes v. Garnett, &c. Mining Co., that this was a concern with a lim- 
 33 L. J. Ch. 418; iJc Cork &Youghal ited capital, and that the directors 
 Ey. Co., L. R. 4 Ch. 748; Ulster could not be justified in expenditure 
 Ry. Co. V. Banbridge, &c. Ry. Co., beyond the capital; but this deed 
 Ir. R. 2 £q. 190 ; Ke Norwich Yarn must be construed like other part- 
 
§345 
 
 THE LAW OF PEIVATB COEPOBATIONS. 
 
 330 
 
 § 345. The case of the German Mining Company should 
 be compared with that of the Worcester Corn Exchange 
 
 nership deeds. In all such cases 
 the capital is limited, but the en- 
 gagement of the partnership cannot 
 be measured by the extent of the 
 capital. New undertakings were 
 not indeed to be entered into after 
 the full capital had been embarked, 
 nor is it suggested that any such 
 •were entered into, but how was the 
 expenditure upon the existing un- 
 dertakings to be measured by the 
 extent of the capital? Was the con- 
 cern to be stopped at the moment 
 ■when the expenditure equalled the 
 capital, and how, in a concern of 
 this nature, was it to be ascei'tained 
 when that moment had arrived? . . . 
 Upon the evidence of this case, 
 I think it must be taken that the 
 mines have been continued, not for 
 the purpose of continuing and caiTy- 
 ing on the business of the company, 
 but with a view to a more advanta- 
 geous sale of the mines being ulti- 
 mately effected ; and if the directors, 
 in the lonafide exercise of their dis- 
 cretion, and their hona fides is not 
 questioned, thought proper to con- 
 tinue the mines for this purpose, I 
 see no ground on which the appel- 
 lants can found any objection upon 
 the ground of the mines having 
 been so continued. The case must, 
 in my opinion, depend upon the 
 broad and general positions on which 
 the appellants relied. . . . The ap- 
 pellants' argument on this point 
 rested mainly upon several cases 
 which have been detei-mined at 
 law, Burmester ». Norris (6 Exch. 
 796), Ricketts v. Bennett (4 C. B. 
 686), and the cases there cited. 
 Those cases seem to me fully to 
 establish this position that the act- 
 ing manager of a mine, whether he 
 be a shareholder in the mine or not, 
 
 has no power to render his co-share- 
 holders liable for money borrowed, 
 although it may be borrowed for the 
 necessary purpose of carrying on, or 
 even of preserving, the mine; and 
 the appellants, adopting this posi- 
 tion, contended that the distinction 
 between moneys borrowed and debts 
 contracted was too narrow and re- 
 fined to be acted upon by the courts. 
 But this distinction seems to be es- 
 tablished, and to rest upon sound 
 principles. ' ' (The Lord Justice here 
 referred to Hawtayne ». Bourne, 7 
 M. & W. 595, and Hawken v. Bourne, 
 8 M. & W. 703.) "It is not ac- 
 cording to the usual course of busi- 
 ness for the manager of a mine to 
 borrow moneys for the purpose of 
 carrying on the mine, and therefore, 
 where money is lent to the manager 
 of a mine, the party lending it must 
 look to the power of borrowing with 
 ■which the manager is invested, and 
 can recover over against the parties 
 ■who have authorized the borrowing 
 of the money; but, on the other 
 hand, ■wages must become due to 
 the miners, and goods must be 
 bought upon credit by the manager 
 of a mine, and the shareholders 
 therefore are considered to have 
 authorized the manager to incur 
 such expenses and contract such 
 debts, and consequently are held 
 liable for such expenses and debts. 
 Surely this distinction is sound in 
 principle." 4 De G., M. & G. 39- 
 43. See also Lowndes v. Garnett, 
 &c. Mining Co., 33 L. J. Ch. 418, 
 per Page- Wood, V. C. 
 
 The cases above referred to must 
 not be understood as deciding that 
 the directors of an ordinary min- 
 ing company cannot borrow money 
 where there is no express provision 
 
331 THE COKSTBUCTIOK OF CHAETEES. § 346 
 
 Company .1 A company had been formed for the purpose of 
 erecting a corn exchange, and the management of the com- 
 pany was placed in the hands of a board of directors. The 
 building was to be paid for out of calls levied upon the share- 
 holders ; but the liability of each shareholder was expressly 
 limited to a certain sum. The building cost more than was 
 expected, and the directors borrowed the excess. Lord Cran- 
 worth, L. C, held that the shareholders were not liable, 
 because the directors had no power to charge them beyond 
 the amount fixed by the deed. 
 
 The difference between this case and He German Mining 
 Co. was pointed out by Lord Justice Turner in his judgment 
 in the latter case. He said : " That case appears to me to be 
 wholly different from the present. In that case a particular 
 sum was subscribed for the purpose of being expended upon 
 a particular building. There was no trade to be carried on 
 requiring continued expenditure." ^ 
 
 § 846. The Eight of Mortgaging. — Authority to borrow 
 money or incur an indebtedness generally includes authority 
 to give a mortgage upon the corporate property as security. 
 
 The power of mortgaging, like any other power, can be 
 exercised by a corporation only in carrying on its legitimate 
 business. If a corporation holds its property upon a trust in 
 favor of another, it is plain that the company can have no 
 authority to mortgage the property in violation of the trust. 
 And so, where the use of property obtained by a corporation 
 through the assistance of the State is necessary in order to 
 enable the company to perform obligations assumed by it for 
 the benefit of the public, no authority to mortgage such prop- 
 erty can be implied ; for, if the power of mortgaging were 
 conceded under these circumstances, the corporation might 
 indirectly deprive itself of the means of performing its duties 
 to the public.^ 
 
 In the absence of a restriction of this character, or an 
 
 to the contrary. See Union Mining i Re Worcester Corn Exchange 
 
 Co. V. Rocky Mt. Nat. Bank, 2 Col. Co., 3 De G., M. & G. 180. 
 
 248; Bradley v. Ballard, 55 III. 413; M De G., M. & G. 43. 
 
 Moss V. AvereU, 10 N. Y. 457. » Infi-a, § 1020. 
 
§ 347 THE LAW OF PEIVATE COEPORATIONS. 332 
 
 express prohibition by charter, it would seem to be settled 
 law that the right of mortgaging may always be implied 
 where there is authority to borrow or to incur an indebted- 
 ness, and to alien the subject matter of the mortgage. The 
 right of mortgaging follows as a necessary incident to the 
 right of managing the business of a corporation according to 
 the usual methods of business men.^ 
 
 § 347. If the charter of a corporation expressly confers 
 authority to execute one kind of security, as by mortgage 
 upon the corporate property and franchises, this does not 
 impliedly preclude the right of giving other security, as, for 
 example, by pledge.^ Nor does an express grant of au- 
 thority to mortgage for a particular purpose take away 
 the implied authority to mortgage for any other legitimate 
 purpose." 
 
 A simple prohibition from mortgaging does not affect the 
 right of borrowing; and a loan on mortgage or other secu- 
 rity which was unauthorized may stand as a simple debt.* 
 So a mortgage to secure an unauthorized issue of bills may 
 
 ^ Barry v. Merchants' Exoh. Co., E. R. Co. v. Metcalfe, 4 Mete. (Ky.) 
 
 1 Sandf. Ch. 280; King v. Same, 5 199; Pierce v. Emery, 32 N. H. 
 
 N. Y. 547; Curtis v. Leavitt, 15 503; Richards v. Merrimack, &c. 
 
 N. T. 9; Nelson v. Eaton, 26 N. Y. R. R. Co., 44 N. H. 127 ; Methodist 
 
 410; Clark v. Titcomb, 42 Barb. Episc. Ch. of Kendallville v. Shulze, 
 
 122; Jackson v. Brown, 5 Wend. 61 Ind. 511 ; Australian, &c. Steam 
 
 590 ; State v. Rice, 65 Ala. 83 ; Clipper Co. v. Mounsey, 4 K. & J. 
 
 Jones V. Guaranty, &c. Co., 101 733; Re Patent File Co., L. R. 6 
 
 U. S. 622; Detroit v. Mutual Gas Ch. 83; Shears v. Jacob, L. R. 1 
 
 Light Co. 43 Mich. 594; Memphis, C. P. 513. Compare Commonwealth 
 
 &o. R. R. Co. V. Dow, 19 Fed. R. v. Smith, 10 Allen, 448. 
 
 388; Hopson v. iEtna Axle, &c. '^ Uncas National Bank v. Eith, 
 
 Co., 50 Conn. 597; Gordon v. Pres- 23 Wis. 339. See also Talladega 
 
 ton, 1 Watts, 385; Watts's Appeal, Ins. Co. «. Peacock, 67 Ala. 253. 
 
 78 Pa. St. 370 ; Aurora Agricultural, Compare National Bank v. Insu- 
 
 &c. Soc. V. Paddock, 80 111. 263 ; ranee Co., 41 Ohio St. 1. 
 
 West V. Madison County Agricult. * Allen v. Montgomery E. R. Co., 
 
 Board, 82 111. 205; Burt v. Rattle, 11 Ala. 438. 
 
 31 Ohio St. 116; Burr v. McDon- * Payne v. Mayor of Brecon, 3 
 
 aid, 3 Gratt. 215; Susquehanna H. & N. 572; Holdsworth ». Mayor 
 
 Bridge, &c. Co. v. General Ins. of Dartmouth, 11 A. & E. 490; 
 
 Co., 3 Md. 305; Thompson u. Lam- Utica Insurance Co. b. Scott, 19 
 
 bert, 44 Iowa, 244; Bardstown, &c. Johns. 1. 
 
333 THE CONSTBUCTION OF CHAETERS. § 349 
 
 be a valid security for the debt, though the bills be legally 
 void.^ 
 
 § 348. Mortgages by Manufacturing Corporations under the 
 Laws of New York. — Corporations organized in New York 
 under the general law of 1848, for the formation of manufac- 
 turing corporations, were prohibited by the second section of 
 that act from executing mortgages or creating liens upon 
 their property. Subsequently, by the act of 1864, it was pro- 
 vided that such companies might "secure the payment of 
 any debt ... by mortgaging all or any part of their real 
 estate, . . . provided the written assent of at least two thirds 
 of the capital stock be first filed in the oflBce of the clerk of 
 the county where the mortgaged property is situated." ^ 
 
 The Court of Appeals of New York held, under this law, 
 that a mortgage, executed by a corporation in the form of a 
 deed of trust to secure the payment of its negotiable bonds, to 
 be issued thereafter, was authorized ; that it was not essential 
 that the debts to be secured by the mortgage should be in 
 existence at the time of the execution of the mortgage and 
 bonds, but that the statute was complied with if the bonds 
 were negotiated only for the purpose of securing or paying 
 debts contracted before the bonds were actually issued, the 
 security of the creditors then first coming into existence.' 
 
 In Carpenter v. Black Hawk Gold Mining Co.,* the court 
 took the view that a mortgage was authorized' by the law only 
 to secure the payment of existing debts, and that it could not 
 be executed to secure debts contracted simultaneously, or as a 
 means of raising money to carry on the company's business ; 
 but this view has since been disapproved by the court, and 
 would probably not be followed.^ 
 
 § 349. The Power of Pledging. — A corporation has implied 
 authority to pledge any personal property which it may law- 
 
 1 Scott u. Colburn, 26 Beav. 276. N. Y. 43; Vail v. Hamilton, 85 
 
 ^ Laws of 1848, chap. 4, § 2; N. Y. 453; Jones v. Guaranty, &o. 
 
 Laws of 1864, chap. 517, amended Co., 101 U. S. 622; Rochester Sav- 
 
 by Laws of 1871, chap. 481. ings Bank v. Averell, 96 N. Y. 467. 
 
 » Lord V. Yonkers Fuel Gas Co., * 65 N. Y. 43. 
 
 99 N. Y. 547. Compare Carpenter ^ Lord v. Yonkers Fuel Gas Co., 
 
 V. Black Hawk Gold Mining Co. , 65 supra. 
 
§ 350 THE LAW OF PEIVATE CORPOBATIONS. 334 
 
 fully dispose of as security for any debt which it may lawfully 
 contract.! 
 
 It has been held that a corporation may even pledge bonds ^ 
 or shares of stock' issued by itself, as security for its own 
 debts. A transaction of this kind would in reality be a 
 pledge of the power to issue the securities on non-payment 
 of the debt, rather than a pledge of the* securities them- 
 selves.* 
 
 The right of a corporation to pledge shares of its stock is 
 subject to certain limitations which do not apply to the right 
 of pledging property or negotiable certificates of indebted- 
 ness. It is a rule founded upon elementary principles, that 
 shares in a corporation must not be declared paid up unless 
 they have in fact been paid up, and that a corporation has no 
 right, by any artifice, to put it out of its power to call in the 
 full amount of its capital stock.^ 
 
 A corporation may undoubtedly pledge shares which have 
 once been fully paid up and have come back to the corpora- 
 tion, and may authorize the pledgee to sell the shares at any 
 price. But if shares have never been issued or paid up, 
 the corporation would have no right to give the pledgee the 
 power to issue the shares or sell the certificates representing 
 them, as fully paid up, for less than their par amount, unless 
 the company's charter expressly authorizes it to declare its 
 shares fully paid up on receiving payment of less than their 
 amount.® 
 
 § 850. The Right of issuing Negotiable Obligations. — In the 
 United States it has been held, in accordance with the 
 general rule governing the construction of charters,' that 
 corporations have implied authority to execute negotiable 
 
 1 Leo r. Union Pacific Ry. Co., teau w. Allen, 70 Mo. 338. Compare 
 
 17 Fed. Eep. 273. Keaii v. Johnson, 9 N. J. Eq. 401. 
 
 * Combination Trust Co, u. Weed, * Compare Burgess v. Seligman, 
 
 2 Fed. Rep. 24. 107 U. S. 20; and see infra, § 830. 
 
 8 Lehman v. Tallassee Manuf. « Infra, §§ 427, 761, 805. 
 Co., 64 Ala. 567; Androscoggin « See, however, to the contrary, 
 
 R. R. Co. ». Auburn Bank, 48 Me. Peterborough R. R. Co. «. Nashua, 
 
 335. See also Duncomb v. N. Y., &c. R. R. Co., 59 N. H. 385. 
 &c. R. R. Co., 84 N. Y. 190; Chou- ' Supra, § 320. 
 
335 
 
 THE CONSTBUCTION OP CHAETEES. 
 
 §350 
 
 promissory notes, whenever the use of commercial paper is 
 appropriate as a means of accomplishing their chartered pur- 
 poses. Willard, J., said, in delivering the opinion of the 
 Court of Appeals of New York: "No question is better 
 settled upon authority than that a corporation, not prohibited 
 by law from doing so, and without any express power in its 
 charter for that purpose, may make a negotiable promissor}'^ 
 note payable either at a future day or on demand, when such 
 note is given for any of the legitimate purposes for which the 
 company was incorporated." ^ 
 
 Upon the same principle it has been held that corporations 
 have an implied right to draw and accept drafts and bills 
 of exchange, and to execute other classes of commercial 
 securities.^ 
 
 A corporation has implied authority to indorse negotiable 
 paper for any authorized purpose. And the power of in- 
 dorsement may be exercised both for the purpose of transfer- 
 
 1 Moss V. Averell, 10 N. Y. 449, 
 457. See also Barker ». Mechanics' 
 Ins. Co., 3 Wend. 94; Moss v. Oak- 
 ley, 2 Hill, 265 ; SafCord v. 'VVyckofE, 
 4 Hill, 442; Moss v. Rossie Lead 
 Mining Co., 5 Hill, 137; Mott v. 
 Hicks, 1 Cowen, 513; Clark u. Farm- 
 ers', &c. Manuf. Co., 15 Wend. 
 256; Kelley v. Mayor of Brooklyn, 
 4 Hill, 263; Munn v. Commission 
 Co., 15 Johns. 44; Barry ». Mer- 
 chants' Exch. Co., 1 Sandf. Ch. 280; 
 Atfcy.-Gen. v. Life & Fire Ins. Co., 
 9 Paige, 470 ; Mead v. Keeler, 24 
 Barb. 20; Partridge v. Badger, 25 
 Barb. 146 ; Central Bank v. Empire 
 Stone, &c. Co., 26 Barb. 23 ; Curtis v. 
 Leavitt, 15 N. Y. 9; Olcott v. Tioga 
 R. R. Co., 40 Barb. 179; 27 N. Y. 
 546; Ketchum v. Buffalo, 14 N. Y. 
 356; Connecticut Mut. L. Ins. Co. 
 V. Cleveland, &o. R. R. Co., 41 Barb. 
 9 ; Mechanics' Banking Ass. v. 
 N. Y., &c. White Lead Co., 35 N. Y. 
 505 ; Monument Nat. Bank v. Globe 
 Works, 101 Mass. 57 ; Fay v. Noble, 
 12 Cush. 1; Narragansett Bank v. 
 
 Atlantic Silk Co., 3 Mete. (Mass.) 
 282; Smith v. Eureka Flour Mills 
 Co., 6 Cal. 1; Magee v. Mokelumne 
 Hill Canal, &o. Co., 5 Cal. 258; 
 Union Bank v. Jacobs, 6 Humph. 
 515; Richmond, &c. R. R. Co. v. 
 Snead, 19 Gratt. 354; Oxford Iron 
 Co. V. Spradley, 46 Ala. 98; Came 
 V. Brigham, 39 Me. 35; Lucas v. Pit- 
 ney, 3 Dutch. 221 ; Clarke v. School 
 District, 3 R. 1. 199; Re Great West- 
 ern Tel. Co., 5 Biss. 363; Straus 
 V. Eagle Ins. Co., 5 Ohio St. 59; 
 McMasters v. Reed's Exrs., 1 Grant's 
 Cas. 36; Hamilton v. Newcastle, &c. 
 R. R. Co., 9 Ind. 359; Ward v. 
 Johnson, 95 111. 215, 238; Millard w. 
 St. Francis, &o. Academy, 8 Bradw. 
 341 ; Rockwell v. Elkhorn Bank, 13 
 Wis. 653. 
 
 ^ Hascall v. Life Ass., 5 Hun, 151 ; 
 Conro V. Port Henry Iron Co., 12 
 Barb. 27; Olcott v. Tioga R. R. 
 Co., 40 Barb. 179; 27 N. Y. 546; 
 Munn V. Commission Co., 15 Johns. 
 44; Barnes v. Ontario Bank, 19 
 N. Y. 152. 
 
§ 351 THE LA"W OF PRIVATE COEPOBATIONS. 336 
 
 ring the legal title from the corporation,^ and for the purpose 
 of guaranteeing payment to the transferee.^ 
 
 § 351. In the United States a corporation has implied 
 authority to issue negotiable paper for any legitimate purpose, 
 although the issuing of negotiable paper may not be required 
 under ordinary circumstances, in carrying on the kind of 
 business in which the company is engaged. There is no dif- 
 ference in this respect between the issuing of negotiable paper 
 and the making of contracts of any other class. Transactions 
 which would not be in pursuance of the authorized purposes 
 of a corporation, in the usual course of events, may be entirely 
 proper under extraordinary circumstances. The use of nego- 
 tiable paper is merely a means of accomplishing the chartered 
 purposes of a corporation ; and it is implied in the grant of a 
 charter that the company may carry on its legitimate busi- 
 ness in accordance with the usages of business men. 
 
 The question whether or not a contract executed on behalf 
 of a corporation is of such a character that it might have 
 been performed in pursuance of the legitimate business of 
 the company under ordinary circumstances, is material only 
 in determining the rights of parties dealing with the company 
 in good faith and without notice. It is strictly a question of 
 the law of agency. An inquiry into the authority of an agent 
 executing a negotiable instrument or other contract is always 
 in order ; and in case of an agent of a corporation this in- 
 volves an inquiry whether the agent acted for a purpose 
 authorized by the company's charter, or a purpose in excess 
 of it. A corporation is bound by an unauthorized act per- 
 formed by an agent, only provided the act was within the 
 apparent authority with which the agent was invested, and 
 the person dealing with him had no notice that the act was 
 in fact unauthorized.^ 
 
 1 Goodrich v. Reynolds, 31 HI. » Railroad Co. v. Howard, 7 Wall. 
 
 490; Hardy v. Merri weather, 14 412 ; Connecticut Mutual L. Ins. Co. 
 
 Ind. 203; Mclntire v. Preston, 10 «. Cleveland, &c. R. R. Co., 41 
 
 111. 48; Frye v. Tucker, 24 111. 180; Barb. 9; Mechanics' Banking Ass. 
 
 Buckley v. Briggs, 30 Mo. 452; v. N. Y., &c. White Lead Co., 35 
 
 Alexander v. Horner, 1 MoCrary, N. Y. 505. Compare infra, § 423. 
 634. » Infra, § 565. 
 
337 THE CONSTRUCTION OF CHAETBES. § 352 
 
 If the business of a corporation is of such a character as to 
 require the issuing of negotiable paper under ordinary cir- 
 cumstances, a party receiving such paper in good faith and 
 ■without notice, from an agent of the company having author- 
 ity to issue it under ordinary circumstances, will be protected, 
 although the agent may have acted without authority and in 
 violation of the company's charter in the particular case.^ 
 But if the execution of negotiable instruments is not required 
 in carrying on the legitimate business of a corporation except 
 under extraordinary circumstances, a party receiving such 
 paper is not entitled to assume the existence of those ex- 
 traordinary circumstances, and must, at his peril, ascertain 
 the real facts.^ 
 
 § 852. The Rule in England. — A different rule seems to be 
 established in England. It is there held that a corporation 
 has implied authority to issue negotiable instruments, pro- 
 vided its business be of such a character that the issuing of 
 negotiable instruments would be an ordinary incident to it ; ^ 
 but it seems that a corporation whose business does not re- 
 quire the issue of negotiable paper under ordinary circum- 
 stances has no implied authority to issue negotiable paper 
 under any circumstances whatever. 
 
 In Bateman v. Mid-Wales Ry. Co.,* Erie, C. J., said: 
 " The question is whether this company, being a corporation 
 created for the specific purpose of making a railway, can 
 lawfully bind itself by accepting a bill of exchange. I am of 
 opinion that it cannot. The bill of exchange is a cause of 
 action, a contract by itself, which binds the acceptor in the 
 hands of any indorsee for value ; and I conceive it would be 
 altogether contrary to the principles of law which regulate 
 such instruments that they should be valid or not, according 
 as the consideration between the original parties was good or 
 bad, or whether, in case of a corporation, the consideration 
 
 1 Infra, § 577. 4 Ch. 460; Bateman v. Mid-Wales 
 
 2 Infra, § 586. Ry. Co., L. R. 1 C. P. 512, per 
 ' Re General Estates Co., L. R. Montague Smith, J. 
 
 3 Ch. 758, 761, per Page- Wood, < L. R. 1 C. P. 499, 509, 512. 
 L. J.; Be Land Credit Co., L. R. 
 VOL. I. —22 
 
§ 352 THE LAW OP PBIVATE COEPOKATIONS. 338 
 
 in respect of which the acceptance is given is sufficiently con- 
 nected with the purpose for which the acceptors were incor- 
 porated. It would be inconvenient to the last degree if such 
 an inquiry could be gone into. Some bills might be given 
 for a consideration which was valid, as for work done for the 
 company, and others as a security for money obtained on 
 loan beyond their borrowing powers. It would be a perni- 
 cious thing to hold that in respect of the former the corpora- 
 tion might be sued by an indorsee, but in respect of the 
 latter not." 
 
 In the same case, Montague Smith, J., said : " I am 
 clearly of opinion that it was not within the competency 
 of this company to accept bills. It is a company incorpo- 
 rated for the formation of a railway, with a limited capital 
 and limited powers of borrowing money. If such a com- 
 pany had power to accept bills of exchange, the consequence 
 would be either that they might bind themselves by accept- 
 ances to an unlimited extent, or there must in each case 
 be an inquiry whether the bill was given for the payment 
 of a just debt, or for a purpose not warranted by their 
 incorporation." ^ 
 
 Accordingly, it has been held in England that the right of 
 issuing negotiable instruments could not be implied from the 
 business of a railway company,^ a mining company,^ a gas 
 
 1 This argument carries too far; Co., 40 Barb. 179; 27 N. Y. 546; 
 for the reasoning upon which it Lucas «. Pitney, 27 N. J. Law, 
 is founded would apply to contracts 221 ; Richmond, &c. E. R. Co. v. 
 and transfers of property of every Snead, 19 Gratt. 354; Union Bank 
 description. An inquiry into the v. Jacobs, 6 Humph. 515 ; Ham- 
 authority of an agent executing a ilton v. Newcastle, &c. R. R. Co., 
 contract, whether it be negotiable 9 Ind. 359; Railroad Co. v. How- 
 or not, is always proper ; and it ard, 7 Wall. 412; and cases supra, 
 is immaterial whether the principal § 350. 
 
 be an individual or a corporation. ' Dickinson ». Valpy, 10 B. & C. 
 
 Infra, Chapter VIII. 128; Brown v. Byers, 16 M. & W. 
 
 2 Bateman v. Mid-Wales Ry. 252. Compare Barrett's Case, 4 
 Co., L. R. 1 C. P. 499. Compare De G., J. & S. 758. 
 
 Peruvian Rys. Co. v. Thames, &c.. In the United States, see Moss 
 
 Ins. Co., L. R. 2 Ch. 617. v. Rossie Lead Mining Co., 5 Hill, 
 
 The rule is different in the United 137; Moss v. Averell, 10 N. Y. 
 
 States. See Olcott v. Tioga R. R. 457. 
 
339 THE CONSTKUCTION OF CHAETEBS. § 354 
 
 company,^ a water-works company,* a salt and alkali com- 
 pany ,8 a cemetery company,* or a salvage company.^ 
 
 § 858. The Use of a Corporate Name. — Corporations, like 
 copartnerships, transact their business and are known to the 
 world under particular names ; but a corporation differs from 
 a copartnership in this, that it is recognized by law, and must 
 sue and be sued, as an entity, under the name by which it is 
 known to the world.^ 
 
 If a particular name is given to a corporation by its char- 
 ter, this name should be used, and the use of any other name 
 is unauthorized.' But it seems that a corporation may ac- 
 quire a new name by usage or reputation.^ If no name was 
 given to a corporation by its charter, the right to adopt a 
 name may be implied.® 
 
 § 354. The Effect of a Misnomer. — The identity of a corpo- 
 ration is no more affected by a change of name, than the 
 identity of an individual.^*' 
 
 The agents of a corporation have no implied authority to 
 use any name except that indicated by the company's char- 
 ter, in contracting on the company's behalf ; but the use of a 
 
 1 Bramah v. Roberts, 3 Bing. Co., 32 Ind. 376; Regina v. Eegis- 
 
 N. C. 963. trar, 10 Q. B. 839. 
 
 ^ Neale v. Turton, 4 Bing. 149. ' Dutch West India Co. v. Moses, 
 
 8 Bult u. Morrell, 12 A. & E. 745. 1 Stra. 614; Knight v. Mayor of 
 
 In the United States, manufacturing Wells, 1 Ld. Raym. 80; Smith v. 
 
 companies have a general authority Tallassee Plank Road Co., 30 Ala. 
 
 to issue negotiable paper in regular 650; Minot v. Curtis, 7 Mass. 441; 
 
 course of business. See Mott v. South School District v. Blakeslee, 
 
 Hicks, ICowen, 513; Clark u. Farm- 13 Conn. 227. See Melledge v. 
 
 ers', &c. Manuf. Co., 15 Wend. 256; Boston Iron Co., 5 Cush. 158. 
 
 Mechanics' Banking Ass. v. N. Y., ^ Anonymous, 1 Salk. 191. Com- 
 
 &c. White Lead Co., 35 N. Y. 505; pare Pits u. James, Hob. 124; Ayray's 
 
 Smith V. Eureka Flour Mills Co., 6 Case, 11 Co. 19 ; Johnson v. Common 
 
 Cal. 1 ; Oxford Iron Co. v. Spradley, Council of Indianapolis, 16 Ind. 227. 
 
 46 Ala. 98; Monument Nat. Bank " Cahillw. Bigger, 8 B.Monr. 211; 
 
 V. Globe Works, 101 Mass. 57. Rosenthal v. Madison, &c. Plank 
 
 * Steele v. Harmer, 14 M. & W. Road Co., 10 Ind. 358; Northwest- 
 831 ; 4 Exch. 1. ern College v. Sohwagler, 37 Iowa, 
 
 * Thompson v. Universal Salvage 577. Compare Episcopal Char. Soc. 
 Co., 1 Exch. 694. v. Episcopal Ch. , 1 Pick. 372 ; Dela- 
 
 ° Supra, § 7. ware, &c. R. R. Co. v. Irick, 3 Zabr. 
 
 ' Glass V. Tipton Turnpike, &c. 321. Infra, § 791. 
 
§355 
 
 THE LA"W OF PRIVATE CORPOBATIONS. 
 
 340 
 
 wrong name is ordinarily not material, if the corporation'is 
 really intended by the parties. A misnomer of a corporation 
 has the same legal effect as a misnomer of an individual. A 
 contract entered into by a corporation, under an assumed 
 name, may be enforced by either of the parties.^ If the con- 
 tract is expressed in writing, and the identity of the corpo- 
 ration can be ascertained from the instrument itself, the 
 misnomer is wholly unimportant ; ^ but, if necessary, other 
 evidence may be introduced in order to establish what com- 
 pany was intended .3 The same rules apply to devises to 
 corporations.* 
 
 If a notice is sufficient to serve its purpose, it will be suffi- 
 cient in law, although it contain a misnomer.^ So, a statute 
 or legal proceeding, relating to a corporation, is not inopera- 
 tive by reason of a slight variation in the company's name, if 
 the identity of the corporation is clearly indicated.^ 
 
 § 355. A misnomer of a corporation in pleading has the 
 same legal effect as a misnomer of an individual under simi- 
 
 1 Hoboken Building Ass. v. Mar- 
 tin, 2 Beasl. 427; Boisgerard v. New 
 York Banking Co., 2 Sandf. Ch. 23; 
 Hammond v. Shepard, 29 How. Pr. 
 188, 191. Compare Dutchess Cotton 
 Manuf. Co. v. Davis, 14 Johns. 238; 
 All Saints' Church v. Lovett, 1 Hall, 
 191. 
 
 2 Mott V. Hicks, 1 Cowen, 513; 
 Boisgerard v. New York Banking 
 Co., 2 Sandf. Ch. 23; Brockway v. 
 Allen, 17 Wend. 40 ; Hoboken Build- 
 ing Ass. V. Martin, 2 Beasl. 427; 
 Chadsey v. McCreery, 27 111. 253; 
 Northwestern Distilling Co. v. Brant, 
 69 111. 659; Pitman v. Kintner, 5 
 Blackf. 250; Thatcher u. West River 
 Nat. Bank, 19 Mich. 196; Ryan v. 
 Martin, 91 N. Car. .464; Asheville 
 Div. No. 15 V. Aston, 92 N. Car. 
 578; Clement v. City of Lathrop, 
 18 Fed. Rep. 885. 
 
 » Medway Cotton Manufactory 
 V. Adams, 10 Mass. 360; Franklin 
 Avenue, &c. Savings Inst. v. Board 
 
 of Education, 75 Mo. 408; Melledge 
 V. Boston Iron Co., 5 Cnsh. 158; 
 Milford, &c. Turnpike Co. v. Brush, 
 10 Ohio, 111; Kentucky Seminary 
 V. Wallace, 15 B. Monr. 35; Berks, 
 &c. Turnpike Co. ». Myers, 6 S. 
 
 6 R. 12 ; Hammond v. Shepard, 29 
 How. Pr. 188. 
 
 * First Parish v. Cole, 3 Pick. 
 232; Minot v. Boston Asylum, &c., 
 
 7 Mete. (Mass.) 416; New York In- 
 stitution, Sec v. How, 10 N. Y. 84; 
 Button V. American Tract Soc, 23 
 Vt. 336; Vansanti). Roberts, 3 Md. 
 119; Chapin v. School District, 35 
 N. H. 445; Preachers' Aid Soc. v. 
 Rich, 45 Me. 552; Atty.-Gen. v. 
 Mayor, 7 Taunt. 546. 
 
 ^ Eastham v. Blackburn Ry. Co., 
 23 L. J. Exch. 199; Gray v. Mo- 
 nongahela Nav. Co., 2 W. & S. 
 156. 
 
 » Chancellor of Oxford's Case, 
 10 Co. 54, 57 b; Souhegan Nail, &o. 
 Co. V. McConihe, 7 N. H. 309. 
 
341 THE OONSTEtrCTION OP OHAETEES. § 356 
 
 lar circumstances. Suits should be brought by and against 
 parties by their proper names. But a misnomer of the plain- 
 tiff in an action must be pleaded in abatement in the United 
 States, as was formerly the rule in England ; ^ and the same 
 rule applies in case of a misnomer of the defendant.^ 
 
 If a corporation has been misnamed in an obligation made 
 in its favor, the company should bring suit against the obligor 
 in its right name ; ^ but if the obligor of a bond or deed be 
 misnamed, it seems that, at common law, he should be sued 
 by such assumed name,.and not by his proper name.* 
 
 The Code of Civil Procedure of New York provides that, 
 " In an action or special proceeding brought by or against a 
 corporation, the defendant is deemed to have waived any 
 mistake in the statement of the corporate name, unless the 
 misnomer is pleaded in the answer, or other pleading in the 
 defendant's behalf." ^ 
 
 § 356. The Implied Right to sue and be sued. — The distin- 
 guishing characteristic of a corporation is, that it is recognized 
 by law as a collective body. Partnerships usually act like 
 collective bodies in their business transactions, but they are 
 not recognized by law in that character ; and the rights of 
 the several partners or members must be worked out di- 
 rectly, upon common law principles, without the intervention 
 of the company or united body, as a representative of their 
 joint interests. In this fact, and the consequences which 
 result therefrom, lies the fundamental distinction between a 
 
 1 1 Chitty on PI. 451 (6th ed.); 423. Compare Virginia, &c. Nav. 
 Mayor of Stafford v. Bolton, 1 B. Co. v. United States, Taney, 418. 
 & P. 40 ; Hoereth v. Franklin Mill » Northwestern Distilling Co. v. 
 Co., 30 111. 157; State v. Bell Tele- Brant, 69 HI. 658; New York Afri- 
 phone Co., 36 Ohio St. 296. Com- can Sec. v. Varick, 13 Johns. 38; Al- 
 pare Burnham v. Savings Bank, 5 loways Creek Township v. String, 
 N. H. 446. 6 Halst. 323; Commercial Bank 
 
 2 Gilbert v. Nantucket Bank, 5 v. French, 21 Pick. 486; Berks, &c. 
 Mass. 97; Stone v. Berkshire Cong. Turnpike Co. v. Myers, 6 S. &R. 12. 
 Soc, 14 Vt. 86; School District v. * 1 Chitty on PL 245 (6th ed.). 
 Griner, 8 Kans. 224 ; Lake Sup. Build. « Code of Civil Procedure, § 1777 ; 
 Co. V. Thompson, 32 Mich. 293; Whittlesey ». Frantz, 74 N. Y. 456 ; 
 State ». Bell Telephone Co., 36 Ohio Methodist, &c. Church v. Tryon, 
 St. 296; Wilson ». Baker, 52 Iowa, 1 Denio, 451. 
 
§ 357 THE LAW OF PEIVATE COEPOEATIONS. 342 
 
 corporation and a copartnership.^ To be recognized by law 
 as a collective body is, therefore, essential to the legal exist- 
 ence of a corporation ; and it is necessarily implied in the 
 grant of every charter of incorporation, that the company 
 may sue and be sued in a corporate capacity, without regard 
 to the individual members who compose the company, when- 
 ever the corporate property or rights are involved. 
 
 § 357. Remedies available to a Corporation. — A corpora- 
 tion may avail itself of any legal or equitable remedy which 
 would be available to an individual under similar circum- 
 stances. Thus, a corporation may sue like an individual 
 upon express or implied promises. It may obtain a writ of 
 right, and prosecute real and possessory actions 5^ and it 
 may sue its tenants for use and occupation whenever an in- 
 dividual might sue in that form of action.^ A corporation 
 which has rendered salvage services through its agents may 
 sue in admiralty as a salvor.* So a corporation may sue out 
 a commission in bankruptcy as petitioning creditor ; ^ and it 
 may agree to a reference to arbitrators.® 
 
 Corporations are impliedly authorized to sue in chancery 
 whenever their equitable rights are involved. Thus, a cor- 
 poration may apply for an injunction to prevent other per- 
 sons from using its name, to the injury of its trade.'' So a 
 corporation may, by injunction, restrain the commission of a 
 nuisance upon its property ; ^ and, in a proper case, it may 
 maintain a bill of interpleader.® 
 
 It has been held that a corporation cannot at common law 
 be an administrator or executor, for the duties of an admin- 
 
 1 See supra, §7. v. Winneganoe Mill Co., 26 Me. 
 
 1 Kyd on Corp. 185; Gospel 122; Paret v. City of Bayonne, 39 
 
 Soo. V. Wheeler, 2 GaU. 126. N. J. Law, 559. 
 
 « Mayor of StafEord v. Till, 4 ' Newby ». Oregon, &c. Ry. Co., 
 
 Bing. 75. Deady, 609 ; Holmes v. Holmes, &o. 
 
 * The Camanche, 8 Wall 448; Manuf. Co., 37 Conn. 278. Compare 
 
 The Blackwall, 10 Wall. 1. London, &c. Law Assnr. Soc. v. Lon- 
 
 5 Ex parte Bank of England, 1 don, &o. Ins. Co., 11 Jurist, 938. 
 
 Swanst. 10. » Central Bridge Co. v. Lowell, 4 
 
 ' Alexandria Canal Co. v. Swann, Gray, 474. 
 
 5 How. 89; Day v. Essex County ° Salisbury Mills v. Townsend, 
 
 Bank, 13 Vt. 97. Compare Sawyer 109 Mass. 115. 
 
343 THE CONSTEtrCTION OF OHAETBRS. § 359 
 
 istrator or executor are of a personal nature, and cannot be 
 delegated, to an agent ; ^ but there are numerous instances in 
 which corporations have been expressly empowered by stat- 
 ute to administer estates. 
 
 § 358. Personal injuries cannot, in the nature of things, 
 be suffered by a corporation aggregate; but a corporation 
 may sue for loss of service or other pecuniary damage result- 
 ing from personal injuries to its servants. And a corporation 
 may by the usual remedies recover damages for every kind 
 of wrong which it can suffer. 
 
 Corporations are not confined to suits for damages to their 
 tangible property, as by action of trespass or trover; but 
 they may also sue for consequential damages caused by loss 
 of profits in their business. Thus, a corporation may sue on 
 account of a libel or slander concerning its business or prop- 
 erty ; and an allegation of special damages is not necessary 
 in such case, if it would not be necessary in a suit of similar 
 character brought by an individual.^ So a corporation may 
 maintain an action on the case on account of a vexatious suit 
 brought against it.^ 
 
 § 359. The Territorial Iiimits Tvithin •which a Corporation 
 may act — It has sometimes been said, that a corporation must 
 reside in a particular place, and that it cannot migrate from 
 the State which created it to another State.* Expressions 
 of this kind are mere figures of speech, and cannot be made 
 the basis of intelligent argument. 
 
 It is true that the meetings of the shareholders in a corpo- 
 ration must be held at some fixed place, even though no 
 
 1 Georgetown College v. Browne, Shoe & Leather Bank v. Thompson, 
 34Md. 450; 5e Thompson's Estate, 23 How. Pr. 253; Knickerbocker 
 33 Barb. 334. Life Ins. Co. lu Ecclesine, 42 How. 
 
 In England it is held that, if a Pr. 201 ; s. c. 34 N. Y. Super. Ct. 
 
 corporation be named executor, it 76 ; Hahnemannian Life Ins. Co. v. 
 
 may appoint an individual to receive Beebe, 48 Bl. 87. Compare Brennan 
 
 administration in its place. 1 Wil- v. Tracy, 2 Mo. App. 540. 
 
 liams on Exrs. 229. ' Compare South Royalton Bank 
 
 2 Metropolitan, &c. Omnibus Co. v. Suffolk Bank, 27 Vt. 505. 
 
 V. Hawkins, 4 H. & N. 87; Trenton, * See State v. Milwaukee, &c. 
 &c. Ins. Co. V. Perrine, 3 Zab. 402; Ky. Co., 45 Wis. 579. 
 
§ 360 THE LAW OP PRIVATE COEPOEATIONS. 844 
 
 express provision to that effect be contained in their char- 
 ter ; 1 and it is evident that a corporation cannot extend its 
 franchises from the jurisdiction of the sovereignty which 
 granted them, to the jurisdiction of a sovereignty which did 
 not grant them.^ But it is not true that there is any techni- 
 cal rule of law restricting a corporation in its transactions to 
 a particular area or territory. The extent of the territory 
 within which a corporation may carry on its operations de- 
 pends entirely upon the nature of the business in which the 
 corporation is engaged ; and if there is no express provision 
 in the charter of a corporation, limiting it in its ordinary 
 business transactions to a particular place or territory, no 
 such limitation is to be implied. The rule is, that a corpo- 
 ration is impliedly authorized by its charter to carry on its 
 business both at home and abroad, through the usual agencies, 
 in the same manner as a copartnership engaged in a similar 
 enterprise. The right to carry on the business of a corpora- 
 tion in a foreign State undoubtedly depends upon the con- 
 sent of that State; but this consent is almost universally 
 accorded as a matter of comity.^ 
 
 § 360. It has been held, in accordance with these views, 
 that a corporation chartered for the purpose of carrying on 
 the business of banking may engage in legitimate banking 
 operations in the territory of any State which gives its con- 
 sent. In Bank of Augusta v. Earle, Chief Justice Taney 
 said : " The charter of the Bank of Augusta authorizes it 
 in general terms to deal in bills of exchange, and conse- 
 quently gives it the power to purchase foreign bills as 
 well as inland ; in other words, to purchase bills payable in 
 another State. The power thus given clothed the corpora- 
 tion with the right to make contracts out of the State, in so 
 far as Georgia could confer it. For whenever it purchased 
 a foreign bill, and forwarded it to an agent for acceptance, 
 if it was honored by the drawee, the contract of acceptance 
 was necessarily made in another State ; and the general 
 power to purchase bills, without any restriction as to place, 
 
 1 Infra, § 468. « Infra, § 940. 
 
 2 Infra, § 939. 
 
345 THE CONSTEUCTION OP CHAETEES. § 360 
 
 by its fair and natural import authorized the bank to make 
 such purchases wherever it was found most convenient and 
 profitable to the institution ; and also to employ suitable 
 agents for that purpose. The purchase of the bill in ques- 
 tion was, therefore, the exercise of one of the powers which 
 the bank possessed under its charter ; and was sanctioned by 
 the law of Georgia creating the corporation, so far as that 
 State could authorize a corporation to exercise its powers 
 beyond the limits of its own jurisdiction."* 
 
 It has frequently been held that railroad companies,^ and 
 insurance companies,* may establish agencies, and enter into 
 contracts in foreign States, in the prosecution of the enter- 
 prises for which they were chartered ; and the same rule un- 
 doubtedly applies to all other classes of corporations. 
 
 Corporations may acquire and hold real and personal prop- 
 erty, wherever this is found convenient in the prosecution of 
 their authorized purposes, subject, of course, to the laws in 
 force where the property is situated. And although a cor- 
 poration may not have authority to purchase lands in a for- 
 eign State, for purposes of speculation, it may nevertheless 
 be authorized to receive the property in satisfaction of a 
 valid debt.* 
 
 The cases above referred to are cited merely to illustrate, 
 and not to define, the general rule, that corporations are 
 impliedly authorized by their charters to carry on business 
 in the customary manner, wherever this is found most con- 
 venient and profitable. The territory within which a cor- 
 
 1 Bank of Augusta v. Earle, 13 Ins. Co. ». Massachusetts, 10 Wall. 
 Pet. 588; Williams v. Creswell, 51 567, 573; Bard v. Poole, 12 N. Y. 
 Miss. 817; Hadley v. Freedman's 498; Western v. Genesee Mutual 
 Savings, &c. Co., 2 Tenn. Ch. 122; Ins. Co., 12 N. Y. 258; Mumford 
 Silver Lake Bank u. North, 4 Johns, v. American Life Ins., &c. Co., 4 
 Ch. 370. Compare People o. Oak- N. Y. 468. 
 
 land County Bank, 1 Dougl. (Mich.) * Thompson ». Waters, 25 Mich. 
 
 282 ; Atty.-Gen. 1). Oakland County 227, 232; Lathrop v. Commercial 
 
 Bank, Walk. (Mich.) 90. Bank, 8 Dana, 114; New York Dry 
 
 2 See McCluer ». Manchester, &c. Dock Co. v. Hicks, 5 McL. Ill; 
 K. R. Co., 13 Gray, 124. National Trust Co. ». Murphy, 30 
 
 ' Kennebec Co. y. Augusta Ins. , N. J. Eq. 408; Cincinnati, &c. 
 &c. Co., 6 Gray, 204; Liverpool R. R. Co. v. Pearoe, 28 Ind. 502. 
 
§ 361 THE LA"W OP PBIVATE COEPOEATIONS. 346 
 
 poration must confine its operations is determined by the 
 nature of its business, and not by the political boundaries 
 between States.^ 
 
 § 361. In State v. Milwaukee, &c. Ry. Co.,* the Supreme 
 Court of Wisconsin expressed an opinion that it is the duty 
 of every private corporation to keep its principal place of 
 business and its records so located as to render it accessible 
 to the process and to the exercise of the visitatorial power of 
 the State by which it is chartered. This doctrine is correct 
 only provided the legislature has expressed the policy of 
 the State by some special enactment, or by a general system 
 of legislation regarding incorporated companies ; there is no 
 such rule at common law. It is always implied in the grant 
 of a charter of incorporation, where there is no indication to 
 the contrary, that the company shall have its central office 
 or place of management in the State under whose laws it 
 was organized. This, however, is merely a rule applicable 
 to the construction of charters, in determining the intention 
 of the corporators and of the State, and is not an arbitrary 
 rule of law. 
 
 In some instances it has been provided , in general incor- 
 poration laws, that a majority of the directors of a company 
 incorporated under the laws shall be residents of the State. 
 In the absence of a provision of this description, there is no 
 rule requiring the directors and officers, any more than the 
 corporators forming the company, to reside within the State.' 
 The directors may even hold their meetings out of the State.* 
 However, a corporation cannot be formed in one State for the 
 purpose of evading the laws of another State; to attempt 
 this would be an abuse of the comity extended by the States 
 to foreign corporations.^ 
 
 1 New York Floating Derrick Co. ^ State v. Milwaukee, &c. Ry. 
 
 V. New Jersey Oil Co., 3 Duer, 648; Co., 45 Wis. 579. 
 
 Walter A. Wood, &c. Co. v. Cald- ' Humphreys v. Mooney, 5 Col. 
 
 well, 54 Ind. 270. 282. See State v. Milwaukee, &c. 
 
 As to statutory regulations gov- Ry. Co., 45 Wis. 579. Supra, § 85. 
 
 erning foreign corporations, see i»/ro, ^ Infra, § 513. 
 
 §§ 641-645. 6 Infra, § 945. 
 
347 THE OONSTKUOTION OF CHAKTEES. § 362 
 
 PART II. 
 
 § 362. What Transactions are authorized. — General Princi- 
 ples. — It is a well-established general rule, that a corporation 
 may carry on the business for which it was chartered in the 
 manner in which a business of that particular kind is usually 
 carried on. What the usual manner of carrying on a business 
 is cannot be determined by the application of purely legal 
 principles ; it is a question of fact, and not a question of law. 
 Evidently, therefore, it is impossible to decide abstractly that 
 acts of a particular description are within or without the char- 
 tered powers of a corporation. The right of a corporation 
 to perform an act depends, in every case, upon all the sur- 
 rounding circumstances ; no act is authorized under all cir- 
 cumstances, and facts can be conceived which would render 
 almost any act justifiable. Thus, a railroad company may 
 usually buy coal and material for constructing its road, but 
 it would have no authority to buy coal or anything else as a 
 speculation, with the intention of selling it again.^ On the 
 other hand, it would clearly be unauthorized, under any ordi- 
 nary state of facts, to use the funds of a railroad company for 
 building a church or a theatre ; yet this use of the corporate 
 funds might be entirely justifiable, if a church or a theatre 
 were required for the use of the company's workmen, in a 
 part of the world where no church or suitable place of recre- 
 ation was accessible.^ 
 
 No rules can be framed which would be of any practical 
 value in determining cases of this character. The most that 
 can be done is to state the general principles which have in- 
 fluenced the courts in their decisions, and to illustrate these 
 general principles by examples. The application of the law 
 to individual cases must always remain a matter involving the 
 exercise of sound practical judgment and business experience. 
 
 1 Infra, § 393. 2 See infra, § 589. 
 
§ 363 THE LA"W OF PRIVATE COEPOBATIONS. 348 
 
 Great caution is therefore necessary in treating a decision 
 that a corporation has or has not authority to do a particular 
 act, as a precedent to be followed in other cases. Such a de- 
 cision would not establish an absolute rule, which could be 
 applied mechanically ; but all the facts and the general prin- 
 ciples by which the court was guided in reaching its conclu- 
 sion must always be considered. It is important also to bear 
 in mind, that the fact that a transaction of a corporation has 
 been sustained by a court does not necessarily prove that the 
 corporation had a right to enter into it. There are many in- 
 stances in which the courts will disregard the illegality of a 
 transgression by a corporation of its charterered powers, in 
 order to do justice between the parties.^ 
 
 § 363. Profitableness of a Transaction not the Test. — The 
 fact that a transaction is profitable to a corporation is not 
 alone sufficient to show that it is within its chartered pow- 
 ers. The ultimate object of every business corporation is 
 the gain of money, but this object must be attained by the 
 particular means indicated by the company's charter. To 
 employ other means would be contrary to the agreement 
 of the shareholders, and in excess of the authority granted 
 by the State. Charters must be construed in the light of 
 custom. Such transactions as are customary or usual in 
 the prosecution of a business of the kind in which a corpo- 
 ration is engaged, are impliedly authorized by its charter; 
 but a corporation has no right to engage in any transac- 
 tion which is not in pursuance of the particular enterprise 
 described in its charter. The same rule of construction is 
 applicable to articles of copartnership.^ 
 
 In Central R. R. Co. v. Collins,' a portion of the share- 
 holders in a railroad company obtained an injunction to re- 
 strain the corporation from purchasing a large amount of the 
 stock of another company, for the purpose of controlling 
 its management. McCay, J., delivering the opinion of the 
 
 1 Infra, §§ 628-634. 11 Ch. D. 480, 481, per James, 
 
 » Hood V. New York, &c. R. R. L. J. 
 Co., 22 Conn. 1, 16, 17; Atty.-Gen. » Central R. R. Co. v. Collins, 
 
 V. Great Eastern Ry. Co., L. R. 40 Ga. 582-617. 
 
349 THE CONSTRUCTION OP CHAETEES. § 364 
 
 court, said : " We do not think the profitableness of this 
 contract to the stockholders of the Central and Southwest- 
 ern Railroad Company has anything to do with the matter. 
 These stockholders have a right, at their pleasure, to stand 
 on their contract. If the charters do not give to these 
 companies the right to go into this new enterprise, any 
 one stockholder has a right to object. He is not to be 
 forced into an enterprise not included in. the charter. That 
 it will be to his interest is no excuse ; that is for him to 
 judge. By becoming a stockholder he has contracted that 
 a majority of the stockholders shall manage the affairs of 
 the company within its proper sphere as a corporation, but 
 no further ; and any attempt to use the funds or pledge the 
 credit of the company, not within the legitimate scope of the 
 charter, is a violation of the contract which the stockholders 
 have made with each other, and of the rights — the contract 
 rights — of any stockholder who chooses to say, ' I am not 
 willing.' It may be that it will be to his advantage, but he 
 may not think so, and he has a legal right to insist upon it 
 that the company shall keep within the powers granted to 
 it by the charter."^ 
 
 § 364. Transactions collateral to the Main Purposes of a Cor- 
 poration. — Business corporations are formed for the pecuniary 
 profit of their shareholders. Economy is, therefore, essential 
 in the proper management of the corporate afi^airs ; and it is 
 implied in the charter of every corporation of this character, 
 that it may adopt all such means as will enable it to attain 
 its legitimate purposes in the most profitable manner. A 
 transaction may prima facie appear to be wholly foreign to 
 the business for which a corporation was formed ; and yet, if 
 it be auxiliary to any legitimate purpose of the company, 
 and adapted to attain the same more advantageously, it is 
 impliedly authorized. 
 
 The considerations which influence the courts in passing 
 upon questions of this character were stated clearly by Lord 
 Romilly, in Lyde v. Eastern Bengal Ry. Co. In that case, 
 
 1 See also Beman v. EufEord, First Bryan Bapt. Church, 63 Ga. 
 1 Sim. N. 8. 564 ; Harriman v. 186, 195. 
 
§ 365 THE LAW OP PEIVATB COBPOEATIONS. 350 
 
 a motion was made for an injunction to restrain the officers 
 of a railway company from operating a steamboat line and 
 applying the company's funds to that purpose. The defend- 
 ants insisted that the use of a steamboat was warranted by 
 the nature of the company's business ; and, as an illustration 
 of the manner in which a railway company might legitimately 
 embark in projects apparently inconsistent with its means 
 and objects, it was suggested that a railway company might 
 properly work a coal-mine, if by so doing it could obtain 
 coals more cheaply than by purchasing them ; and that it 
 would be foolish, in such case, to prevent the company from 
 obtainiog a profit by the sale of such coals as were raised but 
 not required for the use of the company. The Master of the 
 Rolls said : " The answer to this argument appears to me to 
 depend upon the facts of each particular case. If, in truth, 
 the real object of the colliery was to supply the railway with 
 cheaper coals, it would be proper to allow the accidental ad- 
 ditional profit of selling coals to others ; but if the principal 
 object of the colliery was to undertake the business of rais- 
 ing and selling coals, then it would be a perversion of the 
 funds of the company, and a scheme which ought not to be 
 permitted, however profitable it might appear to be. The 
 prohibition or permission to carry on this trade would depend 
 on the conclusions which the court drew from the evidence. 
 The same observations apply here : if the use of the boat is 
 really to assist the traffic of the existing railway, it is lawful 
 and proper; but if the object be to extend the traffic to 
 places beyond the railway, which the railway is never in- 
 tended to reach, then it is illegal and beyond the powers of 
 the company." ^ 
 
 § 365. A Corporation may adapt itself to Changes of Time 
 and Circumstances. — A corporation has implied authority to 
 conduct its business upon liberal principles. It may gener- 
 ally do whatever an intelligent man would do under similar 
 circumstances. Hence, it is implied in the formation of every 
 
 1 Lyde D. Eastern Bengal Ry. Co., & Bl. 397, 415, 443; Atty.-Gen. v. 
 36 Beav. 16, 17. See also Mayor of Great Eastern Ry. Co., L. R. 11 
 Norwich v. Norfolk Ry. Co., 4 El. Ch. D. 480, 481, 505. 
 
351 THE CONSTEUCTION OP CHAKTEES. § 366 
 
 business corporation that it shall adapt itself to changes of 
 time and circumstances ; and that it may avail itself of any 
 new appliances or inventions which are deemed necessary 
 or convenient to a successful prosecution of its business. 
 Under these circumstances there is no departure from the 
 original agreement of the corporators, although the latter 
 could not possibly have contemplated the alterations which 
 time and events have brought about. The members of a 
 corporation all agree that its business "shall be carried on 
 in the usual manner. Very few of the transactions of a 
 business corporation can be anticipated at its formation. Yet 
 they are within the agreement of the shareholders, because 
 it is understood that the company's business shall be man- 
 aged in the customary way; and, for the same reason, it 
 follows that a corporation may extend its business and 
 adapt itself to altered circumstances, so long as it remains 
 true to its original purposes. 
 
 Thus, a manufacturing company may adopt new machin- 
 ery and buy a patent right, in order to be able to com- 
 pete successfully with other parties engaged ■ in a similar 
 business.^ 
 
 A canal company may widen and deepen its canal, and a 
 railroad company may enlarge the carrying capacity of its 
 road, in order to meet the requirements of an increase of 
 traific.2 There can be no doubt that railroad companies may 
 adopt all improvements in their business which a liberal 
 management and inventive genius can provide.^ 
 
 § 366. In Dupee v. Boston Water Power Co.,* the 
 Supreme Court of Massachusetts held that a corporation 
 chartered for the purpose of creating water power by erec- 
 tion of dams might release its water privileges after they 
 
 1 Re British, &o. Cork Co. (Leif- E. R. Co. ». St. Louis, 66 Mo. 228; 
 
 child's Case), L. R. 1 Eq. 231 ; Chicago, &c. R. R. Co. v. Wilson, 
 
 Gleadow v. Hull Glass Co., 19 17 111. 123. 
 
 L. J. Ch. 44; Dorsey, &c. Rake » Mayor of Norwich v. Norfolk 
 
 Co. V. Marsh, 6 Fish. Pat. Cas. Ry. Co., 4 El. & Bl. 397, 433. 
 387. * Dupee v. Boston Water Power 
 
 ^ Selden o. Delaware, &o. Canal Co., 114 Mass. 37, 43, 44. 
 Co., 29 N. Y. 634; Atlantic, &c. 
 
§ 367 THE LAW OP PRIVATE OOEPOKATIONS. 352 
 
 could no longer be profitably used ; that it might there- 
 upon enter into arrangement to sell its lands, receiving shares 
 of its own stock in payment at a certain valuation ; and that 
 it might agree to raise the grade of the lands as an induce- 
 ment to the purchasers. Colt, J., said : " Regard must be 
 had to the peculiar situation of the property. The increase 
 of population since the original act of incorporation has 
 given greatly increased value to the lands acquired by the 
 company. The business of the company can no longer be 
 profitably confined to the development and use of its water 
 privileges. It has, by contract with the Commonwealth, 
 the city, and other owners of lands, extinguished its water 
 power, and now owns instead thereof extensive and valuable 
 tracts of lands, over which it had originally only the right to 
 flow. This change in its business has made it necessary to 
 fill in and improve the land, that it might be available as 
 assets of the company ; and this necessity has been recog- 
 nized by a resolve of the legislature authorizing an increase 
 of capital for that purpose. 
 
 " There is nothing in the general laws of the Common- 
 wealth, or in the company's charter, which forbids the sale 
 proposed. The power to purchase and hold implies the 
 power to sell, and to sell upon such terms as to secure 
 the highest price. . . . We cannot see that the rights of 
 any of the stockholders will be illegally prejudiced by the 
 proposed receipt of the shares in payment for its land. 
 Nor is there anything unreasonable in an agreement of 
 the corporation to fill up lands so sold to the usual grade, 
 made at the time of the sale as an inducement to their 
 purchase, and as one way to make the most profitable dis- 
 position of the property. The power to make such an 
 agreement is implied in the power to sell." 
 
 § 367. The Disposition of Surplus Property. — Under the 
 most skilful management of the affairs of a corporation, it 
 may happen at times that a portion of its fixtures or other 
 property cannot be made available in prosecuting the princi- 
 pal business for which the company was formed. Under 
 these circumstances, it is clearly for the benefit of all those 
 
363 THE CONSTRUCTION OP CHAKTEES. § 367 
 
 who are interested in the welfare of the corporation that its 
 property be employed in the most profitable manner possible, 
 even though not for the purposes for which it was acquired. 
 A prudent business man would not allow his capital to lie 
 idle under similar circumstances. 
 
 Thus, a steam-ferry company may own a larger number 
 of vessels than are required in the prosecution of its regular 
 business at any particular time ; it may be advisable to hold 
 additional vessels in reserve for cases of emergency or acci- 
 dent. But it is not necessary that the vessels held in reserve 
 be kept idle. The company may temporarily lease them to 
 other parties, or may use them itself for any purpose for 
 which they are suitable, such as the towage of vessels or the 
 transportation of passengers and merchandise, provided such 
 use be merely temporary and incidental to the principal busi- 
 ness of the company.! So a railway company having author- 
 ity to keep steam vessels for the purposes of a ferry may 
 use such vessels for excursion trips when not otherwise 
 employed.^ 
 
 The principle of these cases was affirmed by the House of 
 Lords in Simpson v. Westminster Palace Hotel Co.* It was 
 there held that a company which had been established for 
 the purpose of building and managing a hotel and tavern, 
 and which had erected a much larger building than it could 
 use at first before its business was created, might tempora- 
 rily lease a large portion of the building to the head of a 
 government department for offices. Lord Chelmsford said: 
 " I am satisfied that this arrangement will be highly benefi- 
 cial to the shareholders, and will aid rather than obstruct the 
 objects of the undertaking, while it appears to me quite clear 
 that it does not interfere with the general principle upon 
 which the undertaking is based." 
 
 1 Bro-wn V. Winnisimmet Co., 11 also City Hotel v. Dickinson, 6 Gray, 
 
 Allen, 326. 586; French v. Quincy, 3 Allen, 9 
 
 * Forrest v. Manchester, &c. Ry. Horsey's Claim, L. R. 5 Eq. 561 
 
 Co., SOBeav. 40. Lafond v. Deems, 81 N. Y. 507 
 
 ' Simpson v. Westminster Palace Temple Grove Seminary v. Cramer, 
 
 Hotel Co., 8 H. L. Cas. 712. See 98 N. Y. 121. 
 VOL. I. — 23 
 
§ 367 THE LAW OF PEIVATE COEPOBATIONS. 354 
 
 In Featherstonhaugh v. Lee Moor, &c. Co.,^ Vice-Chan- 
 cellor Page-Wood held that a mining company had implied 
 authority to lease the whole of its mines, works, and build- 
 ings for twenty-one years, for the reason that it could not at 
 the time use them profitably itself. The decision was based 
 upon the principle which was acted upon in Simpson v. The 
 Westminster Hotel Co. ; but it may be doubted whether 
 other considerations should not have controlled.^ 
 
 Upon the same principle it has been held that companies 
 may temporarily lend their surplus funds on safe security, 
 when it is inexpedient to distribute them among the share- 
 holders.^ 
 
 § 367 a. Further Authorities in Illustration of the preceding 
 Sections. — The principles indicated in the preceding sections 
 have been applied in a great variety of cases arising under 
 diverse circumstances. 
 
 Thus, it has been held that a company newly incorporated 
 for the purpose of manufacturing and selling glass, after hav- 
 ing purchased the business and fixtures of a former company 
 engaged in the same trade, might rightfully contract for a 
 stock of goods in order to enable it to continue the business 
 regularly, and thus retain the customers of the old company 
 while the machinery was undergoing repairs.* 
 
 It has been held that a railway company might agree to 
 construct a carriage-road and wharf in consideration of a 
 release from a more onerous engagement ; ^ and that a corpo- 
 ration might undertake the performance of a trust wholly 
 foreign to its chartered purposes provided the trust was 
 charged upon a legacy the substantial part of which was for 
 the company's benefit.® 
 
 It has been held that a corporation owning a large body of 
 lands, and having authority " to aid in the development of 
 
 1 L. R. 1 Eq. 318, 329. 6 Wilson v. Furness Ky. Co., 
 
 = See infra, §§ 412, 415, 416. L. R. 9 Eq. 28. 
 
 ' Commissioners v. Atlantic, &c. « In the Matter of Howe, 1 Paige, 
 
 R. R. Co., 77 N. Car. 289. 214. 
 
 * Lyndeborough Glass Co. v. Mas- 
 sachusetts Glass Co., Ill Mass. 315. 
 
355 THE CONSTRUCTION OP CHARTEES. § 368 
 
 minerals and other materials in and upon the lands, and to 
 promote the clearing and settlement of the country," could 
 rightfully build saw-mills and a hotel for the accommodation 
 of those having business with the company .^ A manufactur- 
 ing company may, under certain circumstances, open a shop 
 for supplying its laborers with necessaries, and may carry 
 on the shop in the usual manner of retail trade.^ And a 
 turnpike company may lease land and build a house for the 
 shelter of its servants and for storing the implements used in 
 its business.^ It has been held, that a mining company may, 
 without being expressly authorized by its charter, purchase 
 a steamboat, or provide other means of transportation, for the 
 purpose of carrying its minerals to the market and delivering 
 them to purchasers ; * and a similar rule has been applied to 
 a lumber company.* 
 
 § 368. Railroad Companies. — Railroad companies have im- 
 plied authoritj'' to build docks, elevators, and warehouses for 
 the storage of property transported or to be transported on 
 their roads, and workshops for the manufacture and repair 
 of machinery ; they may keep horses and trucks for the deliv- 
 ery of freight, and may make all other arrangements for the 
 proper and convenient management of their business.® They 
 are also impliedly authorized to provide refreshment and din- 
 ing rooms, book-stalls, omnibuses, and otherwise secure the 
 comfort and convenience of travellers.^ Railroad companies 
 
 1 Watts's Appeal, 78 Pa. St. 370, R. R. Co., 27 N. H. 86, 95; Cother 
 392. ». Midland Ry. Co., 2 Phill. 469; 
 
 2 Dauchy v. Brown, 24 Vt. 197; East & West India Docks, &c. Ry. 
 Searight v. Payne, 6 Lea, 283. Co. v. Dawes, 11 Hare, 363. 
 
 ' Crawford v. Longstreet, 43 ' Flanagan v. Great Western Ry. 
 
 N. J. Law, 325. Co., L. R. 7 Eq. 116; Shrewsbury, 
 
 * Calloway Mining, &c. Co. ». &c. Ry. Co. v. Stour Valley Ry. Co., 
 
 Clark, 82 Mo. 305; Moss v. Averell, 2 De G., M. & G. 866; Holmes v. 
 
 10 N. Y. 449, 456. Eastern Counties Ry. Co., 3 K. & J. 
 
 ' Gruber v. Washington, &o. 675; Atty.-Gen. v. Great Eastern 
 
 R. R. Co., 92 N. Car. 1. Ry. Co., L. R. 11 Ch. D. 505, per 
 
 ' New York, &c. R. R. Co. v. Bramwell, L. J. See Railroad 
 
 Kip, 46 N. Y. 546 ; Western Union Commissioners v. Portland, &c. 
 
 Telegraph Co. U.Rich, 19 Kans. 517; R. R. Co., 63 Me. 269. It has 
 
 Moses V. Boston, &o. R. R. Co., 24 been held that a railroad company 
 
 N. H. 71, 82 ; Smith v. Nashua, &o. may contract for the constrnction 
 
§ 369 THE LAW OF PRIVATE COEPOBATIOKS. 356 
 
 have no implied authority to become trading companies, or to 
 speculate in lands, coal, grain, or other property.^ But they 
 may always dispose of their sui-plus property, or such prop- 
 erty as cannot be profitably used by them. Companies which 
 have received land grants from the government may take 
 measures to attract settlers, by building townships and pro- 
 viding other inducements ; they may also dispose of the land 
 upon such terms as they deem most profitable. 
 
 § 369:. Acquisition of Land by Railroad Companies. — Rail- 
 road companies are usually incorporated for the purpose of 
 constructing certain lines of railroad, and operating them 
 when completed ; and they are enabled by statute to acquire 
 the necessary land and rights of way, by exercise of the right, 
 of eminent domain. The extent to which the right of emi- 
 nent domain can be exercised by a company depends upon 
 the constitutional limits of this right,^ and upon the terms 
 of the statute by which the legislature has delegated it. 
 
 A grant to a company of the right to use the power of 
 eminent domain for the purpose of building a railroad, by 
 implication confers the right of taking such land as is neces- 
 sary for the safe and convienient construction of the com- 
 pany's tracks, turn-outs, side-tracks,^ bridges, and embank- 
 ments,* and all the necessary appurtenances of a properly 
 constituted railroad, such as stations, engine-houses,^ repair 
 shops,^ warehouses for freight,^ cattle yards for live cattle,' 
 a telegraph lincj® etc. 
 
 of a hotel near its station. Texas, ^ Re New York, &o. R. R. Co., 
 
 &c. R. R. Co. V. Robards, 60 Tex. 77 N. Y. 248. 
 
 545. As to what accessories are ^ Hannibal, &c. R. R. Co. v. 
 
 included in a mortgage of a "rail- Muder, 49 Mo. 165; Virginia, &o. 
 
 road," see Morgan v. Donovan, 58 R. R. Co. «;. Elliott, 5 Nev. 358; Low 
 
 Ala. 241, 260. v. Galena, &o. R. R. Co. , 18 111. 324. 
 
 1 Infra, § 394. ' Re New York, &c. R. R. Co., 
 
 2 Infra, § 1067. 77 N. Y. 248 ; New York, &c. R. R. 
 "Cleveland, &c. R. R. Co. v. Co. w. Kip, 46 N. Y. 546; Hannibal, 
 
 Speer, 56 Pa. St. 325; Toledo, &c. &c. R. R. Co. v. Muder, 49 Mo. 165. 
 
 Ry. Co. V. Daniels, 16 Ohio St. » New York, &c. R. R. Co. ». Met- 
 
 390. ropolitanGasLightCo.,63N.Y.326. 
 
 ^ Reusch V. Chicago, &o. R. R. » Prather v. Jeffersouville, &c. 
 
 Co., 57 Iowa, 687. R. R. Co., 52 Ind. 16. 
 
857 THE CONSTEUOTION OF CHAKTBES. § 370 
 
 § 370. Delegated PO'wer of Eminent Domain not commensurate 
 with Power to purchase. — The right of a railroad company to 
 take property by exercise of the power of eminent domain is 
 not commensurate with the right of obtaining property by pur- 
 chase. A railroad company may purchase any property which 
 is convenient in the management of its business, and the 
 property so obtained may have no immediate connection with 
 the use and operation of the railroad itself. Thus, a railroad 
 company may purchase land and establish offices in distant 
 places for the convenience of those dealing with it ; it may 
 buy shops for the manufacture of materials, and mines for 
 the production of coal ; ^ it may build dwelling-houses for its 
 operatives, and, in general, may acquire any property which 
 is convenient for the construction or use of the company's 
 road and the development of its business, according to the 
 usual manner of railroad companies.^ 
 
 But this cannot be done by exercise of the power of emi- 
 nent domain. Property can be appropriated under the power 
 of eminent domain only provided two conditions concur. 
 First, the property must be of such a description that the 
 company cannot safely be left to acquire it by purchase only. 
 It is for this reason that the power of eminent domain usually 
 extends only over land or fixed property. Rails, ties and 
 spikes, engines, cars, coals, oil, lamps, and many other articles, 
 are necessary for the construction and use of a railroad, yet 
 these things can always be obtained by purchase, and cannot 
 be taken under the power of eminent domain.^ Secondly, 
 only such property can be taken as is necessary for the con- 
 struction and operation of the railroad itself. Property which 
 
 1 Per Lord Romilly, in Lyde v. In Old Colony R. R. Co. v. Evans, 
 
 Eastern Bengal Ry. Co., 36 Beav. 6 Gray, 25, the court held that a 
 
 16, 17. Compare Atty.-Gen. v. purchase by a railroad company of 
 
 Great Northern Ky. Co., I'Dr. & land upon its line of road, for the 
 
 Sm. 154; 3. c. 6 Jurist, n. s. 1006. purpose of selling gravel taken from 
 
 ^ Spear v. Crawford, 14 Wend, the land and transporting it, was 
 
 20, Black V. Delaware, &c. Canal not unauthorized. 
 Co., 7 C. E. Green, 410; Blackburn « Eldridge ». Smith, 34 Vt. 484, 
 
 V. Sehna, &e. R. B. Co., 2 Flipp. 493. 
 525. See cases in the following 
 notes; also supra, § 368. 
 
§ 372 THE LAW OP PBIVATB COEPOKATIONS. 358 
 
 is not immediately connected with the road must be obtained 
 by purchase. Thus, a railroad company cannot use the power 
 of eminent domain to take land for building a wharf,i or for 
 shops at which to manufacture railroad cars,^ or for the 
 dwellings of operatives,^ or for offices in town, or for any 
 other similar purpose,* yet it may purchase land for any of 
 these purposes. 
 
 § 371. How a Railroad Company may obtain its Railroad. — 
 Railroad companies have implied authority to enter into such 
 financial arrangements as are necessary to obtain the means 
 of constructing, equipping, and operating their lines of road. 
 The right to borrow money and issue bonds and negotiable 
 paper, is clearly implied ; ^ but it has been held that a rail- 
 road company cannot mortgage its line of road, unless ex- 
 pressly authorized by the legislature.^ 
 
 A railroad company is entitled to obtain its railroad in the 
 most economical manner which is consistent with the obliga- 
 tions imposed by the company's charter. It may obtain its 
 right of way by exercise of the power of eminent domain, or 
 by purchase or compromise upon such terms as are most 
 favorable.' If a bridge is needed for the convenience of the 
 company's traffic, it may buy one already built, answering 
 the required purposes.^ And there can be no doubt that rail- 
 road companies are in many instances authorized to purchase 
 or lease lines of road constructed by other companies, or to 
 make such traffic arrangements as are deemed advantageous. 
 
 § 372. The right of a railroad company to purchase or 
 lease a line of road already constructed, or to make arrange- 
 ments for the use of another company's tracks, depends upon 
 
 1 Iron E. R. Co. v. Ironton, 19 ^ Savannah, &o. K. R. Co. i». 
 Ohio St. 299. Lancaster, 62 Ala. 655; Branch v. 
 
 2 New York, &c. R. R. Co. v. Atlantic, &c. R. R. Co., 3 Woods, 
 Kip, 46 N. Y. 546; 6 Hun, 24. 481. Supra, § 350. 
 
 8 Eldridge v. Smith, 34 Vt. 484. « Infra, § 1020. 
 
 4 New York, &c. R. R. Co. v. ' Wilson v. Furness Ey. Co., 
 
 Gunnison, 1 Hun, 496; Rensselaer, L. R. 9 Eq. 28. 
 
 &c. R. R. Co. V. Davis, 43 N. Y. ' Thompson v. New York, &c. 
 
 137; State v. Mansfield, 3 Zab. 510. R. R. Co., 3 Sandf. Ch. 62^; Moss 
 
 See Proprietors, &c. v. Nashua, &c. v. McCullough, 7 Barb. 279. 
 R. R. Co., 104 Mass. 1. 
 
359 THE CONSTRUCTION 0¥ CHAETBES. § 373 
 
 the circumstances of the case. The objects for which the 
 company was formed must be considered. If a company is 
 chartered for the purpose of constructing and operating a new 
 railroad between given points, different from any existing 
 line, it would be a departure from the charter to buy or 
 lease a road already built between the two points.^ If, how- 
 ever, the company should be able to form the line of road 
 contemplated by its charter by constructing part of it, and 
 using a road already built to complete the line, there is no 
 reason why it should not do so. The ultimate purpose of an 
 ordinary railroad company is, not to build a railroad, but to 
 carry on the business of common carrier by operating a rail- 
 road. If the company can obtain just the line of road which 
 its charter calls for by purchase, lease, or gift, every reason 
 of policy indicates that it should be allowed to do so rather 
 than to compel it to go to the unnecessary and wasteful ex- 
 penditure of constructing a new railroad.^ 
 
 § 373. The Construction of Branch Roads and Extensions. — 
 A railroad company has ordinarily no right to build branches 
 or extensions from the line of road laid out in its charter, un- 
 less there be some provision expressly authorizing this to be 
 done.^ But this rule is not without exception. Thus, if it 
 should prove advantageous to build the line of a railroad 
 company a short distance away from a town which the com- 
 pany would be entitled to reach, the construction of a short 
 branch connecting the town with the railroad would be en- 
 tirely proper. Cases of this kind must be viewed liberally ; 
 it should be borne in mind that the main purpose of a rail- 
 road is to obtain traffic, and provide the public with means 
 of transportation. 
 
 1 See Lamb v. Anderson, 54 doubtedly cause its railroad to be 
 Iowa, 190; Lawrence v. Smith, 57' constructed by an independent con- 
 Iowa, 701. , tractor, having full control over the 
 
 2 Branch v. Atlantic, &c. R. R. work. Hughes v. Railway Co., 39 
 Co., 3 Woods, 481; affirmed as Branch Ohio St. 461. 
 
 V. Jesup, 106 U. S. 468, 484, 486; « See Works v. Junction R. R. 
 
 Stockton, &c. R. R. Co. v. Stock- Co., 5 McLean, 425; Baltimore, &c. 
 
 ton, 51 Cal. 328. Compare State v. Turnpike Co. v. Union R. R. Co., 
 
 Beck, 81 Ind. 500. 35 Md. 224. 
 A railroad company may un- 
 
§ 375 THE LAW OP PEIVATE CORPORATIONS. 360 
 
 Where the right to build branches and extensions is ex- 
 pressly granted, the exercise of this right depends largely 
 upon the discretion of the company or its agents. But a 
 branch road or extension must remain subsidiary to the main 
 line ; it cannot be made the principal thing, and the main 
 line a mere addition .^ 
 
 § 374. Purchase of Steamboats and other Conveyances. — A 
 railroad company may provide stage-coaches, and other means 
 of conveyance between stations along its road and neighbor- 
 ing towns and villages.^ Upon the same principle, it has 
 been held that a railroad company may establish a line of 
 steamboats to connect the terminus of its road, at a river or 
 other navigable body of water, with other railroads or centres 
 of trade.* 
 
 But each case of this character depends upon its peculiar 
 circumstances. A railroad company has no right to become 
 a steamboat company ; nor can it make the transportation of 
 passengers and merchandise over other roads its principal 
 business. The implied right of a railroad company to extend 
 its business to distant points is merely incidental to the right 
 of operating its own line of road in the most advantageous 
 manner.* 
 
 § 375. Railroad Companies may contract to carry Freight 
 and Passengers beyond the Iiimits of their Roads. — It is 
 well settled that railroad companies have implied authority 
 to make contracts for the transportation of merchandise to 
 points beyond the limits of their own lines ; and that they 
 
 1 Platteville v. Galena, &c. R. K. Central R. R. Co. v. Irvin, 72 111. 
 
 Co., 43 Wis. 493. 452, 455. 
 
 ^ Buffett K. Troy, &c. R. R. Co., * Colman v. Eastern Counties 
 
 40 N. Y. 168; 36 Barb. 420. Ry. Co., 10 Beav. 1; Gregory v. 
 
 8 South Wales Ry. Co. v. Red- Patcbett, 33 Beav. 595, 606 ; Hareu. 
 
 mond, 10 C. B. n. s. 675; Shawmut London, &c. Ry. Co., 2 J. & H. 80, 
 
 Bank w. Plattsburgb, &c. R. R. Co., 106; Hoagland v. Hannibal, &c. 
 
 31 Vt. 491; Wheeler v. San Fran- R. R. Co., 39 Mo. 451; Camblos v. 
 
 Cisco, &c. R. R. Co., 31 Cal. 46. See Philadelphia, &c. R. R. Co., 4 Brews- 
 
 also Lyde v. Eastern Bengal Ry. ter, 563, 604; Pearce v. Madison, 
 
 Co., 36 Beav. 16; Camblos i;. Phila^ &c. R. R. Co., 21 How. 441. See 
 
 delphia, &c. R. R. Co., 4 Brewster, Lyde v. Eastern Bengal Ry. Co., 
 
 563, 604, 605. Compare Illinois 86 Beav. 16. 
 
361 
 
 THE CONSTEUCTION OF CHAETEES. 
 
 §375 
 
 may become liable for the safe carriage of the property to 
 the place of its destination.^ Similar contracts made for the 
 transportation of passengers and their luggage are of daily 
 occurrence, and have repeatedly been held to be authorized.^ 
 This rule is based upon the requirements of commerce 
 and public convenience. In Perkins v. Portland, &c. R. R. 
 Co.,^ the Supreme Court of Maine said: "Upon a careful 
 survey of all the authorities, we are satisfied that a railroad 
 company may be bound by a special contract to transport 
 persons or property beyond the line of their own roeid. In 
 granting the charter, all incidental powers which are neces- 
 sary to the proper and profitable exercise of those which are 
 
 ' Railroad Co. v. Pratt, 22 Wall. 
 123; Railway Co. v. McCarthy, 96 
 D. S. 258; Burtis b. Buffalo, &c. 
 R. R. Co,, 24 N. Y. 269; BufEett v. 
 Troy, &o. R. R. Co., 40 N. Y. 168; 
 36 Barb. 420; Maghee v. Camden, 
 &c. R. R. Co., 45 N. Y. 514; Root 
 V. Great Western R. R. Co., 45 
 N. Y. 524; Milnor v. New York, 
 &c. R. R. Co., 53 N. Y. 363; 
 Darling v. Boston, &c. R. R. Co., 
 11 Allen, 295; Hill Manuf. Co. v. 
 Boston, Sec. R. R. Co., 104 Mass. 
 122; Feital v. Middlesex R. R. Co., 
 109 Mass. 398; Baltimore, &c. 
 Steamb. Co. v. Brown, 54 Pa. St. 
 77; Camblos v. Philadelphia, &o. 
 R. R. Co., 4 Brewster, 563, 604; 
 Cincinnati, &c. R. R. Co. v. Pontius, 
 19 Ohio St. 221; Illinois Central 
 R. R. Co. V. Copeland, 24 111. 332; 
 Field V. Chicago, &c. R. R. Co., 
 71 ni. 458; Toledo, &c. Ry. Co. v. 
 Ijockhart, 71 111. 627; Nashua Lock 
 Co. V. Worcester, &o. R. R. Co., 48 
 N. H. 339; Wheeler v. San Fran- 
 cisco, &c. R. R. Co., 31 Cal,46; Gro- 
 ver & Baker S. M. Co. v. Missouri 
 Pac. Ry. Co., 70 Mo. 672; Morse 
 V. Brainerd, 41 Vt. 550 ; Stewart v. 
 Erie, &c. Transp. Co., 17 Minn. 372; 
 Bryan v. Memphis, &c. R. R. Co., 
 
 11 Bush, 597; Candee u. Pennsyl- 
 vania R. R. Co., 21 Wis. 582; Mul- 
 ligan V. Illinois Central Ry. Coi, 
 36 Iowa, 181 ; East Tenn., &c. R. R. 
 Co. V. Rogers, 6 Heisk. 143; Louis- 
 ville, &c. R. R. Co. «. Campbell, 7 
 Heisk. 253; Wilby v. West Corn- 
 wall Ry. Co., 2 H. & N. 703. 
 
 A different rule has been enforced 
 in Connecticut; but it seems proba- 
 ble that the courts of that State will 
 ultimately accept the prevailing doc- 
 trine. See Converse v. Norwich, 
 &c. Transp. Co., ,33 Conn. 166; 
 Hood V. New York, &c. R. R. Co., 
 22 Conn. 1, 502 ; Elmore v. Nau- 
 gatuck R. R. Co., 23 Conn. 457; 
 Naugatuck R. R. Co. v. Waterbury 
 Button Co., 24 Conn. 468. 
 
 2 Croft V. Baltimore, &c. R. R. 
 Co., 1 Mac Arthur, 492; Kessler v. 
 New York Central R R. Co., 7 
 Lans. 63; 61 N. Y. 538; BurneU v. 
 New York Central R. R. Co., 45 
 N. Y. 184; Wilson v. Chesapeake, 
 &c. R.R. Co., 21 Gratt. 654; Illinois 
 Central R. R. Co. v. Copeland, 24 
 111. 332; Candee v. Pennsylvania 
 R. R. Co., 21 Wis. 582. 
 
 ' Perkins v. Portland, &c. R. R. 
 Co., 47 Me. 573, 590. 
 
§ 376 THE LAW OP PKIVATE COEPOKATIONS. 862 
 
 specially enumerated may be presumed to be conferred by 
 implication. The business of common carriers between dif- 
 ferent places is intimately interwoven, branching off into 
 innumerable channels. And it is often of great public con- 
 venience, if not of absolute necessity, that several companies 
 should combine their operations, and thus transport passen- 
 gers and merchandise, by a mutual arrangement, over all 
 their lines, upon one contract for one price." 
 
 § 376. Traffic Arrangements betv^een Railroad Companies. — 
 The right of a railroad company to make contracts for the 
 transportation of freight and passengers beyond the limits 
 of its own line of road, necessarily implies a right to enter 
 into arrangements with other carriers for the regulation of 
 through traffic, and the apportionment of the income derived 
 therefrom. 
 
 It is often difficult, in practice, to determine whether a 
 traffic arrangement between two companies is authorized by 
 their charters or not. Each case must depend largely upon 
 all the peculiar circumstances surrounding it ; but the gen- 
 eral principles which govern are clear. A railroad corpo- 
 ration cannot enter into any arrangement amounting to a 
 practical consolidation or copartnership, nor can it delegate 
 any of its statutory powers, to another company, whether by 
 a sale, a lease, or a mere license, unless expressly authorized 
 by law.^ It is also settled that the enterprise for the prose- 
 cution of which a corporation was formed cannot be extended 
 beyond the limits fixed by the company's charter.^ All cor- 
 porations, however, have implied authority to enter into con- 
 tracts for the purpose of attaining their legitimate objects ; 
 and accordingly railroad companies may make any reasonable 
 arrangements with each other, for the purpose of regulating 
 and increasing their legitimate joint traffic.^ 
 
 Thus, it has been held that railroad companies owning 
 connecting lines may, by contracts between each other, fix 
 
 1 Infra, §§ 396, 421, 910. regard to pooling contracts and 
 
 " Infra, § 392. traffic arrangements between com- 
 
 ' Stewart v. Erie, &c. Transpor- peting lines, see infra, § 1130. 
 tation Co., 17 Minn. 386-395. "With 
 
363 THE CONSTEUCTION OF OHAETEKS. § 377 
 
 the time of running trains, and the rates to be charged upon 
 through transportation. "The companies may agree, as in- 
 dividuals may agree, to certain rates of transportation, which 
 may be considered mutually advantageous. Neither com- 
 pany has parted with its corporate powers; each acts for 
 itself, and under its own powers in fixing the rates of trans- 
 portation, and they both agree that the charge shall be uni- 
 form throughout the line." ^ 
 
 Agreements between companies owning connecting lines, 
 providing for a division between them of all their earnings 
 derived from joint traffic, upon fixed proportions, are author- 
 ized ; 2 and an agreement of this kind may be valid, although 
 a larger portion of the joint earnings be given to one com- 
 pany than is in proportion to the work which it has done.* 
 
 § 377. Railroad companies have implied authority to enter 
 into contracts with each other to maintain connection be- 
 tween their several lines of road ; and an attempt by either 
 company to sever the connection agreed upon, by changing 
 the gauge of its road, may be restrained by a court of chan- 
 cery.* Under the proper circumstances, several companies 
 may even join in constructing a connecting road, and may 
 agree that it shall be operated upon certain prescribed con- 
 ditions for their joint benefit.^ 
 
 Two railroad companies, whose roads form a continuous 
 
 1 Columbus, &c. R. R. Co. v. R. R. Co., 19 N. J. Eq. 13; s. c. 
 
 Indianapolis, &c. R. R. Co., 5 MeL. 20 N. J. Eq. 542. 
 450 ; Stewart v. Erie, &c. Transpor- Arrangements of this kind do 
 
 tation Co., 17 Minn. 372. not create a partnership between 
 
 ^ Munhall v. Pennsylvania R. R. the contracting companies. Irvin 
 
 Co. , 92 Pa. St. 150 ; Stewart v. Erie, v. Nashville, &c. Ry. Co., 92 111. 103. 
 &c. Transportation Co., 17 Minn. * Columbus, &c. R. R. Co. v. 
 
 372 ; Hartford, &c. R. R. Co. v. New Indianapolis, &c. R. R. Co., 5 McL. 
 
 York, &c. R. R. Co. 3 Robertson, 411 ; 450 ; Androscoggin, &c. R. R. Co. v. 
 
 Arnot V. Erie Ry. Co., 5 Hun, 610; Androscoggin R. R. Co., 52 Me. 417. 
 
 Hare v. London, &o. Ry. Co., 2 J. & Compare Beman v. Rufford, 1 Sim. 
 
 H. 80. Compare Fitchburg, &c. n. s. 569; Sussex R. R. Co. v. Mor- 
 
 R. R. Co. ». Hanna, 6 Gray, 539; ris, &c. R. R. Co., 19 N. J. Eq. 13; 
 
 Lancaster, &c. Ry. Co. v. North- s. c. 20 N. J. Eq. 542. 
 western Ry. Co., 2 K. & J. 301, ^ Compare Bartlette v. Norwich, 
 
 302. ' &c. R. R. Co., 33 Conn. 560. 
 
 8 Sussex R. R. Co. v. Morris, &o. 
 
§ 379 THE LAW OP PRIVATE COKPOEATIONS. 364 
 
 line, may by mutual agreement regulate their joint traffic, 
 and appoint a common manager to act for both; but they 
 cannot enter into a copartnership.^ 
 
 § 378. Agreements between Railroad Companies for Running 
 Powers. — Agreements between railroad companies, by which 
 one company is given the right to use the tracks, stations, 
 and other fixtures belonging to another company, are very 
 common in practice; and there can be no doubt that such 
 agreements are impliedly authorized under certain circum- 
 stances. Before the validity of an agreement of this char- 
 acter can be determined, in any given case, it is necessary to 
 consider two distinct questions depending upon different 
 facts. These are : — 
 
 First. Had the company giving up the use of its tracks 
 and other property the right to do so ? 
 
 Secondly. Had the company obtaining the running powers 
 authority by its charter to extend its business over the line 
 of the other company? 
 
 § 379. When such Agreements are authorized on the Part of 
 the Lessor. — It is clear that a corporation, chartered for the 
 purpose of constructing a railroad and operating it as a com- 
 mon carrier for hire, is not impliedly authorized to act as a 
 construction company merely, and to build a railroad for the 
 use of another company; nor has a railroad company im- 
 plied authority to cease prosecuting its business as common 
 carrier, and, instead, to lease its road to another company.^ 
 But a railroad company, like any other company whose ob- 
 ject is the gain of money, may make the most profitable use 
 which it can of its surplus property, and may sometimes ap- 
 ply such surplus property to uses entirely disconnected from 
 the main enterprise for which the company was chartered.^ 
 If, then, a railroad company should not be able to utilize all 
 of its running facilities in the prosecution of its own busi- 
 ness, it may properly lease the surplus to another company. 
 
 1 State V. Concord R. R. Co., 13 = Tnfra, § 1020. As to the rule 
 
 Am. & Eng. R. R. Cas. 94. Com- in New York, see Woodruff v. Erie 
 
 pare Burke v. Concord R. R. Co., 8 Ry. Co., 93 N. Y. 609. 
 Am. & Eng. R. R. Cas. 554. » Sapra, § 367. 
 
365 THE CONSTKUiCTION OP CHARTERS. § 380 
 
 There is no reason why the tracks, stations, and other prop- 
 erty belonging to a railroad company, should lie idle while 
 they may be profitably employed. 
 
 The case of Midland Ry. Co. v. Great Western Ry. Co.^ is 
 a strong illustration of this doctrine. It was there held that 
 a corporation owning a short line of road, which could not be 
 used profitably except in connection with other lines, might, 
 under the circumstances, make a contract with another com- 
 pany, giving the latter the right to use the whole of the 
 railroad, and the appurtenances belonging to it, upon certain 
 specified terms. 
 
 § 380. When authorized on the Part of the Lessee. — A 
 railroad company, whose charter authorizes it to operate a 
 particular line of road, has no implied authority to operate 
 a different road. Nor can the enterprise of a company be 
 varied from that authorized by its charter, by purchase or 
 lease of the road of another company .^ And for the same 
 reasons it follows that a corporation cannot make a contract 
 for running powers over the line of another company, if this 
 would extend its own business beyond the limits authorized 
 by law.^ 
 
 But the ultimate object for which railroad companies are 
 formed is to carry on the business of common carriers, and 
 not to construct railroads. And it has frequently been held 
 that corporations are impliedly authorized to prosecute their 
 enterprises, and obtain their legitimate objects, in the most 
 economical manner possible.* Hence, if a railroad com- 
 pany, authorized by its charter to do business as carrier 
 between two given points, can perform its duties as carrier 
 with equal facility, and at a saving of cost, by obtaining 
 the right to run its trains over a road belonging to another 
 
 1 Midland Ry. Co. v. Great Reg. n. s. 733; London, &c. Ry. 
 Western Ry. Co., L. R. 8 Gh. 841, Co. v. London, &c. Ry. Co., 4 
 858. See also Atty.-Gen. v. Great De G. & J. 362, 389 ; Simpson v. 
 Eastern Ry. Co., L. R. 11 Ch. Div. Denison, 10 Hare, 51. Compare 
 449. Richmond Water Works Co. v. 
 
 2 Infra, § 394. Vestry of Richmond, L. R. 3 Ch. 
 8 Ohio &c. R. R. Co. v. Indian- D. 98. 
 
 apolis, &c. R. R. Co., 5 Am. L. * Supra, §§ 364-368. 
 
§ 883 THE LAW OP PEIVATE COBPOEATIONS. 366 
 
 company, there is no good reason why it should not be al- 
 lowed to do so.^ 
 
 § 381. A Kailroad Company should operate its Road by its 
 Regular Agents. — A company chartered for the purpose of 
 operating a railroad should operate the road in the usual 
 manner and by the usual agencies. It follows, therefore, 
 that a railroad company has no implied authority to make an 
 agreement with a contractor that the latter shall manage all 
 the traffic^ upon the road, and furnish the motive power. Such 
 an arrangement, if carried out, would release the agents of 
 the company from the charge of the most important part of 
 the company's business.^ 
 
 § 382. The Banking Business. — The business of banking 
 has been carried on for many years according to certain well- 
 understood customs ; the general nature of these customs 
 will be judicially noticed by the courts.^ When an asso- 
 ciation is incorporated for the purpose of doing a banking 
 business, it is implied that it may carry on business in the 
 customary manner, unless restrained by its charter or a gen- 
 eral statute. 
 
 § 383. Banks may borrow and lend Money. — The right of 
 carrying on the banking business in the usual manner neces- 
 sarily involves the right of borrowing and lending money. 
 All incorporated banks may borrow and lend money, in the 
 regular course of banking, unless expressly restrained by 
 their charters. The right to borrow includes the right to 
 execute a bond, note, or other evidence of indebtedness, and 
 to give security by pledge or mortgage.* 
 
 1 Midland Ky. Co. v. Great ' Bank of Australasia v. Breillat, 
 Western Ky. Co., L. R. 8 Ch. 841; 6 Moore P. C. 17 S, per Lord Camp- 
 Naugatuck R. R. Co. v. Water- bell, C. J. ; Pattison v. Syracuse 
 bury Button Co., 24 Conn. 468, 482; Nat. Bank, 80 N. Y. 82. As to 
 Bartlette v. Norwich, &c. R. R. Co., the implied powers of the ordinary 
 33 Conn. 560; Great Northern Ry. agents of banks, see infra, §§ 318, 
 Co. M. Manchester, &o. Ry. Co., 5 319. 
 
 De G. & S. 138. Supra, § 391. * Ward v. Johnson, 95 111. 215; 
 
 2 Per Lord Justice Turner, in Curtis v. Leavitt, 15 N. Y. 9. 
 Johnson v. Shrewsbury, &o. Ry. Co., 
 
 8D6G.,M. &G. 930. 
 
367 THE CONSTRUCTION OF CHAETEES. § 384 
 
 The right of banks to lend money is frequently regulated 
 and restricted by express provisions, contained in their char- 
 ters and the general laws. But loans can in no case be made 
 outside of the course of legitimate banking business, or in an 
 irregular manner. 
 
 § 384. National Banks. — The National Banking Act pro- 
 vides that no person or company shall at any time be indebted 
 to any corporation formed under the act for a sum exceeding 
 one tenth part of the capital of the corporation actually paid 
 in.i It also provides that no national bank shall make any 
 loan or discount on the security of shares of its own stock,^ 
 or upon the security of real estate.* 
 
 Loans made in violation of either of these provisions are 
 necessarily illegal, and in excess of the powers conferred upon 
 the agents of any bank organized under the act ; but it does 
 not follow, as a consequence, that such loans must be declared 
 void in all cases, and be held unenforceable in favor of either 
 of the parties.* 
 
 By the express provisions of the act, the prohibitions 
 against receiving shares of stock or real estate as security 
 do not apply where they are received in good faith to prevent 
 loss upon a debt previously contracted. It is held that the 
 renewal of promissory notes, or the extension of the time of 
 payment of a debt, is not the creation of a new indebted- 
 ness within the meaning of the act.^ 
 
 1 R.S. §5200. See Bank U.Lanier, Allen v. First Nat. Bank, 23 Ohio 
 11 Wall. 369; Allen u. First National St. 97; Merchants' Nat. Bank v. 
 Bank, 23 Ohio St. 97; National Bank Mears, 8 Biss. 158; Ornn u. Mer- 
 ». Paige's Exr., 53 Vt. 452. Infra, chants' Nat. Bank, 16 Kans. 341; 
 § 653. Upton V. National Bank, 120 Mass. 
 
 2 R. S. § 5201. See Conklin v. 153; New Orleans Nat. Bank u. 
 Second Nat. Bank, 45 N. Y. 655; Raymond, 29 La. Ann. 355; Third 
 Bank v. Lanier, 11 Wall. 369; Bui- Nat. Bank v. Blake, 73 N. Y. 260; 
 lard V. Bank, 18 Wall. 589 ; Re First Nat. Bank v. Haire, 36 Iowa, 
 Bigelow, 1 Bankr. Reg. 667; Evans- 443; Soofield v. State Nat. Bank, 9 
 ville Nat. Bank v. Metropolitan Neb. 316. See National Bank v. 
 Nat. Bank, 2 Biss. 527; Second Matthews, 98 U. S. 621, and cases 
 Nat. Bank v. National State Bank, infra, § 653, as to the effect of un- 
 10 Bush, 367. authorized loans. 
 
 a R. S.§5137. See Kansas Valley * Infra, § 653. 
 Nat. Bank v. Rowell, 2 Dill. 371; « Shinkle v. First Nat. Bank, 22 
 
§ 886 THE LAW OF PRIVATB COEPOEATIONS. 368 
 
 § 385. National banks are expressly authorized by law 
 to carry on the business of banking, "by discounting and 
 negotiating promissory notes, drafts, bills of exchange, and 
 other evidences of debt ; ' by receiYing deposits ; by buying 
 and selling exchange, coin, and bullion ; by loaning money 
 on personal security; and by obtaining, issuing, and circu- 
 lating notes." 
 
 The right of "loaning money on personal security" includes 
 the right of receiving personal property as collateral security, 
 according to the usual practice in the banking business. Mr. 
 Justice Dillon said : " National banks are not, in my judg- 
 ment, confined, in the taking of security for discounts and 
 loans, to the security afforded by the names of indorsers or 
 personal sureties, but may take a pledge of bonds, choses 
 in action, bills of lading, or other personal chattels. The 
 words 'loans on personal security' in the banking act are 
 used in contradistinction to real estate security," ^ 
 
 It has been held that the right of discounting and nego- 
 tiating negotiable paper does not include the right of buy- 
 ing and selling it, and that a purchase by a national bank of 
 negotiable paper is unauthorized.^ 
 
 It has also been held that a national bank has no right to 
 act as broker in disposing of securities for other parties.* 
 
 § 386. What Property Banks may acquire. — Banking cor- 
 porations have implied authority to acquire and hold such 
 
 Ohio St. 516; Howard Nat. Bank v. Pierson, 24 Minn. 140; Weckler v. 
 
 Loomis, 51 Vt. 349 ; National Bank First National Bank, 42 Md. 581 ; 
 
 V. Paige's Exr., 53 Vt. 452. Farmers', &c. Bank v. Baldwin, 23 
 
 1 This includes the right of deal- Minn. 198. But compare Smith v. 
 ing in checks. First Nat. Bank v. Exchange Bank, 26 Ohio St. l4l ; 
 Harris, 108 Mass. 514. Atlantic State Bank v. Savery, 82 
 
 2 Pittsburg Locomotive,&c. Works N. Y. 291 ; First National Bank v. 
 V. State Nat. Bank (U. S. C. C), Harris, 108 Mass. 514 ; Thatcher 
 2 Cent. L. J. 692. See also Shoe- v. West River Nat. Bank, 19 Mich, 
 maker v. National Mech. Bank, 2 196. 
 
 Abb. U. S. C. C. 416; Baldwin v. < First Nat. Bank v.. Hoch, 89 
 
 Canfield, 26 Minn. 43; Third Nat. Pa*. St. 324; s. c. 9 Repwter, 153; 
 
 Bank v. Boyd, 44 Md. 47. First Nat. Bank v. National Ex- 
 
 8 Lazear v. National Union Bank, change Bank, 92 U. S. 122 ; Fowler 
 
 52 Md. 78; First National Bank v. v. Scully, 72 Pa. St. 456. 
 
369 THE CONSTRirOTION OF CHAETBKS. § 387 
 
 property as is necessary, for the convenient transaction of 
 their business.^ Thus, they may purchase or erect suitable 
 buildings, and may provide office furniture, books, and other 
 appliances, for the accommodation of their agents and the 
 management of their affairs. The right to acquire real es- 
 tate for the purpose of establishing a proper place of busi- 
 ness, or banking-house, is sometimes conferred by express 
 prfivision.2 
 
 Banking corporations have no implied authority to deal in 
 real estate, or any other kind of property, as this is not inci- 
 dental to the prosecution of an ordinary banking business.^ 
 But they may receive real estate and other property in satis- 
 faction of debts, or as collateral security, if this be done in 
 good faith to prevent a loss,* even though thej'- be expressly 
 prohibited from buying and selling the property or dealing 
 in it.^ In many instances, the right to receive mortgages or 
 conveyances of real estate in satisfaction of debts previously 
 contracted is conferred by express provision.* 
 
 § 387. Place of Business of a Banking Corporation. — Bank- 
 ing corporations have implied authority to create agencies for 
 special purposes, such as the redemption and purchase of 
 bills of exchange and other securities, wherever this may be 
 advantageous in carrying on their business ; '^ but they have 
 no right to establish branch banks in the absence of express 
 authority conferred by charter. When a banking corpora, 
 tion is created to do business at some particular place, it is 
 
 1 See supra, § 327. Third Nat. Bank v. Boyd, 44 Md. 
 
 ° See Banks ». Poitiaux, 3 Rand. 47. 
 136; Metropolitan Bank v. Godfrey, ^ See supra, § 321. Sacket's 
 
 23 111. 579; Thomaston Bank ». Harbor Bank v. Lewis County 
 
 Stimpson, 21 Me. 195. Bank, 11 Barb. 213. 
 
 » First Nat. Bank v. National Ex- * Baird v. Bank of Washington, 
 
 change Bank, 39 Md. 600; Week- 11 S. &R. 411. See National Bank- 
 
 ler V. First Nat. Bank, 42 Md. 581 ; ing Acts. 
 
 First Nat. Bank v. National Ex- ' City Bank v. Beach, 1 Blatchf . 
 
 change Bank, 92 U. S. 122, 128; 425; Bank of Augusta t. Earle, 13 
 
 Thweatt v. Bank of Hopkinsville, Pet. 519; Tombigbee R. R. Co. v. 
 
 81 Ky. 1. Kneeland, 4 How. 16. See supra, 
 
 * First Nat. Bank v. National § 359 ; contra, People w. Oakland 
 
 Exchange Bank, 92 U. S. 122 ; County Bank, 1 Dougl. (Mich.) 282. 
 VOL. I. — 24 
 
§ 389 THE LAW OP PRIVATE CORPORATIONS. 370 
 
 implied that its banking-house shall be established at that 
 place only, and that its affairs shall be managed by a single 
 set of officers, in the usual manner. 
 
 § 388. Special Deposits, etc. — The receipt of money, bul- 
 lion, securities, and other valuables, on special deposit, ap- 
 pears to be incidental to the management of a bank according 
 to the general usages of the banking business.^ It has been 
 held, therefore, that incorporated banking companies have 
 implied authority,, unless prohibited by their charters, to re- 
 ceive special deposits for safe keeping, either gratuitously or 
 for a consideration.^ The right of national banks to receive 
 special deposits is settled by an adjudication of the Supreme 
 Court of the United States.^ 
 
 There seems to be no doubt that a bank may receive 
 money on general deposit as a stakeholder, and agree to pay 
 it over according to the terms of an agreement, or in pursu- 
 ance of definite instructions.* 
 
 § 389. Collections. — Accommodatiou Indorsements. — All 
 banks have implied authority to collect notes, checks, and 
 bills of exchange, and to transmit them to their business 
 correspondents for that purpose ; this constitutes an im- 
 portant branch of the banking business.^ It has been held 
 that national banks have implied authority to undertake 
 to exchange non-registered government bonds for registered 
 bonds.® 
 
 1 See Pattison v. Syracuse Nat. 471 ; First Nat. Bank v. Graham, 79 
 Bank, 80 N. Y. 94. Pa. St. 106; First Nat. Bank v. Rex, 
 
 2 Ibid., 82, and authorities cited. 89 Pa. St. 308; Turner v. First Nat. 
 Foster v. Essex Bank, 17 Mass. 479 ; Bank, 26 Iowa, 562 ; Smith v. First 
 and see cases in the following note. Nat. Bank, 99 Mass. 605; First Nat. 
 
 As to the authority of particular Bank v. Ocean Nat. Bank, 60 N. Y. 
 
 agents to receive special deposits, 278; Third Nat. Bank v. Boyd, 44 
 
 see infra, § 540. Md. 47; Wylie v. Northampton Nat. 
 
 8 First Nat. Bank v. Graham, Bank, 15 Fed. R. 428. 
 100 U. S. 699. Contra, Wiley v. * Compare Bushnell ». Chatauqua 
 
 First Nat. Bank, 47 Vt. 546; Whit- County Nat. Bank, 10 Hun, 378. 
 ney v. First Nat. Bank, 50 Vt. 388. ' Yerkes v. National Bank, 69 
 
 Compare Chattahoochee Nat. Bank N. Y. 382. 
 
 1). Schley, 58 Ga. 369 ; Lancaster ' Ibid. ; Van Leuven ». First Nat. 
 
 County Nat. Bank v. Smith, 62 Pa. Bank, 54 N. Y. 671; Leach v. Hale, 
 
 St. 47 ; Scott V. Nat. Bank, 72 Pa. St. 31 Iowa, 69. 
 
371 THE CONSTBTJOTION OP CHAKTBES. § 390 
 
 Banks may indorse negotiable paper, and guarantee the 
 payment of debts for a consideration, and in the regular 
 course of the banking business,^ but they have no right to 
 execute indorsements, or lend their credit for accommodation, 
 or in any unauthorized transaction.^ 
 
 § 390. Savings Banks. — Their Nature. — Savings banks dif- 
 fer radically from ordinary banks. They are not formed for 
 the profit of their shareholders, but for the benefit of those 
 who deposit their money in them. 
 
 In Huntington v. Savings Bank,^ Justice Strong defined 
 a savings bank as follows: "It is not a commercial part- 
 nership, nor is it an artificial being the members of which 
 have property interests in it, nor is it strictly eleemosynary. 
 Its purpose is rather to furnish a safe depository for the 
 money of those members of the community disposed to in- 
 trust their property to its keeping. It is somewhat of the 
 nature of such corporations as church-wardens for the con- 
 servation of the goods of a parish, the college of surgeons for 
 the promotion of medical science, or the society of antiquaries 
 for the advancement of the study of antiquities. Its purpose 
 is a public advantage, without any interest in its members." 
 
 In Tappan v. Warren Savings Bank,* the Supreme Court 
 of Massachusetts said : " The chief business of a savings 
 bank is to receive deposits, invest them in certain classes of 
 securities, specified in the statutes of the Commonwealth, and 
 to pay to depositors the amount due them, either in whole or 
 in part, as they from time to time demand. It has no au- 
 thority to do a general banking business, not even to engage 
 in the business of discounting bank paper. It is no part of 
 the business for which it is established, to give a market 
 value to, or obtain a market value for, the negotiable paper 
 of persons or other corporations, by guaranteeing or indors- 
 ing it." 
 
 1 See Peoples' Bank v. National * Huntington v. Savings Bank, 
 Bank, 101 U. S. 181. 96 U. S. 388, 394. 
 
 2 Seligman v. Charlottesville Nat. * Bradlee v. Warren, &c. Savings 
 Bank, 3 Hughes, 647; Johnston v. Bank, 127 Mass. 107, 109. 
 
 Same, Id., 657; National Bank v. 
 Welles, 15 Hun, 51. Infra, § 423. 
 
§ 391 THE LAW OP PRIVATE COEPOEATIONS. 372 
 
 § 391. Rights of Depositors. — The depositors in a savings 
 bank, organized upon the usual plan, are the beneficial owners 
 of the entire corporate estate. The legal title to this estate 
 is in the corporation, as an entity, and fuU powers of manage- 
 ment are vested in the corporate officers and agents ; but the 
 affairs of the corporation must be managed in the interest of 
 the depositors, and not in the interest of the shareholders, or 
 corporators, as in case of an ordinary banking company. 
 
 The rights of the depositors in a savings bank are of a 
 twofold character. While the corporation is solvent and 
 in operation, the depositors may be regarded solely in the 
 light of creditors of the corporation; they may withdraw 
 their deposits, and claim interest, as provided in the char- 
 ter and by-laws, and may enforce their rights by the usual 
 remedies at law. But the depositors are in reality some- 
 thing different from ordinary creditors. They are in reality 
 joint beneficiaries of the corporate estate, and occupy a 
 position similar to that of the stockholders in an ordinary 
 corporation. The courts will recognize the true position of 
 the depositors, as they do the true position of shareholders, 
 whenever this becomes necessary for the protection and 
 adjustment of their equitable rights. 
 
 Accordingly, it has been held that, if a depositor in a sav- 
 ings bank is indebted to the corporation, and the corporation 
 becomes insolvent, he will not be allowed to set off the 
 amount of his deposit against the claim of the corporation, 
 but must pay the amount of his debt in full, and take a divi- 
 dend with the other depositors, upon the distribution of the 
 assets of the corporation.^ 
 
 The profits of an ordinary savings bank, after deducting 
 the expenses of managing it, inure wholly to the benefit of 
 the depositors, and must be distributed as dividends, or re- 
 served as a surplus for their greater security.^ 
 
 1 Stockton V. Mechanics', &c. Whether the profits of a savings 
 
 Savings Bank, 32 N. J. Eq. 163, bank, when distributed among the 
 
 166, 167; and see infra, § 621. depositors, be called "interest," or 
 
 ^ Huntington v. Savings Bank, "dividends," is purely a question 
 
 96 U. S. 388. of definition. As a matter of fact, 
 
373 THE CONSTBTJOTION OF CHAKTEES. § 393 
 
 § 392. A Corporatiou bas no Implied Authority to engage in 
 Transactions outside of its Chartered Purposes. — A corpora- 
 tion has no implied authority to engage in any transaction 
 which is not in pursuance of the particular business for 
 which it was chartered. It is a reasonable presumption 
 that the founders of a corporation intended that the com- 
 pany's business should be carried on in the usual manner and 
 by the usual means, unless they have expressly provided the 
 contrary. A transaction which is not in pursuance of the 
 chartered purposes of a corporation, or which is unusual as 
 a means of attaining those purposes, cannot be deemed to be 
 impliedly authorized by the company's charter. ^ It is to be 
 borne in mind, that the right of a corporation to do an act 
 depends upon all the circumstances of the case. A decision 
 that an act performed by a corporation under a given state 
 of facts was unauthorized, does not establish that a similar 
 act would be unauthorized if performed under other circum- 
 stances. The authorities relating to the powers of corpora- 
 tions are of no value, except as illustrations of the general 
 principles which should be followed.^ 
 
 § 893. Illustrations. — It is well settled that a corporation 
 cannot engage in a business wholly distinct from its main 
 enterprise, merely in order to raise funds for the purpose 
 of carrying on the latter ;3 nor is a transaction authorized 
 merely because it is profitable to the corporation.* 
 
 Thus, it has been held that a coal mining company cannot 
 buy coals in the market as a speculation;* and a company 
 chartered to build a toll bridge cannot under ordinary cir- 
 
 the money distributed among the among the depositors of a sayings 
 
 depositors is the profit on their in- bank. 
 
 vestment of their own money, and is i Supra, §§ 316, 320, 363. 
 
 in all material respects similar to ^ Supra, § 362. 
 
 the dividends paid to the share- ' Waldo v. Chicago, &c. E. R. 
 
 holders of an ordinary corpora- Co., 14 Wis 575; Clark v. Farring- 
 
 tion. ton, 11 Wis. 306. 
 
 In Van Dyck v. McQaade, 86 * Supra, § 863. 
 
 N. Y. 38, the word "dividends," » Alexander v. Cauldwell, 83 
 
 as used in various statutes, was held N. Y. 480. 
 not to apply to the money distributed 
 
§ 394 THE LAW OF PKIVATB COEPOEATIONS. 374 
 
 cumstances construct a wharf and rent it, without departing 
 from its chartered purposes.^ 
 
 A life or fire insurance company has no implied authority 
 to issue marine policies ; ^ nor can a life and accident insur- 
 ance company insure against loss by fire.^ 
 
 A company incorporated for the purpose of manufacturing 
 and selling railway carriages, and other materials for the con- 
 struction and use of railways, and " to carry on the business 
 of general contractors," cannot lawfully purchase a conces- 
 sion to build a railway in a foreign country, and contract to 
 build the same through the' medium of a foreign company.* 
 And it is clear that a mining and manufacturing company 
 cannot be transformed into a railroad company, without a 
 departure from its chartered purposes.^ So a corporation 
 which was not created for banking purposes has no author- 
 ity to do a banking business, by loaning its funds.® 
 
 It has been held that a corporation chartered to make a 
 road, take tolls, and build hotels, for the accommodation 
 of travellers, could not establish a stage line and carry the 
 mails.' 
 
 § 394. Railroad Companies. — A railroad company has no 
 right to purchase land, merely to prevent a rival company 
 from obtaining it, or for purposes of speculation and sale ; ' 
 nor can a railway company trade in coals,^ or become a 
 
 1 Toll Bridge Co. v. Osborn, 35 ' Downing v. Mt. Washington 
 Conn. 7. Koad Co., 40 ST. H. 230; Wiswall 
 
 2 Natusch u. Irving, Gow on Part- v. Greenville, &c. Plank Road Co., 
 nership, 576 ; lie Phoenis Life Assur. 3 Jones, Eq. 183. 
 
 Soc, 2 J. & H. 441. 8 Eensselaer, &c. R. R. Co. v. 
 
 » Ashton V. Burbank, 2 DiU. Davis, 43 N. Y. 137; Waldo v. 
 
 435. Chicago, &o. R. R. Co., 14 Wis. 
 
 * Ashbury Ry. Carriage, &c. Co. 575; Pacific R. R. Co. v. Seely, 45 
 V. Riche, L. R. 7 H. L. 653. Mo. 212; Morgan v. Donovan, 58 
 
 * Southern Penn. R. R. Co. v. Ala. 241 ; Mayor of Norwich v. Nor- 
 Stevens, 87 Pa. St. 190. folk Ry. Co., 4 El. & Bl. 397; East- 
 
 * Chambers v. Falkner, 65 Ala. em Counties Ry. Co. v. Hawkes, 5 
 448, 454; Grand Lodge v. Waddill, H. L. C. 331. 
 
 36 Ala. 313. Compare Waddill v. » Atty.-Gen. v. Great Northern 
 
 Alabama, &c. R. R. Co., 35 Ala. Ry. Co., 1 Dr. & Sm. 154; s. c. 6 
 
 323. Jur. N. 8. 1006. 
 
875 THE CONSTBtJCTION OF CHARTERS. § 395 
 
 steamboat or navigation company,^ or carry on a brewery or 
 the like.2 
 
 A railroad, or other transportation company, chartered to 
 transact business upon a certain line of road only, has no 
 implied authority to extend its business over other roads.^ 
 But this refers merely to the main business of the company, 
 and does not imply that a railway company may not enter 
 into traffic arrangements with other companies, for the con- 
 veyance of passengers and freight to distant points.* 
 
 It has been held that a railroad company has no right to 
 guarantee the expenses of a great musical festival, in antici- 
 pation of great profits to be earned by the increase of traffic 
 caused thereby.^ 
 
 § 395. Alteration of Charter not impliedly authorized. — The 
 charter of a private corporation cannot be altered without 
 the consent of the legislature,^ nor without the consent of 
 every member of the corporation.^ That such consent cannot 
 be implied, seems self-evident. A grant, by the legislature, 
 of permission to act in a corporate capacity for a specified 
 purpose, does not impliedly authorize the grantees to assume 
 corporate powers for any other purpose. Nor do the mem- 
 bers of a corporation, when they unite to do business under a 
 particular charter, impliedly agree to become parties to a dif- 
 ferent charter. A contract never impliedly gives an option 
 to either party to alter the terms originally agreed upon. No 
 one would suppose that a majority, or any portion, of the mem- 
 bers of a copartnership, have implied authority to adopt new 
 or altered articles of association on behalf of the rest of the 
 
 1 Plymouth R. R. Co. v. ColweU, ^ Davis v. Old Colony R. R. Co., 
 39 Pa. St. 337. 131 Mass. 258. Compare State 
 
 2 Lyde v. Eastern Bengal Ry. Board of Agriculture v. Citizens', 
 Co., 36 Beav. 14. Supra, § 364; &o. Ry. Co., 47 Ind. 407. It was 
 infra, § 403. also held that an organ company 
 
 ' Great Western Ry. Co. v. Pres- could not guarantee the expenses of 
 
 ton, &c. Ry. Co., 17 U. C. Q. B. the festival as a means of advancing 
 
 477, 487; Simpson v. Denison, 10 its business of selling organs. Davis 
 
 Hare, 51 ; Abbott v. Baltimore, &c. v. Old Colony R. R. Co. , supra. 
 Packet Co., 1 Md. Ch. 542; Deade- « Infra, § 648. 
 rick V. Wilson, 8 Baxter, 108. ' Infra, §§ 641, 645, 1047. 
 
 * Supra, § 376. 
 
§ 397 THE LAW OE PRIVATE COEPOEATIONS. 376 
 
 company. It follows, upon the same principle, that no major- 
 ity of the shareholders in a corporation, nor any agent of a 
 corporation, can have any implied authority to agree, on be- 
 half of all the shareholders, to an alteration of their charter.^ 
 
 § 396. Consolidation vrith other Company not impliedly au- 
 thorized. — The reasons stated in the preceding section apply 
 with full force to a consolidation of several corporations into 
 one. This can never be effected without the unanimous con- 
 sent of the members of each company; and such consent 
 cannot be inferred as an implied condition of their charter or 
 articles of association.^ It is equally clear that a corporation 
 cannot be subdivided into two smaller companies, except with 
 the consent of every shareholder.^ 
 
 § 397. Authority to apply to the Legislature for an Altera- 
 tion cannot be implied. — Authority to use the property or 
 funds of a corporation for the purpose of obtaining an altera- 
 tion of the company's charter, by act of the legislature, can 
 never be implied ; * nor can the corporate funds be used in 
 order to procure the destruction of the company's charter by 
 judicial proceedings.^ It is likewise wholly unauthorized on 
 
 1 New Orleans, &o. R. E. Co. v. leans, &c. K. R. Co. v. Harris, 27 
 Harris, 27 Miss. 517, 537-539; Ste- Miss. 517; McCray v. Junction K. R. 
 vens V. Rutland, &c. E. R. Co., 29 Co., 9 Ind. 359; Booe v. Same, 10 
 Vt. 545; Lauman v. Lebanon Val- Ind. 93; Shelbyville, &c. Turnpike 
 ley R. R. Co., 30 Pa. St. 46; South- Co. v. Barnes, 42 Ind. 498; Clinch 
 em Penn. Iron, &o. Co. v. Stevens, v. Financial Co., L. R. 4 Ch. 117; 
 87 Pa. St. 190 ; Ashton v. Burbank, Dougan's Case, L. E. 8 Ch. 540. 
 2 Dill. 435; Zabriskie v. Hacken- See also infra, § 646. 
 
 sack, &e. R. R. Co., 18 N. J. Eq. = Indiana, &o. Turnpike Co. v. 
 
 178; Kean v. Johnson, 9 N. J. Eq. Phillips, 2 Pen. & W. 184; Fulton 
 
 407; Black v. Delaware, &c. Canal County v. Mississippi, &c. R. E. 
 
 Co., 24 N. J. Eq. 466; Hartford, Co., 21 111. 338. 
 &c. R. R. Co. V. Croswell, 5 Hill, < See supra, § 295. If the direc- 
 
 386; Clearwater u. Meredith, 1 Wall, tors of a corporation have express 
 
 40. Infra, § 645. See Railway Co. authority to apply to Parliament for 
 
 I). AUerton, 18 Wall. 233, 235. an alteration, they may defray the 
 
 2 Mowrey v. Indianapolis, &c. costs out of the company's funds. 
 R. R. Co., 4 Biss. 83; Clearwater v. Lyde v. Eastern Bengal Ry. Co., 36 
 Meredith, 1 Wall. 25; Pearce v. Beav. 10. 
 
 Madison, &c. R. E. Co., 21 How. ^Daniel i>. Mayor of Memphis, 
 441; Tuttle v. Michigan Air Line 11 Humph. 582. 
 E. E. Co., 35 Mich. 247;. New Or- 
 
377 THE CONSTKUCTION OF CHAETERS. § 399 
 
 the part of any person or persons to apply to the legislature, 
 in the name and on behalf of a corporation, for an alteration 
 of its charter, unless expressly authorized to do so by the 
 whole body of shareholders.^ 
 
 § 398. Contracts in Anticipation of a Future Alteration are 
 not impliedly authorized. — A charter of incorporation does 
 not impliedly confer authority to make a contract in anticipa- 
 tion of obtaining a new charter to supersede the existing one. 
 Thus, a railway company has no implied authority to make 
 an absolute contract to purchase lands for the purpose of build- 
 ing an extension, in anticipation of obtaining the requisite 
 authority by act of Parliament.^ Nor would the charter of 
 a railway company impliedly confer authority to enter into 
 a contract with regard to the traffic upon a line which the 
 company may thereafter be chartered to build.^ 
 
 A contract to sell out the concern of a company, and take, 
 in payment, shares of a company about to be formed, is clearly 
 unauthorized, unless expressly provided for by its charter.* 
 
 § 399. A Grant of New Franchises not an Alteration. — The 
 authorities cited in the preceding sections, and the reasons 
 upon which they are founded, apply only to such altera- 
 tions of the charter of a corporation as affect the agreement 
 between the members of the company. 
 
 The charter of a corporation fulfils two distinct purposes : 
 it provides the terms of the agreement of association between 
 the shareholders of the company, and it also constitutes 
 a grant of franchises, or privileges, from the State to the 
 shareholders. 
 
 So far as the charter constitutes a contract between the 
 shareholders, it cannot be altered by the legislature in any 
 respect ; nor can it be altered by any portion of the parties 
 to that contract. A contract can be altered only with the 
 unanimous consent of the contracting parties. 
 
 1 See supra, § 296 et seq. Morris, &c. R. R. Co. v. Sussex 
 
 2 Gage V. Newmarket Ry. Co., R. R. Co., 20 N. J. Eq. 563; Mauii- 
 18 Q. B. 457; Preston v. Liverpool, sell v. Midland, &c. Ry. Co., 1 H. 
 &c. Ry. Co.,5H. L. C. 622. & M. 130. 
 
 ' Midland Ry. Co. v. London, &o. * Bird v. Bird's, &c. Sewage Co., 
 Ry. Co., L. R. 2 Eq. 524. See L. R. 9 Ch. 358. 
 
§ 400 THE LAW OF PEIVATB COEPOEATIONS. 378 
 
 But the legislature may authorize a body of corporators to 
 exercise new franchises without impairing those previously 
 granted ; ^ and if these new franchises can be exercised with- 
 out a departure from the original contract between the cor- 
 porators, there is no reason why they should not be accepted 
 and exercised on behalf of the company, by the majority, or 
 by the ordinary managing agents.^ Thus, if the road of a 
 turnpike or railroad company having authority to build a road 
 of a certain general description is found impracticable after 
 having been located, the majority may, with the consent of 
 the legislature, locate a new road, falling within the general 
 description contained in the charter.^ A law authorizing a 
 river navigation company to increase the height of its dams 
 would not alter the agreement of the shareholders of the com- 
 pany; it would merely enable the company to carry out its 
 main purposes more fully and effectually, by removing a legal 
 obstacle.* 
 
 § 400. A Discharge from Obligations to the State not an Al- 
 teration. — Obligations imposed upon a corporation for the 
 
 1 Infra, § 1083. plete efiect. The corporation still 
 
 2 In Fry's Exr. v. Lexington, has the power to execute the primary 
 &c. K. K. Co., 2 Mete. (Ky.) 322, objectof its creation, and if it should 
 323, Chief Justice Simpson said: not attempt to use the means of the 
 "None of the stockholders are in- shareholders for any other purpose, 
 jured by the mere passage of the they cannot claim to be absolved 
 act of the legislature amending the from their obligation to pay the 
 charter. Unless the company shall amount of their subscriptions." See 
 adopt the amendment, and proceed also Everhart v. West Chester, &c. 
 to act under it, the subscribers have R. R. Co., 28 Pa. St. 339; Gray v. 
 no just cause of complaint. . . . And Monongahela Nav. Co., 2 W. & S. 
 if it should avail itself of such pro- 156 ; Clark v. Monongahela Nav. 
 visions in the amendment as are Co., 10 Watts, 364; Cross ». Peach 
 calculated to aid in the accomplish- Bottom Ry. Co., 90 Pa. St. 392; 
 ment of the original undertaking, Poughkeepsie, &c. Plank Road Co. 
 and are entirely consistent there- u. Griffin, 24 N. Y. 150; Delaware, 
 with, it will have the right to do it. &o. R. R. Co. v. Irick, 3 Zabr. 321. 
 Every stockholder in a company ' Irvin v. Turnpike Co. , 2 Pen. & 
 which is organized for the purpose W. 474. Compare Fall River Iron 
 of constructing a railroad comes Works Co. «. Old Colony, &c. R. R. 
 under an implied agreement that Co., 5 Allen, 221; Hamilton, &c. 
 such amendments may be made to Plank Road Co. v. Rice, 7 Barb. 157. 
 the charter as may be required to * Gray v. Monongahela Nav. Co., 
 carry the original design into com- 2 W. & S. 156. 
 
379 THE CONSTE0CTION OF CHAETBES. § 400 
 
 benefit of the public constitute no part of the agreement 
 between the members of the company. The State may dis- 
 charge obligations of this character without the consent of 
 any of the shareholders of the company ; ^ and, under these 
 circumstances, the ordinary agents of the company are au- 
 thorized to act within the scope of their powers, in the same 
 manner as if such obligations had never existed. Thus, if a 
 railroad or plank-road company is unable to mortgage its road 
 solely by reason of the duties which it owes to the State, this 
 disability may be removed by statute ; and a mortgage exe- 
 cuted by the directors thereafter will be valid.^ Upon the 
 same principle, it has been held that the legislature may pass 
 an act enabling a bridge company to issue preferred stock ; and 
 that the majority may thereupon issue such stock in order to 
 raise money for the necessary purposes of the corporation.^ 
 
 A law discharging a railroad company from a requirement 
 of its charter to make connection with another line of road 
 is not unconstitutional ; and, after the passage of such a law, 
 no shareholder can complain if the majority decide not to 
 
 1 Infra, § 1084. conceded. . . . The issuing of pre- 
 
 2 Joy V. Jackson, &c. Plank Road ferred stock, witli the dividends to 
 Co., 11 Mich. 155. Compare Lau- be first applied as provided in the 
 man v. Lebanon Valley R. R. Co., amendments, is only a means of 
 30 Pa. St. 42, 45. enabling the company to pledge the 
 
 * In Covington v. Covington, &c. revenue of the corporation to obtain 
 
 Bridge Co., 10 Bush, 76, 77, the money, instead of pledging the fran- 
 
 courtsaid: " The capital of the com- chise; the only distinction being 
 
 pany having been expended, it was that in the latter case the franchise 
 
 evident that, without the addition itself, or the rights therein, may 
 
 of some available means, the stock pass from the stockholder; while in 
 
 already taken must not only be sac- the former, although the payment 
 
 rificed, but the enterprise itself prove of the dividends may in effect lessen 
 
 a failure. It was necessary, there- the value of the non-preferred stock, 
 
 fore, to raise money, either by mort- yet the last-named stockholders have 
 
 gaging the corporate property to left them a voice in the control and 
 
 secure its payment, or issuing pre- management of the corporation, with 
 
 ferred stock, in order to enable the the right to share the profits when 
 
 company to complete the work. . . . the dividends to the preferred stock 
 
 The power of the legislature to ena- have been paid." See also Ever- 
 
 ble the company to borrow money hart v. West Chester, &c. R. R. Co. , 
 
 by nfortgaging the whole of the cor- 28 Pa. St. 339, 353; but compare 
 
 porate property to secure it must be infra, §§ 463, 464. 
 
§ 402 THE LAW OF PEIVATE COEPOEATIONS. 380 
 
 make the connection as originally required, provided the 
 company's enterprise be not thereby altered.^ The same 
 principle has been held applicable where the charter of a 
 railroad company was amended by extending the time within 
 which the company was required to complete the construction 
 of its road.2 
 
 § 401. General Municipal Laws do not impair Charters. — 
 Corporations, as well as copartnerships, are by necessary im- 
 plication subject to all such general municipal regulations as 
 fall within the scope of the ordinary legislative powers of the 
 State. Enactments of this character may enlarge or restrict 
 the legal rights of a corporation, and alter the powers of its 
 agents correspondingly ; but they do not impair the contract 
 between the members of the company, any more than they 
 would impair the contract between the members of a copart- 
 nership under similar circumstances. Thus, the legislature 
 may repeal a general law prohibiting the execution of notes 
 payable to bearer, without impairing the charters of existing 
 companies ; and, after such repeal, the agents of a banking 
 company, incorporated while the prohibition was in force, 
 would be authorized to issue notes payable to bearer in the 
 regular course of the banking business. The same principle 
 would be applicable if only corporations or banking com- 
 panies had been prohibited from issuing notes payable to 
 bearer, and the prohibition had been repealed by a subsequent 
 enactment. 
 
 Numerous cases illustrating this doctrine will be referred 
 to in a subsequent chapter, in treating of the constitutionality 
 of State legislation affecting private corporations.® 
 
 § 402, Authorities holding that the Power of Alteration may 
 be implied. — The views expressed in the preceding sections 
 have not been universally adopted. There are authorities in 
 favor of the doctrine that a majority of the shareholders in 
 a corporation may, with the consent of the legislature, make 
 
 1 Wilson V. Wills Valley R. K. tural, &c. R. R. Co. v. Winchester, 
 Co., 33 Ga. 470. 13 Allen, 29; Clark v. Monongahela 
 
 2 Taggart v. Western Md. R. R. Nav. Co., 10 Watts, 864. 
 Co., 24 Md. 564. See also Agrioul- » Infra, Chapter XV. 
 
381 THE CONSTETJCTION OF CHARTBES. § 403 
 
 fundamental changes in the purposes of the company as origi- 
 nally agreed upon in their charter or articles of association.^ 
 Thus, it has been held that a majority of the shareholders in 
 a railroad company may build an extension to their line of 
 road,2 or materially alter the course of the road as fixed by 
 the charter,^ or consolidate the company with another com- 
 pany,* if the State grant them permission. These decisions, 
 it will be perceived, are not in accordance with the weight of 
 authority, nor can they be supported upon principle. It is 
 probable, therefore, that they would not be followed, except 
 in the States where they were rendered. 
 
 § 403. Alterations which are not Fundamental. — It has 
 sometimes been held that slight alterations may be accepted 
 by vote of the majority, but that radical or fundamental 
 changes can be effected only by unanimous consent ; and there 
 are many dicta in the authorities, to the effect that alterations 
 which are auxiliary to the main design of a corporation, and 
 not fundamental in their nature, may be accepted by the 
 directors of the company, or a majority of the shareholders.^ 
 But the principle is the same, whether the alteration be great 
 
 1 See Pacific R. R. Co. v. Hughes, 380, 381 ; Champion v. Memphis, 
 
 22 Mo. 297; Delaware R. R. Co. v. &c. R. R. Co., 35 Miss. 692; Winter 
 
 Tharp, 1 Houst. 174; Martin v. v. Muscogee R. R. Co., 11 Ga. 450; 
 
 Pensacola, &c. R. R. Co.,8Fla. 381; Middlesex Turnpike Co. v. Locke, 
 
 Pacific R. R. Co. v. Renshaw, 18 8 Mass. 268; Stevens v. Rutland, 
 
 Mo. 210; Commonwealths. Cullen, &o. R. R. Co., 29 Vt. 545; Hart- 
 
 13 Pa. St. 141. See Dayton, &c. ford, &c. R. R. Co. v. Croswell, .5 
 
 R. R. Co. V. Hatch, 1 Disney, 84; Hill, 386; Marietta, &o. R. R. Co. 
 
 Marlborough Manuf. Co. v. Smith, D.Elliott, 10 Ohio St. 57; Manheim, 
 
 2 Conn. 583. &c. Turnpike Co. v. Arndt, 31 Pa. St. 
 
 ^ Greenville, &c. R. R. Co. v. 317. See also cases supra, §§ 119, 
 
 Coleman, 5 Bioh. Law, 118. 395. Compare Simpson v. Denison, 
 
 » Banet v. Alton, &c. R. R. Co., 10 Hare, 54-56. 
 13 111. 504; Peoria, &c. R. R. Co. * Sprague ». Hlinois River R. R. 
 
 V. Elting, 17 111. 429; Illinois River Co., 19 111. 174. Compare Illinois, 
 
 R. R. Co. V. Zimmer, 20 111. 654 ; &c. R. R. Co. v. Cook, 29 111. 243. 
 
 Ross V. Chicago, &c. R. R. Co., 77 Contra, see cases supra, § 396. 
 111. 134; Rice v. Rock Island, &c. ' Woodfork v. Union Bank, 3 
 
 R. R. Co., 21 111. 93. • Cold. 488; Pacific R. R. Co. v. 
 
 Contra, Witter w. Mississippi, &c. Hughes, 22 Mo. 297; Pacific R. R. 
 
 R. R. Co., 20 Ark. 488; Hester i-. Co. v. Renshaw, 18 Mo. 210; Mower 
 
 Memphis, &c. R. R. Co., 32 Miss. v. Staples, 32 Minn. 284. 
 
§ 404 THE LAW OF PEIVATB CORPOBATIONS. 382 
 
 or small. It would never be contended that a majority of the 
 members of a copartnership have implied authority to alter 
 the partnership articles, in matters either small or great, with- 
 out the consent of the other partners ; and there is no reason 
 for applying a different rule to the contract of association 
 between shareholders in a corporation. 
 
 In Zabriskie v. Hackensack, &c. R. R. Co.,i Chancellor Za- 
 briskie severely criticised several Illinois and Missouri cases, 
 in which it was held that a majority of the stockholders might, 
 by authority of the legislature, make a change, provided it be 
 not a great or radical one. The Chancellor said : " The prin- 
 ciple on which they are decided is wrong ; and if it is once 
 conceded that a majority of the corporators may, by authority 
 of the legislature, change the object of the enterprise in small 
 things, there is no principle of law by which they can be 
 restrained in any a little larger, or in the character of the 
 whole work. The same principle will lead the courts of Illi- 
 nois and Missouri, as it did those in New York,^ to allow rad- 
 ical changes, and must, if consistently applied, allow a charter 
 for a railroad to be used for banking or insurance business, or 
 for a canal, theatre, brewery, or beer saloon." 
 
 It should be observed, however, that the fact that an act 
 of the legislature purports to involve an alteration or amend- 
 ment of the charter of a corporation, does not alwaj's prove 
 that it would, in fact, have this effect. Moreover, changes 
 in the management of a corporation may, in many instances, 
 be effected by the majority, pursuant to legislative authority, 
 without impairing any provision of the original agreement by 
 which the company was formed. 
 
 § 404. A Reservation of Power to alter or repeal a Charter 
 does not increase the Powers of the Majority. — Charters of in- 
 corporation are frequently granted subject to a reservation of 
 
 ^ Zabriskie v. Hackensack, &c. reserved power of alteration and re- 
 
 R. K. Co., 18 N. J. Eq. 178, 191, peal. See infra, §§ 1093, 1099. 
 
 192. The correct rule prevails in New 
 
 ^ The Chancellor probably re- York, where the power of alteration 
 
 ferred to the New York cases in and repeal is not reserved. Hart- 
 
 whichitwasheldthatradicalchanges ford, &o. R. R. Co. v. Croswell, 5 
 
 might be effected by exercise of the Hill, 386. 
 
383 THE CONSTKUCTION OF CHABTEES. § 404 
 
 power in the legislature " to repeal, alter, or suspend " tliem 
 at pleasure. The object of a provision of this kind is to avoid 
 the application of the rule laid down in the Dartmouth Col- 
 lege ease, that a charter of incorporation contains a contract 
 which cannot be impaired by law without the consent of the 
 contracting parties. 
 
 A charter granted subject to a reservation of power to 
 repeal, alter, or suspend it, may be repealed or modified by 
 the legislature at any time, and without the consent of the 
 corporators.^ But it has been a debated question whether 
 a mere offer, by the legislature, of an altered charter, to a 
 corporation whose original charter was granted to it subject 
 to the reserved power of alteration or repeal, can be accepted 
 by vote of a majority of the corporators, against the wishes of 
 the minority. 
 
 It seems perfectly clear, that, when the members of a corpo- 
 ration accept a charter containing a reservation of power in 
 the legislature to repeal or alter it at pleasure, they do not in- 
 tend thereby to confer the power of alteration or repeal upon 
 the majority, or any other agent of the company. 
 
 In Zabriskie v. Hackensack, &c. R. R, Co.,'' the Chancellor 
 said : " The charter of the defendants contains this provision, 
 ' that the legislature may, at any time, alter, modify, or repeal 
 the same.' The object and purpose of these provisions are so 
 plain, and so plainly expressed in the words, that it seems 
 strange that any doubt could be raised concerning it. It was 
 a reservation to the State, for the benefit of the public, to 
 be exercised by the State only. The State was making what - 
 had been decided to be a contract, and it reserved the power 
 of change, by altering, modifying, or repealng the contract. 
 Neither the words, nor the circumstances, nor the apparent 
 objects for which this provision was made, can, by any fair 
 construction, extend it to giving a power to one part of the 
 corporators as against the other, which they did not have 
 before. It was to avoid the rule in the Dartmouth College 
 
 1 Infra, § 1073. also Kenosha, &o. R. R. Co. o. 
 
 '^ Zabriskie v. Hackensack, &c. Marsh, 17 Wis. 16; Cross v. Peach 
 R. R. Co., 18 N. J. Eq. 185. See Bottom Ry. Co., 90 Pa. St. 395. 
 
§ 405 THE LA"W OP PEIVATE COEPOEATIONS. 384 
 
 case, not that in Natusch v. Irving,^ that the change was made. 
 The words limit the power to that object." 
 
 § 405. The Effect of an Offer of an Amendment ■where the 
 Power of Amendment was reserved. — It is well settled, how- 
 ever, that the legislature may, by virtue of a reservation of 
 this character, repeal or alter a charter, against the will of 
 every member of the corporation. And an alteration may, 
 under these circumstances, be made conditional, so that it 
 shall go into effect if it be accepted by a majority of share- 
 holders, but not otherwise. In this case the power of the 
 majority to accept the alteration on behalf of the company is 
 derived from the arbitrary will of the legislature, and not 
 from the unanimous agreement of the corporators. 
 
 It has been held in numerous cases, that, where the legis- 
 lature has the power to make an alteration compulsory, but 
 in terms makes it conditional upon its acceptance by the cor- 
 poration, this impliedly means that the alteration shall go 
 into effect provided it be accepted by vote of the majority. 
 According to this view, a law purporting to authorize a cor- 
 poration to extend its business means that it shall extend the 
 business if the majority of the corporation so desire.^ 
 
 It does not appear clearly, that the course of reasoning in. 
 dicated in the text was followed in any of the cases referred 
 to. But it is the only course of reasoning apparent to the 
 writer by wliich these decisions can be reconciled to well- 
 
 1 See infra, § 643. Midland, &c. Ry. Co. v. Gordon, 16 
 
 2 Durfee v. Old Colony, &c. R. R. M. & W. 803 ; and see infra, § 407. 
 Co., 5 Allen, 230; Northern R. R. In Zabriskie v. Haokensack, &c. 
 Co V. Miller, 10 Barb. 260; White R. R. Co., supra, § 403, most of the 
 V. Syracuse, &c. E. R. Co., 14 Barb, above decisions were ably criticised 
 560 ; Schenectady, &c. Plank Road by the Chancellor, upon the suppo- 
 Co. V. Thatcher, 11 N. Y. 102 ; Buf- sition that they were based upon the 
 falo, &c. R. R. Co. V. Dudley, 14 doctrine of an implied delegation of 
 N. Y. 336 ; Sprigg v. Western Tel. authority by the corporators to a 
 Co., 46 Md. 67; Pacific R. R. Co. v. majority of their number. But the 
 Renshaw, 18 Mo. 213 ; Meadow Dam view that the power of the majority 
 Co. V. Grey, 30 Me. 551; Mowrey m. was derived from the act of the 
 Indianapolis, &c. R. R. Co. , 4 Biss. legislature in the exercise of its 
 78. Compare Joslyn v. Pacific Mail compulsory powers was not adverted 
 S. S. Co., 12 Abb. Pr. n. s. 829; to. 
 
885 THE CONSTKUCTION OF CHARTERS. § 407 
 
 established principles. It is true, that an offer to " a corpo- 
 ration " literally means an offer to the whole corporation, 
 and not to a majority merely. But the distinction between 
 the majority and the corporation itself is frequently over- 
 looked in practice, because the majority usually represent 
 the corporation in all things which the corporation itself can 
 do. It is, perhaps, not too great a stretch of construction to 
 hold that the legislature intended that the alteration should 
 be accepted by vote of the majority, (this being the usual 
 method by which corporations express their assent,) although 
 it was in terms offered to " the corporation." 
 
 § 406. A Reservation of Power to alter a Charter does not 
 include the Power to change it. — A reservation, by the legis- 
 lature, of power to alter a charter, does not include the power 
 of making radical changes.^ And where the legislature has 
 no power to change a charter peremptorily, it cannot enable 
 the majority to do so against the will of a minority. Any 
 change, which is not a mere alteration, cannot be made with- 
 out the unanimous consent of the shareholders, even though 
 the power to repeal or alter the charter at pleasure be reserved 
 by the legislature.^ 
 
 § 407. Changes in the Constitution of a Corporation may be 
 made by the Majority, if provided for in the Charter. — It is evi- 
 dently the intention of all the parties who join in creating a 
 corporation, that all acts which are done by the company 
 under its charter shall be done in the usual manner, and by 
 the agencies through which a corporation usually acts. The 
 majority in shareholders' meeting, and in some instances the 
 board of directors,^ are impliedly invested with full powers 
 to do on behalf of the corporation whatever they deem ju- 
 dicious in carrying out the company's chartered purposes. If 
 
 1 Infra, § 1096. 248; Bank v. City of Charlotte, 85 
 
 2 Zabriskie ». Hackensack, &c. N. C. 433; Hoey v. Henderson, 32 
 R. R. Co., 18 N. J. Eq. 192; White La. Ann. 1069. 
 
 V. Syracuse, &c. R. R. Co. , 14 Barb. * As to the extent of the powers 
 
 560 ; Buffalo, &c. R. R. Co. v. Dud- of the majority and board of direc- 
 
 ley, 14 N. Y. 348 ; Durfee v. Old tors, see infra, Chapter VII. 
 Colony, &c. R. R. Co., 5 Allen, 247, 
 VOL. I. — 25 
 
§ 407 THE LAW OP PRIVATE COKPOBATIONS. 886 
 
 the charter contains a provision purporting to authorize the 
 corporation to do a certain act, this is not merely a grant of 
 authority from the legislature to the corporation, but it en- 
 ters into the agreement of the shareholders, and impliedly 
 invests the majority, or the board of directors, with authority 
 to do the act on behalf of the corporation. This is true 
 although a change in the company's constitution, or an alter- 
 ation of the character of its main enterprise, be the result. 
 The powers of the majority, or board of directors, under these 
 circumstances, are derived strictly from the agreement of the 
 shareholders.^ 
 
 It has been held accordingly, that, if the charter of a cor- 
 poration authorizes the capital stock of the company " to be 
 increased from time to time, at the pleasure of the said corpo- 
 ration" this impliedly includes a delegation of power to the 
 majority, in shareholders' meeting, to declare the pleasure of 
 the corporation.^ So, if two corporations are authorized by 
 their charters, or by a general law, which must be considered 
 as part of their charters, to form a single company by consol- 
 idation, a consolidation may be effected by a majority of the 
 shareholders of the several companies at general meetings 
 duly convened.^ 
 
 If the general law under which a railroad company was 
 organized authorizes any company formed under the act to 
 
 1 Under an express delegation of organization or purposes of the corn- 
 authority, the majority or any agent pany, which, at the time the sub- 
 of a corporation may apply to the scription was made, were authorized 
 legislature for an alteration, and ac- either by the general law or special 
 cept an offered alteration, on behalf charter; and a clear distinction is 
 of the whole company. Lyde ». recognized between the effect of such 
 Eastern Bengal Ry. Co., 36 Beav. 10. alterations and the effect of those 
 
 * Railway Co. v. Allerton, 18 made under legislation subsequent 
 Wall. 236. to the contract of subscription." 
 
 * In Nugent v. Supervisors, 19 See Sparrow ». Evansville, &c. 
 Wall. 241, Justice Strong said: "In R. R. Co., 7 Ind. 369; Bish v. 
 a multitude of cases decided in Eng- Johnson, 21 Ind. 299; Cork, &c. 
 land and in this country, it has been Ry. Co. v. Paterson, 87 Eng. L. 
 determined that a subscriber for the & Eq. 398; Nixon v. Brownlow, 3 
 stock of a company is not released H. & N. 686; Lynch i'. Eastern, &c. 
 from his engagement to take it and Ry. Co., 57 Wis. 431. 
 
 pay for it by any alteration of the 
 
887 THE CONSTRUCTION OF CHAETBES. § 409 
 
 extend its tracks beyond the limit fixed in the certificate of 
 incorporation, an extension, made with the consent of a ma- 
 jority of the shareholders, would be authorized, though there 
 were dissenting members.^ 
 
 § 408. 'When a Corporation may begin to carry on Business. 
 — Capital must be subscribed. — The subscription of the en- 
 tire capital stock fixed by the charter of a corporation is not, 
 as a rule, a condition precedent to the formation of a corpo- 
 rate association between those who subscribe for shares. But 
 in the absence of some provision indicating a contrary in- 
 tention, the subscription of the entire capital fixed by the 
 charter is always a condition precedent to the right of the 
 company to begin the prosecution of its main enterprise. 
 The object of fixing the capital of a corporation at a definite 
 sum is to indicate the scope of the company's business, and 
 the amount of capital deemed necessary for the transaction 
 of the business contemplated. It indicates to shareholders 
 their fractional interests in the whole concern, and the extent 
 of the enterprise in which they are invited to join. Until the 
 amount of capital fixed by the charter has been subscribed, 
 the right of the company to begin to carry on business re- 
 mains inchoate, and the agents of the company have no au- 
 thority to perform any acts except such as are necessary to 
 perfect its organization, and prepare it for the prosecution of 
 its regular business after the capital agreed upon has been 
 obtained.^ It has for this reason been held, in numerous 
 cases, that the subscribers for shares cannot be compelled to 
 contribute the capital subscribed by them for the purpose of 
 carrying on the company's business, until the amount of capi- 
 tal indicated by the charter has been subscribed.^ 
 
 § 409. Preparatory Arrangements. — Although the capital 
 of a corporation is fixed by its charter at a certain sum, the 
 company has a right to perfect its organization, and to do all 
 acts which are required to prepare it for entering upon its 
 regular business, before the whole capital has been subscribed. 
 
 ^ Sims V. Street R. K. Co., 37 Allman v. Havana, &c. R. R. Co., 
 Ohio St. 556. 88 lU. 521. 
 
 = Bray v. Farwell, 81 N. T. 607; » See supra, § 137. 
 
§ 410 THE LAW OP PRIVATE CORPORATIONS. S88 
 
 The officers of the company are impliedly authorized to open 
 offices, issue prospectuses, solicit and receive subscriptions 
 for shares, and prepare plans for the execution of the com- 
 pany's main enterprise.^ 
 
 In Salem Mill Dam Co. v. Ropes,^ the charter of a com- 
 pany formed for the purpose of erecting mill dams authorized 
 the company to organize and " arrange its affairs " as soon 
 as one fifth of the whole capital had been subscribed. This 
 provision was construed to give the power to make a careful 
 examination into the probable success of the project and the 
 expense of carrying it into execution, to cause plans and sur- 
 veys to be made, to employ the necessary agents, to hold 
 meetings, to obtain legal advice, and in general to do what- 
 ever was necessary to determine the advisability of proceeding 
 with the main enterprise and to procure further subscrip- 
 tions. The court held that the power of levying assess- 
 ments upon the shareholders, in order to provide the means 
 of accomplishing these purposes and to defray the expenses 
 incurred in obtaining the act of incorporation, followed as a 
 necessary consequence. 
 
 § 410. Express ProvisionB authorizing Business to be begun 
 upon Subscription of Fart of the Company's Capital. — If the 
 charter of a corporation provides that it may begin the prose- 
 cution of its enterprise, in whole or in part, upon the subscrip- 
 tion of a specified amount of its capital, it is clear that the 
 agents of the company may begin to carry on its business, and 
 may make the required calls upon its shareholders, as soon as 
 the specified amount of capital has been subscribed. Whether 
 a corporation is authorized to begin its business before the 
 whole amount of its capital has been subscribed, can only be 
 determined upon a construction of the entire charter under 
 which the company was formed.^ 
 
 It has been held in a number of cases, that a provision in 
 
 1 Central Turnpike Co. v. Val- lington, 113 Mass. 79. See Boston, 
 entine, 10 Pick. 142. &c. R. R. Co. v. Pearson, 128 Mass. 
 
 2 Salem Mill Dam Co. v. Ropes, 445; and compare Bray v. Farwell, 
 6 Pick. 23, 43. 81 N. Y. 600. 
 
 8 Boston, &c. E. E. Co. v. Wei- 
 
389 THE CONSTRUCTION OF CHAETBES. § 411 
 
 the charter or law under which a corporation was formed, 
 authorizing the company to organize and elect officers as 
 soon as a specified per cent of its capital has been subscribed, 
 by implication authorizes the company to begin the prosecu- 
 tion of its main business at the same time.^ The reasoning 
 by which this conclusion was reached, in the cases referred 
 to, appears to the writer to be unsatisfactory .^ 
 
 § 411. Duration of Corporations. — A corporation whose 
 charter does not limit its existence to a definite period of 
 time continues in existence, in legal contemplation, until it 
 has been declared dissolved by one of the methods prescribed 
 by law." The existence of the corporation, in legal contem- 
 plation, does not necessarily indicate that the corporation has 
 any right to carry on business, or that it is in existence as a 
 matter of fact. The fiction of a corporate existence is pre- 
 served even after the company has entirely ceased to do 
 business and wound up its affairs, and after the contract be- 
 tween the shareholders has been dissolved by unanimous 
 consent.* 
 
 The grant of a charter of incorporation, where there is no 
 provision to the contrary, confers upon the grantees the right 
 of acting in a corporate capacity in carrying out the purposes 
 set forth in the charter, during an unlimited period of time. 
 It is also an implied condition in the contract between the 
 shareholders in a corporation, that the company shall con- 
 tinue in existence, and shall prosecute the business for which 
 
 1 Schenectady, &c. Plank Road subscription of all of its shares. See 
 Co. V. Thatcher, 11 N. Y. 102, 107; supra, §§ 143, 149. 
 
 Hunt V. Kansas, &c. Bridge Co., 11 » Infra, § 1002 el seq. 
 Kans. 412 ; Willamette Freighting A charter providing that the cor- 
 
 Co. V. Stannus, 4 Oreg. 261; Mas- porators shall have "perpetual suc- 
 
 sey ». Building Ass., 22 Kans. 624. cession" incorporates them for an 
 
 2 A provision authorizing the unlimited period of time, although 
 directors to make calls upon the there be a general law enacting that 
 subscribers at such times as they the duration of a corporation, when 
 may see fit, would not indicate that not limited by the charter to a par- 
 the main business of the company ticular time, shall be twenty years, 
 may be begun before its capital has Fairchild v. Masonic Hall Ass., 71 
 been subscribed, or that the sub- Mo. 526, overruling Scanlan ». Craw- 
 scribers agree to pay before the shaw, 5 Mo. App. 337. 
 
 whole company has been formed by * Infra, § 1002. 
 
§ 412 THE liAV OF PErVATB COBPOEATIOKS. 390 
 
 it was formed, at least so long as the majority deem this ad- 
 visable and the main object of the company has not become 
 impossible of attainment. The individual shareholders clearly 
 have no power to dissolve the corporation by surrendering its 
 franchises to the State ; nor can they interfere with the man- 
 agement of the company, 1 or insist on having its affairs 
 wound up, against the wishes of the majority .^ A corpora- 
 tion differs in this respect from a simple copartnership, which 
 exists merely at the will of its members, and may be dissolved 
 by any one of them at any time, if no certain period for its 
 duration was agreed upon in the partnership contract.^ 
 
 § 412. When it is the Duty of a Corporation to wind up its 
 Business. — The general rule stated in the preceding section 
 must be taken subject to the qualification, that, if it turns out 
 that the purposes for which a corporation was formed cannot 
 possibly be attained, it is the duty of the company to cease 
 transacting business, and to wind up its affairs; for any 
 transaction in which the company might engage, under these 
 circumstances, would necessarily involve a departure from 
 the purposes for which the company was incorporated. 
 
 The ultimate object of every ordinary trading corporation 
 is evidently the pecuniary gain of its shareholders. It is for 
 this purpose alone that ordinary trading corporations are char- 
 tered, and for this purpose and no other have the shareholders 
 advanced their shares of the capital. It seems to follow, there- 
 fore, that after a corporation of this character has become hope- 
 lessly insolvent, or unable to caiTy on its business except at a 
 loss, it is the duty of the managers of the company to stop 
 carrying on its business any further, and to wind up its af- 
 fairs. To continue the business of the company under these 
 circumstances would involve both an unauthorized exercise 
 of corporate franchises,* and a breach of the contract between 
 the shareholders.^ For the same reason, it follows that, if 
 circumstances have rendered it impossible to continue to 
 
 I St^a, §§ 282-285. * Infra,. § 1026. 
 
 a Pratt v. Jewett, 9 Gray, 34. « Swpro, § 281 
 
 ' 1 Lindley on Partnership (4th 
 Lond. ed.), 232-235. 
 
391 
 
 THE CONSTKUCTION OP CHAETBES. 
 
 §412 
 
 carry on the particular kind of business for which a corpora- 
 tion was formed with profit to the shareholders, it is the 
 duty of the managing agents to wind up the company's af- 
 fairs voluntarily. 
 
 It is well settled that a copartnership may be dissolved, 
 under similar circumstances, by any one of its members, al- 
 though the partnership agreement provides that the company 
 shall continue for a definite term of years.^ And the rule 
 applicable in case of a copartnership has been held to be 
 fully applicable in case of a corporation or joint-stock com- 
 pany .^ The reasonableness of this doctrine requires no com- 
 
 1 Thus, in Baring ». Dix, 1 Cox, 
 213, the question arose whether a 
 partnership, which had been formed 
 for the purpose of spinning cotton 
 under a certain patent, should be 
 dissolved, after the invention had 
 turned out to be a failure, and had 
 been given up entirely. LordKenyon . 
 referred the case to the master, " to 
 inquire and state to the court whether 
 the said copartnership business could 
 now be carried on, according to the 
 true intent and meaning of the said 
 articles of copartnership," and de- 
 clared that, if the master should re- 
 port that the business could not be 
 so carried on, he would dissolve and 
 wind up the company. 
 
 In Bailey v. Ford, 13 Sim. 495, 
 Vice-Chancellor Shadwell ordered 
 that a partnership entered into for 
 a term of twenty-one years should 
 be wound up before the expiration 
 of the term, because it had become 
 whoUy insolvent, and its affairs were 
 daily growing worse. 
 
 In Jennings v. Baddeley, 3 K. & 
 J. 78, Vice-Chancellor Page-Wood 
 held that a partnership which had 
 been entered into for a term of years 
 should be dissolved before the end 
 of the term, after it had turned out 
 that the business could not be car- 
 ried on profitably without further 
 
 capital, each partner having con- 
 tributed his share according to the 
 partnership agreement, and some of 
 the partners being unwilling to con- 
 tribute any more; and that it was 
 immaterial whether the concern be 
 already embarrassed or not. The 
 Vice-Chancellor said: " The doc- 
 trine of this court has always been, 
 that expectation of profit is implied 
 in every copartnership; that every 
 partnership is entered into by the 
 partners with the view of deriving 
 profit from the concern. No one 
 can suppose that persons who have 
 agreed to carry on business for a 
 certain term will continue to carry 
 it on during as many years as the 
 term may have to run, when it is 
 clear that during the residue of the 
 term they must be working at a cer- 
 tain loss." See also Brien v. Har- 
 riman, 1 Tenn. Ch. 467; Holladay 
 V. Elliott, 8 Oreg. 84; Sieghortner 
 ». Weissenhom, 20 N. J. Eq. 172; 
 Howell V. Harvey, 5 Ark. 270; Van 
 Ness V. Eisher, 5 Lans. 236. 
 
 " Re Suburban Hotel Co., L. R. 
 2 Ch. 737, 743-750, per Lord Cairns. 
 See also Be Factage Parisien, 13 
 W. R. 214; Id. 330; Bank of Switz- 
 erland V. Bank of Turkey, 5 L. T. 
 If. s. 549; Marr v. Union Bank, 
 4 Cold. 484; De Witt v. Hastings, 
 
§ 413 THE LAW OP PBIVATE COEPOKATIONS. 392 
 
 ment ; it is a protection to creditors and to the public when 
 applied to companies whose shareholders are not individually 
 liable for the corporate obligations, and it is in all cases a 
 protection to the individual shareholders against unfair deal- 
 ing on the part of the managers of their company, or the 
 majority. 
 
 § 413. The Discretionary Po'wer of a Majority to wind up' 
 the Company's Business. — Ordinary trading corporations are 
 formed solely for the pecuniary benefit of their shareholders. 
 It is therefore no more than reasonable that the majority of 
 an association of this description should have a discretionary 
 power to give up the joint speculation, and wind up the 
 company's business, whenever they deem this step to be in 
 the interest of the whole association. 
 
 The law is settled accordingly ; and it may be stated as a 
 rule, that it is an implied condition in the charter of every 
 corporation formed solely for the pecuniary profit of its 
 shareholders, such as an ordinary trading or manufacturing 
 corporation, that its business may be wound up whenever 
 the majority deem this to be expedient. Under these cir- 
 cumstances the majority may, without the consent of the 
 minority, sell the whole of the company's property, close up 
 the business, distribute the assets, and surrender the charter 
 to the State.^ 
 
 But the majority of a corporation have no right to sell 
 property which is necessary to enable the company to carry 
 on its business under the charter, unless this be done in good 
 faith, for the purpose of distributing the proceeds after pay- 
 
 69 N. Y. 518; Lafond v. Deems, 52 30 Pa. St. 42; Wilson v. Mieis, 10 
 How. Pr. 41; 81 N. Y. 507; and C. B. n. s. 348; Bank of Switzer- 
 see supra, §§ 284, 285. land v. Bank of Turkey, 5 L. T. 
 ^ Treadwell v. Salisbury Manuf. n. s. 549. Compare Kean ». John- 
 Co. , 7 Gray, 393. See also Buford !». son, 9 N. J. Eq. 413; Curien v. 
 Keokuk, &c. Packet Co., 3 Mo. App. Santini, 16 La. Ann. 27 ; Polar Star 
 159, 169; Merchants', &c. Line v. Lodge v. Polar Star Lodge, 16 La. 
 Waganer, 71 Ala. 581; Wilson v. Ann. 53; Mobile, &o. R. R. Co. 
 Central Bridge Co., 9 R. I. 590; v. State, 29 Ala. 586, 587; Abbot 
 Black V. Delaware, &c. Canal Co., v. American Hard Rubber Co., 33 
 22 N. J. Eq. 404, 415, 416; Lau- Barb. 579. 
 man v. Lebanon Valley R. R. Co., 
 
393 THE CONSTEUCTION OP CHARTERS. § 415 
 
 ing off creditors, and finally winding up the company's af- 
 fairs. The majority would have no implied authority to sell 
 out the company's property as a speculation, with the inten- 
 tion of starting the company's business anew at a subsequent 
 time. 
 
 § 414. To what Corporations the Rule does not apply. — 
 The right of a majority of shareholders to wind up the com- 
 pany's business, and distribute its assets, exists only provided 
 the company was formed solely for the benefit of its share- 
 holders. The majority of a charitable corporation, or any 
 corporation formed to administer a trust in favor of third 
 persons, evidently possess no such power. Nor can such a 
 power be exercised by the majority of a corporation which 
 has obtained its property through exercise of the right of 
 eminent domain in the State, and has assumed obligations 
 to the public. Even the unanimous consent of the share- 
 holders of a railroad company would not discharge the com- 
 pany from the duty of providing the public with means of 
 transportation, or enable the shareholders to appropriate for 
 their sole benefit the property which was obtained for a 
 public use under the power of eminent domain.^ 
 
 § 415. After -winding up, Capital must be distributed in Cash. 
 — Upon winding up the business of a corporation, the pro- 
 ceeds of a sale of its assets, after paying off creditors, must 
 be distributed among the shareholders in cash. It is a fun- 
 damental principle, that property or funds belonging to a 
 corporation cannot be applied in any manner inconsistent 
 with the chartered purposes of the company, without the 
 unanimous consent of its shareholders. Thus a sale of the 
 property of a corporation to another company, in consider- 
 ation of a transfer of shares in the latter company to the 
 shareholders of the former, is clearly not impliedly author- 
 ized. No majority have any implied authority to constitute 
 any dissenting shareholder a member of another corporation. 
 
 1 Infra, §§ 1114, 1116. If, how- would have the same powers as in 
 
 ever, the legislature should discharge case of other classes of corpora- 
 
 a railroad company from its obliga- tions. 
 tions to the public, the majority 
 
§ 417 THE LAW OP PBIVATE COEPOEATIONS. 394 
 
 A transaction of this description would in effect amount to 
 a consolidation of the two companies.^ 
 
 But a corporation may sell out its assets, and receive in 
 payment stock in another company, having a fixed money 
 value and convertible into cash at any time. The stock re- 
 ceived under these circumstances is taken in lieu of money. 
 It may be distributed in specie among those shareholders 
 who are willing to accept it, but should be converted into 
 cash and the proceeds distributed among those who do not 
 consent to the arrangement.^ 
 
 § 416. The shareholders in a corporation are entitled to 
 an immediate distribution of the company's capital after its 
 business has been brought to a close and settled up.^ They 
 cannot be compelled to accept an annuity in place of their 
 shares. Hence a transfer of the assets of a corporation by a 
 sale, or a long lease in consideration of an annual rent, is un- 
 authorized, although made in good faith for the purpose of 
 closing out the company's business, unless provision be made 
 for paying to dissenting shareholders, the value of their 
 shares in the whole property in cash.* 
 
 § 417. Arrangements for -winding up Corporations. — In wind- 
 ing up the business of a corporation, the majority should use 
 their discretion to obtain the most favorable terms for the 
 benefit of all the shareholders. It seems reasonable, there- 
 fore, that the majority should be entitled to make a lease 
 of the whole property, or apply it to any other use which 
 they may find profitable, provided this be done in good 
 
 1 Re Empire Ass. Co., L. E. 4 K. R. Co. v. Boston, 8eo. R. R. Co., 
 Eq. 341; Clinch v. Financial Co., 115 Mass. 351; Winch v. Birken- 
 L. R. 4 Ch. 117; MoCurdy u. Myers, head, &o. Ey. Co., 5 De G. & Sm. 
 44 Pa. St. 535; Bird v. Bird's, &c. 562; Conro v. Port Henry Iron Co., 
 Sewage Co. , L. R. 9 Ch. 358 ; Froth- 12 Barb. 27, 63. 
 
 ingham v. Barney, 6 Hun, 366. Compare Featherstonhaugh ». Lee 
 
 2 Treadwell v. Salisbury Manuf. Moor, Sec Clay Co., L. R. 1 Eq. 318, 
 Co., 7 Gray, 393, 397, 405. stated supra, § 367; Midland Ry. 
 
 8 Frothingham v. Barney, 6 Hun, Co. v. Great Western Ry. Co., L. E. 
 
 366; Taylor v. Earle, 8 Hun, 1; 8 Ch. 841, stated supra, § 379; Gratz 
 
 McVicker v. Ross, 55 Barb. 247. v. Pennsylvania R. R. Co., 41 Pa. 
 
 * Black V. Delaware, &c. Canal St. 447. 
 Co., 24 N. J. Eq. 455; Middlesex 
 
395 THE CONSTRUCTION OP CHAETBES. § 417 
 
 faith, for the purpose of finally winding up the business of 
 the corporation, and provided every shareholder who is un- 
 willing to join in the new enterprise be given the full value 
 of his shares. A transaction of this description would be the 
 same in effect as a purchase of the entire property for cash, 
 and an immediate reinvestment, by those shareholders who 
 consent to the arrangement, of their shares of the purchase- 
 money. Chancellor Zabriskie said: "If I am right in the 
 conclusion arrived at above, that the majority of corporators 
 under a charter, which specifies no definite time for its con- 
 tinuance, have a right to abandon the undertaking and dis- 
 pose of and divide the property, the proceeding in this case 
 is valid, as against the complainants, as a lawful way of ac- 
 complishing that end as to them. Two thirds of these cor- 
 porators have determined that they do not desire to go on 
 with these enterprises under the charters, and that they wish 
 to abandon them, and are willing to accept as their share of 
 the corporate property a yearly rent or annuity secured by 
 a provision like that contained in this proposed lease. Some 
 stockholders are not willing ; and although the majority can 
 effect the abandonment, they cannot compel the dissentients 
 to accept like compensation for their stock ; it might be com- 
 pelling them to embark their capital in a new enterprise. 
 Provision is therefore made to pay or return to them the full 
 value of their shares of the whole property of the corpora- 
 tion. This is all they would have if the works were sold 
 out. The provision is a most equitable one, and without it 
 the transaction, even if valid and legal, would not be equita- 
 ble and just."'' 
 
 It is evident, however, that authority to enter into an ar- 
 rangement of the kind above described can exist only under 
 extraordinary circumstances. A majority of the shareholders 
 in a corporation have no implied right or power to expel or 
 drive out the minority, upon paying them the value of their 
 shares ; nor can the majority compel the minority to elect 
 whether they will consent to a departure from the company's 
 
 1 Black V. Delaware, &c. Canal 455; Lanman v. Lebanon Valley 
 Co., 22 N. J. Eq. 415; 24 N. J. Eq. K, R. Co., 30 Pa. St. 42. 
 
§ 418 THE LAW OP PEIVATB COEPOEATIONS. 396 
 
 original purposes, or withdraw with the value of their shares. 
 The existence of such a power would be intolerable. The 
 majority have a right to wind up the business of their com- 
 pany only provided they do this in good faith in the interest 
 of all the shareholders, and because the further prosecution 
 of the business for which the company was formed would 
 be unprofitable. They have a right to dispose of the assets 
 by lease or exchange, instead of selling them for cash, only 
 if, under all the circumstances of the case, this is a reason- 
 able method of obtaining the best price for the property. 
 The right to exercise a power of this description involves 
 the exercise of discretion, and, as in all other cases of dis- 
 cretionary powers, depends largely upon the good faith of the 
 parties. 
 
 § 418. Charters in Force for a Limited Period of Time. — 
 It is often provided in charters and general incorporation 
 laws, that the corporations formed under them shall continue 
 in existence for a limited period of time only. Provisions 
 of this character are usually inserted for the benefit of the 
 State : their purpose is to limit the duration of the fran- 
 chises granted by the State to the corporators, rather than 
 to bind the latter to continue their business for any defi- 
 nite period of time. However, if the meaning of a provision 
 in the charter of a corporation is that the company's busi- 
 ness shall be carried on for a definite period of time, it is 
 evident that no majority should have a right in their discre- 
 tion to shorten that period, even with the consent of the 
 State.^ But if the provision is intended merely as a limita- 
 tion upon the duration of the franchises granted to the cor- 
 porators, there is no reason why the majority should not be 
 held to have implied authority, as in other cases, to wind up 
 the business of the company, whenever they deem this to be 
 expedient. Even if the charter of a corporation expressly 
 provides that its business should be carried on during a speci- 
 
 1 See per Chancellor Zabriskie, in As to the effect of such a limitation 
 
 Black V. Delaware, &c. Canal Co., upon the powers of the corporation 
 
 22 N. J. Eq. 403, 404-406, 415; Von to make engagements, see supra, 
 
 Schmidt v. Huntington, 1 Cal. 55. § 330. 
 
397 THE CONSTEUCTION OF OHABTBES. § 420 
 
 fied period of time, this would be subject to an implied con- 
 dition that the prosecution of the business in the manner 
 contemplated by the charter should continue practicable. 
 It is the right and the duty of every corporation to wind 
 up its business whenever it can no longer be carried on with 
 a chance of profit, or in accordance with the company's char- 
 tered purposes.^ 
 
 § 419. When a Corporation may abandon a Portion of ils 
 Enterprise and continue the Remainder. — A corporation may, 
 for reasons of expediency, abandon a portion of the enterprise 
 for which it was incorporated, provided the result be merely 
 to contract the business within smaller limits, and not to 
 change its character.^ Each case of this description must be 
 considered with respect to the peculiar circumstances under 
 which it arises, and the nature of the company's enterprise. 
 If an abandonment of a portion of the enterprise of a corpo- 
 ration is a reasonable proceeding, under all the circumstances, 
 in carrying out the speculation in which the shareholders 
 have embarked, it is authorized. But if the abandonment 
 of a portion of the enterprise for which a corporation was 
 formed would substantially alter the character of the re- 
 mainder, it would not be impliedly authorized by the charter. 
 Thus, in some instances, a railroad company has no authority 
 to abandon the construction of a portion of the line of road 
 which it was chartered to construct.^ Under other circum- 
 stances, a different rule would apply. 
 
 § 420. When a Corporation may purchase the whole Concern 
 of another Company. — The question whether or not a corpo- 
 ration may purchase the whole concern of another company 
 depends upon the circumstances of the case. A corporation 
 
 1 Supra, § 412. G. 389. Compare Commonwealth 
 
 2 Re Norwegian, &c. Iron Co., v. Fitehburg R. R. Co., 12 Gray, 
 35 Beav. 223; Moss v. Averell, 10 180; Platteville v. Galena, &c. R. R. 
 N. Y. 449 ; . Commonwealth v. Fitch- Co. , 43 Wis. 493. Compare People 
 burg R. R. Co., 12 Gray, 180. v. Improvement Co., 103 111. 491. 
 
 ' People V. Albany, &c. R. R. As to the duty of a railroad com- 
 
 Co., 24 N. Y. 261; Cohen v. Wil- pany to operate its road for the bene- 
 
 kinson, 12 Beav. 125; Bagshaw v. lit of the public after it has been 
 
 Eastern Union Ry. Co., 2 MacN. & constructed, see infra, § 1116. 
 
§ 421 THE LAW OF PKIVATB COEPOBATIONS. 398 
 
 may purchase from another company, as well as from an indi- 
 vidual ; and it may acquire any property which is needed for 
 the attainment of a purpose authorized by its charter, upon 
 the most advantageous terms which it can obtain. If, then, 
 one company should desire to sell all of its fixtures and stock 
 in trade, and another company should have a legitimate use 
 for substantially the same property in carrying on its own 
 business, the latter company would be entitled to purchase 
 the whole concern of the former. Under these circumstances, 
 it would not be an objection to the transaction, that a portion 
 of the property was not required by the purchasing company 
 in carrying on its proper business, if the bulk of the property 
 was purchased in good faith for authorized purposes, and the 
 remainder merely as a means of effecting an advantageous 
 bargain.^ And there is no reason why the purchasing com- 
 pany should not pay for the property so obtained, by assuming 
 certain debts of the selling company instead of paying cash.^ 
 
 § 421. A Corporation has no implied Authority to enter 
 into a Partnership. — It seems clear that corporations are not 
 impliedly authorized to enter into partnership with other 
 companies, or with individuals. The existence of a partner- 
 ship not only would interfere with the management of the 
 corporation by its regularly appointed officers, but would 
 impair the authority of the shareholders themselves, and in- 
 volve the company in new responsibilities through agents 
 over whom it would have no control.^ 
 
 1 Moss V. Averell, 10 N. Y. 449. assume the risks taken by the agents 
 
 " See Ernest v. NichoUs, 6 H. L. of another company. Re Era Assnr- 
 
 C. 400. ance Co. , 2 J. & H. 404 ; 1 De G. , J. 
 
 Another question may arise in &S. 29; 1 H. & M. 678. Compare 
 
 case of the transfer of the whole of Ernest v. Nicholls, 6 H. L. C. 421. 
 a business, like that of an insurance * Whittenton Mills v. Upton, 10 
 
 company, from one company to an- Gray, 582; Marine Bank v. Ogden, 
 
 other. It has been held that the 29 111. 248; New York, &o. Canal 
 
 officers of an insurance company are Co. v. Fulton Bank, 7 Wend. 412 ; 
 
 appointed to take the risks in each Morris Ran Coal Co. v. Barclay Coal 
 
 separate case upon an examination Co., 68 Pa. St. 173; Charlton ». New 
 
 of its merits; it may therefore be Castle, &o. Ry. Co.,5 Jur. n. 8. 1097; 
 
 doubted whether they can be con- Burke v. Concord R. R. Co., 8 Am. 
 
 sidered to have implied authority to & Eng. R. R. Cases, 552; State v. 
 
399 THE CONSTRUCTION OF CHARTERS. § 423 
 
 § 422. Transfer of the whole Concern of a Corporation to an- 
 other Company. — The franchises of a corporation are merely 
 personal privileges, and cannot, in the nature of things, be 
 transferred like tangible property. A transfer of franchises 
 in reality means a grant of new franchises by the State to the 
 transferee. It is evident, therefore, that an attempted trans- 
 fer of franchises without the consent of the State, such con- 
 sent operating as a grant to the transferee, is simply void.^ 
 
 The validity of a transfer of all the property and rights of 
 a corporation, not including its franchises, to another com- 
 pany, depends upon other principles. 
 
 It must then be considered, — 
 
 First. Whether the transfer is authorized by the charter 
 of the transferring company. 
 
 Secondly. Whether the receiving company has authority 
 by its charter to acquire the property. 
 
 Thirdly. Whether the courts are bound, for reasons of 
 public policy or for the protection of the rights of the State, 
 to treat the transfer as invalid. 
 
 § 423. The Corporate Funds cannot be given away gratui- 
 tously. — The property and funds of a corporation belong to 
 its shareholders, and cannot be devoted to any use which is 
 not in accordance with their chartered purposes, except by 
 unanimous consent. No agent of a corporation has implied 
 authority to give away any portion of the corporate property, 
 or to create a corporate obligation gratuitously .^ It follows. 
 
 Concord R. R. Co., 13 Am. & Eng. Morrison, 31 Minn. 140; Bissell v. 
 
 R. R. Cases, 94. Compare Ontario City of Kankakee, 64 111. 249 ; Brod- 
 
 Salt Co. V. Merchants' Salt Co., 18 head v. City of Milwaukee, 19 Wis. 
 
 Grant's Ch. (U. C.) 541; Allen v. 658; Polar Star Lodge v. Polar Star 
 
 Woonsocket Co., 11 R. I. 288. Lodge, 16 La. Ann. 53; Frankfort 
 
 A corporation may, however, Bank u. Johnson, 24 Me. 490 ; Salem 
 
 hold property as tenant in common Bank v. Gloucester Bank, 17 Mass. 
 
 with another corporation or a nat- 30; St. James's Church v. Church 
 
 ural person. Estell v. University, of Redeemer, 45 Barb. 356. Ifor 
 
 12 Lea (Tenn.), 476. can they condone a fraudulent mis- 
 
 1 Infra, § 924. application of the corporate funds. 
 
 ' Atty.-Gen v. Mayor, &o. of Minor v. Mechanics' Bank, 1 Pet. 
 
 Batley, 26 L. T. n. S. 392; Ex parte 71. Infra, § 622. 
 Mellish, 8 L. T. N. s. 47 ; Jones v. 
 
§424 
 
 THE LAW OF PEIVATE COKPOBATIONS. 
 
 400 
 
 for the same reason, that authority can never be implied to 
 lend the credit of a corporation without a consideration, or 
 to sign its name to negotiable paper for the accommodation 
 of others.^ Thus, a railroad company is not liable upon a 
 guaranty of the bonds of a connecting road, made by its 
 agents without a consideration, and induced merely by the 
 expectation of an increase of business.^ But a guaranty or 
 indorsement of the bonds of another company, made for a 
 valuable consideration and for a legitimate purpose, may be in 
 furtherance of the company's chartered purposes, and within 
 the powers impliedly delegated to the board of directors.^ 
 
 § 424. Exceptions to the Rule. — A payment which is 
 really for the benefit of the corporate enterprise is author- 
 ized, although it be in the form of a gratuity.* Thus, in 
 Taunton v. Royal Insurance Co.,^ a shareholder of an in- 
 
 ^ Monument Nat. Bank v. Globe 
 Works, 101 Mass. 57; Lafayette 
 Sav. Bank v. St. Louis Stoneware 
 Co., 2 Mo. App. 299 ; Bank of Gen- 
 esee V. Patchin Bank, 13 N. Y. 309; 
 Morford v. Farmers' Bank, 26 Barb. 
 588; Savage Manuf. Co. ». Wor- 
 thington, 1 Gill, 284; West St. Louis 
 Sav. Bank v. Shawnee County Bank, 
 95 U. S. 557; JEtna Nat. Bank v. 
 Charter Oak Life Ins. Co., 50 Conn. 
 167; Culver v. Reno Real Estate 
 Co., 91 Pa. St. 367; Beecher v. Da- 
 cey, 45 Mich. 92. See also Davis 
 V. Old Colony R. R. Co., 131 Mass. 
 258. 
 
 "No one member of a firm can 
 bind it, without the consent of all 
 its members, by signing the copart- 
 nership name as drawer, maker, ac- 
 ceptor, or indorser of negotiable 
 paper for the accommodation of a 
 third party, for the obvious reason 
 that such a transaction is not with- 
 in the scope of copartnership busi- 
 ness, unless expressly or impliedly 
 made so, and would ordinarily be 
 without authority and in fraud of 
 
 the firm." 1 Daniel on Neg. In- 
 struments, § 365. 
 
 ^ Smead v. Indianapolis, &o. R. 
 R. Co., 11 Ind. 104; Madison, &c. 
 Plank Road Co. v. Watertown, 'Sc. 
 Plank Road Co., 7 Wis. 59. A 
 general authority to aid a connect- 
 ing road is sufficient to authorize a 
 guaranty of its bonds. Zabriskie v. 
 Cleveland, &c. R. R. Co., 23 How. 
 381 ; Smead v. Indianapolis, &o.'R. R. 
 Co., 11 Ind. 104. 
 
 * Low V. California Pao. R. R. 
 Co., 52 Cal. 53; Opdyke v. Pacific 
 R. R. Co., 3 Dill. 55;' Amot v. Erie 
 Ry. Co., 5 Hun, 610, 611 ; 67 N. Y. 
 315. 
 
 ^ Clarke v. Imperial Gaslight, &o. 
 Co., 4 B. & Ad. 315; Lambert v. 
 Northern By. Co., 18 W. R. 180. 
 
 6 2 H. & M. 135. In Atty.-Gen. 
 V. Great Eastern Ry. Co., L. R. 11 
 Ch. D. 480, Lord Justice James, re- 
 ferring to the case above cited, said: 
 "I recollect a case of an attempt 
 being made to restrain an insurance 
 company from paying or contribut- 
 ing to losses which were not techni- 
 
401 THE CONSTRUCTION OP CHARTERS. § 425 
 
 surance company applied for an injunction to restrain the 
 directors of the company from paying losses for which the 
 company was not liable by reason of an exception contained 
 in the policy of insurance ; but the court held that, inasmuch 
 as it was usual, and for the benefit of the business reputation 
 of the company, to make such payments, the complainant was 
 not entitled to relief. Vice-Chancellor Page-Wood said : 
 " It is said the payment is a mere gratuity. Let it be so 
 called ; it does not follow that it is beyond the power of the 
 company, if to give such gratuities be the generally received 
 method of conducting such a business. Even the case put, 
 of subscribing to a school, would, in my opinion, be a legiti- 
 mate application of money, if it were proved to be the received 
 mode of carrying on a particular business. ... It is one 
 thing to say that the directors are pa,ying something which 
 they are not bound to pay, and quite another thing to say 
 that they are making payments for purposes not within the 
 objects of the company." 
 
 There can be no doubt that any corporation may enter into 
 a compromise ; and the payment of a claim by the agent* 
 of a corporation in good faith, for the purpose of avoiding 
 litigation, will not be held unauthorized merely because the 
 claim was not a just one.^ 
 
 The directors of a corporation may offer a reward for the 
 apprehension of a thief who has stolen the company's prop- 
 erty, and may pursue and cause the arrest and punishment 
 of the offender by the usual course of proceedings.^ This 
 must be deemed impliedly authorized by the company's 
 charter, because it is a reasonable means of protecting the 
 company from the loss of its property. 
 
 § 425. What may be received in Payment of Stock Subscrip- 
 tions and Debts. — The directors of a corporation have implied 
 
 cally covered by the terms of their Albany v. Burke, 11 Wall. 96; See- 
 insurances, but it was answered by ley v. San Jose, &c. Co., 59 Cal. 22. 
 the court, that such libei-ality was a " Kelsey v. National Bank, 69 
 legitimate mode of preserving and Pa. St. 426 ; American Express Co. 
 increasing: their customers." v. Patterson, 73 Ind. 430; Kicord «. 
 * First Nat. Bank v. National Central Pacific R. K. Co., 15 Nev. 
 Exchange Bank, 92 U. S. 122; New 167. 
 vot. I. — 26 
 
§ 426 THE LAW OP PRIVATE COEPOBATIONS. 402 
 
 authority to call in the capital subscribed by its shareholders, 
 whenever this is needed in carrying on the company's busi- 
 ness.^ The money so obtained may be applied in purchasing 
 such property as is necessary or appropriate as a means of 
 attaining any of the company's authorized purposes. It is 
 also within the powers of the directors to receive property 
 in lieu of a payment due the company, whether from a stock- 
 holder or an ordinary debtor, provided the property be of 
 such character and value that they would be authorized to 
 purchase it with the money, if this had been first paid into 
 the treasury of the company.^ The directors may even ac- 
 cept a payment in property which is not needed in carrying 
 on the company's business, provided this be done in good 
 faith, to prevent the company from suffering loss through the 
 insolvency of a debtor or subscriber ; and they may enter into 
 a bona fide compromise where the liability of a shareholder or 
 of any debtor of the company is in dispute.^ This follows 
 as an incident to the power of the directors to manage the 
 company's affairs according to the usages of business, and 
 to do all reasonable acts to protect it from the loss of its 
 property. 
 
 § 426. It has been held in various cases, that the agents 
 of a corporation could receive in payment of stock sub- 
 scriptions either promissory notes with security,* or real 
 
 1 Supra, § 143 et seg. Co., 17 0hio, 187; Neuse River Nav. 
 
 2 Philadelphia, &c. R. R. Co. v. Co. v. Newbern, 7 Jones (N. Car.), 
 Hickman, 28 Pa. St. 318; Brant v. 275. 
 
 Ehlen, 59 Md. 1 ; Reichwald v. Com- A railroad company having au- 
 
 raercial Hotel Co., 106111. 4-39; Sea- thority to purchase a railroad may 
 
 right V. Payne, 6 Lea (Tenn.), 288; pay for the same in shares of paid- 
 
 Hayden v. Atlanta Cotton Factory, up stock. Branch v. Jesup, 106 U. S. 
 
 61 Ga. 234; Lorillard v. Clyde, 86 468,481, 484. 
 
 N. Y. 384; Oregonian Ry. Co. v. ' Philadelphia, &o. R. R. Co. v. 
 
 OregonRy. &Nav. Co.,23Fed. Rep. Hickman, 28 Pa. St. 318; Macon, 
 
 232, 244; Van Cott v. Van Brunt, 2 &c. R. R. Co. v. Vason, 57 Ga. 814; 
 
 Abb. N. C. 283; 82 N. Y. 535; New Albany w. Burke, 11 Wall. 96. 
 Schroder's Case, L. R. 11 Eq. 131; * Clark v. Farrington, 11 Wis. 
 
 Pell's Case, L. R. 5 Ch. 11; Spargo's 306; Lyon v. Ewings, 17 Wis. 61; 
 
 Case, L. R. 8 Ch. 407; and see cases Andrews v. Hart, Id. 297; Western 
 
 in following notes. Compare, how- Bank v. Talhnan, Id. 580; Hardy v. 
 
 ever, Henry v. Vermillion, &o. R. R. Merriweather, 14 Ind. 203; Goodrich 
 
403 
 
 THE CONSTETJCTION OP CHAKTEES. 
 
 §427 
 
 estate,^ or labor and materials useful in constructing the com- 
 pany's works,^ or other property,^ provided it be equal in 
 value to the sum due on the subscription. Paid-up shares 
 may also be issued in payment of debts due from the com- 
 pany, if the directors have authority to issue or sell the shares 
 for an equal amount of cash.* 
 
 § 427. Shares can be declared paid up only on Payment of 
 their Par Amount. — The rule that shares cannot lawfully be 
 declared paid up unless their par value has been contributed 
 to the company's capital, rests upon the equities existing be- 
 tween the shareholders forming the company and also upon 
 the equitable rights of outside parties, who deal with the 
 company on the faith of the capital indicated by its charter. 
 The charter of a corporation never authorizes the company's 
 agents to issue shares as fully paid up for less than their 
 
 ti. Reynolds, 31 111. 490; Vermont 
 Central R. R. Co. v. Clayes, 21 Vt. 
 30. See People v. Stockton, &e. 
 R. R. Co., 45 Cal. 806. 
 
 After a corporation has received 
 the note and mortgage of a stock 
 subscriber in payment of his lia- 
 bility, the shares must be regarded 
 as fully paid up, and are transferable 
 as paid-up shares. The maker of 
 the note is liable as an ordinary 
 debtor to the company. Union, &c. 
 Ins. Co. V. Curtis, 35 Ohio St. 343; 
 Protection Life Ins. Co. v. Osgood, 
 93 lU. 69. 
 
 It seems questionable, therefore, 
 whether the agents of a corporation 
 should be allowed to receive un- 
 secured promissory notes in pay- 
 ment of shares. So long as shares 
 are not paid up, the company is at 
 least secure that no dividend will 
 be paid the holder or his transferee 
 until the amount of the shares has 
 actually been contributed to the 
 company's capital. 
 
 ' Cincinnati, &c. R. R. Co. v. 
 Clarkson, 7 Ind. 595 ; State v. Bai- 
 
 ley, 16 Ind. 46; Carr v. Le Fevre, 
 27 Pa. St. 413; Dayton, &c. R. R. 
 Co. V. Hatch, 1 Disney, 84. 
 
 2 Philadelphia, &c. R. R. Co. v. 
 Hickman, 28 Pa. St. 318; Pitts- 
 burgh, &c. R. R. Co. V. Stewart, 
 41 Pa. St. 54; Ashuelot Boot, &c. 
 Co. V. Hoit, 56 N. H. 548, 558; 
 Eppes I'. Mississippi, &c. R. R. Co., 
 35 Ala. 33; Ridgefield, &c. R. R. 
 Co. t!. Brush, 43 Conn. 86; Van 
 Cott V. Van Brunt, 82 N. Y. 535, 
 overruling 2 Abb. N. C. 283; Boody 
 V. Rutland, &o. R. R. Co., 24 Vt. 
 660; Boston, &c. R. R. Co. v. Wel- 
 lington, 113 Mass. 79. 
 
 ^ See Schroder's Case, L. R. 11 
 Eq. 131 ; East New York, &c. R. R. 
 Co. V. Lighthall, 6 Roberts. 407; 
 Swatara R. R. Co. v. Brune, 6 Gill, 
 41 ; Louisville, &c. R. R. Co. i». 
 Thompson, 18 B. Monr. 735; Stod- 
 dard V. Shetucket Foundry Co., 34 
 Conn. 542. 
 
 * Lohman v. New York, &c. R. R. 
 Co., 2 Sandf. 39; Reed v. Hayt, 51 
 N. Y. Super. Ct. 121. 
 
§ 429 THE liAW OF PBIVATE COKPOKATIONS. 404 
 
 actual or market value, because this would be fraud upon, tbe 
 existing shareholders,^ and it never authorizes the company 
 to represent to the world that its capital has been fully paid 
 up unless it -was paid up at par, for this would be a fraud 
 upon persons dealing with it.^ 
 
 § 428. Property received must be Money's Worth. — It fol- 
 lows, therefore, that property cannot be received in payment 
 for more than it is really worth ; ^ and where property has 
 no ascertained and settled value, it cannot be received at all, 
 unless it be required in carrying on the company's business.* 
 
 The agents of a corporation who receive property in pay- 
 ment of a stock subscription, or debt due to the company, are 
 not bound at their peril to ascertain whether the value of the 
 property is equal in amount to the indebtedness or liability 
 in payment of which it is received; they are not liable as 
 guarantors of the value of the property. All that is required 
 is, that the agents of the company in receiving the property, 
 and the debtor or stockholder in transferring it, should act in 
 good faith, and should estimate the value of the property with 
 the same care as if it were paid for in cash.^ 
 
 § 429. Under Statute in New York. — The general law of 
 New York for the incorporation of companies for manufactur- 
 ing, mining, and other purposes, originally contained a provis- 
 ion that nothing but money should be considered as payment 
 of any part of the capital stock of a company formed under 
 the act.^ Subsequently, an amendatory act was passed, au- 
 thorizing the trustees of such a company to purchase any 
 
 1 Supra, § 306. bum Coal, &c. Co., 63 Iowa, 332; 
 
 2 Tnfra, § 781. and .see cases infra, §§ 825, 826. 
 
 In some States corporations are * See Barnes ». Brown, 11 Hun, 
 pi'ohibited by statute or constitu- 315; Taskert;. Wallace, 6 Daly, 364. 
 tional provision from issuing stock ^ Lorillard v. Clyde, 86 N. Y. 
 as paid up, except for money or 384; and see cases cited in the fol- 
 money's worth. See Const, of Cal., lowing section. 
 Art. XII. § 11; Ewing v. Oroville As to the rights of the corpora- 
 Mining Co., 56 Cal. 649; McDonald tion and its stockholders where this 
 V. Patterson, 54 Cal. 245; Hyatt v. rule is violated, see supra, §§ 289- 
 Allen, Id. 353. 292. As to the rights of creditors, 
 
 * Cabot, &o. Bridge Co. v. Cha- see infra, § 825 et seq. 
 pin, 6 Cush. 50; Oliphant v. "Wood- ' Act of 1848, ch. 40, sect 14. 
 
405 
 
 THE CONSTBUCTION OP CHAETJ 
 
 the stock 
 
 e or error 
 
 it must be 
 
 as in bad 
 
 .may be 
 
 4 or mis- 
 
 th%s good 
 
 all that is 
 
 property necessary for the compai 
 stock " to the amount of the val 
 Under this amendment it ha^ bee 
 holder of stock, issued as paira;t\up 
 vidual liability for the debts OTlhseSii 
 to prove that the property haaHaee: 
 paid up at an over-valuation «rbi| 
 of judgment on the part of /^s/ti 
 shown that the purchase at i 
 faith, and to evade the /statute. 
 impeached for fraud, but not for erro 
 taken views of the value of the propi 
 faith and the exercise of an honest judg: 
 required." 2 
 
 § 430. The Rigbt of carrying on Legal Proceedings. — It is 
 implied in every charter of incorporation, ihat the company 
 formed under it may engage in legal prirceedings, and take 
 whatever steps may be required for the protection and en- 
 forcement of its rights. The right to execute an appeal 
 bond, or other undertaking in the course of a litigation, fol- 
 lows as a necessary consequence.' It is also clear that the 
 managing agents of a corporation have implied authority 
 to employ attorneys and counsellors to represent the com- 
 pany in legal proceedings, and to give legal advice when- 
 ever, in the exercise of a reasonable discretion, this would 
 be a prudent ^neasure in the management of the company's 
 affairs.* 
 
 If a corporation has an interest in the result of a litigation, 
 it may properly support the same out of the corporate funds, 
 although the corporation be not itself a party to the suit. 
 Thus, a corporation may indemnify an agent for expenses in- 
 curred in carrying on a suit involving a construction of the 
 
 1 Act of 1853, ch. 333. 
 
 " Douglass e. Ireland, 73 N. Y. 
 100, 102; Lake Superior Iron Co. 
 V. Drexel, 90 N, Y. 87; Boynton v. 
 Andrews, 63 "if. Y. 98 ; Schenok v. 
 Andrews, 57 N. Y. 133; Boynton 
 V. Hatch, 47 N. Y. 225. 
 
 ' Collins V. Hammock, 59 Alai 
 418. 
 
 * Western Bank v. Gilstrap, 45 
 Moi 419. See also infra, § 635, and 
 supra, § 356. 
 
§ 431 THE LAW OP PEIVATB COKPOKATIONS. 406 
 
 company's charter, or a determination of a disputed question 
 affecting the company's rights.^ The funds of a corporation 
 may also be used in defending a suit brought against an 
 agent on account of acts performed in the service of the com- 
 pany, whenever the corporation is materially interested in 
 the result ; as, for example, where there is a reasonable pos- 
 sibility that the corporation may ultimately be compelled to 
 indemnify its agent.^ 
 
 But the agents of a corporation have no right to use the 
 corporate funds in order to support a litigation which is not 
 for the company's benefit and for an authorized purpose.* 
 Thus, in Pickering v. Stevenson,* the directors of a foreign 
 railway company were enjoined, at the suit- of a shareholder, 
 from applying the funds of the company in paying the costs 
 of a prosecution instituted by them on account of a libel con- 
 cerning their management of the company's affairs. 
 
 The managing agents of a corporation have authority to 
 compromise a suit, or to confess judgment, whenever, in the 
 exercise of their discretion, they deem this to be in the in- 
 terest of the corporation: A provision in the charter of a 
 corporation, providing a particular form of serving process on 
 the company, does not prohibit the execution of a power of 
 attorney to confess judgment waiving service.^ 
 
 § 431. The Right to purchase Shares in another Company. — 
 A corporation has no implied right to purchase shares in 
 
 1 Compare Baker v. Windham, 11 Humph. 582; Butler v. City of 
 13 Me. 74; Babbitt ». Savoy, 3 Milwaukee, 15 Wis. 493 ; Regina ». 
 Cush. 530; Mayor of Macon v. Cum- Mayor of Tamworth, 17 W. R. 231. 
 mins, 47 Ga. 321; Harbison u. First Compare Regina v. Town Council 
 Presbyterian Society, 46 Conn. 529; of Lichfield, 4 Q. B. 893; Regina 
 Regina v. Prest, 16 Q. B. 33. v. Town Council of Stamford, Id. 
 
 2 It seems that a town may in- 900, n. 
 
 demnify an executive officer, out of * Pickering ». Stephenson, L. R. 
 
 town funds, for losses sustained 14 Eq. 322 ; Vincent v. Nantucket, 
 
 while acting in good faith in the 12 Cush. 103; Merrill v. Plainfield, 
 
 discharge of his official duty. Nel- 45 N. H. 126 ; Harbison v. First 
 
 son V. Milford, 7 Pick. 18; Hadsell Presbyterian Society, 46 Conn. 529. 
 V. Hancock, 3 Gray, 526; Merrill v. « Millard v. St. Francis, &c. Acad- 
 
 Plainfleld, 45 N. H. 126. emy, 8 111. App. 341. 
 ' Daniel v. Mayor of Memphis, 
 
407 THE CONSTETJCTION OF CHARTERS. § 432 
 
 another company for the purpose of controlling its manage- 
 ment.i Nor may a corporation hold shares in another com- 
 pany as an investment, unless this be the usual method of 
 carrying on its own proper business. The right of a corpo- 
 ration to invest in shares of another company cannot be im- 
 plied merely because both companies are engaged in a similar 
 kind of business. A corporation must carry on its business 
 by its own agents, and not through the agency of another cor- 
 poration.2 It is clear, also, that a corporation has no implied 
 right to speculate in shares unless this be the kind of busi- 
 ness for which the company was formed.' 
 
 But a corporation may always, without express authority, 
 acquire shares in another company while carrying on busi- 
 ness in the usual manner ; * and even although purchasing 
 shares be not within the course of the business of a corpora- 
 tion under ordinary circumstances, it may be entirely proper 
 under exceptional circumstances. Thus, every corporation, 
 irrespective of the nature of its business, would have a right 
 to receive shares given in payment of, or as security for, a 
 claim which is in danger of proving worthless through insol- 
 vency of the debtor.^ 
 
 § 432. No rule can be stated for determining, in all cases, 
 whether or not a corporation may purchase shares in another 
 
 1 Sumner v. Marcy, 3 Woodb. &. Ohio St. 350. In Milbank v. New 
 M. 105; Central R. R. Co. v. Col- York, &c. R. R. Co., 64 How. Pr. 
 lins, 40 Ga. 582 ; Hazlehurst v. Sur 20, it was held that a railroad com- 
 vannah, &c. R. R. Co., 43 Ga. 13; pany, having acquired shares in an- 
 Great Northern Ry. Co. v. Eastern other company, could not vote upon 
 Counties Ry. Co., 21 L. J. Ch. 837. the same, although it could collect 
 See, however, Ryan v. Leavenworth, the dividends. 
 &c. Ry. Co., 21 Kans. 365; Booths). » First Nat. Bank v. National 
 Robinson, 55 Md. 419. Exchange Bank, 92 U. S. 128; Tal- 
 is Mechanics', &c. Ass. p.Meriden mage v. Pell, 7 N. Y. 828; Royal 
 Agency Co., 24 Conn. 159; Sum- Bank of India's Case, L. R. 4 Ch. 
 ner v. Marcy, 3 Woodb. & M. 105; 252; Joint Stock, &c. Co. v. Brown, 
 Franklin Co. v. Lewiston Savings L. R. 8 Eq. 381; Franklin Bank 
 Institution, 68 Me. 43; Berry v. v. Commercial Bank, 36 Ohio St. 
 Yates, 24 Barb. 199. Compare 350. 
 
 Terry v. Eagle Lock Co., 47 Conn. * Royal Bank of India's Case, 
 
 141; McMillan v. Carson Hill, &c. L. R. 4"Ch. 252. 
 Mining Co., 12 Phila. 404; I rank- ^ pij-gt i^^t. Bank v. National 
 
 lia Bank v. Commercial Bank, 36 Exchange Bank, 92 U. S. 128. 
 
§ 434 THE LAW OB" PRIVATE OORPOBATIONS. 408 
 
 company. Shares are, in reality, the interests belonging to 
 the associates or part owners of the corporate concern ; but 
 in many instances they have a fixed value, and are dealt with 
 as tangible property. The right to purchase and hold shares, 
 therefore, depends upon the precise character of the shares 
 and the circumstances of the case. Thus, a corporation 
 whose charter authorizes it to invest its funds in an enter- 
 prise not requiring the direct supervision of its agents, would 
 be entitled to do this indirectly by purchasing shares in an- 
 other company, but would have no right to buy shares for 
 speculation. A corporation having authority to lend money 
 on security would be entitled to receive shares of approved 
 value as security, but would have no right to hold them to 
 obtain the dividends, or in the hope of a speculative increase 
 of their value. On the other hand, a corporation engaged in 
 the business of buying and selling shares as a speculation 
 would have no right to acquire them for any other purpose. 
 
 § 433, Subscribing for SliEires in another Company. — A cor- 
 poration cannot, in the absence of express statutory authority, 
 become an incorporator by subscribing for shares in a new 
 corporation ; nor can it do this indirectly through persons 
 acting as its agents or tpols.^ The right of forming a cor- 
 poration is conferred by the incorporation laws only upon 
 persons acting individually, and not upon associations ; more- 
 over, it would, under ordinary circumstances, be in violation 
 of the charter of an existing company to subscribe for shares 
 in a new company and assume the resulting liabilities. 
 
 § 434. A Corporation has no Implied Authority to alter the 
 Amount of its Capital Stock, or to purchase Shares of its own 
 Stock. — A corporation has no implied authority to alter the 
 amount of its capital stock, where the charter has definitely 
 fixed the capital at a certain sum. The shares of a corpora- 
 tion can neither be increased nor diminished in number, or 
 in their nominal value, unless this be expressly authorized by 
 the company's charter.^ 
 
 ^ Central R. R. Co. v. Pennsyl- 430; Droitwich Salt Co, v. Curzon, 
 
 Yftnia R. R. Co., 31 N. J. Eq 475. L. R. 3 Exoh. 42; Re Financial 
 
 '^ Smith V. Golds worthy, 4 Q. B. Corporatioa, Holmes's Case, L- R. 
 
409 THE COUSTEtJCTION OP CHAETEKS. § 434 
 
 It follows, for this reason, that a corporation can have no 
 right to purchase shares in itself, unless expressly author- 
 ized by its charter to do so ; for such purchase would di- 
 minish the amount of the company's capital, and involve a 
 rescission of the contract of membership.^ If, however, the 
 charter of a corporation expressly provides that the company 
 may alter or diminish the amount of its capital stock, there 
 seems to be no reason why this should not be done by pur- 
 chasing a portion of the company's outstanding shares. 
 
 There are exceptional cases in which a corporation may 
 become a purchaser or transferee of shares in its own stock, 
 although its charter does not authorize a reduction of capital ; 
 as, for example, where the shares are received in discharge of a 
 debt which cannot be collected in any other manner, or where 
 the shares are received as a gift, and the company's real capital 
 therefore remains undiminished.^ It is clear that the direc- 
 tors of a corporation have no right, under any circumstances, 
 to purchase shares in the company with the company's own 
 money, for the purpose of controlling the election of officers. 
 Shares in a corporation which have been purchased by the 
 company itself, either in its own name or the name of a trus- 
 tee, cannot be voted on by either the trustee or the com- 
 pany's officers.* 
 
 2 Ch. 714; New York, &c. R. R. Co. shares may be assigned to new indi- 
 V. Schuyler, 34 N. Y. 30; Salem Mill viduals in perpetual succession, yet 
 Dam Co. «. Ropes, 6 Pick. 23 ; Knowl- the number of shares and amount 
 ton V. Congress, &c. Spring Co., 14 of capital cannot be increased, ex- 
 Blatchf. 364; Scovill v. Thayer, 105 cept in the manner expressly au- 
 U. S. 143 ; Grangers' Life, &c. ,Ins. thorized by the charter or articles of 
 Co. V. Kamper, 73 Ala. 325; and association... . Changes in the pur- 
 see infra, §§ 761, 763. pose and object of an association, or 
 
 A provision in the charter of a in the extent of its constituency or 
 
 corporation authorizing the directors membership, involving the amount 
 
 to increase its capital stock does not of its capital stock, are necessarily 
 
 authorize a subsequent reduction, fundamental in their character, and 
 
 Sutherland v. Olcott, 95 N. Y. 93. cannot, on general principles, be 
 
 In Railway Co. v. AUerton, 18 made without the express or implied 
 
 Wall. 235, Justice Bradley said: consent of its members." 
 
 " A corporation, like a partnership, ' Supra, § 112. 
 
 is an association of natural persons ' Supra, § 114. 
 
 who contribute a joint capital for a * Ex parte Holmes, 5 Cow. 
 
 common purpose ; and although the 426 ; Brewster v. Hartley, 37 Cal. 
 
§ 435 THE LAW OP PRIVATE COEPOKATIONS. 410 
 
 In reducing the capital stock of a corporation, the rights 
 of creditors must always be respected. Existing creditors 
 would be entitled to retain the benefit of the full security on 
 the faith of which they have contracted. It would be a fraud 
 upon those dealing with the company, after a reduction of its 
 capital by the purchase of shares or otherwise, to represent 
 the capital as being greater than the sum to which it has 
 been reduced.^ 
 
 PART III. 
 
 PAYMENT OE DIVIDENDS. 
 
 § 435. Dividends may be paid out of Profits. — The ulti- 
 mate object for which every ordinary business corporation is 
 formed is the pecuniary profit of its individual members.^ 
 Any net increase of the capital of an institution of this kind 
 is a gain upon the united investment of its shareholders, and 
 may be distributed amongst them as profits, each shareholder 
 being entitled to his proportionate dividend or share. 
 
 It is a fundamental rule, that dividends can be paid only 
 out of profits or the net increase of the capital of a corpora- 
 tion, and cannot be drawn upon the capital contributed by 
 the shareholders for the purpose of carrying on the com- 
 pany's business. If the capital stock of a corporation is fixed 
 by its charter at a certain amount, the company has no legal 
 authority to begin to carry on business with a less capital ; 
 nor do the members of a corporation of this description agree 
 to unite in any corporate speculation until the amount of 
 capital indicated by the charter has been fully subscribed.^ 
 For the same reasons, it follows that the capital of a corpo- 
 ration cannot be reduced wilfully below the amount fixed by 
 the charter, after the company has begun to carry on busi- 
 ness. The managing agents, and even the holders of a ma- 
 
 15. Compare Taylor v. Miami Exp. * This does not apply to savings 
 Co., 6 Ohio, 76. banks. See supra, § 390. 
 
 1 Infra, § 851. s gupra, § 408. 
 
411 THE CONSTEUCTION OP CHAETERS. § 437 
 
 jority of shares, have no authority to diminish the prescribed 
 capital of the company by distributing a portion of it among 
 the shareholders in the shape of dividends. This would not 
 only be in violation of the rights of every dissenting mem- 
 ber, but would be a fraud upon creditors ; and the latter 
 would be entitled to treat such dividend as a repayment pro 
 tanto of the capital pledged as security for their claims, and 
 not as an irrevocable distribution of profits.' 
 
 Accordingly, it has been held that, if the agents of a cor- 
 poration repay to its stockholders any portion of the fund 
 originally contributed as capital, the corporation may recover 
 the amount paid, as money paid by its agents without any 
 authority.^ And if the managing agents of a corporation 
 threaten to distribute any portion of its funds amongst the 
 stockholders before a net increase has been realized, any dis- 
 senting stockholder may interfere on behalf of thfe company, 
 in order to protect his equitable rights.^ 
 
 §436. Under New York Statutes. — In New York it is 
 provided by statute that the directors or managers of a cor- 
 poration shall make no dividend except from surplus profits, 
 and shall not divide, withdraw, or in any manner pay to the 
 stockholders, any portion of the company's capital stock.* 
 By the terms of the Penal Code, any director who concurs 
 in making a dividend not allowed by law, or in dividing, 
 withdrawing, or paying to the stockholders any part of the 
 company's capital stock, is guilty of a misdemeanor.^ 
 
 § 437. What may be distributed as Net Profits. — It is often 
 a matter of practical difficulty to determine what the actual 
 profits of a corporation are, but the method of calculation is 
 
 1 Infra, § 789. The rule here perial Hotel Co., 2 H. & M. 528, and 
 stated is not applicable to corpo- cases supra, § 276. 
 
 rations whose capital is not pro- * R. S. of N. Y.,.Part I. Ch. 
 
 vided as a permanent fund for car- XVIII. Title IX. § 2. (L. 1825, 
 
 Tying on business. Infra, §§ 442, ch. 448, § 2.) As to the construo- 
 
 830. tion of this provision, see Williams 
 
 2 Lexington, &c. Ins. Co. v. Page, v. Western Union Tel. Co., 93 N. Y. 
 17 B. Monr. 412, 442, 443. See 162. 
 
 Ranee's Case, L. R. 6 Ch. 104. » New York Penal Code, § 594. 
 
 » See Macdougall v. Jersey Im- 
 
§ 438 THE LAW OP PRIVATE COBPOEATIONS. 412 
 
 extremely simple. Vice-Chancellor Sandford said : " The 
 capital stock of a corporation is, like that of a copartnership 
 or joint-stock company, the amount which the partners or 
 associates put in as their stake in the concern. To this they 
 add, upon the credit of the company, from the means and 
 resources of others, to such extent as their prudence or the 
 confidence of such other persons will permit. Such addi- 
 tions create a debt; they do not form capital. And, if 
 successful in their career, the surplus over and above their 
 capital and debts becomes profits, and is either divided 
 among the partners and associates, or used still further to 
 extend their operations." ' 
 
 The rule was stated by Blatchford, J., with special refer- 
 ence to the case of a railroad company, as follows: "Net 
 earnings are, properly, the gross receipts less the expenses 
 of operatin'g the road to earn such receipts. Interest on debts 
 is paid out of what thus remains, that is, out of the net earn- 
 ings. Many other liabilities are paid out of the net earnings. 
 When all liabilities are paid, either out of the gross receipts 
 or out of the net earnings, the remainder is the profit of the 
 shareholders to go towards dividends, which in that way are 
 paid out of the net earnings." ^ 
 
 § 438. Method of ascertaining Profits. — The right to de- 
 clare a dividend depends upon the state of the company's 
 finances at the time when the dividend is declared. The 
 question usually is, whether or not there would remain 
 a net increase upon the original investment, after deduct- 
 ing from the assets of the company, all present debts and 
 making provision for future or contingent claims.^ It is 
 immaterial at what time the increase was earned. Profits 
 accumulated by a corporation in times of prosperity may be 
 
 1 Barry K. Merchants' Exchange Co., 40 Ga. 103; People v. Super- 
 Co., 1 Sandf. Ch. 307; Williams v. visors, 4 Hill, 20. See Union Pa- 
 Western Union Tel. Co., 93 N. Y. cific R. R. Co. v. United States, 99 
 162. U. 8. 426; Stringer's Case, L. R. 
 
 2 St. John V. Erie Ry. Co., 10 4 Ch. 475. 
 
 Blatchf. 271, 279; 22 Wall. 136. » See cases in the following sec- 
 See also Reid v. Eatonton Manuf. tious. 
 
413 THE CONSTEUCTION OP CHAETEKS. § 439 
 
 distributed bj the company subsequently, when no profits 
 are earned.^ 
 
 A corporation may be largely indebted, and yet be entitled 
 to pay dividends to its shareholders before the indebtedness 
 has been paid,^ and it may even be proper to borrow money 
 for the purpose of paying a dividend, provided a sm-plus 
 would remain after deducting the amount of the company's 
 capital and indebtedness: from the fair value of the assets 
 which it owns.^ 
 
 § 439. In ascertaining whether a company has a surplus 
 which may be divided among the shareholders, permanent 
 improvements made by means of borrowed money may often 
 be valued as counterbalancing the liability of the company 
 for the money used to construct them.* Machineiy or roll- 
 ing stock purchased by a railroad company may be taken as 
 representing the amount of capital invested in it, after mak- 
 ing due allowance for depreciation in value through accident 
 and wear.^ 
 
 Future and contingent claims against a corporation must 
 be reduced to their present value, in order to determine 
 the net gain upon the capital invested. Hence, it is the 
 duty of the directors of an insurance company to reserve 
 at all times a sufficient fund, in addition to the capital 
 stock, to meet probable losses on risks assumed by the 
 company.® 
 
 If the entire capital has not been paid in by the share- 
 holders, the amount remaining unpaid should be treated as 
 a reserve fund, and be added to the assets on hand, in deter^ 
 
 1 See Williams v. Western Union v. Sheffield Water Works Co L R 
 Tel. Co., 93 N. Y. 162; Mills v. 14 Eq. 521. ' 
 Northern Ey. Co., L. R. 5 Ch. 621 ; 6 Mills v. Northern Ry. Co., L. R. 
 Beers v. Bridgeport Spring Co., 42 5 Ch. 631. Compare Corry v. Lon- 
 Conn. 17; Hoole v. Great Western donderry, &c. Ry. Co., 29 Beav. 272, 
 Ey. Co., L. R. 3 Ch. 268. 273. 
 
 2 Mills D. Northern Ry. Co., L. R. 6 gcott v. Eagle Fire Co., 7 
 5 Ch. 631. Paige, 198 ; De Peyster «. American 
 
 » Stringer's Case, L. R. 4 Ch. Fire Ins. Co.. 6 Paige, 486; Lexing- 
 
 475. See infra, § 838. ton, &c. Ins. Co. v. Page, 17 B.Monr. 
 
 * Corry v. Londonderry, &o. Ry. 412. 
 Co., 29 Beav. 272. See Bardwell 
 
§ 441 THE LA"W OP PEIVATE COEPOKATIONS. 414 
 
 mining whether the company has a surplus with which it can 
 pay a dividend. 
 
 § 440. Dividends where the Capital haa been reduced in 
 Value. — The right of a corporation to declare dividends 
 cannot be determined by reference to the market value of the 
 company's shares, or the price for which its assets could be 
 sold. After the capital of a corporation has been invested in 
 property, to be used in carrying on its business, the value of 
 the company's assets and of its shares would be a purely spec- 
 ulative one, depending upon the success of the enterprise. 
 
 In determining whether a company is entitled to pay a 
 dividend to its shareholders, the property acquired for per- 
 manent use in carrying on business, maj' be valued at the 
 price actually paid for it, although it could not be sold again 
 except at a loss. And even although the business of the 
 company should prove less profitable than was anticipated, 
 and the value of the whole concern, and consequently of 
 the shares representing it, should greatly depreciate in 
 actual value, it would not be necessary to accumulate the 
 profits until the depreciation had been made up, and the 
 value of the shares again raised to par. All that is required 
 is, that the whole capital originally contributed by the share- 
 holders shall be put into the business and kept there ; that 
 no part of it shall be taken out again, directly or indirectly, 
 and given back to the shareholders. 
 
 § 441. The rule above stated applies to all corporations 
 whose capital is intended to provide a permanent means of 
 carrying on business ; it applies to banking, manufacturing, 
 railroad, telegraph, and insurance corporations, and to all 
 companies of a similar character. If the capital of a com- 
 pany of this description is invested in machinery, land, or 
 fixtures used in carrying on its business, the machinery, land, 
 or fixtures may be valued at their original cost, provided 
 they be kept up in their original condition. 
 
 Any depreciation of- the value of the company's property 
 resulting from the uncertainty of the speculation in which 
 the company has embarked, or from a failure to carry on 
 business profitably by reason of the state of trade, or similar 
 
415 THE CONSTETTCTION OF CHARTERS. § 442 
 
 causes, may be disregarded ; but any depreciation caused by 
 design, accident, or wear and tear in using the property, 
 should be made up out of the earnings before any dividend 
 is declared. 
 
 The capital of some classes of corporations, such as banking 
 and insurance companies, is not contributed for the purchase 
 of machinery or fixtures of any kind, except to a very lim- 
 ited amount, but is provided as a fund of money to be used 
 by the company solely in money transactions. It is evident 
 that no material depreciation of the value of the capital of a 
 company of this description can take place except through 
 losses sustained in business transactions. The fund pro- 
 vided for carrying on the business should therefore be kept 
 up at its original amount ; and if it has been reduced by 
 losses, no dividend should be declared until the losses have 
 been repaired.^ 
 
 § 442. Different Rule applicable to Mining Companies. — The 
 rule stated in the preceding section has no application to a 
 corporation whose sole purpose is to invest its capital in a 
 specific piece of property like a mine, and afterwards to con- 
 sume the property or extract its value at a profit. The capi- 
 tal of a mining company is not designed to be used, like that 
 of a banking or manufacturing company, in carrying on busi- 
 ness permanently. The working of a mine necessarily causes 
 it to become exhausted and to depreciate in value, and this 
 depreciation cannot be repaired. There would be no object 
 in accumulating the money obtained by the company through 
 working the mine, so as to keep up the original amount of 
 
 1 In New York the rule above deficit of capital so created shall be 
 
 stated applies to moneyed corpora- made good, either by the recoveiy 
 
 tions by statutory enactment. Sec- of the moneys charged as lost, or 
 
 tionl82 of the banking law provides: from the subsequently accruing 
 
 " When any losses shall be sustained profits of the company." Act of 
 
 by any such corporation, that shall 1882, ch. 409, re-enacting sections 
 
 exceed its undivided profits then 3 and 4 of Title II. Chap. XVIII. 
 
 realized and possessed, they shall of Part I. of R. S. 
 be charged as a reduction of the The rule thus enacted appears to 
 
 capital stock of the company, and be the rule applicable to companies 
 
 no dividend shall thereafter be made of this description at common law. 
 on the shares of such stock until the 
 
§ 443 THE LAW OF PEITATB COEPOKATIONS. 416 
 
 capital. It is implied from the character of the speculation 
 of a mining company, that the income derived from working 
 the mine shall be distributed among the shareholders as divi- 
 dends, after deducting the expenses, and making reasonable 
 provision for contingencies.-' 
 
 But a mining company has no right to draw upon its capi- 
 tal by borrowing money, or by selling a portion of its property, 
 in order to declare a dividend.^ It can only use the net pro- 
 ceeds of working the mine for this purpose, and clearly no 
 dividend can be declared without considering the rights of 
 creditors, and providing for future liabilities. 
 
 § 443. Distribution of Capital. — Money obtained by a com- 
 pany upon the sale of forfeited stock,* or as compensation for 
 property taken under the power of eminent domain,* or as 
 interest or penalty on account of the failure of a contractor 
 to complete his work,^ cannot be treated as profits, and di- 
 vided among the shareholders, without reference to the gen- 
 eral state of the company's finances. 
 
 If the nominal capital stock of a corporation has been re- 
 duced by the proper authorities, the shareholders are entitled 
 to have any excess of the actual capital on hand over the 
 reduced amount of the nominal capital divided amongst them 
 in proportion to the number of their shares. The sum thus 
 divided does not constitute profits, nor is it a part of the 
 capital of the newly organized company. It is merely a part 
 of the fund originally invested by the shareholders, which 
 they are entitled to have restored to them, or applied accord- 
 ing to their agreement, after the original investment has been 
 abandoned.^ Upon winding up a corporation, the entire 
 capital after paying the company's debts must be distributed 
 among the shareholders ; ^ in this case, the rules governing 
 
 1 See infra, § 830. « Seeley ». New York Nat. Exch. 
 
 ^ Davia v. Flagstaff Silver Mining Bank, Thompson's Nat. Bank Cases, 
 
 Co., 2 Utah, 74. 804; 8 Daly, 400; affirmed, 78 N. Y. 
 
 » Gratz V. Redd, 4 B. Monr. 187. 608; Strong v. Brooklyn, &c. R. R. 
 
 * Semble, Heard v. Eldredge, 109 Co., 93 N. Y. 426. See Parker v. 
 
 Mass. 258. Mason, 8 R. I. 427. 
 
 5 Bloxam v. Metropolitan Ry. ' Supra, §§ 415, 416. 
 Co., L. R. 3 Ch. 337. 
 
417 THE CONSTRITCTION OP CHAETEKS. § 444 
 
 the distribution of profits and payment of dividends have no 
 application. 
 
 § 444. Agreements to pay Interest to Sbareholders. — There 
 is an obvious difference between dividends paid to the share- 
 holders of a corporation, and interest paid to bondholders or 
 creditors who have loaned -their money to the company. The 
 money contributed by the shareholders constitutes an in- 
 vestment fund created for their mutual benefit. The fund 
 thus created belongs to the shareholders in equity ; any in- 
 crease is their profit, any depreciation is their loss. To dis- 
 tribute any portion of this fund among the shareholders in 
 the form of interest would be paying them out of their own 
 money, by reducing the amount of their working capital. It 
 is a rule that the capital of a corporation cannot lawfully be 
 reduced by distribution among the shareholders in any form, 
 until the business of the company is wound up.^ An agree- 
 ment to pay dividends or interest to the shareholders of a 
 corporation, without reference to the ability of the company 
 to pay the same out of profits or the net increase of its capi- 
 tal, is therefore, wholly unauthorized.^ 
 
 But a corporation may properly stipulate that each share- 
 holder shall be entitled to interest on the amount paid upon 
 
 1 A loan to the shareholders, of Co., 40 Pa. St. 239, "Woodward, J., 
 capital not needed by the company said: " This c'ompany conformed 
 in its business, would not necessarily to the foolish practice of receiving 
 be unauthorized. This would not subscriptions on a guaranty that 
 be a reduction of capital, as the they would pay interest on stock ' as 
 shareholders would remain liable to soon as paid,' until the road is 
 restore the money loaned. It would finished. When it is considered 
 be an investment of corporate funds, that railway companies are joint- 
 
 2 Lockhart v. Van Alstyne, 31 stock associations, and depend on 
 Mich. 76; Painesville, &c. R. R. borrowing most of the money they 
 Co. V. King, 17 Ohio St. 534; Troy, expect to expend, the absurdity of 
 &c. R. R. Co. V. Tibbits, 18 Barb, borrowing money to pay interest to 
 297; Pittsburg, &c. R. R. Co. v. themselves is self-evident. They 
 County of Allegheny, 63 Pa. St. never borrow at less than from seven 
 126, 135; Macdougall v. Jersey Im- to ten per cent, and, in so far as the 
 perial Hotel Co., 2 H. & M. 528; money is used to pay themselves six 
 Salisbury w. Metropolitan Ry. Co., percent on their stock, it is mani- 
 38 Jj. J. Ch. 249. festly a ruinous, as well as absurd 
 
 In Miller v. Pittsburgh, &o. R. R. operation." 
 VOL. I. — 27 
 
§ 444 THE LAW OP PRIVATE COKPOEATIONS. 418 
 
 his shares while the works of the company are in process 
 of construction, provided such interest be made payable only 
 out of the net income or profits which the company may earn. 
 The justice of an agreement of this character was clearly 
 shown by Peck, J., in Richardson v. Vermont, &c. R. R. 
 Co : 1 " In the early stages of such undertakings, the use of 
 money for the construction of the road may be presumed to 
 be worth the legal interest ; and therefore he who pays early 
 practically contributes more than he who pays the same sum 
 late. This arrangement for the payment of interest, or in- 
 terest dividends, so called, is equitable and just, as it is but a 
 mode of distributing benefits among the stockholders in pro- 
 portion to the aid they have respectively contributed to the 
 common enterprise, and thus producing equality between 
 them. Equality is equity as between the stockholders ; and 
 such payment, made only out of the surplus earnings not 
 needed for the payment of debts of the corporation nor 
 for the prosecution of its business, does not interfere with 
 the rights of creditors, nor contravene any principle of 
 public policy. It is no more withdrawing capital from the 
 corporation than would be the payment of ordinary divi- 
 dends, to which purpose the fund would otherwise be ap- 
 propriated." 
 
 If a corporation agrees that its shareholders shall be al- 
 lowed interest upon the sums contributed by them during 
 the construction of the company's works, but no time of pay- 
 ment is fixed, it will be implied that such interest shall be 
 payable whenever a sufficient amount of net profits have 
 been earned.^ And for the same reason it has been held that 
 a holder of preferred shares guaranteeing the payment of 
 semiannual dividends of five per cent is entitled to be paid 
 
 1 Richardson v. Vermont, &c. &c. R. R. Co., 7 Allen, 512; Evans- 
 R. R. Co., 44 Vt. 613, 618; Rutland, ville, &o. R. R. Co. v. EvansviUe, 15 
 &c. R. R. Co. V. Thrall, 35 Vt. 543; Ind. 414, 415: McLaughlin ». De- 
 Wright V. Vermont, &c. R. R. Co., troit, &c. Ry. Co., 8 Mich. 100. 
 12 Cush. 75; Waterman v. Troy, = Rutland, &o. R. R. Co. w. 
 &o. R. R. Co., 8 Gray, 433; Cun- Thrall, 35 Vt. 543; Waterman v. 
 ningham ». Vermont, &c. R. R. Co., Troy, &c. R. R. Co., 8 Gray, 433. 
 12 Gray, 411 ; Barnard v. Vermont, 
 
419 THE CONSTEUCTION OF CHAETBKS. § 446 
 
 only out of net profits earned by the company.^ But if the 
 profits realized in any one j^ear are not sufficient to pay the 
 amount promised, the deficiency must as a rule be made up 
 out of profits earned at a subsequent time.^ 
 
 § 445. Dividends are irrevocable. — A dividend properly 
 declared by the directors of a corporation cannot subse- 
 quently be revoked ; those persons who were shareholders on 
 the books of the company at the time when the dividend 
 was declared, have a legal claim against the company for the 
 payment of the amount of the dividend.* After profits have 
 been set apart and appropriated to the payment of a divi- 
 dend, they belong to the shareholders, and cannot be recalled, 
 although the company should suffer losses and become insol- 
 vent before the dividend is actually paid.* 
 
 But profits remain a part of the fund constituting the 
 company's capital, until set apart and appropriated to the pay- 
 ment of a dividend ; and if the general fund is reduced by 
 losses before the profits have been set apart and appropriated, 
 only the actual surplus can be divided, after taking a new 
 account of the company's condition.^ 
 
 § 446. Fovrers of Directors to determine VT-hether a Surplus 
 exists. — The power of determining whether a corporation 
 has earned a surplus which would warrant the payment of 
 a dividend, is vested in the board of directors. In exercising 
 this power the directors cannot act arbitrarily; they must 
 make an investigation of the affairs of the corporation, and 
 must in good faith apply the principles which have been in- 
 dicated in the preceding sections. 
 
 But the directors cannot be held responsible for a mere mis- 
 
 ' Lockhart ». Van Alstyne, 31 14 Hun, 8, where the company be- 
 
 Mich. 76, 84; Taft v. Hartford, &c. came insolvent after a dividend had 
 
 R. B.. Co., 8 R. I. 310, 333; Bates been declared and placed in the 
 
 V. Androscoggin, &c. R. R. Co., hands of a bankei", but had not been 
 
 49 Me. 491 ; and see cases infra, paid over to the shareholders. See 
 
 § 457. also King v. Paterson, &c. R. R. 
 
 2 7n/ra, §458. Co., 29 N. J. Law, 82. 
 
 » /Supra, §§ 162, 170. « Scott v. Eagle Fire Co. , 7 Paige, 
 
 * See Le Roy v. Globe Ins. Co., 203; Curry ». Woodward, 44 Ala. 
 
 2 Edw. Ch. 657, and Re Le Blanc, 305. 
 
§ 447 THE LAW OF PBIVATB COKPOEATIONS. 420 
 
 take of judgment in making an erroneous valuation of the com- 
 pany's assets. A dividend declared and paid after a proper 
 investigation of the company's condition and the preparation 
 of a balance-sheet, in good faith, is irrevocable both as to 
 the company and its creditors, though it should afterwards 
 turn out that the company was insolvent at the time when 
 the dividend was declared.^ 
 
 § 447. The Discretion of the Directors with respect to the 
 Distribution of Profits. — Profits earned by a corporation may 
 be divided among its shareholders ; but it is not a violation 
 of the charter if they are allowed to accumulate and remain 
 invested in the company's business. The managing agents 
 of a corporation are impliedly invested with a discretionary 
 power with regard to the time and manner of distributing its 
 profits. They may apply profits in payment of floating or 
 funded debts, or in development of the company's busi- 
 ness; and so long as they do not abuse their discretionary 
 powers, or violate the company's charter, the courts cannot 
 interfere.^ 
 
 But it is clear that the agents of a corporation, and even 
 the majority, cannot arbitrarily withhold profits earned by 
 the company, or apply them to any use which is not author- 
 ized by the company's charter. The nominal capital of a 
 company does not necessarily limit the scope of its opera- 
 tions ; a corporation may borrow money for the purpose of 
 enlarging its business, and in many instances it may use 
 profits for the same purpose. But the amount of the capital 
 contributed by the shareholders is an important element in 
 determining the limit beyond which the company's business 
 cannot be extended by the investment of profits. If a cor- 
 poration is formed with a capital of f 100,000 in order to carry 
 on a certain business, no one would . hesitate to say that it 
 
 1 Stringer's Case, L. R. 4 Ch. Ch. 351 ; Barry v. Merchants' Ex- 
 475; infra, § 838. change Co., 1 Sandf. Ch. 280, 303; 
 
 2 See Pratt o. Pratt, 33 Conn. Smith v. Prattville Manuf. Co., 29 
 446 ; State v. Baltinnore, &o. R. R. Ala. 503 ; State v. Bank of Lonisi- 
 Co., 6 Gill, 363; Karnes v. Roch- ana, 6 La. 745. See Stringer's 
 ester, &c. R. R. Co., 4 Abb. Pr. Case, L. R. 4 Ch. 475; and see 
 N. s. 107; Ely v. Sprague, Clarke's supra, §§ 243, 276. 
 
42l THE CONSTRUCTION OF CHAETERS. § 448 
 
 would be a departure from the intention of the founders to 
 withhold the profits, in order to develop the company's busi- 
 ness, until the sum of $500,000 had been amassed, unless the 
 company was formed mainly for the purpose of accumulating 
 the profits from year to year. The question in each case 
 depends upon the use to which the capital is put, and the 
 meaning of the company's charter. If a majority of the share- 
 holders or the directors of a corporation wrongfully refuse to 
 declare a dividend and distribute profits earned by the com- 
 pany, any shareholder feeling aggrieved may obtain relief in 
 a court of equity.^ 
 
 It may often be reasonable to withhold part of the earnings 
 of a corporation in order to increase its surplus fund, when it 
 would not be reasonable to withhold all the earnings for that 
 purpose. The shareholders forming an ordinary business cor- 
 poration expect to obtain the profits of their investment in 
 the form of regular dividends. To withhold the entire profits 
 merely to enlarge the capacity of the company's business 
 would defeat their just expectations. After the business of 
 a corporation has been brought to a prosperous condition, and 
 necessary provision has been made for future prosperity, a 
 reasonable share of the profits should be applied in the pay- 
 ment of regular dividends, though a part may be reserved to 
 increase the surplus and enlarge the business itself. 
 
 § 448. How Dividends are Payable. — Dividends are pre- 
 sumed to be payable in lawful money ; ^ and it seems that, 
 in England, they must be payable in cash.^ But in America 
 the declaration of scrip or stock dividends is a matter of com- 
 mon occurrence.* 
 
 1 Beers v. Bridgeport Spring Co. , * Hoole v. Great Western Ry. 
 
 42 Conn. 17; Pratt «. Pratt, 33 Co., L. K. 3 Ch. 262. 
 Conn. 446; Scott ». Eagle Fire Co., * See State v. Baltimore, &c. 
 
 7 Paige, 203 ; State ». Bank of R. R. Co., 6 Gill, 863; Brown t>. 
 
 Louisiana, 6 La. 745; Browne v. Lehigh Coal, &o. Co., 49 Pa. St. 
 
 Monmouthshire Ry., &c. Co., 13 270; City of Ohio v. Cleveland, &c. 
 
 Beav. 32; Stevens v. South Devon R. R. Co., 6 Ohio St. 489; Bailey 
 
 Ry. Co., 9 Hare, 313; supra, § 276. v. Citizens' Gas Light Co., 27 N. J. 
 
 * See Ehle v. Chittenango Bank, Eq. 196; and see infra, § 452, as to 
 
 24 N. Y. 548 ; Scott v. Central R. R., stock dividends. 
 &c. Co., 52 Barb. 45. 
 
§ 450 THE LAW OF PEIVATE COEPOKATIONS. 422 
 
 The board of directors have authority to fix the time and 
 place of payment of dividends ; they may deposit the money 
 to pay a dividend with a banking-house of good standing, 
 giving notice to each stockholder of the deposit, and that he 
 can obtain payment on demand.^ 
 
 § 449. To whom Dividends are Payable. — The strictly legal 
 right to require payment of a dividend is in those persons 
 who were shareholders on the books of the company at the 
 time when the dividend was declared ; but the rights of equi- 
 table assignees will be protected by the courts.^ The agents 
 of a corporation are justified in paying dividends to the share- 
 holders on the company's books, unless notified of the rights 
 of equitable assignees.^ 
 
 Profits must be divided ratably among all the share- 
 holders ; when a dividend is declared, a specific sum should 
 be made payable on each share. A shareholder is entitled 
 to share in all profits divided by the company after he be- 
 came a member. No discrimination can be made against 
 a shareholder who received his shares from the company 
 after the dividend had been earned ; for the price of the 
 shares would have included a proportionate part of the ac- 
 cumulated profits.* 
 
 § 450. Suits for Dividends. — A shareholder in a corpora- 
 tion has no legal claim to profits earned by the company until 
 after a dividend has been declared by the proper agents ; nor 
 can he compel the directors to declare a dividend unless they 
 withhold profits which they have no discretionary power to 
 retain for further investment. A suit to enforce the declara- 
 tion of a dividend must be brought in equity, and all the 
 
 1 King V. Paterson, &c. R. K. The directors cannot make a divi- 
 Cc, 29 N. J. Law, 82. dend payable in cash to all share- 
 
 2 Supra, § 181. holders holding less than fifty shares 
 
 * Supra, § 170. in each, and partly in bonds to 
 
 * Jones V. Terre Haute, &c. R. R. those shareholders holding more 
 Co., 57 N. Y. 196; Phelps v. Farm- than fifty shares. State v. Balti- 
 ers', &c. Bank, 26 Conn. 269; Ryan more, &c. R. R. Co., 6 Gill, 363. 
 
 V. Leavenworth, &c. Ry. Co., 21 As to preferred shareholders, see 
 Kans. 365. See Currie v. White, infra, § 456 et seq. 
 45 N. Y. 822. 
 
423 THE CONSTRUCTION OF CHARTERS. § 451 
 
 conditions precedent to the right of maintaining an ordinary 
 shareholders' bill must be complied with. However, after a 
 dividend has been declared payable to all shareholders, each 
 shareholder is entitled to recover his distributive share in an 
 action of assumpsit against the corporation. 
 
 In King v. Paterson, &c. R. R. Co., Chancellor Green, 
 in delivering the opinion of the Supreme Court of New Jer- 
 sey, said : " After a dividend is declared, all community of 
 interest in relation to such dividend, as between the stock- 
 holders themselves and between the stockholders and the 
 corporation, is at an end. The right of a party to whom 
 the dividend is payable is recognized as a separate and inde- 
 pendent right, which may be enforced as against the corpora- 
 tion. . . . The true principle is, that the dividend, from 
 the time that it is declared, becomes a debt due from the 
 corporation to the individual stockholder, for the recovery 
 of which, after demand of payment, an action at law may 
 be maintained." ^ 
 
 § 451. It has been held that, if a dividend has been de- 
 clared payable to the shareholders generally, any share- 
 holder may sue in indebitatus assumpsit for the amount due 
 to him according to the terms of the resolution declaring 
 the dividend.2 But if a shareholder is not entitled to share 
 in a dividend according to the terms of the resolution declar- 
 ing it, he cannot sue for the amount in indebitatus assumpsit;^ 
 under these circumstances, his claim against the corporation 
 
 ' King V. Paterson, &c. K. R. of the agents of the company to de- 
 Co., 29 N. J. Law, 82, 504; West clare a dividend cannot be investi- 
 Chester, &c. R. R. Co. v. Jackson, gated in a suit of this description, 
 77 Pa. St. 321 ; Kane v. Bloodgood, if this would involve an inquiry into 
 7 Johns. Ch. 90; Keppel's.Admrs. the financial condition of the com- 
 V. Petersburg R. R. Co., Chase's pany. See Stoddard v. Shetucket 
 Dec. 168. Compare State v. Balti- Foundry Co., 34 Conn. 542; Scott 
 more, &c. R. R. Co., 6 Gill, 368; ». Central R. R., &c. Co., 52 Barb. 
 Jackson U.Newark Plank Road Co., 45. 
 
 31 N. J. Law, 277 ; Bank of England ^ Jackson's Admr. v. Newark 
 
 V. Davis, 5 B. & C. 185; Coles v. Plank Road Co., 31 N. J. Law, 277; 
 
 Bank of England, 10 Ad. & E. 437 ; West Chester, &c. R. R. Co. v. 
 
 Carlisle v. South Eastern Ry. Co., Jackson, 77 Pa. St. 821. 
 6 Eng. Ry. Cas. 685. = State v. Baltimore, &c. R. R. 
 
 It has been held that the power Co., 6 Gill, 368. 
 
§ 452 THE LAW OF PEIVATE COKPOEATIONS. 424 
 
 would be that his rights of membership were infringed by 
 the act of the directors, in declaring the dividend improperly, 
 and refusing him participation in the profits. 
 
 A shareholder has no claim upon any part of the specific 
 funds constituting the profits of a corporation until his share 
 has been set apart and appropriated to the payment of his 
 dividend. If a shareholder is ignored in making a dividend, 
 his claim is against the corporation ; he cannot sue the other 
 shareholders for contribution out of -the money which they 
 have received, nor can he sue a stranger who received the 
 share which should have been paid to him, in an action for 
 money had and received. If the directors have paid divi- 
 dends to persons not entitled to receive them, the corporation 
 itself must sue for a recovery of the money misappropriated.^ 
 
 It has been held that a bill in equity will lie to compel the 
 payment of a dividend which has been declared.^ But man- 
 damus is not a proper remedy for this purpose.^ 
 
 In the absence of any provision to the contrary, dividends 
 are payable only on demand at the proper office of the cor- 
 poration, and no action can be maintained until the requisite 
 demand has been made.* 
 
 § 452. stock Dividends. — A corporation which has earned 
 a surplus may in many instances retain the money for the 
 purpose of making improvements, or for the payment of 
 debts, instead of dividing it among its shareholders. The 
 actual capital of the company is thus increased, while the 
 nominal or share capital remains unchanged ; consequently, 
 the value of its shares will be increased. If the charter of a 
 corporation authorizes it to increase the amount of its capi- 
 tal stock by the issue of new shares, this may be done either 
 by receiving new stock subscriptions, or by selling paid-up 
 shares at par, for cash. The only essential is, that each share 
 be represented at its par value by real capital. 
 
 1 Peckham v. Van Wagenen, 83 " Van Norman v. Central Car, 
 N. Y. 40; 45 N. Y. Super. Ct. &c. Co., 41 Mich. 166. 
 
 328. * State v. Baltimore, &c. R. R. 
 
 2 Beers w. Bridgeport Spring Co., Co., 6 Gill, 364; Hagar v. Union 
 42 Conn. 17; Le Roy «. Globe Ins. Nat. Bank, 63 Me. 509; Scott v. 
 Co., 2 Edw. Ch. 657. Central R. R., &o. Co., 52 Barb. 45. 
 
425 THE CONSTEUOTION OP CHARTEES. § 453 
 
 If then a corporation having power to increase its nominal 
 or share capital has accumulated a surplus which it would be 
 entitled to distribute among its shareholders, it may issue to 
 the shareholders new paid-up shares, to the extent of the 
 surplus on hand, without violating the rule governing the 
 issue of paid-up shares.^ Thus, if a corporation whose nom- 
 inal capital is one million dollars allows its earnings to ac- 
 cumulate until the actual capital amounts to two millions of 
 dollars, the value of each share will be doubled. The com- 
 pany may then distribute one million of dollars as profits, 
 thereby reducing the shares to their par value; or it may 
 retain the whole of its earnings, and issue to its shareholders 
 paid-up shares to the extent of one million dollars, instead of 
 distributing cash. The nominal capital of the company will 
 thus be increased to two millions of dollars, and each share- 
 holder will hold two shares at par where he previously held 
 only one worth double the par value. 
 
 § 453. Whether the Right to make Stock Dividends ia con- 
 ferred by Implication. — The directors of a corporation have 
 clearly no right to make a stock dividend unless three con- 
 ditions concur. These are, — 
 
 1. The directors must have authority under the company's 
 charter to issue new shares. 
 
 2. There must be profits which the corporation may legally 
 distribute among the shareholders. 
 
 3. The directors must have the power, in their discretion, 
 to retain these profits for future use. 
 
 This last condition must not be forgotten. The directors 
 of a corporation have a discretionary power, to a limited 
 extent, to accumulate the profits of the company ; but they 
 
 1 Williams v. Western Union v. Hubbell, 115 Id. 471; Brown v. 
 
 Tel. Co., 93 N. Y. 162, 189-193; Lehigh Coal, &c. Co., 49 Pa. St. 
 
 Howell V. Chicago, &c. Ry. Co., 270; Commonwealth v. Pittsburg, 
 
 51 Barb. 378; Jones v. Terre Haute, &o. Ry. Co., 74 Pa. St. 83; Terry v. 
 
 &c. R. R. Co., 57 N. Y. 196; Ken- Eagle Lock Co., 47 Conn. 141; Re 
 
 ton Furnace, &c. Co. v. McAlpin, Barton's Trust, L. R. 5 Eq. 239; 
 
 5 Fed. Rep. 743; Atty.-Gen. v. Mills i>. Northern Ky.,&c. Co., L.R. 
 
 State Bank, 1 Dev. & B. Eq. 545; 5 Ch. 621. 
 Minot V. Paine, 99 Mass. 101 ; Rand 
 
§ 454 THE LAW OP PBIVATE CORPORATIONS. 426 
 
 cannot go on accumulating them indefinitely. After a rea- 
 sonable limit has been reached, every shareholder has a right 
 to insist that they shall be distributed as dividends.^ 
 
 Moreover, it may be doubted whether the directors of a 
 corporation, or even the majority of the shareholders, have 
 implied authority to capitalize profits by issuing a stock divi- 
 dend, even though they be authorized to retain the profits 
 in the company's business, and to issue new shares. Profits 
 which are merely retained by a corporation in its business, 
 without a corresponding increase of share capital, may at any 
 time be withdrawn and distributed among the shareholders.^ 
 But after a stock dividend has been made on account of accu- 
 mulated profits, these profits become permanently capitalized, 
 and can no longer be withdrawn for distribution. After the 
 nominal capital of a corporation has been increased by the 
 issue of new shares, in the form of a stock dividend or other- 
 wise, further dividends can be declared only out of profits 
 added to the increased capital. 
 
 The power of the directors of a corporation or the majority 
 of the shareholders to capitalize profits by issuing stock divi- 
 dends, is certainly not without limit, even where this power is 
 held to exist. To accumulate the profits beyond the amount 
 contemplated at the creation of a company, by issuing stock 
 dividends from time to time, would not be authorized, unless 
 all the shareholders give their assent.^ 
 
 § 454. Rights of Shareholders when new Shares are "issued. 
 — When a corporation declares a stock dividend in wholly 
 or partially paid-up shares, the new shares are paid up in 
 whole or in part out of the profits which belong to the ex- 
 isting shareholders. It is evident, therefore, that each share- 
 
 1 Supra, § 447. * This point was not considered 
 
 2 Supra, § 438. But the di- in Williams v. Western Union Tel. 
 rectors would have no right to Co., 93 N. Y. 163, 192. It was not 
 withdraw accumulated profits for claimed in that case that the direc- 
 distribution at a time or in a man- tors had exceeded their discretion- 
 ner evidently disadvantageous to ary power of accumulating profits, 
 the company ; they must in good or that an excessive accumulation of 
 faith exercise their best judgment profits was threatened. 
 
 in the interest of the company. 
 
427 THE CONSTRUCTION OF CHARTERS. § 456 
 
 holder is entitled to share ia the dividend, to the same 
 extent as if it were paid in cash. It is equally clear, that 
 a corporation cannot issue new shares at less than their 
 full market value, except by equal distribution among all 
 the shareholders ; for whatever the new shares are worth is 
 represented by capital or profits belonging in equity to the 
 existing shareholders.^ 
 
 § 455. Right of Pre-emption. — It seems that, if a corpora- 
 tion resolves to increase the amount of its capital by issuing 
 and selling new shares, every stockholder has a right of pre- 
 emption of a fractional part of the new issue, proportionate 
 to his fractional share in the company's entire stock.^ Each 
 stockholder is thus enabled to preserve unimpaired his voice 
 in the management of the company's affairs. But this ap- 
 plies only where the nominal capital of the company is in- 
 creased; if shares once issued by a corporation come back 
 into its possession, there is no reason why they should not be 
 sold in the market.^ 
 
 If a stockholder fails to exercise his privilege to take and 
 pay for his part of a new issue of shares within the time 
 limited by the board of directors, or the vote ordering the 
 new issue, his right of pre-emption becomes forfeited, and 
 the shares may be disposed of by the corporation by sale or 
 subscription in the usual manner.* 
 
 § 456. Preferred Shareholders. — Their Rights. — Shares which 
 confer upon the holder special privileges or benefits that do 
 not belong to the other members of the corporation are called 
 preferred or preference shares. The precise nature of the 
 
 1 Jones V. Morrison, 31 Minn. 78; Wilson v. Bank of Montgomery 
 140; Page v. Smith, 48 Vt. 289; County, 29 Pa. St. 537; Mason v. 
 Gray v. Portland Bant, 3 Mass. 364. Davol Mills, 132 Mass. 76. Contra, 
 
 2 Eidmanw. Bowman, 58 lU. 444; Ohio Ins. Co. v. Nuunemacher, 15 
 Jones V. Morrison, 31 Minn. 140; Ind. 294. 
 
 and see semble, Gray v. Portland » State v. Smith, 48 "Vt. 290; 
 
 Bank, 3 Mass. 364 ; Matter of Hartridge v. Bcekwell, R. M. Charl- 
 
 Wheeler, 2 Abb. Pr. n. s. 361; ton, 260. 
 
 Miller v. Illinois Central R. R. Co., * Hart v. St. Charles Street R. R. 
 
 24 Barb. 312. Compare Curry v. Co., 30 La. Ann. 758; Brown v. 
 
 Scott, 54 Pa. St. 270; Reese w. Bank Florida Southern Ry. Co., 19 Fla. 
 
 of Montgomery County, 31 Pa. St. 472. 
 
§ 457 THE LAW OF PRIVATE CORPORATIONS. 428 
 
 privileges or benefits thus conferred depends upon the terms 
 of the resolution under which the shares are issued, and the 
 form of the certificates delivered to the holders.^ The most 
 common preference is in respect to the payment of dividends. 
 Thus it is often provided that the holders of the preferred 
 shares shall have priority in the distribution of profits, and 
 shall receive annual dividends at a specified rate before the 
 other shareholders receive anything ; the payment of these 
 dividends is sometimes expressly guaranteed.^ 
 
 § 457. Their Dividends payable only out of Profits. — The 
 agreement of a corporation to pay to preferred shareholders 
 certain annual dividends, is always subject to an implied con- 
 dition that the payments shall be made only out of net 
 profits which are legally applicable to the payment of divi- 
 dends. This is true whether the agreed payments be called 
 " dividends " or " interest," and whether they be guaranteed 
 or simply promised.^ It would be contrary to fundamental 
 principles to allow the capital of a corporation to be reduced 
 by distribution among the shareholders in any form.* 
 
 ^ Forexamples see Bailey u. Han- ' Taft v. Hartford, &c. R. K. 
 
 nibal, &o. R. R. Co., 1 Dill. 174; Co., 8 R. I. 310, 333; Lockhart i>. 
 
 17 Wall. 96; Matthews v. Great Van Alstyne, 31 Mich. 76, 84; 
 
 Northern Ry. Co., 28 L. J. Ch. Chaffee v. Rutland R. R. Co., 55 
 
 375; Williston (^. Michigan South- Vt. 110, 125; Barnard v. Ver- 
 
 ern R. R. Co., 13 Allen, 400; St. mont, &c. R. R. Co., 7 Allen, 519; 
 
 John V. Erie Ry. Co., 22 Wall. 136; Cunningham v. Vermont, &o. R. R. 
 
 10 Blatchf. 271; West Chester, &c. Co., 12 Gray, 411; Waterman v. 
 
 R. R. Co. V. Jackson, 77 Pa. St. Troy, &c. R. R. Co., 8 Gray, 433; 
 
 321; State v. Cheraw, &c. R. R. Wright v. Vermont, &c. R. R. Co., 
 
 Co., 16 S. Car. 524. 12 Cnsh. 68; McGregor v. Home 
 
 " With regard to the meaning of Ins. Co., 33 N. J. Eq. 181; Elkins 
 
 the words " preference," " pre- v, Camden, &c. R. R. Co., 36 N. J. 
 
 ferred," and " guaranteed," when Eq. 233. See also supra, § 444, 
 
 used in this connection, see Henry and cases cited in the note to § 458. 
 
 V. Great Northern Ry. Co., 4 K. & Compare Gordon's Exrs. v. Rich- 
 
 J. 1, 21; Taft ». Hartford, &c. mond, &c. R. R. Co., 78 Va. 501. 
 E. R. Co., 8 R. I. 310, 333; Lock- * See infra, Chapter X. 
 hart V. Van Alstyne, 31 Mich. 76 ; An absolute right to receive in- 
 
 Matthews v. Great Northern Ry. terest may undoubtedly be given to 
 
 Co., 28 L. J. Ch. 375; Stevens v. part of the shareholders of a corpo- 
 
 South Devon Ry. Co., 9 Hare, 313; ration, by express provision of their 
 
 Gordon's Exrs. v. Richmond, &o. charter. They would thus be con- 
 
 R. R. Co., 78 Va. 501. stituted creditors of the company, 
 
429 THE CONSTKUCTION OF CHAETBES. § 459 
 
 § 458. When Arrears must be made up. — If a corporation 
 has agreed or guaranteed that the holders of preferred shares 
 shall be paid dividends at a certain rate per annum, and the 
 profits at any time are insufficient to enable the company to 
 perform its agreement, the arrears must be made up out of 
 profits subsequently earned ; and no dividends can be paid 
 to the holders of the common shares until the preferred 
 shareholders have been fully paid.^ 
 
 § 459. Discretion of Directors to withhold Profits. — The di- 
 rectors of a corporation have a discretionary power to with- 
 hold profits from the holders of common shares in order to 
 accumulate a surplus and enlarge the company's business 
 capacity ; but it is the duty of the directors to pay the pre- 
 ferred shareholders their promised or guaranteed dividends, 
 whenever the company has acquired funds which may right- 
 fully be used for the payment of dividends. This rule 
 applies with peculiar strictness where the preferred share- 
 holders are entitled to receive their dividends annually out of 
 profits earned during the current year only, and a deficit in 
 any year does not become payable out of subsequent profits.^ 
 
 Thus, in Dent v. London Tramways Co.,^ it was held that, 
 after the property and capital of a tramway company had 
 become impaired by using the entire earnings in order to pay 
 
 rather than shareholders. See, for Crawford v. Northeastern Ry. Co., 
 example, Williams v. Parker, 136 3 K. & J. 723; Corry v. London- 
 Mass. 204. Compare Phillips v. derry, &c. Ry. Co., 29 Beav. 263; 
 Eastern R. R. Co., 138 Mass. 122. Coates v. Nottingham Water Works 
 1 Boardman v. Lake Shore, &c. Co., 30 Beav. 86; Matthews «. Great 
 Ry. Co., 84 N. Y. 157 ; Proxity Northern Ry. Co., 28 L. J. Ch. 
 V. Michigan Southern R. R. Co., 375; Stnrge v. Eastern Union Ry. 
 1 Hun, 655; Lockhart v. Van Al- Co., 7 De G., M. & G. 158; Fielden 
 styne, 31 Mich. 76, 84; Taft v. w. Lancashire, &c. Ry. Co., 2 De G. 
 Hartford, &c. R. R. Co., 8 R. I. & S. 531. 
 
 310, 333. Compare Elkins v. Cam- 2 Niokals v. New York, &c. R. R. 
 
 den, &c. R. R. Co., 36 N. J. Eq. Co., 15 Fed. Rep. 575. Compare 
 
 233, 236. See also Henry v. Great St. John v. Erie Ry. Co., 22 Wall. 
 
 Northern Ry. Co., 4 K. & J. 1; 136; 10 Blatchf. 271. 
 8. c. 27 L. J. Ch. 1; s. c. 1 De G. » Dent v. London Tramways Co., 
 
 & J. 606; Webb v. Earle, L. R. 20 L. R. 16 Ch. Div. 344. Compare 
 
 Eq. 556; Smith v. Cork, &c. Ry. St. John v. Erie Ry. Co., 22 Wall. 
 
 Co., Ir. R. 3 Eq. 356; 5 Eq. 65; 136; 10 Blatchf. 271. 
 
§ 461 THE LAW OF PRIVATE COKPOEATIONS. 430 
 
 dividends to the common shareholders, instead of reserving 
 part of the earnings for repairing its tramway and rolling 
 stock, the deterioration thus caused could not be repaired, 
 in subsequent years, by withholding the actual profits of 
 those years from the preferred shareholders, whose dividends 
 were payable in each year, out of the profits of that year 
 only. 
 
 § 460. But the fact that a corporation has made profits is 
 not alone sufiicient to show that it is able to pay dividends, 
 or that it ought to pay its preferred shareholders. It is the 
 right and the duty of the directors to keep on hand at all 
 times a fund sufficient to meet current expenses, and to 
 make reasonable provision against such accidents and losses 
 as are incidental to the business in which the company is en- 
 gaged. It is often a question involving the exercise of busi- 
 ness knowledge and judgment, whether a corporation can 
 safely use any portion of its profits in paying dividends. The 
 power of deciding this question should not be taken from 
 the directors and assumed by the courts, unless it is clear 
 that the directors have a mistaken view of their legal duties, 
 or have acted in bad faith.^ 
 
 § 461. Preference in Distribution of Capital. — Ordinarily, 
 preferred shareholders have no preference in the distribution 
 of the company's capital, when the business is wound up. 
 A right of this kind cannot be presumed from the fact that 
 a preference has been given in the payment of dividends j^ 
 but under an express agreement, a preferred shareholder may 
 be entitled to withdraw the amount of his shares before the 
 other shareholders can take anything. The rights of the pre- 
 ferred member are thus assimilated in many respects to those 
 of a creditor.^ 
 
 1 See Culver v. Reno Real Estate Co., 33 N. J. Eq. 181; In re London 
 
 Co., 91 Pa. St. 367; Barnard v. India Rubber Co., L. R. 5 Eq. 519; 
 
 Vermont, &c. R. R. Co., 7 Allen, Griffith v. Paget, L. R. 6 Ch. Div. 
 
 519; Richardson v. Vermont, &c. 511. 
 
 R. R. Co., 44 Vt. 622; Stevens v. s /n re Bangor, &e. Slate, &c. Co., 
 
 South Devon Ry. Co., 9 Hare, 313, L. R. 20 Eq. 59 ; Warren v. King, 108 
 
 326. U. S. 389 ; McGregor v. Home Insur- 
 
 ^ McGregor v. Home Insurance ance Co,, 33 N. J. Eq. 181; Gordon's 
 
431 THE CONSTKTJCTION OF CHAETEES. § 46^ 
 
 § 462. Hemedies of Preferred Shareholders. — If the direc- 
 tors of a corporation wrongfully refuse to declare the divi- 
 dends due to preferred shareholders, any one of the latter is 
 entitled to enforce his rights by bill in equity ; an action at 
 law is not the proper remedy.^ The rights of preferred 
 shareholders of a particular class are equal, and each is enti- 
 tled to be paid pari passu with the others ; it is evident, 
 therefore, that a suit by a shareholder seeking to enforce his 
 rights should be brought on behalf of all others similarly 
 situated, and the relief granted in the suit should be for the 
 benefit of all. It would be necessary, in a proceeding of this 
 kind, to take an account of the earnings and expenses of the 
 corporation in order to determine the amount of its profits. 
 The corporation would clearly be a necessary defendant, and 
 it seems that a demand made upon the directors before 
 bringing suit should be alleged. 
 
 § 463. When the Right to issue Preferred Shares exists. — It 
 is clear that the right of issuing preferred shares cannot be 
 implied, if the charter of the corporation does not authorize 
 it to increase the amount of its capital by the issue of new 
 shares of any kind. And even if the charter of a company 
 expressly provides that its capital may be increased by the 
 issue of new shares, it seems that this does not impliedly war- 
 rant the issue of shares conferring special privileges upon the 
 holders. The issue of preferred shares does not merely in- 
 crease the capital stock of the company ; nor is it merely a 
 means of raising money by pledge of the company's income. 
 If the capital of a corporation is increased by the sale of new 
 shares, the original members are entitled to share equally 
 with the new members ; and if money is borrowed upon 
 
 EirS. V. Richmond, &c. E. R. Co., R. R. Co., 44 Vt. 613; Williston 
 
 78 Va. 501. Compare 7n re London r. Michigan Southern R. R. Co., 13 
 
 India Rubber Co., L. R. 5 Eq. 519. Allen, 400; Boardman v. Lake 
 
 See Burt v. Rattle, 31 Ohio St. 116; Shore, &c. Ry. Co., 84 N. Y. 157, 
 
 Totten w. Tison, 54 Ga. 139 ; where 180 ; Dent v. London Tramways 
 
 the preferred shareholders appear to Co., L. R. 16 Ch. Div. 344. See 
 
 have been creditors in all except in further cases supra, § 280, and oom- 
 
 name. pare § 277. 
 * Richardson v. Vermont, &o. 
 
§463 
 
 THE LAW OP PRIVATE CORPORATIONS. 
 
 432 
 
 security of the property or income of a corporation, the 
 constitution of the company remains unchanged, and the se- 
 curity may be redeemed by repayment of the loan. But the 
 issue of preferred shares permanently impairs the equality 
 among the shareholders, and creates a perpetual charge upon 
 the income of the company.^ It may be said, also, that the 
 issue of preferred shares is not a usual method of raising 
 money, and that the power of creating preferences is a dan- 
 gerous one to vest in the directors, or even the majority of 
 the shareholders, as it might easily be made the source of un- 
 fairness and oppression.^ 
 
 However, the authorities on this point are not in harmony. 
 It has been claimed that the power to issue preferred shares 
 would often be advantageous to all the shareholders, by 
 enabling the company to raise funds without the risk of 
 financial embarrassment and bankruptcy which would attend 
 an ordinary absolute indebtedness; and it has been argued 
 that, if the directors of a corporation may issue new shares. 
 
 1 Hutton V. Scarborough Cliff 
 Hotel Co., 2 Dr. & Sm. 514, 521; 
 affirmed, 13 W. K. 631; s. c. 12 
 L. T. N. 8. 289; In re Bangor, &o. 
 Slate, &o. Co. , L. K. 20 Eq. 59 ; Moss 
 V. Syers, 32 L. J. Ch. 711 ; Harrison 
 V. Mexican Ry. Co., L. R. 19 Eq. 
 358. 
 
 In Melhado ». Hamilton, 28 L. T. 
 N. s. 578, affirmed 29 L. T. n. s. 
 364, Vice-Chancellor Malins said: 
 "It has always been considered, 
 I think on the soundest principles, 
 that preference shares cannot be 
 created by a company unless there 
 is an express power to create them." 
 
 In Kent v. Quicksilver Mining 
 Co., 78 N. Y. 159, the charter. of 
 the company provided that " Said 
 company shall have power ... to 
 issue certificates of stock represent- 
 ing the value of their property in 
 such form and subject to such regu- 
 lations as they may from time to 
 time by their by-laws prescribe." 
 
 Shares were accordingly issued to 
 the amount of ten millions of dol- 
 lars. Afterwards the holders of a 
 majority of the shares adopted a 
 by-law providing that every share- 
 holder should be entitled to ex- 
 change his shares for an equal 
 number of preferred shares, upon 
 paying the company a bonus of five 
 dollars upon each share exchanged. 
 The Court of Appeals of New York 
 held that the action of the majority 
 was unauthorized, and that the issue 
 of the preferred shares in exchange 
 for ordinary shares was not a legiti- 
 mate means of raising money for the 
 company's use. 
 
 There seems to be no objection, 
 if the right to retire the preferred 
 shares upon payment of the money 
 advanced is reserved by the corpora- 
 tion. West Chester, &c. R. R. Co. 
 V. Jackson, 77 Pa. St. 321. 
 
 ''-Kent V. Quicksilver Mining Co., 
 78 N. Y. 159. 
 
433 THE CONSTKTJCTION OP CHABTEKS. § 464 
 
 and also incur debts, there is no reason why they may not, at 
 the same time, issue new shares, and confer upon the holders 
 a claim upon the company's profits, prior to that of existing 
 shareholders but subsequent to that of creditors.^ 
 
 § 464. The objections which have been raised against the 
 existence of a right to issue preferred shares where no such 
 right has been provided for in the charter or articles of asso- 
 ciation of the company, are all based upon the assumption 
 that such issue would be in violation of the contract rights 
 of the existing shareholders. If the existing shareholders 
 unanimously give their consent to an issue of preferred shares, 
 these objections would have no application. 
 
 It has been held on this ground, that, after an unauthorized 
 issue of preferred shares has been acquiesced in and ratified 
 by all the shareholders in the corporation, the latter cannot 
 afterwards refuse to recognize the preferred shares as valid.^ 
 
 There seems to be no reason for doubting that the issue of 
 preferred shares may be provided for at the organization of 
 a corporation under general laws, by inserting proper provis- 
 ions in the articles of association, unless there be something 
 in the laws prohibiting the issue of this class of shares. And 
 it seems that an issue of preferred shares is valid in any case 
 where the shares are properly classified at the outset, and all 
 the shares in the company are subscribed for or taken subject 
 to the terms of the classification.* 
 
 1 See Hazlehurst ». Savannah, " in such manner, to such amount, 
 
 &o. R. R. Co., 43 Ga. 15; Totten and to be with and subject to such 
 
 V. Tison, 54 Ga. 140 ; Bates v. An- rules, regulations, privileges, and 
 
 droscoggin,&c. R.R. Co.,49Me.491; conditions, as the company in gen- 
 
 Covington v. Covington, &c. Bridge eral meeting . . . shall think fit." 
 
 Co., 10 Bush, 69; Westchester, &c. " Kent v. Quicksilver Mining 
 
 R. R. Co. V. Jackson, 77 Pa. St. Co., 78 N. Y. 159; Lockhart v. 
 
 321. Van Alstyne, 31 Mich. 81; Hazle- 
 
 In Harrison v. Mexican Ry. Co., hurst v. Savannah, &c. R. R. Co., 
 
 L. R. 19 Eq. 358, Sir George Jessel 43 Ga. 53. 
 
 held that the issue of preferred shares ' Kent v. Quicksilver Mining 
 
 ■was authorized by a clause in the Co., 78 N. Y. 159, 178; Harrison 
 
 articles of association of a company, v. Mexican Ry. Co., L. R. 19 Eq. 
 
 authorizing an increase of its capital 358. 
 to be made by the issue of new shares 
 
 VOL. I. — 28 
 
§ 465 THE LAW OF PEIVATB COEPOBATIONS. 434 
 
 It has been held that authority to issue preferred shares 
 may be conferred by an act of the legislature amending the 
 charter of the corporation.^ But this doctrine appears to be 
 untenable. If the directors of a corporation or the majority 
 of shareholders have no right to issue preferred shares be- 
 cause this would be in violation of the contract rights of the 
 individual shareholders, the legislature would have no consti- 
 tutional power to authorize the issue of such shares against 
 the will of any shareholder.^ 
 
 § 465. Construction of Grants of the "Income and Profits of 
 Shares." — Does not include undivided Earnings. — Shares are 
 sometimes granted or bequeathed to pay the "income and 
 profits " to one person for life or for years, with remainder 
 over to another. The words " income and profits," when thus 
 used, evidently do not mean the undivided profits earned by 
 the corporation, but refer to dividends declared upon the 
 shares. It is true that profits earned by a corporation in 
 reality belong ultimately to the individual shareholders who 
 form the corporation ; but they are not " income and profits 
 of the shareholders," according to the natural and ordinary 
 use of those terms, until separated from the general corporate 
 fund and divided among the shareholders. 
 
 A person holding shares for life or for a term of years 
 would have no means of obtaining the benefit of profits 
 earned by the corporation during the tenancy for life or for 
 years, except by obtaining a distribution of the profits among 
 the shareholders, or by selling the shares themselves and 
 retaining the increase of their value. It is clear that the 
 latter proceeding would not be warranted by a simple grant 
 or bequest of the use, income, or profits of the shares, as such 
 grant would imply the preservation of the shares themselves 
 for the benefit of the remainderman. It is clear, also, that a 
 person holding shares for life or for years cannot compel the 
 corporation to declare a dividend and distribute the profits 
 
 1 Rutland, &c.R. R. Co. v. Thrall, v. Proprietors, 8 Mete. (Mass.) 321 ; 
 35 Vt. 545 ; Covington v. Covington, and see supra, § 400. 
 &c. Bridge Co., 10 Bush, 69; Davis « Infra, Chapter XV. 
 
435 THE CONSTRUCTION OP CHAKTBES. § 466 
 
 earned, if they are withheld by the directors, in pursuance 
 of the discretionary power conferred by the implied terms of 
 the charter.^ If the directors should exceed their discretion- 
 ary power, and should refuse to declare a dividend when they 
 ought to do so, any shareholder would have, his renjedy by a 
 shareholders' bill in the usual form.^ 
 
 § 466. All Regular Dividends are " Income or Profits " upon 
 the Shares. — It seems reasonable to hold that a grant of the 
 " use, income, or profits " of shares for life or for a term of 
 years, means a grant of all ordinary dividends declared by 
 the company in the usual course of business during the ten-- 
 ancy for life or years, irrespective of the time when the money 
 out of which the dividends are paid was earned, or the source 
 from which it was obtained by the corporation. This would 
 be the natural and ordinary meaning of the terms used. It 
 has been held, accordingly, that ordinary dividends declared 
 upon shares belong to the person to whom the " use, income, 
 and profits " of the shares have been given for life, although 
 the dividends are payable out of money earned before the 
 life estate was created,^ 
 
 Dividends declared by a corporation in the regular and 
 usual course of its business belong to a tenant for life of 
 shares, although payable out of the capital originally invested 
 by the shareholders. In Reed v. Head,* the dispute was as 
 to the proper construction of a bequest of shares in a corpo- 
 ration, in trust to pay the income to a tenant for life, with 
 remainder over. The business of the company was to imr 
 prove certain land in which its capital had been invested, and 
 afterwards to sell the land at a profit. It was held that 
 dividends declared during the tenancy for life should be 
 given to the tenant for life, although they were paid out of 
 the proceeds of sales of the lands in which the company's 
 capital was invested. The same rule would evidently be ap- 
 
 1 Supra, § 447. assumed by all the authorities. See 
 
 " Supra, § 276. cases cited in the following sections. 
 
 « Cliveu. Clive, Kay, 600; Bates * Reed v. Head, 6 Allen, 174. 
 
 V. Mackinley, 31 Beav. 281; Bar- See also Balch v. Hallet, 10 Gray, 
 
 clay V. Wainewright, 14 Vesey, 66. 402 ; Harvard College v. Amory, 9 
 
 The rule above stated appears to be Pick. 446. 
 
§ 467 THE LAW OF PEIVATE COKPOBATIONS. 436 
 
 plicable to dividends declared by an ordinary mining com- 
 pany, or any other company of a similar character.^ 
 
 § 467. Unusual Dividends of Accumulated Earnings. — After 
 a corporation has allowed a large surplus of profits to accu- 
 mulate, it is sometimes deemed advisable to distribute the 
 accumulated fund among the shareholders in the form of a 
 large dividend in cash, or to capitalize the surplus perma- 
 nently by issuing a dividend in shares.^ It is often difficult 
 to determine whether a dividend of this description belongs 
 to a grantee of the " use, income, and profits " of shares for 
 life or a term of years, or to the person who is entitled to 
 receive the shares in remainder. The question is one of 
 definition, and no reasoning can be of any assistance in 
 reaching the proper conclusion, unless by making clear the 
 intentions of the grantor of the shares. 
 
 It seems reasonable to assume that a grant of the " income 
 and profits " of shares for life is intended by the grantor 
 to include all ordinary periodical dividends declared by the 
 company during the existence of the life estate, whether pay- 
 able out of profits earned during the life tenancy or not. 
 But if a dividend is not an ordinary dividend, there would 
 be no reason for assuming that the grantor intended it 
 should go to the life tenant, unless it was in fact the income 
 and profits of the shares according to the terms of the grant. 
 If a grant or bequest merely provides that the " income and 
 profits " of shares shall be paid to a tenant for life, it is rea- 
 sonable to assume that the grantor or testator never specifi- 
 cally thought of extraordinary dividends. But the general 
 intention of the grantor or testator in a case of this kind 
 evidently is, that the shares shall be preserved for the benefit 
 of the remainderman substantially in the condition in which 
 they exist at the creation of the trust, and that the benefits 
 accruing on the shares during the life tenancy shall belong 
 to the life tenant. This intention cannot be carried out in 
 all cases by distributing extraordinary dividends declared on 
 the shares, without regard to the source out of which they 
 are paid. Thus, a corporation desiring to restrict its oper- 
 1 Compare supra, § 442. « See supra, §§ 438, 452. 
 
437 THE CONSTKUCTION OF CHAKTEKS. § 468 
 
 ations within narrower limits may properly distribute the 
 surplus no longer needed in the business among its share- 
 holders in the form of a dividend. A dividend of this de- 
 scription made during the life tenancy could certainly not be 
 called income and profits of the shares during the life tenancy 
 in any correct sense, if the surplus was earned before the 
 life tenancy was created.^ By distributing the accumulated 
 surplus, the value of the shares would be correspondingly 
 reduced. 
 
 So it is clear that the amount distributed by a corporation 
 among its shareholders on winding up its business and mak- 
 ing a final division of the corporate assets, is not in any sense 
 " income and profits " on the shares. A tenant for life of 
 shares, under these circumstances, would be entitled to re- 
 ceive only his share of the surplus profits accumulated since 
 the tenancy for life began.^ 
 
 So, if two corporations consolidate, and shares in the new 
 company formed by consolidation are issued to take the place 
 of the shares in the old companies, a bonus given to the share- 
 holders of one of the old companies on account of the greater 
 value of their shares would not belong to a person having 
 the income of such shares for life, unless it consist of profits 
 earned during the tenancy for life.^ 
 
 On the other hand, if an unusual dividend is not only de- 
 clared during the existence of a life estate in shares, but is 
 also payable out of profits accumulated during the existence 
 of the life estate, it would in every sense be " income and 
 profits " accruing on the shares, and should be given to the 
 life tenant, according to the terms of the grant.* 
 
 § 468. The Rule as to Stock Dividends. — It has been held 
 in various cases, that the rule applicable to dividends paya- 
 ble in cash does not apply to dividends payable in shares ; 
 
 1 Vinton's Appeal, 99 Pa. St. 201. If the bonus is in the form of 
 
 434. an issue of extra shares, it should be 
 
 ' Simpson v. Moore, 30 Barb, applied as in case of a stock divi- 
 
 637. dend. Infra, § 468. 
 
 * Clarkson v. Clarkson, 18 Barb. * See cases cited in the following 
 
 646; Goldsmith v. Swift, 25 Han, sections. 
 
§ 468 THE LAW OF PEIVATB COKPOEATIONS. 438 
 
 that while thie former may belong to the tenant for life, the 
 latter should always be preserved as capital for the benefit of 
 the remainderman.^ However, the weight of reason and of 
 authority appears to be the other way. 
 
 While the payment of a stock dividend is not an actual 
 distribution of profits, it does materially affect the rights of 
 the shareholders in respect of the accumulated profits. The 
 effect of a stock dividend is to capitalize the accumulated 
 profits permanently. The profits on account of which a 
 stock dividend is declared can never afterwards be distrib- 
 uted among the shareholders as dividends, and, after the 
 new shares have been issued, the right of the corporation to 
 pay further dividends, and the right of the shareholders to 
 demand them, must be considered with reference to the in- 
 creased nominal capital.^ The payment of a stock dividend 
 is not merely an increase of the nominal amount of the 
 shares, leaving the rights of the shareholders unchanged. In 
 substance and effect, it amounts to a distribution of profits 
 among the shareholders in cash, and a subsequent purchase 
 of new shares in the company with the sums distributed. 
 
 Accordingly, in Paris v. Paris,^ Lord Eldon said : " As to 
 the distinction between stock and money, that is too thin ; 
 and if the law is that this extraordinary profit, if given in the 
 shape of stock, shall be considered capital, it must be capital 
 if given as money." 
 
 It should be observed, however, that the distribution of a 
 stock dividend permanently capitalizes only so much of the 
 accumulated surplus as is applied in paying up the new 
 shares. Any additional amount would be retained by the 
 corporation as surplus, after the increase of its nominal capi- 
 tal, and might still be used to pay dividends. Hence, a ten- 
 ant of shares for life is never entitled to receive more than 
 
 1 See the Massachusetts cases 102-104; Clarkson v. Clarkson, 18 
 
 cited infra, § 472. See also Re Bavb. 646. In the last-named case, 
 
 Barton's Trust, L. R. 5 Eq. 238. a gift of "the dividends " on stock 
 
 ^ Supra, § 453. was held to include all stock divi- 
 
 ' Paris V. Paris, 10 Vesey, 185. dends. But see contra. Re Barton's 
 
 See also Riggs ». Cragg, 26 Hun, 89, Trust, L. R. 5 Eq. 288. 
 
489 THE CONSTRUCTION OF CHAETEES. § 469 a 
 
 the par amount of 9, stock dividend, although the new shares 
 are worth more than par, and the entire surplus of the com- 
 pany was earned during the existence of the life estate.' He 
 is entitled to receive only so much of the surplus earned dur- 
 ing the life estate as is used in paying up .the new shares. 
 
 § 469. The Authorities in PemisylTania and New Jersey. — 
 Earp's Appeal ' involved the construction of a bequest of the 
 testator's residuary estate, upon trust to pay the " rents, in- 
 come, and interest" to a beneficiary for life. The residuary 
 estate included 540 shares in an iron manufacturing corpora- 
 tion. At the time of the testator's death, the company had 
 accumulated a large surplus of profits, and the value of the 
 shares had increased from #50 to fl25 each. The company 
 continued to accumulate large profits, and no dividend was 
 declared for six years after the death of the testator. Then 
 a stock dividend was declared, and the 540 shares held by 
 the trustee were increased to 1350 shares in the enlarged cap- 
 ital. The court decided that the rule which rejects appor- 
 tionments of periodical payments, or of ordinary dividends 
 recurring at fixed intervals, had no application to a division 
 of large accumulations extending over a number of years. 
 It was therefore decreed that so much of the new issue of 
 stock as was paid up out of profits earned since the death of 
 the testator must be given to the tenant for life, and the rest 
 kept for the remainderman.^ 
 
 § 469 a. This case should be compared with the decision of 
 the same court in Moss's Appeal.^ The trustees under a will 
 
 1 Earp's Appeal, 28 Pa. St. 368. belonged to the tenant for life. 
 See also Wiltbank's Appeal, 64 The court therefore held that 506 
 Pa. St. 256. of the new shares should be given 
 
 2 The value of the 540 shares left to the tenant for life, and the remain- 
 by the testator, at $125 each, was ing 296, together with the original 
 $67,500. The value of the 1350 540 shares left by the testator, be 
 shares after the dividend was de- retained upon the trusts declared by 
 clared, at $80 per share, was the will. 
 
 $108,000. The difference between » Moss's Appeal, 83 Pa. St. 264. 
 
 $108,000 and $67,500, being $40,500, See also Riddle's Appeal, 99 Pa. St. 
 
 was represented by profits earned 278; Brinley v. Grou, 50 Conn. 66. 
 since the death of the testator, and 
 
§ 469 a THE LAW OP PRIVATE COKPOEATIONS. 440 
 
 held certain shares in a corporation, to pay the "income, profits, 
 and products " to the testator's wife for life. After the death of 
 the testator, the company doubled the amount of its nominal 
 capital, and gave to each of the existing shareholders the 
 privilege of subscribing for as many shares as he already held, 
 at par. The company had accumulated a very large surplus 
 of profits, and the shares, before the new issue took place, 
 were worth more than twice their par amount ; the privilege 
 of subscribing for the new shares at par was therefore of 
 considerable value. The court held that no part of this 
 privilege belonged to the life tenant, as income on the shares, 
 but that it must be sold or exercised by the trustees so as to 
 increase the principal of the trust estate.^ 
 
 The rule was stated by Chancellor Zabriskie in Van Doren 
 V. Olden,^ in ttie following words : " Where trust funds, of 
 which the income, interest, or profits are given to one person 
 for life, and the principal bequeathed over upon the death of 
 the life tenant, are invested, either by the trustee or at the 
 death of the testator, in stock or shares of an incorporated 
 company, the value of which consists in part of an accumu- 
 
 ' The trustees in Moss's case had scribing for a new issue of shares at 
 
 sold the privilege attaching to part $75 per share, for the sole benefit 
 
 of the shares held by them, and used of the tenant for life. This decis- 
 
 the proceeds of the sale to pay for ion was correct, provided the differ- 
 
 the remainder of the shares which ence between the subscription price 
 
 they were entitled to take. of the shares and their actual value, 
 
 There was certainly no actual up to par, was made up by profits 
 
 distribution of profits in this case; earned since the life estate began, 
 
 nor was any portion of the accumu- The tenant for life was not entitled 
 
 lated profits permanently capitalized, to have the benefit of profits earned 
 
 as in case of the issue of a stock by the corporation before the death 
 
 dividend. The new shares were of the testator, nor was he entitled 
 
 paid up at par out of new funds, to profits which were neither dis- 
 
 and the company's surplus remained tributed nor permanently capital- 
 
 as large after the new issue of shares ized. If the profits exceeded the 
 
 as before. This surplus could at amount credited as payment on the 
 
 any time thereafter be distributed, shares, the surplus might at any 
 
 See supra, § 438. time thereafter be distributed in 
 
 In Wiltbank's Appeal, 64 Pa. St. the form of dividends. 
 
 2.56, the court held that a trustee hold- ^ Van Doren v. Olden, 19 N. J. 
 
 ing shares upon a similar trust must Eq. 177. To the same effect, see 
 
 exercise or sell a privilege of sub- Lord v. Brooks, 52 N. H. 72. 
 
441 THE C0NSTET7CTI0N OF CHAETEES. § 471 
 
 lated surplus or undivided earnings laid up by the company, 
 as is frequently the case, such additional value is part of the 
 capital ; this, as well as the par value of the shares, must be 
 kept by the trustee intact, for the benefit of the remainder- 
 man, but the earnings of such capital, as well as upon the par 
 value of the shares, belongs to the life tenant." 
 
 § 470. The Authorities in England and New York. — In 
 England it was formerly held, that, if stock is given to trus- 
 tees to pay the use, income, ^and profits to a tenant for life, 
 all extraordinary dividends must be preserved by the trustees, 
 together with the shares, and given to the remainderman 
 after the expiration of the life estate.^ The later decisions 
 are not all in harmony with this rule ; but the courts do not 
 appear in any case to have investigated whether the divi- 
 dends were paid out of profits earned before or after the life 
 tenancy began.^ 
 
 In New York, the rule appears to be, that all dividends 
 payable in money or in stock belong to the tenant for life of 
 shares, under a bequest of " the use, income, and profits," 
 whether the surplus on account of which the dividends are 
 declared was earned before or after the life estate began.^ 
 But a distribution of corporate funds which is not made in the 
 form of a dividend does not go to the tenant for life, except 
 to the extent of the profits added since the life estate began.* 
 
 § 471. The Rule in Massachusetts. — In Minot V. Paine,^ 
 the Supreme Court of Massachusetts held that a stock divi- 
 dend on shares does not belong to the tenant for life, to 
 
 1 Brander v. Brander, 4 Vesey, '634; Clive».Clive, Kay, 600; Plumbs 
 800; Paris v. Paris, 10 Vesey, 185; v. Neild, 6 Jur. n. s. 529. Re Bar- 
 Witts V. Steere, 13 Vesey, 363. ton's Trust, L. R. 5 Eq. 238. 
 Compare Norris v. Harrison, 2 ' Woodrufi's Estate, Tucker, 58 ; 
 Madd. 279 ; Barclay w. Wainewright, Goldsmith v. Swift, 25 Hun, 201; 
 
 14 Vesey, 66. Riggs v. Cragg, 26 Hun, 103 ; Clark- 
 
 2 Cuming v. Boswell, 2 Jur. son u. Clarkson, 18 Barb. 646; Simp- 
 N. s. 1005; Price v. Anderson, 15 son u. Moore, 30 Barb. 637. 
 
 Sim. 473; Johnson v. Johnson, * Clarkson t). Clarkson, 18 Barb. 
 
 15 Jur. 714; Murray v. Glasse, 17 640; SimpsoncMoore, 30Barb. 637. 
 Jur. 816; Bates v. Mackinley, 31 ^ Minot v. Paine, 99 Mass. 101. 
 Beav. 281 ; Hooper v. Rossiter, 13 See also Richardson v. Richardson, 
 Price, 778; Ward v. Combe, 7 Sim. 75 Me. 571. 
 
§ 471 THE law" 01" PRIVATE CORPORATIONS. 442 
 
 whom the net income of the shares was made payable, but 
 must be preserved as part of the capital of the trust fund for 
 the benefit of the remainderman. It was laid down as a rule, 
 in this case, that cash dividends, however large, must be 
 regarded as income upon shares, and stock dividends, how- 
 ever made, must be regarded as part of the capital. 
 
 In Daland v. Williams,^ and subsequent cases, the same 
 court held, that if a corporation declares a dividend payable 
 in cash, and at the same time provides that this dividend 
 shall be received in payment of new shares, to be issued and 
 apportioned among the existing shareholders according to 
 the number of shares already held by them, the dividend 
 does not belong to a life tenant of the shares on which it was 
 declared, whether received in cash or in shares, and that it 
 is immaterial when the dividend was earned. 
 
 Leland v. Hayden ^ was a suit brought by the trustees of a 
 fund, the income of which was payable to tenants for life, to 
 ascertain the proper application of certain dividends declared 
 upon shares constituting part of the trust fund. The corpo- 
 ration in which the shares were held had accumulated a large 
 surplus since the death of the testator, and part of this sur- 
 plus had been used to purchase shares of its own stock. The 
 dividend was declared payable one half in shares which had 
 been thus purchased and one half in cash, but with the privi- 
 lege of taking, instead of cash, new shares issued by the 
 company at par. The court held that the first half of the 
 dividend belonged to the tenant for life as income on the 
 shares, but that the latter half must be preserved as capital, 
 whether received in cash or in shares. 
 
 It is difficult to follow the reasoning by which these con- 
 clusions and distinctions were reached. Reasoning based 
 upon legal technicalities can clearly be of no service in ascer- 
 taining the intentions of a grantor. The rule in Minot's 
 case undoubtedly has the merit of being simple and of easy 
 application. But that does not prove it would carry out the 
 
 1 Daland v. Williama, 101 Mass. 102 Mass. 542; Atkins ». Albree, 12 
 571; Rand v. Hubbell, 115 Mass. Allen, 359. 
 460. See also Leland v. Hayden, " 102 Mass. 542. 
 
443 THE CONSTEtrCTION OP CHAETEES. § 472 
 
 intentions of the grantor of a trust of this kind. Indeed, it 
 seems almost self-evident that a simple grant of the income 
 of shares is not in fact intended as a grant of all cash divi- 
 dends and of no stock dividends ; and if the general purpose 
 of a grant of this description is considered, it becomes evident 
 that such a construction would in many cases defeat the in- 
 tentions of the grantor rather than carry them out. 
 
 § 472. The Right of Shareholders to receive Certificates of 
 Shares. — It is customary to issue to each shareholder in a 
 corporation a certificate stating the number of shares held 
 by him, and other particulars indicating his rights as a share- 
 holder in the company. The object of issuing these certifi- 
 cates is to provide the shareholders vi^ith evidence of their 
 rights, and to enable them to deal vrith their shares freely by 
 indorsement and transfer of the certificates. The certificates 
 are treated as representing the shares themselves.^ 
 
 If the charter or by-laws of a corporation provide that cer- 
 tificates for shares shall be issued to the company's share- 
 holders, the agents of the company are bound to issue a 
 certificate in the customary form to each holder of shares 
 upon the company's books. The same rule would apply in 
 the absence of any express provision in the charter or by- 
 laws, if the issue of certificates was an established practice 
 of the company sanctioned by acquiescence of the share- 
 holders. The agents of the company would have no right 
 to discriminate against particular shareholders under these 
 circumstances. 
 
 It has sometimes been supposed that a shareholder is not 
 entitled to receive a certificate for his shares until the latter 
 have been fully paid up ; ^ but this appears to be a mistake. 
 
 If the charter or by-laws of a company provide that the 
 "shareholders" shall receive certificates for their shares, it 
 would seem that every shareholder would be entitled to a 
 certificate indicating the number of shares held by him as 
 
 1 See supra, §§ 185-192. N. Y. 416. In these cases, how- 
 
 " Compare Gould v. Town of ever, it is evident that the dispute 
 
 Oneonta, 71 N. Y. 298, 305; John- was as to the right to receive cer- 
 
 son V. Albany, &c. B. B. Co., 54 tificates for fully paid-up shares. 
 
§ 473 THE LA"W OF PEIVAJE COEPOEATIONS. 444 
 
 soon as he becomes a shareholder, or, in other words, as soon 
 as his subscription is accepted and the company properly- 
 organized. A shareholder, undoubtedly, is not entitled to a 
 certificate for paid-^p shares until the shares have in fact 
 been fully paid up ; ^ he has merely a right to a certificate 
 showing the number of shares which he holds, and the amount 
 actually paid thereon, if anything has been paid. A person 
 who has merely agreed to subscribe for shares, or to purchase 
 them at a subsequent time, is clearly not entitled to a cer- 
 tificate, because he does not become a shareholder until the 
 contract has been executed by making the subscription or 
 purchasing the shares.^ 
 
 § 473. The Right of Ezamining the Company's Books. — The 
 members of a simple copartnership are entitled to examine 
 the partnership books and accounts whenever they desire ; ^ 
 but this rule is inapplicable to large joint-stock companies 
 and corporations. The control over the affairs of associations 
 of this description is, by common consent, delegated to direc- 
 tors and managing agents, elected by the majoritj-, and the 
 individual shareholders have no authority or control except 
 by their votes at shareholders' meetings. If every share- 
 holder in a large joint-stock association were allowed to ex- 
 amine its books and accounts at pleasure, it would become 
 impossible, in practice, to keep the books in a proper man- 
 ner ; moreover, it is evident that the result would be to lay 
 open the affairs of the company to the public, and render any 
 privacy in its dealings impossible.* It is reasonable, how- 
 
 1 In Johnson v. Albany, &c. 460; Taylor w. Rundell, 1 PhiU. 222; 
 
 R. R. Co., 54 N. Y. 416, it was Freeman v. Fairlie, 3 Mer. 43; 
 
 rightly held that a stockholder could Toulmin v. Copland, 2 Y. & C. 
 
 not compel the corporation to issue Exoh. 655. 
 
 to him a certificate for his shares * In Regina v. Mariquita, &c. Min- 
 until the full amount due upon them ing Co., 1 El. & El. 289, Lord Camp- 
 was paid to the company, although bell, C. J., said: " The business of 
 the latter was barred by the statute such companies could hardly be con- 
 of limitations from maintaining a ducted if any one, by buying a share, 
 suit for the amount remaining un- might entitle himself at all times to 
 paid. gain a knowledge of every commer- 
 ^ Supra, § 61. oial transaction in which the direc- 
 ' Stuart V. Lord Bute, 12 Sim. tors engage, the moment that an 
 
445 THE CONSTBUOTION OF CHAETEES. § 473 
 
 ever, that the majority of a company should have the power 
 to examine its books and accounts, through agents appointed 
 for that purpose at a meeting duly convened.^ 
 
 However, in the United States the prevailing doctrine ap- 
 pears to be that the individual shareholders in a corporation 
 have the same right as the members of an ordinary partner- 
 ship to examine their company's books, although they have 
 no power to interfere with the company's management. The 
 Supreme Court of Pennsylvania said : " Unless the charter 
 provides otherwise, a shareholder in a trading corporation 
 has the right to inspect its books and papers, and to take 
 minutes from them, for a definite and proper purpose, at rea- 
 sonable times. 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." 2 
 
 In many instances statutes have been passed giving the 
 shareholders of a corporation a right, subject to certain lim- 
 itations, to obtain from the company's agents a sworn state- 
 ment of its accounts, or to inspect its books in an orderly 
 manner.^ A shareholder is clearly entitled to obtain a 
 
 entry of it is made on their books." 27, as amended by L. 1854, Chap. 
 
 Compare Rex v. Merchant Tailors' 201, and L. 1862, Chap. 472, § 1. 
 Co., 2 B. & Ad. 115; Rex v. Host- The Revised Statutes of New 
 
 men in Newcastle, 2 Strange, 1223; York provide that the transfer-books 
 
 Mayor of Southampton v. Graves, and books' containing the names of 
 
 8 T. R. 590. the shareholders in a corporation 
 
 1 Such a right is given by the shall be open to the examination of 
 English Companies Act of 1862. every shareholder in such company, 
 
 2 Commonwealth v. Phoenix Iron during the usual hours of busi- 
 Co., 105 Pa. St. Ill, 116; Cockburn ness, for thirty days previous to any 
 V. Union Bank, 13 La. Ann. 289; election of directors. 1 R. S. 601, 
 Deaderick v. Wilson, 8 Baxter, 108, § 1 (Chap XVIII. Title IV. § 1). 
 137. See also State ». Einstein, 46 Under this provision see Sage v. 
 N. J. Law, 479 ; Union Nat. Bank v. Lake Shore, &o. Ry. Co., 70 N. Y. 
 Hunt, 76 Mo. 439; Wannell w. Kem, 220; Cotheal v. Brouwer, 5 N. Y. 
 57 Mo. 478; People v. Northern Pa- 562; 10 Barb. 216. 
 
 cific R. R. Co., 50 N. Y. Super. Ct. In England the Companies Act 
 
 456. of 1862 contains full provisions on 
 
 ' For example, see the Act of this point. See also the Companies 
 
 New York of 1848, Chap. 40, §§ 25, Clauses Consolidation Act (8 & 9 
 
§473 
 
 THE LAW OF PKIVATE COEPOBATIONS. 
 
 446 
 
 production of the company's books in a legal proceeding, 
 whenever he can base his rights to an inspection upon the 
 established rules of practice.^ 
 
 Vict., c. 16). 1 Lindley on Part- 
 nership, 811, 812. 
 
 It has been held in England, that 
 a shareholder who, by the terms of 
 the company's special act, is entitled 
 at all reasonable times to inspect the 
 books of the company, and who has 
 applied for an inspection and has 
 been refused, is not entitled to a 
 mandamus against the company to 
 allow an inspection, unless, before 
 it was refused him, he stated for 
 what purpose he desired to see 
 the books, and unless such purpose 
 
 was, in the opinion of the court, a 
 reasonable purpose, and unless the 
 refusal proceeded from the managing 
 body. 1 Lindley on Partnership 
 (4th ed.), 809, citing Rex v. Wilts, 
 &c. Canal Co., 3 A. & E. 477; Reg. 
 V. Grand Canal Co., 1 Ir. Law R. 
 337; Rex v. Clear, 4 B. & C. 899. 
 
 1 Hall V. Connell, 3 Y. & C. 
 Exch. 707 ; Birmingham, &c. Ry. Co. 
 V. White, 1 Q. B. 282 ; Bank of Utica 
 V. Hillard, 5 Cowen, 419; Williams 
 V. Prince of Wales, &c. Ins. Co., 23 
 Beav. 338. 
 
447 THE MANAGEMENT OF COEPOEATIONS. § 474 
 
 CHAPTER VII. 
 
 THE MANAGEMENT OF CORPOEATIONS. 
 
 PART I. 
 
 THE POWERS OF THE MAJORITY. 
 
 § 474. The General Rule. — As a corporation consists of the 
 whole number of its members, it is apparent that it cannot 
 carry on business directly and without the intervention of 
 agents; for the unanimous action of the stockholders would 
 be essential to every corporate act. It has, for this reason, 
 been held to be an implied condition in the formation of 
 every association of this character, that the majority of mem- 
 bers present at a shareholder's meeting shall have authority 
 to bind the whole association by their vote. The extent of 
 the powers of the majority to act for the corporate body is 
 measured by the charter itself : " Each and every share- 
 holder contracts that the will of the majority shall govern 
 in all matters coming within the limits of the act of incor- 
 poration." ^ 
 
 The rule was laid down by Chief Justice Bigelow as fol- 
 lows : " It may be stated as an indisputable proposition, that 
 every person who becomes a member of a corporation aggre- 
 gate by purchasing and holding shares agrees, by necessary 
 implication, that he will be bound by all acts and proceed- 
 ings, within the scope of the powers and authority conferred 
 by the charter, which shall be adopted or sanctioned by a 
 vote of the majority of the corporation, duly taken and as- 
 certained according to law. This is a result, of the funda- 
 
 1 Per Lindsay, J., in Dudley 578. See also infra, § 641 et 
 V. Kentucky High School, 9 Bush, seq. 
 
§ 475 THE LAW OP PEIVATB CORPORATIONS. 448 
 
 mental principle, that the majority of the stockholders can 
 regulate and control the lawful exercise of the powers con- 
 ferred on a corporation by its charter." ^ It is implied that 
 the majority shall have supreme authority to direct the policy 
 of the corporation in attaining its chartered purposes, and 
 shall have the power to appoint the usual managing agents, 
 to whom the immediate control and direction of the com- 
 pany's business is delegated. 
 
 § 475. Extent of Powers of the Majority. — The powers of 
 a majority to bind the whole company by their vote is de- 
 rived solely /rom the agreement of association between the 
 shareholders. The majority are not authorized to represent 
 the company in any transaction which is not in pursuance of 
 its chartered purposes ; ^ nor are the majority empowered to 
 do any act without complying with every formality which is 
 prescribed by the company's charter or articles of association, 
 or by custom.^ 
 
 Sometimes the general managing powers of a majority are 
 restricted, with regard to special matters, by express provis- 
 ion of the charter; and, in certain cases, such restrictions 
 may be implied. If the charter of a corporation provides 
 that particular agents shall exercise certain powers, or do 
 certain acts, the majority have no right to interfere with 
 such agents in the exercise of the powers intrusted to them ; 
 and it is immaterial that such agents were appointed by the 
 majority, and that the majority have authority to appoint 
 their successors. Under these circumstances the majority 
 can exercise merely an appointing power, and control the 
 management of the company's business by the election of 
 such officers as will carry out their wishes.* 
 
 1 Durfee J). Old Colony, &o. E. K. Keyser, 32 N. H. 313; Conro v. 
 Co., 5 Allen, 242; Gifford v. New Port Henry Iron Co., 12 Barb. 27; 
 Jersey R. R. Co., 10 N. J. Eq. 174; McCullough i-. Moss, 5 Denio, 567, 
 New Orleans, &c. R.R. Co. r. Harris, 575; Gashwiler v. Willis, 83 Cal. 
 27 Miss. 537 ; Tread well v. Salisbury 1 1 ; Commonwealth v. Church of 
 Manuf. Co., 7 Gray, 393; Stevens v. St. Mary's, 6 S. & R. 508; State v. 
 South Devon Ry. Co., 9 Hare, 313. Curtis, 9 Nev. 325. Compare Aspin- 
 
 2 Infra, §§ 641-647. wall v. Meyer, 2 Sandf. 186; How- 
 » See infra, § 477 et seq. land v. Myer, 3 N. Y. 290; and see 
 * Union Mutual Fire Ins. Co. v. cases infra, § 511. 
 
449 THE MANAGEMENT OP COKPOKATIONS. § 476 
 
 § 476. Definition of «* the Majority." — " The majority of a 
 corporation " means that portion of the shareholders present 
 at a general meeting, who are entitled to control the corpo- 
 ration by their votes. 
 
 It is not necessary that a majority of all the shareholders 
 in a corporation, or the holders of the greater part of its 
 shares, be present at a meeting, -in order that the resolutions 
 of the meeting shall be binding on the corporation. In the 
 absence of an express provision to the contrary, the rule is 
 that such of the shareholders as actually assemble at a prop- 
 erly convened meeting constitute a quorum for the transac- 
 tion of business, and a majority of that quorum have authority 
 to' represent the corporation.^ 
 
 Kent said : " There is a distinction taken between a cor- 
 porate act to be done by a select and definite body, as by a 
 board of directors, and one to be performed by the constitu- 
 ent members. In the latter case, a majority of those who 
 appear may act ; but in the former, a majority of the definite 
 body must be present, and then a majority of the quorum 
 may decide. This is the general rule on the subject ; and if 
 any corporation has a different modification of the expression 
 of the binding will of the corporation, it arises from the spe- 
 cial provisions of the act or charter of incorporation." ^ 
 
 § 476 a. Number of Votes of each Shareholder. — It seems 
 that, at common law, each shareholder is entitled to cast but 
 
 1 Field V. Field, 9 Wend. 395; by constitutional provision, made a 
 
 Everett i'. Smith, 22 Minn. 53 ; Mad- condition precedent to the issue of 
 
 ison Avenue Baptist Church v. Bap- township bonds, the bonds may be 
 
 tist Church, &o., 5 Koberts. 649; issued, provided two thirds of those 
 
 Craig V. First Presbyterian Church, actually voting give their consent. 
 
 88 Pa. St. 42; Brown v. Pacific Mail " All qualified voters who absent 
 
 Steamship Co., 5 Blatchf. 525. themselves from an election duly 
 
 A majority of those actually vot- called are presumed to assent to the 
 
 ing at a meeting represent the expressed will of the majority of those 
 
 company, and can elect officers. Co- voting, unless the law providing for 
 
 lumbia Bottom Levee Co. v. Meier, the election otherwise declares." 
 
 39 Mo. 53. Compare Commonwealth County of Cass v. Johnston, 95 U. S. 
 
 V. Wickersham, 68 Pa. St. 134. 360, 369. Compare infra, § 478. 
 
 Where the consent of <M)o (foVrf* o/ 2 2 Kent's Com. 293; and see 
 
 the qualified voters of a township is, infra, § 531. 
 VOL. I. — 29 
 
§ 477 THE LAW OP PRIVATE COKPOKATIONS. 450 
 
 one vote, irrespective of the number of shares which he 
 holds ; ^ but there are good reasons for holding that this 
 rule has no application to ordinary joint-stock business cor- 
 porations at the present day. The custom of giving the 
 shareholders in such companies a vote for every share has 
 become so well established, that it is fair to imply an inten- 
 tion to follow this custom in the absence of any indication to 
 the contrary. It is generally provided by statute, or by ex- 
 press provision in the articles of association of a corporation, 
 that the shareholders shall be entitled to a vote on account 
 of each share. 
 
 The right of cumulative voting at the election of a board 
 of directors, does not exist, unless conferred by express pro- 
 vision ; each shareholder can cast but one vote on each share 
 for each member of the board, whether he votes for one or 
 all of them.- 
 
 § 477. Shareholders are not disqualified from voting by Rea- 
 son of Personal Interest. — The rule that the agents of a cor- 
 poration have no a;uthority to represent it in any transaction 
 in which they are personally interested in obtaining an advan- 
 tage at the expense of the company ,3 has not been extended 
 to the majority, who are authorized to bind the corporation 
 by their vote at a general meeting of the shareholders. It is 
 true that the majority derive their powers from an implied 
 delegation of authority from the other shareholders, and are 
 bound to use their powers in good faith, for the benefit of the 
 whole association. But an investigation into the personal 
 interests of the numerous shareholders voting at a general 
 meeting would obviously be very difficult, if not impossible, 
 and great uncertainty would result if the validity of acts of 
 
 1 Taylor v. Griswold, 14 N. J. 82 Pa. St. 518; Pierce v. Common- 
 Law, 222, 237 ; Commonwealth v. wealth, 104 Pa. St. 150. 
 Conover, 10 Phila. 55. A shareholder is not bound to 
 
 ' In Pennsylvania, the system vote for the whole of a proposed 
 
 of cumulative voting at elections of board ; he may vote for a part of 
 
 the board of directors or managing the board, and elect these. Van- 
 
 oflScers of a corporation is estab- denburgh v. Broadway Ry. Co., 29 
 
 lished by provision of the Constitu- Hun, 848. 
 
 tion. See Hays v. Commonwealth, * Infra, § 517 et seq. 
 
451 THE MANAGEMENT OF COEPORATIONS. § 477 
 
 the majority were made to depend upon such an investigation. 
 It has therefore been held, for reasons of convenience amount- 
 ing to a practical necessity, that shareholders in a corporation 
 are not disqualified from voting at a general meeting of the 
 company by reason of their individual interests in the result 
 of the vote. Even though a contract made by a shareholder 
 to vote for or against a certain resolution or candidate for 
 office be illegal, because contrary to public policy, the vote of 
 such shareholder cannot be rejected.^ 
 
 But the courts would undoubtedly scrutinize vrith strict- 
 ness any acts of the majority in which the majority were 
 interested in obtaining an advantage at the expense of the 
 corporation as a whole. If the majority attempt to appropri- 
 ate the corporate funds to their own use, or in any manner to 
 act unfairly towards the minority, or to depart from the com- 
 pany's charter, the courts would not hesitate to interfere at 
 the suit of any aggrieved shareholder.^ The majority may 
 legally control the company's business, prescribe its general 
 policy, make themselves the agents of the company, and take 
 reasonable compensation for their services ; but in taking 
 control, they assume the duty of exercising diligence and of 
 
 1 East Pant Du, &c. Mining Co. v. Yates, 57 111. 416; Foil's Appeal, 
 
 V. Merryweather, 2 H. & M. 254. 91 Pa. St. 434; Bolton e. Madden, 
 
 It cannot be laid down, as an in- L. R. 9 Q. B. 55; Elliott v. Rich- 
 flexible rule, that an agreement made ardson, L. R. 5 C. P. 744; Moffatt 
 by a shareholder to vote for or against v. Farquharson, 2 Bro. C. C. 338; 
 a certain measure or candidate is Card v. Hope, 2 B. & C. 661. 
 invalid. The validity of such an ^ Menier v. Hooper's Tel. Works, 
 agreement would depend upon cir- L. R. 9 Ch. 350 ; Barr v. New York, 
 cumstances. Thus, a combination &c. R. R. Co., 96 N. Y. 444; Cur- 
 among shareholders to support a rier v. New York, &c. R. R. Co., 
 certain policy would not be illegal, 85 Hun, 855; Goodin v. Cincinnati, 
 if made in good faith for the pur- &c. Canal Co., 18 Ohio St. 169; 
 pose of advancing the company's State ». Concord R. R. Co., 13 Am. 
 interests; but au agreement made & Eng. R. R. Cas. 94, 107; Wright 
 by a shareholder to sell his vote v. Oroville Mining Co. , 40 Cal. 20, 
 for an advantage to himself would 27; Ervin v. Oregon Ry., &c. Co., 
 be an agreement to misuse a power 20 Fed. Rep. 577; Reilly v. Ogle- 
 held in trust, and would therefore bay, 25 W. Va. '36. See also supra, 
 be condemned by the courts. See § 249; infra, § 529. 
 Fisher v. Bush, 85 Hun, 641 ; Faulds 
 
§ 479 THE LAW OF PEIVATB COBPOKATIONS. 452 
 
 administering the company's affairs with the utmost good 
 faith and fairness to the minority.^ 
 
 § 478. Shares belonging to the Corporation cannot be voted. 
 — It is only by the use of a fiction that a corporation can be 
 considered a holder of shares in itself. When shares are 
 purchased by the company which issued them, they really 
 become extinguished, and no novation takes place ; but the 
 corporation may generally reissue new shares in place of 
 those withdrawn.^ It is clear, therefore, that shares pur- 
 chased by a corporation cannot be voted upon. The same 
 rule applies whether the shares be transferred directly to the 
 company, or to a trustee for the company. Shares belonging 
 to a corporation in reality belong to its shareholders col- 
 lectively, whatever the form of ownership may be in legal 
 phraseology. It would be an absurdity to allow shares be- 
 longing to the shareholders of a companj' collectively to be 
 used for the purpose of controlling or diminishing their voice 
 in the management of their own property.^ 
 
 In New York, a manufacturing corporation, organized un- 
 der the general laws, is prohibited from mortgaging its prop- 
 erty except after obtaining and filing " the written assent 
 of the stockholders owning at least two thirds of the capital 
 stock." Under this provision, a corporation owning or con- 
 trolling shares in itself cannot, by its agents, assent to the 
 execution of a mortgage so as to make up the requisite as- 
 sent of the owners of two thirds of its capital stock ; nor can 
 the shareholders actually assenting be deemed to represent 
 a proportionate amount of the stock held in the name of the 
 corporation.* 
 
 § 479. Meetings The Necessity of Notice. — The majority 
 
 are authorized to act for the corporation of which they con- 
 
 1 Meeker v. Winthrop Iron Co., Holmes, 5 Cow. 426; Vail v. Ham- 
 17 Fed Rep. 48 ; and see infra, ilton, 20 Hun, 355, 359. See Fraser 
 § 529. V. Whalley, 2 H. & M. 10; Page v. 
 
 2 See supra, §§ 112-114. Smith, 48 Vt. 266. 
 
 8 Monsseaux v. Urquhart, 19 La. * Vail v. Hamilton, 85 N. Y. 453. 
 
 Ann. 482; Brewster v. Hartley, 37 Compare Commonwealth v. Texas, 
 
 Cal. 16; American Ry. Frog Co. v. &c. R. R. Co., 98 Pa. St. 90. 
 Haven, 101 Mass. 398; Ex parte 
 
453 
 
 THE MANAGEMENT OF OOEPOEATIONS. 
 
 §479 
 
 stitute a part only at a meeting called together in a proper 
 manner. The object of requiring the majority to express 
 their will by vote at a meeting is to enable all the sharehold- 
 ers to consult and deliberate together. Every shareholder is 
 entitled to be present at such meeting, and to have a reason- 
 able hearing.^ For this reason, it is essential that all the 
 shareholders be properly notified of a meeting before it is 
 held. If notice to any one was omitted, those present at the 
 meeting have no authority to act for the whole body of mem- 
 bers, and the transactions at the meeting will not be binding 
 as corporate acts. "It is not only a plain dictate of reason, 
 but a general rule of law, that no power or function intrusted 
 to a body consisting of a number of persons can be legally 
 exercised without notice to all the members composing such 
 body." 2 
 
 But if the charter or by-laws of a company fix the time 
 and place at which regular meetings shall be held, this is 
 itself sufficient notice to all the shareholders, and no further 
 notice is necessary .^ 
 
 1 See Shortz v. Unangst, 3 W. & 
 S. 45, 52, 53; Commonwealth v. 
 Cullen, 13 Pa. St. 133; State v. 
 Bonnell, 35 Ohio St. 10; People 
 V. Albany, &c. E. R. Co., 55 Barb. 
 344; Cannon v. Trask, L. R. 20 Eq. 
 669 ; MacDougall v. Gardiner, L. R. 
 
 1 Ch. D. 14. 
 
 2 People V. Batchelor, 22 N. Y. 
 134; Rex v. Langhorn, 4 A. & E. 
 538; Moore v. Hammond, 6 B. & C. 
 456; Jackson v. Hampden, 20 Me. 
 37; McDaniels v. Flower Brook 
 Manuf. Co., 22 Vt. 274; San Buena- 
 ventura, &c. Manuf. Co. v. Vassault, 
 50 Cal. 534; People v. Albany, &c. 
 R. R. Co., 55 Barb. 344; Stock- 
 holders, &o. V. Louisville, &c. R. R. 
 Co., 12 Bush, 62; Smyth v. Darley, 
 
 2 H. L. C. 789 ; People's Mutual Ins. 
 Co. ». Westcott, 14 Gray, 440; Wig- 
 gin V. First Freewill^ &c. Church, 8 
 Mete. (Mass.) 301. Compare Steb- 
 bins V. Merritt, 10 Cush. 27. 
 
 In Stevens v. Eden Meeting 
 House Society, 12 Vt. 688, it was 
 held that a warning by posting a 
 written notice could not be proven 
 by parol until the absence of the 
 writing was accounted for. 
 
 Every reasonable presumption 
 should be made in favor of the 
 regularity of the meetings of a cor- 
 poration aggregate; and the service 
 of proper notice upon each share- 
 holder will be implied, until the con- 
 trary appears. Sargent v. Webster, 
 13 Mete. (Mass.) 497; McDaniels v. 
 Flower Brook Manuf. Co., 22 Vt. 274. 
 Compare Lane v. Brainerd, 30 Conn. 
 566, 577; Pitts v. Temple, 2 Mass. 
 538; Copp V. Lamb, 12 Me. 312. 
 
 « People V. Batchelor, 22 N. Y. 
 128; San Buenaventura, &c. Manuf. 
 Co. V. Vassault, 50 Cal. 534; Moore 
 ». Hammond, 6 B. & C.456; Warner 
 V. Mower, 11 Vt. 391; State v. Bon- 
 nell, 35 Ohio St. 10. 
 
§ 481 THE LAW OF PKIVATB COEPOEATIONS. 454 
 
 § 480. Who can caU a Meeting. — A meeting of sharehold- 
 ers is not binding upon the corporation unless it was called 
 by some person having competent authority, or unless all the 
 members entitled to vote are present.^ If the charter and by- 
 laws of a corporation, formed for business purposes, contain 
 no express provision for the calling of meetings, the managing 
 agents of the company have implied authority to call a meet- 
 ing whenever they deem this to be advisable.^ In most 
 cases, however, the charter or by-laws of a company provide 
 in express terms what officers or agents shall have authority 
 to call meetings. Where the by-laws of a company provided 
 that a proprietor's meeting should be called upon a petition 
 " signed by twelve of them at least," it was held that a less 
 number than twelve proprietors could not call a meeting, 
 although they were the owners of more than twelve shares.* 
 And where it was provided in a by-law that meetings of the 
 company should be called by the trustees, it was decided 
 that the president had no authority to call a meeting.* But 
 a by-law providing that a meeting shall be called by the 
 president upon application of a certain number of sharehold- 
 ers, does not preclude the directors from calling a meeting 
 without such application.^ 
 
 If the officers of a corporation wrongfully refuse to call a 
 meeting, they may ordinarily be compelled to perform their 
 duty by writ of mandamus.® 
 
 § 481. "What Notice must be given. — The notice of a meet- 
 ing of the shareholders of a corporation must fix the exact 
 time and place of the meeting, and, in certain cases, must 
 also indicate the nature of the business to be transacted. 
 If the manner of giving notice is prescribed by the char- 
 
 1 Bethany v. Sperry, 10 Conn. = stebbins v. Merritt, 10 Cush. 27. 
 200; Reilly v. Oglebay, 25 W. Va. » Evans v. Osgood, 18 Me. 213. 
 36. 4 State v. Pettineli, 10 Nev. 141. 
 
 If a corporation has no officer by 6 Citizens' Mutual Fire Ins. Co. 
 
 whom a meeting can be called to- v. Sortwell, 8 Allen, 217. Compare 
 
 gether, it cannot carry on business Chamberlain ». Painesville, &c. R. R. 
 
 until reorganized under a new char- Co., 15 Ohio St. 225. 
 ter. Goulding v. Clark, 34 N. H. « Supra, s 273. 
 148. 
 
455 THE MANAGEMENT OP COEPOEATIONS. § 482 
 
 ter, notice must be given in that manner in order to be 
 effectual.^ 
 
 The time of meeting must be stated precisely ; ^ if a meet- 
 ing is called to order, and business is transacted before the 
 time set, the proceedings will not be valid.^ If the time 
 of meeting is prescribed by the charter or a by-law, that is 
 sufficient notice ; and it has been held that, if the time of 
 meeting has been fixed by usage, or the tacit consent of the 
 shareholders, no other notice is required.* 
 
 The meeting should be opened within a reasonable time 
 after the hour indicated in the notice.^ 
 
 The place of meeting must also be fixed. And if a meet- 
 ing is held at a different place from that prescribed, it will 
 not be valid.® 
 
 In case^of an extraordinary or special meeting, the notice 
 must indicate the nature of the business to be brought before 
 the shareholders ; but this is not necessary in case of a reg- 
 ular meeting for the transaction of ordinary business.^ 
 
 The notice must be served upon each shareholder in person, 
 unless otherwise provided by the charter or a by-law.* And 
 if the charter does not prescribe how long before a meeting 
 notice must be served, a reasonable time is required.^ 
 
 §482. Regular and Special Meetings. — A distinction has 
 been made between regular and special meetings. The for- 
 
 ^ Stockholders, &c. ». Louis- Sampson v. Bowdoinham Steam Mill 
 
 ville, &c. R. R. Co., 12 Bush, Co., 36 Me. 78. 
 62; Johnston v. Jones, 23 N. J. « State v. Bonnell, 35 Ohio St. 
 
 Eq. 216; Stevens v. Eden Meeting 10; South School District v. Blakes- 
 
 House Society, 12 Vt. 688; Swan- lee, 18 Conn. 227. 
 sea Dock Co. v. Levien, 20 L. J. 6 Miller u. English, 21 N.J. Law, 
 
 Ex. 447. 317 ; American Prim. Soc. v. Pilling, 
 
 2 San Buenaventura, &c. Manuf. 24 N. J. Law, 653. SeeMcDanielsu. 
 
 Co. V. Vassault, 50 Cal. 534. Flower Brook Manuf . Co., 22 Vt. 274. 
 
 8 People V. Albany, &c. R. R. ' Infra, § 482. 
 Co., 55 Barb. 344; People v. Batch- s Stowu. Wyse,7Conn.214; Ste- 
 
 elor, 22 N. Y. 134. Compare Har- vensi). Eden Meeting House Soc, 12 
 
 denburgh v. Farmers', &c. Bank, 3 Vt. 688; Wiggin v. First Freewill, 
 
 N. J. Eq. (2 Green) 68. &c. Church, 8 Mete. (Mass.) 301. 
 
 * See Atlantic, >&c. Ins. Co. v. * See In re Long Island R. R. 
 
 Sanders, 36 N. H. 252; Moore v. Co., 19 Wend. 37 ; Wiggin v. 
 
 Hammond, 6 B. & C. 456; People v. First Freewill, &o. Church, 8 Mete. 
 
 Batchelor, 22 N. Y. 128. Compare (Mass.) 301. 
 
§ 483 THE LAW OP PRIVATE CORPOBATIONS. 456 
 
 mer are held regularly at stated times, according to the char- 
 ter or by-laws of the company, while the latter are called at 
 irregular or unusual times, at the option of the officer in 
 whom the authority to call them is vested. A notice calling 
 a special or extraordinary meeting must state particularly 
 what the purpose of calling the meeting is ; and no business 
 can be transacted at the meeting except in relation to the 
 matters specified.^ 
 
 It is unnecessary to notify the shareholders of the particu- 
 lar business to be brought before a regular meeting, unless it 
 be of great importance, and of an extraordinary character.^ 
 In the latter case, the object of the meeting must be specified. 
 Thus, where a meeting of a mutual fire insurance company 
 was called "for the purpose of making such alterations in 
 the by'laws of said company as may be deemedj^necessary, 
 and for the transaction of such other business as may come 
 before them," it was held that the notification was not suffi- 
 ciently specific to enable, a majority of those present at the 
 meeting to increase the nunaber of the directors of the com- 
 pany.^ 
 
 § 483. The Right of Voting. — The right to vote at the 
 meetings of a corporation belongs only to its members or 
 shareholders. An equitable assignment of shares does not 
 effect a novation of the contract of membership, nor place 
 the assignee in privity with the other shareholders, until a 
 formal transfer has been executed in the manner required by 
 the charter of the company. It has been held, accordingly, 
 that the vendor of shares, and not the vendee, is entitled to 
 vote upon them until a transfer has been recorded upon the 
 
 1 Re Bridport Old Brewery Co., ° Sampson ». Bowdoinham Steam 
 
 L. R. 2 Ch. 191; Re Silkstone Fall Mill Co., 36 Me. 78; Warner v. 
 
 Colliery Co., L. R. 1 Ch. D. 38; Mower, 11 Vt. 385. 
 Atlantic De Laine Co. v. Mason, 5 » People's Mutual Ins. Co. v. 
 
 R. I. 463. See Warner v. Mower, Westcott, 14 Gray, 440. See People 
 
 11 Vt. 385; Savings Bank v. Davis, v. Batohelor, 22 N. Y. 128; South 
 
 8 Conn. 192; Merritt v. Farris, 22 School District ». Blakeslee, 13 
 
 111. 303 ; Zabriskie v. Cleveland, &o. Conn. 227. Compare Wills v. Mur- 
 
 R. R. Co., 23 How. 381, 394. Com- ray, 19 L. J. Ex. 209. 
 pare Ehrenfeldt's Appeal, 101 Pa. 
 St. 186. 
 
457 THE MANAGEMENT OF COEPOEATIONS. § 483 
 
 stock-books;^ and the same privilege belongs to a pledgor or 
 mortgagor, unless a complete transfer was executed.^ So a 
 trustee ^ or administrator ■* is entitled to vote, so long as he 
 is legally a shareholder in the company. A corporation or 
 other collective body holding shares may vote upon them 
 through a duly authorized agent. 
 
 It is important to observe that the legal right to vote be- 
 longing to the legal holder of shares may often be restricted 
 by his equitable obligations to third persons. Thus, a share- 
 holder who has made a complete sale or assignment of his 
 interest in shares has no right, as against his assignee, to 
 vote upon them without the consent of the assignee, although 
 a regular transfer may not have been executed on the com- 
 pany's books.^ 
 
 The right of a trustee to vote upon shares held in trust 
 for other parties depends upon the terms of the trust. A 
 shareholder may transfer his shares to nominees having no 
 real ownership, for the purpose of enabling them to vote at 
 the company's meetings, unless the charter or articles of asso- 
 ciation of the company restrict the right to vote to such per- 
 sons as are the beneficial owners of their shares.® 
 
 1 McNeil y. Tenth Nat. Bank, 46 iels v. Flower Brook Manuf. Co., 
 N. Y. 332; Monsseauxw. Urquhart, 22 Vt. 274; Scholfield v. Union 
 19 La. Ann. 482 ; Johnston u. Jones, Bank, 2 Cranch, C. Ct. 115. 
 
 23 N. J. Eq. 228; Downing v. Potts, s Wilson v. Central Bridge Co., 
 
 3 Zab. 66; In re Long Island R. R. 9 R. I. 590; In re Mohawk, &c. 
 
 Co., 19 Wend. 37; State v. Petti- R. R. Co., 19 Wend. 135. 
 
 neli, 10 Nev. 141; Becher v. Wells * In re North Shore, &c. Ferry 
 
 Flouring Mill Co., 1 McCra. 62. Co., 63 Barb. 556. 
 
 Supra, § 170. s gee swpra, §§ 175-180. Mc- 
 
 In State v. Ferris, 42 Conn. 560, Henry v. Jewett, 26 Hun, 458. 
 
 it was held that the right of a stock- In Vowell v. Thompson, 3 Cranch, 
 
 holder to vote upon shares standing C. Ct. 428, a mortgagee of shares 
 
 in his name did not cease after an was ordered by the Chancellor to 
 
 assignment in bankruptcy. But execute a power of attorney or proxy 
 
 see Re North Shore, &c. Ferry Co., to the mortgagor, in order to enable 
 
 63 Barb. 556. him to vote. 
 
 2 Hoppin V. Buffum, 9 R. I. 513; « In State w. Hunton, 28 Vt. 595, 
 McHenry v. Jewett, 26 Hun, 453; it was held that a non-resident 
 Vail V. Hamilton, 85 N. Y. 453 ; shareholder could not parcel out his 
 />i re Barker, 6 Wend. 509; -Eijoarte shares among his friends so as to 
 Willcocks, 7 Cowen, 402; McDan- enable them to vote, as this would 
 
§ 485 THE LAW OP PEIVATB CORPORATIONS. 458 
 
 If joint owners of shares disagree as to the votes to be cast 
 by them, no vote can be received on account of these shares.^ 
 
 § 484. Powers of Inspectors at an Election. — The right to 
 appoint inspectors or judges of election, at a meeting of the 
 shareholders for the election of directors, is vested in the 
 shareholders themselves, and not in the board of directors.^ 
 Every person who is a legal holder of legally issued shares 
 has a legal right, as against the other shareholders, to vote 
 upon the shares ; and neither the shareholders nor the in- 
 spectors at an election can inquire into the equitable owner- 
 ship of the shares, or deprive the legal owner of his right to 
 vote, by reason of obligations which he has assumed to other 
 parties. In Be St. Lawrence Steamboat Co.,^ Depue, J., de- 
 livering the opinion of the court, said : " The general rule 
 is, that the boots of a corporation are the evidence of the 
 persons who are entitled to the rights and privileges of 
 stockholders in the management of the affairs of the cor- 
 poration, with the single exception that stock really belong- 
 ing to the corporation cannot, at any election for its directors, 
 be voted upon directly or indirectly, the books of the corpo- 
 ration are the only evidence of who are the stockholders, and 
 as such are entitled to vote at elections." 
 
 § 485. Illegal Votes. — Votes for disqualified Candidates. — 
 The reception of illegal votes does not necessarily vitiate the 
 resolutions or acts of the majority. Thus, in order to set 
 aside an election on account of the invalidity of votes cast, 
 it must appear affirmatively that, if the illegal votes had not 
 been counted, the successful ticket would not have received 
 a majority.* But a person having received a minority of 
 
 be ill violation of a statute provid- Pender v. Lushington, L. R. 6 Ch. 
 
 ing that no stockholder residing Div. 70; JSa; ^arte Willcocks, 7 Cow. 
 
 out of the State should be entitled 402; People v. Kip, 4 Cow. 382, n. ; 
 
 to vote. Re Barker, 6 Wend. 509 ; Re Whee- 
 
 1 Re Pioneer Paper Co., 36 How. ler, 2 Abb. Pr. n. s. 861; Re Cecil, 
 Pr. 111. 36 How. Pr. 477 ; Downing t;. Potts, 
 
 2 State V. Merchant, 37 Ohio St. 3 Zab. 66. 
 
 251. ^ First Parish v. Stearns, 21 
 
 « i?e St. Lawrence Steamboat Pick. 148; School District ». Gibbs, 
 
 Co., 44 N. J. Law, 529, 539, citing 2 Cush. 39; Christ Church v. Pope, 
 
469 THE MANAGEMENT OF COEPOEATIONS. § 486 
 
 votes at an election cannot be declared elected because a 
 sufficient number of votes in his favor to make up a majority 
 were refused,^ 
 
 It has been held that " Votes cast for a candidate who is 
 disqualified for the office will not be thrown away, so as to 
 make the election fall on a candidate having a minority of 
 votes, unless the electors casting such votes had knowledge 
 of the fact on which the disqualification of the candidate for 
 whom they voted rested, and also knew that the latter was, 
 for that reason, disabled by law from holding office."^ 
 
 § 486. Voting by Proxy. — The members of a corporation 
 must vote personally, and cannot vote by proxy unless the 
 right to vote by proxy is expressly conferred by the com- 
 pany's charter or by-laws.^ That the right of voting by 
 proxy may be conferred through a by-law adopted by the 
 majority, appears to be reasonably settled.* 
 
 No particular form of the delegation of authority to vote 
 is necessary. The Supreme Court of New Jersey said : " A 
 stockholder, who desires to exercise his right to vote on his 
 stock by proxy, is undoubtedly bound to furnish his agent 
 with such written evidence of the latter's right to act for him 
 as will reasonably assure the inspectors that the agent is acting 
 
 8 Gray, 140 ; Ex parte Murphy, 7 L. E. 20 Eq. 606 ; Re Long Island 
 
 Cow. 153 ; In re Chenango, &o. Ins. R. R. Co., 19 Wend. 37 ; Downing 
 
 Co., 19 Wend. 635; St&te v. Lehre, v. Potts, 3 Zabr. 66. 
 
 7 Rich. L. 284; MoNeely v. Wood- s Philips v. Wickham, 1 Paige, 
 
 riifl, 13 N. J. Law (1 Green), 352. 590, 598; People v. Twaddell, 18 
 
 Compare Stewart v. Mahoney Min- Hun, 427; Craig v. First Presbyte- 
 
 ing Co., 54 Cal. 149. rian Church, 88 Pa. St. 42; Com- 
 
 1 People V. Phillips, 1 Denio, monwealth ». Bringhurst, 103 Pa. 
 388; and see i^a; /larte Desdoity, 1 St. 134; Taylor v. Griswold, 14 
 Wend. 98; In re Long Island R. R. N. J. Law, 222; 2 Kent's Com. 294, 
 Co., 19 Wend. 37 ; State v. Swearin- 295. But see Brown v. Common- 
 gen, 12 Ga. 23; Monsseaux «. Urqu- wealth, 3 Grant's Cas. 209; State 
 hart, 19 La. Ann. 482; Downing u. v. Tudor, 5 Day, 329. Compare 
 Potts, 3 Zabr. 66. Matter of Barker, 6 Wend. 509. 
 
 2 iJe St. Lawrence Steamboat Co., ^ People v. Crossley, 69 111. 195; 
 44 N. J. Law, 529, 535, citing Regina State v. Tudor, 5 Day, 329 ; Philips 
 V. Coaks, 3 E. & B. 249 ; Regina v. v. Wickham, 1 Paige, 598. Contra, 
 Mayor of Tewkesbury, L. R. 3 Q. B. Taylor v. Griswold, 14 N. J. Law, 
 629; Drinkwater v. Deakin, L. R. 9 222, 228. 
 
 C. P. 626; Etherington v. Wilson, 
 
§ 487 THE LAW OB" PEIVATB CORPORATIONS. 460 
 
 by the authority of his principal. But the power of attorney 
 need not be in any prescribed form, nor be executed with 
 any peculiar formality. It is sufficient that it appear on its 
 face to confer the requisite authority, and that it be free from 
 all reasonable grounds of suspicion of its genuineness and 
 authenticity ; and the court, in reviewing the proceedings at 
 an election, must be satisfied that the inspectors had reason- 
 able grounds for rejecting the proxy." ^ 
 
 § 487. Formalities in conducting Meetings. — The members 
 of a corporation may adopt reasonable by-laws, regulating 
 the manner of voting and of holding meetings, and directing 
 the order of proceedings.^ But such by-laws must not be 
 in violation of any provision of the charter or general laws 
 under which the corporation was formed ; nor can the sub- 
 stantial rights of a shareholder be abridged thereby.^ 
 
 The acts of a majority at a corporate meeting are not bind- 
 ing upon the company, unless the proceedings are conducted 
 regularly and in accordance with general usage, or in the man- 
 ner prescribed by the charter and by-laws of the company.* 
 But mere informalities will not be regarded, if the sense of 
 the majority has been fairly expressed;^ and every reasonable 
 
 ' Re St. Lawrence Steamboat Co., Denio, 388; Commonwealth v. Gill, 
 
 44 N. J. Law, 529, 534. See also 3 Whart. 228; Petty v. Tooker, 21 
 
 Re Cecil, 36 How. Pr. 477; Marie N. Y. 267; Kex v. Head, 4 Burr. 
 
 V. Garrison, 13 Abb. N. C. 210. 2515. 
 
 The authority of a proxy may be * State v. Pettineli, 10 Nev. 141 ; 
 
 revoked at any time, unless the dele- Johnston v. Jones, 23 N. J. Eq. 216 ; 
 
 gation be irrevocable as between the People v. Albany, &c. E. R. Co., 55 
 
 parties. Reed «. Bank of Newburgh, Barb. 344; Commonwealth u. Woel- 
 
 6 Paige, 337. per, 3 S. & R. 29. 
 
 ^ Juker V. Commonwealth, 20 A person not a corporator may 
 
 Pa. St. 484; Commonwealth v. be elected moderator of a manufac- 
 
 Woelper, 3 S. & R. 29 ; People taring corporation in Massachusetts. 
 
 ». Crossley, 69 111. 195; Kearney Stebbins v. Merritt, 10 Cush. 27. 
 V. Andrews, 10 N. J. Eq. 70; In re ^ Philips v. Wickham, 1 Paige, 
 
 Long Island R. R. Co., 19 Wend. 590; Downing v. Potts, 3 Zabr. 66; 
 
 37; Newling v. Francis, 3 T. R. People v. Albany, &o. R. R. Co., 55 
 
 189. Compare Rex v. Spencer, 3 Barb. 344 ; Wheeler's Case, 2 Abb. 
 
 Burr. 1827; People v. Kip, 4 Cow. Pr. n. s. 361; People v. Peck, 11 
 
 382, n. Wend. 604; People v. Campbell, 2 
 
 ' Taylor v. Griswold, 14 N. J. Law Cal. 135; Hardenburgh v. Farmers', 
 
 (2 Green), 222; Brewster «. Hart- &c. Bank, 3 N. J. Eq. 68; Hughes 
 
 ley, 37 Cal. 24; People v. Phillips, 1 v. Parker, 20 N. H. 58. 
 
461 THE MAHAGBMENT OF CORPORATIONS. § 489 
 
 presumption will be made in favor of the regularity of the 
 proceedings of a corporation and the election of its officers.^ 
 
 § 488. Place of holding Meetings. — The meetings of the 
 shareholders in a corporation cannot be held at an unreason- 
 able hour ; nor can they be called at an unusual place, where 
 all the shareholders would be unable to be present without 
 great inconvenience. It has for this reason been established 
 as a rule, that shareholders' meetings must be held within 
 the State by which the corporation was chartered, and that 
 the majority at a meeting held in a foreign State have no 
 authority to bind the corporation by their vote.^ But there 
 is no objection to a meeting held in a foreign jurisdiction, 
 provided all the shareholders give their consent. And, in 
 the absence of an express statutory prohibition, there appears 
 to be no reason why the shareholders in an ordinary business 
 corporation should not provide in their articles of association 
 that meetings may be called at convenient places outside of 
 the State under whose laws the company is formed. 
 
 § 489. Adjourned Meetings. — After a meeting has been 
 organized, it may be adjourned from time to time for the trans- 
 action of business, and no further notice to the sharehold- 
 ers is necessary. Redfield, J., said : " It is too well settled 
 to require comment, that all corporations, whether municipal 
 or private, may transact any business at an adjourned meet- 
 ing which they could have done at the original meeting. It 
 is but a continuation of the same meeting. Whether the 
 meeting is continued without interruption for many daj's, or 
 by adjournment from day to day, or from time to time, many 
 days intervening, it is evident it must be considered the same 
 meeting, without any loss or accumulation of powers."* 
 
 1 Blanchard v. Dow, 32 Me. 557; Bellows v. Todd, 39 Iowa, 217, 218; 
 Ashtabula, &c. R. R. Co. v. Smith, Franco-Texan Land Co. v. Laigle, 
 15 Ohio St. 328. 59 Tex. 339; Ohio, &c. R. R. Co. 
 
 2 Ormsbyw. Vermont Copper Min- v. McPherson, 35 Mo. 13. 
 
 ing Co., 56 N. Y. 623, 65 Barb. 363; The directors of a business oor- 
 
 Mitchell V. Vermont Copper Mining poration ordinarily have implied 
 
 Co., 40 N. Y. Super. Ct. 406; Arms authority to hold their meetings 
 
 w. Conant, 36 Vt. 745 ; Miller u. Ewer, wherever they find this to be moat 
 
 27 Me. 509 ; Freeman v. Machias convenient. See infra, § 533. 
 
 Water Power, &c. Co., 38 Me. 345; » Warner v. Mower, 11 Vt. 385, 
 
§ 491 THE LAW OF PEIVATB CORPORATIONS. 462 
 
 § 490. Ratification of Informal Acta of the Majority. — Acts 
 of the majoritj', which are not binding, upon the corporation 
 because unauthorized by the charter, may be ratified by the 
 other shareholders ; and the want of previous authority to 
 represent the whole company may thus be cured by unani- 
 mous consent.^ This principle applies equally whether the 
 acts of a majority are unauthorized because a departure 
 from the company's business, or because formalities pre- 
 scribed by the charter have not been observed. 
 
 Thus, if the members of a corporation are actually present 
 at a meeting, it is immaterial that proper notice of the meet- 
 ing was omitted.2 And any irregularity in the proceedings 
 of a meeting, or the act of a majority, will be cured by 
 the acquiescence of those members who have a right to 
 complain .2 
 
 § 491. The Power of making By-laws. — It is implied in the 
 charter of every private corporation formed for the pecuniary 
 profit of its members, that the majority shall have power to 
 make reasonable rules and regulations, or by-laws, for the 
 better government of the company.* The validity of by-laws 
 prescribed by the majority depends upon the implied agree- 
 ment of all the shareholders in forming the corporation, and 
 therefore any by-law properly enacted by the majority is as 
 binding upon the members of the company as a provision 
 contained in the charter itself.^ 
 
 The term " by-law " was originally applied to the laws and 
 ordinances enacted by public or municipal corporations. The 
 
 391. See SchofE v. Bloomfield, 8 « Rex v. Trevenen, 2 B. & Aid. 
 
 Vt. 472 ; Farrar v. Parley, 7 Me. 339 ; State v. Lehre, 7 Rich. Law, 
 
 404; Smith v. Law, 21 N. Y. 296; 234; Prettyman v. Supervisors, 19 
 
 People V. Batchelor, 22 N. Y. 128; 111. 406; Musgrave v. Nevinson, 2 
 
 Wills V. Murray, 4 Ex. 843; Regina Ld. Raym. 1358; supra, § S3. 
 
 V. Grimshaw, 10 Q. B. 747 ; Scadding ^ Supra, § 325 ; Child v. Hudson's 
 
 V. Lorant, 3 H. L. C. 418. Bay Co., 2 P. Wms. 207; Martin v. 
 
 1 Infra, §§ 623-626. Nashville Building Ass., 2 Coldw. 
 
 2 Rex V. Chetwynd, 7 B. & C. 418. 
 
 695; Re British Sugar, &c. Co., 3 « Cummings v. Webster, 43 Me. 
 
 K. & J. 408; Jones v. Milton, &c. 192, 197. Compare McDermott v. 
 
 Turnpike Co., 7 Ind. 548; Peoples. Board of Police, 5 Abb. Pr. 422; 
 
 Peck, 11 Wend. 604; Stebbins v. Brick Presbyterian Church i). City 
 
 Merritt, 10 Cush. 27, 34. of New York, 5 Cowen, 538. 
 
463 THE MANAGEMENT OP COEPOEATIONS. § 493 
 
 difference between a by-law of a private company and a law 
 enacted by a municipality is wide and obvious. The former 
 is merely a rule prescribed by the majority, under authority 
 of the other members, for the regulation and management of 
 their joint affairs. A by-law of a municipal corporation is 
 a local law, enacted by public officers by virtue of legislative 
 powers delegated to them by the State. 
 
 § 492. What By-laws are valid. — The majority have im- 
 plied authority to prescribe any by-law which is reasonable, 
 and calculated to carry into effect the objects of the corpora- 
 tion in pursuance of its charter.^ By-laws regulating the 
 manner of holding meetings and electing officers,^ and of 
 transferring shares,^ are proper. 
 
 The majority may also make by-laws regulating the direc- 
 tors and other agents of the company in managing the corpo- 
 rate business ; * and they may provide that agents intrusted 
 with the corporate funds shall provide security for the faith- 
 ful performance of their duties.^ 
 
 If the charter contains no provision to the contrary, the 
 majority may prescribe how many directors shall constitute 
 a quorum for the transaction of business, and the powers of 
 the whole board may be exercised at any meeting at which 
 such quorum are present.^ 
 
 § 493. By-laws for the Management of a Corporation. — Ex- 
 pulsion of Members. — The majority have a general authority 
 to provide reasonable rules for the regulation of the corpora- 
 
 1 State V. Tudor, 5 Day, 329 ; the by-laws, this does not authorize 
 Came v. Brigham, 39 Me. 35; People the directors to disregard or alter 
 V. Sailors' Snug Harbor, 54 Barb, another by-law which was intended 
 532; Poultney u. Bachman, 31 Hun, to impose a limitation on their 
 49; German, &o. Congregation v. powers. Stevens v. Davison, 18 
 Pressler, 17 La. Ann. 128; Harring- Gratt. 819. 
 
 ton V. Workingmen's Benevolent 6 Savings Bank ». Hunt, 72 Mo. 
 
 Ass., 70 Ga. 340; Security Loan 597. 
 
 Ass. V. Lake, 69 Ala. 456. ' Compare Hoyt r. Thompson, 
 
 2 Supra, § 487. 19 N. Y. 207, 215. The by-law in 
 
 * Supra, §§ 164, 201. this instance appears to have been 
 
 * Although one of the by-laws of made by the directors, who were in- 
 a company provides that the direc- vested by the charter with full powers 
 tors shall have authority to amend of management. 
 
§ 494 THE LAW OP PBIVATB COKPOBATIONS. 464 
 
 tors in carrying out their mutual agreement. Thus, a by-law 
 of a chamber of commerce, providing for the expulsion of a 
 member for non-compliance with a contract entered into 
 with another member, was held valid, although the contract 
 was not enforceable by suit at law on account of the Statute 
 of Frauds.^ Clubs, benevolent societies, stock and commer- 
 cial exchange associations, and other similar bodies, usually 
 provide by-laws for the trial and expulsion of members who 
 have violated obligations imposed upon them by virtue of 
 their membership, or who have become unfit to continue in 
 their association. By-laws of this description have often 
 been sustained ; ^ but before a member can be expelled, he 
 must always be given an opportunity of defending himself 
 from the charges preferred against him.^ 
 
 § 494. What By-laws are unauthorized. — The charter of a 
 corporation is its fundamental law ; it designates the main 
 objects for which the company was formed, and determines 
 the rights and liabilities of its several members. By-laws 
 which are calculated to assist in carrying into effect the pur- 
 poses of the company are valid, but every by-law which is 
 contrary to the charter, either in its special provisions or its 
 main purposes, is unauthorized and void.* 
 
 1 Dickenson v. Chamber of Com- Commerce, 47 Wis. 670 ; White v. 
 merce, 29 Wis. 45; People v. New Brownell, 4 Abb. Pr. n. s. 162, 193; 
 York Commercial Ass., 18 Abb. Pr. s. c. 2 Daly, 329; Powell v. Abbott, 
 271-279. By-laws of a similar char- 9 W. N. C. 231 ; Sibley v. Carteret 
 acter have been held valid in the Club, 40N. J. Law, 295; Labouohere 
 following cases : State v. Milwaukee v. Earl of WharnclifEe, L. B,. 13 Ch. 
 Chamber of Commerce, 47 Wis. Div. 346; Fisher v. Keane, L. R. 
 670; Goddard v. Merchants' Ex- 11 Ch. Div. 353. Compare People 
 change, 9 Mo. App. 290; 78 Mo. v. Board of Trade, 80 111. 134. 
 609. * Bergman v. St. Paul, &c. Build- 
 
 2 Hussey v. Gallagher, 61 Ga. 86; ing Ass., 29 Minn. 275, 282 ; Mar- 
 People u. Board of Trade, 80 111. 134; tin V. Nashville Building Ass., 2 
 Leech v. Harris, 2 Brewster (Pa.), Coldw. 418; Child v. Hudson's Bay 
 571; Moxey v. Philadelphia Stock Co., 2 P. Wms. 207,209; State w. 
 Exchange, 37 Leg. Int. 82; s. c. 9 Curtis, 9 Nev. 325; Rex v. Cutbush, 
 W. N. C. 441; Dawkins v. Antro- 4 Burr. 2204; Calder, &c. Nav. Co. 
 bus, L. R. 17 Ch. Div. 615. Com- v. Pilling, 14 M. & W. 76; Adley v. 
 pare State v. WiUiams, 75 N. Cai-. Whitestable Co., 17 Ves. 315; 19 
 134. Id. 304. 
 
 ' State V. Milwaukee Chamber of 
 
465 THE MANAGEMENT OF COEPOKATIONS. § 495 
 
 It is evident that a by-law in violation of the common law 
 or statute law is not within the implied powers of the major- 
 ity. And it is equally clear that a majority of the members 
 of a company, acting under authority delegated to them by 
 the other members, cannot enlarge the legal powers of the 
 whole company. Thus, the majority cannot by means of a 
 by-law authorize a corporation to make a usurious contract.^ 
 
 Upon a similar principle, it has been held that a national 
 bank, organized under the act of Congress of 1864, cannot 
 by means of a by-law or a provision in its articles of associa- 
 tion acquire a lien on the shares of its shareholders for debts 
 due by them. This would be contrary to the provision in 
 the banking act, that no association formed under it " shall 
 make any loan or discount on the security of shares of its 
 own stock, nor be the purchaser of any such shares." ^ 
 
 § 495. By-laws in Hestraint of Trade or the Right of Suit. — 
 The majoiity of a corporation can exercise no greater powers 
 than the individual members of the company can bestow. 
 Therefore, a by-law in restraint of trade is void ; ^ even an 
 express contract will not be enforced, if an undue restriction 
 of the liberty of trade. A by-law prohibiting the members 
 of a corporation from suing is also necessarily void ; for even 
 an express agreement not to sue does not oust the jurisdic- 
 tion of the courts.* Thus, it was held by the Supreme Court 
 of Massachusetts that a by-law providing that the members 
 of a mutual insurance company should bring suit in a certain 
 county, in case their claims were disallowed by the directors, 
 was void ; but a by-law limiting the time in which suit must 
 be brought will be given effect.^ 
 
 1 Seneca County Bank v. Lamb, Eitterband v. Baggett, 42 N. Y. 
 26 Barb. 595. Super. Ct. 556. Compare Adley v. 
 
 2 Bank v. Lanier, 11 Wall. 369; Whitestable Co., 17 Ves. 316; Rex 
 Bullard v. Bank, 18 Wall. 589. v. Tappenden, 3 East, 186. 
 Supra, §§ 201, 384. * See infra, § 971, note. 
 
 * Sayre v. Louisville, &c. Ass., 1 * Nute v. Hamilton Mut. Ins. Co., 
 
 Duv. 144; Kex u. Coopers' Co., 7 6 Gray, 174; Amesbury «. Bowditch 
 
 T. R. 543; Gunmakers', &c. Soc. v. Mut. Ins. Co., 6 Gray, 596. See also 
 
 Fell, Willes R. 384. See also People State v. Union Merchants' Exchange, 
 
 «. Medical Soc, 24 Barb. 570; Moore 2 Mo. App. 96; and compare Ana- 
 
 B. Bank of Commerce, 52 Mo. 377; costa Tribe v. Murbach, 13 Md. 91. 
 
 TOL. I. — 30 
 
§ 496 THE LAW OP PRIVATE COEPOEATIONS. 466 
 
 § 496. other invalid By-laws. — The majority of a corpo- 
 ration have no power to alter the rights and liabilities of the 
 shareholders, as fixed by the charter under which they united.^ 
 Thus, the majority cannot, through a by-law, impose upon the 
 shareholders a liability to pay assessments ; ^ nor can the 
 right of a shareholder to vote at corporate meetings be taken 
 away or restricted.^ It is clear that a by-law having the ef- 
 fect of an ex post facto law, or impairing the vested rights of 
 any shareholder, is unauthorized.* 
 
 In Kent v. Quicksilver Mining Co.,^ Folger, J., said : " All 
 by-laws must be reasonable, and consistent with the general 
 principles of the law of the land, which are to be determined 
 by the courts when a case is properly before them. A by- 
 law may regulate or modify the constitution of a corporation, 
 but cannot alter it. The alteration of a by-law is but the 
 making of another upon the same matter. If the first must 
 be reasonable and in accord with the principles of law, so 
 must that which alters it. If, then, the power is reserved 
 to alter, amend, or repeal, and that reservation enters into a 
 contract, the power reserved is to pass reasonable by-laws 
 agreeable to law. But a by-law that will disturb a vested 
 right is not such ; and it differs not when the power to make 
 and alter by-laws is expressly given to a majority of the 
 stockholders, and the obnoxious ordinance is passed in due 
 form." 
 
 This right to make by-laws rests entirely upon the implied 
 agreement of the shareholders in forming the company. By- 
 laws which are vexatious, unequal, oppressive, or manifestly 
 detrimental to the interests of the corporation, are therefore 
 unauthorized and void.® It has been held that the majority 
 
 1 Kent V. Quicksilver Mining Co., Mich. 458 ; People v. Crockett, 9 Cal. 
 78 N. Y. 159. 112 ; Kent v. Quicksilver Mining Co., 
 
 2 Kennebec, &c. R. R. Co. v. Ken- 78 N. Y. 159, 178. 
 
 dall, 31 Me. 470; Free Schools, &o. ' Kent u. Quicksilver Mining Co., 
 
 V. Flint, 13 Mete. (Mass.) 539. 78 N. Y. 182, 183. 
 
 8 Brewster u. Hartley, 37 Cal. 24; « Cartan v. Father Matthew, &c. 
 
 Rex V. Spencer, 3 Burr. 1827; People Soc, 3 Daly, 20; People v. Medical 
 
 V. Kip, 4 Cowen, 382, n. Soc, 24 Barb. 570; Scriveners' Soc. 
 
 ^ People V. Fire Department, 31 v. Brooking, 3 Q. B. 95; Carter f. 
 
467 THE MANAGEMENT OF COKPOKATIONS. § 498 
 
 have no authority to pass a by-law that any shareholder fail- 
 ing to pay an assessment shall forfeit his shares, or the divi- 
 dends accruing upon them, until all arrears have been paid.^ 
 And so a by-law of a merchants' exchange company, requir- 
 ing its members to submit their controversies to arbitration 
 on pain of expulsion if they bring suit, has been held to be 
 invalid.^ 
 
 § 497. Construction of By-laws. — It is a question for the 
 court to decide whether or not a by-law is within the powers 
 delegated to the majority by the express or implied terms of 
 the company's charter.* 
 
 By-laws should be construed liberally, and in accordance 
 with the construction placed upon them by the company 
 itself.* If a by-law consists of distinct parts separable from 
 each other, and one part is unauthorized, while the other is 
 within the powers of a majority, the valid part will stand.^ 
 
 § 498. Form of Adoption of By-laws. — By-laws may be 
 adopted by a corporation without the use of the corporate 
 seal, and no entry in writing is necessary. The existence of 
 by-laws may be established by custom, or bj"- the acquiescence 
 of those authorized to enact them.^ But if an entry in writing 
 authenticated by the corporate seal, or any other formality, is 
 prescribed by the charter or another by-law, the majority have 
 no right to act without observing the prescribed forms.^ 
 
 Sanderson, 5 Bing. 79 ; Calder, &o. Poulters' Co. ». Phillips, 6 Bing. 
 
 Nav. Co. V. Pilling, 14 M. & W. 76. N. C. 314. See Kex v. Bailiffs, &c. 
 
 1 Adley v. Beeves, 2 M. & S. 53; of Ey6, 4 B. & Aid. 271; Breneman 
 Cartan w. Father Matthew, &o. See, v. Franklin, &c. Ass., 3 W. & S. 
 3 Daly, 20. Compare Pentz v. Citi- 218. 
 
 zens' Fire Ins., &c. Co., 35 Md. 73; ^ Amesbury v. Bowditch Mut. 
 
 Kirk V. Nowill, 1 T. K. 118. Ins. Co., 6 Gray, 596; State v. Cur- 
 
 2 State V. Union Merchants' Ex- tis, 9 Nev. 337; Rogers v. Jones, 1 
 change Co., 2 Mo. App. 98. Com- Wend. 237; Cleve v. Financial Co., 
 pare Anacosta Tribe v. Murbach, 13 L. R. 16 Eq. 363. 
 
 Md. 91. 8 Union Bank ti. Ridgely, 1 H. & 
 
 » State V. Overton, 24 N. J. Law, G. 324, 413 ; State ». Curtis, 9 Nev. 
 
 440 ; Commonwealth ». Worcester, 3 385. See Henry u. Jackson, 37 Vt. 
 
 Pick. 462. 431 ; Bank of Holly Springs v. Pin- 
 
 * Re Dunkerson, 4 Biss. 227; son, 58 Miss. 421. 
 
 State ». Conklin, 84 Wis. 21; Vint- ' Dunston v. Imperial Gas Light, 
 
 ners' Co. v. Passey, 1 Burr. 235, 239 ; &c. Co. , 3 B. & Ad. 125. 
 
§ 500 THE LAW OP PRIVATE COBPOKATIONS. 468 
 
 § 499. Repeal of By-laws. — A by-law passed by the ma- 
 jority at a shareholders' meeting, or by the board of directors 
 under authority conferred by the charter, is the act of the 
 whole association, and can be abrogated only in pursuance 
 of authority conferred by the whole association. Neither the 
 majority of the shareholders nor the board of directors have 
 a right to disregard a by-law which was properly passed ; a 
 by-law can be repealed only in the manner prescribed by the 
 charter in express or implied terms. ^ 
 
 It is generallj'^ implied that by-laws may be repealed by 
 vote of the same authority which made them,^ and a repeal 
 may be presumed from general non-observance.® But it is 
 clear that the majority cannot impair vested rights by repeal- 
 ing a by-law upon which the shareholders have relied and 
 acted.* 
 
 § 600. The Effect of By-laws. — ITpon -whom they are bind- 
 ing. — Every shareholder is bound by the by-laws adopted 
 by the majority on behalf of the corporation, under authority 
 of the charter.^ But a person who is not a member of the 
 company is not bound ; nor can he claim any rights by the 
 force of the adoption of a mere by-law ; the majority, in 
 enacting a b3'-law, act on behalf of the shareholders only.* 
 Thus, a creditor of a corporation cannot hold the shareholders 
 individually liable for its debts, although a by-law declaring 
 them liable was passed with their consent, unless credit was 
 given in consideration of the assumption of individual liability 
 by the shareholders. The Supreme Court of Massachusetts 
 said : " The office of a by-law is to regulate the conduct and 
 define the duties of the members towards the corporation 
 
 > Compare, however, Martino v. * Atty.-Gen. ». Middleton, 2 Ves. 
 
 Commerce Fire Ins. Co., 47 N. Y. Sen. 327. 
 Super. Ct. 520. * Kent v. Quicksilver Mining Co. 
 
 2 Smith V. Nelson, 18 Vt. 511, 78 ST. Y. 159. 
 550; Kex v. Ashwell, 12 East, 22. ^ Susquehanna Ins. Co. ». Per- 
 
 A corporate resolution which rine, 7 W. & S. 348; German, &c. 
 
 can be taken only by a two- Congregation v. Pressler, 17 La. Ann. 
 
 thirds vote, cannot be rescinded 128; Palmyra w. Morton, 25 Mo. 593; 
 
 by a bare majority. Stockdale Cuminings v. Webster, 43 Me. 192. 
 V. School District of Wayland, 47 ' As to mimicipal corporations, 
 
 Mich. 226. see supra, § 491. 
 
469 THE MANAGEMENT OP COEPOBATIONS. § 500 a 
 
 and between themselves. So far as its provisions are in the 
 nature of contract, the parties thereto are the members of 
 the association between themselves ; or the corporation on 
 the one side, and its individual members on the other. The 
 right of any third party, stranger to the association, to estab- 
 lish a legal claim through such a by-law, must depend upon 
 the general principles applicable to express contracts." ^ 
 
 So a by-law of a savings bank prescribing the manner of 
 investing savings deposits is merely a direction to the offi- 
 cers of the bank, and confers no rights upon the depositors 
 unless it is made the basis of a contract with them.^ 
 
 § 500 a. 'Whether Shareholders and Directors are deemed to 
 have Notice of By-laws. — It has sometimes been stated as a 
 rule of law, that the shareholders and managing agents of a 
 corporation must be deemed to have notice of the company's 
 by-laws; but this statement is not accurate. Shareholders 
 are undoubtedly bound, in all matters relating to their rights 
 and obligations as shareholders, by every by-law duly adopted 
 by the majority pursuant to the charter. This, however, 
 results from the implied terms of their agreement of member- 
 ship, and not from a supposed notice of the by-law ; — it is 
 immaterial whether they have notice of the by-law or not. 
 So the agents of a corporation are usually bound by the com- 
 pany's by-laws in all matters relating to their agency, irre- 
 spective of notice of the by-laws. Moreover, it' is often fair 
 to presume' that the shareholders and agents of a corporation 
 have notice of its by-laws, without direct proof of notice. 
 
 However, the presumption of notice arises only if it is 
 reasonable to infer notice in view of the established facts 
 of the case. If the fact of notice is material, it must be 
 proven against shareholders and agents as well as against 
 strangers, by direct or by presumptive evidence, and cannot 
 be imputed by an arbitrary rule of law.^ 
 
 1 Flint u. Pierce, 99 Mass. 68, 70. Touche v. Metropolitan Ry., &c. 
 
 See also Mellen v. Whipple, 1 Gray, Co., L. R. 6 Ch. 671. 
 
 317 ; Field v. Crawford, 6 Gray, 116 ; « -yvard v. Johnson, 95 HI. 216. 
 
 Dow V. Clark, 7 Gray, 198; Eley v. ' Rioe». Peninsular Club, 52 Mich. 
 
 Positive, &c. Life Ass. Co., L. R. 87; Bakeru. Woolston,27Kans. 185; 
 
 1 Exch. Div. 20, 88. Compare First Nat. Bank ». Drake, 29 Kans. 
 
§ 501 THE LAW OF PRIVATE COEPOBATIONS. 470 
 
 § 501. Rules and Regulations published by Companies. — 
 Companies which are engaged in enterprises of a public char- 
 acter frequently adopt and publish rules for the government 
 of those who enter into transactions with them. These rules 
 or regulations are sometimes called by-laws, "but are obviously 
 different from the ordinary by-laws passed by private corpo- 
 rations for the regulation of their own management. By- 
 laws of the latter class are binding upon the members of a 
 corporation by virtue of the implied terms of their contract ; 
 those of the former class are merely terms or conditions 
 made binding upon all persons who choose to deal with the 
 corporation. 
 
 Thus, railroad companies and other common carriers usu- 
 ally provide a series of rules and regulations for the safety 
 and convenience of travellers and shippers and the direc- 
 tion of the company's subordinate employees. Persons deal- 
 ing with such companies, with notice of reasonable rules and 
 regulations so published, must be held to give their assent 
 thereto, and to deal with the company upon the conditions 
 offered.^ 
 
 A similar doctrine applies to the rules adopted by savings 
 banks, prescribing the rights of depositors and the methods 
 by which they may withdraw their funds; every depositor 
 
 311; Tarboxu. Gorman, 31 Minn. 62; operation of the principle. Within 
 Union Nat. Bank v. Hunt, 76 Mo. this limit, it is the peculiar and ex- 
 439 ; Wannell v. Kem, 57 Mo. 478. elusive office of the court to decide 
 Compare Jones v. Arkansas, &c. upon the validity of the regulation. 
 Agricultural Co., 38 Ark. 17; Bank But there is another class of regula- 
 of Wilmington, &c. v. Wollaston, 3 tions, made by corporations as well 
 Harr. (Del.) 90; Chaffee v. Rutland as by individuals, who are common 
 E. K. Co., 55 Vt. 110. carriers of passengers, which operate 
 1 In State v. Overton, 24 N. J. upon and affect the rights of others, 
 Law, 440, Chief Justice Green said: which are not, properly speaking, 
 " The Jy-Za!os of a private corporation by-laws of the corporation, and 
 bind the members only by virtue of which do not fall within the opera- 
 their assent, and do not affect third tion of this principle. Of this char- 
 persons. All regulations of a com- acter are all regulations touching the 
 pany affecting its business, which do comfort and convenience of trav- 
 not operate upon third persons, are ellers, or prescribing rules for their 
 properly denominated by-laws of the conduct to secure the just rights of 
 company, and may come within the the company." 
 
471 THE MANAGEMENT OF COEPOEATIONS. § 502 
 
 must be held to give his assent to these rules, and they form 
 part of his contract with the company.^ 
 
 It should be observed, that depositors in a savings bank 
 and members of a mutual insurance company in some in- 
 stances occupy a position vi^hich is similar to that of the share- 
 holders in an ordinary joint-stock corporation. A rule adopted 
 by a savings bank, or a mutual insurance company, may 
 therefore be binding upon its depositors or members, upon 
 the principle which renders a by-law of a joint-stock company 
 binding upon its shareholders, and in this case the rule is bind- 
 ing upon a depositor or member without actual notice. 
 
 § 502. Xiifect of Violation of By-laws by Agents. — The 
 powers of the agents of a corporation are often limited by 
 the company's by-laws. Any act performed by an agent in 
 violation of a by-law is necessarily in excess of the agent's 
 authority, and is not binding upon the corporation unless 
 some principle of estoppel be applicable.^ 
 
 But a person dealing with an agent of a corporation is not 
 bound, at his peril, to take notice of the company's by-laws, 
 nor is notice of the by-laws presumed ; ^ and therefore, if a 
 contract is entered into in good faith with an agent of a cor- 
 poration acting within the scope of his apparent powers, the 
 corporation will be bound, although the agent acted in viola- 
 tion of an existing by-law.* 
 
 For a similar reason, it follows that a corporation cannot 
 enforce a by-law giving it a lien upon the shares of its members 
 for debts due the company, as against a bona fide purchaser of 
 certificates for shares who had no notice of the by-law.^ 
 
 1 See Burrill v. Dollar Savings ' As to who is bound to take 
 Bank, 92 Pa. St. 134; People's Sav- notice of by-laws, see infra, §§ 593- 
 ings Bank v. Cupps, 91 Pa. St. 315 ; 596. 
 
 Supreme Commandery v. Ainsworth, * Samuel v. Holladay, 1 Woolw. 
 
 71 Ala. 436. 400; s. c. McCahon, 214; Mechan- 
 
 It has been held that a depositor ics', &o. Bank i>. Smith, 19 Johns, 
 
 who could not read, and for that rea- 115. Compare Susquehanna Ins. 
 
 son failed to obtain actual knowledge Co. v. Perrine, 7 W. & S. 348 ; Wor- 
 
 of a published rule of the company, cester v. Essex, &c. Bridge Co. , 7 
 
 was nevertheless bound. BurriU v. Gray, 457; infra, §§ 593-595. 
 
 Dollar Savings Bank, 92 Pa. St. 134. ^ Driscoll v. West Bradley, &c. 
 
 2 Susquehanna Ins. Co. v. Per- Manuf. Co., 59 N. Y. 109; supra, 
 rine, 7 W. & S. 348. § 203. 
 
§ 503 THE LAW OP PKIVATE CORPORATIONS. 472 
 
 PART 11. 
 
 THE EXTENT OF THE POWERS OP THE AGENTS OP A 
 CORPORATION. 
 
 § 503. The Appointment of Agents. — It would be a de- 
 parture from the plan of this treatise to enter into a general 
 discussion of the principles of the law of agency. The prin- 
 ciples of the law of agency apply to corporations with the 
 same force as to mere individuals. The application of the 
 principles of the law of agency to corporations will be dis- 
 cussed somewhat in detail in a subsequent chapter.^ In 
 this connection it is proposed to consider only the extent of 
 the authority delegated to the various agents of a corpora- 
 tion, so far as this depends upon the charter or articles of 
 association of the company. 
 
 Charters of incorporation generally provide expressly that 
 the affairs of the companies formed under them shall be 
 managed by certain specified agents, having definite powers 
 and duties. In the absence of express provisions of this 
 character, it is a reasonable implication that the corporate 
 affairs shall be managed in the customary manner.^ 
 
 The individual shareholders of a corporation aggregate 
 have no implied authority to represent the company for any 
 purpose, or to interfere with the management of its business 
 
 ' Infra, §§ 577-647. of the company, impliedly consents 
 
 ^ In Protection Life Ins. Co. v. that it shall be represented by such 
 
 Foote, 79 111. 361, 368, Justice Schol- oflScers and agents as are reasonably 
 
 field, delivering the opinion of the necessary for the transaction of its 
 
 court, said: " It is as indispensable business, and that they shall possess 
 
 that mutual companies, as others, the powers and perform the duties 
 
 shall transact their business through ordinarily possessed and performed 
 
 officers and agents, and in the ab- by such officers and agents." Au- 
 
 sence of express provisions in their thority to appoint a board of direc- 
 
 charters limiting their appointment, tors by vote of the majority may be 
 
 or the scope of their powers and implied. Hurlbut v. Marshall, 62 
 
 duties, it must be presumed that Wis. 590. 
 each person, in becoming a member 
 
473 THE MANAGEMENT OF COEPORATIONS. § 505 
 
 in any respect. But it is implied that the majority present 
 at a regularly called shareholders' meeting shall exercise a 
 general supervisory power over the corporate affairs, and 
 shall have authority to appoint the board of directors, or 
 other agents who have the active management of the com- 
 pany's business in their charge.^ 
 
 § 504. How Agents may be appointed. — The agents of a 
 corporation may be appointed in the same manner as the 
 agents of an individual ; no formalities are required, nor is 
 the use of the corporate seal necessary, unless the contrary 
 be expressly provided by the company's charter.^ 
 
 The appointment of an agent does not go into effect until 
 it has been accepted by the appointee ; ^ but acceptance may 
 ordinarily be presumed from the exercise of the power con- 
 ferred, or from silent acquiescence with knowledge of the 
 resolution of appointment.* 
 
 If a person is allowed to act as agent for a corporation with 
 the knowledge and acquiescence of the superior agent or 
 authority who would have authority to appoint him, the 
 corporation will be bound by such acquiescence, and cannot 
 repudiate the agency.^ 
 
 § 505. Qualifications of the Directors. — Any person of 
 sound mind who is capable of acting as agent for another 
 may be elected director or trustee of a corporation, unless 
 some special qualification is prescribed by the charter or 
 by-laws of the company.^ 
 
 1 Supra, § 474. may be a trustee of a corporation, 
 
 2 5tifim, § 338. Santa Clara Min- unless the contrary be provided by 
 ing Ass. V. Meredith, 49 Md. 389; charter. People v. Webster, 10 
 Crowley v. Genesee Mining Co., 55 Wend. 554. And there appears to 
 Cal. 273; White y. State, 69 Ind. 273. be no reason why a person under 
 
 ' Cameron v. Seaman, 69 N. Y. the age of twenty-one years should 
 
 396, and cases in the following note, not be eligible, if of sufficient in- 
 
 * See Loekwood v. Mechanics' telligence to perform the duties of 
 
 Nat. Bank, 9 R. I. 308 ; Delano v. the office! 
 
 Smith Charities, 138 Mass. 63. Com- The inspectors at an election of 
 
 pare Blake v. Bayley, 16 Gray, 531 ; directors have no power to pass upon 
 
 Re Peninsular, &c. Bank, L. R. 2 the eligibility of the persons for 
 
 Eq. 435. whom votes are offered. Re St. 
 
 6 Infra, §§ 636-688. Lawrence Steamboat Co., 44 N. J. 
 
 « It seems that a married woman Law, 529, 541. 
 
§ 507 THE LAW OF PRIVATE COEPOKATIONS. 474 
 
 It is not necessary that a director should be a shareholder 
 also, unless this be expressly required by the company's 
 charter ; ^ and a director may at the same time act as secre- 
 tary or managing agent, unless this be expressly prohibited.^ 
 
 § 506. When Directors must be Shareholders. — The di- 
 rectors of a corporation are generally required to be share- 
 holders by express provision of the company's charter or 
 articles of association. A person is a shareholder within the 
 meaning of a provision of this description if he holds shares 
 on the books of the company, but not if he is merely the 
 holder of a certificate. It has been held that a transferee on 
 the books is eligible, although he is not the real owner of the 
 shares, and the transfer was executed for the sole purpose of 
 making him a director.* A different rule might apply where 
 the statute expressly requires the directors to be the owners 
 of shares. The question is as to the meaning of the charter 
 or act of incorporation. 
 
 It seems that the bankruptcy of a director does not vacate 
 his office, even though the charter requires the directors to 
 be shareholders.* 
 
 § 507. Powers of Directors who are not qualified. — The 
 majority of a corporation have no power to elect a person to 
 the office of director if he is not eligible by the terms of the 
 company's charter ; and a person who is not qualified to act 
 as director has no authority to represent the corporation. 
 But the corporation, by general consent of its shareholders, 
 may waive the disqualification ; ^ and persons dealing with 
 
 1 State V. McDaniel, 22 Ohio St. Under the general incorporation 
 354. Compare Despatch Line v. act of New York, of 1848, the di- 
 Bellamy Manuf. Co., 12 N. H. 205; rectors named in the certificate of 
 Bartholomew v. Bentley, 1 Ohio St. incorporation to manage the com- 
 37 ; Re St. Lawrence Steamboat Co., pany for the first year are not re- 
 44 N. J. Law, 529, 541; Cumming quired to be shareholders. Davidson 
 V. Prescott, 2 Y. & C. 488; Stock's v. Westchester Gas Light Co., 99 
 Case, 33 L. J. Ch. 731. N. Y. 558. 
 
 2 Sargent ». Webster, 18 Mete. * Atlas Nat. Bank u. Gardner Co., 
 (Mass.) 497. 8 Biss. 537 ; Phelps ». Lyle, 10 
 
 8 State V. Leete, 16 Nev. 242. A. & E. 113. 
 Compare State v. Hunton, 28 Vt. « Infra, §§ 636, 638. See People 
 595. V. Northern R. R. Co., 42 N. Y. 
 
475 THE MANAGEMENT OP COEPOEATIONS. § 509 
 
 a director actually elected by the majority, and held out to 
 the world as a director, would generally be entitled to assume 
 that the election was valid, and that all conditions precedent 
 were complied with.^ 
 
 § 508. Compensation of Directors. — It would be contrary 
 to established principles to allow the directors or other 
 agents of a corporation to fix their own compensation for 
 services rendered to the company.'^ Directors are not enti- 
 tled to any compensation for their official services as direc- 
 tors, unless compensation is provided for by the charter or 
 the by-laws adopted by the majority.^ But if a director is 
 properly employed to perform services which do not pertain 
 to his office as director, he is entitled to such compensation 
 as has been agreed upon, or as the services are reasonably 
 worth.* 
 
 § 509. The Extent of the Authority of Agents. — General Rule. 
 — • The extent of the authority of the various agents of a cor- 
 poration depends upon the terms of their appointment, and 
 upon the provisions of the company's charter. It is clear 
 that no agent of a corporation can, under any circumstances, 
 have authority to do an act in excess of the company's char« 
 tered powers, or in violation of the law.^ The extent of the 
 powers of agents of a well-defined class, such as presidents, 
 directors, or cashiers, is determined largely by general custom, 
 of which the courts will take judicial notice ; and parties 
 dealing with such agents are entitled to assume that they 
 
 217; Atlas Nat. Bank v. Gardner City Ry. Co., 22 Fed. Rep. 883. 
 
 Co., 8 Biss. 537. Infra, § 517 et seq. 
 
 1 Infra, § 637. » Citizens' Nat. Bank v. Elliott, 
 
 ^ See Loan Ass. w. Stonemetz, 29 55 Iowa, 104; Lafayette, &c. Ry. 
 
 Pa. St. 534; Citizens' Nat. Bank Co. v. Cheeney, 87 111. 446; First 
 
 V. Elliott, 55 Iowa, 104; 7 N. W. Nat. Bank v. Drake, 29 Kans. 311, 
 
 Rep. 470; Holder v. Lafayette, &c. and cases there cited; Santa Clara 
 
 Ry. Co., 71 111. 106; Manx Ferry Mining Ass. v. Meredith, 49 Md. 
 
 Gravel R. Co. v. Branegan, 40 Ind. 389, 400. 
 
 361 ; Illinois Linen Co. v. Hough, * See cases cited in notes 2 and 3. 
 
 91 111. 63; Jones v. Morrison, 31 ^ Alexander v. Cauldwell, 83 
 
 Minn. 140; Blatchford v. Ross, 5 N. Y. 480; Planters' Warehouse 
 
 Abb. Pr. N, s. 434; 8. c. 54 Barb. Co. v. Johnson, 62 Ga. 308; and 
 
 42. Compare Davis v. Memphis see infra, § 580. 
 
§ 509 THE LAW OF PKIVATB COEPOEATIONS. 476 
 
 possess all the powers which are usually accorded to agents 
 of the class to which they belong.^ 
 
 The authority of the subordinate agents of a corporation 
 often depends upon the course of dealing which the company 
 or its directors have sanctioned. It may be established, with- 
 out reference to the official record of the proceedings of the 
 board, by proof of the usages which the comp9,ny has per- 
 mitted to grow up in its business, and of the acquiescence of 
 the board charged with the duty of supervising and control- 
 ling the company's business.^ 
 
 Thus, although the secretary and treasurer of a corporation 
 have no authority, by virtue of their office, to sell the corpo- 
 rate property, or to issue corporate obligations,^ yet they may 
 be invested with this authority by resolution of the board of 
 directors, or acquiescence in a course of dealing.* The Su- 
 perior Court of California said : " The result of the cases 
 seems to be, that where the management of the affairs of a 
 corporation is intrusted to a general managing agent, he has 
 power to assign the choses in action of the corporation to its 
 creditors, either in payment of, or as security for the pay- 
 ment of, a precedent debt of the corporation, without express 
 authority from the board of directors, and an assignment so 
 made is valid." ^ 
 
 1 See infra, § 585 et seq. Spangler 67 Ala. 253 ; Perkins v. Bradley, 
 V. Butterfleld, 6 Col. 356. 24 Vt. 66. Compare New England 
 
 It has been held that the courts Fire, &c. Ins. Co. v. Schettler, 38 
 
 will take judicial notice of the au- 111. 166; Whitney v. South Paris 
 
 thority of the managing agents of Manuf. Co., 39 Me. 316. 
 a railroad company. Sacalaris v. ^ Fawcett v. New Haven Organ 
 
 Eureka, &c. R. R. Co., 18 Nev. Co., 47Conn. 224; Bradleew. Warren, 
 
 155. &c. Savings Bank, 127 Mass. 107 ; 
 
 2 See Mining Co. v. Anglo- McCuUough v. Moss, 5 Denio, 667. 
 Californian Bank, 104 U. S. 192 ; « Phillips v. Campbell, 43 N. Y. 
 Martin v. Webb, 110 U. S. 7, 15; 271. Infra, §§534-540. 
 Lohman v. New York, &e. R. R. ^ McKiernan v. Lenzen, 56 Cal. 
 Co., 2 Sandf. 39, 52; Fulton Bank 61, 64. 
 
 V. New York, &c. Canal Co., 4 A general managing agent of a 
 
 Paige, 127; Protection Life Ins. mining company has no implied au- 
 
 Co. V. Foote, 79 111. 361 ; Foster v. thority to issue negotiable paper on 
 
 Ohio, &c. Mining Co., 17 Fed. Rep. behalf of the company, because that 
 
 130; Talladega Ins. Co. n. Peacock, would not be necessarily incidental 
 
477 THE MANAGEMENT OF COEPOEATIONS. § 511 
 
 § 510. The Powers of the Board of Directors. — The active 
 management and direction of the affairs of a business corpora- 
 tion are ordinarily vested in a board of directors or trustees. 
 ^The board of directors of a corporation have implied authority 
 to do all acts in the management of the company's regular 
 business, which the company itself can do without a depar- 
 ture from itg chartered powers. Accordingly, in Burrill v. 
 Nahant Banlc,i Chief Justice Shaw said : " A board of direc- 
 tors of the banks of Massachusetts is a body recognized by 
 law. By the by-laws of these corporations, and by a usage, 
 so general and uniform as to be regarded as part of the law 
 of the land, they have the general superintendence and active 
 management of all the concerns of the bank, and constitute, to 
 all purposes of dealing with others, the corporation." 
 
 The same rule applies to the directors or trustees of all 
 other corporations engaged in business enterprises.^ 
 
 § 511. Powers belonging to the Directors exclusively. — The 
 directors of a corporation should be men of practical business 
 experience and judgment, and should be selected by the ma- 
 jority by reason of their peculiar fitness to manage the cor- 
 porate affairs. Although the appointment of the directors 
 rests with the majority, it does not follow that the majority 
 can control them or interfere with their management of the 
 business of the company. The authority of the board of 
 directors is derived from the unanimous agreement of the 
 shareholders, expressed in their charter or articles of asso- 
 ciation ; and hence those powers which it is intended shall 
 belong to the directors exclusively cannot be impaired by the 
 majority, or any other agent. Each agent is supreme within 
 
 to the management of the business Maynard v. Fireman's Fund Ins. 
 
 of such a company. New York Co., 34 Cal. 48; Wright i>. Oroville 
 
 Iron Mine «. First Nat. Bank, 39 Mining Co., 40 Cal. 20; Tripp v. 
 
 Mich. 644. Swanzey Paper Co., 13 Pick. 291; 
 
 1 Burrill v. Nahant Bank, 2 Meto. Union Mut. Fire Ins. Co. v. Keyser, 
 (Mass.) 163, 166. 32 N. H. 313; Railroad Co. v. Fur- 
 
 2 Hoyt V. Thompson, 19 N. Y. nace Co., 37 Ohio St. 321; Genesee 
 207, 216; Bank of Middlebury v. County Savings Bank v. Michigan 
 Edgerton, 30 Vt. 182; Miller v. Rut- Barge Co., 52 Mich. 488. 
 
 land, &c. R. R. Co., 36 Vt. 452; 
 
§ 511 THE LAW OF PRIVATE COBPOEATIONS. 478 
 
 the scope of the powers expressly delegated to him by his 
 principal. 
 
 The rule limiting the powers of the majority to the general 
 supervision of the affairs of the corporation, and the appoint- 
 ment of the regular managing agents, is established for the 
 protection of the individual shareholders, as well as for rea- 
 sons of practical convenience. It is obvious that a board of 
 directors, selected by the shareholders of a corporation on 
 account of their known business experience and capacity, are 
 far better adapted to carry on the business of the company 
 successfully, than the shareholders themselves assembled at a 
 general meeting. 
 
 Accordingly, in Conro v. Port Henry Iron Co.^ it was held 
 that a lease executed in pursuance of a resolution of the 
 shareholders of a corporation was void, because the power of 
 managing the business of the company was vested solely in 
 the board of directors. Willard, P. J., delivering the opinion, 
 said : " It is quite obvious^ from the charter, that the com- 
 pany could do no act except through its directors. When 
 the charter prescribes the mode of action, its injunctions must 
 be rigidly pursued. When no specific mode of action has 
 been prescribed, the common law mode of acting may be 
 inferred ; but every corporation created by statute must act 
 as the statute prescribes, and the common law cannot control 
 by implication that which the legislature has expressly sanc- 
 tioned. The stockholders in this case had no power to make 
 a lease, or do any other administrative act in the management 
 of the affairs of the corporation. If a lease could be made at 
 all, it could be executed only in pursuance of the act of the 
 directors, who are the body appointed by the charter for the 
 management of its affairs." ^ 
 
 1 12 Barb. 2", 63. Boot, &c. Co. v. Duusmore, 60 N. H. 
 
 2 See also Union Gold Mining 85; Tracy v. Guthrie County, &o. 
 Co. V. Kocky Mt. Nat. Bank, 2 Col. Society, 47 Iowa, 27; Gashwiler v. 
 565-575; Union Mut. Fire Ins. Co. Willis, 83 Cal. 12; Commonwealth 
 V. Keyser, 32 N. H. 318; Dana v. v. St. Mary's Church, 6 S. & R. 508; 
 Bank of U. S., 5 W. & S. 223, 245- State v. Bank of Louisiana, 6 La. 
 247; Dayton, &o. R. R. Co. v. 746-763. 
 
 Hatch, 1 Disney, 84; Chariestown Compare Hoyt v. Thompson, 19 
 
479 THE MANAGEMENT OF COEPORATIONS. § 512 
 
 However, the exclusive powers of the board of directors 
 extend only to the management of the regular business of the 
 corporation. Even an express provision that the powers of 
 the corporation shall be exercised by its board of directors 
 does not deprive the majority of the power of directing the 
 general policy of the corporation, and of deciding upon the 
 propriety of important changes in the company's business." 
 
 § 512. Directors have no Authority to make Important Chan- 
 ges. — The general authority of the directors of a corpora- 
 tion extends merely to the supervision and management of 
 the company's ordinary or regular business. A board of di- 
 rectors has no implied authority to make a material and 
 permanent alteration of the business or constitution of a cor- 
 poration, even though the alteration be within the company's 
 chartered powers. Such an alteration can be effected only 
 by authority of the shareholders at a general meeting. 
 
 This was decided by the Supreme Court of the United 
 States in Railway Company v. Allerton.^ In that case, a 
 shareholder of a city railway company obtained an injunc- 
 tion to restrain the directors of the company from increasing 
 the amount of its capital stock. The charter of the company 
 provided expressly that "the capital stock of said corpo- 
 ration shall be one hundred thousand dollars, and may be 
 increased from time to time, at the pleasure of said corpora- 
 tion " ; it also contained a provision that " all the corporate 
 powers of said corporation shall be vested in and exercised 
 
 N. Y. 216; Despatch Line v. Bel- can the directors of a corporation 
 laray Manuf. Co., 12 N. H. 226; reduce the amount of its capital. 
 Salem Bank v. Gloucester Bank, 17 See Percy v. Millaudon, 3 La. 569, 
 Mass. 29, 30; Oregonian Ry. Co. 587; s«/)ra, § 434. 
 V. Oregon Ky. & Nav. Co., 23 Fed. It has also been held that the 
 Eep. 232, 244; Newby v. Oregon directors of a railway company can- 
 Central Ry. Co., 1 Deady, 616; not execute a lease of the company's 
 Wells V. Oregon Ry. & Nav. Co., entire property, though the majority 
 8 Sawy. 600, 608. See also supra, have this power. Martin v. Conti- 
 § 475. nental Pass. Ry. Co., 14 Phila. 10. 
 1 Railway Co. v. Allerton, 18 See also Metropolitan Elevated R. R. 
 Wall. 233. See also Eidman v. Co. «. Manhattan Elevated R. R. Co., 
 Bowman, 58 111. 444; Finley Shoe, 11 Daly, 377, 430; Flagg v. Manhat- 
 &c. Co. V. Kurtz, 34 Mich. 89. Nor tan Ry. Co., 20 Blatchf. 142. 
 
§ 513 THE LAW OP PRIVATE COEPOEATIONS. 480 
 
 by a board of directors, and such officers and agents as said 
 board shall appoint." But the court held that the latter 
 clause referred merely to the ordinary business transactions 
 of the company, and that an increase of the capital stock 
 could be effected only by vote of the majority at a sharehold- 
 ers' meeting. Mr. Justice Bradley, delivering the opinion, 
 said : " We are satisfied that the decree must be affirmed on 
 the broad ground that a change so organic and fundamental 
 as that of increasing the capital stock of a corporation beyond 
 the limit fixed by the charter cannot be made by the direc- 
 tors alone, unless expressly authorized thereto. The general 
 power to perform all corporate acts refers to the ordinary 
 business transactions of the corporation, and does not extend 
 to a reconstruction of the body itself, or to an enlargement 
 of its capital stock." 
 
 § 513. Nor can they 'wind up the Business of the Corpora- 
 tion. — Upon the same principle, it has been held that the 
 directors of a corporation have no implied authority to wind 
 up the company, or to sell any property which is necessary 
 in order to carry on its business. Directors are merely 
 agents, and they are appointed for the purpose of managing 
 the business in which the shareholders have agreed to unite ; 
 the value of this business as a commercial speculation, and 
 the advisability of continuing it, are matters which concern 
 those who have embarked in it, and not their managing 
 agents.^ 
 
 But it is the duty of the directors of a corporation to pay 
 its debts ; and they are justified in using the corporate assets 
 for this purpose, although the company be thereby disabled 
 
 1 Bank Commissioners v. Bank of rectors of a corporation could not 
 
 Brest, 1 Barring. Ch. (Mich.) 106, direct the filing of a petition to have 
 
 111 ; Rollins v. Clay, 33 Me. 132 ; Ab- the company adjudged bankrupt, as 
 
 hot V. American Hard Rubber Co., the act expressly required that the 
 
 33 Barb. 578; Ernest v. Nicholls, 6 petition be "duly authorized by a 
 
 H. L. Cas. 401. Compare Wilson vote of the majority of the corpo- 
 
 V. Miers, 10 C. B. n. 8. 348; Bank rators at any legal meeting called 
 
 of Switzerland ». Bank of Turkey, for the purpose." Re Lady Bi^yan 
 
 5 L. T. N. 8. 549. Mining Co., 2 Abb. (U. S.) 527. 
 
 Under the bankrupt law the di- 
 
481 THE MANAGEMENT OF COEPOKATIONS. § 514 
 
 from carrying on its business, provided they act in good faith, 
 with a due regard to the interests of all the shareholders.^ 
 It has been held that the directors of an insolvent corpora- 
 tion may convey the whole of its assets to a trustee for the 
 payment of creditors.^ 
 
 § 514. Directors cannot depart from the Company's chartered 
 Purposes. — It is a fundamental principle, that the authority 
 of every agent of a corporation is derived directly or indi- 
 rectly from the unanimous agreement of the shareholders, as 
 expressed in their charter or articles of association. The 
 board of directors are impliedly authorized to do all acts 
 which are proper to carry out the company's chartered pur- 
 poses, but they cannot depart from these purposes upder 
 any circumstances. 
 
 In Pickering v. Stephenson,^ the directors of a railway 
 company were restrained, at the suit of a shareholder from 
 applying the company's funds in payment of the costs of a 
 prosecution for libel brought by them against a person who 
 had been in the employ of the company. Sir John Wickens, 
 V. C, said : " The principle of jurisprudence which I am 
 asked here to apply is, that the governing body of a corpora- 
 tion that is in fact a trading partnership cannot, in general, 
 use the funds of the community for any purpose other than 
 those for which they were contributed. By the governing 
 body I do not, of course, mean exclusively either directors or 
 a general council ; but the ultimate authority within the so- 
 ciety itself, which would ordinarily be a majority at a general 
 meeting. According to the principle in question, the special 
 powers, given either to the directors or to a majority by the 
 statutes or other constituent documents of the association, 
 however absolute in terms, are always to be construed as 
 
 ^ Semble, Sheldon Hat Blocking Commercial Hotel Co., 106 HI. 439. 
 
 Co. V. Eickemeyer Hat, &c. Machine Compare infra, § 802; contra, Bank 
 
 Co., 56 How. Pr. 70; 90 N. Y. 613. Commissioners ». Bank o£ Brest, 
 
 2 De Camp v. Alward, 52 Ind. 473 ; 1 Harring. Ch. (Mich.) 106 ; Gibson 
 
 Sargent v. Webster, 13 Mete. (Mass.) v. Goldthwaite, 7 Ala. 281 ; Epp- 
 
 497; Dana v. Bank of U. S., 5 W. & right v. Nickerson, 78 Mo. 482. 
 S. 223, 247; Merrick v. Bank of ' Pickering u. Stephenson, L. R. 
 
 Metropolis, 8 Gill, 59; Keichwald v. 14 Eq. 322, 340. 
 
 VOL. I. — 31 
 
§ 516 THE LAW OF PRIVATE COEPOEATIONS. . 482 
 
 subject to a paramount and inherent restriction that they are 
 to be exercised in subjection to the special purposes of the 
 original bond of association. This is not a mere canon of 
 English municipal law, but a great and broad principle, which 
 must be taken, in absence of proof to the contrary, as part of 
 any given system of jurisprudence." ^ 
 
 It is clear that the directors of a corporation can under no 
 circumstances make or accept an alteration of the company's 
 charter, unless the power to do this is expressly conferred 
 upon them by a provision contained in the charter itself.^ 
 
 § 515. Powers of Directors are derived from the Sharehold- 
 ers. — In some of the cases it has been said that the pow- 
 ers of the board of directors which are given in terms by the 
 act of incorporation are derived from the legislature, and 
 not from the shareholders of the company.^ This view is 
 certainly not strictly correct. The function of the legislature 
 in forming a private corporation is solely to legalize the 
 agreement of its shareholders ; and those provisions in an act 
 of incorporation which prescribe the purposes of the corpora- 
 tion, and the powers of its agents, merel}'^ indicate the nature 
 of the association which the shareholders are authorized to 
 form. The shareholders consent and agree that the business 
 of the corporation shall be carried on in the manner and by 
 the agencies prescribed by the charter, either in express or 
 implied terras. Every agent who has authority to represent 
 the collective body of shareholders must necessarily derive 
 his powers from the consent of the shareholders themselves. 
 
 § 516. The Fiduciary Relation between a Corporation and its 
 Directors. — It is clear that the directors or managing agents 
 of a corporation are not trustees in a technical sense, although 
 they are often called trustees in practice ; they are merely 
 agents, invested with wide discretionary powers in the man- 
 agement of the company's business. 
 
 1 To similar effect see Minor v. Gold, &o. Mining Co., 10 Phila. 32; 
 Mechanics' Bank, 1 Pet. 71, per Blatohford v. Ross, 5 Abb. Pr. n. s. 
 Justice Story. 434; Dayton, &c. R. R. Co. v. Hatch, 
 
 2 See supra, § 395. Compare. 1 Disney (Ohio), 84. 
 Marlborough Manuf. Co. v. Smith, " See Hoyt w. Thompson, 19 N. Y. 
 2 Conn. 583; Brown v. Fairmount 216. 
 
483 THE MANAGEMENT OF COEPOEATIONS. § 517 
 
 The relation between the directors of a corporation and 
 the company itself is, however, in many respects, a fiduciary 
 or trust relation. Whenever an agent is invested with au- 
 thority to use any discretion in the exercise of the powers 
 conferred upon him, it is an implied condition that this dis- 
 cretion shall be used in good faith for the benefit of the prin- 
 cipal, and in accordance with the true purpose of the agent's 
 appointment. To this extent, every agency which is not a 
 purely ministerial one involves a fiduciary relation between 
 the parties. 
 
 The directors of a corporation are ordinarily invested with 
 the most extensive powers of management. They are em- 
 powered to represent the company in all of its business trans- 
 actions and ventures; and the entire corporate affairs are 
 placed in their charge, upon the trust and confidence that 
 they shall be cared for and managed for the common benefit 
 of the shareholders, and in accordance with the provisions of 
 the charter agreement. It is manifest, therefore, that the 
 directors of a corporation occupy a position of the highest 
 trust and confidence, and that the utmost good faith is re- 
 quired in the exercise of the powers conferred upon them.^ 
 
 § 517. Directors or Agents have no Authority to represent 
 the Corporation in Transactions for their Personal Advantage. 
 — The directors or trustees of a corporation, in accepting 
 their appointment to ofiice, impliedly undertake to give the 
 company the benefit of their best care and judgment, and to 
 
 1 " Whether a director of a cor- tial or complete, upon the party 
 poration is to be called a trustee or intrusted to deal, on his own be- 
 not, in a strict sense there can be half, in respect of any matter in- 
 no doubt that his character is fidu- volved in such confidence." Hoyle 
 ciary, being intrusted by others with v. Plattsburgh, &c. R. R. Co., 54 
 powers which are to be exercised N. Y. 314, 328, per Johnson, C. 
 for the common and general inter- See also Cumberland Coal Co. v. 
 ests of the corporation, and not for Sherman, 30 Barb. 553, 559-577, 
 his private interests. He falls, there- and authorities cited. Booth v. Kob- 
 fore, within the great rule by which inson, 55 Md. 419, 436; York, &c. 
 equity requires that confidence shall Ry. Co. ». Hudson, 16 Beav. 485; 
 not be abused by the party in whom and see cases cited in the following 
 it is reposed, and which it enforces sections, 
 by imposing a disability, either par- 
 
§ 517 THE LAW OF PEIVATB COBPOKATIONS. 484 
 
 use the powers conferred upon them solely in the interest of 
 the corporation. They have no right under any circum- 
 stances to use their official positions for their own benefit or 
 the benefit of any one except the corporation itself. It is 
 for this reason that the directors have no authority to repre- 
 sent the corporation in any transaction in which they are 
 personally interested in obtaining an advantage at the ex- 
 pense of the company. The corporation would not have the 
 benefit of their disinterested judgment under these circum- 
 stances, as self-interest would prompt them to prefer their 
 own advantage to that of the company. 
 
 Accordingly, it has been held, in numerous cases, that 
 the directors of a corporation have no authority to bind the 
 company to any contract made with themselves personally, 
 or to represent it in any transaction with third persons, 
 in which they have a private interest at stake .^ The 
 
 1 See Warden v. Union Pacific Henry Iron Co., 12 Barb. 64; Blatch- 
 K. E. Co., 4 Dill. 330; 108 U. S. ford v. Ross, 5 Abb. Pr. n. s. 434; 
 651; Koehler v. Black Eiver Falls Gray v. New York, &c. Steamship 
 Iron Co., 2 Black, 715; Thomas v. Co., 3 Hun, 383; Abbot v. Ameri- 
 Brownsville, &c. Ry. Co., 1 McCr. can Hard Rubber Co., 33 Barb. 
 C. Ct. 392; Cook v. Sherman, 20 578; Cumberland Coal, &c. Co. v. 
 Fed. Rep. 167, 175, and cases cited Sherman, 30 Barb. 553 ; Cumber- 
 in notes. land Coal, &o. Co. v. Parish, 42 
 
 See also Aberdeen Ry. Co. v. Md. 598; European, &c. Ry. Co. v. 
 
 Blakie, 1 Macq. Sc. App. 461, 471; Poor, 59 Me. 277; Flint, &c. Ry. Co. 
 
 Flanagan u. Great Western Ry. Co., v. Dewey, 14 Mich. 477; Alford v. 
 
 L. R. 7 Eq. 116; Murphy v. O'Shea, Miller, 32 Conn. 543; Redmond v. 
 
 2 Jones & La T. 422; Jones v. Mor- Dickerson, 9 N. J. Eq. 507; Coving- 
 
 rison, 31 Minn. 140,147; Risley u. ton, &c. R. R. Co. v. Bowler, 9 
 
 Indianapolis, &c. Ry. Co., 1 Hun, Bush, 468; Port v. Russell, 36 Ind. 
 
 202,reversed62N. Y. 240; Coleman 60; Paine v. Lake Erie, &o. R. R. 
 
 V. Second Ave. R. R. Co., 38 N. Y. Co., 31 Ind. 283; Cook v. Berlin 
 
 201; Butts e. Wood, 37 N.Y. 317; Woolen Mill Co., 43 Wis. 433; 
 
 38 Barb. 181; Hoyle v. Plattsburgh, Bestor v. Wathen, 60 111. 138; Harts 
 
 &c. R. R. Co., 54 N. Y. 314; Blake v. Brown, 77 111. 227; Gilman, &c. 
 
 «. BufealoCreekR. R. Co.,56N.Y. R. R. Co. v. Kelly, 77 111. 426, 
 
 485; Morrison v. Ogdensburgh, &c. 435; McAleer v. McMurray, 58 Pa. 
 
 R. R. Co., 52 Barb. 173; Ogden v. St. 126; Simons v. Vulcan Oil, &c. 
 
 Murray, 39 N. Y. 202; Bliss v. Co., 61 Pa. St. 202 ; Rice's Appeal, 79 
 
 Matteson, 45 N. Y. 22; 52 Barb. Pa. St. 168; Percys. Millaudon, 3 
 
 348; Buffalo, &c. R. R. Co. v. Lamp- La. 568, 587; Lerisee ». Shreveport 
 
 son, 47 Barb. 533; Conro v. Port City R. R. Co., 27 La. Ann. 641; 
 
485 THE MANAGEMENT OF COEPOEATIONS. § 618 
 
 principle acted upon in these cases is a general principle 
 of the law pf agency, and applies to every agent of a cor- 
 poration, whatever may be his position. Thus, a president, 
 cashier, or managing agent, having authority to sign the 
 name of the corporation to negotiable instruments, cannot 
 execute a note or indorse a note to himself,^ or certify a 
 check for his own benefit.^ It is a general rule, that the 
 powers conferred upon an agent must be exercised to advance 
 the interests of the principal, and for no other purpose.' 
 
 § 518. The same rule applies in all cases where the di- 
 rectors attempt to obtain an advantage to themselves through 
 their control over the company. The directors of a corpo- 
 ration have no right to use either its assets or its credit, 
 or any of the powers of their office, except to advance the 
 interests of the company, irrespective of their own advan- 
 tage or desires.* Thus, it has often been decided that the 
 directors have no right to stipulate for a bonus or commission 
 to be paid them by a person with whom they enter into a 
 contract on behalf of the company ,5 and it is equally well 
 settled that they cannot by any arrangement secure to them- 
 selves a share in the profits of any transaction to which the 
 company is a party. 
 
 First Nat. Bank v. GiSord, 47 Iowa, * West St. Louis Sav. Bank v. 
 
 575; Blair Town Lot, &o. Co. v. Shawnee County Bank, 95 U. S. 
 
 Walker, 50 Iowa, 376; Gardner v. 557; 3 Dill. 403; Gallery v. Nat. 
 
 Butler, 30 N. J. Eq. 702, 721 ; Stew- Exchange Bank, 41 Mich. 169; 
 
 art V. Lehigh Valley K. R. Co., 38 Chamberlain v. Pacific Wool Grow- 
 
 N. J. Law, 505; Guild v. Parker, ing Co., 54 Cal. 103. 
 
 43 N. J. Law, 430; Kyan v. Leaven- ^ ciaflin v. Farmers', &c. Bank, 
 
 worth, &c. Ry. Co., 21 Kans. 365; 25 N. Y. 293; 24 How. Pr. 1. 
 
 and see cases cited in the following s Gallery v. Nat. Exchange Bank, 
 
 notes. 41 Mich. 169. 
 
 In England, the common law rule * York, &c. Ry. Co. i>. Hudson, 
 
 is reinforced by provisions in the 16 Beav. 485; Blair Town Lot, Sec. 
 
 various companies acts. It has been Co. v. Walker, 50 Iowa, 376 ; GaskeU 
 
 provided that the office of a director v. Chambers, 26 Beav. 360; and see 
 
 who is interested in a transaction cases cited in next note, 
 
 with the company shall be vacated. ^ Imperial, 8tc. Ass. v. Coleman, 
 
 See 7 & 8 Vict. ch. 110, § 29; 8 & 9 L. R. 6 H. L. 189, reversing L. R. 
 
 Vict. ch. 16, §§ 85, 86, 87; Com- 6 Ch. 558; Dunne v. English, L. R. 
 
 panics Act of 1862, 25 & 26 Vict. 18Eq.524; General Exchange Bank 
 
 ch. 89, Table A, No. 57. v. Horner, L. R. 9 Eq. 480; Gaskell 
 
§ 519 THE LAW OP PBIVATE CORPORATIONS. 486 
 
 This principle was applied bj the Supreme Court of the 
 United States in Koehler v. Black River Falls Iron Co. The 
 directors of a mining company, which was largely in debt, 
 were empowered by the shareholders to obtain a loan of 
 money for the purpose of carrying on the company's busi- 
 ness, and to execute a mortgage of the company's property 
 as security ; but instead of honestly endeavoring to effect a 
 loan of money, advantageously, for the benefit of the com- 
 pany, they executed a note and mortgage for $15,000, in 
 consideration of a loan of $2,000 in money and provisions, 
 and an undertaking on the part of the mortgagee to assume 
 the payment of debts amounting to over $9,000, which the 
 company owed to individual directors. The court held that 
 the transaction was unauthorized, and that the mortgage was 
 invalid. Mr. Justice Davis, after stating the facts of the case, 
 said : " Directors cannot thus deal with the important inter- 
 ests intrusted to their management. They hold a place of 
 trust, and by accepting the trust are obliged to execute it 
 with fidelity, not for their own benefit, but for the benefit of 
 the stockholders of the corporation." ^ 
 
 § 519. It is clear that a director has no right to sell his 
 influence in the management of the company, or to enter into 
 any agreement by which his official action would be influenced 
 or controlled. Such an agreement would be dishonest and il- 
 legal; it would be an agreement to commit a breach of trust.^ 
 
 It has also been held that a director cannot become a pur- 
 chaser of property of the corporation at an execution salcj 
 
 V. Chambers, 26 Beav. 360; Madrid for their own benefit lands along the 
 
 Bank v. Felly, L. R. 7 Eq. 442. line of the projected road, with the 
 
 1 Koehler «. Black River Falls view of increasing the value of their 
 Iron Co., 2 Black, 715, 720. See lands by locating the railroad and 
 also Davis v. Rock Creek, &c. Mining its depots and stations near these 
 Co., 55 Cal. 359 ; Farmers', &c. Bank lands, cannot be enforced in equity. 
 V. Downey, 53 Cal. 466; Rhodes v. " The law does not permit these of- 
 Webb, 24 Minn. 292. ficials to subject themselves to any 
 
 2 Bliss V. Matteson, 45 N. Y. 26 ; temptation to serve their own inter- 
 Berryman v. Cincinnati Southern ests, in preference to the interests of 
 Ry. Co., 14 Bush, 755. the stockholders and of the public." 
 
 A contract made by the officers Per McCrary, J., in Cook v. Sher- 
 of a railroad company to purchase man, 20 Fed. Rep. 167. 
 
487 THE MANAGEMENT OP OOEPOEATIONS. § 520 
 
 except subject to the right of the company to elect to disaf- 
 firm the sale and demand a resale.^ 
 
 § 520. Interest of Directors in other Company disqualifies 
 them from dealing with it. — The rule disqualifying an agent 
 from representing his principal in any transaction in which 
 his personal interests are opposed to the interests of the prin- 
 cipal, applies in all cases where there is danger that the agent 
 may be induced to use his powers for his own advantage. It 
 is immaterial what the character of the interest of the agent 
 may be, provided it be a substantial one. Thus, the directors 
 of a corporation have no authority to represent it in trans- 
 actions with another corporation in which they are share- 
 holders, if their interest in the latter company might induce 
 them to favor it at the expense of the company whose inter- 
 ests have been intrusted to their care.^ 
 
 In Wardell v. Union Pacific Railroad Co.,^ Justice Field 
 said : " All arrangements by directors of a railroad company, 
 to secure an undue advantage to themselves at its expense, 
 by the formation of a new company as^an auxiliary to the 
 original one, with an understanding that they or some of 
 them shall take stock in it, and then that valuable contracts 
 shall be given to it, in the profits of which they as stock- 
 holders in the new company are to share are so many unlaw- 
 
 ' Hoyle u. Plattsburgh, &c. R. R. Co. ». Sherman, 30 Barb. 553; 
 
 Co., 54 N. Y. 314, 329. Jones v. Arkansas Mechanical, &c. 
 
 In this case, Johnson, C, de- Co., 38 Ark. 17. Compare Kitchen 
 
 livering the opinion of the court, ». St. Louis, &c. Ry. Co., 69Mo. 224; 
 
 said: " As director, it was his duty Pioneer Gold Mining Co. v. Baker, 
 
 to prevent a sale if possible; and if 20 Fed. Rep. 4; s. c. 23 Fed. Rep. 
 
 not, then to endeavor to have the 258. 
 
 property produce the highest price; ^ Oilman, &c. R. R. Co. v. Kelly, 
 
 and in order to the attainment of 77 111. 426; Ryan v. Leavenworth, 
 
 these objects, to use the knowledge &c. Ry. Co., 21 Kans. 365; Thomas 
 
 he had derived from the confidence v. Brownsville, &c. Ry. Co., 1 McCr. 
 
 reposed in him as director. As pur- C. Ct. 392; San Diego ». San Diego, 
 
 chaser, on the other hand, it was &c. R. R. Co., 44 Cal. 106. Com- 
 
 his interest to pay as little as possi- pare Aberdeen Ry. Co. v. Blakie, 
 
 ble, and to use his special knowledge 1 Macq. Sc. App. 461. 
 
 for his own advantage. Actual ^ Wardell v. Union Pacific R. R. 
 
 fraud or actual advantage do not Co., 103 U. S. 651, 658; Abbot v. 
 
 need, in such cases, to be shown." American Hard Rubber Co., 33 
 
 See also Cumberland Coal, &c. Barb. 578. 
 
§ 521 THE LAW OP PEIVATB COEPOBATIONS. 488 
 
 ful devices to enrich themselves to the detriment of the 
 stockholders and creditors of the original company, and will 
 be condemned whenever properly brought before the courts 
 for consideration." 
 
 It is clear that the direcibors of a railroad company have no 
 right to make contracts on behalf of the company for the con- 
 struction or equipment of its road by a construction company 
 in which they are interested as shareholders. And even if 
 they were not interested in the construction company at the 
 time when the contract was entered into, they would have no 
 right to become shareholders thereafter and continue to act as 
 directors of the railroad company. Their interest in adding to 
 the profits of the construction company by allowing the railroad 
 to be built cheaply and imperfectly, would be opposed to their 
 duty to the railroad company to insist upon a strict perform- 
 ance of the contract, and a careful construction of the road.^ 
 
 § 521. Qualification of the Rule. — But the rule referred to 
 is not an arbitrary one ; it is founded on reason, and should 
 not be applied without regard to the circumstances of the 
 case. A merely nominal or a naked legal interest in the sub- 
 ject matter of a transaction would not disqualify an agent 
 from representing his principal in the transaction, if there is 
 no temptation to the agent to obtain an advantage at the ex- 
 pense of the principal ; ^ there must be a real and substantial 
 inducement to the agent to sacrifice the interest of the prin- 
 cipal. Thus, a director ought not to be held disqualified 
 from representing the corporation in a transaction with an- 
 other company merely because he is a shareholder in the 
 latter, if the amount of his stock is so small that his interest 
 in the transaction would be practically insignificant. 
 
 A director or other agent of a corporation may deal with 
 the company provided it be adequately represented by other 
 agents ; ^ he may also purchase property, and afterwards sell 
 
 1 Gilman, &c. R. R. Co. «. Kelly, anceof property to himself as trustee 
 77 111. 426. for the benefit of creditors, if he has 
 
 2 Bank v. Flour Co., 41 Ohio St. no personal interest. Bassett v. 
 552. Compare Hopson v. .ffitna Monte Christo Mining Co., 15 Nev. 
 Axle, &c. Co., 50 Conn. 597. 293. 
 
 A director may take a convey- * Infra, § 527. 
 
489 THE MANAGEMENT OF COEPOEATIONS. § 522 
 
 it to the corporation at an advance, provided it was not his 
 duty, when he made the purchase, to purchase on behalf of 
 the company.^ So, an agent of a corporation may purchase 
 claims against the company at a discount, and enforce them 
 in full, if he was not under obligation to make the purchase 
 on behalf of the corporation.^ 
 
 § 522. The Corporation has an absolute Right to repudiate 
 unauthorized Transactions. — The right of a principal to refuse 
 to be bound by a transaction in which the agent assuming 
 to represent him has an adverse interest, is unconditional. 
 It is immaterial whether the transaction was fair to the 
 principal or not. The incapacity of the agent to act in a 
 case of this kind results from an implied limitation of the 
 authority delegated by the principal ; and this limitation is 
 implied in all cases, because sound policy obviously demands 
 that an agent should never be led into the temptation of 
 placing his interest in conflict with his duty. In many cases, 
 it would be impossible to ascertain whether the agent did or 
 did not obtain the best terms for the principal which it was 
 possible to obtain.^ But the principal would always have the 
 privilege of adopting the contract made on his behalf, if he 
 should so desire, and ratification would usually be implied, in 
 a case of this kind, from a failure to dissent. In applying 
 these doctrines to unauthorized contracts made by directors 
 of a corporation for their own benefit, it should be observed 
 that the duty of the directors would ordinarily compel them 
 to adopt a transaction which proves to be clearly beneficial 
 
 1 Parker v. Mckerson, 137 Mass. Michoud v. Girod, 4 How. 503, 557; 
 487. Compare infra, §§ 545, 546. Wardell v. Union Pacific R. K. 
 
 2 Bradley v. Marine, &c. Manuf. Co., 103 U. S. 651; Pearson v. Con- 
 Co., 3 Hughes, 26; Inglehart v. cord R. R. Co., 13 Am. & Eng. 
 Thousand Island Hotel Co., 33 Hun, R. R. Cas. 102, 111, and cases there 
 377. cited. 
 
 ' Aberdeen Ry. Co. ». Blakie, 1 It is submitted that the dicta to 
 
 Macq. So. App. 461, 471; Stewart the contrary in Twin Lick Oil Co. 
 
 V. Lehigh Valley R. R. Co., 38 N. J. v. Marbury, 91 U. S. 587, Buell v. 
 
 Law, 523; Hoyle v. Plattsburgh, &c. Buckingham, 16 Iowa, 284, Kitchen 
 
 R. R. Co., 54 N. Y. 314; Jewett v. v. St. Louis, &c. Ry. Co., 69 Mo. 
 
 Miller, 10 N. Y. 402, 405; Flint, &c. 224, and other cases, ought not to 
 
 Ky. Co. V. Dewey, 14 Mich. 477 ; be followed. 
 
§ 523 THE LAW OF PEIVATB COEPOEATIONS. 490 
 
 to the company, and to repudiate an unauthorized transaction 
 which proves injurious. 
 
 § 523. The legal Effect of unauthorized Acts and Contracts. — 
 The power of an agent to bind the principal by contract, or to 
 dispose of his property, depends entirely upon the measure of 
 authority delegated by the principal. If an agent enters into 
 an unauthorized contract, or makes an unauthorized disposition 
 of property belonging to the principal, the latter is not bound 
 by the transaction, either at law or in equity, unless he is es- 
 topped from denying the authority of the agent to bind him. 
 
 There is an important difference in this respect between 
 the legal effect of an unauthorized act of a trustee and an un- 
 authorized act of a mere agent. A trustee has the legal title 
 to the trust property, and can dispose of the legal title to the 
 property absolutely, the rights of the cestui que trust being 
 ignored at law. It is for this reason that a misapplication 
 of trust property can be remedied only by a court of equitj'-. 
 An agent, on the other hand, has not the legal ownership of 
 the property placed in his charge, and cannot deal with the 
 property in the name of the principal, except in pursuance 
 of the authority delegated by the latter. 
 
 The directors or trustees of a corporation are mere agents ; 
 they have not the legal title to the corporate property. 
 Hence, if the directors enter into an unauthorized contract, 
 or make an unauthorized application of property belonging 
 to the corporation, the latter is not bound either at law or in 
 equity unless estopped from setting up the excess of author- 
 ity .^ This rule is applicable where the directors attempt to 
 use their powers for their personal advantage at the expense 
 of the corporation. If the directors or other agents of a cor- 
 poration enter into a contract with themselves personally, or 
 if they use the corporate property or credit in any transaction 
 in which they are personally interested, the corporation is 
 not bound by the contract or the use of its property or name, 
 because the agents assuming to represent it have no authority 
 under these circumsances.^ 
 
 1 Infra, §§ 577-584. Macq. Sc. App. 461 ; Flanagan v. 
 
 * Aberdeen Ry. Co. v. Blakie, 1 Great Western Ry. Co., L. R. 7 Eq. 
 
491 THE MANAGEMENT OP CORPOEATIONS. § 524 
 
 § 524. Whether Unauthorized Contracts are Vdid or Void- 
 able. — It has been said by some of the judges, that a contract 
 or sale made by a director or agent for his personal benefit 
 is "voidable" by the principal, but not absolutely "void.''^ 
 The precise sense in which the terms void and voidable are 
 here used is not clear ; but it is evidently not the ordinary 
 sense. The expression " void contract " usually signifies, 
 either that there is no contract at all, by reason of the 
 absence of some element essential to the existence of con- 
 tract, as, for example, contracting parties or mutual consent ; 
 or that a contract was actually entered into, but is not legally 
 enforceable by either party by reason of some rule of law, 
 such as the statute prohibiting usurious contracts, or the 
 common law rule against immoral contracts or contracts 
 without a consideration and not under seal. A contract is 
 generally said to be " voidable," if the essential elements of 
 a contract are present, but one of the parties is entitled, by 
 reason of some rule of law, to withdraw from the agreement. 
 Contracts made by infants, or induced by the fraud of either 
 of the parties, are of this description. It is evident that a 
 contract made by an agent in violation of his duty is not void- 
 able in the sense here indicated. The reason why the princi- 
 pal is not bound, if his agent attempts to contract with 
 himself, or for his own benefit, is that authority to make 
 such a contract was not delegated to the agent. An essen- 
 tial element of a contract, the consent of the parties, is there- 
 fore wanting, and no contract is in fact created. But it does 
 not necessarily follow that the agent may refuse to be bound, 
 if the principal should give his consent afterwards by adopt- 
 ing the pretended contract. It has always been held that 
 the principal may ratify an unauthorized attempt to form a 
 
 116 ; Gardner v. Butler, 30 N. .T. Eq. peal, 60 Pa. St. 291 ; Little Eock, 
 
 702; Warden v. Union Pacific R.R. &c. Ry. Co. v. Page, 35 Ark. 304; 
 
 Co., 103 U. S. 651 ; 4 Dill. 330; Cole- Buell v. Buckingham, 16 Iowa, 284; 
 
 man v. Second Ave. R. R. Co., 38 Kitchen v. St. Louis, &c. By. Co., 
 
 N. Y. 201 ; Wilbur v. Lynde, 49 Cal. 69 Mo. 224 ; Stewart v. Lehigh Val- 
 
 290; and see cases supra, § 517. ley R. R. Co., 38 N. J. Law, 522. 
 
 ^ See Twin Lick Oil Co. v. Mar- Compare Gardner i-. Butler, 30 N. J. 
 
 bury, 91 U. S. 587; Ashhurst's Ap- Eq. 702. Infra, § 526. 
 
§ 525 THE LAW OP PEIVATE COEPOBATIONS. 492 
 
 contract on his behalf, and thereby give the transaction the 
 same effect as if a contract had been formed originally. If 
 an agent attempts to contract with himself, or for his own 
 benefit, the principal has always the privilege of adopting 
 the transaction. He may either ratify it entirely, or, at his 
 option, may allow the transaction to stand at law, and hold 
 the agent liable in equity, as trustee, to account for the 
 profits obtained through the violation of his fiduciary obli- 
 gations.^ 
 
 In applying these general doctrines to the unauthorized 
 attempts of directors of a corporation to bind the corporation 
 for their own benefit, it should be borne in mind that the 
 corporation cannot, as a rule, act except through its mana- 
 ging agents. It .would generally be the duty of the direc- 
 tors themselves either to adopt or repudiate the unauthorized 
 transactions on behalf of the corporation, as its interests may 
 require. The directors certainly cannot complain if they are 
 held liable according to their own professions, and on their 
 obligations to the corporation. 
 
 § 525. Remedies of the Corporation. — The corporation would 
 be entitled to recover damages for any injuries caused by un- 
 authorized acts of this description.^ If the unauthorized acts 
 are merely threatened, a preventive remedy by injunction 
 may usually be obtained by the corporation, or by its share- 
 holders, if the company's agents refuse to act.^ 
 
 The corporation may, however, ratify an unauthorized 
 transaction of its agents; and this may be done either by 
 the unanimous acquiescence of the shareholders, or by vote 
 of the majority, if the transaction is of such a character that 
 the majority might have authorized it at the outset.* 
 
 1 Supra, § 516 et seq. If the ' Supra, § 254. Gray v. New 
 corporation does not disaffirm the York, &c. Steamship Co., 3 Hun, 
 transaction, or take proceedings to 383. 
 
 set it aside, it should, as a rule, * Hotel Co. v. Wade, 97 TJ. S. 
 
 be treated as binding, if called in 13; Twin Lick Oil Co. v. Marbury, 
 
 question by other parties. Buell v. 91 U. S. 587 ; BueU v. Buckingham, 
 
 Buckingham, 16 Iowa, 284. 16 Iowa, 284, 295; First Nat. Bank 
 
 2 Shultz V. Christman, 6 Mo. ». Eeed, 36 Mich. 263'; U. S. Koll- 
 App. 338, 342. ing Stock Co. v. Atlantic, &c. R. R. 
 
493 THE MANAGEMENT OP COEPOEATIONS. § 527 
 
 If an agent of a corporation has applied corporate funds to 
 his own use, he may be compelled to account for these funds 
 in equity as trustee ; and so if an agent obtains a profit to 
 himself through an unauthorized dealing with the company, 
 the corporation may treat the transaction as binding at law, 
 and charge the agent as trustee of the profits received.^ 
 
 § 526. Obligation of the Company to pay for the Value re- 
 ceived under a pretended Contract -with ita Agents. — If the 
 directors or other agents of a corporation supply it with money 
 or property, under a pretended contract with themselves, 
 and the money or property is properly used in carrying on 
 the company's business, or in adding to its assets, they are 
 entitled to recover the value of the money or property so 
 supplied and used, in an action against the company. The 
 obligation of the company to pay under these circumstances 
 does not rest upon any actual contract with the directors, but 
 is a duty which the law imposes, for reasons of justice, to 
 make fair compensation for what has been properly received 
 and applied. The same rule applies where the directors per- 
 form services for the company which are outside of the duties 
 of their office.^ 
 
 § 527. A Director or Agent may deal with the Corporation if 
 the latter is represented by other Agents. — The incapacity of 
 
 Co. , 34 Ohio St. 463 ; Kitchen v. by a contract which he makes with 
 
 St. Louis, &c. Ry. Co., 69 Mo. 224; himself, or for his own benefit, and 
 
 and see infra, § 625. set it up, either at law or in equity, 
 
 1 York, &c. Ry. Co. v. Hudson, as a valid obligation. . . . But while 
 16 Beav. 485 ; Gaskell v. Chambers, the express undertaking is without 
 26 Bear. 360 ; Madrid Bank v. Felly, legal force, the directors of a com- 
 L. R. 7 Eq. 442 ; Parker v. Mc- pany have a right to serve it in the 
 Kenna, L. R. 10 Ch. 96; Bent v. capacity of officers, agents, or em- 
 Priest, 10 Mo. App. 543; Gilman, ployees, and for such services the 
 &c. R. R. Co. V. Kelley, 77 111. 426; law will enable them to recover a 
 Blair Town Lot, &c. Co. v. Walker, just and reasonable compensation. 
 50 Iowa, 376 ; and see the following . . . No claim which they may make 
 section. against their company can acquire 
 
 2 Gardner v. Butler, 80 N. J. Eq. any support or validity from the 
 702, 721, 724; and see infra, § 715 fact that they have expressly sanc- 
 et seq. In Gardner v. Butler, Van tioned it; it must rest exclusively 
 Syckel, J., said: " The rule is, that upon its fairness and justice, and be 
 the trustee cannot fortify himself enforced upon the quantum meruit." 
 
§ 527 THE LAW OF PRIVATE COEPOEATIONS. 494 
 
 the agents of a corporation to bind it by making contracts 
 with themselves personally, rests solely on the principles of 
 the law of agency. There is no arbitrary rule of law pro- 
 hibiting contracts between a corporation and its agents, where 
 these principles have no application. Thus, if an agent does 
 not assume to represent the corporation in entering into a 
 contract with it, but deals with another independent agent, 
 who has authority to act for it, the transaction will be un- 
 objectionable. An agent may even represent the corporation 
 in executing a contract with himself personally, provided he 
 acts under immediate instructions from some other superior 
 agent or from the board of directors.^ 
 
 It has been held in some cases, that a director cannot en- 
 ter into a valid contract with the corporation of which he is 
 agent, although the corporation is represented in the trans- 
 action by a majority of the board. This view is placed upon 
 the ground that each director owes the corporation the full 
 benefit of his judgment and skill, and is bound to assist the 
 other directors in their deliberations.^ 
 
 But the weight of authority and of reason appears to indi- 
 cate that such a contract would be valid.^ It is never neces- 
 sary that all the directors should take part in the deliberations 
 of the board. The general rule is, that a majority of the 
 board constitute a quorum for the transaction of business, 
 and that a majority of those who attend a meeting, at which 
 a quorum are present, have authority to bind the corporation 
 by their vote.* There is no necessary impropriety in a con- 
 tract between a director and the corporation, if the latter is 
 
 1 Bradley v. Richardson, 23 Vt. E. K. Co., 88 N. Y. 1; Harts v. 
 720; Addison v. Lewis, 75 Va. 701; Brown, 77 111. 226; Twin Lick Oil 
 Stratton v. Allen, 16 N. J. Eq. Co. v. Marbury, 91 U. 587, 588; 
 229. Kitchen v. St. Louis, &c. Ry. Co., 
 
 2 Aberdeen Ry. Co. ». Blakie, 1 69 Mo. 224; Chouteau v. Allen, 70 
 Macq. Sc. App. 461, 473, per Lord Mo. 338; Barnes v. Trenton Gas 
 Campbell, in the House of Lords; Light Co., 27 N. J. Eq. 33, 37; 
 Stewart v. Lehigh Valley R. R. Co., Combination Trust Co. v. Weed, 2 
 38 N. J. Law, 623. Fed. Rep. 24; Hubbard v. New 
 
 » U. S. Rolling Stock Co. v. At- York, &o. Investment Co., 14 Fed. 
 lantic, &c. R. R. Co., 34 Ohio St. Rep. 675. 
 450; Duncomb v. New York, &c. * Infra, § 531. 
 
495 THE MANAGEMENT OP COEPOKATIONS. § 528 
 
 represented by other agents. On the contrary, such con- 
 tracts are, in many instances, the natural result of circum- 
 stances, and are justified by the approved usages of business 
 men. The directors of a corporation are generally selected 
 by reason of their influence or wealth, and because they are 
 interested in the~ success of the company, and familiar with 
 its affairs. Not infrequently, persons who agree to advance 
 money to the corporation expressly stipulate for a voice in the 
 board of directors, so that they may be able to supervise the 
 faithful application of the money advanced, and keep watch 
 for their own security. To prohibit the directors, in all cases, 
 from dealing with the corporation, would often deprive the 
 latter, in time of need, of the assistance of those persons who 
 have the greatest interest in its welfare, and who are willing 
 to give their aid upon the most reasonable terms.* 
 
 But a transaction between a director and the corporation, 
 even if the latter was represented by a majority of the board, 
 will always be scrutinized by the courts with strictness, and 
 will be set aside at the suit of the corporation, upon proof of 
 the slightest unfairness or imposition practised upon it. A 
 director will not be allowed to obtain any advantage over the 
 corporation of which he is agent, through his position, or the 
 information which he has obtained of the affairs of the cor- 
 poration, or his influence over his co-directors.^ 
 
 § 528. Directors or Agents cannot represent both Parties in 
 making a Contract. — ^ A person who is agent for two parties 
 cannot, in the absence of express authority from each, repre- 
 sent them both in a transaction in which they have contrary 
 interests. This rule is based upon the same reason as the 
 rule which prohibits an agent from representing his principal, 
 when his personal interests are opposed to his duty. The 
 principal stipulates for the judgment and skill of his agent, 
 and the latter has no authority to act, when he is not in a 
 position to give the principal the benefit of his best endeav- 
 
 1 Compare Kitchen v. St. Louis, 450 ; Twin Lick Oil Co. v. Marbury, 
 &c. Ry. Co., 69 Mo. 224. 91 U. S. 587; Combination Trust 
 
 2 U. S. Rolling Stock Co. v. At- Co. v. Weed, 2 Fed. Rep. 24. 
 Ian tic, &c. R. R. Co., 34 Ohio St. 
 
§ 529 THE LAW OF PEIVATE COEPOKATIONS. 496 
 
 ors. It follows, therefore, that the directors, or other agents 
 of a corporation, have no implied authority to bind the com- 
 pany by making a contract with another corporation which 
 they also represent. Each company would be interested in 
 obtaining an advantageous bargain at the expense of the 
 other company, and each would have a claim upon the best 
 endeavors of its agents, unbiased by favor to others. 
 
 It has been held, upon this principle, that a person acting 
 as agent for two insurance companies cannot execute a 
 contract of reinsurance on behalf of one company in favor 
 of the other.^ 
 
 § 529. Directors cannot favor the Majority at the Expense 
 of a Minority. — It is well settled, that, if the same persons 
 are appointed to act as directors of different companies, they 
 have no authority to represent both companies in transactions 
 in which their interests are opposed. It matters not that the 
 acts of the directors are in the interest of a majority of the 
 shareholders in each company, and have received their ap- 
 proval. Nothing can be more unjustifiable and dishonorable 
 than an attempt on the part of those holding a majority of 
 the shares in a corporation to place their nominees in control 
 of the company, and then to use their control for the purpose 
 of obtaining advantages to themselves at the expense of the 
 minority ; it would be a conspiracy to commit a bi'each of 
 trust. The directors of a corporation are bound to administer 
 its affairs with strict impartiality, in the interest of all the 
 shareholders alike ; and the inability of the minority to pro- 
 
 ^ New York Central Ins. Co. v. duty to the plaintiffs required that 
 National, &c. Ins. Co., 14 N. Y. 85, he should act in their behalf with 
 91. Denio, C. J., said: "The all the sagacity and discretion which 
 plaintiffs were entitled to all his a fair man would have exercised in 
 skill and ability, and the defend- his own business. There was, there- 
 ants had the like claims upon him. fore, a manifest inconsistency in his 
 Neither required the services of an attempting to negotiate this insur- 
 indifferent person, whose object ance as agent for the insurers and 
 might be to secure equal advan- the assured." See also Mercantile 
 tages to both the contractors. No Mut. Ins. Co. v. Hope Ins. Co., 8 
 one will contend that he, as the de- Mo. App. 408 ; Utica Ins. Co. v. 
 fendant's agent, could have made a Toledo Ins. Co., 17 Barb. 132. 
 contract to insure himself; but his 
 
497 THE MANAGEMENT OF COEPOEATIONS. § 530 
 
 tect themselves against unauthorized acts performed with the 
 connivance of the majority, renders their right to the protec- 
 tion of the courts the clearer.^ 
 
 The case of Pearson v. Concord R. R. Co.,^ is a good illus- 
 tration of these doctrines. Two railroad companies, whose 
 lines connected with that of a third company, bought up a 
 controlling interest in the stock of the latter company, and 
 then elected a number of their own agents to its board of di- 
 rectors. Having thus obtained control over the management 
 of the company, they induced the board of directors to make 
 certain contracts in relation to the apportionment of earnings 
 upon joint traflBc of the companies, and to vote the payment 
 of large sums of money in compromise of claims made by 
 the two companies against the company in whose behalf the 
 directors were acting. In a suit brought by a dissenting 
 shareholder of that company, the Supreme Court of New 
 Hampshire held that the company whose management was 
 thus controlled had an absolute right to refuse to be bound 
 by these transactions, whether the contracts and the com- 
 promise were fair or not. 
 
 § 530. However, there is certainly no rule of law or of 
 propriety prohibiting a person from holding office as director 
 of different companies at the same time. Nor would the 
 board of directors of a company be disqualified from approv- 
 ing of contracts with another company, merely because cer- 
 tain members of the board, less than a majority, are officers 
 of both the companies. Those directors who are agents of 
 both companies would be disqualified from representing them 
 both in a transaction in which their interests are opposed ; 
 but the other directors would retain their power of acting by 
 vote of a majority of a quorum, as in case of a simple absence 
 of the disqualified members from the meetings of the board.^ 
 
 1 See supra, Chapter V. Fed. Rep. 14. See also cases supra, 
 
 2 Pearson v. Concord R. R. Co., §§ 249, 477. 
 
 13 Am. & Eng. R. R. Cas. 94, 102. » U. S. Rolling Stock Co. v. At- 
 
 See also Goodin v. Cincinnati, &o. lantic, &c. R. R. Co., 34 Ohio St. 
 
 Canal Co., 18 Ohio St. 169; Booth 450; Kitchen v. St. Louis, &c. Ry. 
 
 V. Robinson, 55 Md. 419, 442, 444; Co., 69 Mo. 224; Flagg v. Manhat- 
 
 Bill V. Wefjtern Union Tel. Co., 16 tan Ry. Co., 4 Am. & Eng. R. R. 
 VOL. I. — 32 
 
§ 582 THE LAW OF PEIVATE COKPOEATIONS. 498 
 
 § 531. Directors can act only as a Board. — Meetings. — 
 The general rule is, that the directors of a corporation have no 
 implied authority to act singly ; they can act only as a board, 
 unless there be a different custom, or an express delegation of 
 authority to act individually.^ Either all must be present at 
 a meeting, or the meeting must be called in a regular manner, 
 and all the directors given notice ; and in the latter case, if 
 a majority assemble, they may act by a major vote. A ma- 
 jority of the directors form a quorum, in the absence of a 
 different regulation, and a majority of the quorum determine 
 the action of the board. Thus, if there are nine directors, 
 five constitute a quorum, and a resolve passed by the major- 
 ity at a meeting where at least five are present is binding 
 upon the company .^ 
 
 Notice of the meetings of directors of a corporation must 
 be given in the same manner as notice of the meetings of 
 shareholders.' The notice must distinctly fix the time and 
 place of the meeting, and the notice musb be given in time to 
 enable the person notified to reach the place of meeting in 
 the customary manner.* 
 
 § 532. Notice of Meetings necessary. — It has been held, 
 that, if a quorum of the directors of a corpoi'ation meet and 
 unite in any determination, the company is bound thereby, 
 
 Cas. 141; Metropolitan Elevated Town of Alton, 7 N. H. 253; Bank 
 
 Ry. Co. V. Manhattan Elevated Ry. of Middlebury v. Rutland, &c. R. R. 
 
 Co., 11 Daly, 373, 380. Supra, Co., 30 Vt. 159; Bradstreet u. Bank 
 
 §527. of Royalton, 42 Vt. 128; State v. 
 
 1 Baldwin v. Canfield, 26 Minn. 43. Smith, 48 Vt. 266 ; Baldwin v. Can- 
 
 ' Despatch Line u. Bellamy Manuf. field, 26 Minn. 43, 54; Lockwood v. 
 
 Co. , 12 N. H. 207, 225-228 ; Edgerly Thunder Bay, &c. Boom Co., 42 Mich. 
 
 II. Emerson, 23 N. H. 555; Wells v. 536; Doyle v. Mizner, 42 Mich. 332. 
 
 Rahway, &c. Rubber Co., 19 N. J. Eq. Compare also supra, § 475. 
 
 402 ; Sargent v. Webster, 13 Mete. It is not necessary that the presi- 
 
 (Mass.)497; Gordon v. Preston, 1 dent of a corporation should be pres- 
 
 Watts, 385; Price v. Grand Rapids, ent at a meeting of the directors in 
 
 &c. R. R. Co., 13 Ind. 58; Cowley order to enable them to transact 
 
 V. Same, Id. 61 ; Hamiltoii ». Same, business. Sargent v. Webster, 13 
 
 Id. 347; Junction R. R. Co. v. Reeve, Mete. (Mass.) 497. 
 
 15 Ind. 237; Cram v. Bangor House ' See supra, § 481. 
 
 Proprietary, 12 Me. 359; German * Covert v. Rogers, 38 Mich. 
 
 Evangelical Congr. v. Pressler, 14 863. 
 La. Ann. 811. Compare Jewett v. 
 
499 THE MANAGEMENT OP COBPOBATIONS. § 533 
 
 whether the other directors were notified or not.^ But this 
 view is certainly not correct. The shareholders in a corpora- 
 tion are entitled not only to the votes of the directors, but 
 also to their influence and argument in the discussion which 
 leads to the passage of their resolutions.^ While it may not 
 be the duty of every director to be present at every meeting 
 of the board, yet it is certainly the intention of the share- 
 holders that every director shall have a right to be present 
 at every meeting, in order to acquire full information con- 
 cerning the affairs of the corporation, and to give the other 
 directors the benefit of his judgment and advice. If meet- 
 ings could be held by a bare quorum, without notifying 
 the other directors, the majority might virtually exclude 
 the minority from all participation in the management of the 
 company .3 If it appears that a meeting of the directors was 
 attended by a quorum, it will be presumed, in the absence of 
 the contrary, that due notice of the meeting was given to all 
 the directors, and that all necessary formalities have been 
 complied with.* 
 
 § 533. The Authority of Agents to act in Foreign States. — 
 Place of Meeting of Directors. — It is well settled that a cor- 
 poration has implied authority to carr^ on its legitimate 
 business in foreign States, unless expressly prohibited from 
 doing so by the terms of its charter. The ordinary managing 
 agents of a corporation are impliedly authorized to represent 
 it abroad, as well as at home.® 
 
 It has been doubted whether the board of directors of a 
 corporation may hold their meetings outside of the territory 
 
 1 See per Bell, J., in Edgerly v. Cammeyer w. United German, &o. 
 Emerson, 23 N. H. 555, 569; Bank Churches, 2 Sandf. Ch. 187; Schumm 
 V. Flour Co., 41 Ohio St. 552, 559. v. Seymour, 24 N. J. Eq. 153; Dey 
 
 2 Per Grover, J., in Ogden v. v. Jersey City, 19 N. J. Eq. 412; 
 Murray, 39 N. Y. 207. D'Arcy v. Tamar, &c. Ry. Co., 
 
 « Kersey Oil Co. v. Oil Creek, L. R. 2 Ex. 158. Compare Re Bo- 
 te. R. R. Co., 12 Phila. 374; Doyle nelli's Tel. Co., L. R. 12 Eq. 246, 
 V. Mizner, 42 Mich. 332; Herring- 259. 
 
 ton V. Liston, 47 Iowa, 11; Stoys- * Chouteau Ins. Co. v. Holmes, 
 
 town, &c. Tump. Co. v. Graver, 45 68 Mo. 601. 
 Pa. St. 886; Corn Exch. Bank v. ' Supra, §S59. 
 Cumberland Coal Co. , .1 Bosw. 436 ; 
 
§ 534 THE LAW OF PKIVATE COBPOBATIONS. 500 
 
 of the state by which the company was chartered ; but the 
 weight of authority seems to be in favor of the view that the 
 directors may hold their meetings and transact business wher- 
 ever they deem this to be desirable, unless the contrary is 
 expressly prescribed by the company's charter or by-laws ; ^ 
 every director must, however, be given a fair opportunity to 
 be present. 
 
 § 534. Delegation of Authority. — The Appointment of Com- 
 mittees and Inferior Agents. — The authority of an agent to 
 represent his principal is, in the nature of things, not trans- 
 ferable without the consent of the principal himself. This 
 rule applies with full force to the agents of a corporation.^ 
 
 It is to be observed, however, that authority in an agent 
 to appoint inferior agents with power to represent the prin- 
 cipal may in many cases be implied. Thus, the directors of 
 a corporation have a general authority to manage the com- 
 pany's business in the customary manner ; and this usually 
 necessitates the appointment of various inferior agents to 
 take charge of the details of the company's business. The 
 directors of a corporation have implied authority to appoint 
 all such agents, of the usual character, as may be required 
 for the purpose of carrying on the company's business advan- 
 tageously and conveniently .3 The directors of a bank may 
 
 ^ McCall V. Byram Manuf. Co., may exercise its powers out of the 
 
 6 Conn. 428; Wrights. Bundy, 11 State incorporating it, provided there 
 
 Ind. 404; Smith v. Alvord, 63 Barb, be nothing in the charter or in the 
 
 415 ; Bellows v. Todd, 39 Iowa, nature of its powers contravening it. 
 
 209 ; Ohio, &c. R. B.. Co. ». McPher- If one agent may thus act, there 
 
 son, 33 Mo. 13; Arms v. Conamt, would seem to be no sensible reason 
 
 36 Vt. 745; Corbett v. Woodward, why a board of agents may not do 
 
 5 Sawy. 403; Bassett v. Monte so. As directors are only agents, 
 
 Christo Mining Co., 15 Nev. 293; the principle is broad enough to in- 
 
 Eeichwald v. Commercial Hotel Co., elude them." 
 
 106 111. 489; Galveston R. R. Co. v. The general rule is, that meetings 
 
 Cowdrey, 11 Wall. 477. Compare of the shareholders must be held 
 
 Hilles V. Parrish, 1 McCarter, 380; within the State which chartered 
 
 Ormsby v. Vermont Copper Mining the company. Supra, § 488. 
 Co., 56 N. Y. 623. ^ See cases cited in the following 
 
 In Wood Hydraulic, &c. Mining notes. 
 Co. V. King, 45 Ga. 40, McCay, J., « Hoyt v. Thompson, 19 N. Y. 
 
 said : " The authorities are now uni- 207, 216 ; Kitchen v. Cape Girardeau, 
 
 form, that an agent of a corporation &c. R. R. Co., 59 Mo. 514; Burrill 
 
601 THE MANAGEMENT OP COBPOBATIONS. § 535 
 
 authorize the president, ot president and cashier, to borrow 
 money, and to draw and indorse negotiable paper in the 
 name of the corporation.^ The board of directors of a bank 
 may also delegate to a committee of their own members au- 
 thority to mortgage and sell real estate belonging to the 
 company .2 The dii'ectors of a land company may invest an 
 agent with authority to draw bills of exchange.' 
 
 Agents appointed by the directors of a corporation to assist 
 in carrying on its business are agents of the corporation, and 
 not of the directors themselves. Hence the authority of 
 such agents does not necessarily cease -upon the termination 
 of the authority of the directors who appointed them.* 
 
 § 535. Delegation of Discretionary Powers. — It has some- 
 times been laid down as a rule, that powers involving the ex- 
 ercise of discretion and judgment cannot be delegated except 
 under an express grant of authority ; ^ but this statement of 
 the rule is not strictly accurate. The authority of an agent 
 to delegate powers to another agent depends always upon the 
 intention of the principal. The appointment of an agent with 
 powers requiring the exercise of judgment and discretion is 
 in many cases an indication that the principal intended the 
 judgment and discretion to be exercised by the particular 
 agent whom he selected; but this is not always so. Thus, 
 the directors of a corporation have, undoubtedly, implied au- 
 
 V. Nahant Bank, 2 Mete. (Mass.) ^ Burrill v. Nahant Bank, 2 Mete. 
 
 163,167; Western Bank of Missouri (Mass.) 163, 167; Hoyt v. Thomp- 
 
 V. Gilstrap, 45 Mo. 419. son, 19 N. Y. 207 ; Mitchell v. Deeds, 
 
 1 Ridgway v. Farmers' Bank, 49 111. 418; Augusta Bank ». Ham- 
 
 12 S. & R. 256; Pleckner v. U. S. blet, 35Me. 491. Compare GiUis ». 
 
 Bank, 8 Wheat. 838, 356; Spear v. Bailey, 21 N. H. 149. 
 Ladd, 11 Mass. 94; Northampton » Preston v. Missouri, &c. Lead 
 
 Bank V. Pepoon, 11 Mass. 288; Mer- Co., 51 Mo. 43. 
 rick V. Bank of Metropolis, 8 Gill, ■• Anderson v. Longden, 1 Wheat. 
 
 59. Compare Bank Commissioners 85; Exeter Bank v. Rogers, 7 N. H. 
 
 V. Bank of Buffalo, 6 Paige, 497; 33; Dedham Bank v. Chickering, 3 
 
 Olcott V. Tioga R. R. Co., 27 N. Y. Pick. 335. 
 
 546. In State v. Glenn, 18 Nev. « Gillis v. Bailey, 21 N. H. 149, 
 
 34, it was held that the directors 161-165; Silver Hook Roadu. Greene, 
 
 of a land company could authorize 12 R. I. 164; Farmers', &o. Ins. Go. 
 
 the president to donate land to a v. Chase, 56 N. H. 341. 
 county. 
 
§ 536 THE LAW OP PEIVATE COEPOEATIONS. 502 
 
 thority to appoint various agents, the performance of whose 
 duties involves the exercise of a high degree of judgment and 
 discretionary power. Directors of a railroad company may, 
 without express authority, appoint engineers, superintend- 
 ents, freight and passenger agents, and any other officers that 
 may be required for the proper construction and manage- 
 ment of the railroad. The directors of banking, insurance, 
 and commercial corporations have implied authority to em- 
 ploy financial agents. The employment of attorneys to man- 
 age the legal affairs of a corporation, and to institute or defend 
 suits, is clearly within the implied authority of the directors 
 or general managing agents.^ 
 
 The board of directors have also implied authority to ap- 
 point a committee of their number with authority to execute 
 the resolutions of the board, and to exercise general control 
 over the affairs of the corporation during the recess of the 
 board. The extent of the powers which may thus be con- 
 ferred by the board of directors upon a committee depends 
 upon the character of the corporation, the frequency with 
 which the board is required to meet, the nature of its duties, 
 and upon established custom. No more definite rule can be 
 formulated.^ 
 
 § 536. When Authority cannot be Delegated. — However, 
 the authority of the directors of a corporation to appoint in- 
 ferior agents with power to represent the company can be 
 implied only where such appointment would be a reasonable 
 measure in carrying on the company's business in the ordi- 
 nary manner. Those powers of the directors of a corporation 
 
 1 Western Bank v. Gilstrap, 45 of a corporation must be verified 
 
 Mo. 419 ; American Ins. Co. v. Oak- and filed by those persons who are 
 
 ley, 9 Paige, 496; Southgate v. At- officers of the corporation at the 
 
 lantic, &c. K. R. Co., 61 Mo. 89; time when the answer is filed. 
 
 Bristol County Savings Bank v. Mechanics' Nat. Bank v. Burnet 
 
 Keavy, 128 Mass. 298; Thompson Manuf. Co., 32 N. J. Eq. 236. 
 V. School District, 71 Mo. 495; = gge Hoyt ». Thompson, 19 N. Y. 
 
 Davis V. Memphis City Ry. Co., 207, 215; and cases supra, § 534. 
 
 22 Fed. Rep. 883. See, however, Compare Taylor v. Agricultural, &o. 
 
 Citizens' Bank v. Keim, 10 Phila. Ass., 68 Ala. 229; Tracy v. Guthrie 
 
 811 ; Maupin v. "Virginia Lead Min- County Agr. Society, 47 Iowa, 27. 
 ing Co., 78 Mo. 24. The answer 
 
603 THE MANAGEMENT 01" CORPORATIONS. § 537 
 
 which it is intended they should exercise personally, can in 
 no case be delegated. 
 
 The general supervision and direction of the affairs of a cor- 
 poration are especially intrusted by the shareholders to the 
 board of directors ; it is upon the personal care and attention 
 of the directors that the shareholders depend for the success 
 of their enterprise. It follows that authority to delegate these 
 general powers of management cannot be implied. Thus, the 
 directors of a company have no implied authority to enter into 
 a contract with a creditor, by which the entire management 
 of the company's affairs is placed in his control until the debt 
 has been paid.^ 
 
 Upon the same principle, it has been held that the board 
 of directors of a colliery company cannot delegate a discre- 
 tionary power of allotting shares to two members of the board 
 and the manager.^ 
 
 The directors of a corporation have no implied authority 
 to delegate, to other agents the power of making calls,* or of 
 declaring dividends ; * and it has been held that they cannot 
 give an inferior agent the power of selling shares for non- 
 payment of calls, if this power is intrusted by the charter 
 to their own discretion.^ 
 
 § 637. The Powers of the President of a Corporation. — The 
 implied powers of the president of a corporation depend upon 
 the nature of the company's business, and the measure of au- 
 thority delegated to him by the board of directors. It seems 
 that a president has no greater powers, by virtue of his office 
 merely, than any other director of the company, except that 
 
 1 Davis V. Flagstafi Mining Co., discretion intrusted to the directors 
 
 2 Utah, 74; Flagstaff Mining Co. alone. Lohman v. New York, &o. 
 
 V. Patrick, 2 Utah, 304. E. R. Co., 2 Sandf. 39. 
 
 There would be no objection to a ' Silver Hook Boad v. Greene, 12 
 
 transfer of the control over the cor- R. 1. 164; Farmers', &c. Ins. Co. i;. 
 
 porate affairs, if aU the stockhold- Chase, 56 N. H. 341. Compare Read 
 
 ers give their consent. Lorillard v. v. Memphis, &c. Gas Co., 9 Heisk. 
 
 Clyde, 86 N. Y. 384. 545. Supra, § 145. 
 
 '2 Howard's Case, L. R. 1 Ch. * Gratz v. Redd, 4 B. Monr. 
 
 561, 563. Shares may, however, be 186. 
 
 issued by deputy, if the allotment ^ York, &c. R. R. Co. v. Ritchie, 
 
 does not involve the exercise of a 40 Me. 425. Supra, § 123. 
 
§ 538 THE LA-W OP PRIVATE CORPORATIONS. 504 
 
 he is the presiding officer at the meetings of the board.^ The 
 Supreme Court of New Jersey said : " In the absence of any- 
 thing in the act of incorporation bestowing special power 
 upon the president, he has, from his mere official station, no 
 more control over the corporate property and funds than any 
 other director. The affairs of corporate bodies are within the 
 exclusive control of their boards of directors, from whom 
 authority to dispose of their assets must be derived." ^ 
 
 In Walworth County Bank v. Farmers' Loan, &c. Co„^ 
 Cole, J., delivering the opinion of the court, said: "It is 
 contended that Durand, by virtue of his office as president 
 of the railroad company, was fully authorized and empowered 
 to sell and dispose of any of the personal property of the com- 
 pany in payment of its debts. We are unable to say what 
 are the precise powers and duties of the president of a rail- 
 road company over its property and concerns ; but we do not 
 think he can, by virtue of the power inherent in his office, 
 dispose of the personal property of the corporation for any 
 purpose at his pleasure, without special authority from the 
 board of directors. If so, we cannot see why he might not 
 dispose of the entire rolling stock of the company, if he saw 
 fit. It is probable that the general custom is for the board 
 of directors to clothe the president of the road with extensive 
 authority over its management and concerns ; but the fact 
 that this power is conferred either by some article in the by- 
 laws, or by a resolution of the board, shows conclusively that 
 it is not inseparable from the office." 
 
 § 638. However, the presidents of corporations, by general 
 custom, exercise much wider powers than those accorded to 
 
 1 Chicago, &c. Ry. Co. v. James, 329, See also Fulton Bank v. New 
 22 Wis. 198. York, &c. Canal Co., 4 Paige, 134, 
 
 2 Titus u. Cairo, &c. R. R. Co., 135; Bliss v. Kaweah Canal, &c. 
 37 N. J. Law, 98, 102, per Van Co., 65 Cal. 502; Hodge v. First 
 Syckel, J. See also Westerfield v. Nat. Bank, 22 Gratt. 51 ; Union 
 Radde, 7 Daly, 326; McCullough v. Gold Mining Co. v. Rocky Mt. Nat. 
 Moss, 5 Denio, 567. Compare, how- Bank, 2 Col. 565. 
 
 ever, Stokes v. New Jersey Pottery As to the powers of the president 
 
 Co., 46 N. J. Law, 237. of a bank, see Hodge v. First Nat. 
 
 » Walworth County Bank v. Bank, 22 Gratt. 58 ;. First Nat. Bank 
 
 Farmers' Loan, &c. Co. , 14 Wis. 325, ». Kimberlands, 16 W. Va. 555, 578. 
 
505 THE MANAGEMENT OF CORPORATIONS. § 539 
 
 them by the authorities cited in the preceding section ; and 
 this custom has been judicially recognized. In Smith v. 
 Smith, the Supreme Court of Illinois said : " In the absence 
 of legislative enactment or provision made in the by-laws, 
 corporations usually act through their president, or those rep- 
 resenting him. He being the legal head of the body, -when 
 an act is performed by him the presumption will be indulged 
 that the act is legally done, and is binding upon the body ; 
 and, as a general rule, in the absence of the president, or 
 where a vacancy occurs in the office, the vice-president may 
 act in his stead, and perform the duties which devolve upon 
 the president." ^ 
 
 There can be no doubt that the board of directors may 
 invest the president with authority to act as chief executive 
 officer of the company. This may be done either by an ex- 
 press resolution, or by acquiescence in a course of dealing. 
 A person dealing with the president of a corporation in the 
 usual manner, and within the powers which the president 
 has been accustomed to exercise without the dissent of the 
 directors, would be entitled to assume that the president had 
 actually been invested with those powers.^ 
 
 § 539. The Powers of the Cashier of a Bank. — The extent 
 of the powers of a cashier of a bank was very fully consid- 
 ered by the Supreme Court of the United States, in Mer- 
 chants' Bank v. State Bank.^ It was there decided that a 
 cashier had, virtute officii, authority to certify checks in the 
 usual course of banking business. Justice Swayne, de- 
 livering the opinion of the court, said : " The cashier is the 
 
 1 Smith V. Smith, 62 111. 493, Co., 67 N. Y. 280; Twelfth Street 
 
 496, per Justice Walker. See also Market Co. o. Jackson, 102 Pa. St. 
 
 Mitchell t). Deeds, 49 111. 417, 424; 269; Asher v. Sutton, 31 Kans. 286; 
 
 Union Mut. Life Ins. Co. v. White, Second Ave R. R. Co. v. Mehrbach, 
 
 106 111. 67, 75; Irwui v. Bailey, 8 49 N. Y. Super. Ct. 267; Castle v. 
 
 Biss. 523; Kraft ». Freeman Print- Belfast Foundry Co., 72 Me. 167. 
 
 ing, &c. Ass., 87 N. Y. 628; Crow- = First Nat. Bank v. Kimber- 
 
 ley V. Genesee Mining Co. , 55 Cal. lands, 16 W. Va. 555, 580. Com- 
 
 273; Merchants' Bank v. Goddin, pare Stokes ». New Jersey Potteiy 
 
 76 Va. 503; Reno Water Co. b. Co., 46 N. J. Law, 237. 
 
 Leete, 17 Nev. 203. Compare » 10 Wall. 604. 
 Mitchell V. Vermont Copper, &c. 
 
§ 540 THE LAW OF PEIVATB COEPOEATIONS. 606 
 
 executive officer, through whom the whole financial opera- 
 tions of the bank are conducted. He receives and pays out 
 its mqneys, collects and pays its debts, and receives and trans- 
 fers its commercial securities. Tellers and other subordinate 
 officers may be appointed, but they are under his direction, 
 and are, as it were, the arms by which designated portions of 
 his various functions are discharged. A teller may be clothed 
 with the power to certify checks, but this in itself would not 
 affect the right of the cashier to do the same thing. The 
 directors may limit his authority as they deem proper, but 
 this would not affect those to whom the limitation was un- 
 known." 1 Judge Story said : " The cashier of a bank is, 
 virtute officii, generally intrusted with the notes, securities, 
 and other funds of the bank, and is held out to the world by 
 the bank as its general agent in the negotiation, management, 
 and disposal of them. Prima facie, therefore, he must be 
 deemed to have authority to transfer and indorse negotiable 
 securities held by the bank, for its use and in its behalf. 
 No special authority for this purpose is necessary to be 
 proved." ^ 
 
 § 540. The authority of the cashier of a bank is limited to 
 the management of the company's ordinary business. Trans- 
 actions which are outside of the ordinary course of banking 
 business must be approved by the board of directors. Thus, 
 in United States v. City Bank of Columbus,^ the Supreme 
 
 1 Merchants' Bank ». State Bank, Bank, 69 Pa. St. 415; Badger v. 
 
 10 Wall. 604, 650. See also West Bank of Cumberland, 26 Me. 428; 
 
 St. Louis Sav. Bank v. Shawnee Ryan v. Dunlap, 17 111. 40; Kobin- 
 
 County Bank, 95 U. S. 559; 3 Dill, son v. Bealle, 20 Ga. 275. 
 
 403 ; Martin v. Webb, 110 U. S. 7; The cashier may borrow money. 
 
 City Bank v. Perkins, 29 N. Y. 554 ; Donnell v. Lewis County Savings 
 
 Caldwell v. National Mohawk Val- Bank, 80 Mo. 165. 
 
 ley Bank, 64 Barb. 333 ; Yerkes v. 2 yfug, „_ Bank of Passama- 
 
 Nat. Bank of Port Jervis, 69 N. Y. quoddy, 3 Mason, 506. 
 
 383; Coats v. Donnell, 94 N. Y. The cashier of a bank may war- 
 
 168 ; Chemical Nat. Bank v. Kohner, rant the collectibility of a bill of 
 
 8 Daly, 530, 533, 534; Matthews v. exchange. Sturges v. Bank of Cir- 
 
 Mass. Nat. Bank, 1 Holmes, 396; cleville, 11 Ohio St. 153. 
 
 Cochecho Nat. Bank v. Haskell, 51 ' United States v. City Bank of 
 
 N. H. 121 ; BisseU v. First Nat. Columbus, 21 How. 356. 
 
507 THE MANAGEMENT OF COEPOEATIONS. § 540 
 
 Court held that the cashier of a bank had no implied au- 
 thority to authorize an individual director to enter into a 
 contract with the Secretary of the Treasury to transport 
 money of the United States free of charge. Justice Wayne, 
 delivering the opinion of the court, said : " In Bank of 
 the United States v. Dunn (6 Peters, 61), the court would 
 not permit the president and cashier of the bank to bind it 
 by their agreement with the indorser of a promissory note, 
 that he should not be liable on his indorsement.^ It is said 
 it is not the duty of the cashier and president to make such 
 contracts, nor have they power to bind the bank, except in 
 the discharge of their ordinary duties. All discounts are made 
 under the authority of the directors, and it is for them to fix 
 any conditions which they maj' think proper in loaning money. 
 The court defines the cashier of the bank to be an executive 
 officer, by whom its debts are received and paid, and its secu- 
 rities taken and transferred, and that his acts, to be binding 
 upon a bank, must be done within the ordinary course of his 
 duties. . . . The term ' ordinary business,' with direct refer- 
 ence to the duties of cashiers of banks, occurs frequently in 
 English cases, and in the reports of decisions of our State 
 courts, and in no one of them has it been judicially allowed 
 to comprehend a contract made by a cashier, without an ex- 
 press 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 sell the 
 property, or create an agency of any kind for a bank, which 
 he had not been authorized to make by those to whom has 
 been confided the power to manage its business, both ordinary 
 and extraordinary." 2 
 
 It has been held that the cashier of a bank has no implied 
 authority to certify a post-dated check,^ or to pledge the 
 
 1 See also Cochecho Nat. Bank v. chaster, 14 Miss. 218, 234-238 ; 
 Haskell, 51 N. H. 116, 121; Hodge Mapes v. Second Nat. Bank, 80 Pa. 
 V. First Nat. Bank, 22 Gratt. 51. St. 163; Lamb v. Cecil, 25 W. Va. 
 
 2 United States v. City Bank of 288. 
 
 Columbus, 21 How. 356, 364. See » Clarke Nat. Bank v. Bank of 
 State V. Commercial Bank of Man- Albion, 52 Barb. 592. 
 
§ 540 a THE LAW OF PEIVATE COEPOEATIOKS. 508 
 
 assets of the bank for the payment of an antecedent debt,i 
 or to settle an account in another State by receiving unse- 
 cured notes of individuals in payment,^ or to compromise 
 claims due the bank.^ 
 
 In those States where the receipt of special deposits is con- 
 sidered outside of the regular course of the banking business, 
 it is evident that a cashier would have no authority to re- 
 ceive special deposits.* But a different rule applies where 
 the receipt of special deposits is deemed incidental to the 
 banking business, or is authorized by an express delegation 
 of authority.^ 
 
 § 540 a. When Evidence of an Admission or Statement made 
 by an Agent is admissible. — The general rule is that evidence 
 of hearsay is inadmissible ; a fact to be proven by a party to 
 a judicial proceeding cannot be established by showing that 
 a person other than the opposing party, or a party in inter- 
 est, made a statement regarding the existence of that fact. 
 There are, however, several distinct grounds upon which evi- 
 dence of statements made by an agent may be admissible as 
 against the principal. 
 
 First, if the principal authorized his agent to make a state- 
 ment on his behalf, the statement may be shown against 
 the principal as an admission.^ Thus, in an action against a 
 railroad company, brought by a passenger for the loss of 
 his baggage, the admissions of the conductor, baggage-master, 
 and station-agent, made in answer to inquiries of the passen- 
 ger on the morning after the loss, were held provable against 
 the company, because these agents had authority, under 
 the circumstances, to make the statements on behalf of the 
 company. Bigelow, J., said : " It was a part of the duty of 
 those agents to deliver the baggage of passengers, and to ac- 
 count for the same, if missing, provided inquiries for it were 
 
 1 State V. Davis, 50 How. Pr. Vt. 546; Whitney v. First Nat. 
 
 447. Bank, 50 Vt. 388. 
 
 " Sandy Kiver Bank ». Merchants', ^ Supra, §S88. Pattison u. Syra- 
 
 &c. Bank, 1 Biss. 146. cuse Nat. Bank, 80 N. Y. 82, and 
 
 8 Chemical Nat. Bank ». Kohner, oases cited; National Bank w. Gra- 
 
 8 Daly, 530. ham, 100 U. S. 699. 
 
 * Wiley V. First Nat. Bank, 47 » See Stephen on Evid., art. 17. 
 
509 
 
 THE MANAGEMENT OF COEPOEATIONS. 
 
 §540 a 
 
 made within a reasonable time. These declarations were there- 
 fore made by them as agents of the defendant, within the 
 scope of their agency and while it continued." ^ It should be 
 observed, that a statement made by an agent is admissible 
 against the principal as an admission only provided the agent 
 had actual authority, as between himself and the principal, 
 to make the statement. There is no principle of estoppel in 
 a case of this kind, by which the powers of an agent can be 
 extended beyond the authority actually conferred upon him. 
 It follows, that a naked statement made by an agent that his 
 principal has incurred a liability cannot, as a rule, be proven 
 against the principal as an admission of the liability ; for an 
 agent would ordinarily have no authority to make such an 
 admission on behalf of the principal.^ A statement of this 
 character is ordinarily admissible in evidence against the prin- 
 
 1 Morse v. Connecticut River 
 R. R. Co., 6 Gray, 450. To the 
 same effect, see Lane v. Boston, &c. 
 R. R. Co., 112 Mass. 455; McGen- 
 ness V. Adriatic Mills, 116 Mass. 
 177; Webb ». Smith, 6 Col. 365; 
 Kirkstall Brewery Co. v. Furness 
 Ry. Co., L. R. 9 Q. B. 468. 
 
 In Holden v. Hoyt, 134 Mass. 
 181, the Supreme Court of Massa- 
 chusetts said: " We have no doubt 
 that the books and records of a cor- 
 poration are prima facie evidence 
 against it, as admissions, and under 
 some circumstances may be conclu- 
 sive evidence. But, at most, a 
 corporation can only be bound con- 
 clusively by its records, either when 
 they are the records, duly made by 
 the recording officer, of its proceed- 
 ings, or when some person who has 
 had proper access to them, or knowl- 
 edge of them, has become aware of 
 their contents, and has acted on the 
 faith that they were the records of 
 its proceedings." 
 
 2 See Kalamazoo Novelty Manuf . 
 Co. V. McAlister, 36 Mich. 327; 
 
 Henry v. Northern Bank, 63 Ala. 
 527; Hall v. Mobile, &o. Ry. Co., 
 58 Ala. 10 ; East River Bank v. Hoyt, 
 41 Barb. 441 ; Hanover Water Co. 
 V. Ashland Iron Co., 84 Pa. St. 279; 
 Sweatland v. Illinois, &c. Tel. Co., 
 27 Iowa, 433, 458; Ashmore v. Penn- 
 sylvania Steam Towing, &c. Co. , 38 
 N. J. Law, 13; Grayville, &c. R. R. 
 Co. V. Burns, 92 111. 302; Tripp v. 
 New Metallic Packing Co., 137 Mass. 
 499; Stiles v. Western R. R. Co., 8 
 Mete. (Mass.) 44. Compare Male- 
 cek V. Tower Grove, &c. Ry. Co., 
 57 Mo. 17. 
 
 In Peek v. Detroit Novelty Works, 
 29 Mich. 313, Graves, C. J., said: 
 " The declarations or statements of 
 individual directors when the board 
 was not in session, and when such 
 declarations or admissions did not 
 accompany any official act, were 
 clearly incompetent ; and the state- 
 ments made in discussion while the 
 board was in session were not nego- 
 tiations between the company and 
 the plaintiff." 
 
§ 5406 THE LAW OF PKIVATE COEPOEATIONS. 510 
 
 cipal, to prove a fact to which it relates, only if it was made 
 by the agent in the course of a transaction within the scope 
 of his duties ; under these circumstances, it may be proven as 
 part of the res gestae, and not strictly as an admission. 
 
 Secondly. If statements made by an agent, or any other 
 person, constitute part of a transaction which is in issue be- 
 tween parties, such statements may be proven as part of the 
 transaction. This doctrine has been stated by an English 
 writer as follows : " The result of the cases appears to be, that 
 if it is shown that an admission has been made by an agent 
 acting in a matter within the scope of his authority, and that 
 it is a part of the res gestae, and does not relate to bygone 
 transactions, then such admission is receivable in evidence 
 against the principal, and the agent himself need not be 
 called."! 
 
 Thirdly. If the fact that an agent or other person made 
 a certain statement is in issue between parties, such state- 
 ment may be proven like any other fact. Thus, in an action 
 to charge a principal with a false representation made by 
 his agent, the making of the representation may clearly be 
 proven by any person who heard it. So, where an attempt 
 is made to charge a principal with a contract liability or an 
 estoppel by reason of statements made by an agent, evidence 
 of such statements must undoubtedly be introduced.^ 
 
 § 540 b. When Notice to an Agent binds the Corporation. — 
 In order to charge a corporation with notice of a fact, the 
 notice must be given through one of the corporate agents, for 
 these alone have authority to represent the whole company ; 
 notice to the individual shareholders is not binding upon the 
 company as a collective body.^ The doctrine that notice to 
 an agent of a corporation binds the corporation is a branch 
 of the law of agency applicable to individuals as well as to 
 
 1 Evans on Agency, 155; Im- Co. v. Betsworth, 30 Conn. 380; 
 boden v. Etowah, &c. Mining Co., Morris, &c. R. R. Co. v. Green, 15 
 70 Ga. 86; Coyle v. Baltimore, &c. N. J. Eq. 469; National Exchange 
 R. R. Co., 11 W. Va. 94. Co. u. Drew, 2 Macq. So. App. 103. 
 
 2 Northrup ». Mississippi Valley » Supra, § 234. 
 Ins. Co., 47 Mo. 435; Toll Bridge 
 
611 THE MANAGEMENT OP COKPOEATIONS. § 540 J 
 
 corporations, and the same rules and principles govern its 
 application in both instances.^ 
 
 Knowledge casually acquired by an agent must be distin- 
 guished from a notice given, with the design of notifying the 
 principal, to an agent who has authority to receive the notice 
 on behalf of the principal. Knowledge casually acquired by 
 an agent affects the principal with notice only in those trans- 
 actions in which that agent acts for. him; but a notice ex- 
 pressly given to an agent, within the scope of his authority, 
 binds the principal as fully as if it were given to the princi- 
 pal directly, whether the agent has communicated the notice 
 or not. Thus, notice given to the president, cashier, or board 
 of directors of a bank, for the purpose of charging the bank 
 with notice of equities affecting the validity of a negotiable 
 note, subsequently purchased or discounted by the bank, will 
 affect the bank with notice of these equities, although the 
 officers who received the notice failed to communicate it, and 
 took no part in the transaction in which the note was received.^ 
 
 It may be stated as a general rule, that notice given to an 
 agent of a corporation in relation to any matter within the 
 scope of the agent's functions operates as notice to the com- 
 pany; notice served upon a head officer or managing agent 
 may therefore usually be regarded as served upon the corpo- 
 ration itself.^ However, if the notice does not relate to any 
 
 1 The cases upon this subject are 127. Compare Bank of Virginia v. 
 
 collected in a note to the case of Craig, 6 Leigh, 399. 
 Bank of Pittsburgh v. Whitehead, ' Port Jervis v. First Nat. Bank, 
 
 36 Am. Dec. 186, 188-200. See 96 N. Y. 550; Olcott ». Tioga R. R. 
 
 also an article entitled "Notice Co., 27 N. Y. 546; Smith v. Board 
 
 to Directors of Corporations," 6 of Water Comm., 38 Conn. 208; 
 
 So. L. Rev. N. 8. 45; Waynesville New England Car Spring Co. v. 
 
 Nat. Bank v. Irons, 8 Fed. Rep. 1, Union India Rubber Co., 4 Blatchf. 
 
 and notes. 1 ; Quincy Coal Co. v. Hood, 77 111. 
 
 '^ New Hope, &c. Bridge Co. v. 68; Mechanics' Batak v. Sohaum- 
 
 Phenix Bank, 3 N. Y. 166 ; Trenton burg, 38 Mo. 228. 
 Banking Co. v. Woodruff, 1 Green Notice given in good faith to a 
 
 Ch. 117; Porter r. Bank of Rutland, single member of the board of di- 
 
 19 Vt. 410 ; Bank of Pittsburgh v. rectors is suflScient. Bank of United 
 
 Whitehead, 10 Watts, 397; s. c. 36 States v. Davis, 2 Hill, 451. 
 Am. Dec. 186 ; Fulton Bank v. New A valid notice given to an officer 
 
 York, Sec. Canal Co. , 4 Paige Ch. of a corporation is not affected by a 
 
§ 540 C THE LAW OF PRIVATE COBPOEATIONS. 612 
 
 matter within the scope of the duties or functions of the agent 
 to whom it is given, it will not bind the corporation unless 
 it was afterwards communicated to the managing agents, be- 
 cause the agent to whom the notice was given would have no 
 authority to receive it on behalf of the corporation. Thus, 
 notice of the dishonor of a bill or note given to the porter of 
 a bank would not be notice to the bank, and notice of stop- 
 page in transitu of goods shipped through a railroad company 
 would not bind the railroad company if served upon a brake- 
 man or switchman.^ 
 
 § 540 c. "When the Knowledge of an Agent affects the Corpo- 
 ration. — When an agent performs an act on behalf of his 
 principal, the latter by a legal fiction is regarded as the party 
 performing the act ; and by a similar fiction the principal is 
 regarded as having any knowledge possessed by the agent 
 which would affect the validity of the act if the agent were 
 acting for himself. In other words, the knowledge of an agent 
 binds the principal to the same extent as if it were the knowl- 
 edge of the principal, in any transaction in which the agent 
 represents the principal ; and it is immaterial when or how 
 the knowledge of the agent was acquired.^ 
 
 A bank is therefore bound by the knowledge of any direc- 
 tor who takes part in the discount of a note presented to the 
 bank for discount, as to equities affecting the liability of the 
 maker of the note.^ 
 
 However, knowledge of a fact casually acquired by an 
 agent does not afPect the principal with notice of the fact, 
 
 subsequent change of oflBcers. Me- 252; Mihills Manuf. Co. v. Camp, 
 chanics' Bank v. Seton, 1 Pet. 309; 49 Wis. 130. Compare Terrell v. 
 Fulton Bank v. New York, &c. Branch Bank, 12 Ala. 502; House- 
 Canal Co., 4 Paige Ch. 127. man v. Girard Mut. Building, &c. 
 
 1 Cougar V. Chicago, &o. Ry. Ass., 81 Pa. St. 256. 
 Co., 24 Wis. 157; Bank of Virginia ' Bank of United States r. Davis, 
 
 V. Craig, 6 Leigh, 399; Goodloe v. 2 Hill, 451; Myers v. Ross, 3 Head 
 
 Godley, 21 Miss. 233. (Tenn.), 59, 62 ; Nat. Security Bank 
 
 = Holden ». New York, &c. Bank, v. Cushman, 121 Mass. 490; Bank 
 
 72 N. Y. 286 ; Union Bank v. Camp- of New Milford^ v. New Milford, 36 
 
 bell, 4 Humph. 394; Waynesville Conn. 93; Clerks' Savings Bank v. 
 
 Nat. Bank v. Irons, 8 Fed. Rep. 1; Thomas, 2 Mo. App. 367; Smith v. 
 
 Hart V. Farmers', &c. Bank, 33 Vt. South Royalton Bank, 32 Vt. 841. 
 
513 THE MANAGEMENT OF OOEPORATIONS. § 540 
 
 like an express notice served upon an authorized agent. 
 Knowledge casually acquired by an agent is not, strictly 
 speaking, notice to the principal ; it merely affects the validity 
 of those transactions in which the agent having the knowl- 
 edge acts for and represents the principal. This distinction 
 was pointed out by Justice Matthews in Waynesville National 
 Bank v. Irons.^ The plaintiff in that case was a bank, and 
 the defendants were the makers of a promissory note payable 
 to a railroad company, and indorsed by the latter to the 
 plaintiff. It was claimed that the negotiation of the note 
 was unauthorized, and contrary to an agreement between the 
 makers and the railroad company, and that the plaintiff was 
 affected with notice of the fact, because its president was also 
 the president of the railroad company and a member of the 
 executive committees of both companies. In his charge to 
 the jury, Justice Matthews said : " To charge the bank with 
 responsibility on account of any knowledge of Mr. Haines, 
 [the president,] he must, in my opinion, be acting at the time 
 in the name and on behalf of the bank, as its agent or repre- 
 sentative. If he was not, but if the negotiation was in fact 
 conducted by the cashier, and Mr. Haines declined to take 
 any part in it, and refused to be considered as acting for 
 either party, then the question will be, not what Mr. Haines 
 knew, but what the bank may have known by reason of any 
 knowledge on the part of the cashier, and is not chargeable 
 with the knowledge of Mr. Haines." ^ 
 
 1 Waynesville Nat. Bank v. Irons, Norton, 1 Hill, 578 ; Bank of Amer- 
 
 8 Fed. Rep. 1, 9. Compare Fulton ica ». McNeil, 10 Bush, 54; Nat. Se- 
 
 Bank v. New York, &c. Canal Co., ourity Bank v. Cushman, 121 Mass. 
 
 4 Paige Ch. 127; Central Nat. Bank 490; Commercial Bank u. Wood, 7 
 
 V. Levin, 6 Mo. App. 543. W. & S. 89. 
 
 It cannot be laid dovra as an ^ See also Miller ». Illinois Cen- 
 
 arbitrary rule, that the actual knowl- tral K. R. Co., 24 Barb. 313; City 
 
 edge of a head officer or a member Bank v. Barnard, 1 Hall (N. Y.), 
 
 of the board of directors of a corpo- 70; Nat. Bank v. Norton, 1 Hill, 
 
 ration will give rise to a presumption 578; Louisiana State Bank v. Sene- 
 
 that he communicated his knowledge cal, 13 La. 525; Stevenson ti. Bay 
 
 to the other officers, or acted on be- City, 26 Mich. 44 ; Farrel Foundry 
 
 halt of the company in a transaction, v. Dart, 26 Conn. 376; Housatonio 
 
 See Farmers', &o. Bank v. Payne, Bank ». Martin, 1 Mete. (Mass.) 
 
 25 Conn. 446; National Bank w. 308; Nat. Security Bank v. Cush- 
 voL. I. — 33 
 
§ 541 THE LAW OP PRIVATE COBPOEATIONS. 514 
 
 Upon similar grounds, it has been held that, when an agent 
 of a corporation himself contracts with the company, or other- 
 wise deals with it in a transaction in which his interests are 
 opposed to the interests of the company, his knowledge will 
 not be deemed the knowledge of the company as to matters 
 connected with that transaction ; for the agent could not rep- 
 resent the company in such a transaction.^ So if a person is 
 an officer of two companies, and these companies enter into 
 dealings with each other, the knowledge of the common offi- 
 cer cannot be attributed to either company in a transaction 
 in which he did not represent it.^ 
 
 § 541. Revocation of Powers of Agents. — It is a general 
 rule of the law of agency, that the powers of an agent exist 
 only at the will of his principal, and may be revoked by the 
 latter at any time. It is immaterial whether the agent was 
 engaged for a definite term or not. The agency and the 
 contract of hiring are entirely distinct. The principal can 
 withdraw the authority of the agent, even although this 
 would be in violation of his contract ; but he can rescind the 
 contract of hiring only provided the agent proves wholly 
 
 man, 121 Mass. 490; United States tucky, 5 J. J. Marsh. 545; Loomis 
 
 Ins. Co. u. Shriver, 3 Md. Cb. 388; v. Eagle Bank, 1 Disney, 285; 
 
 General Ins. Co. v. U. S. Ins. Co., Washington Bank v. Lewis, 22 
 
 10 Md. 527; Stratton v. Allen, 1 C. Pick. 24; Commercial Bank». Cun- 
 
 E. Green (N. J. Eq.), 229; Custer ningham, 24 Pick. 270; West Bos- 
 
 V. Tompkins County Bank, 9 Pa. St. ton Savings Bank v. Thompson, 124 
 
 27; Powlesu. Page, 8 C. B. 16. Mass. 506; Piatt v. Birmingham 
 
 Knowledge casually aoquh-ed by Axle Co., 41 Conn. 255; Peckbam 
 
 a prior agent, therefore, does not v. Hendren, 76 Ind. 47. 
 bind the principal. Great Western ^ See Re Marseilles, &c. Ry. Co., 
 
 Ey. Co. V. Wheeler, 20 Mich. 419; L. R. 7 Ch. App. 161; Re Contract 
 
 Piatt V. Birmingham Axle Co., 41 Co., L. R. 8 Eq. 14. 
 Conn. 255. The mere fact that a person is an 
 
 1 First Nat. Bank v. Christopher, officer of two corporations will in no 
 40 N. J. Law, 435 ; Barnes u. Trenton case charge one company with con- 
 Gas Light Co., 27 N. J. Eq. 33; structiye notice of the affairs of the 
 First Nat. Bank v. GifEord, 47 Iowa, other; and the actual knowledge of 
 575; Wickersham v. Chicago Zinc the common officer will affect either 
 Co., 18 Kans. 481; Winchester v. company only in those transactions 
 Baltimore, &c. R. R. Co., 4 Md. in which he represents it. First 
 231 ; La Farge, &c. Ins. Co. v. Bell, Nat. Bank v. Loyhed, 28 Minn. 
 22 Barb. 54; Lyne v. Bank of Ken- 396. 
 
515 THE MANAGEMENT OP COEPOKATIONS. § 542 
 
 unfit to perform the duties he has undertaken, or has wilfully 
 violated his obligations.^ In applying these doctrines to the 
 agents of a corporation, it is necessary to take into considera- 
 tion the character of the corporate organization. As a rule, 
 a corporation can act only through agents, and can revoke 
 the powers of the latter only by means of other agents. 
 
 The directors and managing agents of a corporation have 
 undoubted authority to revoke the powers of the inferior 
 agents whom they have appointed. It would be practically 
 impossible to carry on the business of a corporation without 
 this power ; it is therefore always implied. The power is a 
 discretionary one, and the rightfulness of its exercise cannot 
 be investigated by the courts. 
 
 But the directors of a corporation have no implied authority 
 to revoke the powers of those agents who are appointed by 
 vote of the shareholders, or whose office is fixed and regulated 
 by the charter. The majority of the board clearly have no 
 power to expel an individual director, or to exclude him from 
 inspecting the company's books and participating in its man- 
 agement, although they may believe him to be hostile to the 
 interests of the association.^ So it would be difficult to imply 
 authority in the board of directors to revoke the powers of any 
 agent, like a president or treasurer, whose term of office is 
 fixed by the charter or articles of association of the company.* 
 It' does not follow that the directors have authority to remove 
 an agent of this character merely because they appointed him 
 pursuant to the provisions of the charter. There should be 
 an express provision granting the power of removal. 
 
 § 542. Removal of Directors. — The majority at a share- 
 holders' meeting have no power to revoke the powers of the 
 
 1 See Story on Agency, § 462 to mean an interest or estate in 
 
 et seq. ; Evans on Agency, 83. specific property, and not, strictly 
 
 It has been said that an excep- speaking, a power of agency, 
 tion exists in case of a " power ^ People v. Throop, 12 Wend, 
 
 coupled with an interest," and that 183; Taylor v. Rundell, 1 Y. & C. C. 
 
 a power of that description is not C. 128; s. c. 1 Phil. 222; Stuart t". 
 
 revocable; but the exception is only Lord Bute, 12 Sim. 460. 
 in name. The expression " power ' Compare Sparks v. Farmers' 
 
 coupled with an interest" appears Bank, 3 Del. Ch. 274. 
 
§ 543 THE LAW OF PRIVATE COEPOEATIONS. 516 
 
 inferior agents of a corporation because the power of appoint- 
 ing and controlling these agents is delegated to the board of 
 directors exclusively. Nor have the majority at a share- 
 holders' meeting implied authority to revoke the powers of 
 the directors or managing agents, if their term of office is pre- 
 scribed by the charter or the articles of association or by-laws 
 of the company. The power of removing the directors of 
 a corporation is sometimes conferred by express provision. 
 Thus the English Companies Act of 1862 provides that " the 
 company in general meeting may by special resolution remove 
 any director before the expiration of his period of office, and 
 may by an ordinary resolution appoint another person in his 
 stead." ^ If the charter or articles of a company provide that 
 the shareholders at a general meeting may remove any direc- 
 tor "for negligence, misconduct in office, or other reasonable 
 cause," the expression " reasonable cause " does not refer to 
 such a cause as would be deemed reasonable in a court of 
 justice, but only to such a cause as is deemed reasonable 
 by the shareholders, and the discretion of the shareholders 
 in determining what is reasonable cannot be interfered with, 
 in the absence of direct fraud.^ 
 
 § 543. Remedies of Shareholders against ofEending Directors. 
 — Cases may arise in which the removal of the directors of 
 a corporation would be essential to the company's welfare. 
 Thus, the directors may be wholly unable or unwilling to 
 perform their duties and protect the interests of the share- 
 holders ; they may even threaten the company with wilful 
 mismanagement and financial ruin. Under these circum- 
 stances some remedy must be found. 
 
 It has been pointed out in a preceding chapter, that the 
 courts will grant relief, at the suit of individual shareholders 
 
 I 25 & 26 Vict. ch. 89. Schedule in place of those incapable of acting. 
 
 I, Table A. 65. Wilson v. Wilson, 6 Scott, 540. 
 
 ^ Inderwick v. Snell, 2 MacN. & The bankruptcy of a director does 
 
 G. 216. not necessarily vacate his office. 
 
 If a director has absconded, he Phelps v. Lyle, 10 A. & E. 113; 
 
 is "incapable of acting," within Atlas Nat. Bank ». Gardner Co., 8 
 
 the meaning of a clause providing Biss. 537. 
 for the appointment of new directors 
 
517 THE MANAGEMENT 01" COEPOEATIONS. § 543 
 
 of a corporation, whenever the company is unable, by reason 
 of the fault of its agents, to maintain its rights.^ Hence, if 
 the removal of the directors is absolutely essential to the pro- 
 tection of the corporation, and the corporation has no means 
 of removing them or of revoking their powers, individual 
 shareholders may apply to the court on behalf of the company, 
 and the courts will grant such redress as justice requires. In a 
 case of this kind, it would be necessary to consider the rights 
 of the shareholders as among themselves, rather than the per- 
 sonal rights of the directors. The directors have no personal 
 interest in their power of representing the corporation ; they 
 have a personal interest in their salaries alone. The power 
 of acting for the corporation is given to the directors solely 
 in trust for the corporation, and would be revocable by the 
 latter if it had any means of expressing its will. The inabil- 
 ity of the majority of a corporation to revoke the powers of 
 the directors does not result from a want of power in the cor- 
 poration, but from the absence of a delegation of power to 
 the majority to act for the corporation in this respect.^ The 
 defence of the directors in a suit of this kind would not be 
 made in their own interest, but in the interest of the share- 
 holders, — each of whom has a right to have the corporation 
 managed by the agencies provided by the charter unless these 
 agencies wholly fail. It would seem, therefore, that a court 
 of equity may remove the directors of a corporation from 
 office at the suit of the corporation or a shareholder acting 
 on its behalf, if for any reason the directors are incapable or 
 unsuitable to perform the trust they have undertaken. 
 
 It should be observed, that the courts will not remove the 
 directors from office, or restrain them generally from repre- 
 senting the corporation, except in a case of absolute necessity. 
 Ordinarily an injunction will be issued only to restrain spe- 
 cific threatened wrongs. If the powers of the directors are 
 revoked in pursuance of an order of the court, a receiver 
 should be appointed until a meeting can be held and new 
 directors elected by the majority.^ 
 
 1 Supra, § 239 et seq. ' See supra, § 281. As to the 
 
 * Supra, § 541. remedies provided in New York for 
 
§ 543 a THE LAW OP PKIVATE COKPOEATIONS. 618 
 
 § 543 a. Remedies against Persons claiming -without Right to 
 be Officers of a Corporation. — It has been held that a court of 
 equity has no jurisdiction to remove an officer of a corpora- 
 tion who is in actual possession of his office under a void 
 election, or after his right to the office has expired or become 
 forfeited. In Johnston v. Jones,^ Chancellor Zabriskie said : 
 " It is clear that a court of equity has no jurisdiction to re- 
 move an officer of a corporation from an office of which he 
 has possession, or to declare the forfeiture of such office. Its 
 decree will not, like the judgment of a court of law, operate 
 in rem, and remove or oust any one from an office which he 
 in fact holds. When the object is simply to determine the 
 regularity of an election, or to declare an office to which any 
 one has been duly elected forfeited, a court of law is the only 
 competent and proper tribunal." 
 
 This doctrine seems to have originated in the mistaken 
 view that the same principles apply to the removal of a per- 
 son claiming to be an officer or head agent of a private incor- 
 porated company as to a de facto officer of a public corporation 
 or a person in possession of a government office.^ 
 
 An entire stranger to a corporation may be enjoined by a 
 court of equity, at the suit of the corporation, from meddling 
 with the corporate affairs, if an action for damages would not 
 be an adequate remedy ; and there is no reason, founded upon 
 principle, why similar relief should not be granted against a 
 person who claims without right to be an officer or agent of 
 the company.^ The rule excluding equitable relief in a case 
 
 the removal or suspension of ofiBcers edy under the common law, except 
 
 of a corporation who have been by bill in equity, for their rights are 
 
 guilty of misconduct in office, see wholly of an equitable character. 
 
 Code of Civil Procedure, §§ 1781, Directors who attempt to con- 
 
 1812. tinue themselves in office by unlaw- 
 
 1 Johnston v. Jones, 23 N. J. Eq. ful means may be enjoined at the 
 
 216, 226. See also Owen v. Whit- suit of a shareholder from doing 
 
 aker, 20 N. J. Eq. 122; Neall v. anything which will prevent a fair 
 
 HiU, 16 Cal. 145. meeting of the shareholders, and a 
 
 ^ See infra, § 640. new election, at the regular time. 
 
 » It is difficult to perceive how Elkins v. Camden, &c. R. R. Co., 
 
 the shareholders, who are the real 36 N. J. Eq. 467, affirmed 37 N. J. 
 
 parties in interest, have any rem- Eq. 273. 
 
519 THE MANAGEMENT OF COEPOR ATIONS . § 544 
 
 of this kind has not been applied to agents of individuals or 
 unincorporated associations, nor to the inferior agents of cor- 
 porations ; nor has it been applied in any case in which the 
 person claiming the office was not in actual possession under 
 color of right. What constitutes such possession of an office 
 under color of right as will constitute a person an officer de 
 facto, within the meaning of this rule, is not clear from the 
 cases. 
 
 In New York it is provided by statute that it shall be the 
 duty of the Supreme Court, upon the application of any per- 
 son or persons, or body corporate, that may be aggrieved 
 by an election, to proceed in a summary way to inquire into 
 the cause of complaint, and to direct a new election, or make 
 such other order as justice may require.^ Similar statutes 
 have been passed in other States. A shareholder is " a per- 
 son aggrieved " under a statute of this description.^ 
 
 The denial of jurisdiction in the courts of equity to restrain 
 persons from acting as officers of a private corporation under 
 a void election does not proceed from a supposed incapacity 
 of the courts of equity to pass upon a question of this kind ; 
 for it is held that such a question may be determined by a 
 court of equity in a collateral proceeding, though not in a 
 proceeding directly against the claimants of the office. In 
 Johnston v. Jones,^ the Chancellor said : " If the question of 
 the legality of an election, or whether a certain person holds 
 such an office, arises incidentally in the course of a suit of 
 which equity has jurisdiction, that court will inquire into and 
 decide it, as it would any other question of law or fact that 
 arises in the cause. But the decision is only for the purpose 
 of the suit ; it does not settle the right to the office, or vacate 
 it if the party is in actual possession." ^ 
 
 § 544. Contract of Hiring not rescinded by Revocation of Au- 
 thority. — A principal has art absolute right to revoke the 
 
 1 R. S. 603, § 5. Laws of 1825, » Johnston v. Jones, 23 N. J. Eq. 
 
 451, § 9; amended Dec. 10, 1828, 216,226. See also Mechanics' Nat. 
 
 § 15. Bank v. Burnet Manuf. Co., 32 
 
 ^ Re St. Lawrence Steamboat N. J. Eq. 236. 
 Co., 44 N. J. Law, 529. 
 
§ 545 THE LAW OP PRIVATE COEPOKATIONS. 520 
 
 powers of his agent at any time ; but he cannot rescind the 
 contract of hiring, or refuse to pay the agent his salary, in 
 absence of a sufficient cause. There must be wilful negli- 
 gence or misfeasance on the part of the agent, or he must be 
 wholly incapable, through want of skill, of performing the 
 duties he has undertaken. The same rule applies to corpo- 
 rations. If a corporation violates its contract with any of 
 its agents, and refuses to pay the salary agreed upon, the 
 agent may recover his damages in an action against the 
 company. 
 
 § 545. Relation between a Corporation and its Promoters. — 
 A person, who, by his active endeavors, assists in procuring 
 the formation of a company and the subscription of its shares, 
 is commonly called a promoter. The word "promoter" has 
 no technical legal meaning, and applies to any person who 
 takes an active part in inducing the formation of a company, 
 whether he afterwards becomes connected with the company 
 or not.^ 
 
 It frequently happens, that persons owning property which 
 is adapted to business uses bring about the formation of a 
 company, for the purpose of selling the property to the com- 
 pany at a profit, and providing the money to pay the purchase 
 price by inducing others to subscribe for shares. There is 
 no rule of law prohibiting a transaction of this description.^ 
 The rule which prohibits an agent or trustee from obtaining 
 a profit at the expense of his principal or cestui que trust 
 clearly has no application under these circumstances; for 
 the fact that a person has assisted in forming a company, and 
 in inducing others to subscribe for shares, neither constitutes 
 
 1 See an article by Adelbert Ham- ^ See Erlanger ». New Sombrero 
 
 ilton in 16 Am. L. Rev. 671. Phosphate Co., 3 App. Cas. 12Z6, per 
 
 In Whaley Bridge, &c. Co. v. Lord Cairns, L. C. ; Gover's Case, 
 
 Green, L. R. 5 Q. B. D. 109, 111, L. R. 1 Ch. Div. 182; Albion Steel, 
 
 Bowen, J., said: " The term "-pro- &o. Co. v. Martin, L. R. 1 Ch. Div. 
 
 meter ' is a term not of law, bnt of 580 ; Densmore Oil Co. v. Densmore, 
 
 business, usefully summing up, in a 64 Pa. St. 43 ; Lnngren v. Pennell, 
 
 single word, a number of business 10 W. N. C. 297 (Sup. Ct. of Pa.). 
 
 operations familiar to the commer- See also supra, § 291. 
 cial world, by which a company is 
 generally brought into existence." 
 
521 THE MANAGEMENT OF COEPOBATIONS. § 546 
 
 him an agent of the company, nor gives rise to the legal relar 
 tion of trustee and cestui que trust. 
 
 But the relation between the promoters of a corporation 
 and its agents and shareholders is often of such a character 
 as to render their dealings liable to be scrutinized by the 
 courts with great strictness. Promoters of a company usu- 
 ally represent themselves to be deeply interested in its suc- 
 cess, and are instrumental in inducing the subscriptions of 
 the shareholders by means of representations and promises 
 in relation to the projected enterprise. As a rule, the pro- 
 moters possess absolute control over the policy and operations 
 of the company when it is first formed, and in many instances 
 the first board of directors of the company consists of nomi- 
 nees of the promoters, and is wholly within their control. 
 The subscriptions of the shareholders are made upon the 
 trust that the promoters are men of rectitude and business 
 sagacity, who will use their knowledge, and exercise their 
 control over the entei'prise, for the benefit of the compan}\ 
 
 It is evident that a corporation dealing with its promoters 
 under such circumstances would not meet them on an equal 
 footing. It would not be represented by independent agents, 
 acting wholly in the interests of the shareholders. The pro- 
 moters would, therefore, be bound to exercise the highest 
 degree of fairness in their dealings. Justice demands that 
 the promoters of a company should not abuse the confidence 
 placed in them by the subscribers for shares, or derive any 
 unjust advantage through their control over the organization 
 or management of the company. 
 
 § 546. Liability of Promoters for Frauds upon the Corpora- 
 tion. — Accordingly, it has been held that, if persons start a 
 company, and induce others to subscribe for shares, for the 
 purpose of selling property to the company when organized, 
 they must faithfully disclose all facts relating to the prop- 
 erty which would influence those who form the company in 
 deciding upon the judiciousness of the purchase. If the pro- 
 moters are guilty of any misrepresentation of facts or sup- 
 pression of the truth in relation to the character and value 
 of the property, or their personal interest in the proposed 
 
§547 
 
 THE LAW OF PRIVATE COKPORATIONS. 
 
 522 
 
 sale, the company will be entitled to set aside the transactiou, 
 or recover compensation for any loss which it has suffered.^ 
 
 In those cases where the scheme of organization gives 
 the promoters the power of selecting the directors who 
 are to represent the company in the proposed purchase, 
 they are bound to select competent and trustworthy persons, 
 who will act honestly in the interest of the shareholders. A 
 purchase made from the promoters under these circumstances 
 will not bind the company, unless it was a fair and honest 
 bargain .2 
 
 § 547. Liability of a Corporation for the Acts of its Promot- 
 ers. — A corporation is not responsible for acts performed, or 
 contracts entered into, before it came into existence, by pro- 
 moters or other persons assuming to bipd the company in 
 advance. It is clear that the corporation cannot, in such 
 
 1 Bagnall v. Carlton, L. E. 6 Ch. 
 Div. 385; Emma Silver Mining Co. 
 V. Grant, L. R. 11 Ch. Div. 918; 
 New Sombrero Phosphate Co. v. Er- 
 langer, L. R. 6 Ch. Div. 73 ; 3 App. 
 Cas. 1218; Hichensu. Congreve, 1 R. 
 & M. 150; Simons v. Vulcan Oil, &c. 
 Co., 61 Pa. St. 202; Short v. Ste- 
 venson, 63 Pa. St. 95; McElhenny's 
 Appeal, 61 Pa. St. 188; St. Louis, 
 &c. Mining Co. v. Jackson, 5 Cent. 
 L. J. 317. See 16 Am. L. Rev. 
 671; and compare supra, §§ 291, 
 292. 
 
 2 See New Sombrero Phosphate 
 Co. V. Erlanger, L. R. 5 Ch. Div. 73 ; 3 
 App. Cas. 1218. Lord Cairns, L. C, 
 in delivering judgment in the House 
 of Lords, said: "Promoters stand, 
 in my opinion, undoubtedly in a 
 fiduciary position. They have in 
 their hands the creation and mould- 
 ing of the company; they have the 
 power of defining how, and when, 
 and in what shape, and under what 
 supervision, it shall start into exist- 
 ence and begin to act as a trading 
 corporation. If they are doing all 
 this in order that the company may, 
 
 as soon as it starts into life, become, 
 through its n^Anaging directors, the 
 purchaser of the property of them- 
 selves, the pijomoters, it is, in my 
 opinion, incumbent upon the pro- 
 moters to take care that in forming 
 the company they provide it with 
 an executive, that is to say, with 
 a board of directors, who shall both 
 be aware that the property which 
 they are asked to buy is the prop- 
 erty of the promoters, and who shall 
 be competent and impartial judges 
 as to whether the purchase ought or 
 ought not to be made. I do not 
 say that the owner of property may 
 not promote and form a joint-stock 
 company, and then sell his prop- 
 erty to it, but I do say that, if he 
 does, he is bound to take care that 
 he sells it to the company through 
 the medium of a board of directors 
 who can and do exercise an inde- 
 pendent and intelligent judgment 
 on the transaction, and who are not 
 left under the belief that the prop- 
 erty belongs, not to the promoter, 
 but to some other person." 3 App. 
 Cas. 1236. See also p. 1268. 
 
523 THE MANAGEMENT OP COEPOEATIONS. § 548 
 
 case, be held liable on any principle of the law of agency, 
 for an agency implies the existence of a principal and a dele- 
 gation of authority from the principal to the agent.^ 
 
 § 548. Adoption of Acts of Promoters. — A corporation 
 may, however, make itself responsible for such acts and con- 
 tracts by subsequently adopting them. The liability of the 
 corporation under these circumstances does not rest upon a 
 supposed agency of the promoters, and a ratification of their 
 acts, but upon the immediate and voluntary act of the com- 
 pany. If an agreement is made with promoters or persons 
 about to form a corporation, and the parties intend that the 
 corporation, when formed, shall become a party to the agree- 
 ment, such agreement would usually constitute or include an 
 open offer, which may be accepted by the corporation after 
 it is formed. And this is true whether the promoters are 
 primarily liable or not. If the promoters are not made liable 
 primarily, the agreement would, in effect, be a naked offer or 
 project until accepted by the corporation after it has been 
 formed ; if the promoters are liable, an offer would ordinarily 
 be implied to substitute the corporation in their place by a 
 novation. The real character and effect of an agreement or 
 transaction with promoters necessarily depends, in each case, 
 upon the intention of the parties who enter into it ; there is 
 no arbitrary rule of law which would defeat this intention, 
 or create a liability on the part of either the corporation or 
 the promoters, where none was contemplated.^ 
 
 1 Payne u. New South Wales Coal, v. Christy, 79 Pa. St. 54. Compare 
 
 &c. Co., 10 Exch. 283; Gunn v. Lon- Low v. Connecticut, &c. R. R. Co., 
 
 don, &c. Fire Ins. Co., 12 C. B. n. s. 45 N. H. 370; 46 N. H. 284; Perry 
 
 694; Caledonian, &c. Ry. Co. v. Hel- v. Little Rock, &c. Ry. Co., 44 Ark. 
 
 ensburgh Harbor, 2 Jur. n. 8. 695; 383; Hall v. Vermont, &c. R. R. 
 
 s. c. 2 Macq. 391; Rockford, &c. Co., 28 Vt. 401; and cases in the 
 
 R. R. Co. V. Sage, 65 111. 328; Safety following notes. See also 16 Am. 
 
 Deposit, &c. Ins. Co. v. Smith, 65 L. Rev. 281. 
 
 111. 809 ; Western Screw, &o. Co. v. A corporation is not liable to pro- 
 
 Cousley, 72 111. 531 ; New York, &c. moters for services rendered before 
 
 R. R. Co. y. Ketchum, 27Conn. 170; the incorporation of the company, 
 
 Franklin Fire Ins. Co. v. Hart, 31 unless expressly provided by its char- 
 
 Md. 59 ; Frost v. Belmont, 6 Allen, ter or articles of association. Frank- 
 
 152; Marchand v. Loan, &c. Ass., 26 lin Fire Ins. Co. v. Hart, 31 Md. 60. 
 
 La. Ann. 389; Bell's Gap R. R. Co. " See Scott v. Ebury, 36 L. J. 
 
§ 549 THE LAW OF PEIVATB COEPOEATIONS. 524 
 
 The offer which is implied in an agreement with promoters 
 assuming to act in behalf of a proposed corporation may be 
 accepted by the latter, either at the time of its formation, or 
 subsequently, through the usual agencies. If the charter or 
 articles of association of the company refer to the agreement, 
 and provide 'that the company shall become a party thereto, 
 it is evident that the agreement would be binding upon the 
 company from its inception, by reason of the unanimous con- 
 sent of the shareholders.-' A similar rule applies where two 
 companies form a new company by consolidation, and the 
 new company is made a party to the contracts of the old 
 companies by the agreement of consolidation.^ 
 
 § 549. Power of Agents of a Corporation to adopt an Engage- 
 ment of its Promoters. — The right of the agents of a corpora- 
 tion to adopt an agreement originally made by its promoters, 
 depends upon the purposes of the company and the nature 
 of the agreement. If the agreement appears to be a reason- 
 able means of carrying out any of the company's authorized 
 purposes, the usual agents of the company have implied au- 
 thority to adopt it ; but they have no authority to adopt it 
 under any other circumstances. There is no difference in 
 this respect between the adoption of an agreement originally 
 made by promoters, and the formation of an entirely new 
 contract.^ 
 
 The adoption of an agreement made by the promoters of a 
 corporation may often be implied from the acts or acquies- 
 cence of the corporation or its agents, without any express 
 
 C. P. 161; Landman v. Entwistle, & J. 547; Little Rook, &c. R. R. 
 
 7 Exch. 632 ; Higgins v. Hopkins, Co. v. Perry, 37 Ark. 164 ; Bommer 
 
 3 Exch. 163. V. American Spiral Spring, &c. Co., 
 
 1 See Tilson C.Warwick Gaslight 81 N. Y. 468; Whitney v. Wyman, 
 Co., 4 B. & C. 962; Shaw's Claim, 101 U. S. 392; Spiller». Paris Skat- 
 L. R. 10 Ch. 177; Caledonian, &c. ing Rink Co., L. R. 7 Ch. Div. 368; 
 Ry. Co. V. Helensburgh Harbor, 2 Preston v. Liverpool, &c. Ry. Co., 
 Macq. 391, 405. 5 H. L. C. 605. Compare Kelner 
 
 2 See infra, §§ 952-957. v. Baxter, L. R. 2 C. P. 174; Mel- 
 ' Western Screw &c. Co. v. Cons- hado v. Porto Alegre, &o. Ry. Co., 
 
 ley, 72 111. 531 ; Rookford, &c. R. R. L. R. 9 C. P. 503; Scott v. Ebury, 
 Co. V. Sage, 65 lU. 328; Williams 36 L. J. C. P. 161. 
 V. St. George's Harbor Co., 2 De G. 
 
525 THE MANAGEMENT OF COEPOEATIONS. § 550 
 
 acceptance. After a corporation has knowingly received the 
 benefit of an engagement entered into by its promoters, it 
 will usually not be permitted to deny that it agreed to as- 
 sume the corresponding burdens.^ 
 
 A corporation cannot be charged with the acts or contracts 
 of its promoters, by virtue of the technical doctrine of rati- 
 fication. This doctrine applies only to acts performed on 
 behalf of an existing principal. Ratification operates retro- 
 spectively, and amounts, in legal effect, to an original grant 
 of authority. By virtue of this doctrine, a principal is made 
 responsible for an act or contract to which he was not in fact 
 a party, and which he never authorized, by simply giving 
 his assent. On the other hand, the adoption by a corpora- 
 tion of an agreement made with its promoters involves the 
 creation of a new agreement, and is governed by all the rules 
 applicable to the formation of a contract, under the com- 
 mon law. 
 
 § 550. Liability of Agents to the Corporation. — The nature 
 of the duties resting upon an agent, ajid the degree of care 
 and skill which he is bound to exercise, depend upon the 
 character of the ofiice or employment which the agent has 
 assumed. Every agent is boiind, by the implied terms of his 
 contract of agency, to serve his principal faithfully in the of- 
 fice which he has undertaken. If an agent violates this con- 
 tract, he is liable to the principal for the consequences ; and 
 this is true, wliether the breach of duty consists of an active 
 misfeasance or merely of passive neglect of the obligations 
 assumed. 
 
 An agent is liable for torts committed against his principal 
 to the same degree as a stranger under similar circumstances. 
 If an agent is guilty of an unauthorized act, constituting a 
 positive misapplication of property or invasion of rights be- 
 longing to the principal, the latter may hold the agent re- 
 sponsible both for the tort and for the breach of the contract 
 
 1 Compare Edwards v. Grand Chester, &c. Ry. Co., 3 My. & Cr. 
 
 Junction Ry. Co., 1 My. & Cr. 650; 773; Low v. Connecticut, &c. R. R. 
 
 Petre v. Eastern Counties Ky. Co., Co., 45 N. H. 370; Bell's Gap R. R. 
 
 1 Eng. Ry. Cas. 462; Stanley v. Co. v. Christy, 79 Pa. St. 54. 
 
§ 551 THE LAW OF PKIVATE COEPORATIONS. 526 
 
 of agency. An agent who has charge of funds belonging to 
 the principal may likewise be liable in equity to account for 
 these funds. These doctrines apply to the agents of a corpo- 
 ration, as well as to the agents of an individual. 
 
 The remedy of the principal for a breach of the contract of 
 agency, or a wrongful interference with the property of the 
 principal, is by a common law action for damages.^ If the 
 agent has incurred an obligation to account for property or 
 funds received for the principal, this obligation may be en- 
 forced by bill in equity ; and, if the agent has received the 
 legal title to property or funds equitably belonging to the 
 principal, or has applied such property or funds to his own 
 use, the principal may in either case charge the agent in 
 equity as a trustee. ^ 
 
 § 551. The Duty of Directors to exercise Care. — The direc- 
 tors or trustees of a corporation are charged with the general 
 supervision and management of the company's affairs. The 
 amount of attention and care which the proper performance 
 of these duties requires evidently depends upon the charac- 
 ter of the business in which the company is engaged. Di- 
 rectors of a company not engaged in active business, or whose 
 business is of a routine character, such as a turnpike com- 
 pany, may have no other duties than to hold occasional meet- 
 ings for the purpose of appointing officers and examining the 
 company's accounts. On the other hand, directors of a bank- 
 ing, manufacturing, or trading company may be obliged to 
 exercise active control in supervising and directing the com- 
 pany's policy and business operations. If a director wilfully 
 neglects or fails, without sufficient excuse, to use as much 
 attention and care in performing the duties of his office as 
 the proper performance of these duties necessitates, he is 
 liable to the corporation for any resulting loss.^ 
 
 1 See Hun v. Gary, 82 N. Y. 65, ofSoe, see Brinckerhoff v. Bostwiok, 
 
 80; Godbold v. Branch Bank, 11 99 N. Y. 185, reversing s. c. 34 
 
 Ala. 191; Overendu. Gurney, L. R. Hun, 352; Williams v. Halliard, 38 
 
 4 Ch. App. 701. N. J. Eq. 373, 378; Spering's Ap- 
 
 ^ As to the statutes of limitations peal, 71 Pa. St. 11. 
 applicable to suits against directors ' In Hun v. Gary, 82 N. Y. 71, 
 
 and other agents for misconduct in Earl, J., said: "It is impossible to 
 
527 THE MANAGEMENT OF COKPOEATIONS. § 552 
 
 § 552. The Degree of Care to be exercised by Directors. — 
 Attempts have been made to define the degree of care and 
 prudence which directors must exercise in the performance 
 of their duties. In some of the cases it has been said, that, 
 inasmuch as directors are usually not paid for their services, 
 they are to be regarded as mandataries, — persons who have 
 gratuitously undertaken to perform certain duties, and are 
 bound to exercise only ordinary care and prudence, — and 
 that they are liable to the corporation only for what is called 
 crassa negligentia, or gross negligence.^ But all this is, at the 
 best, misleading. The plain and obvious rule is, that direc- 
 tors impliedly undertake to use as much diligence and care as 
 the proper performance of the duties of their ofiice requires. 
 What constitutes a proper performance of the duties of a 
 director is a question of fact, which must be determined in 
 each case in view of all the circumstances ; the character of 
 the company, the condition of its business, the usual methods 
 of managing such companies, and all other relevant facts 
 must be taken into consideration. It is evident that no 
 abstract reasoning can be of service in reaching a proper 
 solution. 
 
 give the measure of culpable negli- 388; Dunn's Admr. v. Kyle's Exr., 
 
 gence for all cases, as the degree of 14 Bush, 134. 
 
 care required depends upon the sub- At common law a person who 
 jects to which it is to be applied, agrees without any consideration to 
 What would be slight neglect in the act as bailee or trustee for another 
 care of a quantity of iron might be is not liable if he refuses to perform 
 gross neglect in the care of a jewel, his agreement at all; but if he en- 
 "What would be slight neglect in the ters upon the performance of his 
 care exercised in the affairs of a agreement, he is bound to exer- 
 turnpike corporation, or even of a cise reasonable care and attention, 
 manufacturing corporation, might These doctrines have no applica- 
 be gross neglect in the care exer- tion to directors whose duties are 
 oised in the management of a sav- indicated by the charter or act of 
 ings bank intrusted with the savings the legislature under which the com- 
 of a multitude of poor people, de- pany was formed. The directors, 
 pending for its life upon credit, and by accepting their appointment, im- 
 liable to be wrecked by the breath pliedly assume such obligations as 
 of suspicion." the incorporating law provides. The 
 1 See Spering's Appeal, 71 Pa. common law rule that a contract re- 
 st. 11, per Sharswood, J. ; Vance ». quires a consideration maybe dis- 
 Phoenix Ins. Co., 4 Lea(Tenn.), pensed with altogether by statute. 
 
§ 554 THE LAW OP PRIVATE COEPOEATIONS. 528 
 
 The law upon this subject was carefully considered by the 
 Court of Appeals of New York in Hun v. Cary,^ and the 
 conclusion was reached, that the directors or trustees of a 
 corporation are bound to manage the affairs of the company 
 with the same degree of care and prudence which is gener- 
 ally exercised by business men in the management of their 
 own affairs. 
 
 § 553. Directors not liable for Mistakes of Judgment. — The 
 directors of a corporation are intrusted with wide discretion- 
 ary powers. They are bound to exercise these powers with 
 the utmost good faith in the interest of the corporation, and 
 to give the latter the benefit of their best judgment ; but they 
 are not liable for innocent mistakes. Directors merely un- 
 dertake to make honest use of such judgment as they possess. 
 They do not insure the correctness of their judgment ; and 
 they cannot be charged with the consequences of an honest 
 error of judgment or accidental mistake in the exercise of 
 their discretionary powers.^ 
 
 § 554. But the Directors are bound to use reasonable Care 
 and Skill. — Directors are not merely bound to be honest ; 
 they must also be diligent and careful in performing the du- 
 ties which they have undertaken. They cannot excuse im- 
 prudence on the ground of their ignorance or inexperience, 
 or the honesty of their intentions ; and if they commit an 
 error of judgment through mere recklessness or want of or- 
 dinary prudence and skill, the corporation may hold them 
 responsible for the consequences. 
 
 The decision of the Coujrt of Appeals of New York, in 
 Hun V. Cary,^ is in accordance with these views. The direc- 
 
 1 Hun V. Gary, 82 N. Y. 65. Smith v. Prattville Manuf. Co., 29 
 See also Charitable Corporation v.' Ala. 503; Overend u. Gurney, L. R. 
 Sutton, 2 Atkyns, 405; Litchfield 4 Ch. 701; L. R. 5 H. L. 480; and 
 V. White, 3 Sandf. 545; Scott v. De other cases cited in the following 
 Peyster, 1 Edw. Ch. 513, 543; sections. 
 
 Hodges V. New England Screw Co., ' Hun v. Gary, 82 N. Y. 74. 
 
 1 R. I. 312. See the very able See also Mutual Building, &c. Ban^ 
 
 opinion of Porter, J., in Percy w. v. Bossieux, 4 Hughes C. Ct. 387; 
 
 Millaudon, 8 Mart. n. 8. (La.) 68. Percy v. Millaudon, 8 Mart. n. 8. 
 
 2 Spering's Appeal, 71 Pa. St. (La.) 68; Shea v. Mabry, 1 Lea 
 11; Hun V. Gary, 82 N. Y. 74; (Tenn.), 319. 
 
529 THE MANAGEMENT OP COEPOEATIONS. § 655 
 
 tors of a savings bank, whose entire assets consisted of about 
 seventy thousand dollars, purchased a piece of land for thirty 
 thousand dollars, and erected a banking-house upon it at a 
 cost of twenty-seven thousand dollars more. The bank had 
 never been profitable, and was practically insolvent at the 
 time. It subsequently failed, and a receiver was appointed, 
 who sued the directors for the damages caused by the im- 
 proper investment of its fund. A judgment was rendered 
 against the defendants, and was affirmed by the Court of 
 Appeals. Earl, J., delivering the opinion, said : " One who 
 voluntarily takes the position of director, and invites confi- 
 dence in that relation, undertakes, like a mandatary, with 
 those whom he represents or for whom he acts, that he pos- 
 sesses at least ordinary knowledge and skill, and that he will 
 bring them to bear in the discharge of his duties. Such is 
 the rule applicable to public officers, to professional men, and 
 to mechanics, and such is the rule which must be applicable 
 to every person who undertakes to act for another in a situ- 
 ation or employment requiring skill and knowledge ; and it 
 matters not that the service is to be rendered gratuitously. 
 These defendants voluntarily took the position of trustees of 
 the bank. They invited depositors to confide to them their 
 savings, and to intrust the safe-keeping and management of 
 them to their skill and prudence. They undertook, not 
 only that they would discharge their duties with proper care, 
 but that they would exercise the ordinary skill and judg- 
 ment requisite for the discharge of their delicate trust. . . . 
 Whether, under the circumstances, the purchase was such as 
 the trustees, in the exercise of ordinary prudence, skill, and 
 care, could make, or whether the act of purchase was reck- 
 less, rash, extravagant, showing a want of ordinary prudence, 
 skill, and care, were questions for the jury." ^ 
 
 § 556. Liability of Directors for Unauthorized Acts. — If direc- 
 tors of a corporation wilfully do an act which they know or 
 ought to know to be unauthorized, they are clearly liable to 
 the corporation for resulting damages. Directors are liable, 
 therefore, if they do an act which is expressly prohibited by 
 
 1 82 N. Y. 74, 77. 
 VOL. I. — 34 
 
§ 557 THE LAW OF PBIVATE CORPORATIONS. 530 
 
 the company's charter or by-laws ; for they are bound, by the 
 duties of the office which they have assumed, to observe every 
 provision contained in the company's charter or by-laws. Thus 
 it has been held that directors are liable to the corporation, 
 if they make a loan of corporate funds to an unauthorized 
 amount, or upon a prohibited security, or without any secu- 
 rity where security is expressly required.^ 
 
 Directors are equally liable for damages resulting from an 
 act in excess of their chartered powers, although the act may 
 not be expressly prohibited, or in excess of the company's char- 
 tered powers. Thus, directors are liable if they use their con- 
 trol over the company to obtain a personal advantage at the 
 company's expense, or if they wrongfully create obligations 
 binding upon the company, or cause its property to be wasted 
 or misapplied.2 
 
 § 556. Effect of statutory Prohibitions. — The liability of 
 directors for damages caused by acts expressly prohibited by 
 the company's charter or act of incorporation is not created 
 by force of the statutory prohibition. The performance of 
 acts which are illegal or prohibited by law may subject the 
 corporation to a forfeiture of its franchises, and the directors 
 to criminal liability ; but this would not render them civilly 
 liable for damages. The liability of directors to the corpora- 
 tion for damages caused by unauthorized acts rests upon the 
 common law rule which renders every agent liable who vio- 
 lates his authority to the damage of his principal. A statu- 
 tory prohibition is material under these circumstances merely 
 as indicating an express restriction placed upon the powers del- 
 egated to the directors when the corporation was formed. 
 
 § 557. Directors not responsible for an Excusable Mistake 
 of Law. — It is often very difficult in practice to determine 
 whether or not a given act is within the powers of the direc- 
 tors of a corporation. Charters and by-laws sometimes con- 
 tain provisions which are extremely vague and uncertain ; and 
 
 1 Citizens' Building Ass. ». Co- ^ See Percy v. Millandon, 8 Mart, 
 
 riell, 34 N. J. Eq. 383. See also n. s. (La.) 68; Shea v. Mabry, 1 
 
 Oakland Bank v. Wilcox, 60 Cal. Lea (Tenn.), 319; Neall v. Hill, 16 
 
 126. Cal. 149, 151. 
 
531 THE MANAGEMENT OF COEPOEATIONS. § 557 
 
 the authority of the directors to do an act may depend upon 
 complicated questions of law. Under these circumstances, 
 the directors are not obliged to act at their peril. They are 
 undoubtedly bound to act in good faith, and to exercise due 
 skill and care to ascertain the exact measure of their powers. 
 Directors can never set Up as a defence, that they were igno- 
 rant of a provision of the company's charter or by-laws ; and if 
 they are in doubt about a point of law, or the construction of 
 the charter or by-laws, they should consult competent coun- 
 sel. But they ought not to be held responsible if they exceed 
 their allotted powers, notwithstanding the exercise of due dil- 
 igence and caution. 
 
 The decision of the Court of Appeals of Pennsylvania in 
 Spering's Appeal,^ is in accordance with this view. Shars- 
 wood, J., said : " In regard to the question whether the de- 
 fendants should be held responsible for any of their acts and 
 investments as ultra vires, it might be sufficient to notice the 
 fact that the charter of this corporation was a very compli- 
 cated one, made up by comparing together no less than six- 
 teen different acts of incorporation or supplements. To have 
 mistaken the extent of their powers under such circumstances 
 would not have been a matter of surprise, even in the most 
 timid and cautious. We may adopt upon this point the lan- 
 guage of C. J. Greene, in Hodges v. New England Screw 
 Co.^ : ' In considering the question of the personal responsibil- 
 ity of the directors, we shall assume that they violated the 
 charter of the Screw Company. The question then will be. 
 Was such violation the result of mistake as to their powers, 
 and if so, did they fall into the mistake from want of proper 
 care, such care as a man of ordinary prudence practises in his 
 own affairs ? For if the mistake be such as with proper care 
 might have been avoided, they ought to be liable. If, on the 
 other hand, the mistake be such as the directors might well 
 make, notwithstanding the exercise of proper care, and if they 
 acted in good faith for the benefit of the Screw Company, 
 they ought not to be liable.' We may say in this case, con- 
 
 1 Spering's Appeal, 71 Pa. St. 24. Co., 1 R. I. 312, 346; Williams v. 
 " Hodges V. New England Screw McDonald, 37 N. J. Eq. 409. 
 
§ 659 THE LAW OF PKIVATE COEPOEATIONS. 532 
 
 ceding that the directors did violate the charter, it was a 
 question upon which, with all due care, they might have made 
 an honest mistake ; and, moreover, it appears by the evi- 
 dence, and is so reported, that they acted throughout by the 
 advice of their counsel. It is well settled that trustees will 
 be protected from responsibility under such circumstances." 
 
 § 558. Mistake of Law may be ezcuaable, though not under 
 Advice of Counsel. — Directors are not bound at their peril to 
 act always under advice of counsel. This would be extremely 
 inconvenient in practice, and would subject the company to 
 much unnecessary expense. Directors should consult coun- 
 sel only when the importance of the occasion renders this 
 advisable, or when they are in doubt concerning the law. 
 They should act as a prudent business man would act under 
 similar circumstances in managing his own affairs. Directors 
 are not liable if they fail to consult counsel, and commit an 
 error of law while acting in good faith, and with the degree 
 of skill and prudence which may reasonably be expected of 
 business men under the circumstances.^ 
 
 § 559. Advice of Counsel not necessarily an Excuse. — The 
 fact that directors have acted under advice of counsel is not 
 necessarily an excuse for an excess of their authority. The 
 fundamental rule is, that directors are bound at all times to 
 act in perfect good faith, and to exercise reasonable skill and 
 prudence. If they fail in this, they are liable whether they 
 have consulted counsel or not. Directors must consult coun- 
 sel if the exercise of reasonable skill and prudence requires 
 
 ' See Vance v. Phoenix Ins. Co., a new bond. In the third term of 
 
 4 Lea (Tenn.), 385. The facts of his office the secretary became a de- 
 
 this case were as folJows. The by- faulter. The court decided that the 
 
 laws of a corporation contained a directors were not liable to make 
 
 provision that the board of directors good the loss to the corporation, 
 
 should elect a secretary, and re- they having decided in good faith, 
 
 quire the latter to give a bond with though erroneously, and without tak- 
 
 sureties for the faithful performance ing legal advice, that the bond first 
 
 of his duties. The directors elected taken was a continuing security, and 
 
 a secretary, and took the prescribed that no new bond was required, 
 
 bond, and at the end of his term of See also Godbold v. Branch Bank, 
 
 office re-elected the same person for 11 Ala. 191 ; Percy v. Millaudon, 8 
 
 two further terms, but failed to take Mart. n. s. 68. 
 
533 THE MANAGEMENT OF COEPOKATIONS. § 561 
 
 this to be done ; and the counsel must be of such professional 
 reputation and character as the exigency of the case requires. 
 Good faith is always essential. Directors cannot shield them- 
 selves from liability for acts which they ought to know to be 
 unauthorized, by obtaining advice from counsel upon whose 
 opinion no prudent man would rely under the circumstances. 
 
 § 560. Directors not responsible for an excusable Mistake of 
 Fact. — The authority of directors to do an act cannot be de- 
 termined without regard to the circumstances under which 
 the act is done. An act which would be authorized under a 
 particular state of facts may be wholly unauthorized under 
 other circumstances.! Directors are bound to use due care 
 to ascertain the existence of the state of facts upon which 
 their authority to act depends; if they are in doubt, they 
 should make a careful investigation; but they are not liable 
 for an innocent mistake made in the exercise of due skill and 
 care. 
 
 Thus, if the directors of a corporation are expressly pro- 
 hibited from paying dividends except out of actual profits, 
 they are bound to use diligence and care to ascertain whether 
 profits have in truth been earned ; but they are not liable for 
 erroneously paying a dividend out of the company's capital, 
 if they have made a careful investigation of the company's 
 accounts, and believe in good faith that profits to pay the 
 dividend have been earned.^ 
 
 § 561. Liability for Failure to -watch over the Company's 
 Interests. — Wrongs committed by Co-agents. — Directors by 
 accepting their appointment to ofiice impliedly agree to give 
 as much time and attention to the interests of the corporation 
 as the proper care of these interests requires.* If directors 
 fail to perform the duty thus undertaken, they are liable to 
 the corporation for any resulting loss. Thus, if directors pay 
 no attention to the management of the company's business or 
 the care of its property, and the business is thereby wrecked 
 or the property lost, they may be held responsible by the cor- 
 
 1 See supra, § 362. also Stringer's Case, L. K. 4 Ch. 
 
 '^ Excelsior Petroleum Compa- 476. 
 ny V. Lacey, 63 N. Y. 422. See ' See supra, § 550 et seq. 
 
§ 562 THE LAW OF PEIVATB COEPOEATIONS. 634 
 
 poration. So if directors leave entire control over the com- 
 pany's interests to other agents, and fail to exercise the proper 
 supervision, they are liable for breaches of trust committed 
 by those in control, which due care and attention on the part 
 of the directors would have prevented.^ 
 
 In practice it is often difficult to determine whether a loss 
 caused by the immediate wrong of agents whom the directors 
 have given control over the company's interests can fairly be 
 attributed to inattention or neglect of duty on the part of 
 the directors. Directors are not insurers of the fidelity of 
 their co-directors, or of the agents whom they have appointed. 
 Agents appointed by the directors are agents of the corpora- 
 tion, and not of the directors themselves. Directors cannot 
 be charged with the acts of their appointees on any principle 
 of the law of agency. Directors can be held responsible for 
 a loss resulting from wrongful acts or omissions of other 
 directors or agents only provided the loss was a consequence 
 of their own neglect of duty, either in failing to supervise 
 the company's business with attention, or in neglecting to use 
 proper care in the appointment of inferior agents. 
 
 Thus, if directors of a bank have used due care in selecting 
 a cashier, they are not liable for a defalcation of the cashier 
 which proper attention to their duties would not have pre- 
 vented.^ But if a cashier has committed a series of frauds 
 which proper care on the part of the directors would have 
 exposed and thus rendered impossible, the corporation may 
 hold the directors responsible for those losses which resulted 
 through their want of care. 
 
 § 562. Liability for Acts of other OfiScers. — Directors who 
 participate in wrongs committed by their co-directors or other 
 agents, or who have notice of the wrongs and fail to take 
 such measures as lie within their power to prevent their com- 
 mission, are clearly liable to the corporation for the resulting 
 damages.^ 
 
 1 Charitable Corporation v. Sut- 14 Bush (Ky.), 134; Batchelor v. 
 
 ton, 2 Atkyns, 400; Shea v. Mabry, Planters' Nat. Bank, 78 Ky. 435; 
 
 1 Lea (Tenn.), 319; Scott v. Depey- Scott v. Depeyster, 1 Edw. Ch. 513. 
 
 ster, 1 Edw. Ch. 513. s See 1 Lindley on Partnership, 
 
 - ^ Dunn's Admr. v. Kyle's Exr., 595; Joint Stock Discount Co. v. 
 
535 THE MANAGEMENT OF COEPOKATIONS. § 563 
 
 But if a director has no notice of wrongs committed by his 
 co-directors or by other agents, and is guilty of no neglect of 
 duty in failing to prevent them, he cannot be held responsible.^ 
 
 § 563. Resignation of Directors. — By accepting their ap- 
 pointment to office the directors impliedly agree to perform 
 the duties which are incident to the office so long as their 
 agency lasts. But they may ordinarily terminate their agency 
 at any time by resignation. This right seems to result from 
 the implied consent of the corporation, for it is evident that 
 the shareholders of a corporation would not desire the deli- 
 cate duties which devolve upon directors to be performed by 
 unwilling agents.^ 
 
 Directors who wish to terminate their liability to perform 
 the duties of their office should express their wish in an or- 
 derly manner, by resignation, so that new directors may be 
 elected. But it seems that, if a director has tendered his 
 resignation to the proper authority, he cannot be charged by 
 reason of a failure to act as director thereafter, although the 
 resignation may not have been accepted.^ 
 
 Brown.L.R. 8 Eq. 381; Land Credit Eq. 225; Perry's Case, 34 L. T. 
 
 Co. V. Fermoy, L. R. 5 Ch. 763. n. s. 716; Williams v. Halliard, 88 
 
 Directors are jointly and severally N. J. Eq. 373, 377. 
 liable for all wrongful acts to which ^ The circumstance that directors 
 they are parties or privies. They serve without compensation, and re- 
 are also jointly and severally liable ceive no technical consideration for 
 for the results of their joint neglect, their undertaking, is not in itself a 
 But where directors are charged in sufficient ground for holding that 
 equity to account for the appropria- they may terminate their office at 
 tion of corporate funds, or for profits will. The question is one of con- 
 improperly received by them, they struction, taking into consideration 
 are liable only severally to account the customs of business, 
 for their own receipts. They may, ' In Chandler v. Hoag, 2 Hun, 
 however, be jointly and severally 613, affirmed 63 N. Y. 624, it was 
 liable for having caused or permitted held that a director who had sent in 
 the misappropriation, in addition to his resignation could not be held 
 the several liability of each to ao- liable under the statute rendering 
 count in equity for what he has the directors liable for failure to 
 received. Compare Parker v. Mo- make, publish, and file annual re- 
 Kenna, L. R. 10 Ch. 96 ; General ports, although the resignation had 
 Exchange Bank «. Horner, L. R. 9 not been accepted and entered on 
 Eq. 480; Franklin Ins. Co. v. Jen- the minutes of the corporation. See 
 kins, 3 Wend. 180. also Blake v. Wheeler, 18 Hun, 496, 
 
 1 Ashhurst v. Mason, L. R. 20 affirmed sub nom. Bonnell v. Gria- 
 
§ 565 THE LAW OF PEIVATB COEPOKATIONS. 536 
 
 Directors, however, cannot escape from liabilities already 
 incurred, by terminating their agency ; and they are charge- 
 able with the losses resulting after the termination of their 
 agency from breaches of duty previously committed. It 
 seems clear, also, that directors cannot terminate their 
 agency, or accept the resignation of others, if the immediate 
 consequence would be to leave the interests of the company 
 without proper care and protection. 
 
 § 564. A distinction should be observed between the obli- 
 gation of directors to act as agents or business managers of 
 the corporation, and their obligation to perform those minisr 
 terial duties which are necessary to perpetuate the corporate 
 organization. Directors cannot divest themselves of their 
 legal status as part of the corporate organization except in a 
 manner prescribed by law. If their terra of office is fixed by 
 the charter at a definite period, they continue legally to be of- 
 ficers of the company, and are bound to call meetings, and to 
 do such other ministerial acts as are necessary to protect the 
 corporate organization, until their term of office has expired 
 or their resignation has been accepted by competent author- 
 ity. They are bound to perform these duties, although their 
 obligation to devote themselves to the active management of 
 the company's business may have ceased. 
 
 § 565. Liability of Agents to Shareholders at Comiaon Law. — 
 It has been pointed out in a previous chapter that the share- 
 holders in a corporation cannot sue individually for damages 
 suffered through wrongful acts affecting the corporation as a 
 body.i Directors or other agents of a company, therefore, are 
 not liable to the shareholders for breaches of duty to the cor- 
 poration.2 The remedy for acts in violation of the corporate 
 rights must be obtained through the corporation. If the cor- 
 poration is prevented from suing, the shareholders should 
 proceed by bill in equity on its behalf.^ 
 
 wold, SON. Y. 128; Bruce w. Piatt, Bosw. 675; Smith v. Hurd, 12 
 
 80 N. Y. 379; Squires v. Brown, Mete. (Mass.) 371. 
 22 How. Pr. 35, 44; Smith v. Dan- ' Ackerman v. Halsey, 37 N. J. 
 
 zig, 64 How. Pr. 320. Eq. 356, affirmed 38 IS^^. J. Eq. 501, 
 
 * Supra, § 235 ct seq. was a suit brought by a person, who 
 
 * See Gardiner v. Pollard, 10 was a shareholder and creditor of 
 
537 THE MANAGEMENT OP COEPOKATIONS. § 565 
 
 A shareholder can in no case recover damages from the 
 directors for a mere non-performance of their obligations to 
 the corporation; and this is true although the individual 
 rights of the shareholder, as against the corporation, may be 
 infringed thereby. The reason of this is, that the directors 
 are agents of the corporation as a body, and not of the indi- 
 vidual shareholders. The corporation alone can compel its 
 agents to do their duty, or recover damages for non-perform- 
 ance thereof. 
 
 Thus, if the agents of a corporation should wrongfully re- 
 fuse to pay to a shareholder the dividends to which he is 
 entitled, they would not be liable to the shareholder in an 
 action for damages.^ The claim of the shareholder would 
 be against the corporation itself, for the failure on its part to 
 perform a legal obligation to him. The wrongful acts of 
 the company's agents would not discharge this obligation ; 
 the shareholder would be entitled to recover his dividends 
 in an action against the company, and the company would 
 alone have a right to complain of its agents. 
 
 Upon the same principle, it follows that the agents of a 
 company are not liable in damages to a purchaser of shares 
 for refusing to allow a transfer to be executed on the com- 
 pany's books,^ or for refusing to issue a certificate to a share- 
 
 an insolvent national bank, to re- '■ French v. Fuller, 23 Pick. 108. 
 cover for losses caused by the wrong- The directors and shareholders 
 f ul acts of the directors, and the in a corporation may deal with each 
 corporation, the receiver, and the other individually as freely as stran- 
 directors were all made defendants, gers. There is no trust relation be- 
 Chancellor Eunyon said: " The lia- tween directors and shareholders 
 bility is to the corporation in the except with regard to the manage- 
 first instance, where the corporation ment of the corporate interests, 
 is capable of acting; but if it re- Gillett v. Bowen, 23 Fed. Rep. 
 fuses to do so, then a person ag- 625; Deaderick v. Wilson, 8 Bax- 
 grieved may bring suit. If the ter, 108. 
 
 corporation be insolvent, and its " Denny v. Manhattan Co., 2 
 
 afEairs in the hands of a receiver, he Denio, 115. A different principle 
 
 may maintain the litigation. If he may apply where the agents of a 
 
 refuses, or is himself involved, a company wrongfully refuse to allow 
 
 person aggrieved may sue." See a shareholder to transfer his shares 
 
 also Williams v. Halliard, 38 N. J. and thereby cause him to incur in- 
 
 Eq. 373, 376, and supra, § 235 et seq. dividual liability to creditors. 
 
§ 567 THE LAW OF PRIVATE COEPOEATIONS. 538 
 
 holder. So, a person "who has entered into a contract with 
 a corporation cannot hold the agents of the company liable 
 for having caused it to violate the contract, but they must 
 seek their remedy in an action against the corporation.^ 
 
 § 566. Liability of Directors for Acts impairing the Value of 
 Shares. — The distinction between the individual rights and 
 the collective or corporate rights of shareholders is of much 
 importance in determining what remedies the shareholders 
 must pursue for wrongful acts impairing the value of their 
 shares. 
 
 If the value of shares is impaired by wrongful acts affecting 
 the property or business of the corporation, the corporation 
 itself is the proper complainant, because the injury is to the 
 collective or corporate rights of all the shareholders. Under 
 these circumstances, the individual shareholders cannot sue 
 the wrongdoers for damages by reason of the depreciation of 
 the value of their shares, but must obtain redress through the 
 corporation. Any relief obtained by the corporation would, 
 of course, inure to the benefit of the shareholders indirectly. 
 
 Accordingly, it has been held that shareholders cannot re- 
 cover damages for a depreciation of the value of their shares 
 caused by embezzlement of the corporate funds, or by wrong- 
 ful acts affecting the company's business or property .^ 
 
 § 567. On the other hand, if the value of shares is impaired 
 by wrongful acts affecting the shares directly, and not merely 
 by impairing the value of the corporate estate which they 
 represent, the shareholders must sue individually for their 
 damages. Thus, if the salable value of particular shares is 
 impaired by mutilation or destruction of the certificates, or by 
 creating uncertainty as to the validity of the shares them- 
 selves, those persons who are aggrieved thereby must seek 
 their remedy in an action for damages against the wrongdoers. 
 The same rule applies in all cases where the damage is caused 
 
 ' Smith V. Poor, 40 Me. 415. Me. 415; Allen v. Curtis, 26 Conn. 
 
 2 Gardiner v. Pollard, 10 Bosw. 456 ; Tomlinson v. Bricklayers' Un- 
 
 674; Denny v. Manhattan Co., 2 ion, 87 Ind. 308; Evans m. Brandon, 
 
 Denio, 115; Forbes v. Whitlock, 3 53 Tex. 56. See also Peckhami;. Van 
 
 Edw. Ch. 446; Smith v. Hurd, 12 Wagenen, 83 N". Y. 40. Compare 
 
 Mete. (Mass.) 371 ; Smith v. Poor, 40 Kimmel v. Stoner, 18 Pa. St. 155. 
 
639 THE MANAGEMENT OP CORPORATIONS. •§ 569 
 
 by impairing the value of the shares directly, and not through 
 injuries to the corporate property or rights, even though every 
 shareholder should suffer alike. Thus, if the market value of 
 shares is impaired by false and slanderous reports, or by the 
 issue of spurious certificates, creating uncertainty as to the 
 title or validity of the existing shares, each holder would be 
 entitled to recover his damages directly.^ However, the cor- 
 poration might, under these circumstances, have a separate 
 cause of complaint for the injuries to the corporate interests ; 
 thus, if the slanderous reports were injurious to the corporate 
 business or credit, or if the issue of spurious certificates re- 
 sulted in legal liability or other damage to the company, the 
 latter would be entitled to sue for redress. 
 
 § 568. Liability of Agents to Creditors at Common Law. — 
 Creditors of a corporation clearly have no right to meddle 
 with the company's management, and have no cause of com- 
 plaint on account of wrongful acts aflFecting the corporate es- 
 tate, provided sufficient assets remain to satisfy their claims.^ 
 Creditors of an insolvent corporation are, however, entitled 
 in equity to have the company's remaining assets applied in 
 payment of their claims ; and this equitable right will be pro- 
 tected by the courts.^ Creditors of an insolvent corporation 
 may therefore restrain any misapplication of the company's 
 assets, either by the board of directors, or by other persons j 
 and they may hold the company's agents liable for wasting 
 assets which are needed to satisfy their claims, on the ground 
 that this constitutes a misapplication of trust funds.* 
 
 § 569. Liability of Agents for Torts. — The agents of a corpo- 
 ration are clearly liable for their tortious acts ; they are there- 
 fore liable for any wrongful conversion of property, or injury 
 to property belonging to other persons. Thus, if property is 
 
 1 Cazeaux v. Mali, 25 Barb. 578. » Infra, §§ 795, 796. 
 
 ^ Fusz V. Spaunhorst, 67 Mo. * Bank of St. Mary's v. St. John, 
 
 256,264; Zinn ». Mendel, 9 W.Va. 25 Ala. 566; Wood v. Dummer, 3 
 
 580; Smith v. Poor, 40 Me. 415; Mason, 308; Gratz v. Redd, 4 B. 
 
 Winter v. Baker, 34 How. Pr. 183; Monr. 178, 194; Adler v. Milwaukee 
 
 Branch v. Roberts, 50 Barb. 485. Brick Co., 13 Wis. 62. As to the 
 
 See Van Weel v. Winston, 115 rights and remedies of creditors, see 
 
 U. S. 228. infra, Chapter X. 
 
§ 570 THE LAW OF PKIVATB COBPOKATIONS. 540 
 
 deposited with a corporation for safe keeping, or as a pledge, 
 any agent who converts the property, or, by his wrongful 
 acts, causes it to be lost or destroyed, is liable to the owner in 
 damages.^ 
 
 The liability of the agent under these circumstances does 
 not arise from any contract obligation assumed by the agent 
 in favor of the company, or in favor of those dealing with 
 the company ; and it is entirely independent, of any liability 
 which the company may have incurred. If the company con- 
 tracted to keep the property in safety, it would be liable to 
 the owner for the breach of this contract, and if the agent 
 doing the wrong acted within the scope of his employment, 
 it would be liable in tort. The liability of the agent to the 
 corporation for any damages suffered by the latter would be 
 on account of the breach of the contract of agency ; but his 
 liability to the owner of the property would be solely for the 
 positive misfeasance constituting a tort at commxDn law. 
 
 Upon a similar principle, it follows that, if agents of a cor- 
 poration knowingly participate in any misapplication of a 
 fund held by the corporation in trust, they are liable in 
 equity to the beneficiaries of the fund. But they are not lia- 
 ble to the owners of the fund for mere negligence in taking 
 care of it or managing it. Their liability is no greater than 
 that of any stranger to the company who deals with the trust 
 property with notice of the rights of the beneficiaries. It is 
 to be observed, however, that the corporation would have a 
 claim against the directors for any negligence resulting in a 
 loss of assets or a pecuniary liability ; and this claim would 
 be enforceable, on the insolvency of the company, for the 
 benefit of those having an interest in or claim upon the cor- 
 porate estate.^ 
 
 § 570. Liability for Fraudulent Representations. — In order 
 to maintain an action for false representations, it is necessary 
 to show that the representations were false, that the de- 
 fendant knew the representations to be false, or made them 
 
 1 See United Society of Shakers Percy v. Millaudon, 8 Mart. n. s. 
 ». Underwood, 9 Bush, 609, 620. 68. Infra, § 795. 
 
 2 Hun V. Cary, 82 N. Y. 65 ; 
 
541 THE MANAGEMENT OF COBPOEATIONS. § 571 
 
 wilfully, without having any information as to their truth or 
 falsity, that the plaintiff relied on the representations, and 
 that he was misled and suffered damage in consequence. In 
 applying this rule to an action against directors of a corpora- 
 tion for false representations about the company's business or 
 financial condition, it is obviously necessary to take into con- 
 sideration the peculiar position which directors of a corporation 
 occupy. Directors may fairly be presumed to have a general 
 knowledge of the company's management and financial con- 
 dition, because it is their duty to know this. They must know- 
 that their position as the board of management of a company 
 naturally leads the public to give credence to their state- 
 ments in regard to the company, and it is their duty, there- 
 fore, not to abuse the credulity of the public by incautious 
 statements about the matters which the public suppose to be 
 peculiarly within their knowledge.^ 
 
 However, directors cannot be held liable for false represen- 
 tations, unless they were made with knowledge of their falsity, 
 or carelessly, without due regard to the confidence placed in 
 them. Directors are not presumed to have notice of every- 
 thing relating to the organization and management of the 
 company which they represent ; they can only be presumed 
 to know those things which would necessarily be known to 
 them if they had performed the duties of their office. Direc- 
 tors are not liable if they, in good faith, publish reports based 
 upon details furnished by the ordinary managers and clerks 
 whom they have employed.^ 
 
 § 571. Representations as to Authority. ^ An agent incurs 
 no liability to persons dealing with him in his representative 
 capacity, vmless he is guilty of some positive misfeasance or 
 fraud. This rule applies to the agents of a corporation as well 
 as to the agents of an individual or unincorporated society.^ 
 
 An agent in assuming to enter into a contract on behalf of 
 a disclosed principal does not impliedly guarantee that he has 
 
 1 Morgan v. Skiddy, 62 N. Y. 400, 406. See Shrewsbury v. Blount, 
 319, 326. 2 M. & G. 475; Addington v. Al- 
 
 2 Wakeman v. Dalley, 51 N. Y. len, 11 Wend. 374. 
 
 27, 32 ; Arthur v. Griswold, 55 N. Y. « Fusz v. Spaunhorst, 67 Mo. 256. 
 
§ 572 THE LAW OF PEIVATB COEPOEATIONS. 542 
 
 authority to bind the principal ; and even though the contract 
 should prove in excess of the agent's powers, and be repudi- 
 ated by the principal, the agent would not be liable to the 
 party deaUng with him in the absence of any misrepresenta- 
 tion of facts. It is evident, however, that the execution of a 
 contract by an agent on behalf of a principal would ordinarily 
 involve a representation that the agent had authority to bind 
 the principal, and the truth or falsity of this representation 
 would be within the agent's knowledge. If an agent of a 
 corporation should induce parties to contract with him by 
 falsely representing the extent of his powers, or by falsely 
 representing the existence of facts from which his authority 
 to enter into the contract would be inferable, he would clearly 
 be liable.* 
 
 § 572. An agent is not liable for an innocent misrepresen- 
 tation of the law, or of the meaning of a written instrument, 
 of which the other party has equal means df knowledge. 
 Hence, if a person entering into a contract with an agent 
 has legal notice that the contract is in excess of the agent's 
 powers, the latter cannot be held responsible on the ground 
 that the principal has refused to be bound. Charters of in- 
 corporation are usually public laws, and a person dealing 
 with a corporation is deemed to have notice of the terms of 
 the company's charter ; ^ it seems, therefore, that, if a person 
 dealing with a corporation through its agents can ascertain 
 by reference to the company's charter that the agents have 
 no authority to bind the corporation under the disclosed cir- 
 cumstances of the case, he cannot hold the agents responsible 
 though their acts are repudiated by the corporation.^ 
 
 The case of Eaglesfield v. Londonderry * is a good illustra- 
 tion of this point. A company had issued £85,000 of pre- 
 
 > See Jefts v. York, 10 Cush. mortgage upon the company's prop- 
 
 392, 395. erty, cannot hold the directors of 
 
 ^ Infra, § 591. the company liable for misrepre- 
 
 ' Abeles v. Cochran, 22 Kans. sentations as to matters disclosed by 
 
 405; Humphrey i\ Jones, 71 Mo. the bonds or mortgage. See Van 
 
 62; Jefts v. York, 10 Cush. 392. Weel v. Winston, 115 U. S. 228. 
 
 A purchaser of bonds issued by * Eaglesfield v. Londonderry, L. 
 
 a railroad company, and secured by K. 4 Ch. Div. 693. 
 
543 THE MANAGEMENT OF COBPOEATIONS. 5 573 
 
 ferred shares. The directors, under a bona fide belief that 
 they had authority to issue £15,000 more, issued that amount 
 also, and the plaintiff became the purchaser. It afterwards 
 turned out that the issue of the £15,000 of stock was un- 
 authorized. An action having been brought against the di- 
 rectors, the court held that, if the plaintiff was led by any 
 false representation of the directors to believe that he was 
 purchasing part of the £85,000 of stock originally issued, 
 the directors were liable ; but if the plaintiff was not led to 
 believe that he was purchasing part of this original issue of 
 stock, and there was a common misconception concerning the 
 provisions of the act under which the defendants derived 
 their authority to issue the shares, they could not be held 
 liable. 
 
 § 573. Liability of Directors for publishing false Reports. — 
 The agents of a corporation are subject to the general rule of 
 the common law, that a person is liable for the direct conse- 
 quences of a false and fraudulent representation whereby 
 another is misled. Thus, it has often been decided that di- 
 rectors are liable for fraudulent representations as to the 
 financial condition of the company, whereby others are in- 
 duced to give credit to the company, or to purchase its obli- 
 gations or shares of its stock.^ If directors issue reports or 
 prospectuses intended for general circulation and to advertise 
 and give credit to the company with the public, they are re- 
 sponsible for the natural consequence of their action in this 
 respect; and therefore, if the reports or prospectuses are 
 false, and were made fraudulently, any person into whose 
 hands they come in the ordinary course of events, and who is 
 misled thereby, has his action against the directors ; it is not 
 necessary that the misrepresentation be made by the direc- 
 tors directly to the party complaining.^ In Bedford v. Bag- 
 
 1 Stewart v. Austin, L. R. 3 Eq. 437; and see cases in the following 
 
 299; Henderson v. Lacon, L. R. 5 notes. 
 
 Eq. 249; Ship v. Crosskill, L. R. 10 " Gerhard v. Bates, 2 El. & Bl. 
 
 Eq. 73, 84; Paddock v. Fletcher, 42 476; Wontner v. Shairp, 4 C. B. 
 
 Vt.389; Morgan 0. Skiddy, 62 N. Y. 404; Jarrett «. Kennedy, 6 C. B. 
 
 319, 326 ; Cole v. Cassidy, 138 Mass. 319 ; Bale v. Cleland, 4 F. & F. 117 ; 
 
§ 673 THE LAW OF PRIVATE COKPOEATIONS. 544 
 
 shaw,^ the defendant and others forming the board of manage- 
 ment of a joint-stock company, for the purpose of getting the 
 shares inserted in the official list of the Stock Exchange, falsely 
 and fraudulently represented, through their secretary, that two 
 thirds of the capital of the company had been paid in. The 
 shares having been inserted in the official list in consequence 
 of this representation, the plaintiff, knowing the requirements 
 of the Stock Exchange, and on the faith that two thirds of 
 the capital of the company had in good faith been paid in, 
 purchased shares in the company. The shares having proved 
 worthless, the court held that the defendant was liable to the 
 plaintiff for the damages caused by the deceit. 
 
 The same rule was applied where directors rendered false 
 reports and accounts, and pretended that dividends were 
 being paid out of profits, when in truth no profits had been 
 earned.^ 
 
 In Cross V. Sackett,^ the plaintiff alleged in his complaint, 
 that the defendants, who were the promoters and directors of 
 a mining company, had, by means of various false and fraud- 
 ulent practices and statements, set forth in detail, caused 
 it to be generally believed in the city of New York, and by 
 the plaintiff in particular, that the company was possessed of 
 property worth a million of dollars ; that the plaintiff, upon 
 the faith and credit of the representations thus made by the 
 
 Clarke ». Diotson, 6 C. B. n. s. 453 ; other relation or privity between 
 Cross V. Sackett, 2 Bosw. 617; s. c." the parties need be shown, except 
 6 Abb. Pr. 247. that created by the wrongful and 
 In Morgan v. Skiddy, 62 N. Y. fraudulent act of the defendants in 
 319, 325, Andrews, J., said: "If issuing or circulating the prospectus, 
 the plaintiii purchased his stock re- and the resulting injury to the plain- 
 lying on the truth of the prospectus, tiff." See also Eaton v. Avery, 83 
 he has a right of action for deceit N. Y. 31. 
 
 against the persons who, with knowl- ^ Bedford v. Bagshaw, 29 L.J. 
 
 edge of the fraud, and with intent Exch. 59 ; 4 H. & N. 538. See also 
 
 to deceive, put it in circulation. Scott u. Dixon, 29 L. J. Exch. 62, n. 
 The representation was made to ^ Davidson v. Tulloch, 3 Macq. 
 
 each person comprehended within App. Cas. 783; Cross v. Sackett, 2 
 
 the class of persons who were de- Bosw. 617; s. c. 6 Abb. Pr. 247. 
 signed to be influenced by the pro- » 2 Bosw. 617; 8. c. 6 Abb. Pr. 
 
 spectus ; and when a prospectus of 247. 
 this character has been issued, no 
 
545 
 
 THE MANAGEMENT OF CORPORATIONS. 
 
 §574 
 
 defendants, had purchased shares in the company from a per- 
 son holding a certificate of shares issued by the company ; 
 but that the representations were false, and the shares proved 
 , worthless. The court held that these allegations disclosed a 
 good cause of action, and that the defendants were liable to 
 the plaintiff for his damages. 
 
 § 574. Liability for issuing Fraudulent Certificates. — If direc- 
 tors of a corporation knowingly issue unauthorized and void 
 certificates of shares, or invalid transferable obligations of 
 the company, they are liable to any purchaser or subsequent 
 transferee of the certificates or obligations who tabes them 
 relying on their apparent validity. ^ The company may like- 
 wise be liable, under these circumstances, in an action for 
 damages, on account of the deceit practised by its agents 
 within the scope of those duties in which the public were 
 invited to trust them.^ 
 
 1 Brnff I). Mali, 36 N. Y. 200; 593, affirming Watson u. Crandall, 
 
 National Exchange Bank v. Sibley, 7 Mo. App. 233; Clark v. Edgar, 12 
 
 71Ga. 726; Hornblower u. Crandall, Mo. App. 345; Eaglesfield w. Lon- 
 
 78 Mo. 581, affirming 7 Mo. App. donderry, L. R. 4 Ch. Div. 693. 
 
 220; Whiting v. Crandall, 78 Mo. ^ j„fra^ § eo5. 
 
 END OF VOL. I. 
 
 University Press: John Wilson & Son, Cambridge.